Discouraged by realtor?

Question

Hey Bigger Pockets community! I'm new to the real estate world and have been absorbing as much as I can the past few months through books, podcasts, and these forums. I'm most interested in the buy/fix and hold strategy like BRRRR. I live in the northern part of DFW where the market seems to be pretty crazy with great deals not coming around very often. I can't express how grateful I am for a place like BP where people genuinely are here to help. The rest of the Internet could learn a thing or two from everyone here.

I contacted a real estate agent last week based on a referral and went through my list of questions asking about their experience with investment properties instead of just move in ready homes for families. They stated they currently work with 4 investors but are all pretty much at a stand still because of the lack of deals that come around. They also said foreclosures are close to retail prices right now and that short sales would be the best bet for a good deal.

I know that agents should only be 1 of many stream for finding properties but it was a little deflating to hear. Is driving for dollars, direct mailers, and wholesalers the only way to find decent deals in this market?

Thanks!

Stephen

Dawn Brenengen · Answer

Stephen Z. Welcome to the site where you will be ENCOURAGED.  Now, Dallas is a very hot market, and deals probably are very hard to come by, but they can still be found.  They can be found in every market.  I would look for an agent who sounds more positive about finding YOU a deal.  If he already works with four investors who are currently buying, then maybe you should find someone else.  This agent has no reason to send you a deal over the four he is already working with (assuming his current clients are proven buyers).  MLS is only one avenue, as you said.  Maybe talk to property management companies and see if they have any clients who are thinking about selling?

I work with new people all the time, but I don't have any single investors who buy LOTS of properties.  Maybe 3-4, but that's usually where my buyers cap out of money.  :)

Jeremy Paschedag · Answer

As Joe Dirt say, you gotta keep on keepin on.

I'm still new but I'm learning more and more all the time.  People say to focus on a neighborhood.  When you're starting out, you may not know where to focus.  I'd suggest driving around in a chosen zip code.  Not on the main streets, but hit the smaller/less traveled streets.  When you find a house you like, it doesn't have to be for sale necessarily, make a note of the address.  Once you have a couple, then go home and research value of the place, what the rents would be.  That will give you an indication on whether that is the right area or property for you.  Once you know that zip code forwards and back, then repeat with another zip code.

While you're driving around, if there is a for sale or for rent, write the address and number down.  Ask the for rent owner if they thought about selling.  But know your numbers first.  That way you get a deal that's right for you.

Fred Heller · Answer

The problem I'm running into these days finding properties for flip investors isn't so much that there aren't deals out there. The problem is all the other investors who seem to be willing to pay insanely high prices for properties that need a lot of work.

For example, I found a 3/2/2 in a decent neighborhood that was in need of work. When we went to look at it there were 4 other guys who crashed my time walking around with their clipboards.

My client thought the place needed about $20,000 - $25,000 in work. The structure was sound, but it needed some serious updating/cosmetic work.

The house sold in just a few days for $125,000. But the comps from the last six months show the average sold price for a move-in ready 3/2/2 in that subdivision is $132,000.  Of the seven sold, only two sold for $140K or more. The highest sold price was $147K. Most of the others sold for $130K to $139K and one sold for $119K.

I wish someone would explain the math where paying $125,000 for a house that needs a lot of work in a neighborhood with comps like that is a good deal.

By the way, I'm finding it a lot easier to sell a turnkey house to a buy and hold investor. There doesn't seem to be as much competition and you can usually buy those for list price give or take a few percent.

I guess being a buy and hold investor doesn't have the same glamour as being a fix and flipper.

Account Closed · Answer

@Dawn Brenengen Thank you for the encouragement Dawn, I'll keep that in mind.

@Mark Allen Thanks for the tip, I'll start looking for specific neighborhoods.

@Fred HellerYeah it seems like there is still money to be made but it's competing against people that don't mind a smaller return.

I'm staying motivated and excited to get my first property under my belt. Hopefully will get some experience for if/when the market pulls back in the future.

Tyler H. · Answer

Stephen Z.  Don't get discouraged! The reality is this is a tough, super competitive market, but hopefully that will drive you to work harder to find that right deal. Highly recommend networking with as many wholesalers and bird dogs as you possible can--since you are new to the game, you will have to start at the bottom and prove you can be trusted to bring deals to--that takes time. Focus on 1 or 2 zip codes and get to know them extremely well. The best deals will be off market, direct to seller, so the more appts you can make to meet sellers, the better!

Rachel Pervis · Answer

Hi Stephen Z. the Realtor seem to be just stating the truth. You shared in your post that you were referred to him, which is typically good. So I would give the Realtor an opportunity and also look for other ways of finding leads. I've had investors contact me and I have stated the same thing, but I was still willing to help them. I just wanted them to know it may take a little longer to find something that fits their criteria.

Brett Tousley · Answer

I don't know your market but regarding this particular Realtor, I advise you to trust your gut.

If you feel they were being honest and telling you the truth about the market, you may have found a great Realtor.

Because he or she already works with investors, they will know where to set up searches to find the right deals, how to negotiate on distressed homes, how to write an offer for HUD, Fannie or one of the various reo companies out there.  The process varies quite a bit from company to company.

Unless you are planning on buying a home a month, the Realtor will need to be working with other clients to avoid going broke.

Good luck out there!

Russell Brazil · Answer

Every metro area is going to have properties that you can buy at a "discount" (I hate saying that, as it is a distortion of reality) and other areas where there is zero discount.  Typically the areas where there is a "discount" are the areas where there is a lot of flips going on. Typically the areas where there is small to no discount are the higher income areas or areas with good school districts.

JD Martin · Answer

It's not just flippers. The rental market has become hot enough that trainwrecks are selling for more than the house is worth after rehab, and these guys are doing 5 cents worth of work and putting it on the market for rent, hoping (I assume) to realize appreciation and collect some rent in the mean time. I'm talking about dropping floating laminates over rotted subfloors, repairing broken/rotted water lines with sink/toilet compression hoses, glue-on tub surrounds over broken/rotted/molded drywall, etc. My heating guy, who has the maintenance contracts for several real-estate owned PM companies, told me the other day that my rentals are by far the nicest he maintains/services, and that you wouldn't believe the quick-fixes these guys are doing to these houses and then renting them for market prices. This puts those of us who do it "right" at a competitive disadvantage, because renters can't see inside walls or in crawl spaces.

I like to sleep at night, so I just accept that part of it, but the markets that I know are definitely getting ridiculously hot. My last couple of deals were foreclosures and court-ordered sales. I can't really make any money on the others.

Discouraged by realtor?

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