Making below market offers for fun and profit

[squall74]

I'm reading a lot of books and articles online, and had some questions regarding making offers to a potential property. As every property is strictly a business transaction (Will it cashflow, and is it worth the time and money invested), I would have to value every deal and make offers based on what the property is really worth.

This might be very general but I look at the potential rent, operating expenses, and add in a return percentage that makes financial sense. So on a 4plex bringing in $2,800 ($700/unit) less operating expenses of about 50% (conservative) would be $1,400 per month. Do I then multiply the yearly return ($16,800) and multiply that by that by the preferable rate (lets say 10%) to come to an offer of $168k? Would this matter over COCR?

Also my next question is how do you make a bunch of these offers? Is it possible to work out a deal on each property I am interested in and submit offers to every potential deal? Should I work with a realtor on my end? If I do and make 100's of offers based on my financial analysis will they still work with me? It seems like the realtor won't want to spend time with a tire kicker but I can only acquire properties if the deal works. I know that properties listed with realtors usually won't mean motivated sellers but I am looking to expand my numbers as much as possible to locate deals.

 

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[Rickson9]

That's what I do. I've made 20 offers using a realtor just to land 1.

The deals that you're talking about (I.e. 5x gross annual rent) seem harder to come by this year. They were plentiful up until the fall of 2011.

 

[Vigilante]

I heard Trump say once that he makes dozens of ridiculous offers just to find one seller in desperate need of a deal.

 

[squall74]

That's what I do. I've made 20 offers using a realtor just to land 1.

The deals that you're talking about (I.e. 5x gross annual rent) seem harder to come by this year. They were plentiful up until the fall of 2011.

Ok that is what I wanted to know. I just don't see myself making a deal unless the numbers are truly right, and in the worst case scenario I can still cashflow.

I'm finding ranges of $700-900 for single units in my area so I'm basing the calculations off of that. Of course I'd have to do a more thorough search to find the true rates. Most of the multi-plexes go for about $300k, so I'd have to get it at quite a discount to make them work, which would require making outrageous deals through multiple owners for that one great deal.

I heard Trump say once that he makes dozens of ridiculous offers just to find one seller in desperate need of a deal.

This is what I am looking to do. I don't have much of a motivated sellers list as I am new in the market so I'm planning on utilizing whatever method I can to locate sellers. Back in my mortgage broker days I would do telemarketing and swung very low but just that one client would make the other calls worthwhile.

Should I be going to investor's clubs to find realtors who would understand my situation better?

 

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