How Much Should You Offer For That Property?

Save my moneyI wanted to use this blog post to answer a question that I've been asked several times over the past few weeks.

It's actually one of the most important questions you'll have to answer as a real estate investor, and maybe you've already had the chance to wrestle with it first-hand. The question is this:


As you can probably imagine, this is a very important question because your offer price has everything to do with your ability (or inability) to make money on a real estate deal. With this in mind, I'd like to provide a bit of explanation on the basic math that I use to come up with an offer price for any given property.

The Importance Of Price

No matter how you slice it, your offer price (i.e. – the amount of your initial investment) is going to play a major role in the overall scope of any transaction. With the right number, you'll have a grand slam deal on your hands. With the wrong number, you can lose yourself a lot of money in an instant.

There are a couple of sayings that a lot of real estate investors like to throw around:

“Begin with the end in mind.”

“The money is made when you buy.”

Well guess what, both are true. If you make the right assumptions about a property's market value and have an accurate idea of what your holding costs, closing costs and improvement costs (if any) are going to be along the way, you can essentially write yourself a pay check, simply by choosing an offer price that will allow the necessary room for your profit margin…  however big or small you'd like it to be.

How Most Investors Think

Most of the people who flip houses and buy investment properties use something called the 70% Rule – perhaps you've heard of it.

This is a simple mathematical equation that takes the anticipated value of a property (i.e. – ARV or After Repair Value), times seventy percent (0.70), minus ALL costs, which will give you the “maximum offer price” that you should consider for any given property.

It makes sense on paper. You're giving yourself a 30% margin, from which you'll have to grab your profit. In theory, you're writing yourself a pay check which is being drawn from this 30% difference between your offer price, and the property's full market value.

It's not a bad framework for making offers IF the market is trending upwards, IF your assumptions are perfect, and IF you really are able to sell the property immediately, it could work…

Why I'm Different

After living through the “Great Recession” from 2008 – 2012, I've seen too many people lose their shirts using this “tried and true” 70% rule.

There is always an element of uncertainty with any real estate deal, and 30% just isn't a big enough profit margin to make me comfortable. I want more.

You see…   a lot of the properties I buy are vacant lots, raw land, housing in lower-end neighborhoods, and as a general rule of thumb – these types of properties don't tend to sell quite as fast when they're listed at “full market value” (which btw, is an incredibly subjective number to begin with).

I've found that unless I'm offering some kind of crazy incentive in the form of:

  • A ridiculously low price
  • Seller Financing
  • The most desirable property in a square mile radius
  • All the above

…it's just not wise to rely on the 70% rule.

To put it another way…  I don't want to leave ANY possibility of getting hurt, regardless of whether I've made some kind of judgment error.

In my mind, the only way to get around this is to make offers that are WAY below market value. Think 30%, 20%, even 10% of market value. You might think this kind of thing is crazy, but it's not a pipe dream – trust me. I make offers like this all the time and people accept them. It's just a matter of knowing how to find motivated sellers (which is a topic for another blog post).

That being said, here's an overview of how I come up with my offer price:

Base Your Offers On Math, Not Emotion

The beauty behind this spreadsheet is that it tells me in very plain terms what my offer price should be. If I'm going to stick to my business model and keep my emotions out of the equation, it's as simple as following what the numbers say.

I always use this approach when I'm making offers, it doesn't matter what kind of property I'm dealing with. I don't know of any better way to do business, than to lay out your potential courses of action and make a decision based on what the data says.

Am I going to miss out on some opportunities because my offer price is too low? Absolutely.

Am I willing to compromise my business model just because I'm worried a seller might not accept my offer? Absolutely not.

Am I going to break my own rules and bump up my offer price just because I “fell in love” with a particular property? Um…  are you kidding me?

YES – you will have to play the numbers game and send out a lot of offers. YES – you're probably going to hear the word “No” a time or two… but what do you get in return? You get peace of mind.

When someone does accept your offer – you get to be 1,000% SURE that you're holding the deal of a lifetime in your hands. And you deserve it! When you make data-driven decisions, you'll reap some huge benefits…   and if there's anything I've learned about real estate investing, it's that data-driven decisions beat emotion-driven decisions every time.

If you'd like to use the same spreadsheet shown in the video above, you can download it by signing up for the REtipster email list below…

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RELATED: How to Find the Market Value of Vacant Land

RELATED: Finding Your Best Market for Land Investing

RELATED: How To Make An Offer In 30 Seconds

Join the discussion 28 Comments

  • cliff daniels says:

    Tons of information on this site to use as resource. I am always seeking content (to direct as a link) for my Real Estate (residential) website blog hosting RE related articles for my viewership to click through for their consideration.

    Cliff Daniels
    Active Properties
    Boulder Colorado

    • Seth Williams says:

      Thanks Cliff, glad you stopped by!

    • MB says:

      Seth, great info here. Thank you for putting this together. With that being said. I am under the impression that you are missing quite a bit of expenses in your ROI calculation. What about the Direct mail campaign, list costs, legal docs/accountant, etc.? I read your article about the basic costs to start this business, so shouldn’t we be including those expenses in this calculator too? Thanks.

      • Seth Williams says:

        Hey MB – those are great points, thanks for pointing that out. As for the costs of legal docs (in the closing process), those costs are covered in the line items for “Purch: Closing Costs” and “Sale: Closing Costs”. When it comes to the cost of direct mail and lists… these costs are quite variable, and sometimes these costs may even be non-existent (e.g. – many of my leads come in from my website organically, which doesn’t require direct mail costs of any kind) – so it’s not always accurate to assume these costs should be factored into your offer price… it just depends on where your leads are coming from and how much (if anything) you’re paying for them.

  • Ken Cardillo says:

    Seth – sound advice! If you are in this business, you should treat it like business and therefore, NO EMOTION.

    I wrote an article based on my experience about how much to submit a bid for at My number one rule is to “remove the emotion”! I also discuss how knowing the seller and your competition can help you develop a bidding strategy. Check out the article and post your thoughts.

  • real estate pune says:

    emotions play very important if u r seller..if the buyer tells his tale a seller gets sentimental and gives away at buyers price..

  • Elvis says:

    Awesome material. I came to your blog thanks to the webcast on biggerpockets which I really enjoyed.

    My question..have you considered to make a detailed tutorial on how you determine the sell price of the land? Like showing the tools you use and how to come up with the potential sales price.


    • Seth Williams says:

      Hi Elvis, thanks for the suggestion! I actually did come up with something kind of like what you’re suggesting (though perhaps I could go into more detail about that specific issue). Check out this post about determining the market value of land: (this is arguably what you could list a property for – though I’d suggest starting a bit lower to increase your chances of a sale).

      And keep in mind, a lot of a property’s value is in people’s perceptions. If you want to communicate this kind of value effectively (thereby allowing you to get a higher sale price), check out this post:

      Hope that helps!

  • Lisaan Derson says:

    Hi…thanks for sharing your suggestion. Please keep posting.

  • Mike Scott says:

    Great blog! Lots of good information. When making a low offer on a house had you ever had anyone protest and say that the land alone is worth more than your offer and how do you respond?

    • Seth Williams says:

      Hi Mike! Absolutely – people are always entitled to their opinion (and in some cases, they may even be right), but this has nothing to do with the way I make offers. The offer-making process needs to remain 100% unemotional (which btw, is easier said than done). The fact is – I have a business model that I need to stick with, and if a seller doesn’t agree with the price that I NEED to have on their property – there isn’t much more to discuss, I simply walk away.

      This can be tricky to navigate in the beginning (especially when you don’t have the luxury of more leads than you can handle)… but it’s still important to use good judgment and buy at the right price because if you fail at this, everything else can fall apart later on down the road.

  • Deb says:

    The more information you have about a property, the easier it should be to determine an offer price. Have you tried Their property history reports include building permits, mortgage history, fire, flood, catastrophic history and other specific property details. The first report is free, additional reports are only $9. Visit and check it out!

  • Ryan says:

    Hi Seth,

    Another awesome post! Any chance I get hold of your offer generator worksheet? I tried downloading, but I received a “page not available” message.

    • Seth Williams says:

      Thanks Ryan! I’m not sure what happened with the offer generator worksheet. I just tried downloading it myself and it worked no problem.

      You might try downloading it one more time and if it still doesn’t work, shoot me and email through my contact page and I’ll send it to you manually.

  • savannah says:

    Seth, I really liked your site, for two reasons
    1. I use to do residential appraising in the 80’s and one thing I learned is Banks have NO concept of value. At that time they wanted you to make sure you came in for loan amount or you could say goodbye to them as a client. It was so skewed towards their criteria, it made me cringe because it is opinion, but you better have the right one.
    2. I have mountain property that I bought WAY back when. I toured the state, I was looking for EXACTLY the criteria you mentioned here. I wanted protective covenants, so my neighbors wouldn’t BE the issue with how they used their acreage-decreasing my value. I knew if I bought cheap, then it would appreciate if I was careful with the purchase. It has. In CO it was all about water, because you can have gorgeous views, but if you are not allowed to drill a well. Really how do you USE the property, that is expensive camping land. I wanted tap available because in more rural areas, it COSTS lots to bring in electricity on acreage if it isn’t available. So I found the parcel in a mountain subdivision that was small, had wells, electric, good access roads, and great views.
    Circumstances have changed and I have to sell. But finding comparables are difficult. The ones in the area are NOT like mine. I have a well on a good aquifer (the parcels available don’t and can’t get a permit), a combo of pines, aspen, rock outcroppings, meadow . But I am one of the few in this area that hasn’t built. I am surrounded with VERY nice homes/cabins. The last really NICE parcel in a well maintained mt. subdivision. The ones that haven’t sold are flat, covered with prairie grass and the views aren’t as nice and the winds are an issue, can’t have a well. But people COMPARE those with mine, and it isn’t an apples to apples comparison. Wells here go for 12 to 14,000 in this area IF you can hit a source, and IF you could GET a permit.

    How does one CREATE value for this parcel? I think I am asking a fair price, not an inflated price. But offers are ridiculously low. And if I sold at a loss, I know the buyer would turn around and make a killing flipping it. It has to sell for cash, I can’t offer financing.
    Any thots?

  • Residential Property and Flats for Buy / Sale in Pune says:

    RELIABILITY MUST RULE REALTY: Unauthorised construction is a major challenge for the organised real estate players and liveability index of the city

  • Cal says:

    Hey Seth,
    Soaking in all your good information, I’m a total newbie and have a newbie question for you. I am about to send out my first offers, I’m assuming I need to sign each one (by hand or docusign) or do I just not sign them and wait for them to sign and send it back? silly question perhaps, but I’m very much into the nitty gritty details of the basics at this point.

    Thanks for all you share!

    • Seth Williams says:

      Hi Cal – that’s actually a great question! Personally, I sign mine before I send them out. This shows the recipient that I’m serious, I’m onboard with the deal, and I’m ready to rock if they are (if anything, it may give them a little subconscious encouragement to accept and reply).

      Does that make sense?

  • Jocelyn Thomas says:

    Hi. I am new to this. So I may have questions that a lot of you know the answers to. Anyways, I’m trying to wholesale… and I have seen your numbers for the prospectus report (the assignment fee section) and I have seen this offer generator worksheet video posted here. What is the difference between these two sets of numbers? Are these different numbers for buyers and sellers? Just confused as to what is what, and how much would I really profit if this applies to wholesaling?

    • Seth Williams says:

      Hi Jocelyn – the offer generator worksheet was created with the assumption that I would be buying the property outright and selling it to a new buyer (so it’s not quite the same as a wholesale situation). With a wholesale deal – you would simply get it under contract (and you can use the same offer prices generated by this worksheet if you want), but the difference is – you would find another investor and sell the paper to them for a fee… so you would generally make less money, but you also wouldn’t have to take on any of the risks of ownership. Also, the selling costs wouldn’t necessarily factor into the equation, because those would be your third party buyer’s problem to pay in the future.

      Does that make sense?

  • Annabelle Dilworth says:

    Value may be in people’s (buyers and sellers) perceptions but learning rudimentary measures (measurements; units of measure such as price paid per square foot and value projected per square foot, etc); actually evaluating real estate and land would make sense to mention. Such as counseling readers to take elementary courses in real estate appraisal, and to have access to prices paid for similar properties and land in any area in which buyer/investor/speculator is interested in buying — how to check and further verify (confirm) public record information and information in real estate data bases, etc. How to assess (evaluate) “condition” and learn how local county property assessors assess (evaluate) “condition” of existing improvements to the land (to parcels).

    • Seth Williams says:

      Thanks for sharing your thoughts Annabelle – those are some great insights, I can see how those things would fit well here.

      I do have some other blog posts that discuss those things in greater detail… perhaps I’ll include some “related” links to those blog posts at the bottom of this one as well. Thanks gain for your input!

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