| Thinking of investing in real estate? Make money | | | | nice bonus if it happens. The real point is just to |
| more consistently with this simple technique. | | | | lower expectations. |
| The first time I invested in real estate, I was able | | | | Consider the following scenario. You are ready to |
| to make money in part because I bought a piece | | | | sell your house and you think it's worth $340,000. |
| of land cheap. In fact, I offered 22% less than | | | | Then a friend with some real estate experience |
| the asking price. Understandably, the real estate | | | | comes along and, after hearing that you plan to |
| agent didn't want to bring my offer to the seller. | | | | sell, says, "You can probably get almost $300,000, |
| But fortunately I was too ignorant to know that | | | | right?" How confidant would you then be in about |
| such a low offer would normally be insulting, and a | | | | your estimate of $340,000. You might lower your |
| waste of time. | | | | expectations, right? |
| I say fortunately, because my offer was | | | | That is why smart investors use "lowball" offers. |
| accepted. This was my introduction to the art of | | | | They make money by lowering expectations. |
| the low offer. It was of course, a misleading | | | | Suppose, for example, that you look at a rental |
| lesson for me, because the truth is that such low | | | | house that is for sale for $123,000. You make an |
| offers are almost never accepted. But this | | | | offer of $102,000. Will it be accepted? Almost |
| doesn't mean that they're not worth making. | | | | never. But you will sometimes get a counter |
| First of all, it is important to recognize that low | | | | offer. You might then go back and forth until a |
| offers ARE sometimes accepted. A friend of | | | | price of $113,000 is agreed upon. Prior to your low |
| mine bought a home on a lake for $40,000 less | | | | offer, the seller might have never considered |
| than it was worth, simply because he made a low | | | | selling that low, but now he sees it as getting you |
| offer. No one else was making any offers at the | | | | to come up $10,000. |
| time, and the seller was ready to move. | | | | Of course you'll have a lot of offers that are just |
| Of course, as I said, this doesn't work often, so | | | | plain rejected. Sellers will often feel annoyed or |
| you have to balance the time and trouble of | | | | insulted, and won't even consider subsequent |
| making many rejected offers against the | | | | offers. That's okay - it is just part of this game. |
| occasional profit from one that is accepted. In the | | | | Investing in real estate in this way is about the |
| case of my friend, he had probably made ten | | | | numbers. You make your money by making |
| offers on various homes before getting this one. | | | | more offers. |
| $40,000 for ten offers seems like decent pay, | | | | How low should you go? You'll have to work that |
| doesn't it? For that matter, if you aren't too busy, | | | | out for yourself, based on market conditions in |
| wouldn't $40,000 justify one hundred offers? | | | | your area, and on the specific of a particular |
| (That's $400 per offer, by the way, if you want | | | | property. But one millionaire real estate investor |
| to average it out.) | | | | who uses this technique told me, "If you're not |
| Make Money By Lowering Expectations | | | | truly embarrassed by your offer, it isn't low |
| The real point of a low offer on real estate isn't | | | | enough. |
| to get the property at that price. That's just a | | | | |