7 Tips for Making Cash Real Estate Offers
If you are a real estate investor making cash offers on investment properties, you want to make the right decisions. You don’t want to overpay for the house and cut into your profit potential. You don’t want to come in with lowball offers that sellers won’t take seriously. You have to find that “sweet spot” in terms of price, along with implementing other important cash offer strategies that will allow you to close quickly.
Here are 7 tips for making cash real estate offers:
1. Do Your Research
Of course, you need to make sure it’s a property worth buying before you make an offer. Study the market and understand potential resale prices (or rent prices if you are buying and holding the unit). Run property-specific analytics to estimate renovation costs and timeline. Do all the necessary research. This will help you come in with a fair offer price that fits your budget, allows room for financial gain, and will be more acceptable to the seller.
2. Set Your Target
Some investors will go with a quantity over quantity approach. They will make a bunch of lowball offers and hope that one seller bites. This shotgun style isn’t always effective, especially when compared to a laser-focused approach where you find and target very specific properties that meet all of your investment needs. Understand what you are looking for and then work to find it. It’s okay to be picky when spending this much money!
3. Set Realistic Price Ranges
Setting a fair cash offer price for real estate can be tricky. You ultimately want to get the property for the lowest possible price, but remember most homeowners have at least some idea of what their house is worth. They may be thinking of the high end of the market with a traditional sale, while you are thinking wholesale prices. You have to find the middle ground. As you are running your property analytics, set a realistic price range you are comfortable paying (that will still allow for ample profitability). Your initial offer should be somewhere near the low end of that range. It is a fair price, but not the top dollar you are willing to pay. This gives you some wiggle room for negotiations. However, the range also should set your highest amount. If you still can’t get the property for the high end of your price range, move on to a different opportunity.
4. Ask Questions
One of the best strategies you can implement as a real estate investor is to understand the seller’s wants and needs. Ask them questions and get to know their specific situation. Everybody is motivated by something different. Someone facing foreclosure will have different priorities than someone who is selling an inherited property. Some will only be looking at the price. Others may be considering the move-out date or overall selling timeline. Figure out their priorities and use this to craft a specific offer with details that will be most appealing to them.
5. Build Trust
Home sellers are naturally skeptical of real estate investors. You have to work to build a sense of trust with them. Asking questions and getting to know them is a good place to start. Let them know you understand their situation and present your offer as a solution, not as a strictly financial transaction. Do what you can to make them feel good about their decision to sell for cash.
6. Be Ready to Act Fast
We all know it’s a strong seller’s market right now and this gives you less leverage as a real estate investor. You’ll have to be ready to act fast and make offers as quickly as possible. There may be other investors after the same property or they may start getting offers from regular home buyers. You still want to do all your research and be smart about your offers, but don’t take too long or you will lose your opportunities in this fast-moving market.
7. Stick to Your Plan
You should have a solid investment plan and budget. It’s easy to get caught up in the excitement of making cash real estate offers and buying new properties. Just remember to stick to your plan and stay within your desired price ranges. This is how you avoid overpaying and/or getting caught in a bad investment situation.
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