It has been an interesting and pretty wild ride on this investment train. Along the way I have learned a lot of do's and dont's...and I am still learning every day. There is so much to take in. There are ridiculous HUD rules, Dodd-Frank legislation, QM rules, owner occupied preferential buyer treatment, First look Fannie Mae guidelines as well as dealing with listings that are just flat out wrong or misleading (thanks dumbass listing agents). Although, through it all, I have gotten pretty darn good at running the numbers. So good, in fact, that now (at a) glance, I can estimate an ARV based on where the property is located. I have had to tweak my search model by trial and error as well as rethink how I go about determining the purchase price on my offer.
Its a Sellers Market
Right now in San Antonio it is a fantastic time to be investing, however it is assuredly a sellers market. To date, I have put in probably 12 offers and have had two accepted. The first one was a dud, so I rescinded the offer during the option period and the second I am closing on this Friday. I started off with full price offers, but was not getting a nibble from the little Realtor fishes in the San Antonio pool. At that point, I slowly started upping my bids to above the listing price. I realized that there are a few things that you should NEVERdo... Never get involved in a land war in Asia”—but only slightly less well-known is this: “Never go against a Sicilian when death is on the line and NEVER.. NEVER EVER EVER EVER put in a lowball offer on a newly listed property in this market.
Adventures with Ms. Lowball
I have had the great privilege to work with a person who is the best at what she does and I lean on her expertise to help guide me through this process. She is fantastic at producing CMA's and getting quick accurate ARVs; helping me weed out the "nolo contentres" that I may be looking at. Time is money, and she does a great job of helping me cut through the BS listings, the HUD rules and can contact a listing agent and or broker at a moments notice.HOWEVER she can also be maddening at times! I am not saying the woman is cheap, but she converted to Catholicism just to get the free breakfast and drink at mass every morning!
Getting an extra $500 dollars out of her on a bid recommendation is like asking a fat kid if he is giving up the last piece of cake.... wait isn't this my money we are talking about??
Cash is King
All kidding aside, when investing is concerned CASH is KING. If two equal offers are looked at side by side and one is a CASH and the other is financed, cash will win every time. For me, the number one thing to know is my numbers. I have to compare the offer price plus rehab price against the After Repair Value (ARV). Knowing this ratio by heart determines what your ceiling is regarding your offer price. You need to know what you have in reserves and what the offer will cost you out of pocket. There is NOTHING wrong with offering above the listing price and in this market, and on NEW listings it is a must -- if the numbers make sense.
I hope you enjoyed this, my next blog with be about closing day!!
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