Doing The Work & Why We Are Happy We DIDN’T Get The Deal
Failed Deal
We wanted to share this story to inspire folks to do the work daily and trust their gut.
Deal Highlights
Single Family - 4 bed - 3 bath -2,057 sqft - MLS listing
List Price: $140,000
ARV: $154,000-$185,000
Desired Offer Price: $95,000
Sold Price: read on to find out…
Deal Details
For a bit more detail and context on this deal. We subscribe to and practice the Michael Zuber technique of doing the work daily. That means we look at our market(s) every single day. We look for new properties that meet our criteria. We look for existing properties that have been sitting for longer. We look at properties that came back on to the market. We look for anything that others may have missed. We have been doing this for years and it is what has allowed us to find a lot of our deals off the MLS.
Our minimum investment criteria for our single family rentals is $200 cash flow (after all reserves, maintenance, cap ex, fees, turn costs, etc.) and 8% cash on cash return. We run all our numbers and property analyses to meet this strict minimum. We will not proceed with anything less than that.
Now with that context said, enter 8958 Burton Ave. We saw this property pop up while doing our daily work, first listed for $140k, in early April. We entered it in our spreadsheet to run the numbers, analyze, and track it. Knowing the asking price and rents for a property of this type in this location, we knew right off the bat that the numbers would not meet our minimum. The property went under contract a week later. About a month after that, doing our daily market work, we saw this property show up on the MLS again at the same asking price. A little over a week later, it went under contract again and we didn’t think any more of it. Two days after that, we saw the same property back on the MLS listed for sale. Still at $140k. Still doing our daily work, a month later in June, we saw a $10k price reduction on this property and adjusted our inventory spreadsheet accordingly knowing the numbers would still not cut it. Two weeks later, doing our morning routine, we noticed this property still had not sold so we decided to run our numbers again and see at what purchase price our $200 cash flow and 8% cash on cash minimums would be met. That price was $95k.
We decided to give it a shot since the property had been sitting for 75 days in a market where properties go from listed to pending in less than a week. We spoke to our agent, explained we wanted to do a cash offer with inspection contingencies for $95k (we had done our homework and knew the property was owner occupied and in the family for at least two generations, we knew the most recent owners had passed and their family was trying to sell, we knew the house was paid off). Our agent wasn’t sure how to react and didn’t seem comfortable extending a $95k offer on a $130k list price citing today’s aggressive sellers’ market, homes typically going for 4%-7% above list price, this $35k-below-ask offer being insulting, etc. We went back and forth a few times explaining how it had been sitting, came back on the market a couple times, had a price drop in a crazy sellers’ market, all signs that pointed to this seeming like a situation where the sellers wanted to get rid of this property. Finally convincing our agent, we decided to go have one last look at this property on the MLS while our agent drafted up the offer docs. That is when we saw the property was under contract again and immediately told our agent to not spend anymore time on the offer. We left it at that, figured we missed our chance on this one and went straight back to work looking for the next one.
Three weeks later, and still because we watch our market every single day, we noticed that 8958 Burton Ave had finally sold. Curious, we went to look up the sale price. It was with mixed feelings that we saw the property had sold for……. $90k!!!! Yes, $5k less than what we wanted to offer for it. It was mixed feelings because we felt like we missed an opportunity. We were a bit frustrated with our agent who could have just executed on our offer which would have likely resulted in us getting the deal. More importantly, we were happy!
Why we are happy we didn't get the deal, you ask? This deal is a great example of what results you can get from doing daily work looking at your market. It is an additional data point that we know our market and know what to offer on different property types in our market. It is validation. It is a confidence booster. It pushed us to realize it may be time to look for a different agent.
On to the next one.
What We Learned From This Deal
Trust your gut. When you do the work long enough and you know your market (arguably better than your realtor…) your instincts are usually correct.
Move fast. We should have pushed harder on our realtor and asked them to submit our offer instead of debating.
Time to look for a new agent. It’s pretty simple. The back and forth trying to convince our agent of our numbers took time and ultimately cost us the deal. We shared this feedback with the agent and will be looking for a new agent using this as an example for expectation setting.
Detailed Property Analysis
You can find a more detailed deal analysis on how we ran our numbers here: https://app.dealcheck.io/#!/shared/-MaOMk94m0KyH8buygfY
Use code UNDOOR when signing up for dealcheck.io to get 20% off!
