Why is it advised to find the deal first ?

16 Replies

Hello,

Newbie here trying to absorb as much knowledge as possible. So I've listen to BP for a bit now and there is a reoccurring phrase I hear not only from the host but other investors and that is "get out and find the deal first". To be honest if it's what I think it is it frightens the hell out of me. I assume this means search for a deal and place an offer. This makes me nervous because I ask what if you don't have resources solidified.

Question:

Is that what the statement means?
If so how do you circumvent no money?
Could this cause issues in the deal?
Is this general practice?

Thanks
-Darren

Taking action and purchasing property without funding are two different topics.  The BP hosts encourage the first one and some investors promote the latter.  The premise behind finding the deal first and the money will follow simply comes from the ability to likely wholesale a deal, at a minimum, if it's a really good one.  You will have to find the funding one way or the other (which takes effort) and you have to respect the seller and be able to close.  I'm a proponent of finding the funding first but to each their own...lot's of successful strategies out there.

@Darren Landerway I am new to this, as well. My limited experience has been that nobody's going to want to commit any money to you without knowing what you have to offer or what you personally bring to the table.  In other words, Mike, above, appears to be a seasoned investor.  He might have relationships with investors who know his track record, so they are willing to commit to him finding a deal, because they trust that he will actually be able to find something, and they also trust that he will be successful in the endeavor.  I, on the other hand, do not have a track record of success, and so it is almost unreasonable to try to find investors willing to commit to the possibility of me ever bringing them a deal, and then not really knowing how well I will perform.

A very solid option for you might be to get pre-approved for as large a mortgage as possible, so you know your own price range.  This can be even if you feel you could not afford to go all out.  But you can then credibly go make offers.  Generally, all your offers will have financing contingencies, and my impression is that if you cannot find the financing on time, you can walk.  ***But do not just take my word on that.

Once you have something to show investors, either a deal or a track record, it will become easier for you.

Good luck, and keep on truckin!

Originally posted by @Simcha Davidman :

@Darren Landerway I am new to this, as well. My limited experience has been that nobody's going to want to commit any money to you without knowing what you have to offer or what you personally bring to the table.  In other words, Mike, above, appears to be a seasoned investor.  He might have relationships with investors who know his track record, so they are willing to commit to him finding a deal, because they trust that he will actually be able to find something, and they also trust that he will be successful in the endeavor.  I, on the other hand, do not have a track record of success, and so it is almost unreasonable to try to find investors willing to commit to the possibility of me ever bringing them a deal, and then not really knowing how well I will perform.

A very solid option for you might be to get pre-approved for as large a mortgage as possible, so you know your own price range.  This can be even if you feel you could not afford to go all out.  But you can then credibly go make offers.  Generally, all your offers will have financing contingencies, and my impression is that if you cannot find the financing on time, you can walk.  ***But do not just take my word on that.

Once you have something to show investors, either a deal or a track record, it will become easier for you.

Good luck, and keep on truckin!

Lots of buy and hold or flip investors work with bird dogs and wholesalers.  You don't necessarily have to find permanent funding.  This is a tough strategy long-term but many use it to get started.  The "take action" commentary pushes the first deal(s) along and then doors begin to open.  Being on BP is a big advantage...good luck and keep us posted.

thanks everyone for the tips! I def pulled value from you all. It makes more sense now that an investor won't want to give money unless there is a deal to offer. 

Again thank you everyone and I'll keep all posted on what I come up with. Also let's all connect, I need to keep a circle of smart ppl in this world of RE! 

@Mike Dymski Are you calling the "take action" stream of thought the bird dogs and wholesalers?  I'm trying to find deals first and then money, but to hold for rental income.  (I'm not challenging you - just trying to learn what more experienced/successful investors mean and think.)

@Simcha Davidman yes those are one of an number of good ways to get started if capital is scarce.  Chad Carson's podcast on BP is a great real life and down to earth example of someone who started as a bird dog.  He targeted finding properties for certain investors rather than getting a large buyer's list.  This gave him a strategy, an education and a track record.  It's one of the best podcasts I've listened to and it's not even pertinent to my investing strategy.

@Darren Landerway , it has been my experience that if you have a (truly) *good* deal, the money will come.

You need money. Don't listen to anyone who tells you to run around trying to find a deal and the rest will just work itself out later...It won't and you will waste a lot of peoples time including your own. Get your finances in order then look for deals within your budget.

I agree with @James Wise

If you want to build wealth there is no better avenue than real estate. Funding is that one issue that faces almost every investor at some time. I have had pretty good success but the reason I don't own more properties...is funding! You never know who you will come across that will help out. Brothers, sisters, aunts, uncles, people from church, co-workers, etc. However, to get them to commit to money you will need to show you have knowledge. You can get that through BP, books, becoming an agent, etc. The more you know and can show to others the more confidence they will have in lending. You will still need SOME of your own cash. If you can show others that you will put your money at risk they will feel more comfortable putting theirs at risk. Now, you know where to start!
1. education
2. funding
3. then...find your deals!

There's different ways to skin a cat, no wrong answer. But from personal experience the best way to light a fire under your bum is to get a house under contract. 

You will call every single lender, general contractor, insurance agent, closer in 30 miles...

@Darren 

@Darren Landerway undefined

Yes, it's pretty discouraging listening to the general populace who are basically deal makers and not real estate professionals, heck, seems like most don't even know business common sense, much less real estate.

If you owned a used car lot in a rural area where pick up trucks were the hottest sellers, then SUV's and very few in the area drove a compact car, when you go to auction, what do you buy? 

Are you going to pass on a good clean truck that you can sell for a $5,000 profit for a Fiat 500 that you might sell for the same profit? I hope not!

Who do you cater to in your business? 

Does Wal-Mart fill the isles with patio furniture in November or do they stock Christmas items?

If your buyers want 2 and 3 bedroom ranch style homes in the Southeast part of town, why would you jump on what you think is a good deal on a duplex on the North side of town?   

The most important thing is to be able to turn your inventory quickly, you cannot be assured of turning deals quickly just because you think you got a deal, if it isn't marketable you're stuck with it. 

Spend your time filling the needs of your buyers, not speculating if you can find a buyer.

And, if you'r not actually buying and using guru tactics, then you increased the odds of ticking off some owner, especially if it is owner occupied because you failed to market the place. Understand, wholesaling the guru podcast ways is pretty much an underground business venture, kind of like a black market since you don'y have a license, and more so if you lack the ability and intent to buy using a sale contract. Ticking sellers off isn't a good way to keep a low profile, under the radar, you increase the chance of someone calling the authorities!    

These wholesalers are sending you to a turkey shoot, just get close and let it all wash out, bad way to do business, shoot with pinpoint accuracy, target what you know you can move. The only way to do that is to know your customers first, what and where they want to do business. 

Like I've said, put the horse in front of the cart. :)

Originally posted by @James Wise :

You need money. Don't listen to anyone who tells you to run around trying to find a deal and the rest will just work itself out later...It won't and you will waste a lot of peoples time including your own. Get your finances in order then look for deals within your budget.

 Amen, brother. Few want to admit this, but everyone thinks they have Mad Skilz until they go to find someone to underwrite the endeavor, and then find out that everyone else thinks they are fools. The ability to access capital is a prime indicator of whether you have anything to offer (in the eyes of the underwriters, who are the only ones who count if you're broke) and if your project is likely to succeed. 

So back to the OP: in my opinion, you should always have your funding lined up before putting on your shoes. I have bought property that was under contract from some other "investor" right up to the point that they couldn't close the deal, and I'm talking about sub $30k houses. If you can't close the deal on a $30k house, which is not even enough money to buy a little better than fancy car, you are probably starting off in the wrong arena. 

first off i want to thank everyone that has responded to this post again and the new individuals who have responded today! This is all great information and things to think about while trying to navigate through these "muddy waters" called real estate, so I appreciate the feedback and the assistance. @james  

@James Wise and @John Thedford  thank you, that was my thought but wasn't sure if there was something I was missing. I took a step back and tried to put myself in the shoes of a person that was offered for their home to be bought and I didn't have the funds to do so and then went to try and track money down causing possible irritation and a bad name. Then I thought what if I'm the investor and I came up to me asking for money but had no deal nor a track record so its a double edge sword I guess. I will have to ask myself which is the lesser of the two that won't cause too much damage to myself and the others I'm working with.

@Bill Gulley thank you for the in site! I see that there is a few aspects of this I still need to get a better grasp on. All i know for sure is that I want another piece of property to grow my passive income but i just at a point of determining how to go about doing it. BP is a great resource and when you listen/ read the stories on here its easy to look at the benefits but harder to see if it will fit the mold you need to grow! 

Again thanks everyone

@Darren Landerway

I already know what the problem is, you're trying to learn real estate operations without first understanding real estate. Those that cause irritations, get a bad name, tick off property owners, get into trouble are the same ones who try to learn from a crowd on the internet. 

That's not the way to learn real estate or understand this business. 

To actually learn real estate, the basics, you can go to my sight and take a free course or you can buy a real estate text book for agents on Amazon for less than $20. The text book doesn't have to be current but no older than 3 years, it may have recent legal aspects contained in the newer versions.

Read my blog "How To Develop A Good BS Meter" !

As you study, read to understand how and why we do things, everything is based on the basic principles of real estate, in all states. All investor strategies or operations involve the basic understanding of real estate to be successful, ethical, legal and to build a solid business, no exceptions. 

It should take you less than 10 days to learn, how many days have you been trying to study where you're still lost? 

Like most newbies, you wanted to do a deal yesterday, but like most you're lost, it's quicker to learn the right way than to try and figure things out for yourself. Good luck :) 

Hello @Bill Gulley where can I find your blog? Also whats your website. Any other book recommendations?

Originally posted by @Darren Landerway :

Hello Bill Gulley where can I find your blog? Also whats your website. Any other book recommendations?

 Search the BP Blogs, enter that title. Mine is through that big blue logo on each post and my signature line. Just make sure the text is for agent licensing exams for the basics, I don't really recommend any guru book, especially the TV types, just follow the blog advice, you should be fine. Good luck :)  

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