How Not to Find Deals

In my last post, I explained the paradox I found myself in. My first business was failing, big time. In the small business world, I was equivalent of an extremely motivated home seller. As desperate as I was to get out, I owed more than the business was worth. My dad, a real estate appraiser, (and the best Dad in the world, by the way), saw an opportunity. Knowing my work ethic, my ability to systematize and to innovate, proposed a deal: Figure out how to start a fix and flip business and he would carry the debt until the profits from the new venture could pay it off. Talk about doubling down.

As I mentioned before, he had done a few flips, mostly from deals he picked up as real estate appraiser, but mostly his construction experience came from spec building. Side note: just due to the shear number of houses appraisers see every year, they are bound to come across a few deals; try to befriend one. In short, we had no idea how to go about systematically and constantly finding deals.

So there I was on day one. The first order of business, find a deal. I hopped on the MLS (I have my real estate license) and pulled a list of every property in the system listed for less than $150k. I then pulled up the tax records and if the list price was 30% less than the assessed price, I added it to my spreadsheet. Where I got 30% from, I have no idea. Grabbed it out of thin air. At this point, I had zero education and hadn't discovered BP. There were probably 500 properties I had to sort through, so this process took most of the day before I narrowed  the list down to the 50 best prospects.

The next afternoon, I met my dad for lunch, super proud of the prospects I gathered. As we started looking over the list, he pulled out half of them for just being to far away from where we lived to make rehabbing possible. Next, he pulled out another quarter because they didn't fit his criteria (he didn't like historic, bad parts of town, condo's, short sale, etc.). In my defense, he never gave me a set of criteria to begin with. Then, he eliminated another five or so because they were in HUD's, or whatever government agency's, "first look" period and weren't open to investors. By the time we were finishing our sandwiches, there were one or two houses left. "Call the agent on these," he said. 

Deflated, but not beaten, I went home and called the agents for the few remaining properties. Turns out, all were under contract, the listings in the MLS just hadn't been updated yet. 

Man, was I bummed when I told my dad the news, but it wasn't a problem to him. "This is going to take some time." he said, "We only need to find seven or eight good ones a year. You'll figure it out."

I didn't know how, but his confidence in me gave me confidence that I would figure it out. "Take a deep breath," I told myself. "There's a learning curve for everything."

I knew I had to re-assess my acquisition stately, I just had no idea how.