I hear all the time almost every week from Investors that good deals are hard to come by...What is everyone's thoughts? Do you work with agents to find deals, search through realtor.com or other sites?
It is harder to find deals, but not impossible. It's rare to fond deals on sites like Realtor or Zillow. The MLS is also hard to find deals. Networking, mail marketing and driving for dollars are your best bet.
I have actually been booming over the last 2 years. I was doing 3 houses a year like clockwork for the first 6 or so years of investing (I started just after the crash). Over the last 25 months or so, I've taken down 33 houses. Closing on #51 sometime next week. :-)
Over the last 2 months, Ive either close or will be closing on within the next week or so a total of 6 houses.
So do I think the deals are hard to come by right now? No.
Do I think the deals are tighter than they were? Of course.
What I really believe though is that if you're in a high density area, you probably are finding it incredibly tough to find deals. You're competing against all the funds out there and a bunch of other investors with lots of money to put to work.
But if you go out a little further into the smaller towns 10k to 20k populations, I think the deals can still be had if you're creative and put in the effort to consistently put in offers.
Here are my last 6 deals.
1) Oct 2015. Gatehouse Way, Bourbonnais. This deal was brought to me by another BP investor. They did direct marketing and found this one. They were too busy on deals they already had and offered it up to me out of the blue. This is the only time I've ever had someone bring me a deal ever. Purch and rehab came in just under 70% of the ARV.
2) Nov 2015 - Mitchell Court, Braidwood. Got this one on hubzu. Solid deal. Just finished up the rehab today (carpet was just installed). My purchase and rehab came in right at 70% of the ARV.
3) Nov 2015 - Lawn St, Bradley. HUD house. This one is a stinker. It sat and sat and they kept dropping the price. I liked the architecture because it was unusual/different and I get tired of the cookier cutter boxes sometimes. And I liked the space (1500 sq ft).
Needed a full rehab but I got it for 34k, had room for a 45k budget to make everything like new and it should appraise out for 115k to 120k or so. My purch plus rehab just under the 70% ARV.
4) Nov 2015 - Edwin, Bourbonnais. Estate sale. This one was initially listed at 130k. I had zero interest in it initially because I figured it was just too new and too expensive. Then about 2 or 3 mos later they dropped it to 120k. Now i figured they might want to negotiate.
I took a look at it and it needed some work. But the upstairs bedrooms had really nice hardwood and I loved the space. It was a 3/2 and the upstairs had a nice size living/dining room and the downstairs had a big family room with a space I could see easily framing out a 4th bedroom. 4/2, 2,000 sq ft when done. And I love 4 bedroom rentals. Still, I was on a pretty good run so I really didn't want this one unless it was a super deal.
I offered 80k. No response. Then about 2 weeks later, I got a counter. 90k. They made a point to tell my realtor to tell me not to bother countering at a penny less. That was the lowest they'd take. And that works on me about as well as I can keep my dog away from a slice of pizza. Not a chance.
I came back at 80k best and final. No response. About a week later they accepted. 80k. Needed 25k in rehab. Should be worth 150k when its done. All in at just under the 70% ARV.
5) Dec 2015 - Anita Dr bourbonnais. HUD home. This was a really nice 3/2, 1750 sq ft brick ranch. Big yard. Great deck with a nice gazebo. Great subdivision. I actually grew up on Anita when from the 2nd grade so this one was personal.
Initially listed at 150k, I got it at 111k. Needs about 15k in rehab. Should be worth about 170k when its done. So the numbers didn't work for me to be all in under that 70% ARV target I have. But again, just a great house. Built in the 80's. 1750 sq ft for a 3 bdrm house is a great rental. And the brick, the deck, the yard. Can't beat it. The fact that it was on the same block I grew up on as a kid was the difference in taking this one down though. I wanted it and I knew I'd have to pay a little more out of pocket than usual to get it. But it was worth well it to me.
6) Dec 2015 - 130 diversatech manteno. Homesearch auction. This one had come and gone several times. Finally got it at a price that made sense. Very little rehab was needed. 3/2.5, 1400 sq ft. Built in 05.
7) Jan 2015 - Oak St, manteno. This was a short sale. I have it under contract and bank approved. Should be closing sometime next week.
This was a short sale. Initially listed back in October for 115k. Its a 3/1.5, 1,235 sq ft built in 1990 so relatively new. Still at 115k and the fact it was a little smaller than I really like (1350 or above is kind of my preferred/target size for a rental). I had no interest.
Then they dropped it to 110k about 2 weeks later. Still not interested. But i noticed. Then they dropped it to 90k another 2 weeks later and I knew they were motivated. I was so sure that it would get bid up that I had my realtor put in an offer sight unseen (other than the listing pics) just to get in there. And then I got a showing setup for the next day.
After getting in, I revised my offer to 83k. Again, they countered at 87k. I said 83k is my number. They accepted. Bank approved. House #51. 83k with a 9k rehab. Estimated ARV of 135k to 140k so all in at just under 70% ARV.
So thats 7 houses I will have closed on in a 4 month period. I'd say you can find deals if you're looking in hidden gem areas of smaller towns like mine.
One thing I will add though so people don't think I'm suggesting I'm some great negotiator. It doesn't always work out as easy as it sounds. It takes effort and it takes being willing to lose out on houses too.
I just lost out on a homepath house where the asset manager really stuck it to me. I had been watching a house for several months on there and in november put in a bid of 60k. It was listed at 69k. They countered at 67k. I came up to 60,250. They countered at 61k. I came back at 60,500. They said 61k was the best they could do. My realtor told them 60,500 was my best. I didn't know they said 61k was their top. I had my realtor put the offer back in at 61k. They sat on it for a week and then I pulled it. I hate waiting.
But interestingly enough the house sat another month and they dropped it to 50k. I really didn't want to do it but how could I not? :-) I put in an offer at 45k. I figured the house had sat for over 4 months so nobody else was bidding on the thing. And they should definitely take a 10% discount on it.
Well, they countered at 48,750. I came back and said 45k best and highest. They accepted. They accepted via email on new years eve day.
Then a funny thing happened. Come monday of the new year when we were supposed to get the EM in, my realtor got another email saying their acceptance was no longer valid. There was apparently other "interest" in the property and they wanted it to go back up to bid.
They stuck it to me.
I put my 45k bid back in.The told us, officially, that there were multiple bids so best and highest. I asked my realtor if I was allowed to reduce my best and highest offer to $1 so I could stick it to them. But she told me that I'd have to sign a new contract to do that so that was a no for me.
And now we're still waiting to hear back from homepath to see if I got it.
I already told my realtor I'm not getting that house. There's no way the asset manager is pulling that house back out of an accepted offer unless they're 100% positive that the "other interest" is going to offer more than what they accepted.
Not happy about the way they played the game with accepting the offer and then backing out. But its a good example of how my negotiating techniques negotiated myself right out of a deal. :-)
For every win you get, there are usually one or two losses you have as well like that. Getting deals is about putting in the legwork and staying on top of all the listings every day to know when a deal opportunity pops up. And then, secondly, its about being in the right areas where there is less deep pocket competition so there are still a few deals left....
I haven't noticed the deals being gone at all. I have noticed more competition for them though.
Great response. Are you doing your own rehab, or subbing it out?
As you can see from Mikes response it pays to have multiple approaches. I think the Mls can work in some areas just fine. It depends on how competitive your market is.
@Mike H. Thank you for sharing your deal flow and method! How do you manage "staying on top of all the listings every day". Do you set alerts or have a list of properties you're watching and go to the various sites daily? What the most effective method you have found?
From your post I gathered the following deal sources:
- BP investor :)
- listed (MLS?)
- Homesearch auction
- short sale
Are they any others you use?
Thanks again for sharing and congratulations on your awesome, successful method.
No they are fairly easy to find unless you are lazy or broke.
@Account Closed I don't do any of the work myself. I have a full time job and do the investing on the side. I literally can't even change a lock. When we first started, I used to do anything that was manual labor to save money (pull out carpet, trash out, etc). Now the only thing we do is paint. My wife does that actually.
In terms of sources:
MLS (realtor.com is the one I use but you can use others to view mls listed properties - short sale and estate sales would also be found here).
You'll get some overlap for MLS stuff too (i.e. HUD and most of the auction sites list their stuff on MLS as well as the auction sites). But its important to know where they're listed because each one has a unique flavor to how you offer and the discounts you can get.
That's awesome those are great especially considering you're not doing any of the work. Thanks for sharing that information, very inspiring
you sure it's hard if you're not using creative power prospecting tech needs to find a motivated seller. Your deal is going to come from a sour who has not paid their real estate taxes, their mortgage payment, or has a house that is ugly and need repairs. As an investor it is up to you to control that type of real estate at a price that would create a cash flow or equity profit.
please disregard the above post it was sent before editing. My apology.
It is true, that sometimes, if not all the time, it is hard to find a good deal. They are not advertised "this is a great deal make an offer".
To find a good deal I believe you have to go underground to unconventional places to find a seller willing to give you a property that will be a cash flow or an equity profit. Some of the best ways to find those transactions is to work the tax sale system, the foreclosure marketing and making offers at wholesale prices, farming and public advertising; where there is real estate there are profitable deals to be had! It is the real estate investor's obligation to create that offer that will produce the best equity or cash flow transaction.
As an investor I feel , that if it's going to be it is up to me. Making offers daily on real estate is the key to finding that one deal that will produce cash flow or equity.
Hey @Tam Lapp. There are plenty of deals out there for those that are hustling and or have a system in place. Remember to have a handful of ways you are looking to find deals.
Here are just a few of the many ways to locate deals and or generate leads:
- Driving for dollars then mail campaign or knocking on door if you have the courage to.
- Bandit signs
- Build relationships with REI savvy agents
- Direct mail campaigns
- Absentee owners
- Code violations
- Build relationships with Attorneys in these areas
- Relationships with Financial Planners and Property managers
- Call on For Rent Ads to find tired landlords that may want to sell.
- Call For Sale By Owner Ads and screen for motivation
- Help other wholesalers market their deals
There are many ways to find or generate leads. Really depends on your budget, motivation, and time you can allocate to it.
Hope this helps.
Here's to your success!
In North Carolina you can go directly to the trustee attorney websites and they list properties, sale dates at the courthouse, minimum bid price, and deed and book pages so you can do the title search before buying. We've found plenty of good deals there.
very good feedback yall...seems like everyone is doing great!!!!
@Tam Lapp its totally regionalized.... but as @Mike H. states small mid western towns have little to no competition... if one had the capital you could buy 100's upon 100;s of properties in these little bergs . are they are good deal ... well time will tell.
I have done a few .. I find the little bergs have benefits IE no to little crime compared to urban... but renters by and large make very little money so rents can be pretty low and the turn over very high... so you want to look out for that.
if there is a flipping market that is established then I would certainly be looking at that.
The Triangle area and even the outskirts are booming here in North Carolina. Finding deals is very easy. There is alot of competition but there is so much building and revamping going on that you can find deals all the time. You just have to do research. I have gone to courts, looked online, drove around neighborhoods looking for those sale signs, looked at others investors sites that sell properties etc. Also, I find networking to be the key to finding out where all the hidden gems are. I can't tell you how many times I have overheard people discussing neighborhoods and profits.
the one thing, I don't think mentioned here, are at the sheriff sales.
these require payment in 24 hours. it's where the bigger investors go.
need to know what you are doing and have the cash. but reduces a lot of the competition.
I would definitely agree with @Jay Hinrichs on becoming familiar with the smaller towns because they are very dissimilar markets from town to town.
Find the ones with the good school districts relative to the surrounding towns and you'll typically find good rents and good tenant pools.
The towns I target have rents for 3bdrm/2.bath, 1400 to 1500 sq ft homes running at about 1350 to 1400 and the houses are worth around 130k to 150k - which means I'm all in at about 90k to 105k or so on average.
But go two towns over and you'll find rents for those same houses in the 800 to 1000 range with lower values and much more sparse tenant pool where collections would probably be more difficult.
I don't want to say there's no competition down here though. But I know that some of the big players in the suburbs just north of me have stated that they won't come down to this area. I think because it just doesn't scale. And I know that the big funds/rental companies that are operating out here don't have any rentals in these areas either.
They are in a couple of the towns I'm in but not my main ones which helps. Oddly enough, they actually aren't bad to have as compeitition though as they tend to push the envelope on the rents. My homes look like absolute steals to renters when they compare the rates that those funds/rental companies charge. And those companies have no problem letting their homes sitting for months on end instead of just lowering their price. Its actually funny.