I'm in my acquisition stage, and put an offer on what would have been my 4th purchase in the past 12 months on Monday. It was a 3/2 single family in a top school district, asking $144,000. I offered $135,000 with 20% down and to close on 7/20/18. They countered at $139,000 and to close on 8/3/18, plus they wanted 3 days' possession so they could move out over that weekend.
That weekend following 8/3/18 would have been valuable time for me to put in new flooring and start showing to applicants. I'm out of state, about 2 hours away, so I would have had to waste a week before getting the chance to be back in town. They wouldn't budge from their counter, and I did not want to overpay AND give up the 3 days' possession, so I walked.
Part of me wants to feel proud for not "chasing the deal" just to get my fix of an acquisition, but part of me wonders if it's petty to walk away over $4,000 stretched over a 30 year loan. However, it would have added $800 to my down payment, and the lost opportunity cost of the week I would have waited to be back in town. Anyone out there with a similar experience, or an opinion?
If the numbers don't work, it's time to walk away. Time has a dollar value. If the numbers do work, a week shouldn't make that much difference. Strongly recommend that you don't 'chase' any deals.
@Derek Luttrell It's my experience that tells me I'd rather let a few or even several potential "good" deals fall through than to ever overpay for a property.
Paying too much for a property is the worst thing you can do in RE investment IMO. If you buy it right you can:
-Afford to hire great Property Managment
-Afford to be a great landlord and fix everything
-More easily obtain financing
-Sell and not lose money if it doesn't work out
I want to be ecstatic when I sign the HUD/deed on a new property. If not, I'd rather wait on the next one.
@Will Gaston that's a nice perspective. I should be more excited about the deal itself, and less about just adding something to my portfolio. I need to remember that the benefit of being an investor is that we can be picky, and there's always something else out there.
In my opinion the 4K is no biggie. That is pretty much a send the parties back to their corners and get a good nights sleep and get back at it.
However the possession, nope. I am a firm believer in possession at closing. Not before and not having the owner hang on longer except in extreme circumstances. If you agreed, you would find Monday that the place they were going to fell through and they are still there. 30 days later you are still working on the eviction of former owners. When they finally are kicked out 3 months after closing you have new holes in the walls, they left the water running and all the windows open and a family of raccoons are nesting in the master bedroom closet.
@Mike Cumbie good point about the possession. Who knows what kind of condition the house could have been in after a weekend of a family moving out. Holes in walls, trash, unwanted personal belongings, all could have been left behind and I would have been SOL.
Get yourself a good manager and don’t worry about the peanuts. If the deal makes since your time isn’t best served redoing the flooring and leasing it yourself.
@Derek Luttrell like others have said I don’t like the 3 day holdover. The 4K isn’t necessarily a big deal depending on deal size and mortgage terms.
4K on a 50k house means a lot more than a 200k house.
@Caleb Heimsoth I agree. I actually countered that I would pay the $139,000 they were asking for if they gave me immediate possession on 8/3, but they were a family with kids and said the extended possession was a must. Onto the next one.