How to FIND a Great Deal

Question

Asked about a dozen different ways, this is a question that we constantly see on BP forums, usually asked by people relatively new to real estate investing. These people have spent a few weeks to many months trying to implement a strategy or tactic promoted by some guru, and having come to the realization that it’s not working, are making a “last ditch” effort to find out “how it works”.

When “times are tough” good deals do seem to just “pop up” without the investor going into a whole lot of effort.  Especially if the investor can pay cash, and close fast.  But those times don’t happen often and the window usually closes pretty fast.  The rest of the time GREAT deals are not FOUND, they’re MADE.  Deals are listed on MLS or its commercial equivalent at 40% below REAL market value.  They’re not easily identified as being smack in the middle of the next hot redeveloping market sitting there unrecognized, they’re not readily identified as easy to reposition to double the rental income and triple the value.

To purchase a “great” deal the investor needs to NEGOTIATE a large discount to “ask”; they need to have the ability and knowledge to be able to analyze and research to identify properties that can be upgraded, repositioned, leased for greater profit, or have zoning changed. They need to be able to PREDICT what areas will gentrify, and at what rate.

I personally prefer the “easy pickens” times to invest when basically I just have to flash a wad of cash and insist on a large discount. But I don’t stop investing the other 95% of the time. I just have to look at many more Properties, make many more offers, and spend a lot more time to make a deal.

It is in times like these that the new type investor will have the most difficulty being able to close a good deal, as they will be lacking the knowledge, experience, and network that established players in the market possess.

How do you find ( or CREATE) your deals?

James Hamling · Answer

I apply the rule of "Don't Fight The FED" too Investment Real Estate....

Don't Fight the Market.

I move as the market moves, and engage in the strategy of THAT, not yester market.

The "everyone's a flip" market, ancient history.

"Cash-flow on discount" market, long gone.

"Cheap $" market, kaput.

"Path-of-Progress" market..... nail, head, ka-pow!

And there is the universal omnipresent market immune opportunities of; Distressed/ Exhausted/ Novice landlord, Death & Divorce.

Beauford Jefferies · Answer

@Don Konipol TY, for sharing your experience and given that you brought your first deal 44 years ago I am sure that you have a wealth of knowledge that you've been able to share to help the young and experienced real estate investor. I have a question regarding how I analysis deals? After using my tool to analyze from purchase price, renovation, insurance etc, I tend to laser focus in on how much equity I'm getting when I purchase and am I buying at the lowest sq.ft possible before I am ready to make a offer? Is this a tried and true approach that other investors at all levels are doing?For example I brought a MF property at 32 sq ft 2062 overall with 25k equity at close. Continued renting it until it needed an overhaul which was a 2-year period. Current renovation is 78 per sq ft with potential of 2x after completion based on market comps, meaning I would raise the sq ft from purchase that was $32 to $156 pending appraisal?

Don Konipol · Answer

Really good points - First, to identify a “great” deal you need to know what you’re looking for! And it helps if you can acknowledge specific parameters, and relay those parameters to the market participants.  Second, you have to be “out there” letting people know that you’re a buyer, and what it is you’re trying to buy.  A big problem for many especially new investors is that they DON’T know what they’re looking for, couldn’t identify it if they came across it, and couldn’t close the purchase if they could identify it, for lack of capital and or lack of credit capacity.

The biggest fallacy in real estate investing is that you can buy property without capital.  It CAN be done, by someone with KNOWLEDGE, EXPERIENCE and a VERIFIABLE track record.  I purchased my first commercial property as a 50/50 partnership in which I invested $5,000 and borrower the rest for my 1/2 of the $185,000 purchase price - BUT this was 1981, I had a lot of experience (albeit) in residential property, had sufficient knowledge and education.  And my partner brought $45,000 cash to the closing table.  But title companies are MUCH more diligent these days, and have all but eliminated a favorite tool of 45 years ago, the “second mortgage crank”.

James McGovern · Answer

In Connecticut, I mine the foreclosure auction lists and identify properties that don't show up on sites such as auction.com as many are too lazy to do the work. I then filter on towns where flipping isn't big.

Beauford Jefferies · Answer

@Don Konipol, having a solid team and some patience goes a long way. When my wife and I first started we looked at about 50 properties before we were able to find the one that fit our business plan. The agent continued to dive deeper into the process of knowing her customer and using her network to match our needs. When our first deal broke, turned out that the owner had other properties that he was willing to part with that we had no idea before engaging and starting a relationship. The owner was an older gentleman who had made out well on is current portfolio but was reaching an age where he wanted to have more liquidity than assets. Being the we had access to cash it was a great paring! Oh and as for the properties that we looked at most are still unsold!!

How to FIND a Great Deal

Contact Us

Most Popular Reply