The 6 Steps Before Making an Offer in Real Estate Investing

Introduction

At Baron Realty, we deal with a diverse clientele of buyers in the apartment building market. To help them be more efficient in their investment decisions, we’ve developed a step-by-step process for deciding whether to make an offer on a particular property. In this blog post, we will share six essential steps to consider before making an offer on a property.

The 6 steps before the offer process begins

1. Assess the Pricing First, determine if the asking price is reasonable based on comparable properties in the area. If the price is significantly higher than the market value, it may be best to move on to another property. This can be a quick 2 minute analysis to advance or not.
2. Evaluate the Location Consider whether the property’s location fits your investment criteria. For instance, if you prefer properties close to public transportation or within a certain driving distance from your home, make sure the location meets these requirements before moving forward. There is not point to make an offer on a property if the location was not satisfactory.
3. Understand the Demographics Consider the target clientele for the property, as different locations cater to different renters. Investors should know their preferred market, whether it’s students, downtown dwellers, or suburban families, and ensure the property aligns with their investment strategy. Different clientele needs different types and sizes of units and this must be assessed at this step 3.
4. Inspect from the exterior the Property Condition Before making an offer, assess the property’s condition in relation to its asking price. If a property requires significant repairs or maintenance, the price should reflect those costs. Avoid making an offer that will require renegotiating after discovering obvious maintenance issues during the property inspection stage.
5. Determine the Rent Upside vs. Cap Rate Compare the property’s current rent levels with the potential for rent increases. Properties with more upside in rents may justify a lower cap rate, while those with little to no rent growth potential should command a higher cap rate.
6. Conduct a Financial Analysis Lastly, analyze the property’s financials. This step should be taken after passing the previous criteria, as there’s no point in investing time in analyzing numbers if the property doesn’t meet your other requirements. The financial analysis will help you determine the final offer price and at this step is where the offer negotiations can begin.

Conclusion

Real estate investing is a long game, and our years of experience in multi-family and commercial real estate brokerage have taught us the importance of a systematic approach. Following these six steps will help you make more efficient and informed decisions when it comes to making an offer on a property or waiting for a better opportunity.

Baron Realty specializes in matching buyers and sellers of apartment buildings. The author,

Mikael Kurkdjian works in partnership with Ramona Ursu and a team of real estate professionals to bring the best boutique-brokerage services to the apartment transactional space in Ontario and Quebec. mkurkdjian@baronrealty.ca

Youtube video of this article is at

(53) The 6 steps BEFORE making your offer – 2023 edition – YouTube