How to look for deals

Question

I'm interested into REI, but I want to build my skills on how to find deals while I'm building capitol, I don't know where to start, and how to calculate if the deal would be good or not (if it will cashflow).

Dan Nelson · Answer

Braeden, good instinct building the skill before the capital shows up. Two things to build, both free.

First, the math. A rental lives or dies on four numbers: what it really rents for, what it costs to run, what the loan costs, and what is left. Rents: pull listings with the same bedroom count within a mile, listed right now, not what the seller claims. Costs: the county's real tax bill, an insurance quote, and a monthly set aside. I use 5% of rent for vacancy, 5% for big future repairs, 3% for small stuff. Loan: any loan officer turns price and rate into a payment for you in five minutes, free. Run that on twenty listings in one market and you will spot a workable deal faster than most people who already own property.

Second, pick one market and go stand in it. Open houses are free education. The photos hide things and your feet find them.

On where deals come from: you do not need secret off market lists. Generally, off market properties come with a problem, a problem that no one is going to pay you for. Most good first deals sit on the open market wearing bad photos and an old kitchen. The buyer who has run twenty sets of numbers recognizes them first. That can be you by Christmas.

Jaron Walling · Answer

@Braeden Hoff There's so many layers to your question. Instead of focusing on everything at once I'd slow down and think about 1-2 aspects of REI at a time; think small of a pie not the entire thing.

Where are you at in life? Are you 18 or 40 y/o? Single, married, kids? This makes a massive difference in what kind of deals I'd be going after.

What competitive market advantages do you have? Can you swing hammers, are you great with numbers and negotiation, does your dad own a carpentry business? #1 goal is leveraging what you have in your own backyard, gaining experience, and scaling conservatively if you're new.

Learn to run the numbers. Give yourself 6 months to educate, read, listen to podcasts, and to buildout spreadsheet(s). At a minimum copy/paste someone else's and learn how the numbers work (rents, capex, vacancy, PM, taxes, repairs/maintenance). It all plays into whether an opportunity is worth making an offer. Every market, every neighborhood, and sometimes every street is different. If you don't know what to look for get out and drive around. Ride your bike and actually look at properties as if you had the keys in hand. Is this area appreciating or stuck in 1900? Does the city or town embrace the area and fix the roads? Do people like the schools? It's so important to know these things.

Drew Sygit · Answer

Best way to "find" deals is to tap & grow your personal network, to find motivated sellers BEFORE they contact a real estate agent.

Otherwise, it becomes a matter of CREATING deals, not finding them.

Divin Kanyama · Answer

You’re actually starting in a good place, @Braeden Hoff . Learning how to find and analyze deals while you build capital will help you move with confidence when the right opportunity comes along. Start with one strategy and a small area so you don’t get overwhelmed. Follow local listings, study recent sales and rents, talk with agents, property managers, lenders, and other investors, and practice running the numbers every week. You can also find opportunities by driving for dollars, connecting with wholesalers, reaching out to tired landlords, and following up on older listings.

To estimate cash flow, begin with the monthly rent and subtract all the costs of owning the property: the mortgage, taxes, insurance, vacancy, repairs, future big-ticket replacements, property management, HOA fees, and any utilities you would pay. What is left is the estimated monthly cash flow. Be conservative, and confirm the rent with comparable rentals or a local property manager. A deal can look great on paper if a few expenses are left out.

A simple spreadsheet is enough to get started. Try analyzing a few properties each week, then stress-test them by lowering the rent, increasing repairs, or adding extra vacancy. At the same time, keep improving your credit, building reserves, and learning about financing options. You do not need to know everything before you begin—you just need to keep practicing. The goal is not to rush into the first available property, but to be ready to recognize a solid deal when it shows up.

How to look for deals

How to look for deals

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