You’ve finally found the perfect property. With some minor renovations, this piece of commercial real estate will generate a lot of revenue as either a rental or a market flip. You put in an offer that you think the seller can’t refuse, and then start lining up permits for the rehab work. A short while later, you receive notice that another potential buyer has put in a slightly higher offer, and you’ve found yourself in a bidding war. Bidding wars are not uncommon in the commercial real estate arena, but there are two strategies to come out on top.
Don’t Engage in Bidding Wars
Not participating in bidding wars may seem like leaving money on the table, especially when you have a great property lined up, but it makes sense when you break it down into more realistic parts. First, there is no such thing as a “perfect property.” Every property needs some amount of work, and bidding wars escalate the purchase price which eats into the renovation budget and potential profits. Second, the only winners in bidding wars are the property sellers. Commercial real estate investors end up spending more money than they need to in a bidding war, and sellers want to keep the back and forth going, which increases their bottom line. Third, bidding wars are not strategic, bur a point of pride. No matter what plans you might have for a property, a bidding war escalates the purchase price and suddenly renovation plans start getting walked back due to budgetary restrictions. “Beating” other buyers in a bidding war only satisfies the ego, not the wallet, and personal pride doesn’t generate revenue.
Winning Bidding Wars in One Move
One way to ensure you get the property you want and shut down any potential budding wars is to back up your offer with cash. This involves some planning to make certain you have the capital to at least make a decent down payment. Property sellers may love the escalation of a property sale with a bidding war, but cash makes a more compelling argument, and a commercial real estate investor who can put up capital with an offer is more likely to get the property they want and avoid bidding wars completely.
Get the Commercial Real Estate You Want
At Nanaki Capital, we offer a wide range of commercial real estate financing solutions to help investors and developers get the properties they want. Whether you are looking at a potential rental, a fix and flip project, or ground-up construction, we can help. Contact our offices today and get the commercial real estate you want.