I'm a new investor, and this will be my first purchase so please bare with me. My plan is to purchase a duplex as an owner occupant using an FHA loan.
I’m currently struggling with the fact that right now in my area (Minneapolis, MN) it is a seller’s market.
When looking at potential properties, should I have an appraiser with me to determine the true market value of a property? Then based on that information make my offer below market value? For a lot of the properties I have viewed -the list price has been set by the seller and these homes aren’t on the market for very long. As an investor, how does one find deals in this type of market? Or should I wait it out until the market changes?
Any advice would be much appreciated.
@Theodore Gibson make offers based on your numbers. I'm finding deals weekly for people and we're getting offers accepted based on their numbers. It takes 3-6 months and 2-7 offers before you'll find something.
@Jordan Moorhead how does one make an offer without doing proper due diligence? If I offer 100k but after the appraiser tells me it’s only worth 75k can I renegotiate?
1) You wont need an appraiser with you to determine the true market value. No need for it.
2) As Jordan mentioned. Make offers based on the numbers you ran and feel comfortable with.
3) Finding investments can end up being a numbers game. Especially here in MN. You just need to make offers! And I don't recommend waiting to make offers.
Bottom line: Run your numbers and don't force them. If you like your numbers then make offers asap! Don't be afraid if the numbers work.
If you make an offer at 100K and the appraisal comes back at 75K the deal will fall through anyway because the bank won't give you the money. So you can renegotiate then. I would look for properties to add value to the Minneapolis market is hard right now not a lot of room to make the numbers work.
@Theodore Gibson House hacks are the best way to get started. You have the advantage of being right next door for tenant issues and repairs. While numbers here in the twin cities are tight, that doesn’t mean there isn’t value. Often it is a matter of finding properties that match your advantages, if you are skilled and can do some work yourself, if you know rents in the area (or have a real estate agent that also manages properties in many different areas), everyone brings something to the table.
Your realtor ideally should have experience in investments, management, rehabs, house hacking, and boiler license and or HVAC are helpful.
We often have conversations with appraisers to adjust appraisals as they don’t always see the big picture and are human and miss things. Appraisers look at properties in a few different ways ie. income approach, comparison, and cost approach.
It is difficult without professional management experience to determine potential rental rates for an area. This is one of your most important variables in determining the price you want to offer.
A good agent should be able to let you know a good property and guide you on price. We tell our investors to ignore the listing price and make offers based on the return that they are comfortable with. If that means offering 20k under or over asking, then sometimes that is the right approach.
Don’t get too caught up in how much you will make in the first two years, it is year 2-30 that really make a property a good value. Making money is different than building wealth.
Hey @Theodore Gibson ,
First off congrats on taking the step into real estate and I think going for a duplex is a really good first investment.
True, this is a seller's market but there are still deals to be found. Either you have to find value in properties others don't see on the surface, be in the fast lane and offer quickly when a good deal comes on the market, or find an off market property to reduce the competition you have to bid against.
A good real estate agent can help you determine the value of a property. No appraiser should be necessary for this point. I like to teach my clients how I value properties and help them become experts in their market.
Some people are waiting for the market to go down and some are not. Personally, I am not waiting and I am buying properties myself and helping clients buy property. Both on the MLS and off. Patience is key!
DM if you have any questions at all!
Good luck out there :-)
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