The Automated Offer Formula
When you find a property that you are considering purchasing as an investment property, are you often stuck on what number you should offer the seller?
Are you interested in learning a foolproof formula that works EVERY time to give you the price you should offer on a potential property?
I have one for you – it’s called the Automated Offer Formula and it works in any market, for any deal. It consists of the ARV (After Repair Value) of the property, multiplied by 90%. Then I take that number and multiply by 90% again to get my net proceeds after closing costs. Then I subtract $40,000 to get my profit. From that number you will subtract the repairs. This number will be your maximum offer price. Multiply by 75% to get your starting offer number.
Often times your real estate agent might think that your starting offer number is too low, but remember you have up to your max offer bid if you need to go higher. Many times these properties have been on the market for a long time or need to be sold quickly, so your first offer might be the one they accept.
If you know the property has multiple offers, you will need to start with your maximum offer price.
Now, if you are in a hotter market, like Chicago, California or Seattle, there are two adjustments you will need to make to the formula:
- The profit portion of the formula should go up. For the Cleveland market, we use $40k, but you will need to go up to $60 or $80k.
- You will not need to drop your list price by 10% to get your sold price, you should only be dropping it 2-3%.
Finding Off-Market and Vacant Properties
This week, I had the pleasure of sitting down with my friend and colleague, Chris Seder for the latest episode of Strategic Real Estate Investor Radio. Chris is a fellow real estate investor and is also one of my Maverick Mastermind Coaches and he works with many of my students at live events and on webinars.
Chris’ specialty is finding off-market, vacant properties and that’s the topic we covered on this podcast.
You might be asking yourself “WHY focus on vacant properties?”
Here are three simple reasons:
- Little or NO competition. About 90% of real estate investors aren’t going to do the follow up necessary and want the deals spoon fed to them
- Many of the vacant houses that are found have owners who are incredibly motivated to sell
- No matter how the market is doing, there are ALWAYS going to be vacant houses
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