How to Set a Maximum Offer Price

Or Max Bid for Auction

Author

Roger Blankenship
September 06, 2024 • Estimated Reading Time: 2 minutes

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Pick a number and stick with it.

The number one mistake of all new investors: paying too much for the property. Sometimes we want a deal so badly our emotions crowd out logic and we pay more than we should.

Here is a logical process for setting a MAX offer or bid.

  1. Define your desired return on investment (or return on cash). This is your net profit margin.

  2. Determine the “After Repairs” value of the property (ARV).

  3. Estimate all costs, including repairs, holding, property taxes, and costs to sell. 

  4. Subtract the costs from the ARV and multiply by your desired net margin. This number is your MAX offer or bid. 

Thoughts to help you maintain bid discipline.

  1. If I go over my max, there may be better things to do with my money.

  2. Another deal will come along.

  3. I’d rather be in NO deal than a BAD deal.