Am I wasting time sifting through the MLS?

18 Replies

I am in the West Palm Beach area. I have been more focused this year with trying to get the first property under my belt. I analyze properties pretty regularly (my focus is on 2-4 unit multifamily). Every listing is quoting a 8-10 cap and when I put any expenses to it it quickly goes to a negative cashflow. After putting in all the numbers i run goal seek of a $100 a month cash flow (iterate to get lower taxes with the county tax appraiser) and it shows that my offer should be about $17k on properties listed for $400k. It seems ridiculous.

My expenses usually look like this:

  • Taxes - tax appraiser calc at sale price
  • Insurance - guestimation of my house and fiance's condo
  • Mortgage (+mip) - 1.15% (of purchase price - down payment)/12
  • Rental Eff - 11/12 * monthly income
  • HOA -
  • Utilities - (check for seperate meters in listing or not ~150-200 per unit)
  • Lawn - 100-150ish
  • CapX - roof sq ft times $6.00 (difficulty multiplier) / 30 years / 12 month ; # water heaters ; # HVAC ; # wall shakers ; Septic Tank pump out per 10 year
  • Property management - 1/12 of monthly income
  • Other - usually left blank

My Income is usually whats listed. Sometime I look via trulia for "comps." problem is the MLS program the photos rarely show up. Also most multifamilies never show interior pictures on listing.

Should I keep on trucking? Should I try a mail campaign? Should I offer 17k on a 400k listing (My agents I have talked too don't seem to get what I want to do, seem kind of un-responsive to me)? Are my expenses way off? Try a new market? stockpile money for the next dip (i want the experience more than staying out of the game waiting for a better deal)?

@Scott Rosslow Most agents won't want to waste their time offering 17k on a 400k property, what you should have agents do is contact the listing agent on some of these properties and ask for a breakdown of expenses for the last 12 months and ask if there are any problems with the property currently such as a leaky roof or foundation issues. Many times you can find a property with below market rents that has not been sub metered, and changing just those two things can turn a mediocre deal into a good deal. There are deals on the MLS you just need to keep looking.

here's what you need to do if you aren't marketing to owners yourself.  Find a good agent that works with INVESTORS.  Give him the formula for what you consider a deal, have him go find it and come back with a list of places that you can go see.

Don't give your agent 3% or whatever just for MLS access and a closing. PUT HIM TO WORK and if he won't do it, fire him.

Oh, and no you aren't going to find that deal, at least nothing that looks like that fresh off the MLS.

You will need to value add, rehab etc. to get anywhere near that "real" cap rate here in Palm beach, everyone has cash and wants MF's here.

you are doing something wrong if your analysis comes to the conclusion that you should offer 17000 on a $400,000 property

Originally posted by @David Sicherman :

here's what you need to do if you aren't marketing to owners yourself.  Find a good agent that works with INVESTORS.  Give him the formula for what you consider a deal, have him go find it and come back with a list of places that you can go see.

Don't give your agent 3% or whatever just for MLS access and a closing. PUT HIM TO WORK and if he won't do it, fire him.

 That has been its own struggle. I find most agents don't get or even care about the investing side. It would also be a different story if I was flush with cash. I know some people I can do some private financing / funding with. I am having a hard time finding a 'deal'

@Scott Rosslow This is going to be a vague response as I don’t know your market but I do think the MLS can be useful. Primarily for 2 areas: listings <7 days or >120 days. So basically, new or stale. If it’s new you *might* catch someone who really doesn’t want holding costs, has to move for their job, and will take a lower “bird in hand” offer rather than waiting 60 days for a better one. Once you’re past 120 days...you’re stale. Something is off and 99% of the time it’s price. At that point you probably have an exasperated agent and owner. They probably know (even if they don’t want to admit it) they won’t get the price that they want. At some point, people “just want out”.

That said, multifamily can be a different animal. You can easily have an owner that will want ____ or they’ll just keep on making money through cash-flow. It’s why, in my opinion, you occasionally see multifamily properties that are relisted every year, have a DOM of 400, etc.

Hi everyone, I'm a newbie in REI.

I've been looking for my first deal on MLS and also found that purchase price has to be reduced to like 60% of asking price in order to get good cash flow.

@Andrew Johnson Is it likely that >120 properties on MLS could be something left over with more risk?

@Account Closed That’s exactly my point, the deals are “riskier” than the listing price implies.  So you have to adjust your offer price to compensate.  But after 120 days your “adjusted” offer stands less of a chance of being viewed as a “low offer” and a solid chance of being an “only offer”. If you’re the only offer after 4 months and you (the owner) have been stuck with 4 months worth of carrying costs, well, fatigue can set in.  

@Scott Rosslow

In terms of finding good deals it will be more difficult to find them on the MLS. However, I do think it is worth looking through the listings daily for a couple of reasons.

It gives you insight into the what housing in a certain area is actually worth. Basically what I am saying is how can you know what a deal is unless you know how much houses in an area are selling for?

The second reason is that every once in a while a good deal will pop up and if you act fast enough you can win.

@Andrew Johnson Thanks for your comment. Then where are those a lot of good deals going to before making it to MLS? How those good deals are coming down to experienced investors?

@Anthony Gayden I just started looking my first deal off of MLS. I will continue to check to find the "pop up", but it sounds like the chance is slim. I definitely have to explore the system that leads to my funnel.

it would be great if you could share some of your experience how did you find your deals and what is your favorite way that works to leads potential deals into your funnel?

Thanks!

@Account Closed Before MLS? Agents with pocket listings, investors who direct-market, wholesalers who direct-market, could be Craigslist for all I know. But the reality is that with 2-4 unit properties you do end up with owner-occupants. And owner-occupants have some aspect of emotion involved. Emotion means that they are happy/happier to pay "retail" where investors are looking for a good ROI. That's why if you want to find "good deals" you can go to a neighborhood where nobody owner-occupies but those come with other issues. Half of the battle is defining what a "good deal" is to you.

Originally posted by @Andrew Johnson :

Scott Rosslow This is going to be a vague response as I don't know your market but I do think the MLS can be useful. Primarily for 2 areas: listings <7 days or >120 days. So basically, new or stale. If it's new you *might* catch someone who really doesn't want holding costs, has to move for their job, and will take a lower "bird in hand" offer rather than waiting 60 days for a better one. Once you're past 120 days...you're stale. Something is off and 99% of the time it's price. At that point you probably have an exasperated agent and owner. They probably know (even if they don't want to admit it) they won't get the price that they want. At some point, people "just want out".

That said, multifamily can be a different animal. You can easily have an owner that will want ____ or they’ll just keep on making money through cash-flow. It’s why, in my opinion, you occasionally see multifamily properties that are relisted every year, have a DOM of 400, etc.

The fresh items on the MLS to me look like an investor came in to flip the property usually. I usually can't find enough value in those renovated properties to make the numbers work for me. I find that your perspective on it seems accurate from my experiences. Since this would be my first income properties I was attempting to stay away from things that needed a lot of work since I work 50-60 hours a week usually. I might start looking into a mail campaign as well.

Your numbers do not look different in other parts of the US. The reason your realtors are unresponsive is your price is not high enough. Your negative cash flow suggests this is probably wrong time of cycle to purchase and if that is the consensus you are wasting your time on MLS.