Finding that first deal / Quickly filtering through listings

13 Replies

I’ve spent a lot of time reading lately. I’m familiar with the 50% rule and the 70% rules of thumb. I’m looking for both a property to flip and a property for cash flow. I feel more confident in buying a rental property than I do a flip but I’d love to have the income this year from a flip. So I’m looking for both. 

After looking at a listing online, how do I know if that property is worth further investigation or not? I mean most people aren't going to list their properties at 70% of market value on any website and even if they did I wouldn't know it because I don't know what the market value is of their property. Plus I can't tell by a listing how motivated a seller is to sell at a lower price. Am I just going to get comps on every single property and then put offers in at 70% of ARV on every single property no matter what they listed it at? Which means I'd also have to estimate repairs, which I wouldn't know how to do without looking at the properties and even then I'm not confident I could estimate repairs. Even if I was good at estimating repairs, am I going to visit every single property that I find a listing on? I mean I'm finding tons of things for sale, albeit I have a somewhat broad set of search criteria.

So when I look at a ton of different listings, how do I decide what’s worth a little more investigation and what’s not?

@John Moore use the deal analyzer on the site (5 free) Call an agent ask them to talk to the sellers agent. They can report back with as much info as they are allowed to divulge. You can also ask the agent to run comps for. Usually you can get the taxes from the listing. Call the untility companies in that particular area and ask for their rates. You should be able to get a ball park estimate on repairs by first finding out what you intend on repairing and then do some digging, Google "How much does it cost to fix ____ in whatever town you're looking in". At least this is what I do, Hope this helps,

Happy hunting!

Market analysis is one of the three most important knowledge bases a REI needs to know. It's more important than property analysis. I would describe it as Property analysis on steroids.

You're right when you say "people aren't going to list their properties at 70%...", so don't bother looking for them.  Learn how money works (the 2nd most important knowledge base) so you can buy properties at or above market value and still make money.

However, you can tell from the listing how motivated a seller is. In fact, you can tell almost all you need to know to make an offer, from the price history...if you learn how to read between the lines.

You can make offers, knowing what repairs you will do, without seeing the property.  Yes, you can.  You have to understand the difference between what you are going to do, and what the property needs.  If the property doesn't want to "play nice" with you, then don't buy it.  Estimating he repairs isn't that hard, if you control them.

You don't have to, nor should you, visit any property you make an offer on...before you make the offer.  Inspect properties where your offer has been accepted only.  If the property's rehab isn't what you were told, or shown in the listing, then don't buy it.  That's what the inspection period is for.

Lastly, you need to have a specific set of criteria...not a broad one.  That criteria is based on your plan (the 3rd knowledge base).  My students understand this.  Without all three knowledge bases, working together as equal parts of a whole, you can reach success quickly and efficiently.  Without any one of the three knowledge bases, you will flounder.

@John Moore

...and one more thing. Go driving for dollars. Look at places that are lightly used and maybe haven’t been taken care of to the utmost. Then go on the county website and look up the owner. Write them a nice letter or call them with an offer for their house.

@James Canoy

Thanks. I have read about driving for dollars and I have been keeping my eyes open while just doing my normal driving. 

But I'm not sure about what neighborhoods to invest in and which not to. Seems like in my little town it'd take a while to flip a house but in Huntsville, AL (40 mins away), there are some hot areas and some not so hot areas. It also seems like in the hottest areas, competition is fierce. 

So I don't know if I'd rather invest a little more locally  or what. One of the real estate websites was estimating growth for that area. An area with a bunch of older duplexes. It said estimated growth was 0.5% while the rest of Huntsville would grow at 9% but who knows if I can trust that info at all.

Like @Joe Villeneuve said, I guess I need to learn market analysis. Don't slum lords make money just like higher end landlords?

Thanks everybody

@Kenny C.

Thanks, I guess I do need to get an agent. I've been kind of avoiding it. I understand how to dig a little deeper once I choose a property. I'm just not good at filtering through them at the very very beginning. How do I quickly narrow them down just by scanning through listings on multiple sites? I guess I need narrow criteria. My criteria is "a good deal" lol. But I can't look at a listing and quickly know if it's over-priced or under-priced. 

@Joe Villeneuve

Everything I've read about REI says you make money during the purchase so your advice about being able to make money when buying above market value seems very contradictory to that. I mean sure you could buy above value and have cash flow but no instant equity and it would be harder to get out from under in the case that you might need to.

Thanks for all the advice, I will look into learning more about the 3 areas you mentioned. I'll try to find as many articles as i can on market analysis as well as the other topics you mentioned. 

@John Moore your welcome

We started maybe some will call the long way lol We were looking for our first home and would just call the listing agent and set up a tour of the house (most of the time they would offer to show us anything we were interested in later), if we felt like the agent was too pushy and and made us feel like we waisting their time we woukd not use then for the next one. After kissing a few frogs we found an awesome Agent who showed us house after house for 8 months, she even took us to lunch! She never made us feel like we were a waist of time. So naturally when it was time to buy she was the one. Her husband was a broker and she was the agent and they also had investment property. So they would send us good potential properties in our range.

@John Moore

I have invested in Huntsville now for over 5 years and love the areas. There are some that are up and coming then also some that need revitalizing. Depends what your looking for. I have 2 Single Family homes in South Huntsville zip 35802. Used to be much quieter but they are still expanding Memorial Parkway. I lived there myself back when my babies were born and LOVE the consistent returns. My agent Carolyn Dietrich who also manages for me hooked me up with 2 in the Madison Area or undermarket value so that was awesome. 

Enjoy the process. 

Originally posted by @John Moore :

@Joe Villeneuve

Everything I've read about REI says you make money during the purchase so your advice about being able to make money when buying above market value seems very contradictory to that. I mean sure you could buy above value and have cash flow but no instant equity and it would be harder to get out from under in the case that you might need to.

Thanks for all the advice, I will look into learning more about the 3 areas you mentioned. I'll try to find as many articles as i can on market analysis as well as the other topics you mentioned. 

You do make your money when you buy. If you understood "now money worked" you would understand why I said you don't have to buy low and sell high to make money. Money needs to be a "verb" not a "noun". You also need to eliminate any connection you see/use between investing in the stock market and REI.

@John Moore The comment about different areas of Huntsville growing at different rates is absolutely spot on. Some of the zip codes I see out-of-state investors buying houses in makes me shake my head, because they are in for a rough ride - several of those zip codes will see minimal appreciation, and are ripe for developing D class neighborhoods as the city grows. A lot of those duplexes you referenced are likely C/D neighborhoods.

While Huntsville is not a big city by any stretch, it still has pockets that will continue to be in demand and rapidly appreciate, and areas that investors will be dealing with frequent evictions and headaches for years to come.  Spending time studying the city and surrounding area can really pay dividends for you long term.  Those who say "I got a killer deal in zip code 358**" and really have no idea about the city...well, they will see soon why they got a killer deal there.  There are no killer deals right now in the high demand areas unless perhaps it is off-market.  

Originally posted by @John Moore :

I’ve spent a lot of time reading lately. I’m familiar with the 50% rule and the 70% rules of thumb. I’m looking for both a property to flip and a property for cash flow. I feel more confident in buying a rental property than I do a flip but I’d love to have the income this year from a flip. So I’m looking for both. 

After looking at a listing online, how do I know if that property is worth further investigation or not? I mean most people aren't going to list their properties at 70% of market value on any website and even if they did I wouldn't know it because I don't know what the market value is of their property. Plus I can't tell by a listing how motivated a seller is to sell at a lower price. Am I just going to get comps on every single property and then put offers in at 70% of ARV on every single property no matter what they listed it at? Which means I'd also have to estimate repairs, which I wouldn't know how to do without looking at the properties and even then I'm not confident I could estimate repairs. Even if I was good at estimating repairs, am I going to visit every single property that I find a listing on? I mean I'm finding tons of things for sale, albeit I have a somewhat broad set of search criteria.

So when I look at a ton of different listings, how do I decide what’s worth a little more investigation and what’s not?

I'd recommend doing a BRRRR if you're interested in doing both a flip and a rental. I am helping my dad with his first deal right now. The properties you should be interested in are the ones that need some light updating. Use that as leverage for negotiation, and offer very low to see how motivated the seller is. You'll never know how motivated they are unless the listing agent says they're motivated or you put in a very low offer and they come close to meeting it or accepting it. For example, our property we're on right now. We honestly didn't know how much the rehab was going to cost, but we could get an idea by general rules of thumb and we are friends with a seasoned investor who gave us some ideas on what things would cost. The property was up for 90, we offered 60 and after some negotiating we got it for 75. The total rehab will be about 15 and the property, based on the comps, should appraise for around 120. If the banks loan 75% loan to value we should get a loan for around our total amount in the deal, 90. We will probably pay a little more than that with closing costs and if we go slightly above our budget, but we'll get a property that cash flows for under $5,000 which is awesome. To analyze it we had an easy step-by-step procedure we followed. Saw the listing, estimated rehab based on pictures or visits, went on Rentometer to see the potential rent, and plugged everything into the BRRRR calculator on BP. Before doing this you'll have to figure out how you're going to finance these, whether it be cash or hard money. We used hard money but that's ultimately up to you. If you have the cash you could really have some negotiating power and get into a property for cheap. This comment seems very jumbled but I hope it makes sense. I'm very new to this but I'm learning a lot with this first deal. Please message me for more advice!

@Ross Hewitt

Great advice. BRRRR is exactly the strategy I use on all my purchases. It works really well in the Huntsville, Madison market and as an investor getting into a purchase that can be made new then rented is to me the way to go. But a step further I make sure and continue to take care of deferred maintenance with regular inspections. I don't want the property to be in bad shape when and If I ever go to exchange it.