How common are $2m all-cash offers these days?

Question

I'm bidding on a 40 unit complex in the Midwest. Asking price is $2mm.

Property is on the market for a short time. Broker asked for B&F offer by tomorrow and said that he has two all-cash offers around the asking price.

The property is pretty attractive at that price point.

How can I know if broker is bullshiting me? Are all-cash offers at those prices common these days?

Evan Polaski · Answer

@Dan Bowe, while I can't speak to whether the broker is shitting you or not, there are certainly all cash offers at that price point.

From a purely financial return POV, cash is a smarter move than using debt on a lot of deals. If this property is trading at an in-place 6% cap, and debt is being quoted at 7%, is it detrimental to your returns to go in with any debt at acquisition.

So, again, I don't know the property or broker you are talking about, but I do know that in real estate, $2mm is next to nothing in terms of capital. I know that cash offers make far more sense financially than leveraged deals. And there appears to be significantly more demand for properties than there is supply.

Henry Clark · Answer

You can still do financing. Are you preapproved for a working line of credit? Then don’t do subject to financing.

Allan C. · Answer

@Dan Bowe I can’t say in the Midwest, but in CA I’m still seeing cash offers at $2M….but these are for 4-units and not 40.

Gino Barbaro · Answer

@Dan Bowe

Tough call. If it was a year ago, I would most likely believe him. He may just be posturing up to elicit a bid from you.

Cash prices can still be common. We are about to close on a four unit for 600k all cash. California buyers or 1031 buyers can pay all cash.

Is the deal worth pursuing at that price? If it is, then you put in a bid. Thats why it's so important to build relationships with brokers in the market.

Good Luck

Robert Rixer · Answer

If I've learned anything from years in real estate is that no matter how much money you have, there's always someone with way more. Those people bidding $2M cash probably have a similar reaction on another deal to a guy bidding $10M cash.

James Wise · Answer

If it's a good deal, common. Ain't nobody got time for some wanker without cash.

Bob S. · Answer

VERY common, that's why we get the best deals, as they say, " cash is king" close AS IS. What is the gross rent, I can figure out the net. However, if you have the TRUE net, lets see it If it makes sense. If this is anywhere near Cleveland, well that's my wheelhouse.

Greg Kasmer · Answer

@Dan Bowe - I've lost a few deals that went "all cash" between the $1M-2.5M range. Now, I'm accustomed to just asking the broker up front whether he anticipates an all cash offer to save time. I still underwrite with a debt assumption, so it doesn't make sense for me to spend too much time on a deal if there is a good change of an all cash purchase. My guess is that the broker is being honest with you and she/he does have an all cash buyer. Good Luck!

Russell Brazil · Answer

Pretty common

Melanie P. · Answer

Very common to see all cash offers at this and every other price point. You can counter the all cash guys by removing any financing contingency and making a hefty EMD. If you put up $100,000 and fail to get financing the owner isn't really going to mind keeping your money and calling one of the other two offers up.

See if you can get your bank to give you a credit line against your paid off real estate. That gives you the flexibility to go all cash and work out the details later.

How common are $2m all-cash offers these days?

How common are $2m all-cash offers these days?

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