One of the most important skills you need to develop in this business is the ability to make offers. . . NOT just any offers, but offers that get accepted. Unfortunately, there’s no shortcut to acquiring this skill. The only way you become good at this is to consistently make offers.
When you’re starting out, it’s expected to have offers turned down again and again. Just make sure you’re taking note of the reasons your offers are getting rejected. Maybe you offered too low. Maybe you made a miscalculation on the repairs needed. Maybe you’re leaving too little room for your buyers to breathe. You should take note of all these little things because, in the long run, this will create a clear guide on the kind of offers you should be making in your market.
When making offers, especially through emails, it is important to make things as easy as possible for the recipient. You do this by making sure all the necessary documents are included in your offer such as your proof of funds. Let’s face it: it’s a whole lot easier for sellers to say “yes” to your offer if you can show them right off the bat you got the goods to back it up, right?
Create some criteria and use it to determine your threshold for buying. For instance, decide that you will pay $50,000 TOTAL (initial investment + rehab costs) for a 3 bed/2 bath block property and refuse to budge from this stance. Keep your emotions out of it! You will not be living in this house. It is strictly a moneymaker as far as you’re concerned, so the floor plan should only matter from a “Will my prospective tenants like this?” perspective.
When the bank counters your offer (and they most likely will!), be prepared to defend your original offer if you’re already at your threshold. I would suggest sensationalizing the inspection to work them down on price. For instance, have your contractor/handyman create an estimate that includes every single possible repair. Be sure the estimate reflects retail (read: inflated) pricing as opposed to the investor pricing that he typically gives you. Depending on the asset manager handling the file, this may impact their willingness to work with you on price.
At times you may find that you have a lot of competition on a particular property. If you get outbid, it may be worth your time to contact the investor who got it and see if you can work out a quick deal. Many times the other investor may want to flip it over to you for a quick $2k. If the numbers still work for you, you can move forward. If not, move one. But don’t ever begrudge another investor when they make a profit. Just be happy for them and move on. You don’t want them begrudging you if you’re the one who closed a deal, right?
So start making offers today. The sooner you get started, the sooner you hone your skills.