How can I compete with a cash buyer investor?

37 Replies

As the title says I am wondering how to compete with all the cash buyers in my area.  One of which owns over 90% of the apartment buildings as well as almost all commercial buildings in town.  He also frequents the city auctions and pays cash outbidding anyone that even tries.  Im guessing he gets off market deals too. I tried to start a conversation with the guy, but he is grade A jerk.  Hard to believe someone so arrogant can be so successful.

How do I compete with that?

@Brent Paul The simple answer is to buy like a cash buyer. There are programs that will allow you to close in 1-3 weeks and even provide you an approval letter or proof of funds. MN is a tough state (in fact I don't even loan there) but search BP for the right HML in your area and beat this guy!! Good luck.

I'd look for other areas that this person isn't trying to buy. What type of returns are you trying to get? It's possible you're trying to get too good of a deal and he's being more realistic. 

The simple answer is you can't.  Cash is king and anything else is just wishful thinking.  Sure you can hard money and have a letter but  in my state at auctions you have to pay with cash at the end of the auction.  Instead of focusing on this guy being a jerk and arrogant build a cash flowing portfolio and in 20 years everyone will be calling you a jerk for outbidding them and paying cash. 

@Jordan Moorhead   My goal is to have 4k a month in cash flow.  I would like around 300 per month in cash flow per property. My main reason for staying in the area is I know it really well.  But you are right that really limits my exposure to other properties that meet my criteria. On the flip side this gentlemen is getting up there in age and probably won't be buying any more properties in the next 5 to 10 years.  I need to work harder and develop more relationships with realtors and others involved in real estate in town to get more opportunities.  That is something I am working on this year.

I think by using the brrrr method I can build a portfolio to eventually start paying for properties with cash.  It will take me much longer, but I know I can do it.

@Clifford Paul   You are absolutely right.  For every closed door there is an open door somewhere for me.  With time I really think I can build something substantial and surpass my goals.  Sometimes I try to find the easy way in with things, but in this case it will push me to work even harder to reach those goals.

You need to widen your net and find more ways to take down a deal. My first house ever was where the seller carried the note for me. 

I know I will probably get blasted for saying this, but the more respectful a person’s grooming habits are the more responsible they will appear in many a seller’s mind. 

Originally posted by @Account Closed :

You need to widen your net and find more ways to take down a deal. My first house ever was where the seller carried the note for me. 

I know I will probably get blasted for saying this, but the more respectful a person’s grooming habits are the more responsible they will appear in many a seller’s mind. 

Appearance can definitely give you a good first impression.  If I have uncombed hair and am wearing sweat pants and tank top I probably look not very professional.  The gentlemen buying all the properties actually showed up in a suit and tie.  Stuck out like sore thumb, but you knew he meant business.  There are a few other areas near that I can branch out to.  I just need to get to know the area a little better.

 

Originally posted by @Josh C. :

Price. Sellers will take financing with a higher price everyday of the week.

That's a great strategy I hadn't thought of.  Money talks for sure.  Especially in a hot market.

 

Originally posted by @Brent Paul :

As the title says I am wondering how to compete with all the cash buyers in my area.  One of which owns over 90% of the apartment buildings as well as almost all commercial buildings in town.  He also frequents the city auctions and pays cash outbidding anyone that even tries.  Im guessing he gets off market deals too. I tried to start a conversation with the guy, but he is grade A jerk.  Hard to believe someone so arrogant can be so successful.

How do I compete with that?

 Brent, my husband and I ran into the same problem when we first started out. You can't compete with a cash buyer because cash is King no matter who says what. 

We dealt with it by started looking at places where other investors aren't. Don't limit yourself to any particular area. We now own 8 properties and they are wherever in the greater metropolitan area we could find them. Working great for us. 

Hope that helps. 

@Josh C. I don’t necessarily agree. The difference in price would need to be meaningful enough to make up for the financing risk of not going with the cash buyer. Right now in the Minneapolis area 12% of purchase agreements are failing to complete (although not always due to financing). For example, I have a house on the market that I would need to probably get at least $5k more for from a non-cash buyer over cash. But that is me...

 Brent, my husband and I ran into the same problem when we first started out. You can't compete with a cash buyer because cash is King no matter who says what. 

We dealt with it by started looking at places where other investors aren't. Don't limit yourself to any particular area. We now own 8 properties and they are wherever in the greater metropolitan area we could find them. Working great for us. 

Hope that helps. 

Thanks for the encouragement.  I will definitely have to look a little further out of this area to compete.

 

Originally posted by @Brent Paul :

 Brent, my husband and I ran into the same problem when we first started out. You can't compete with a cash buyer because cash is King no matter who says what. 

We dealt with it by started looking at places where other investors aren't. Don't limit yourself to any particular area. We now own 8 properties and they are wherever in the greater metropolitan area we could find them. Working great for us. 

Hope that helps. 

Thanks for the encouragement.  I will definitely have to look a little further out of this area to compete.

 

I should also add that we have become cash buyers ourselves. Trust me, you'll get there one day. Then you will look back and wonder how you even lofted off the ground without being a cash buyer. We certainly couldn't imagine ourselves being cash buyers when we only had 2-3 properties. 

I think it is like an initiation thing that every investor has to go thru first. 

 

@Brent Paul . I have lots of cash buyers, one in the prior lake area has bought 14 units in the past 6 months but doesn’t win every house.

As others have said sometimes sellers will take more money, would like a flexible closing waiting for their house to sell, a promise of no clawback for inspection items, etc. A good listing agent would ask for these things from a cash buyer if they are not mentioned in the offer, but not all are good.

The thing that beats us 99% of the time is price, we only are willing to spend much (cash investors expect a discount), the other 1% is home sellers that don’t want an investor to buy if all things are equal (they don’t want their neighbors to have renters)

Spend a little more than the cash buyer, find some off the beaten path properties. Most properties of value will have multiple bidders some of which will be cash so fine tuning analysis is very important.

@Brent Paul If you don't want to go the hard money route then I would say your best bet is to come in with a potentially 'stronger' offer. Offer over asking and put as much as you can down for the earnest money. In some seller's eyes this will outweigh a cash offer. 

@Brent Paul . Brrr strategy should allow you to offer a higher price. Maybe provide a deposit that is non-refundable if you fail to close due to financing. If your confident in financing then you should be able to close. Make the deposit refundable if the home inspection does not back clean. It puts the ball in the sellers court to provide a house that is structurally sound.

If that rich dude is offering all cash with no contingencies.... damn. Pretty hard to compete with that!

Cash is king, you cant win so try a different market.  I also know cash buying people that are grade A jerks in the cash bidding arena.  They are that way because those speaking to him want something from him without bringing anything to the table or cursing him for always winning. They are good people to know within the business so maybe try a different approach with him like starting off with Congratulations, introduction hand shake. 

One option is go to work for the rich guy. To strike up a conversation just stroke his ego. Arrogant people love being told how awesome they are. Tell him some day you want to be successful like him. Ask if he has any job openings. Tell him you don’t expect high pay until you prove your value. If the guy is expanding that quickly, he will need people to help him.

The point is the value in learning from this guy is worth a ton. If you gain his trust, he may even let you have some deals. Sometimes the answer is don’t try to beat them, join them.

Be more flexible with your numbers (less return)

Go make deals instead of trying to buy ones that are presented to you

Find a way to pay cash. Save up. Partner up.

Get outside of the market he operates in.

Pursue an asset class he may not be interested in.

Find a cash partner. Speed, market knowledge and offer terms are going to help you. Network with agents and let them know what you're looking for, see if they will send you their pocket listings. It's tough to compete with someone like that but it can be done.

@Brent Paul what does arrogance has to do with success?

Its so funny that people just LOVE hating successful people.

Small people hate successful people

Smart people get motivated and learn from them.