09 Nov How to make a great offer for land and houses
My two main programs – the Land Profit Generator and the Flip it Fast Formula – both require you to get in contact with property owners and make them an offer to purchase their property.
I have found that some folks think this is the hardest part of investing in real estate. In reality, once you know the formulas, all you have to do is plug in the numbers from any property to see if you have found a deal. So let me take a moment and go over some basics for making offers on land and houses.
First, here are the basic factors to take into account when making an offer:
- Value of property
- Condition of property
- Motivation of seller
Your goal is to buy the property at a maximum discount (below market value) so that you can build profit-into deal. Remember that this is the moment to check your emotions at the door and to make sure that the deal you are analyzing really is a deal.
LAND For properties that are worth $50,000 or less, you should never offer more than 25% of market value. This will give you a buffer in case you make a valuation mistake and will also allow you to flip the property quickly for below market. It also leaves open the option of a sale with seller financing and a low down payment. And with land there are no repairs to worry about, so finding the right number isn’t too complicated.
HOUSES When dealing with houses, you have to establish what your maximum offer will be. In other words, what is the most money that you can give to the seller while still leaving enough of a margin to cover a) your profit, b) the rehabber’s profit, c) the cost of repairs, d) the cost of the rehabber’s financing, and e) the cost of delinquent property taxes.
Here’s a real life example a student recently told me about. He found a house that had a market value of $160,000 but that needed about $20,000 in repairs. Knowing that the rehabber would want at least $25,000 in profits, he made an offer to the seller to buy the house for $85,000 and the seller accepted. In turn, the rehabber bought the house for $100,000. So at the end of the day:
- The seller got $85,000 for their house
- The investor got $15,000 profit
- The rehabber (after repairs and financing) gets $25,000 in profit
Making a deal isn’t that hard. But so that all of my students feel confident, I go into much more detail in my two programs the Land Profit Generator and the Flip it Fast Formula. If you haven’t done so already, check them out and start making money!