Overview of Yes, You Should Start Lowballing Offers (Real Estate Rookie — BiggerPockets)
This episode is a “Rookie Reply” where hosts Ashley Kerr and Tony J. Robinson answer three listener questions about partnership structure for mixed-use rentals, when/how to submit lowball offers, and how to scale a rental portfolio quickly. They focus on practical, transactional advice—loan/product implications, partnership agreements, negotiation tactics, and using private capital for construction/BRRRR deals.
Key takeaways
- Structure matters: ownership deed, mortgage name, and financing product determine what you can and can’t do (e.g., gifting rules, FHA limits, LLC financing).
- Don’t fear lowball offers—context matters (market cycle, days on market); justify offers with numbers and consider non-price sweeteners.
- Private money + short-term financing + refinance is a repeatable path to scale if you have deals and execution ability (new construction or BRRRR).
- Always get agreements in writing and talk to multiple lenders/experts before committing.
Q1 — Partnership + primary residence + short-term renting (Jackie)
Situation: Jackie and a friend want to buy a small multifamily unit where the friend lives in one unit (primary residence) and they short-term rent other units. They’re W-2 employees and plan to split work and income.
Main points / practical guidance:
- Mortgage vs deed: You can both be on the deed but typically only the occupant would be on the primary-residence mortgage (example from Ashley: sister was on FHA mortgage; Ashley provided down payment and was on the deed).
- FHA gifting rules: FHA allows gift funds from close family (sibling, parent, etc.), but many lenders will scrutinize down payment sources for non-occupant co-investors—gifting from a friend can be problematic.
- Seasoning: Some lenders accept funds that have been “seasoned” (sitting in the account for a period), but requirements vary—talk to lenders.
- LLC ownership: Primary residences are rarely put in an LLC for mortgage purposes; buying in an LLC typically means commercial financing with higher rates or specific DSCR loans (and you usually can’t occupy DSCR-financed homes).
- Partnership agreement: Regardless of title, have a written contract detailing capital contributions, equity split, management duties, handling of repairs/turnover, and exit scenarios (e.g., what happens when the occupant moves).
- Actionable: Shop multiple lenders, document gifting/seasoning, draft a formal partnership agreement that aligns responsibilities with ownership/equity.
Q2 — Submitting lowball offers (Henry / agent question)
Situation: Investor clients want to offer $230K on a 3-bed, 2-bath listed at $300K (on market > 1 year, needs <$20K cosmetic repairs) and expect seller to pay buyer agent commission.
Main points / guidance:
- Lowball is appropriate here: a property sitting > 1 year is prime for aggressive offers—submit lowball offers rather than being timid.
- Do upfront research: use tools like PropStream to estimate seller’s mortgage balance, liens, and motivation (if seller owes little, less chance to accept deep discounts).
- Seller financing alternative: If seller owes little or owns free-and-clear, structure seller-financing to bridge gap—can get you closer to the seller’s expectations.
- Market context: Low rates / heavy buyer markets change tactics. Today’s market (less buyer competition than a few years ago) gives buyers more leverage.
- Presentation matters:
- Make a verbal inquiry before pulling contracts (saves time).
- Justify your number with repair costs, comps, and rehab budget (show your math).
- Offer non-price sweeteners: faster close, limited repair requests, fewer contingencies when possible.
- Agent advice: If you’re an investor, work with an agent comfortable submitting lowball offers.
Practical negotiation flow:
- Research comps, liens, mortgage balance.
- Make a verbal offer to test the waters.
- If seller is open, submit formal offer with justifications and terms that make it attractive beyond price.
Q3 — Scaling from 5 to 30 rentals (Grant)
Situation: Grant has 5 rentals purchased at 25% down, wants 30 rentals but lacks capital to move on many deals; asks about private lenders that let him make long-term mortgage-like payments.
Main points / strategy:
- Ask “why 30?”: Clarify the goal (cashflow, equity, retirement number). Scaling for its own sake isn’t always best—10 great assets can beat 30 mediocre ones.
- Private money / construction strategy: Use private short-term capital to fund land and construction (or rehab), then refinance into long-term debt once the unit is complete and appraised.
- Example timeline: build for $300K → completed appraises at $400K → refinance at 80% LTV = $320K → pay off private lender and retain new long-term mortgage.
- This is the common BRRRR/new-construction play to scale fast without selling.
- Comparisons: Consider whether paying down current mortgages (to increase cashflow) versus acquiring new assets yields faster portfolio growth—depends on interest rates on current debt.
- Execution matters: If deals exist and you can raise private capital repeatedly, this is a repeatable model; you still need strong underwriting, contractors, and exit refinance plans.
- Actionable: model each deal (costs, ARV, refinance LTV, timeline), secure relationships with private lenders and investor backers, and decide whether to deploy capital to pay down current debt or acquire new properties based on ROI.
Actionable checklist (what listeners should do next)
- For co-ownership primary residence deals:
- Talk to multiple lenders about loan-products, seasoning, and gifting rules.
- Draft an explicit written partnership agreement covering contributions, management duties, capital calls, and exit.
- Decide ownership structure (deed names vs. mortgage name) and how to handle future transitions.
- For lowball offers:
- Research prop history & comps (PropStream or similar).
- Make a verbal offer first; submit contract if seller engages.
- Back offers with rehab/comp math and consider seller-financing or better terms (fast close, limited repair demands).
- For scaling with private money:
- Build standard pro-formas for each construction/BRRRR deal (cost → ARV → refinance LTV).
- Cultivate private lending relationships; plan payoff/refinance timelines (6–18 months is common).
- Re-evaluate portfolio goals: is the number-based target (30) optimal for your financial goals?
Notable quotes
- “Don’t be afraid to submit lowball offers.” — Tony
- “Go shop it around—talk to multiple lenders.” — Tony & Ashley
- “Even if it’s not owned in an LLC, have some sort of contractual agreement between the two of you.” — Ashley
Resources mentioned
- biggerpockets.com/lenderfinder — find investor-friendly lenders
- PropStream — property data, mortgage balance estimates, comps
- WD Suite (Walker & Dunlop), PPR Opportunity Fund, Steadily — sponsor tools/services referenced for market data, investment funds, and insurance (useful but optional for listeners)
This episode emphasizes pragmatic, transaction-level thinking: validate loan/titling mechanics before partnering, use data to justify negotiation, and leverage short-term private capital plus refinance to scale when you have deals and execution capacity.