How much below asking price do you offer?

[atlam]

Looking to add another property to our rental portfolio. With current prices compared to rentals acheived there is often a fair amount to top the mortgage up by. Apart from buying property with a subdividable section (which are getting few and far between) how else do you close the gap.
One way is to offer a lower amount, often 20 to 30% below asking price.
Alot of people operate like this and have success, although I imagine alot of knock backs along the way.
There is still the strategy of purchasing for capital gain, however having 10 rentals that you are topping up the mortgage on while waiting for that capital gain can be costly week to week.
Interested to hear other peoples thoughts on this.

[cube]

Asking price is usually what the agent said to the vendor in order to get the vendor's hopes up and buy the business!

What is important is the 'value', and for that you can ask 6 different people and get 8 different answers.

For a property 'worth' $300,000 with an asking price of $260,000, you could offer the asking price and still get a margin. However if the 'value' is $260,000 and the asking price is $300,000, offering anything close to the asking price is asking for trouble.

In the current falling/flat market (in most areas) a lot of houses are sitting around, and an agent will be glad of any offer, if only to condition the vendor's expectations downwards.

Remember that a $10,000 price cut reduces the agent's cash-in-hand by only about $150, so what do they care!

cube

[atlam]

Same lines Im thinking along

I think in this current market vendors have to expect offers significantly lower than the asking price. Especially if they have properties suited to the rental market, as landlords can not withstand adding $100 and sometimes more to the rent each week to meet the mortgage.
I do believe that rents will have to rise in the coming 12 to 18 months to offset a little.

[cube]

The amount that a landlord has to subsidise the mortgage by depends on many factors, one of the least or which is how much discount they get at time of purchase!

A high-value property may be purchased at a substantial discount, but if its not suitable as a rental, then the rent will be low.

Equally, a cheap property purchased at asking price in a popular rental area may attract a higher (relative to mortgage payments) rent than the high-value place in a not so rentable area.

Rent level is more a combination of supply and demand and tenants ability to pay that anything to do with the landlord's costs.

If interest rates sky-rocket - does the tenant care?

Over time, as landlords re-finance at the higher rates, there may be pressure to increase rents, but if there is an over-supply of rentals, they will be unable to if there are landords with lower (or no) mortgages to finance.

If a majority of landlords face an increased cost, e.g. insurance or rates, and try and pass it on to the tenants, then tenants will consolidate, resulting in more people living in the same space - you may get the higher rent, but wear and tear will be greater.

cube