When you put in an offer on something simple as a turnkey rental… lets face it. Its mostly about price. But there are some terms that I usually put in there such as a credit back for the maximum seller paid closing costs (~2%) in order to minimize the money out of pocket.
Other common things to watch out for especially if you are working directly with a turnkey provider as a non MLS transaction are terms of how your earnest money goes non-refundable (goes hard) and how long you have for an inspection period. And other basic contingencies such as financing contingency or sale pending completed and inspected scope of work and tenanted property.
As much as I don’t like brokers, their job is to walk you through these legalities and be a fiduciary to you. Also you can hide behind their errors and omission insurance. Going directly through a turnkey provider gives you little protection however assuming people are working in good faith there should be no problems. Big deals or small deals I don’t work with people I don’t know like or trust. But starting out we all make mistakes.
Unlike owner occupied properties “Letter To Sellers” for investment grade properties have little impact. Normally these letters humanize the process and helps connect you with the sellers but investors don’t care. In my opinion, you time is better spent researching more vendors or networking with other investors than to write a lame letter.
Set a Deadline – Give the seller a reasonable expiration date usually 3-5 days from the day you submit the offer. This gives them a little pressure.
Earnest Money is typically is suggested to be 1-10% of the property or $500-5,000. Putting down a larger amount of earnest money can make you seem more serious.
Another way to make you offer stronger is to waive contingencies in the contract. These include the mortgage contingency, a home sale contingency, an inspection contingency or an appraisal contingency. A lot of times the appraisal price may come up lower than the sale price you can agree before time should this happen how you will react to that.
Closing date – Most deals these days when using one of our Hui lenders are closing deals in 45-60 days. The seller wants the property sold the quicker but they also know that its a bit outside of your control. Again a broker can help advise you here. I was in one transaction where I was using 1031 exchange money and basically got extorted an extra $5,000 because I need to extend the closing period.
Can I negotiate with a Turnkey Seller? Answer is not really or you risk being seen as that unsophisticated investor who a pain in the butt. Here is the landscape, its been a bull market for over a decade, and there is a line of turnkey buyers around the block. That said you might be able to get $500 off the list price but its not worth it losing your social capital off the bat. My personal negotiation style is to offer full price but I make it clear that I am buying a property with certain expectations on the condition. As we move through the inspection that is where I try to be fair and knock down the price or get extra work done to the property.
I am not going to write that here because its too much to capture in a blog post but that is where it is critical to get someone experienced to look over your shoulder on an inspection report who will advise you on what is fair game to ask for. This is another reason to sign up for a year of group coaching or pay for an hour of consulting.
If you would like to get my form letter for my “letter of intent” (LOI) an offer letter for 2-300+ properties please apply for the Group Coaching Mastermind.
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