Investors totally unrealistic and crazy low ball offers
I put a Condominium Triplex for sale to investors only. I did all the needed analysis for a fix and flip type investors. My price = After Repair value (based on detailed comps analysis)- Detailed & accurate Renovations Cost-Hard Money Loan Interest (9 months at 10% interest rate include 90% of list price+ Renovation Cost)- Loan Cost (5 points)- Realtors Commissions-Taxes-Maintenance-Other costs. Their profit based on ARV list price is 15% to 20%. Yet every investor who showed up wants to reduce my price by $ 80,000 to $ 100,000. What the hell? Are these people for real? How do they even get a deal with such crazy low offers? I think their hit ratio is 1/50 if they are very lucky, the idiots I met probably have a hit ratio of 1/100.
End rant.
Joseph S. it sounds like the 1:100 hit ratio surprises you but maybe you were just hoping it would be easier. I have heard a lot of realtors and investors say that the average number of houses purchased is right on par with that.
I have known for quite some time that sales and marketing is much like that. For example, the response rate on direct mail marketing is usually around 1%. So for every 100 flyers you mail out you will average 1 lead. For every appointment you wish to get you have to call 10 leads. For every sale/purchase you must have 10 appointments. In real estate these numbers will vary some on either end but you should get the point by now. For every deal you wish to make you will have to identify no less than 1,000 potential prospects and quite possibly 10,000 potential clients. That said, if you continue to work that list, eventually you will net far more than 1 sale if you hone your skills.
Another fact I didn’t know until recently is that it takes 8-10 contacts before most people respond to your pitch. So if you wish to improve your conversion rate you have to increase your contact rate.
I don't disagree with you. I understand while it has worked out for me so far there are risks associated with it and I continually try to learn the specifics of contracts. I also use a combination of sales tactics; agents, flat fee listings, and even deal straight with my end buyers without agents on either side. I use a law firm to handle those closings. The agent that handles my flat fee listings also has a service where they will review and advise on the contract for a small additional fee. While I haven't used that service yet I may do so on my next flat fee sale as you do have some good points.
Thanks for the insight.
Originally posted by @Joseph S.:
Originally posted by @Matthew Paul:Throw out enough offers and one will stick
In this case Matthew I doubt that these are successful investors, it seems that their business moidel is just based on pure luck i.e. not a real business.
That has been my experience with them. I had some middle aged guy show up and offer me 1/3 what I paid for a house at the bottom of the market, after years of appreciation had driven it's value up. I asked him how many rentals he had. He stuttered and said a couple. I honestly doubt he had any. Just seemed like he went to some real estate seminar or listened to some random podcast and thought he was Donald Trump or something. I told him I'd sell it to him for a million. :-)
Hey Joseph just thought I’d throw this out there since it doesn’t seem anyone has yet.
There is a technique we’re partners or an individual acting as multiple people get together and throw numerous offers at one seller hoping that the multiple low offers will have the seller come off his numbers and choose one of the offers on the table which could all even be one person.
If you know your numbers are correct stick it out. Good luck