Formula For Maximum Allowable Offer In A Property
Since the real estate market is tight and the inventory is low, meaning there is hardly any property in the mobile listing service that is available to buy, does this situation affect the criteria for figuring out the maximum amount that investors will put a house under contract?
Watch this short video and find out Brett Snodgrass’ answer to this question.
Brett Snodgrass is CEO of Simple Wholesaling and has been a full-time real estate investor for 10+ years. He specializes in wholesaling, wholetailing, creative financing, and scaling a business from a one-man-band to an amazing full team running 100s of deals per year.
Brett’s amazing team buys and sells 300+ properties per year and builds passive streams of income by creating 50+ creative financing deals per year. In a five-year timespan, Brett has gone from a one-person team to a full-time staff of 10+ team members and has tripled his deal flow.
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Jay Conner:
So since the market is so tight and inventory is so tight there’s hardly anything in the multiple listing service to buy. Has that changed your formula on figuring what is the maximum amount that you will put a house under contract? And if so, what is your current formula on deciding, “Okay, this is the most I’m going to offer to get on a contract.”
Brett Snodgrass:
That’s a great question, Jay. I’ve actually, this is probably a weird answer, but I actually stepped a lot of, out of the business about a year ago, Brian Snyders, our CEO of the simple team now and they’re the ones that kind of come up with the formulas lately. Our formula has always kind of been we might pay like 70% of the ARV or the comparison price value or whatever the brokers buy opinion. That was kind of our formula before. But I will tell you, has it gone up? Yes. I mean, it’s almost sometimes the prices that we’re putting on properties. I look at it and I’m like, “Ah, I don’t know” because history, right? I mean, I’m still stuck in two years ago, three years ago where I was buying that house for what, $30,000 cheaper, 40,000, $50,000 cheaper.
So it is a weird time. And I think that as investors, we always have to be pivoting and just be watching right now. I’m very conservative and I’m always having a conversation on, “Hey, what happens if the government does something crazy or the market or the stock market starts to tank.” And the real estate market starts to tank. And I’m like, “Hey, when, when that happens, like we really have to always be watching because I think if you’re like me, Jay, aren’t you guys still asking those questions and always watching and trying to figure out when you’re going to have to pivot.” I think we’re all going to have to pivot sooner or later. Right now we can’t keep doing this forever. It’s like, “Hey, eating is good right now in the markets. The market’s hot,” but I’m like, “It’s going to change.” And when it does, we have to be ready.
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