Anyone who has been in the commercial real estate investment business for any length of time has run into budding wars. Whether the property is a prospective fix and flip project or a revenue-generating structure like a multifamily apartment complex, there is a non-zero chance that someone else will make an offer on top of your, thus setting off a bidding war. While it is impossible to eliminate the chances of a bidding war starting, there are two methods of handling bidding wars in the commercial real estate arena.
Method 1: The only winning move is to not play the game
While some may view the approach of avoiding bidding wars as passing up a lucrative opportunity or leaving money on the table, the reality of the situation is much different. Bidding wars start when two or more property investors see the potential revenue in a piece of real estate. Each bid may bring you closer to owning the property, but the increased price also reduces your profit margin and depletes your existing budget. At some point, budgets get tossed to the side and “winning” a bidding war becomes a point of pride instead of financial strategy. Knowing when to walk away, and that there is not such thing as the perfect property can help you to realize the futility of bidding wars. Or, to put it another way, the only winner in a bidding war is the property seller. Making an offer on a property with the understanding that there are many others out there that can similarly generate revenue will allow you to walk away when the offers start to pile up and exceed your budget.
Method 2: Heading bidding wars off at the pass
Bidding wars can be stressful and arduous, but there is a way to head them off at the pass and keep them from escalating. While property sellers like to hold out for other offer, they will typically listen to the person who can offer cash up front. Offers come and go, but cash speaks louder than anything, so if you want to get the property you want and eliminate the risk of a bidding war, you need a financial partner who can provide the capital you need. The Capital Rams offers a wide range of commercial real estate financing solutions so you can get the funding you need to make an offer, prevent bidding wars, and get the property you want. Contact our offices today to get started.
