I have been looking at a few duplex’s in my area, and I have seen a couple that are interesting but when I analyze them the cash flow is not good. I want to give an offer but for a price that works.
From your experience when offering is there a certain % below offering that you typically will offer?
What if the home has been on the market for 9 months? Are there any tips you recommend?
@Habbak Burs Every listing has a price that makes it worth it to YOU. I recommend that you focus more on what price makes it a good deal for you rather than a specific % below asking price. You will get lots of rejections for low ball offers, so make lots of offers and expect rejection. Last thing you want to do is overpay for something and then struggle to keep it alive.
Thanks I will try it out.
@Habbak Burs the first duplex I bought my first offer was 40% less than asking price. When it was all said and done we closed 25% less than asking.
There have been times for rehab properties I’ve offered 75% less and been flat out rejected.
@Habbak Burs - Let your goals determine the price. You start at "no", so why not make the offer that fits your needs.
My last purchase was a four house package deal. I offered $25k under and they only dropped the price by only $5K. I agreed but knew that I would not compromise on any known repairs that we detected during due diligence. They spent a few thousand and fixed all detected repair items. I was comfortable paying near full price. Also the seller paid commission and half of closing costs. Of note, the property had a fifth home not included in the pricing determination since it required $20k in rehabilitation and had been uninhabited for over 1 year. Also rents were a little below market. Also, it was on 2.7 acres with an empty lot. All this added up to another $50k in unrealized equity. This is why I was comfortable paying near asking price.
If it helps I’ve offered 20% over asking and not gotten the deal because someone else paid more.
The worst, absolute worst mistakes I’ve made is not buying a property because I had bought a comparable property for less previously. I lost enough deals over less than $5k that I avoid looking up their current values or sales prices.
If you slightly overpay time will take better care of you than if you never purchase.
@Habbak Burs I base my offers on my expected ROI, not the asking price. If it is rejected, I make an offer on something else. BTW, most duplexes are old and in bad areas. I wouldn't recommend them generally.
@Habbak Burs "offer bellow asking" is the wrong approach i think!
What if the asking price is already bellow Fair Market value?
Some markets don't cashflow, and there is nothing you can do about it.... unless the property has a "twist" to create cashflow.
In low cap-rates markets (2%-4%) you will need to buy the property for 50% of its value to cashflow. or be at the 1% rule.
Sometimes properties seat on the market for long time because something is wrong with it, OR because the sellers price expectations are high.... and they don't care to wait or just not really motivated to sell.
"low ball offers" is Not a great way to form solid relationships with Agents, you should consider been more pro active and try to source off-market deals.
Thanks everyone for the help.
I appreciate it
Greetings from Sacramento! Riverside is a little down the way there.
I've been looking in Sac for my first deal, and something up here you dont do is offer below listing. Market is so tight on the MLS up here that homes can easily go for above asking, with multiple offers.
Not sure how it works in the south part of the state, but California seems to be a buyer's market as a whole right now.
As others have mentioned, going for off-market deals is going to give you a much better deal. Your numbers look okay to me, but that's it. Just okay.
I'd pass and keep looking if it were me and I wasnt going to owner occupy.
@Habbak Burs in the riverside area?? DONT DOOO ITTTTTT!
Also, that's a very rule of thumb-esque question. If you're making an equity play or flipping a property then you're looking for a big discount. If you're looking for cash flow, you have a pro-forma ROI that you're seeking to get in return, and there will be a price at which your desired returns are acheived.
Independent of all of the above- the MLS isn't exactly the place to buy properties for less than what they're worth. In fact, even wholesalers and property sales businesses are seeking market price these days, with many buyers willing to pay that price for the right property. If discounted property is a necessity for you, then I suggest learning to market directly to sellers on a small but highly targeted sale.
There are exceptions to this: but if it's been on the MLS for 9 months in this hot of a market, you're pursuing a deal that many many many other investors passed on. Some of them presumably less prudent than you. Consider the implications of that.
Every market is different. When we are in a strong sellers marketing we are in California, most deals will not go for much under the listing g price simply because there just arent enough to choose from.... all the investors and buyers are looking at the same properties. You just need to decide if the issues with the property are within your wheelhouse or not. Measure how many days on the market and if there have been any price reductions. Sometimes sellers have to learn the hard way... if theres one you like and your offer gets rejected, come back to it later if it's over priced and re-evaluate. Most listing agents price within a range of recently sold similar properties. Most properties are still selling for 97%+ of asking price in the Central Valley.
If you are offering more than 5% below list on a freshly listed property, in most cases I wouldn't waste your time writing an offer. You can be a bit more aggressive with things that have been on the market longer though. In general if something is a good deal in RIV it will go quickly.
You said the listing has been on the market for 9 months which tells me its overpriced. You need to do some homework here and work backwards. There is no set % number that you just go and throw on the wall and hope it sticks. You want to work backwards.
First, you need to figure the true value of the property. Find out repair costs and now you have an idea how much over-price it is. Have your agent discuss with the other agent your price based on the facts. The facts would be the true market value. Submit an offer based on that. If the seller does not want to sell then move on. Sometimes people will only sell at a certain price, could be delusional, could be what they need for the loan payoff it really doesn't matter the reason. The facts are you need the seller and you to agree on a price to make a deal. Sometimes things just aren't meant to be. Happens all the time.