No more than 80%... Really??

29 Replies

I've been reading The Book on Rental Property Investing by Brandon Turner as well as listening to the Bigger Pockets Podcast, and I've heard not buying for more than 80% of the property value was a must.

So what I did was run the numbers on some of the houses I'm interested in and it seems to really undercut what the asker is wanting. 


For example a seller listed a unit for $72,000.00 in my area, buying at 80% would mean I would offer them $57,600.00. That seems really insulting to me if I was the seller.

So how do you even begin to achieve this goal of 80% without being told to F-Off???

I'm looking for a BRRR in my market also. In general, you're not going to find an average owner willing to give away 20% for nothing. If a house is in good shape, and the owner wants to maximize the sale price, they will.

You get the 20%+ from finding distressed properties: maybe the house is damaged and the owner can't pay to fix it and a bank won't lend a mortgage on it. Or the owners have issues like divorce, death of the owner, etc... Or someone that needs cash quick.

One thing being missed here is that Brandon said 80% of value, not ask price. There are properties on the market that are listed both below and above their actual value. Finding those listed under market is not common but an off market property may be able to meet the 80% criteria.

@Danual Berkley

I think having the personality or ability to not take F-off personally and go with your game plan.

If the worst that can happen is a seller telling your to F-off that is not that big of a deal if there is one seller that says OK.

No one is saying that every offer is going to get accepted or that it is comfortable making low offers.  This is part of a strategy to get an upper hand when investing.

You know what you are comfortable with. Just know that there are some very good silver tongue real estate investors who have the gift of gab and make these deals come through.

Do a self assessment and figure out your game plan.  Don't get mad when your competition is getting a deal because you can't deal with someone telling you to F-off.   

Just my opinion!

@Danual Berkley

I'm exploring my second property and getting funded through a hard money lender whom I've built a relationship with over the past few years through other means outside real estate. We just started talking about him potentially providing me a loan and his advice to me was "if you're putting in an offer that you're not embarrassed of then you probably went too high" which I found funny and pretty interesting.

I’m a newbie so take it with a grain of salt coming from me.

"So how do you even begin to achieve this goal of 80% without being told to F-Off??"

Pre-screen if it's been on market for a while and is still listed, they want to sell and maybe more amenable to a lower offer.

OTOH, so they tell you f-off, you're still alive and move on to the next deal.

@Danual Berkley it feels awkward, but just do it! Currently I have just one unit, on the advice of our agent we offered 75% of the current asking price which had already been reduced 10% from the original asking price. I never thought we had a chance of landing the property at that price but the seller didn't even counter.

Not sure what market you’re in but the initial asking price on our unit was very similar to yours.

We've done it a lot & still do & have been told to "go forth & multiply" many times, in fact one nasty owner came back to us several months later & we got it for our offer, because all his <mkt rent tenants bailed pending a sale. 

But the ones you nail are usually some of your best deals. I like getting those not yet listed, so not losing the 6-7% to RE commission gives us more leeway. Tired & fed-up owners are out there & there will be more now if they haven't seen rents for awhile. In fact we have a couple of owners with vacant properties that we are playing the waiting game with now.

It's ALL & ONLY about the numbers & margins NOT the fear of offending a seller or their very sensitive listing agent.

I'm new to all of this as well but I would say it's in your best interest to analyze the property (as in market value vs asking price, potential work that needs to be done, days on the market, etc.) To be able to give insight to why you offered what you did, then i would find out if the seller is motivated. Above all else, though, i would tell myself that the worst that can happen is the seller would say no. I'm sure in this business we'll come across quite a few "f off's" because we want to find a deal, we're not like the typical sally homemaker buying a home with no other intention than to live there the rest of our lives. Not to mention people often think their house is worth more than it really is. Affirmations are a powerful tool if you want to get past the fear of being told to F off, as is practice. Once you're told to F off you'll realize it wasn't that bad, which will eliminate that fear you have and give you the confidence to offer on the next deal which can ultimately land you exactly what you're looking for. Hope this helps!

Originally posted by @Pat L. :

We've done it a lot & still do & have been told to "go forth & multiply" many times, in fact one nasty owner came back to us several months later & we got it for our offer, because all his <mkt rent tenants bailed pending a sale. 

But the ones you nail are usually some of your best deals. I like getting those not yet listed, so not losing the 6-7% to RE commission gives us more leeway. Tired & fed-up owners are out there & there will be more now if they haven't seen rents for awhile. In fact we have a couple of owners with vacant properties that we are playing the waiting game with now.

It's ALL & ONLY about the numbers & margins NOT the fear of offending a seller or their very sensitive listing agent. 

This is a great point, sometimes people will initially tell you no but then months later realize your offer is all they really had when they've listed too high. Also finding an off market deal is good leverage if you can offer a cash offer and a quick close.

If you're looking at marketed properties, they are expecting market value. Find off market.

I keep my eye on properties that go delisted without sale, I have a few I plan on contacting soon. 

I like distressed properties that can't be financed.

good luck!

I haven't read that book, but that is good advice. All your profits are made with the purchase. There's no easier $10,000 made then cutting it from the price.

  I think the point is to be very patient and to be okay with turning away 10 okay deals so that you can nail a great deal.

also....

Your initial offer doesn't have to be at the 80% value. Your offer is just the starting point for negotiation. There is no problem starting with their asking price so you're locked in and you can then try and negotiate down to the 80% value level.

Originally posted by @Rebecca Salazar :
Originally posted by @Pat L.:

We've done it a lot & still do & have been told to "go forth & multiply" many times, in fact one nasty owner came back to us several months later & we got it for our offer, because all his <mkt rent tenants bailed pending a sale. 

But the ones you nail are usually some of your best deals. I like getting those not yet listed, so not losing the 6-7% to RE commission gives us more leeway. Tired & fed-up owners are out there & there will be more now if they haven't seen rents for awhile. In fact we have a couple of owners with vacant properties that we are playing the waiting game with now.

It's ALL & ONLY about the numbers & margins NOT the fear of offending a seller or their very sensitive listing agent. 

This is a great point, sometimes people will initially tell you no but then months later realize your offer is all they really had when they’ve listed too high. Also finding an off market deal is good leverage if you can offer a cash offer and a quick close. 

Agreed, Cash, close in 30, no conditions usually seals the deal. We had one seller turn us down with expletives then went through hoops to comply with higher offers subject to conv., financing only to be denied regardless of work done. So we got it @ <60% of the initial list $$$ & discovered uninstalled new furnaces & HW tanks in the basement. BUT it did need a LOT of work & my partner bailed on it, so we flipped it contract-for-deed @ 12%, as is, for 30% over our buy point. One of many!!!

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