There are few similarities between purchasing your home (your primary residence) and buying a distressed house with the intent of fixing it and retailing it back into the market.
For instance, when purchasing your own home, you will look at the house before deciding to make an offer. You’re going to make sure it’s a layout you like, and the quality is what you expect.
That isn’t the case when looking at an investment property.
You don’t always get the opportunity to look at a distressed home before buying it. At auction, for example, you may have driven by the property before putting in a bid. But if you find a property on the MLS or made an appointment with the owners, if you have the option to view it, you better be ready to make an offer.
WHY LOOK AT IT, THEN?
Contrary to popular belief, you don’t get in your car, drive across town to look at a property to determine IF you’re going to buy it or not.
You look at a property to determine the price you’re going to offer! You need to already have numbers on paper of what the property is selling for, what it’s worth after it’s fixed up (the ARV, or After Repair Value), and what the comps in the area are.
“But what if it has mold?”
Then the price goes down.
“But what if it has fire damage?”
Then the price goes WAY down.
Sure, if you’re a newcomer and you see a house that you know is way over your head, I’m not saying that you’re locked in just by looking at it. As long as you have leads flowing and more houses lined up, pursue the next one. But you better have an offer ready, even if it’s a low-ball one.
Looking at a house without the intent to make an offer can kill your productivity.
- It’s a waste of your time. Looking at a property without intended commitment isn’t income producing. I can’t tell you how many people are afraid to make an offer because they think their MAO (maximum allowed offer) is too low and they figure the process will be a waste of time. Then, someone else comes along and gets that property for the same amount or less! It doesn’t happen every time, but you don’t know unless you try, and you’re not trying out of fear.
- You haven’t given feedback to the owner about what the price should be. If you’re looking at a FSBO (for sale by owner) property and they’re asking too much, your first inclination might be to let someone else burst their bubble. Many homeowners, regardless of whether or not they’re in distress, put an unrealistic price tag on a house from sentimental value alone. If you don’t give them an appropriately priced offer, they may never get any offers, and then they may end up TRULY distressed.
- It creates a false sense of accomplishment. If you have to make an appointment, get in the car, drive across town, put on your professional slacks and smiles, and take the time to view a property, you’re going to wipe your brow when it’s over and feel accomplished that you took a step.
I’m all for taking one step after the other, but the work has barely begun. Don’t pat yourself on the back just yet! Take the next step and write the offer!
At first, it can be tricky knowing what to do and what not to do, what to look for, how to write up an offer, how to communicate with a homeowner, etc. You may feel like you need to ease in, like inching forward in the icy water, acclimating with each step.
Not only will you acclimate faster, you’ll make all your mistakes right away (because you WILL make mistakes), and then you can move on to success.
If you want to make less of those mistakes, know what to do, what to say, and how to offer, might I suggest some assistance? If you can’t catch one of our upcoming FUNDING TOURS (ask us how you can get your $497 ticket paid for and a $250,000 pre-approval letter just for attending), try jumping in full force by getting a coach. For more information on what will help launch you forward into making offers faster, call us at 800-533-1622, and we’ll help you figure it out.
Don’t view a property just to see it. See it with the intention of making an offer.
Otherwise, spend your time on things that are income producing.
To Your Success;
Lee A. Arnold
The Lee Arnold System of Real Estate Investing