7 Steps to Preparing a Winning Offer
Put yourself in the best position possible to place a winning offer on Sundae’s marketplace with these pointers.
Placing an offer for a property is an exciting experience, whether it’s your first investment property or you’re a seasoned pro in real estate investment. No matter your experience, here are some top resources to explore and things you should do and know before placing an offer on Sundae’s marketplace.
Research the local area
While many people start by submitting offers on properties in their own neighborhood, you may also be placing an offer on properties outside of your immediate area. In either case, you’ll want to get a good idea of the real estate health of where you want to place an offer on a property. You’ll also want to gather info on the specific area, down to zip code, individual neighborhood, and even the street. Get familiar with the quality of public schools and/or access to private ones nearby. Know the home’s proximity to quality of life perks like parks, restaurants, shops, grocery stores, and the downtown business district. Plus, learn the area’s crime statistics and any other issues that might affect a home’s price, like being on a busy street or very close to a noisy highway.
Study the local regulations
Experienced investors know exactly what they’ll do with a property — whether it’s doing a fix and flip — before they place an offer. Whatever your planned strategy is, you’ll need to be familiar with any applicable regulations, including zoning, land-use policies, building restrictions, permit requirements, and anything else necessary for you to execute your exit strategy. When in doubt, consult with someone who knows the ins and outs of the area’s real estate laws.
Have the comps in hand
To get an idea of a fair price for the property, know the comps or comparables. That’s another way of saying the average recent sales price for a similar home in the area. Dig into sites such as Zillow, Realtor.com, and Trulia to see what nearby similar homes have sold for in the past six months. Just remember to compare apples to apples — make sure you’re looking at homes of a comparable size, with the same sort of updates, on similar lots, and in the nearby area. If you want to nail your comps down to the last dollar, use Sundae’s detailed breakdown to dive into exactly how to figure a comp.
Get all the details on the property
The more information you have about exactly what you’re buying, the more informed you’ll be on the right price. View the interior with our photos and 3D matterport camera. This camera uncovers everything a photo might hide, like a moldy wall, and gives you a better view of the floor plan. Google Maps street view is a great way to view the exterior. Do not visit the property without permission. If there’s an inspection report, read it carefully and calculate the cost of any renovations or updates that you might want to do. If you have any questions, consult your Investor Advisor for guidance on comps and rehabs. Scrutinize any photos or spec sheets about the property until you feel like you know exactly what you’re placing an offer on.
Know the state of the real estate and lending markets
It’s important to be in touch with overarching trends in the U.S. real estate market, mortgage industry, and other related industries such as new construction. Are home prices trending upward? Is supply exceeding demand at certain price points? Where are the jobs moving? What kind of percentage rate can you get on your financing? Getting answers to these sorts of questions can help you be a better-informed buyer. Sites to check out include HousingWire, Mashvisor.com, and these other websites. You might also want to look through forums and ask questions at spots including Bigger Pockets Forum and Reddit Real Estate.
Line up your financing
Are you paying all cash or getting a traditional mortgage? Maybe you’re working with private investors or are getting a hard money loan. Whatever route your financing takes, make sure it’s ready to go before you jump into making an offer. You need to know exactly how high you can go when placing an offer and how that will translate into monthly payments and business decisions you make around your real estate investment business.
Calculate the end game
Knowing your exit strategy is key to understanding how much you can afford in your offer. If you plan on renting it, then you should use the 2% rule as a guide to how much you’ll want to pay. The 2% rule states that if you can rent the property for 2% of the price you pay for it, you’ll make money. It’s a flexible guideline, but a good place to start. If you plan on flipping, then apply the 70% rule, which states that you should not pay more than 70% of the After Repair Value (ARV) of a property. There, too, you’ll want to run exact numbers. Or, perhaps you plan to wholesale the property, in which case you’d likely want to purchase the property at below market value and have a buyer in mind.
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