how to analyze and find deals in todays market (2022)
hi everyone,
im a total newbie to real estate. I've been looking for an investment property that'll also be my first house. the plan is to purchase a property (CA) and execute the BRRRR strategy. however, that's proven to be extremely difficult. im having a hard time just figuring out exactly what is a deal and how the numbers would really work. analysis paralysis is real!
what do you look for when analyzing a SFH for future rental potential? what would be your advice to a brand new investor and newbie to the real estate game in general?
@Nestor Vega BRRRR means you are looking to add value to a house by significantly increasing the ARV, either via repairs, or adding square footage, or adding a bedroom, or some other creative strategy, or some combination. To use real numbers (but not California numbers!), a "deal" would be something you could buy for $100K and spend $40-50K on, that would appraise for $200K+. If you read more about this on BP most will say that to do this you have to buy something off market (IE not on the MLS) because there isn't enough opportunity to add value to an MLS property.
Getting started with a BRRRR is possible, but can be difficult, because you have to find a deal that is way undervalued as described above.
Another way to get started is to house hack. Or to pick a different market. Or to house hack in a different market.
I'm in the same situation. Trying to get started, but the CA market is tough to crack without experience. I considered buying a property and building an ADU - convert a garage, or build a backhouse to add value. Thoughts?
@Justin Stewart it would depend on the numbers.
@Nicholas L. that is my plan with BRRRR. i was looking at doing small but significant changes to a house. (adding bathroom, room, adding Sq ft, opening floor plans, etc.) i can definitely see that there's not much on the MLS to consider a deal. how would i go about scoring an off market deal? another question i had was, what would be the best way to collect the capital to do the rehab? what's a smart way of not having to use all your money to accomplish these rehab projects?
Originally posted by @Justin Stewart:I'm in the same situation. Trying to get started, but the CA market is tough to crack without experience. I considered buying a property and building an ADU - convert a garage, or build a backhouse to add value. Thoughts?
>Thoughts?
Hands off ADU additions in most areas of CA is the opposite of a value add in that it is likely to add less value than the hands off cost of the ADU. In these markets, you are better off purchasing a property with an existing ADU. In both cases though there is no value add by simply having/adding the ADU which means if you need to extract value you will need another value add or to wait for appreciation/equity pay down to obtain enough equity.
I think the best opportunity currently is to purchase large lot, owner occupy and use Sb9 to lot split. This likely requires some capital or at a minimum partnering for the capital.
Good luck
@Nestor Vega do you have your capital ironed out? beginnings of the contractor relationships? multiple lenders lined up?
Drive around the B and C neighborhoods and find the worst house in the best neighborhood you can afford. Reall try and make an effort to analyze 5-10 real deals each day so you can quickly identify the good and bad deals. This way you can stay focused and help weed out the bad stuff when you see them
When touring the property asking questions like; who typically rents here, what's the draw of the property, what are the renovation needs, what's the biggest surprise you've had while owning. Hopefully these help and best of luck getting started.