What is the science behind an offer price?

by Readers Question

11:03 AM, 1st August 2016
About 2 years ago

What is the science behind an offer price?

Make Text Bigger
What is the science behind an offer price?

I am very new to the whole property investment market and I have been researching two areas for investment property (flats) at the moment in Slough and Ilford. secret sauce

I have made a few offers, unfortunately my bid usually just falls through. I wonder if my offers are too low or investors see something that I fail to see. I guess what I am after is some guidance on how to work out a offer price?

I have tried to use the per square meter average price for the area along valuation reports from mouse price, I usually look up the demand for rental in the area as well. The figure usually comes a lot lower than the guide price, even after factoring a 5-10% premium for infrastructure, transport links or regeneration projects. I can’t quite quantify raising the offer to battle the kind of bidding wars that happen towards the end.

So what is the secret sauce for working out the offer prices on investment properties?

Any tips and pointers would be greatly appreciated.

Many thanks

Tarun



Comments

Neil Patterson

11:05 AM, 1st August 2016
About 2 years ago

Hi Tarun,

It sounds like you have not yet found the right property that stacks up yield wise for your business model. Otherwise you would have offered more?

Our Landlords Calculator may help you assess the figures in more detail. Please see >> https://www.property118.com/calculating-rental-yields-and-returns/

Michael Freer

12:42 PM, 1st August 2016
About 2 years ago

When you have made "a lot" of offers and they are not accepted, maybe it is time for a re-think until then keep going and evaluate each deal as you have been, tweaking as necessary with the experience you gain each time.

There is a price the vendor is prepared to sell at and a price you are willing to pay, where they don't match or overlap, move on to the next deal.

Steve From Leicester

12:45 PM, 1st August 2016
About 2 years ago

Hi Tarun,

You are thinking too hard and trying to be too scientific.

Market values, even for properties aimed at the investor market don't follow a simple formula because different buyers have different motivations and expectations.

Make an offer that works for you. If its not enough to secure the property decide if it will still work for you at a higher price. If it does, make a higher offer. If it doesn't just walk away.

james pearce

15:43 PM, 1st August 2016
About 2 years ago

I make many offers for each successful bid, I'd be concerned if most bids were accepted.
Art or science? State of the market has a huge bearing on what discount you can get away with.
Don't bid above what you feel comfortable with......

david porter

18:33 PM, 3rd August 2016
About 2 years ago

Reply to the comment left by "james pearce" at "01/08/2016 - 15:43":

Tarun,
You know from your spreadsheet what rate of return you need.
Stay with the formula.
If you make an offer a month you may buy one or two properties a year.
You can often be outbid by a first time buyer, the newspapers will say this isnt so but it is the truth.
You just need to buy well, nothing else is that difficult.

Tarun Arora

22:35 PM, 10th August 2016
About 2 years ago

Great feedback, thank you. Is there a spreadsheet version of this calculator available for download? https://www.property118.com/calculating-rental-yields-and-returns/

Neil Patterson

8:26 AM, 11th August 2016
About 2 years ago

Hi Tarun,

It was programmed into the website using gravity forms so unfortunately not.


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Patrick Collinson has got it wrong yet again!

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More