Welcome back to another episode of the Discount Property Investor podcast. In this episode, Mike and David talk about the importance of making offers. They try to make at least an offer a day that keeps the debt collector away. By not making an offer a day you’re not really even trying. Get out there and make some offers!
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Mike: Welcome back to the discount property investor podcast. Your hosts David Dodge and Mike Slane here speaking. We are talking today about the importance of making offers and we wanted to talk about that because I said hey Dave give me a few minutes, I'll come back and then we can record some more content, I got to make some offers.
David: Let's do that.
Mike: Yeah, and Dave said: all right, don't even need to worry about doing the podcast, let's make some offers. So that's what we did, Dave and I, I think we both try to make at least an offer a day, that keeps the debt collectors away.
David: Haha I like that saying, that's a good one.
Mike: I mean, for real though, if we're not making at least an offer or two a day, it's just not- we're not- you're not even really trying. You're not in the real estate game or the wholesaling game rather, so our offers are not that good. So this one again, I didn't- I didn't even have really much property, I haven't viewed enough lately so this one was a- an MLS property that I went out and viewed I'd say last week and I just never got around to making an offer on it because it just wasn't that interesting to me. It was a little bit small, it was a little bit- just kind of a little bit funny. The price, again it was close to retail and it looks like a newer rehabber or possibly an old tired landlord did the rehab on it cuz it's got old cabinets but they put new carpet in, you know, so they're just trying to- trying to squeeze as much as they can out of this property and again, I just- it just deterred me from even making an offer right away. So I did, I went ahead and this thing's been sitting for about 2 weeks which in this market is an eternity on the MLS I would say. Properties are just- yeah, they get listed and they sell right away when they're priced right. So again, coming in with an offer 70-75% of what they're asking right now is- again, it's probably too high. I mean I feel like I even possibly made the offer too high. So, that's what I did, I- again, we have to make offers. So we need more properties for our crews, keep them working. We need- yeah, we just need inventory so the way to do that is to make offers. Prior to this, I'd say- well today is Monday, how many offers did we get out last week Dave? Do you remember? He would probably made, I don't know, about 8 to 10?
David: Yeah, I'd say somewhere in that range.
Mike: And again, it's just- it's not-
David: We [inaudible].
Mike: It's not enough. Yeah, we're definitely pretty low and that's something- so Dave and I always talk about too. We know this- that we in our business. If it slows down, it's for a couple of reasons. One, we're not marketing enough. Two, we're not making enough offers.
David: Wrote a book on this guys.
Mike: Or three, we're not following up.
David: That's right.
Mike: Yeah so we clearly- we know what our problem is right now, we're not making enough offers. Yes, the market is hot but again that is our fault that we're not busy because we're not making enough offers. So that's pretty much the moral of the story today is make, make, make more offers. We've got a really cool tool, this is something that helps us make offers on all of our off-market ones. Dave actually put this together in our system and we use it constantly. You know what I'm talking about Dave.
David: Cash offer contract baby.
Mike: cashoffercontract.com, so you can go to cashoffercontract.com and it's going to bring you over to our cash offer generator. Dave, you want to kinda briefly talk about that and how that is helpful in making offers?
David: Yeah, so right now, it was supposed to work to where it would send from your email and Mike, I actually need to fix this right now.
David: It still generates offers, it just doesn't send them from yourself but send them to yourself basically. So go to cashoffercontract.com and there's an offer generator in here, it's very similar to the one Mike and I use in our own business. Ours is built in to doing some e-signing and a couple other things is built into the CRM itself that we use, but if you don't have all those tools and those things at your disposal, you can still go generate an offer in about 3 minutes or less from your cell phone using this tool. This tool will basically email the offer to you and then from there, you can take it and you can send it to your motivated seller, and it's really that easy guys. cashoffercontract.com. I'm gonna work on getting that thing fixed too so you can start sending from your email and perform the way that it really should.
Mike: Well, what's really cool though. Yeah, although it isn't perfect like you're telling people, it's free.
David: It's free, that's right.
Mike: And it's fast. So literally, you could send the offer to yourself, you know, in 2 minutes then delete out that email and forward it on to your seller.
David: Yeah, forward it on. That's right.
Mike: It does not have like Dave was saying, it does not have the signature capabilities in it. Again, free product guys.
David: Yeah, it doesn't matter too cuz really a lot of times whenever we're dealing with people, they want to print it out anyway and go show it to a partner or-
Mike: Their spouse.
David: An attorney or whatever so, you know, not- that doesn't even really affect it that much to be honest with you guys, but making offers is important. That's really where the magic happens, right? You can do all the marketing in the world and if you're not actually setting appointments and making offers to people and there's really not even a right order. You can set an appointment then make an offer or you can make an offer then go run the appointment if the offer works for them, right? Either way, you have to start getting it in the- in the mindset and then a habit of making offers. We like to make offers verbally, we like to make offers in writing, we like to follow up on the offers that we make, you name it, we're in the business of making offers. So the reason why we're recording this right now is Mike, you came in here a little bit ago and said hey I want to talk to you about an offer I made, let's talk about that.
David: If we can.
Mike: Yeah, yeah, yeah so I was talking about it a little bit before but let's get into the numbers. So this is a property up in Overland and I showed it to Dave and it is currently listed at 85 thousand dollars.
David: It's on market property.
Mike: It is. Listed property.
David: It is listed property.
Mike: At 85 thousand, what's a nice way to say it? Slummy, you know, like it's just it's not one of the nicer ones in the area and it's probably listed close to the retail value, but it's not in retail shape, like it's not great. This one has, what are they called when it's an unfixable defect? Do you remember what that's called? Like in real estate agent language?
David: I do, if you give me a minute to think about it though.
Mike: Physical obsolescence?
David: Obsolescence is part of the word, there's a phrase that-
Mike: There's a specific term that they make you study in the real estate world, what the heck is it? I don't know, it doesn't really matter.
David: I can't think of it but basically it's gonna be hard to change it.
Mike: Anyways, you can't fix it. It's a- It's a-
David: Tear the whole house down and move it 25 feet closer to the curb.
Mike: 30, yeah. So this house sits on the very back of the lot and all the neighbors houses-
David: Which might not be a problem if all the rest of them did the same.
David: But they don't and that's where that obsolescence comes in.
Mike: Yeah, well it's not obso- I don't know what's obsolescence, we gotta look that up. Look it up, look it up.
David: We'll figure it out.
Mike: See what the word is.
David: But it's offset guys, if you're looking at all the rest of the houses from the corner of the street, they are all you know, 10 to 15, eh probably not ten feet but like you know, 15 to 30 feet from the curb. This one sets back like 90 ft. like it's just way far back, right? It has a backyard but it's very small and now it has a huge front yard, right? So that's basically the issue with this one. So, on market and they're asking what Mike? What's the asking price on this property? 85?
Mike: 85 thousand, that's right.
David: Okay, so the ARV, we know isn't really higher than that. Could we get an appraisal for higher than that if we did a little bit of updates? Sure. Sure, right? But it's not going to be a whole lot higher. So in this case, you know, let's say- let's basically just assume that we- that we could get an appraisal at 90, even though it hasn't even sold for 90, right? So again, we're already kind of stretching a little bit here coming up with that ARV, cuz that ARV isn't a sale ARV, it's an appraisal ARV, alright? So at 90, assuming we were to get in the 80% loan, Overland, good area but it's not necessarily the best of areas. That would be best case scenario, guys and that's because we have good relationships with our banking partners and we have really good credit. We don't miss payments, alright? So that puts us at 72 thousand, alright? An 80% discount rate. Now, we're going to need to spend some money fixing this place up, something, right? Even if it's move-in ready, there's going to be an inspector that's going to come out and he's got to give us an occupancy inspection for us to even be able to rent this property and turn a vacant property into an asset that's bringing in income. I need your attention.
Mike: Yeah, I'm just trying to figure out what that defect is called, can't figure it out. I'm listening too by the way. I gotcha.
David: So we're at 72. So what's the repairs Mike? You- did you- have you been to this one yet or nah?
Mike: I have, yeah. So they got new carpet, it's just- it's just outdated. The kitchen, you saw the pictures, that would need to be addressed. We could probably get by painting cabinets, new countertops and appliances so you're looking at probably 5 grand.
Mike: You got a couple thousand in appliances and that'll be kind of half, you know, doing this cheap as you can. Then you've got the deck on the front which is painted but you can tell it's just older so you're either going to address that now or later, same thing with the systems. So this one had an older HVAC, it's probably functional but again I think that what we've learned over the past few years is that there's a reason why our re-buyers don't like systems over 10 to 15 years old and they factor in replacement cost and they beat you up over that when they're buying.
David: Yeah, usually what happens is that's not part of the offer. Well, why would it be right?
Mike: Right. So the- so-
David: So then they come back and you're like oh this is 10 grand worth of repairs and they're like yeah it is, right, but in ten years from now, you're going to have capex of another eight grand.
Mike: Well, and here's the reason that I think-
David: And they factor that in too.
Mike: We've gotten smarter about it. It happens at the worst time. It happens in the summer when it's hot and you can't just get an AC tech out when it's the first day that shoots to 100 degrees and everybody's AC that is going break breaks. I mean, you can't- so again you've got, tenants that are inconvenienced.
David: Yeah, when it rains, it pours.
Mike: You've got higher price for the service calls because it's peak season. So again, it just makes sense when they're older to bite the bullet and replace it before you get your tenants in there. I really think that something that we've kind of learned. So again, this is a great example, although the utilities or the systems rather, the HVAC may be functional, probably needs to be replaced so there's three or four grand. So again this one's going to need, you know, quite a bit to get to a true rent ready for us and again, that's just because we've been doing this long enough and yeah, we know, we know better, than to buy it at that.
Mike: So 72, let's call it 10 grand, just for the sake of argument.
David: Okay, so well, do you think we'd have to spend 10 if we bought it, this is a real life situation here.
Mike: Yeah. If I want to get a 90 plus appraisal on it, yes.
David: Okay, so to get to 90, that's again, that's above our actual sole price, they're asking 85. That's the sooner we can get appraised for that times 80% minus 10 thousand, 62 grand and you made him an offer already at 65.
David: Okay, which is an aggressive offer, its $3,000 cutting into our cost to rehab it which is you know still doable not a huge deal. However, they countered us at 75, so what I suggest we do Mike is we send them an offer in writing at 65 and just say hey this isn't- the acceptance day on this isn't tomorrow, we're going to give you guys two weeks, right? If you can go get a higher offer, its listed already, it's already- the market is already happening everywhere, right?
David: All at once. That would be my two cents. Now, why would I do that? Because I like to make offers, and I already know that they've verbally well, in writing actually via text message so it wasn't like a signed thing. So they verbally already rejected our offer and countered us, but it just doesn't work for us so there's really no meeting in the middle on this one unfortunately, and that happens a lot when you're dealing with on market properties. Why? Well lots of reasons, most likely though because that agent in the process of getting the listing, sold himself as being somebody who could get the most for the property.
Mike: Right. I mean, and why wouldn't they though? You know that's exactly-
David: So I'm not saying anything negative. That's why I like to put 95% of my efforts into marketing direct to sellers that don't have the agent involved. In this case, there is one involved. So, what do you think of my opinion on moving forward?
Mike: No that's a great- that's a great plan.
David: Maybe even juice it another thousand or two, 66, 67, 66700, something like that, right? To where we can maybe get by with six or seven grand worth of rehab to still get the 90 appraisal. Even if we didn't get the 90 and we got the 86 or the 87 or whatever it is Mike, we'd have a couple grand in the property, right?
Mike: Well, and we could probably get a higher appraising.
David: Maybe, I just want to speculate.
Mike: Yeah, I just think with the market, the way it is.
David: You're right.
Mike: Fix it up.
David: But if the market turns and then we have to get another appraisal in 3 to 5 years, we may be into trouble. So again, let's not speculate. 90s high-end in my opinion and it's also a goofy property, right?
David: Like you know, it's sound but all the rest of them on the street are lined up, this one sits back, you know.
Mike: I think it's called incurable defects.
David: It could be, there's probably a lot of different ways to describe that, right? So, what is our next steps? We offered 65, they countered at 75. What are we doing now?
Mike: Certain parcels of real estate sometimes contain defects that cannot reasonably be cured. Incurable defect.
David: Incurable defect, there you go.
Mike: Dang, that brain man. It came up with it about ten minutes later.
David: That's right.
Mike: I'm sorry man, I got distracted. Okay, so what are we doing now? I think you're right Dave, let's send them an offer in writing at like 66, 67 you know, with a two week acceptance.
Mike: Just say hey, you've got it listed, get a better offer.
David: Maybe even give them a month and it's the acceptance date because they can sign it at any time, right? What we'll do is we're going to put our closing in our inspection period to- so the inspection won't start until they sign, right? That's a given and we'll probably factor in 10 to 15 business days. Key word here when making offers is 'business' guys. Think of it this way: 10 days is 10 days, we can all do math. 10 business days, right? Is going to be 14 days essentially, it could be, right? So by adding in the business days, you're buying yourself two extra days on either side of a- of a time frame and you can buy- you can buy yourself basically up to 40% more time, right? 10 days versus 10 business days is already guaranteed 14 days so you'd get basically get 40% more time so we're going to start the inspection when they sign, not prior and then we're going to put our closing on or before a date that's very far extended, let's say 45 to 60 days but its on or before. That way if they don't sign for you know, the full 30 days, we still have ourself a time frame built-in so this gets probably 60 days. But it's on or before so if they sign right away and we get to our inspections and it starts right away and we're able to get it closed right away, even better, keep it simple. But I really like the idea of leaving the acceptance date open for a long period of time and basically just saying here's our best and final, we know it's a 5% chance you're going to take this and I hope we- honestly crazy crazy enough, we hope you do go get a higher offer on it but if a week or two goes by and you have zero action and all of a sudden this seller decides that they just don't want to deal with this anymore, boom contract's ready for them and waiting. So here- so the lesson guys, the lesson to take away from this is make the offer even when you think that it may be sometimes a waste of time. They've countered us basically ten grand over what, you know, we're willing to pay but just because that's what they're asking, doesn't mean that's what they're going to be willing to take.
Mike: This brings me into a great one Dave and it's one that you just got the offer accepted on.
David: Yes, Sunday morning, right.
Mike: So let's talk- let's talk about that one. That's a really kind of interesting story too. So what happened way back when versus what happened a week ago, right? So let's talk-tell us what happened Dave. So you- you met with this woman or you spoke with her.
David: Yeah here, give me like 7 seconds.
Mike: What, you're gonna pull up the facts?
David: Because I want to see the dates cuz that's like really the value of my opinion of this is, you know, to show you that, you know. Here's another thing, I get asked a lot Mike, a ton, I know you do as well. How long does it take to get my, you know, my first deal? I'm just getting started. Well, that's a complex loaded question, reason is how much time and effort are you spending into your marketing? How good are you at closing the leads that come in and actually setting appointments? How many of them are you sending offers on, if any? That's like the biggest disconnect, most people, you know, they'll start to do a little bit of marketing, they don't get a deal right away, they get discouraged, no offers are sent. You got to send offers, you got to market, you got to set appointments, you got to follow up, right? All of these things are so incredibly crucial. So when somebody says how long does it take me to get a deal? My response is: how much time and money are you willing to put into your marketing? How many appointments do you plan to set? and do you already have a contract ready to send somebody? Cuz if they don't have that ready to go, then they're probably not already sending offers, so we need to teach them how to send offers, right? So very, very, very important. Alright, this one that we just got, Mike, you had asked.
Mike: Yeah, so when did we start talking with them and when did you make your offer?
David: Yeah so we initially started talking 5 months ago, we had a cold caller, which if she was actually here still with us, I'd send her a bonus but she doesn't work for us anymore cuz that's okay. Cold callers, you know, they kind of come and they go, it's the way it is. Five months ago, she made a cold call to this person, all right. At that time, she made a comment that says hey kindly follow-up, she's interested in selling her property, so I did, the next day I got the message, I said sounds great. I wanna give her a call.
Mike: What was she asking? How much- what was the asking price that time?
David: So we're gonna get to that. That's a great point Mike. So we started chatting, I got all these notes here, just kinda reading through my notes here.
Mike: And I'm trying to speed the conversation along.
David: Yeah, she owns a few properties, I got the addresses of them. The estimated value of the condo that she was wanting to sell at the time, this is 5 months ago, according to Propstream was 66 thousand. That's a 2-1 865 sq. ft. condo, right? She said that she wanted 65 thousand and it was worth 66 so she was basically asking full retail for the property so I verbally offered her 35 which isn't quite half, but I knew with it being a condo that I wouldn't have any like major exterior issues with landscaping or a roof because it's an HOA so that cut down like a lot of my cost. I knew rehabbing this condo with it being 800 square foot and most of it consisting of bedrooms, you have a small bathroom, a small kitchen, flooring and paint and that's going to be like 90% of this condo, right? So I didn't think that my cost would be too crazy. Usually I would have discounted it even more but I made the offer at 35 grand and that offer was literally 5 months ago, it was in September of 2020 and we're in February of 2021 now, okay? She didn't hate my offer in all bold I have in my notes.
Mike: That's awesome.
David: She didn't hate it but she said there's no way that I'm going to sell that right now, right? She has another property out in St. Peters which is 25 minutes away but also needs a rehab and she's got relatives living there so she really wasn't like super motivated but at the time, she told me that she wanted to move to Florida. Why did she tell me that Mike? Because I made a friend with her, I was on the phone with her for 20 minutes.
Mike: And she's excited about going to Florida man.
David: She was excited about going to Florida but at the time, she didn't like it and she wanted me to send her my contact info via email which I did and in that email I said hey I would happily pay you $35,000 for this property. I know you're asking 65 but you know, if things go sideways and you need money, call me. You know, I never begged her, I never like told her like, you know, you have to take this deal. She had a lot of options and still does.
Mike: Yeah, so what's really cool though is Dave made the offer and months later the seller came back and said: is that offer still good? and Dave said absolutely.
David: Incorrect, I came back and that's where the follow-up comes.
Mike: Dang Dave.
David: Right. Close though Mike, close. I came back.
Mike: That's really good.
David: So I have a task set for basically a month-and-a-half, two months out and I didn't get to that task right away.
Mike: Full disclosure baby.
David: It was about-
Mike: We're all about that.
David: It was about two weeks old, but it doesn't matter cuz I had a task to follow up with her at a later time, alright? So then what happened was I called her again and she was like hey I was thinking about you and actually have an email drafted to send to you about your offer. She goes: I want to accept it and this is when I called her back, I didn't even really get a couple words in, I just said hey this is Dave household easy, I was just following up with you about the condo and then she started talking so I just kind of sit back in my chair and let her go and she said I'd like to accept that offer. The day I called her, it was snowing outside and it only snows in St. Louis like maybe 2 or 3 times a year and that morning it had already been snowing for like 6 hours. Nobody was out on the roads, it was freezing cold, you know, you couldn't see very well cuz of the snow and it was dangerous to be out and she literally was like: remember I was telling you I wanted to move to Florida? And I said yep and she goes well this is the straw that broke the camel's back. She goes: me and my husband were literally looking at new places to move in Florida this morning. Now this had been on her list for 3 months cuz she had told me that three months ago and she goes I want to accept your offer and she goes: you're going to make a handsome reward on this deal. She goes: but I don't care, my motivation is leaving St. Louis, getting out of here, retiring and you're just going to make it that much easier for us to do this and she said I want to accept your offer, so I'm sitting here kind of dumbfounded and while she's telling me all this, I'm literally reading notes from- that I had taken to kind of fill myself back in cuz I didn't know all the details when I made the call, you know, it just doesn't make sense to try to do all that. So I mean real time, I'm like looking at it so then I see hey, you know, my offer was for 35 so I then say hey ma'am, you realize that when we talked- when we spoke last, you know, 3 months ago, that the offer was for 35 and she said yep, fully aware and I said cool, Imma send you an offer right now. I did, it took her about two days to sign it and that happened over the weekend so now we have ourself a condo under contract at 35, it has an ARV of about 66, we can maybe even push 70 once we've rehabbed it really nicely and it's under rented. So another motivation for her other than wanting to move to Florida was that the tenant that has- living in this condo has been there for 13 years and they're kind of friends. They're friendly with each other at least, right? She's renting her this for 600 but the market rate on these and the reason we know the market rates because this seller also has another condo in the building, same floor plan that's rented for 775 however, it has updates, this one doesn't. So you're talking about a difference of $175 a month, so she- so again, one of her motivations was to not raise the rent on this woman and/or make her leave so she can- so she could get those updates done to have a higher rent. Well this is a business for Mike and I, so we are going to buy it. We're not going to kick anybody out, but we're going to let her know hey, we could be getting 775 with this being updated and we would love to update it but you're here, so and- so instead, we're going to raise the rent let's say $100 from 600 to 700 , and if she wants to stay, great, stay as long as you want but we need to start capturing some of that market-rate rent. We're not going to go the full $175 because it isn't updated. Now, if she says no I'm not paying 700 to remain here after 13 years, well that's unfortunate for both of us cuz we're going to lose rent and she's gonna have to find a new place to live but this is business, so she can go find somewhere else in the building or even somewhere else elsewhere and now we are having a vacant property that we can go spend the 6, 7, 8 grand into those updates and then we can either get the market rent of 775 or we could turn around and list it for 70 grand, maybe we'll get 65 and we'll make 20 thousand.
Mike: Long story short, Dave made an offer 5 months ago, followed up with it and that's how we're getting a deal this week. So again, because we know our business is slower is because we haven't made enough offers five months ago and if we're not making enough offers five months ago, we're not making enough offers today so we've got to up our offers. Long story short, we know we're not making enough offers, so we have to make more so we can keep telling you guys stories like this one where Dave got this great deal under contract.
David: Not too bad, not too bad. So yeah guys, get out there, make some offers. We are going to end the show right here because we are going to go make an offer right now.
Mike: We need to make more offers.
David: Let's send that offer right now Mike for 65 with a 30-day acceptance period and let them know, you know, hey we get it, it's less than what you guys want to sell it for but just hold on to it and if you can find somebody else, great and if you can't, guess who's going to be calling them up every week or two following up saying: have you found anybody higher? You heard it here, signing off.
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