I’m starting to realize how competitive this business really is and that when our first offer was initially accepted it was the exception rather than the rule. In a little over a month we have submitted 6 offers and analyzed many more than that. 4 of these offers have been rejected or we’ve been outbid and we are currently waiting to hear back on 2. We’re at a disadvantage because we are submitting offers that are contingent upon lender financing, which means anyone who puts in an all-cash offer is automatically more attractive for a few reasons: because sellers don’t have to worry that the buyer’s financing will fall through at the last minute and because closing can happen much quicker with all cash offers. Currently banks are recommending a 45 day close in order to complete all the required paperwork and due diligence (i.e. appraisals, government-required waiting periods, etc.). With all-cash offers there is none of that and closing can happen immediately after the inspection/attorney review (typically 5-10 days after the offer is accepted). It’s possible that we are losing out to investors that are putting in all-cash offers that are lower than our lender-financed offers. So, we’re getting creative and looking into ways to put in cash offers. We put in our first cash offer today. We’ll see what happens….
Despite the seemingly never-ending disappointments, I’m managing to keep my spirits up. I know that it’s just a matter of time and that I need to be patient. Patience is not something John has. He’s gunning to go and is frustrated that things are not going our way. He’s also not as dependent as I am on making this a quick success. I’m working a full-time, salaried job. He’s a realtor and it’s winter in Chicago (i.e. the worst time for realtors). Any of the offers we put in would have been good flips.
We talked about it and have agreed to adjust our strategy a bit. Rather than aiming for higher margins, we are starting to expect lower profits. This makes me nervous (especially for our first deal) because I am not confident that our cost projections are accurate. Once I have a deal under my belt and I know how much things generally cost, I think I’ll feel more comfortable with lower margins and, therefore, less room for error. So, in the meantime, I have to put my trust in John. John and I have now been dating 7 months. I know he’s trustworthy and smart, but at the same time I’m an extremely cautious person. I’ve been self-reliant for a very long time, so I’m not used to relinquishing (or even sharing) control on decisions that affect my life in such a profound way. This is new territory for me – from both a career/business perspective, and a relationship perspective.
The other thing that I’m noticing in terms of our competitive advantage is that we are limited in that we are looking at the MLS as our sole source of information. Don’t get me wrong…the MLS is a wealth of information and we absolutely could not analyze deals without it. But, it’s the same information that everyone else has. I’ve been doing my research and there are a number of ways to seek out real estate deals that are outside of the open market place. One way is the “yellow letter.” This involves canvasing a neighborhood and writing down the addresses of homes that seem to be in need of repair. You then send a “yellow letter” to the owner explaining that you are an investor and are looking for properties to buy. I wrote down a number of addresses the last time we went to view a house, but we’re not in a place yet that we feel comfortable enough to go all in on the yellow letter idea. We’ll get there, but at the moment we’ll stick with the MLS.
So, that’s the status update. There’s been a lot happening, but zero movement. I hope to have better news soon. I’m anxious to move forward with a project.