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Why More Real Estate Deals Don’t Fall Into Your Lap

by Chad Carson on August 20, 2014 · 22 comments

  

Have you heard the news on the BP Podcast, in the blogs, or on the forums?

People are doing lots of deals! Investors are making money again!

So isn’t it time for you to get more deals too?

Maybe you’ve tried. You’ve followed the MLS daily. You’ve sent out direct mail. You’ve made your business card. You’ve built your team.

Why don’t those good deals start falling into your lap?

Is there something wrong with you and your investing?! Are there just no deals in your town?

Well, there is something wrong, but thankfully, you can fix it right now.

Here’s the take home:

Good Deals Don’t Fall into Your Lap! Deals are Found, Nurtured, and Created Using the Skills that I Will Share Here.

Even the easiest of the hundreds of deals I’ve purchased did not just fall into my lap.

Just like fishing, I had to know where to fish, how to get the fish on the hook, how to reel him in, how to bring out the net, and how to get the big fish into my boat.

Some fish struggled for hours before finally being caught. Others swam right towards the boat and made it easy. Still more than I care to admit broke my line, laughed, and swam away!

So, the first thing to fix is this expectation that deals just happen or fall in your lap.

Becoming good at buying real estate deals is like mastering any craft or trade. The better you become, the more effortless the process will appear from the outside.

But the secret is in the fundamentals!!

It’s about the skills that you practice, practice, and practice until you start to master them.

This doesn’t mean you can’t go fishing for deals right away. The opposite it true.  That is how you get better.

This mindset of mastery is completely different from the impatient, results-now mindset we tend to inherit from gurus and get-rich-quick nonsense. And ironically, it tends to get results faster.

In the rest of the article I will share 5 critical skills that I consistently practice and try to master.  If you practice them too, I think you’ll find more and more deals “magically” falling into your lap.

1. Market Knowledge

If you don’t master your target investing market, not much else matters. This is the equivalent of studying the locations where you are most likely to catch the big fish. You can have all the best bait and equipment, but first you need the fish!

Related: Getting to Know Your Market and Evaluating Properties Within It

Here are some questions that will begin to get you thinking about the best fishing holes for your deals:

  • How are big picture demographic trends affecting your local market(s)?
  • What do your local buyers and renters really want?
  • What local features are most desirable? Schools? Amenities? Community centers?
  • What types of properties are most in demand for your market?
  • What price ranges and locations represent the best value?
  • What price ranges and locations have investment grade (income producing) properties?
  • How do other investors in my market make money?

In addition to those big picture questions, I find real estate valuation to be a critical skill.

Even if you don’t plan to become an appraiser or a real estate agent, you need to learn how to predict the likely rental or sales price of a property by studying comparable sales or other income properties.

If an experienced appraiser, real estate agent, property manager, or investor will let you shadow them while they do valuations, I highly recommend it. You will learn a lot.

2. Lead Generation

Deals might not fall into your lap, but you sure can choose good bait that attracts the right fish.

Lead generation is the skill and habit of consistently planting seeds that will later grow into opportunities.

Related: 5 Simple Strategies For Real Estate Acquisition Domination! (You are Going to LOVE #5!)

The possibilities are endless, but I have used all of the following lead generation channels successfully:

  • MLS daily searches
  • Driving For Dollars (or pushing strollers for dollars, my current favorite:).
  • Business cards
  • Direct mail
    • Non-Owner occupied
    • Owner-occupied with equity
    • Probate/estates
    • Local Professionals (attorneys, CPAs, etc)
    • Eviction landlords
    • Tax sale owners
    • Preforeclosures
  • Radio advertising
  • Signs
  • Car magnets

The list could go on and on.

Interestingly, some people think this one step is the secret to finding a lot of good deals.  Unfortunately, many investors waste a lot of money when they work this skill but don’t strengthen the other skills, like #3. Negotiation.

3. Negotiation

When an opportunity comes your way, can you turn it into a deal? If you get a fish on the hook, can you reel it in?

I will write a lot about negotiation in future articles, but for now know that three different things often get lumped together:

1. Haggling

2. Power/control/manipulation

3. Negotiation

I am not a good haggler. It’s fun at the flea market or yard sales, but starting low and meeting in the middle is hardly negotiation.

And my stomach turns at the slimy mind-control and manipulation tactics that get passed off as negotiation by many so-called experts.  If you want to control other people with intimidation, scripts, and subconscious suggestions, go start a hypnosis show in Vegas.

True negotiation is not magic.  It’s not secret.  In fact, the best negotiators I know are very transparent and vulnerable, and as a result, people trust them.

Trust is a currency in high demand in our world. If you can learn to earn trust with people, you can then get the opportunity to present solutions to their problems.

Sounds simple, but it’s a rare and valuable skill for real estate deal making.

4.Deal Analysis

If you are in this business to make a profit, you must sharpen your deal analysis skills.  You need to be able to identify a good deal and run the numbers, just like you would identify when a fish is a keeper or one to throw back.

There are many analysis short cuts or rules of thumb, like the 2% and 1% rules.  But you also need to develop more in depth analysis skills using spreadsheets.

BiggerPockets.com contributor J Scott wrote an awesome Introduction to Deal Analysis that I highly recommend as a starting point. I will also write more about this big topic.

5. Real Estate Tools (Legal/Paperwork)

If you can’t choose and execute the right tools and paperwork for a purchase, you’ve wasted your time with all the other skills.  This is like losing your fish while trying to get it into the boat.

Real estate laws and contracts are the foundation of the real estate market.  You don’t need to be a lawyer, but you do need to understand at least the basics of the contracts and tools you will use.

Where do you start?  I suggest the real estate licensing classes in your state.  Even if you don’t ultimately get your license, you will learn a lot about the basics of contracts and real estate law.

After that, study in more depth some of the primary tools that real estate investors use to purchase properties.

Some of my favorites are:

  1. Private notes/mortgages (especially self-directed IRAs)
  2. Seller carry-back financing
  3. Leases and options
  4. Conventional mortgages (until they cut you off)
  5. Local/portfolio mortgages (in moderation)

I will be writing a lot more about how to use these tools on my BP blog.  But you can also search on the BiggerPockets forums to get started on these subjects.

What do you think?

Have you found these 5 core skills to be helpful?  Are there others that I have missed?

I would love to hear from you.

Be sure to leave your comments below!

 

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{ 22 comments… read them below or add one }

Vamsi August 20, 2014 at 2:08 pm

I like the way you wrote this. You split things up so that it’s easy to digest, and it’s almost like each one of these skill sections could be its own article (which I think you alluded to; writing more in depth on each one). I definitely agree about being able to learn by shadowing RE professionals, I’m learning a lot currently apprenticing under a Realtor :D

I’m glad to have read your first article for BP and I look forward to the next ones :D

Reply

Chad Carson August 20, 2014 at 6:21 pm

Thank you Vamsi. Great to hear you’re shadowing a Realtor. There are few better ways to learn than looking over an experienced person’s shoulder. Best of luck!

Reply

Ken Bryant August 20, 2014 at 3:09 pm

Thanks Chad,
This is good reminder of best practices and encouragement to keep going.

Reply

Chad Carson August 20, 2014 at 6:27 pm

Thanks for reading, Ken! Glad it was a refresher for you

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Robert August 20, 2014 at 3:43 pm

As a Realtor I couldn’t agree with you more about number 5, the contracts. I find it amazing how investors love to look for properties and know about costs etc. but when you sit down with them and hand them a contract it’s like the first time they have ever seen one….they start getting all kinds of nervous and question everything and for the most part they are all standard contracts. Here in Fla the contracts are actually very fair for both but really takes care of the buyer….saw one guy analyze so much someone else got the property….then he was pissed off

Reply

Chad Carson August 20, 2014 at 6:26 pm

I agree Robert. Trying to buy real estate without understanding the standard purchase and sale agreement in your state is asking for trouble. That is another reason that having a real estate license as an investor can be beneficial. You can always bring in your broker or a fellow licensee to look things over with you so that you can borrow some confidence.

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Antonio Coleman August 20, 2014 at 6:52 pm

Yo Chad,

I’m like you bro, deals are found through creative and aggressive marketing on your behave. If you have the right platforms in place to capture leads, then the deals will sooner or later find you.

Antonio Coleman “Signing Off”

Reply

Chad Carson August 20, 2014 at 8:29 pm

Antonio,
Thanks for the comment! I agree that marketing and platforms will bring deals to you. If you can handle receiving thousands of leads, eventually you’ll get a good deal.

BUT … I don’t think that’s the way to go for everyone. Especially small, part-time landlords. Many times all they can afford is inexpensive gorilla marketing, networking, and a cell phone to take calls. Scrapping by with leads here and there, and maximizing the few opportunities they do get is the reality.

That’s where the other skills of negotiation, knowing your market, and creative real estate tools come in. They allow you to be highly targeted with marketing and to squeeze the most out of what leads you do get.

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Leila Jones August 20, 2014 at 9:43 pm

Thank you Chad, I am in the process of completing my testing to get my sales license and have several veteran agents willing to mentor/hire me. I had wondered if that really was an asset for the big picture of investing.

Driving & walking for dollars has become my favorite hobby.. Thanks again for the great post!

Reply

Chad Carson August 21, 2014 at 8:49 pm

Hey Leila, the license can be an asset if you use it to learn the market with an investor mindset. Listing and selling houses is a different ball game, so a successful realtor isn’t always a successful investor.

I love walking for dollars too. These days it is with strollers for me;)

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JerryW. August 20, 2014 at 11:03 pm

Chad, Thanks for taking the time to write this article. I also like your imbedded links to other related articles. I think the most important thing for new investors is #1 knowing your market. Until you know what is a deal and what is not, the rest do not come into play. You can always hire an attorney or a title company to do documents or close the deal.

Reply

Chad Carson August 21, 2014 at 8:45 pm

Jerry, I agree. Market knowledge is #1. I look at it like exercise for real estate investing. I need to study it every day to keep my market muscles strong.

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Steve Garner August 21, 2014 at 5:29 am

I always enjoy your articles and perspective on things. Constant learning and improving is one key to staying successful and you always include it in your articles. Congrats on the Blog.

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Chad Carson August 21, 2014 at 8:42 pm

Thanks Steve! Good to hear from you. Yeah, the day we stop learning and growing is the day we die.

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Brian Moore August 22, 2014 at 6:19 pm

Great article! Well written, very informative and has a simple, but very relevant, fishing analogy to boot. I see the author is featured on the current podcast, I will definitely make time for it.

I just went to Chad’s website and signed up for his newsletter. Looking forward to more of the same great writing & valuable insight.

Reply

Chad Carson August 22, 2014 at 8:03 pm

Hey Brian, thanks for positive feedback and for singing up for my newsletter. I look forward to staying in touch!

Hope you like podcast.

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Scott Cowan August 22, 2014 at 9:41 pm

Hey Chad, I’m glad you see you have begun contributing to the BiggerPockets community now! Keep up the great work. Your newsletter’s and presentations always have relevant information to today’s investor (which is because you are still doing deals), unlike many who offer coaching/mentoring/training/etc who USED to do deals using techniques and strategies that are, all too often, no longer viable in today’s marketplace. Thanks!

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Chad Carson August 25, 2014 at 3:07 pm

Thanks Scott! I appreciate the kind words. I’ll keep trying to make it relevant and practical.

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Frankie WOods August 25, 2014 at 5:03 am

Wow, my favorite comment: True negotiation is not magic. It’s not secret. In fact, the best negotiators I know are very transparent and vulnerable, and as a result, people trust them.”

I often feel like I am waaaay too honest. This is one of the reasons that I hate negotiating. Glad to hear someone else actually values that aspect :).

Reply

Chad Carson August 25, 2014 at 3:11 pm

Hey Frankie, I appreciate the comment.

You’ve got to negotiate with a style that fits you. It doesn’t sound like you’re one who intimidates to get what you want, either. So you and I have to be careful getting negotiation advice from people who do like that or who think it’s the better path (that’s the normal negotiation advice, by the way).

Non-pushy negotiation will lose some deals in the short run, but it has a hidden advantage: LONGEVITY. We get repeat business, happy customers, referrals, and long-term and profitable relationships. We’ll make more money in the end.

Best of luck to you.

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Penny Myers September 11, 2014 at 5:26 am

Hey Chad,
Another great article! Quick question for you regarding direct mail. I’ve been using it for years but now am getting limited results. In your podcast http://www.biggerpockets.com/renewsblog/2014/08/21/creative-finance-design-lifestyle-chad-carson/, you mentioned that what worked five years ago doesn’t work today. I agree but am at a loss to adjust my direct mail marketing. Will you do an article on the subject? Or can you address it here? Thanks much!

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Chad Carson September 11, 2014 at 9:01 pm

Thanks for the question, Penny. Lately I have relied a lot more on very targeted direct mail, where I just send personalized letters to owners of properties that I have identified as desirable or possibly motivated to sell (preforeclosure, vacant, etc).

I also am getting a lot of referral and MLS leads that have turned into deals for me, and when combined with the fact that my deal flow is modest – at 3-4 flips per year and 2-3 new rentals per year, I have filled my bucket with just those means.

Which lists in particular don’t seem to be working as well?

Reply

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