How far will a seller drop?

Question

I have been analyzing a lot of potential rental properties in my area (Pheonix Metropolitan primarily Queen Creek, Gilbert, and Mesa) recently. Most of the properties won't even break even unless the seller drops their price up to 25%!

Is this typical for more expensive markets? Im assuming the seller wont drop more then 5% maybe 10% if the house is way overpriced.

Is it even likely to find a house with minor value add that would make a cash flowing rental?

Tommy Chan · Answer

yes you will find a home that will be a cash flowing rental, keep looking and looking and looking.

JD Randall · Answer

@Daniel Haberkost Thanks for the support!

Marc Winter · Answer

One of the basics of investing is making many offers.  As Aesop would say, "you've got to kiss a lot of frogs".  Keep making offers, and be more concerned about making the numbers work for you rather than offending the seller.

Steve Morris · Answer

Am a apt broker, so may experience:

1) Brokers want listings, so to get it, they may have to "buy" it and fill the seller with unwarranted hope.  I think the strategy, is to tell a buyer to write at asking, tie it up for that valuable first month and then do a retrade (price adjust).  Just say the books suck or there's some mechanical issues.  After the first listing month, props become less shiny and shopworn.

2) If the property has been sitting a while and still listed, the seller does want to sell.  Then I would prioritize those for low-ball offers.  Sometimes, props are fine, they just get tied up by a less-than-serious seller and once it's listed for a couple months and not moving, people assume it has some warts.  Of course, it may have real undisclosed issues also, so be aware - But that's the case with any listing.

Theresa Harris · Answer

In expensive areas you may not be able to find deals that cash flow unless rents are really high or you can do a larger down payment.

Most sellers would be offended and refuse your offer if you offered 25% of list price.  You need to determine what fair market value is and if that doesn't work, then try another house or another area.  How far below list the seller will go depends on the market, how long it has been listed, if it is over priced and why they want to sell.

Looking at vacant properties is more likely to result in a motivated seller as it means they've move to another place and are carrying two mortgages.

Nicholas Mann · Answer

@JD Randall

Didn’t realize you had a partner, if your doing an all cash deal then state that to your agent and sometimes I believe the selling agent may want proof of funds on cash deals. You could let your agent know that you are a cash buyer or you could always reach out to the listing agent and make your offer directly to them, which would be more enticing because they would get the full commission, especially if you have an all cash offer with less contingencies you may be low balling but your offer should still come off as strong. Granted you have proof when the listing agent asks.

JD Randall · Answer

How would getting a pre-approval letter work with me getting the money from a money partner? Would I have my money partner apply for a loan so they would get the approval letter and then I would use my partner's letter to show the agent that I am serious about investing? (Obviously disclosing that the loan is through a partner)

Nicholas Mann · Answer

@JD Randall

Sounds like you have a good solid plan in place just execute on it.  As far as finding an agent that is willing to put in offers for you just get a pre approval letter showing you actually have the funds available and let them know that you are serious about investing.  Start by looking in your local REIA group to see which agents are investor friendly or connect with someone on BP.

Daniel Haberkost · Answer

It's certainly worth it and okay, I ask because every day new investors come on BP talking about how they're going to wholesale without understanding how much time/effort/rejection will be required to find off market deals. It sounds like your expectations are fairly on point. Make a daily plan, don't veer from it and be consistent over long periods of time and you'll figure it out.

JD Randall · Answer

@Daniel Haberkost

I am planning on becoming super good at creating deals. So far I have only analyzed deals that have no value add but because I just finished analyzing 25 deals today I feel that it is time that I start doing so. I am expecting to have to hustle a lot in order to get into real estate but believe it will be beyond worth it. I don't yet have a plan to reach out to sellers because up until recently Ive been hoping that I would be able to find create deals on the MLS.I know it is possible to do the following and if I feel this is where my time would be better spent then this is what I will look into and start doing:Direct mailOnline AdsRadio AdsPublic eviction recordsPublic Divorce records Out of state ownersWater/electric company's list of off water/electricity housesWholesalers Relationships (ask if they have anything else they would be willing to sale)Driving for dollarsThe free options above are the ones that I would pursue first.@Nicholas MannI would also prefer to not have to shotgun approach offering on deals because that would require my real estate agent putting in a lot offers (and time) for me when the majority of them have no chance of being accepted. I would rather put in less offers (and not offering on many properties I analyze) but have a way higher acceptance rate but am not really sure how to do so yet. Do you have any tips that I could do that? Maybe there is a certain type of agent that I should look for?

How far will a seller drop?

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