Closed Tenders

[jad]

Hi,

What kind of strategy do people employ on IP's where the yield is significantly high (>10%) compared to RV and the sale is a closed tender?

Do you ever go significantly over RV (whilst still achieving >7/8% yield) in an effort to secure the property? ie, if it's still positive cashflow does it really matter what you pay compared to RV?

Thanks

[drelly]

Welcome to PT

1. Is the RV a realistic one? (is it relevant anyway?)
2. Just stick to your investing rules. Don't try to secure it outside these parameters.

[JohnL]

One of my investing rules is to buy well below market value. Apart from the advantages of increased yield and immediate equity gain, which help to keep your bankability up, its also helps risk management. If I have to exit, and the markets dropped 10%, then hopefully my loss is smaller or non-existant.

In terms of yield, surely a large positive cash flow is better than break even!!!

John

[cube]

My guess would be that in a slower market, then there is a fair chance that your tender (particularly for unappealing properties) may be the only one, so go in low - you can always come up.

In any case, a tender should only be made at a price that you are prepared to pay - i.e. one that matches your rules.

cube

[jad]

Thanks for the replies. I've only been in the property invesment game for about 6 days now, so in what I would call a research phase, reading up lots to come up with some proper strategy and rules, but have no real 1st hand experience yet.

I get the feeling that a closed tender is almost directed at the 'sucker' investor, ie, someone who is willing to modify their rules slightly in order to beat out the numerous [but potentially nonexistent] other canny investors due to the deal being too good to pass up.

I really now see the benefit of having rules and applying them in every situation.

Andrew

[revdev]

does it really matter what you pay compared to RV?

It always matters to me what I pay, better in my pocket than the vendors. Look to make your money when you buy and you will lock in equity and warm fuzzys for the bank.

Personally, I give tenders a miss as most (general statement) would seem to lack a vital ingredient - that being a motivated vendor.

All the best with your investing!

G

[CJ]

If you have only been in the game 6 days, put in a low ball offer and if you win, good, if not where is the harm and gives you a bit of experience.

The first property is very important as if you don't get a good deal, it is hard to get velocity (cant remember who's word that is) into the next deal.