Beat the House-Hunting Competition: 11 Clever Tips to Win a Bidding War

Today’s housing market is markedly different than what we had just a year ago. Back then, people could make low-ball offers and have a good chance of them being accepted. Now, buying a property has become more expensive and complicated, and there are reports of bidding wars all over the country, even as we move into the slower selling season.

There’s more to winning a bidding war than crushing other investors with your bank account until the home seller caves to your offer. When buying a property, whether it’s a home you’re going to live in or one that you’re acquiring as an investment, it’s best to do your research, set boundaries, and be strategic. Armed with knowledge, you’re more likely to be the victor in your battle to buy a property without paying more than you should.

The following 11 strategies can help your offer stand out and win a bidding war.

1. Establish relationships in advance

Having established relationships with real estate agents and brokers can go a long way. You don’t always have to have the highest offer to win, but you do need the offer the agent likes the most. That often comes down to your confidence in closing and ensuring the agent will get paid their commission quickly. If they know you and know you are qualified, you will be way ahead of the game.

As a buyer, you should pick a representative who is experienced, local, and well known. The more respected the buyer agent or broker is within the community, the better chance they can successfully courting listing agents. While you’re at it, get in the good graces of listing agents, too, as they are the only people who meet all of the parties involved in a sale. In a competitive situation, working with a known broker and meeting face-to-face with the listing agent will make the agent feel more comfortable, which will boost your chances of winning, especially if two offers are very close.

2. Know the neighborhood

Make sure that your expectations aren’t out of line with your capabilities. Some neighborhoods are more expensive. Some have more (or less) popular housing types, and all have different types of nearby amenities. There are many websites with price comparisons for properties in each community. Research can help you avoid neighborhoods out of your price range or help you discover the right locations for you. Use these sites to narrow down the places where you’d like to buy a property.

3. Make strong offers

Standing out in a bidding war is important. If you don’t want to pay more, submit higher earnest money deposits so the seller knows how serious you are. A higher earnest money deposit could also show the seller that you are financially stable, and thus the transaction is less likely to fall through.

Remember, though, earnest money isn’t always refundable, especially if you don’t end up closing on the property. Be intentional when submitting a higher deposit and understand the contingencies you agree to.

4. Write a personal letter

You could write a letter to go along with your offer. Adding your story to your offer can help the seller feel an emotional connection to you. This not only makes you stand out in a bidding war, but also the seller might feel more inclined to be flexible with you.

That being said, it might also influence a seller not to choose you. While this is rare, there are some things to consider when writing a letter with your offer. Focus on what the house can do for you without forgetting what the home already means to the owner. This might be the home where they raised their children or where they’ve lived for years. Making your letter too much about you could cause the seller to consider other offers.

4. Add an escalation clause

Another way to create a strong offer is by agreeing from the start to increase your offer if there’s a higher bid from another buyer. You can accomplish this by writing into the contract that you will offer, for example, $1,000 or $5,000 more than the highest offer submitted.

When pursuing this technique, make sure you include a cap on the total amount you are willing to pay, or you could easily surpass what you want to spend. Pick the point at which you will walk away from the property and then stick to it. Getting caught up in a bidding war can be exhilarating, but don’t let the thrill make you overspend.

5. Drop contingencies

You might be tempted to add contingencies into your offer, especially if the real estate market is moving fast or you fear something will get overlooked in the transaction. Types of contingencies include:

• Home inspection
• Financing
• Home sale
• Appraisal
• Title

That being said, sellers prefer offers without any contingencies. Dropping contingencies reassures the seller that nothing will pop up at the last minute in a close. It can give sellers more confidence in your offer compared with the others they’ve received that include contingencies.

6. Offer all cash

Knowing that speed is the key to winning a bidding war, you should be prepared to pay in cash, if at all possible. No matter how big the down payment, processing, and mortgage approval from the time the offer is accepted until the time the keys are handed over can be a long wait.

Coming to the table with cash gives you a leg up on the competition. Sellers love cash offers because they’re more reliable, and the sale is less likely to fail at the last minute. Not all buyers or investors can make all-cash transactions, though.

7. Be preapproved

If you cannot make an all-cash transaction, get your loan preapproved and offer as much cash as it makes sense for your financial situation. Offers with a mortgage preapproval letter can make the seller feel more confident because the first step in securing financing has already been completed.

Preapprovals also help you as the buyer by knowing

• How much a lender is willing to offer you
• What the monthly mortgage payment will be
• Which mortgage options are available to you

A lender looks at your credit score, job history, identification, bank statements, current debts, and your completed mortgage application before they can preapprove you. If you’re preapproved, you’ll receive a specific loan amount they are willing to lend you, which you can submit with your offer. But here at Money Source of America we are private money lenders and look primarily at the asset and experince of the investor. We do not require income asset and reserve documentation. Go online to fill out a loan proposal summary today. If approved will issue you a Proof of Funds Letter which is legally looked at as cash.

8. Act fast

As noted in No. 6, speed is a big part of the equation in winning a bidding war. The internet has significantly sped up the sales of homes, with some houses selling the same day that they hit this seller’s market. If a property you want becomes available, don’t wait for the open house and forget low-ball offers. Look at the property so you can make your evaluation and make your best offer right away. You may only get one crack at this, so have all your paperwork in order ahead of time. When the right property enters the market, you can swoop in to get it.

9. Be flexible

Expressing your willingness to work with the seller’s timetable and requirements can go a long way toward a successful purchase. If the seller wants to remain in the home for a period of time after closing, you can offer a “lease back” or “rent back,” which means that you would become their temporary landlord until they move out. If you are making a bid on a short sale, make it clear to the seller that you are willing to wait for the bank’s decision, no matter how long it may take.

10. Buy as-is

Be the easy buyer to work with. If you throw up red flags that you’ll be difficult throughout the process, most sellers and agents will shy away, no matter the size of your offer. Instead, price your offer as-is and draw up a simplified contract. Many sellers will take a lower purchase price in exchange for a low-hassle transaction that will close on time. As an added benefit, these same agents or sellers may choose you again one day. The better your reputation, the more access you’ll gain and the better prices you’ll get.

11. Keep trying

Don’t be intimidated by higher bidders; if you really want the property and you think you can make it work, push forward. Make the offers and bids that you’re comfortable with, and remember your “walkaway number.” Bidding wars can get emotional quickly, so it’s important to set and remember your financial limitations.

If you lose the bid, offer to be a backup in case the accepted deal falls through. Remember that not every opportunity will go your way, and it’s better to have bid and lost than to have overbid and overpaid.

If someone else closes on the property, start searching for one to bid on. Buying real estate in a hot seller’s market might mean submitting a few offers before you close on your new property.

Bidding wars have been more common for lower-end properties, but now no property is safe. Even with all of the foregoing information, winning a bidding war also requires some luck. As noted already, employ winning strategies and don’t get so caught up that you end up buying a property for more than your maximum price. Do your research, know your limits and be aware of local real estate market values. Being armed with the proper knowledge can give you an edge over the competition, allowing you to outsmart them without overbidding.

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Here’s What You Need To Know As “adult dorms” become more and more trendy, there’s opportunities to take advantage of.

Before the pandemic, co-living as a housing solution was already gaining popularity as urbanization caused rents to rise in major cities. Now, the concept of living in accommodations with communal spaces is making a comeback after the pandemic left a rental affordability crisis and loneliness epidemic in its wake.

Early this year, the largest co-living operator in North America, Common, announced a merger with Habyt, the largest co-living operator for Europe and Asia. The result is a global leader in co-living that will operate 30,000 units worldwide, many of them co-living spaces. It is estimated that there were 74,000 total co-living bedrooms either for-rent or in development in the U.S. in 2022. At the end of 2019, real estate investment firm CBRE found that there were about 5,000 beds in only about 150 co-living communities around the country. It’s a rapidly accelerating trend, and research shows it may have staying power.

What Is Co-Living?

Co-living has always been a way to save money on rent—groups of friends, especially young single people, often rent shared spaces to save money on their monthly housing costs. But modern co-living spaces are different. Buildings constructed or renovated with the intent of unrelated individuals sharing the same living space often come with top-of-the-line amenities. Think of higher-end decor and furnishings, fitness and yoga studios, expansive co-working areas, and perks like cleaning services and high-speed WiFi. People typically live in individual, furnished bedrooms but share common areas like kitchens, bathrooms, laundry facilities, and living areas.

There are variations in how these spaces are operated. Some companies, like Outsite, use a membership model, where digital nomads can book spaces for as few as three nights. Others, like Bungalow, work as a tech platform that connects roommates seeking housing in major cities and subleases homes to them. Companies like Common offers a combination of private units with co-working spaces and shared units with private bedrooms.

The rising popularity of co-living spaces has also created a market for co-owned units. For example, the Co-Own Co. in Denver allows homebuyers to purchase a share of a unit with a private bedroom and bathroom. It’s a way for individuals to start building equity for a fraction of the typical cost of buying a home in the city. Some developers are also applying the co-living concept to single-family homeownership by building communities with a common house and other amenities and providing programming designed to foster community.

A Solution to Two Distinct Problems

Skyrocketing rents

The rent-to-income ratio in the U.S. is now 30%, an increase from 27.2% in 2019. In some cities, the problem is far worse—in New York, the ratio is 68.5%, and in Miami, it’s 41.6%. High rents are making it difficult for residents to afford elevated prices on gas and groceries and to stash away enough savings to hope for homeownership.

The surge in rental prices, which hit 17.1% year-over-year growth at its peak in February of 2022, was mostly due to limited inventory and high demand for more space during the pandemic. In some pandemic boomtowns, such as Austin, Texas, rents more than doubled within a year.

The rental market is starting to cool—national average asking rents are declining, according to Zillow. Multifamily inventory is forecasted to increase in 2023 as well. But rents remain elevated at 8.4% higher when compared to the same time last year, and apartment homes are still out of reach for many residents of urban areas. In 2022, there were 16% more chronically homeless individuals than there were in 2020. Since limited space relative to the number of residents seeking apartments is a significant part of the problem, co-living is a natural solution.

Even before the pandemic, local governments were examining the prospect of shared living spaces as a potential fix for unaffordable rents. Through SharedNYC, New York City’s Department of Housing Preservation and Development selected three proposals for shared housing developments with various models designed to provide housing to low-income residents. And in San Jose, California, lawmakers adjusted the local zoning code to include co-living, allowing a new development with 800 units to begin construction.

For decades in the U.S., boarding houses prevented homelessness for low-income urban workers. In the 1960s, it’s estimated that there were about 2 million “single room occupancy” units, similar in concept to modern co-living units. The National Alliance to End Homelessness sees the return of shared housing as a solution that would end homelessness for most people. Most modern co-living spaces rent for just slightly below market rate, but there’s an opportunity for multifamily developments that use a co-living model to bring even more affordable units to market.

The Epidemic of Loneliness

Renters who choose co-living may get more bang for their buck—luxury apartment amenities at below-market rental prices—but that’s not the primary reason most people rent a modern co-living unit, according to a survey co-organized by IKEA’s research and design lab. Respondents said the best benefit of co-living was the opportunity for social interaction.

Co-living spaces offer numerous opportunities for community building through both incidental interactions and intentional programming. Digital nomads can take a moment to socialize at the “water cooler,” just like employees who work in offices. Families can get support with child-rearing. Solo seniors can gather for meals. And everyone can have someone to call if they’re injured or need help. There are additional benefits for transplants who may need to move quickly without support—not only does co-living offer easier access to furnished spaces, but it also delivers an instant social circle. Some co-living companies even work to place roommates with common interests.
That’s kind of a breath of fresh air for the astounding percentage of Americans experiencing “serious loneliness.” A report from the Harvard Graduate School of Education puts the figure at 36% of all Americans, including 51% of mothers with young children and 61% of young adults. Social isolation can increase your risk of several serious health issues and is a risk factor that rivals even smoking when it comes to premature death. Loneliness is correlated with higher rates of anxiety, depression, and even suicide.

Issues with the Co-Living Model

Some co-living companies have yet to work out the operational kinks. For example, residents of Common’s co-living spaces complained of unsanitary conditions, poor security, hostility among roommates, and poor communication from the support team. Residents of Bungalow properties in New York reported finding strangers in their bedrooms, which were kept unlocked due to local law. They also complained of poor communication and sudden lease terminations, calling the operation a “scam.”
The complaints are drawing the attention from local lawmakers, who could respond by cracking down on this form of rental housing rather than relaxing regulations to make it more viable. For example, allowing locks on individually-rented bedrooms in New York might solve the problem in part, but if tenant complaints point to other unfair practices, the co-living model might be banned in the city altogether.

But in some cities, like Philadelphia and Minneapolis, lawmakers are embracing the idea of “single room occupancy” rentals, bringing legislation to allow the units in multifamily and commercial zones.

A New Asset Class for Investors

Co-living isn’t just a solution for loneliness and unaffordable rents. It’s also an emerging asset class for real estate investors. Despite some problems with the co-living business model, co-living companies generally report the higher rental income per square foot than traditional rental models. For example, in New York, earnings for co-living units are reported to be 40% to 50% higher than traditional apartment rents.

A report from students at MIT also suggests that co-living buildings should be more resilient during an economic downturn than traditional multifamily housing. Indeed, during the COVID-19 pandemic, co-living spaces continued to earn a 23.2% premium per square foot over rents per square foot for traditional studio apartments in comparable markets, according to research from real estate services firm Cushman & Wakefield.

The MIT report also indicates that co-living is on the verge of becoming more widely accepted, both among lawmakers and the general public. Early signs show that co-living will become a “fundamental asset class within residential real estate,” the report states. While the model is still in its infancy and comes with some potential headaches, it may become a welcome alternative to traditional long-term multifamily rentals for some investors, especially in urban areas where housing prices are making it more difficult to yield positive cash flow.

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J Scott (he goes by “J”) is an entrepreneur, investor, advisor, and author.

I was talking with another investor recently and used a term I assumed he would be familiar with. He wasn’t, which led me to realize that a simple but very effective tool for decision-making was likely to be overlooked by many others as well.

The tool/concept is called expected value (EV), and I’m most familiar with this concept because I spent my youth playing way too much high-stakes poker.

In poker, EV is one of the most common tools used to determine an optimal decision (fold, call, raise, etc.) in the middle of a hand, especially in big situations where all the chips are on the line.

But, EV can be applied to a wide range of decisions, including decisions related to our investments.

How Does Expected Value Work?

Let’s look at how EV works, using a straightforward example from the poker world.

We’re sitting in a poker game. It’s the end of the hand, and there’s $400 in the pot, and the other player in the hand bets $100, making the pot $500, requiring you to put in $100 to see a show-down.

You have a decision to make: Do you call the $100 bet or not?

While I could give you all the details of the hand—what cards you have, how the betting played out, whether the other player looks nervous. The only piece of information you need to make an optimal decision about whether to call is what you estimate the likelihood of you having the best hand (and therefore winning the pot).

To determine the expected value for a decision, you multiply the probability of each possible outcome by the value of that outcome and then add up the results.

In this case, there are three possible outcomes:

• You have the best hand and win
• You have the worst hand and lose
• You have the same hand (we’ll ignore this)

Let’s say that you believe there’s a 25% chance that you have the best hand and a 75% chance of having the worst hand. In other words, you will most likely lose, regardless of what you do.

But what about the expected value?

There’s a 25% chance of the first scenario above happening (you having the best hand and win), and if it does, you’ll win $500 (the amount in the pot). There’s a 75% chance of the second scenario happening (you have the worst hand and lose), and if it does, you’ll lose $100 (the amount you need to spend to call the bet).

To determine the EV, we multiply the probability by the outcome for each scenario and add them up:

• EV = (25% * $500) + (75% * -$100)
• EV = ($125) + (-$75)
• EV = $50

The Expected Value is $50. What does this mean?

It means that, while we have no idea if we’ll win $500 or lose $100 this hand, if we were to play out this exact situation a million times, we should expect to win, on average, $50 per situation.

A good poker player knows that while there is a 75% chance of losing this hand and going broke. Over the long term, taking that risk every time it comes up will ultimately make money.

In fact, if a poker player finds themselves in this exact situation 100 times, they should expect to earn 100 * $50 = $5,000 across all these situations.

A positive expected value investment/decision is one that you should always consider making. A negative EV investment/decision is one that you should always consider passing on.

Had the expected value for the poker situation above been negative, a fold would have been the right move.

How Expected Value Applies to Other Investment Decisions

We can apply the same logic to other types of decisions and different types of investments.

For example, it’s typical for house flippers who do a high volume of deals to consider “self-insuring” their properties. This means they don’t get insurance for the flips and assume the risk/cost themselves.

But is it smart to self-insure your flips? Let’s make some assumptions and run an EV equation.

Let’s assume:

• A typical insurance policy for a house flip will cost $1,000
• 1 in 50 flips (2%) will have a small ($10,000) claim
• 1 in 200 flips (.5%) will have a big ($100,000) claim
• The rest of the flips (97.5%) will have no insurance claim

Should we pay the $1,000 in insurance for each of our flips? Or self-insure?

Let’s take a look at the EV for self-insuring. We’ll start with the possible outcomes and the value of each:

• 97.5% of the time, there would be no claim. Therefore, no out-of-pocket cost.
• 2% of the time, there would be a small claim of $10,000 that we’d have to pay out-of-pocket.
• .5% of the time, there would be a large claim of $100,000 that we’d have to pay out-of-pocket.
• The rest of the flips (97.5%) will have no insurance claim

EV = (97.5% * $0) + (2% * $10,000) + (.5% * $100,000)

EV = $0 + $200 + $500

EV = $700

The EV on self-insuring is $700. That means, on average, we’d spend $700 per project paying for things that would have otherwise been covered by insurance.

In other words, if we were to do 100 flips, we could expect that we’d save about $300 per flip by self-insuring. Or $30,000 across all 100 flips!

Final Thoughts

While this is highly simplified, and you’ll have to use the numbers that make sense for your flips (both insurance costs and likely claims), you can see why many house flippers who are doing large volumes of flips choose to self-insure.

There are thousands of scenarios you’ll run into, both with your investments and daily life, where expected value calculations allow you to make much better decisions than just “going with your gut”.

Disclaimers about expected value

• Yes, there was another option in the poker example (raising). We’re ignoring that one.
• Yes, this discussion ignores variance. Sometimes, lower variance is more important than higher EV.
• Yes, you need to consider other things besides EV, especially when it comes to catastrophic risk (risk of losing everything).
• Yes, this requires that you are good at estimating the probability of each outcome and the value for each outcome, which can be difficult.

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Many new or aspiring investors—plus homeowners who may not even realize they’re real estate investors yet—could benefit from a simple rehab plan of action. Here is a very basic strategy for assessing and executing the renovation of a property to live in, flip, or rent. (Related: Here’s How To Increase the Value of Your Home or Investment Property)

Secure the Property

The first order of business: Securing the house. That means new locks throughout—and paying attention to any other methods of ingress. (Ingress means entrance—in other words, are there obvious ways a thief or vandal could access the property, such as through a window?)

Start by either personally changing the locks or calling a locksmith. In some cases, you may need to board up or block off insecure windows and doors until you can change them out. If you do not take the time to check and double-check the home’s security, then vandalism, such as physical damage or theft of fixtures, appliances, or even AC units, could leave you with far more work than you had originally intended.

Contact your utility company immediately. Get the electricity turned on and leave exterior lighting on at the property (after replacing any dead bulbs or floodlights). No exterior lighting? Prioritize this purchase. You may also consider leaving a light or two on in the interior to make it look like someone is there.

Consider putting up fabric or sheets of butcher paper over the windows to prevent passers-by from being able to see what you are doing. Keeping the outside world from peering in discourages vandals or thieves from breaking in. You don’t want brand-new light fixtures to go missing.

Working with the local authorities

If you’re worried about theft or vandalism, consider contacting the local authorities. Tell them that you have purchased the property and are currently renovating. Ask them if they could have police patrols on the lookout when in the neighborhood.

They will likely be very happy that you are renovating a property in the neighborhood and will be fine with keeping an eye on things for you.

Create a home remodel game plan

Start with a list of problems, intended renovations, and any other minor to-dos that need completion before moving in, renting, or selling the property. Then create a logical order of attack, starting with major systems such as the roof, electrical, HVAC, and plumbing. Next, tackle floor plan changes. (If your floor plan or layout changes would affect the major systems, it may be best to do the work simultaneously.) Cosmetic items, like paint or new lighting, should come last.

Having a scheduled game plan that makes sense is always a good idea before starting the rehab. Take some time to consider the property and what needs to be done.

Make a list

Here are some of the items that you should be looking at:

• Mailbox
• Landscaping and hardscaping, including retaining walls
• Windows
• Roof
• Fencing
• Siding
• Chimney
• Retaining walls
• Exterior lighting
• Patios or decking
• Pool
• Irrigation
• Gutters
• Paint and trim
• Garage door
• Exterior door
• Flooring
• Baseboards
• Ceiling
• Interior lighting
• Interior doors, including handles and hinges
• Outlets and plugs
• Fixtures
• Thermostat
• Curtains
• Kitchen cabinets, appliances, hardware, and counters
• Bathrooms, including vanities and showers
• Smoke and CO2 detectors
• Hot water heater

This list may be overkill for many homes. Still, review each and every item so that you don’t miss anything.

Think about a layout—and budget

Sit down and think about what your plans are. Be general at first. Do you want to move walls? Install a new bath? Does the kitchen need updating? As you layout your rehab project, it will begin to take shape, helping you firm up your budget estimates.

If you’re planning a major room remodel, like a kitchen addition or a master bathroom renovation, make sure to list to-dos for each element—and price out how much they’ll cost.

Consider budget while you’re planning out your strategy. Hopefully, you’ve already considered potential costs—but if not, it’s time to call contractors for quotes on every line item. Many investors hire a general contractor to manage the entire remodel. While that can add to your budget, it also removes a significant burden from your shoulders, especially if you’re not DIY-inclined.

Whatever budget number you end up with, make sure to add extra for emergencies and surprises—we recommend 10 or 15%. This ensures your entire plan won’t be thrown off-course if opening the walls reveals major trouble. (Related: 7 Ways To Spend a $5000 Renovation Budget for Max ROI)

What if I don’t know what work is needed

If you’re staring at a home and all you can think is, “Wow, it really needs a lot of work,” it’s time to call in the pros. Hopefully you had an inspection done during the closing process. If not, have one done now. That report will provide a great starting point. By reviewing the inspector’s comments, you’ll know if the roofing is solid, if the ceilings or drywall have evidence of mold or moisture, or if there are any other major problems that affect the whole house.

Next, consider bringing in an architect, contractor, engineer, and—if it interests you—an interior designer. They’ll be essential partners for your renovation project, especially if you plan to remove any existing walls. That’s typically not a DIY project: If the wall is load-bearing, you’ll need an engineer’s eyes, and you’ll likely need to install heavy beams to ensure the roof doesn’t come crashing down.

For every project on the list we made above, get two contractor quotes. The goal is to try and establish an apples-to-apples bid. If this is your first flip or renovation, it may be hard to find a contractor. Keep calling.

A special note on windows and doors

Take a really good look at the current condition of all of the windows and doors on the property. Ordering replacements may require waiting a number of weeks—or more!—for delivery. Getting that taken care of right away will keep your renovation timeline and budget on track.

Decide on yes, no’s, and maybe’s

At this point, you need to start narrowing the comprehensive bid sheet down. There should be two main factors: the budget and the economics of the deal. What makes sense for your end goal, whether it be rent, sell, or living in the house yourself? What makes sense for the neighborhood?

And most importantly: What can you afford?

Go through every to-do and label it “no,” “yes,” or “maybe.” After you are done doing this exercise, you need to total up the amounts of the bids for the line items where you put “yes” and “maybe.” Does that fit your budget (with allowance for surprises)? Then you’re set. If not, it’s time to keep culling.

Remove the debris

Before diving into your interiors to-do list—and we get that you’re impatient, because it’s probably massive! —take some time to tidy the exterior.

Start by removing loose debris in the yard and around the house and pulling any tall weeds. You’re not just doing this to please the neighbors: You also want to comply with local codes. The last thing you need are code enforcement citations when you are just getting to know the property.

There’s no need to do anything further on the exterior right now. Don’t worry about major landscaping renovations until you have tackled the interior changes.

If the home wasn’t empty when you bought it, now’s the time to clear everything out. Toss or donate old cabinetry, furniture, and any other debris found inside, so you have space to continue construction.

Cleanup and demolition can all take place the same day, but demo cannot start until the house is empty. Once the junk is gone, you will have a better look at the exact demolition required.

Also, be sure to have a plan for junk removal. Don’t pile it in the front yard. If the property has a lot of trash and significant demolition work, rent a “roll-off” trash dumpster that can be dropped off in the morning and picked up that night or the next day.

Start the interior

Unless you need to deal with some exterior leaks, we recommended starting all of the interior work first. One good reason: You want to utilize your budget on the inside—where people will be living!—before tackling curb appeal.

While you might have a rough idea of the costs, you never know what you will find in a building until you start the work. This is why it’s so important to budget extra for emergencies. Mold, leaking pipes, or rotted framing can easily put a major dent in the budget.

Have a contractor meeting

Before you begin, gather your contractors and make sure everyone’s on the same page. Review your plans, introduce everyone, and exchange phone numbers. Some of them, after all, will be working together and closely coordinating various aspects of the rehab project. Having such a meeting will help remove you from the “middleman” role. (Related: 6 Places to Find (Free!) Home Design Ideas)

Begin repair work

The next phase of your rehab is locating the major systems that need work. Be sure to hire licensed electricians, plumbers, HVAC contractors, and more to evaluate and make needed repairs to these systems.

Once these systems have been fixed and are in working order, your property might be covered in holes. Repairing most major systems requires cutting through walls—how else can you replace a leaky pipe behind the drywall? If you added or removed walls, you likely also have exposed studs.

If you need to add new drywall, make sure to get references for a good drywall person and mudder—these skills can look deceptively simple. Otherwise, you’ll want a good handyman to make sheetrock repairs and prepare for paint.

Be Specific

Your contractors will need to know specifics in order to get the job done. Just saying that the stove will be “about here” or the bathroom will be “over here” won’t work.

Tell them exactly where and how you want things. Draw out what you would like—to scale if possible. It does not have to be fancy; a pencil drawing will often do. Have a product list for tile, fixtures, carpet, etc. The more specific you can be on the front end, the better off you will be on the back end. Plus, fewer mistakes will be made throughout the process.

Paint

A new coat of paint always noticeably changes the interior aesthetics—and it’s a must-do for any renovation, especially if you’re adding or repairing drywall.

Once the major systems have been fixed and sheetrock has been installed or mudded, prep the interior for paint. If you are painting kitchen or bathroom cabinets, then be sure they have been sanded so that a new coat of paint can be correctly and easily applied. Cover everything you don’t want painted in plastic or painter’s tape.

If you are painting the entire interior, then consider working a painting subcontractor into the budget. The time they save will make it well worth the additional cost. For amateurs, a DIY paint job can take significantly longer than expected.

Repair or flooring

When deciding which flooring to install in your home or rental, consider cost, durability, and overall appeal. New carpeting always makes a property look nice but doesn’t necessarily stand up over time. If you plan to rent out the home, it might not be the best pick. You may also consider refinishing original hardwoods or even installing durable laminate floors.

Look at the current kitchen and bathroom flooring. Does it look old and dirty? Is there broken tile? You’re probably better off replacing. New tile or linoleum always adds to the appeal of the property and will likely help you justify top dollar if you’re planning to sell or rent.

While flooring installation is technically a DIY-able task, hiring a professional is generally a good idea. Flooring mistakes are highly visible.

Tackle exterior needs

Once you have completed the interior rehab, take a look at the essentials needed outside. This includes siding, porches, railings, shutters, screens, garage doors, and gutters. If the exterior is in bad shape, you’ll want to consider painting.

However, if the property is intended as a rental, you can touch up or paint the front of the house exclusively to add curb appeal—but not break your budget. You’ll also need to be conscious of any items that may pose a danger to a potential tenant (i.e. broken handrails, falling retaining walls, etc.). Be sure to pay careful attention to any items that might become a liability.

Take some time to make the landscape attractive, with pops of color from flowers and a clean look for the yard. Hiring a landscaper may be worth the money. Other things that might seem minor, like a nice mailbox and proper numbering on the building, can improve your home’s value. If you can affordably make changes, do so. You could even hire some local high school students for a day of hard outdoor labor to tackle the simple tasks, like mulching. These items will make your property feel like home.

Following these steps to a quality renovation will help you attract the right tenants, earn more in a sale, or just love the home you live in.

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The following 12 strategies can help your offer stand out and win a bidding war.

1. Establish relationships in advance

Having established relationships with real estate agents and brokers can go a long way. You don’t always have to have the highest offer to win, but you do need the offer the agent likes the most. That often comes down to your confidence in closing and ensuring the agent will get paid their commission quickly. If they know you and know you are qualified, you will be way ahead of the game.

As a buyer, you should pick a representative who is experienced, local, and well known. The more respected the buyer agent or broker is within the community, the better chance they can successfully courting listing agents. While you’re at it, get in the good graces of listing agents, too, as they are the only people who meet all of the parties involved in a sale. In a competitive situation, working with a known broker and meeting face-to-face with the listing agent will make the agent feel more comfortable, which will boost your chances of winning, especially if two offers are very close.

2. Know the neighborhood

Make sure that your expectations aren’t out of line with your capabilities. Some neighborhoods are more expensive. Some have more (or less) popular housing types, and all have different types of nearby amenities. There are many websites with price comparisons for properties in each community. Research can help you avoid neighborhoods out of your price range or help you discover the right locations for you. Use these sites to narrow down the places where you’d like to buy a property.

3. Make strong offers

Standing out in a bidding war is important. If you don’t want to pay more, submit higher earnest money deposits so the seller knows how serious you are. A higher earnest money deposit could also show the seller that you are financially stable, and thus the transaction is less likely to fall through. Remember, though, earnest money isn’t always refundable, especially if you don’t end up closing on the property. Be intentional when submitting a higher deposit and understand the contingencies you agree to.

4. Write a personal letter

You could write a letter to go along with your offer. Adding your story to your offer can help the seller feel an emotional connection to you. This not only makes you stand out in a bidding war, but also the seller might feel more inclined to be flexible with you. That being said, it might also influence a seller not to choose you. While this is rare, there are some things to consider when writing a letter with your offer. Focus on what the house can do for you without forgetting what the home already means to the owner. This might be the home where they raised their children or where they’ve lived for years. Making your letter too much about you could cause the seller to consider other offers.

5. Add an escalation clause

Another way to create a strong offer is by agreeing from the start to increase your offer if there’s a higher bid from another buyer. You can accomplish this by writing into the contract that you will offer, for example, $1,000 or $5,000 more than the highest offer submitted. When pursuing this technique, make sure you include a cap on the total amount you are willing to pay, or you could easily surpass what you want to spend. Pick the point at which you will walk away from the property and then stick to it. Getting caught up in a bidding war can be exhilarating, but don’t let the thrill make you overspend.

6. Drop contingencies

You might be tempted to add contingencies into your offer, especially if the real estate market is moving fast or you fear something will get overlooked in the transaction. Types of contingencies include:
• Home inspection
• Financing
• Home sale
• Appraisal
• Title

That being said, sellers prefer offers without any contingencies. Dropping contingencies reassures the seller that nothing will pop up at the last minute in a close. It can give sellers more confidence in your offer compared with the others they’ve received that include contingencies.

7. Offer all cash

Knowing that speed is the key to winning a bidding war, you should be prepared to pay in cash, if at all possible. No matter how big the down payment, processing, and mortgage approval from the time the offer is accepted until the time the keys are handed over can be a long wait.

Coming to the table with cash gives you a leg up on the competition. Sellers love cash offers because they’re more reliable, and the sale is less likely to fail at the last minute. Not all buyers or investors can make all-cash transactions, though.

8. Be preapproved

If you cannot make an all-cash transaction, get your loan preapproved and offer as much cash as it makes sense for your financial situation. Offers with a mortgage preapproval letter can make the seller feel more confident because the first step in securing financing has already been completed. Preapprovals also help you as the buyer by knowing:
• How much a lender is willing to offer you
• What the monthly mortgage payment will be
• Which mortgage options are available to you

A lender looks at your credit score, job history, identification, bank statements, current debts, and your completed mortgage application before they can preapprove you. If you’re preapproved, you’ll receive a specific loan amount they are willing to lend you, which you can submit with your offer. But here at Money Source of America we are private money lenders and look primarily at the asset and experience of the investor. We do not require income asset and reserve documentation. Go online to fill out a loan proposal summary today. If approved will issue you a Proof of Funds Letter which is legally looked at as cash.

9. Act fast

As noted in No. 6, speed is a big part of the equation in winning a bidding war. The internet has significantly sped up the sales of homes, with some houses selling the same day that they hit this seller’s market. If a property you want becomes available, don’t wait for the open house and forget low-ball offers. Look at the property so you can make your evaluation and make your best offer right away. You may only get one crack at this, so have all your paperwork in order ahead of time. When the right property enters the market, you can swoop in to get it.

10. Be flexible

Expressing your willingness to work with the seller’s timetable and requirements can go a long way toward a successful purchase. If the seller wants to remain in the home for a period of time after closing, you can offer a “lease back” or “rent back,” which means that you would become their temporary landlord until they move out. If you are making a bid on a short sale, make it clear to the seller that you are willing to wait for the bank’s decision, no matter how long it may take.

11. Buy as-is

Be the easy buyer to work with. If you throw up red flags that you’ll be difficult throughout the process, most sellers and agents will shy away, no matter the size of your offer. Instead, price your offer as-is and draw up a simplified contract. Many sellers will take a lower purchase price in exchange for a low-hassle transaction that will close on time. As an added benefit, these same agents or sellers may choose you again one day. The better your reputation, the more access you’ll gain and the better prices you’ll get.

12. Keep trying

Don’t be intimidated by higher bidders; if you really want the property and you think you can make it work, push forward. Make the offers and bids that you’re comfortable with, and remember your “walkaway number.” Bidding wars can get emotional quickly, so it’s important to set and remember your financial limitations. If you lose the bid, offer to be a backup in case the accepted deal falls through. Remember that not every opportunity will go your way, and it’s better to have bid and lost than to have overbid and overpaid. If someone else closes on the property, start searching for one to bid on. Buying real estate in a hot seller’s market might mean submitting a few offers before you close on your new property.

Bidding wars have been more common for lower-end properties, but now no property is safe. Even with all of the foregoing information, winning a bidding war also requires some luck. As noted already, employ winning strategies and don’t get so caught up that you end up buying a property for more than your maximum price. Do your research, know your limits and be aware of local real estate market values. Being armed with the proper knowledge can give you an edge over the competition, allowing you to outsmart them without overbidding.

The post Beat the House-Hunting Competition: 12 Clever Tips to Win a Bidding War appeared first on Money Source of America, LLC.

We spoke with Kendra about how she made a profitable career out of real estate investing, what she’s learned along the way, and how the industry has been changed by COVID and a new wave of investors.

How Did You Transition From a 9-to-5 Job to a Full-Time Real Estate Investor?

“We never imagined investing in real estate,” recalls Barnes, who owned a house in Washington, D.C. with her husband and worked as an international economist for the U.S. government. “It wasn’t that we didn’t think we could do it, but we had literally never thought about it.”

The board game Cashflow opened up the idea of passive income for Barnes — and made her realize working a nine-to-five job until retirement age wasn’t the only option. She and her husband played the game on a Saturday night, and by Monday, they were already looking at investment properties.

Because they didn’t have enough money for the down payment on the D.C. property they wanted, they took a loan out from their retirement funds (Barnes recommends consulting a financial advisor before taking similar steps).

Once Barnes started seeing a return on their first investment property, she and her husband were eager to buy another — which they did through house hacking, or living in one unit of the multi-family property they had purchased while renting out the other three units.

“We started using money from one rental to fund the next,” said Barnes. “People ask me all the time how many rental properties they need to retire or be financially free, but there is no magic number. It depends on where you’re at and the financial goals of each individual investor.”

Pro Tip: There are different types of real estate investments, so it’s important to determine which is best for you.

What Were the Biggest Challenges You Faced When Starting Out in Real Estate?

“Lack of knowledge, followed by lack of funding,” said Barnes, which was part of the reason she wanted to bridge the gap in knowledge and share what she had learned (and the mistakes she made) in her own investing journey.

“One of my friends jokingly said, ‘Did you have to rob a bank?’” Barnes recalls after sharing the news of her newly-purchased four-unit building on Facebook. “I realized there was a gap in information. People wanted to do this, but they really didn’t understand how to start.”

Barnes notes that buy-in from family and friends can also be a major obstacle, especially if investing in real estate isn’t common within a social circle.

“In the Black community, conversations about wealth, in my mind, were lacking,” said Barnes. “We weren’t talking about it in our families, we weren’t talking about it among our friend groups, and I know people often need to see themselves represented in a story. So I started the Key Resource to bridge that gap and be the representation that I wish I had when I started.”

Have You Seen a Shift in the Kind of Investors That Are Getting Into Real Estate?

“One hundred percent,” said Barnes. “I would say 95% of my students and coaching clients are single Black women. There’s a misconception that you have to be wealthy first, or that you can’t do it on a single income, but that’s not true.”

In Barnes’ new book, “Acres,” she highlights the stories of 25 Black investors that built their wealth from the ground up — some of them overcoming homelessness or six-figure debt to build million-dollar portfolios.

“The face of real estate investing is changing and people are realizing that wealth is not a prerequisite, but a byproduct of investing.”

How Do You Think the Industry Has Changed From COVID?

Barnes has seen a mixed bag of reactions to real estate investing brought on by the pandemic. On one hand, people have realized the importance of multiple streams of income when traditional jobs can be taken away at the moment’s notice. On the other, she acknowledges the fear many investors have experienced over tenants not paying rent.

The pandemic has also helped widen the opportunity for long-distance real estate investing. “People are jumping on the remote investing train because they realize that if they live in a high cost of living area, they get a bigger bang for their buck shopping in the lower cost of living areas,” Barnes said.

But overall, Barnes thinks COVID has taught investors to better prepare for all outcomes and be aware that things can quickly change.

“People often find a property and think of one use for it, and those are the only numbers they run,” said Barnes. “But what happens if it doesn’t work out? What happens if something changes, like the county puts restrictions on short-term rentals? When you’re identifying a property, you have to make sure that you’re putting yourself in a position to pivot and still be profitable.”

How Can Real Estate Investors Connect and Learn From One Another?

Barnes’ favorite networking tool has been Instagram, where she connected with almost every investor featured in “Acres” and has been sharing stories of other successful real estate investors through her account for years.

“I’ve met some of my lifelong friends through Instagram, just for the love of investing,” she said.

She also points to Facebook groups, local real estate investing meetups, and networking through social media, with an emphasis on listening to other investor stories and learning from their successes.

“My story is cool, it’s unique, but there’s so many other people out there doing things differently than me that can help someone in a different way.”

Connect, Learn, and Network

You can read more about “Acres” and connect with other real estate investors on the Avail Community Forum, search for real estate investing topics in our library of educational content.

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