Your Knowledge, Your Karma | Understanding How to Make an Offer on a Single Family Property

Understanding How to Make an Offer on a Single Family Property

Everyone has heard that now is the time to invest in real estate. Every real estate expert and mentor out there is saying “Buy! Buy! Buy!” but many people don’t know where to begin. Although this is not always the case, the natural progression of the real estate investor is to begin investing in single family property. The easiest single family property to invest in and to find information on is your “bread and butter deal.” The bread and butter deal (found all over Texas, including the Austin real estate investing market) has around 3 bedrooms, 2 baths, and a 2 car garage. It’s somewhere between $80,000-$120,000, and rents for less than $1,000 a month.

The first step to investing in real estate, after you’ve acquired some basic knowledge on the subject, is to understand how to make an offer on a house. As a consumer, a lot of Americans have a weird conception of asking price that does not carry through in the real estate investing world. While it’s true that the greater discount you get for a prospective property, the more money you make, there is a rhyme and reason to negotiating. As a real estate investor you must detach yourself from the asking price- that has nothing to do with how much you buy for the property, or necessarily how much the property is worth to you. Understand that just because you got a property for $20,000 less than the asking price does not mean you got a deal. Likewise some motivated sellers’ asking price for their property is completely reasonable and can result in large profits for you- as long as you don’t miss out by continuing to hit them with “low ball” offers.

When determining how much to offer for a house the most important factor to consider is comparable sales. Look to similar properties in the neighborhood and see how much they sold for. Lately this number has been skewed by foreclosures, so try not to include these in your equation. Comparable sales do not tell you how much you should pay for a property, they merely give you a strong indication of how much the prospective property could sell for, and how much equity capture you’ll stand to gain depending on your final maximum offer.

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