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This is part two in a two part series on finding and acquiring investment properties. Part one deals with the process of looking for and finding the right investment properties.
In order to find a good deal on an investment house, you will need to look at and submit offers on many houses. You first need to have an understanding and relationship with your buyers agent to know what they need from you and what you expect from them. Having everything communicated and understood up-front can save a lot of misunderstandings and problems down the road. You want to let your agent know that you will be submitting offers on more than one property at a time and that you will sometimes be offering substantially below the asking price. Most agents will probably not like this arrangement, those are not the agents for you- find that out at the beginning before you sign a buyers agreement thus contractually binding you to that agent. Once you do find an agent you like, you will want to sign their buyers agreement giving them piece of mind that you intend to stick with them and make sure they get paid for their efforts. Take care of them and they will take care of you.
If you don't understand the process, don't be afraid to ask your agent questions. Again, a good knowledgeable agent will be patient and stick in there with you because they will realize that if you are successful they will have a repeat customer. If you've found a not so knowledgeable agent, of course they won't tell you so - they will answer your questions as an authority and give you bad advice but package it as "the truth". They also tend to get snippy or impatient when you tread into areas they don't know much about. This is why it is important to find an agent that works *primarily* with investors as they have a different mindset that most typical agents.
As mentioned in our house hunting article, we don't like to drive around looking at a bunch of houses all at once like many agents do. We let our agent know that we will call him when we are ready to submit an offer (we do a quick outside drive-by first, then submit offer, then on acceptance see the inside). Our agent actually appreciates that as we aren't wasting his time and gas driving around looking.
The first few offers you submit there is this gut wrenching feeling of "what did I just do?!?!". The best way to get over that offer fear is to submit a few ridiculously low (i.e. 50%) offers and get rejected a few times, then submitting offers becomes no big deal. The more you do it, the less afraid you will be to "pull the trigger".
One thing to keep in mind- if you are submitting your offers right, you will have a number of rejections because one of your main aims is to buy low. We look at the list price as a suggestion, we may submit a little lower or a lot lower depending on how high the asking price is to start with. Have the attitude that deals are made and not found- you may buy a house really low that was initially listed on the high side and others have passed it up.
One phrase we have heard a number of times when submitting offers on bank foreclosed houses is: "We have a multiple offer situation, please submit your highest and best offer before ______". We do not enter bidding wars, if someone wants the house more than us - let them have it. There are plenty of houses out there. So when we hear that, we stand pat. Our initial offer was our 'highest and best' offer or we wouldn't have submitted it in the first place. In fact, the latest house we bought they told us this after we submitted the offer. We stood pat and we now own the house. Don't let them intimidate you into doing something you don't want to.
Get out there and start submitting offers and make something happen. Submit low enough so that if the offer gets accepted, it's a slam-dunk. That way you won't have to worry about your offers getting accepted! Even if you do submit too high and it gets accepted, know that your clauses are in place to allow you to back out of the deal and you won't have to worry. The more you do it, the easier it gets.
Image courtesy Maryland REO Real Estate
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