How To Bid On A Property
Putting together a bid on a fix-and-flip property requires a detailed plan with in-depth knowledge of a property and access to fast, reliable capital. In a competitive market, it is likely that there will be multiple bids on any given property, so it is critical to be able to make a strong, competitive bid that will give you an advantage over other investors who are looking to buy the same property. The stronger your bid, the more likely the seller will accept your offer.
As you plan the bid for your next deal, what are some of the options you’ll need to consider before making an offer, and what will you need in order to make an offer that will help you outbid your competition and land your next fix-and-flip property?
1) Obtain a letter of pre-approval
One of the first things you’ll need in order to make a strong bid is a letter of pre-approval. A letter of pre-approval is from your lender and shows that you will be able to meet the qualifications necessary to acquire a loan. Things that your lender will consider when issuing a letter of pre-approval are your credit score, the amount of cash on hand that you have, and if you have had any late payments, delinquencies, or bankruptcies. It is also important to have a pre-approval letter in hand when making a bid on a property to help speed up the process of closing on the home. If you are able to show that you can close quickly on a property, the more willing a seller will be to accept your offer over the other offers that they have on the table.
2) Know your margins
Before you make your bid, you need to know if the property will be worth the investment. It’s important to have a good understanding of what you are willing to offer on the property because you want to make a strong profit and return on investment on the deal. To accomplish this, you will need to ensure that your margins are not too thin, and you’ll be able to turn a profit. If you find a property that you believe will require more rehab than you feel comfortable putting into it, there is nothing wrong with walking away. Once you know a deal makes sense, you can start preparing your bid.
3) Access to fast, reliable capital
A final key aspect of making a strong bid on a property is your ability to offer a fast closing to the seller. To do this, you will need to find a lender who can underwrite you as the borrower and the property quickly in order to close on the deal. This lender will also need to be fully capitalized to ensure that the funds for the deal will be readily available when you get to the closing table. For example, if you offer to close on a property in 7-10 business days versus another investor who can only offer to close in a month, automatically puts you at an advantage over that investor. Being able to confidently say that you can have the funds to close on the deal and close it quickly can be the deciding factor for a seller to accept your bid. It’s also important that the lender have the capital ready at closing. You don’t want to be at the closing table and have the lender scrambling to find the necessary funds to complete the deal.
With the fix-and-flip market being as competitive as ever, it’s important that your initial bid on a fix-and-flip property is strong enough to be accepted by the seller. To do this you will want to have a good understanding of your profit margins before you bid, and you’ll want to be pre-approved, with a letter in hand, by a reliable lender that can help you close on the property quickly. These three things can ultimately make a huge difference between acquiring your next fix-and-flip property
Lima One Capital is the premier lender for real estate investors. We make it easy it finance all of your fix-and-flip, rental property, and multifamily investments. We are a national hard money lender lending in 41 states as well as Washington, D.C. We have a passion for real estate and helping real estate investors become successful in their pursuit of their entrepreneurial goals. If you would like to learn more about our FixNFlip program, click here.