Looking for a Good Real Estate Deal? It’s a Numbers Game
Son, get a business degree. That’s what my Dad told me to do. You can’t go wrong he explained. Any occupation you choose will require some basic knowledge of business. So did I take his advice? Of course not. I was 18 years old. How many high school seniors do you know that actually listen to their parents?
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Instead I decided to major in Political Science. Now I didn’t do this because I wanted to become a politician or attorney. I decided to get a Bachelor of Arts degree in Political Science primarily because I didn’t have to do any math to graduate. All it took to earn my degree was a passing grade in Intermediate Algebra.
That’s a pretty dumb way to select a college major. But I was going to be a TV news guy. How much math did I really need for that?
It turns out that the liberal arts program at Arizona State University has a sense of humor. They cleverly named one of my required courses Political Statistics. I’m certain there were many unsuspecting undergraduates like me who saw this name and thought its statistics, not math. How bad could it be?
The answer is really bad. What they should have called this class is Inverted Equations and Twisted Algorithms for Political Pollsters. It would have been easier for me to earn a passing grade in calculus. I understood about every third word that came out of the professor’s mouth.
However, this numbers geek did share one interesting factoid that I still remember. He boldly proclaimed that 80% of all statistics are made up. It was silly math professor humor. Yet it’s hard for me to read any poll or survey and not think about what my instructor jokingly told us that day.
I was forced to overcome my aversion to math when I started my real estate investing career back in 2001. Believe it or not, it wasn’t hard to do. I suppose that’s because the numbers I was dealing with had dollar signs in front of them. It made it a lot more fun. But never in my wildest dreams did I think I would find a practical application for the statistics stuff I learned during my junior year in college.
My company has bid on 208 houses at trustee’s sales here in Arizona since the start of this year. We’ve won 8. That means we have to bid on 26 houses to win 1. In the past 12 months we’ve written offers on about 40 houses and have had 4 accepted. That’s 1 out of 10.
These statistics prove that finding a good deal in real estate is a numbers game. If you plan to make a business out of fixing and flipping then be prepared to place a lot of bids and make a lot of offers. You’ll also want to get used to hearing words like NO, REJECTED, DENIED and OUTBID. Don’t get discouraged. Just last week we were outbid by $60,000 on one property. The next day we picked up a house for $1 over the opening bid.
So if 80% of all statistics are made up that means 20% are true. I swear to you that my data is correct. Hopefully you’ll find it valuable. It could be in your market that the good deals come around a little more often. There’s only one way to find out.