Need for Buying Speed

Posted on Jun 14, 2014 in Big Picture, Due Diligence | 1 comment

There’s one thing in common with all of the buyers who have gotten into contract with me: they were fully prepared to make an offer the day that the property came on the market.

What does “fully prepared” mean?  Simply, it means I have your pre-qualification letter (which you have gotten by qualifying through a lender) and your proof of funds (a screenshot of your bank statement), and you have your Docusign account set up so you can sign the offer I write for you.  Cash buyers clearly only need the latter two items prepared.

Many new buyers of Los Angeles income property naturally expect the process to be like buying a house: you go to the open house, maybe you have a private inspection, and if you still like it, you make an offer.  Investors think differently from that, and therefore you have to keep up with that mindset.

One major reason for the difference is that there are tenants living in the property.  If every interested person got to tour the property, tenants would have 40 people walking through their apartment.  We’re slightly more civil than that in real estate. Instead, once a buyer gets into contract, she can have her team of inspectors come through.  At least the seller knows that she is serious and not wasting the tenants’ and the listing agent’s time. It makes sense.

One reason why this works is because of your physical contingency period.  Typically, we do two inspections during this period, during which we can cancel the deal and get your full deposit back. And if there’s a serious problem with the property or with the numbers the listing agent gave us, we can ask for a price reduction or cancel.

Because of Adaptive Realty’s experience managing properties in the Los Angeles rental market, we do a very good job of estimating monthly expenses for each property I recommend to you, and based off of those numbers and the rents, we can make a fairly accurate estimate of your monthly profit. In investment property, that is one of your two bottom lines.

Your second bottom line comes from appreciation. While I can give my own predictions as to how properties in certain areas will appreciate, that will come from your own gut as much as mine.  That’s why driving by the property if you’re unfamiliar with the area can be a good idea.

I’ve written before that not all buyers are the same. So when I send listings to by clients, first I determine which clients are the right investors for the property. And if there’s more than one, you can be sure that the one who is ready to offer first will have the best shot at the property.