5 Tips for Real Estate Investors in a Seller's Market

5 Tips for Real Estate Investors in a Seller’s Market

Investing in real estate is one of the safest ways you can grow your money. Outside of a few catastrophic instances, the property market is relatively stable and is a fantastic way to earn passive income.

However, it’s a competitive field. With all the good properties selling like hotcakes, you may be able to find an ideal investment property, but the next minute you’ll probably be engaged in a bidding war for that same house. Here are five tips to help you get a leg up when shopping for investment property in a competitive seller’s market. 

Search for the Best Investment Properties for Sale

Although it’s not easy to find the right house in a seller’s market, some self-conducted research or professional help might land you a good deal. Often, mortgage services companies offer a property finder tool (mostly free) on their websites for investors to evaluate properties based on listing price, occupancy rate, cap rate, rental income as well as cash on cash return. 

This tool also helps you find rental properties as per requirements in terms of optimal rental strategy, property type, and return on investment. 

Remember, house listings in popular neighborhoods sell out pretty quickly. So, if you’re keen on buying a house in a specific neighborhood, better kick-start research early. Gather as much info as you can on listings that interest you, such as property reports, offer due dates, and disclosures. 

You can also acquire help from your real estate agent to collect all the important information for you. Keep your schedule flexible for open house tours or book a private tour with your agent.

Have Your Funds Pre-Approved

In a seller’s market, speed is the name of the game. If you’re looking to purchase a rental property in a hot real estate market, remember there are other real estate investors in the same race. You may have less than a few days to submit your offer after viewing the house. To get ahead of others, get a mortgage pre-approval in advance. 

Approaching the seller with pre-approved funds speaks of your seriousness towards purchasing the house. Mortgage approval is based on factors such as income, credit score, and debt-to-income ratio. 

Try to find properties selling $10K to $15K less than your pre-approved amount. This will help keep mortgage costs within your budget and create opportunities for negotiating in a seller’s market. 

Work With a Pro

Although home buying doesn’t necessarily require the services of a real estate agent, they do play a vital role in picking out the most profitable investments for clients. Choose a realtor with a proven track record of successful deals and familiar with your desired neighborhood. Work with a realtor with the following skills:

  • Seller’s market knowledge
  • Experience
  • Honesty
  • Sense of responsibility
  • Communication skills
  • Negotiation skills

Working with an experienced realtor reduces the stress that comes with home shopping from a seller’s market. Some of the advantages are:

  • They have updated information on neighborhoods and market conditions
  • They have better access to listings within and outside of the local market
  • Their negotiating skills come in handy
  • Provide the right guidance and support
  • They do all the paperwork

You can ask family and friends about reliable real estate agents or search online. Overall, using the services of a realtor will save you time and stress.

Make a Strong Offer

If your offer includes contingencies like home inspection, appraisal, mortgage commitment, the seller may see these as potential roadblocks in the process. If there’s another offer on the table with a similar price but none of the contingencies, the seller will most likely pick that offer because it has none of the hassles. A clever way to handle this is to carefully go through the clauses and omit ones you can handle on your own. 

However, be careful not to put your peace of mind at stake. For example, if you choose to waive off home inspection, you agree to buy the house no matter what problems occur later. This sacrifice can turn out very costly at a later time. 

Apart from removing contingencies, there are other ways buyers can score a deal:

  • Back your offer with a large deposit. Submitting a certified check with a good down payment amount with your offer will show the seller you are serious about buying. 
  • Actively participate in negotiations. Your involvement in negotiating a deal plays a vital role rather than letting the real estate agent handle all matters. If the seller wants a clause removed or a price hike, you are better aware of how well you can accommodate the demands. 
  • Offer flexibility on the closing date. Leave the space blank and let the seller choose the closing date. Being considerate of their schedule increases your chances of closing the deal. 

Write a Compelling Offer Letter

Writing a personalized letter to the seller sets you apart from others looking to purchase the same house. The seller mostly has an emotional attachment towards the house, maybe due to special memories. Your offer letter is the way to show gratitude towards the place and stand out among multiple offers. Tell the seller how much you love the house, and be as specific as you can. By going into small details, you’ll prove how much you love the property (even if you don’t plan on living in it). 

Remember, the ideal offer letter is short, friendly, and to the point. Explain why you’re the perfect fit for the house in a few short paragraphs. Also, don’t hesitate in praising the seller for how well they’ve maintained the house, and how you will continue to look after it well. Aim at creating an emotional connection with the seller, so they’re inclined towards your offer. 

In a Nutshell: How to Win

Don’t wait too long to make an offer, have pre-approved funding, remove or reduce contingencies, write an effective offer letter, and most of all, stay positive. 

Shopping for your dream investment property requires planning and patience. A seller’s market is a fast-paced environment where you’ll need to think and act quickly, so you don’t miss out on your desired property. Although it is challenging to quickly secure a property in a seller’s market, staying positive and not giving up will eventually get you the perfect home. 

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