Getting Started and having every deal fall through
Member since 2020 · 20 posts · 18 votes
Getting Started and having every deal fall through
Most Popular Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesSo let me get this straight. You're complaining about a deal, where you would have paid 45k more than it was worth, fell through? Did you actually read what you wrote? You also said that if it keeps up, you wouldn't get to 50-100 doors...like many other REI?
Here's your problem. Not that these deals fell through (thank God), ot's that you're so focused on getting properties that you're making bad offers. Stop focusing on how many properties you have, or want. Start focusing on how many positive dollars you will make...and make offers ONLY on properties that will generate those dollars....and always remember this.
Sometimes, the best deals you make, are the ones you don't.
64 Replies
- Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes6y
Originally posted by @Tom Vanderlinden:
I just had my duplex fall through, before we got to closing, because it appraised 45k short of purchase price. This was my 5th in 6 months that fell through. I've been working hard to read and do research after work and I really had my Hope's up about getting this duplex and house hacking. I feel like I'm hitting a road block at every turn and I really don't see how I can ever get to 50 or 100 doors like all these podcast guests. Any encouragement for someone getting started? I'm not sure what else to do other keep making offer on multi family and try to house hack whenever something comes up?
Keep pushing! Don't give up. Time is on your side. Come back to deals you have overlook and revisit. You would be shocked how many times I have done this with great results. The hardest part is getting your first one. What area are you looking?
- 6yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
So let me get this straight. You're complaining about a deal, where you would have paid 45k more than it was worth, fell through? Did you actually read what you wrote? You also said that if it keeps up, you wouldn't get to 50-100 doors...like many other REI?
Here's your problem. Not that these deals fell through (thank God), ot's that you're so focused on getting properties that you're making bad offers. Stop focusing on how many properties you have, or want. Start focusing on how many positive dollars you will make...and make offers ONLY on properties that will generate those dollars....and always remember this.
Sometimes, the best deals you make, are the ones you don't.
- 6yTwana RasoulBusiness MemberReal Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
@Tom Vanderlinden it’s a good thing it fell through. You don’t want to over pay.
Also, Number of doors is meaningless. It says nothing about how much property someone has amassed. Someone with “8 doors” in a market like San Francisco, Seattle or los angeles could have the same total portfolio value as someone with “80 doors” in other markets.
Compass5122 Reviews - 6yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Originally posted by @Twana Rasoul:
@Tom Vanderlinden it’s a good thing it fell through. You don’t want to over pay.
Also, Number of doors is meaningless. It says nothing about how much property someone has amassed. Someone with “8 doors” in a market like San Francisco, Seattle or los angeles could have the same total portfolio value as someone with “80 doors” in other markets.
True as true can be. Every market is different. Number of doors doesn't have any connection to number of dollars. Focus on the latter, not the former. Focusing on the former will lead you to bad deals.
- 6yMichael K GallagherBusiness MemberReal Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
@Tom Vanderlinden don't worry about deals falling through, especially if it didn't appraise. Just stay consistent, if you are looking for deals, review deals, 1 a day, 5 a day, whatever works for you. But I'd say to start with one, and track it, and stay consistent.
At 1 a day, thats 365 deals looked at in a year. If you make an offer on 10% of those, thats 36.5 offers, and if you get 5% of those offers accepted thats 1.8 deals a year.
- Columbia, SC · Member since 2014 · 133 posts · 190 votes6y
@Tom Vanderlinden I will add this, get a good idea on reading comps and you will offer better. Not only can you justify pricing on offers better but it keeps you from buying over inflated property too. I can't tell you how many laughs I get at wholesalers offering "comps" for property comparing their crack house to the gated community a mile down the road.
- 6yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Originally posted by @Adam Odom:
@Tom Vanderlinden I will add this, get a good idea on reading comps and you will offer better. Not only can you justify pricing on offers better but it keeps you from buying over inflated property too. I can't tell you how many laughs I get at wholesalers offering "comps" for property comparing their crack house to the gated community a mile down the road.
or a 1400 sq ft house to a 2800 one.
- Member since 2020 · 20 posts · 18 votes6y
@adam Odom there weren't many comps in the area and we found the ones the appraiser used were much older and not as nice as this one.
- Member since 2020 · 20 posts · 18 votes6y
Alex Olsen I live in Tulsa. I really think house hacking multi family is the way for me to start. They just come up so rarely in my area and when they do they're off the market quickly.
- Investor · Los Angeles, CA · Member since 2017 · 523 posts · 476 votes6y
Originally posted by @Tom Vanderlinden:
I just had my duplex fall through, before we got to closing, because it appraised 45k short of purchase price. This was my 5th in 6 months that fell through. I've been working hard to read and do research after work and I really had my Hope's up about getting this duplex and house hacking. I feel like I'm hitting a road block at every turn and I really don't see how I can ever get to 50 or 100 doors like all these podcast guests. Any encouragement for someone getting started? I'm not sure what else to do other keep making offer on multi family and try to house hack whenever something comes up?
Tom, I have some good news for you: More deals are going to fall through. No, I'm not being sarcastic or rude. Why do I say this is good news?
A few reasons. First, some of these may not have been the right deal for you. Example, this one appraised short. Being underwater on a property as a new investor in this economy wouldn't be fun. Perhaps one of the others would have come through, and been a headache for you. So many things can happen. There are instances where the deal you did NOT do is better for you.
Also, you've built so much experience in just the past few months, from trying to close deals, and having things fall through. I know it doesn't feel like it, but sit down and write a lesson from each deal - something you learned for the future, or would do differently. Now, there are some things you can do better in the future. You're stronger as a result of these painful experiences.
I have some more good news, this time actual good news: You're going to close a deal. If you keep taking consistent, smart action, it is going to happen. What's more, if you learn more, and keep growing as you seem to be, you'll close more.
I'll share my own story: First deal I ever tried (a duplex, with a close friend), fell through shortly after offer was accepted and we were opening escrow). Next duplex fell through after a 3 month escrow (seriously) and plenty of stress.
Took a pause for a while and got going again, and closed another one after looking at a bunch more. Thought I learned a lot. Yet, to complete my most recent deal, had another escrow fall through and a few more that wasted a lot of time and went nowhere. The point is, this is a constant in this business, but you get better at sniffing out the BS and avoiding the traps, as time goes along. I am still a pretty new investor by any standard, but I've improved, and no doubt you will too. Keep on trucking.
- Investor · Los Angeles, CA · Member since 2017 · 523 posts · 476 votes6y
Originally posted by @Twana Rasoul:
@Tom Vanderlinden it’s a good thing it fell through. You don’t want to over pay.
Also, Number of doors is meaningless. It says nothing about how much property someone has amassed. Someone with “8 doors” in a market like San Francisco, Seattle or los angeles could have the same total portfolio value as someone with “80 doors” in other markets.
I see you're a fellow Californian so let me say how much I agree with this. I can't tell you how many meetups or other things I"ve been too or heard online where someone brags about the 50 doors they have in some D neighborhood in an economically weak city somewhere. This would not bother me per se. After all, to each their own, we should celebrate each other's success. I don't like to knock someone else doing what works for them.
The problems is, some of these same people then proceed to tell folks that Los Angeles or Seattle or San Diego or NYC are not good markets, and we should be investing in THEIR deals in said D neighborhood, or doing something similar. They'll often go on a political rant also, which is completely uncalled for in a business context.
Meanwhile, guys who did BRRRR 3 and 4 unit deals in a B- or C area in Los Angeles have the same dollar value of equity, and pretty solid cash flow, in 3 doors, as the entire 50 unit portfolio we're hearing so much about. Thanks, but no thanks.
- 6yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Originally posted by @Joe Villeneuve:
So let me get this straight. You're complaining about a deal, where you would have paid 45k more than it was worth, fell through? Did you actually read what you wrote? You also said that if it keeps up, you wouldn't get to 50-100 doors...like many other REI?
Here's your problem. Not that these deals fell through (thank God), ot's that you're so focused on getting properties that you're making bad offers. Stop focusing on how many properties you have, or want. Start focusing on how many positive dollars you will make...and make offers ONLY on properties that will generate those dollars....and always remember this.
Sometimes, the best deals you make, are the ones you don't.
Joe worded my sentiment perfectly but I wanted to add, in times of increased risk such as these, investors should be accounting for the elevated risk in their offers. It is my view that even if your offer was at current market value, based on recently closed comps that mostly were pre-Corona, that your offer would be too high.
RE investors should strive for acquiring below retail value but especially at times of higher risk this is true. No one knows what the RE market will do, but I do believe that virtually everyone believes there is more risk of a RE value decline than there was 3 months ago. This should be reflect in offers. Remember selling prices are based on recent comps, most of which were at more historically normal risk levels.
Value decline is not the only increased risk. Most jurisdictions do not allow evictions. All properties that have the RE federally subsidized do not allow evictions. The odds of not getting paid the rent is above historical normal. Then there is the bad tenant. One who breaks the lease, etc. In most jurisdictions there is no way to currently get rid of them. Finally, there is how difficult is it going to be to fill a vacancy. As of today, we have a vacancy. It was occupied for 5 years so it will take about a week to have ready for the new tenant. We usually get a qualified tenant by having an open house with everyone coming at the same time. It helps create the appearance of a frenzy of applicants but typically we receive only 1 to 4 applications. The open house for a large group is not possible. No appearance of a frenzy of demand is possible. How many people want to move now? I suspect this unit will take us more than the usual 1 to 2 hours to get a qualified applicant. Probably much more time. There is a lot of increased risk that should be reflected in offer price.
As others indicated, being rejected a loan for an RE that you were offering over value is a blessing and not a curse. This is especially true at a time of increased risk.
Good luck
- Raleigh, NC · Member since 2017 · 347 posts · 94 votes6y
Originally posted by @Joe Villeneuve:
So let me get this straight. You're complaining about a deal, where you would have paid 45k more than it was worth, fell through? Did you actually read what you wrote? You also said that if it keeps up, you wouldn't get to 50-100 doors...like many other REI?
Here's your problem. Not that these deals fell through (thank God), ot's that you're so focused on getting properties that you're making bad offers. Stop focusing on how many properties you have, or want. Start focusing on how many positive dollars you will make...and make offers ONLY on properties that will generate those dollars....and always remember this.
Sometimes, the best deals you make, are the ones you don't.
I cannot emphasis this enough. The appraiser saved you.
- 6yTwana RasoulBusiness MemberReal Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
@Dan H. I might have a vacancy coming up here shortly and I'm not looking forward to figuring out how to navigate filling it during this crisis. I'm used to being able to complete the transition from one tenant to the next without losing any days at all to vacancy. Like yourself, I like having a single day, maybe 2 days of having a ton of people come through the house "open house" style and I'll get a couple of great options/applications. I rely on being able to show the place with current tenants in place, if I have to show it after they have vacated then I'd lose quite a bit of time and most new tenants need around 30 days to give notice to their old landlord and move in.
Compass5122 Reviews - 6yTwana RasoulBusiness MemberReal Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
@Shiva Bhaskar I have investments in both types of markets so I understand, I prefer my local market however. But I encourage everyone to start by investing in their own town. I do see those in high cost of living areas looking to these new investors with "30 doors within 18 months" and they are getting discouraged because they feel like they need to get the same amount of doors in their own city to be successful. What I'd say to newbie investors who are investing in their own city that has a high cost of living, if you buy a property feel free to count all the doors in that property and count it towards your total, every exterior door, bedroom door, bathroom door, etc. haha
Compass5122 Reviews - Member since 2019 · 56 posts · 22 votes6y
Once you get your first property , and deal with difficult tenants, repairs, contractors, etc , you wont be rushing to get properties that werent a good deal from the beggining.
- 6yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Originally posted by @Twana Rasoul:
@Dan H. I might have a vacancy coming up here shortly and I'm not looking forward to figuring out how to navigate filling it during this crisis. I'm used to being able to complete the transition from one tenant to the next without losing any days at all to vacancy. Like yourself, I like having a single day, maybe 2 days of having a ton of people come through the house "open house" style and I'll get a couple of great options/applications. I rely on being able to show the place with current tenants in place, if I have to show it after they have vacated then I'd lose quite a bit of time and most new tenants need around 30 days to give notice to their old landlord and move in.
We also often show a unit prior to vacancy (with tenant still in place) if it is in pretty good condition. This one qualified, but we did not ask to show it while occupied. We did not want anyone getting sick due to us wanting to shorten the vacancy by a small amount. Mostly we are only doing critical items internal to units (such as blocked sewer or interior leaks) at this time.
There is a thread on BP that is on filling vacancies during the crisis and it appears many areas are not having difficulty. However, I suspect this is one of those items that varies by location. We are spoiled and typically fill our vacancies nearly instantly and I suspect this is unlikely for this vacancy but I will know much better next weekend.
I would have preferred to have zero vacancies until this crisis has abated significantly.
Good luck with your vacancy.
- 6yMichael HaasBusiness MemberReal Estate Agent · Redmond, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 724 posts · 3k+ votes
@Twana Rasoul @Joe Villeneuve Thanks for calling out the number of doors nonsense. I'm seeing a lot of this nowadays, and always laugh at the difference when the 100 doors guys actually list their portfolio value in dollars.
HouseHack Seattle | Michael Haas & Team572 Reviews - Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes6y
Educate yourself better on your market. Look at what's on the market. Go to open houses, get flyers and learn what is being offered for sale. What age is the house? What is the size? What are the cabinets, all wood, composite, IKEA, stock ? What is the flooring? Is it hardwood, tile, laminate, vinyl, carpet, tile or ? Counter tops? Look at appliances, new, old ? Roof ? Does it need paint or is it in good shape. LEARN YOUR MARKET, neighborhoods, etc. Look on realtor websites and watch their listings that are selling. What is selling fast, and what's staying on the market?
The point is, learn to compare apples to apples. Start coming up with a ballpark number for price per square foot for low - and mid range. As others have mentioned, be happy your deals got shot down if you were going to be over paying. Good luck
- Investor · Whitehouse Station NJ · Member since 2020 · 12 posts · 76 votes6y
If you're able to pinpoint exactly where you went wrong in the numbers, then consider the lesson learned and move on. You won't make the same mistake again and your first deal is that much closer for it.
- Member since 2020 · 20 posts · 18 votes6y
Originally posted by @Jhon Restrepo:
Once you get your first property , and deal with difficult tenants, repairs, contractors, etc , you wont be rushing to get properties that werent a good deal from the beggining.
Good point Jhon. I think it's just my competitiveness that wants to get going. I appreciate your outlook from an experienced point of view.
- Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes6y
@Tom Vanderlinden you should be glad that real estate investing is hard, because every failure is one more lesson learned that brings you closer to success. If it was easy, everyone would do it
- Wilmington, NC · Member since 2020 · 5 posts · 5 votes6y
@Steve K. I had the same thought. Won't the sellers be concerned it will happen again with the next potential buyer? Perhaps they are hoping based on the type / condition / price that they will attract a cash buyer that will not need to obtain an appraisal. But this should at a minimum give you some leverage if you are inclined to pursue. I would be highly skeptical and risk adverse to buy something for more than the appraised value though. Especially if you are in fact buying at a discount like everyone tries to do, then even if the appraisal was high, I wouldn't expect it to come in lower than the offer price. Good luck, you got this far, ensure your numbers make sense and keep taking action!
Join the conversationCreate a free account to reply, vote on answers and follow this thread.