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mark sloane

Making offers & desired equity

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Hi,

 

Interested in others thoughts on this. I'm struggling with the etiquette (if there is one) around placing offers. I am viewing a mixture of terraces from those that require full refurbs to ready to move in and everything in between.

 

I am being a bit "gun shy" about placing offers as I feel like they may be seen as naive. All the houses that I am looking at offer good rental yields but I am also looking for an equity gain at the point  of purchase of 8%+ (of the perceived refurbished value, where a refurb is required). I am using a spreadsheet for all of these calculations. The problem is that I feel like my offers will literally be pointless as the number is always so far below asking price.

 

I'd be interested in others opinions on whether my 8%+ equity gain is achievable or over ambitious and what other people purchasing similar properties (for let) are looking for in terms of initial equity gains. 

 

As always, any thoughts would be greatly appreciated.

 

Thanks, Mark

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Do not be worried what other think of your offers, just get them put in and have the evidence that you have the funds to act.  Someone will eventually bite.

 

Are you getting too hung up on finding the  best property?  How long have you now been waiting/looking, and how much have you potentially lost in rent if you had purchased 12 months ago etc?  If a property stacks up, the rental yields are good, then why waste time over a few £k here and there?  The best way to get going is to get going!

 

Darren

 

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if its a decent area/yield then i would not worry about any uplift after refurb as it will happen by itself assuming you don't do an expensive refurb. I have the same strategy and in the early days failed to find a deal that stacked up and after 9 months of looking i just went for a deal that was 'break even' after refurb. When I remortgaged after 9 months it was valued at 15% higher than all my costs so decent result. I've done the same thing a few more times since. I sometimes add a small extension as well as refurb to add more value

My starting offer is usually 10-20% below asking depending on various factors- i buy cash as that helps in the negotiations as well.

 

The hardest thing is the first deal as you will always find reasons why the deal doesn't stack up when in reality its fine

 

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Thanks Darren. Would you or others say that you should probably be offering on the majority of properties that you view as I suppose every single one "stacks up" at the right price?

 

To answer your question, I got my first one last November, good yield but only a small equity gain upfront. I have been in a position to purchase a 2nd for around 2-3 months now and have viewed plenty of properties but only placed a handful of offers. This is definitely where I am struggling/going wrong.

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Speaking from a position of not a lot of experience, I would say always make an offer. Looking back over the last year, I've spent too long trying to calculate the exact price, whereas if I'd known roughly what it was worth to me and offered below that, I'd have probably bought more at a still good price.

When I have made an offer, I've rarely had a complete no, I've found the estate agent will explain the issue and roughly where it needs to be. 

There is a risk that if you just make loads of low ball offers without thought i.e. 20% below asking price every time, the estate agent will get fed up with you, but if you explain your thinking based on comparables, works required etc, they can see where you're coming from and can also provide some guidance e.g. if you're underestimating how much it would be worth when works were finished. 

In short, if you think a house would work, offer below what you think it's worth and go up to that value. If things are going well, you should be viewing and offering on more than you can buy anyway, so who cares if a few get away

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Still catching up with a number of podcasts and one that's come up today is a sound bite episode of The Property Voice from 3/5/17 called '10 ways to secure a discounted property' which includes bits about making an offer. Worth a listen

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Just wanted to say thank you to Dino and Haf, very useful responses. I am definitely in the 'gun shy' zone right now. Trying to make my first purchase through a limited company and I think I have read to much and not offered enough.

 

Question - As someone who is chain free, but needs a mortgage. Is there anything specific you do to try and distinguish yourself as a 'good' buyer. I mean in terms of showing you are serious and that you aren't out to low ball every property that you view.

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you should get some kind of 'mortgage in principle' letter so the estate agent/buyer know you are ready to move and won't fail at the mortgage stage. Unfortunately you are not in as strong a position as a cash buyer so may not get the same level of discount.

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On 9/10/2018 at 8:48 PM, dino v said:

Still catching up with a number of podcasts and one that's come up today is a sound bite episode of The Property Voice from 3/5/17 called '10 ways to secure a discounted property' which includes bits about making an offer. Worth a listen

 

Just downloaded that, I'll give it a listen, cheers.

 

I have made 3 offers since starting this thread, 2 have been refused, I have increased one offer and I am awaiting a response. Thanks all for the advice.

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Isn't there a proverb/anecdote about one 'yes' being worth 99 'nos' and being thankful for every no as it takes you one step closer to a yes? ;-) 

 
Anyway, if your stacking is good enough, the idea, IMHO, is that the properties you are offering on are already good deals anyway so any discount you get is the cherry on the cake. Maybe revisit your stacking process so that you only focusing on the ones that give you the equity gain at asking? 
 
 

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Interesting point Julian, are you basically saying that the deals that you look for are essentially already a bargain at asking price (I presume because of the value you believe you could add?).

 

BTW, 2nd bid rejected. I am going to leave that one now and re-visit in a few weeks. 

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