Are There Any DEALS Out There ?

Question

Are There Any DEALS Out There?

Back almost 50 ago when I began investing in real estate there was scant information available about any property. What information was available was in PRINTED form; the local MLS put out a book updated MONTHLY that contained listings, with no pictures, no hard information, just the listing brokers description of the property and the asking price. In fact less than half the SFR were in areas covered by a MLS. “Pocket listing” were the norm as a listing broker/agent would try to sell the property themselves and it would only reach MLS if it couldn’t be sold “in house”.

Information available for commercial properties was even scantier, broker’s handling commercial listings produced teaser “information sheets” and much more elaborate “offering circulars”. The offering circulars were Only available to buyers who had been carefully vetted and or had “proven” their ability to close on purchases.

Anyone with INFORMATION held a vital role in this environment. If an individual investor could become a “favorite” of intermediaries who had information, or better yet had “control” of a deal, they’d have a steady supply of potential purchases below, and sometimes WAY below market value.

Which all makes me wonder, HOW does any investor find a DEAL (significantly below VALUE price) in a world where instant information is available to EVERYONE?

Many investors have given up on the notion of buying significantly below market value and concentrate on putting together a portfolio of income producing properties where the rent will increase over time, and with steady appreciation and amortization will accumulate wealth for “retirement”. Others chose to enter the world of “syndication” or fund management, where their knowledge, experience and efforts are rewarded with “fee income”, often in the form of some kind of “promote”.

Where I have been successful in say the last 20 years in obtaining
“deals” has been in two categories. One is closing almost immediately
purchasing with cash. I’ve obtained some truly sensational “discounts”
by being able to close deals anywhere from 24 hours to 3 days.

goes same for providing capital to those we help financially do deals.. speed has a premium mark up also complexity has a mark up. Help others succeed and we succeed.

The other category is property where information is readily available - but there exist other factors not recognized or incorrectly recognized by the investing public. Sometimes this is a result of what in the stock market would be considered “insider information”, but real estate is not subject to securities laws.

So, here’s my questions for anybody interested.

Do you still seek deals way below REAL market value? Have you been success in buying these?

Or, do you instead concentrate on putting together a portfolio of good properties, allowing cash flow, price appreciation, amortization and time to help reach your financial goals?

Jay Hinrichs · Answer

this:

Where I have been successful in say the last 20 years in obtaining
“deals” has been in two categories. One is closing almost immediately
purchasing with cash. I’ve obtained some truly sensational “discounts”
by being able to close deals anywhere from 24 hours to 3 days.

goes same for providing capital to those we help financially do deals.. speed has a premium mark up also complexity has a mark up. Help others succeed and we succeed.

my latest deal : Funded last friday.. 1.5mil took less than 7 days repeat client but I have not done anything with him for several years.. I started with him when he was doing turn key houses that we funded.. he gravitated to larger development deals that can be tough to place.

175 parcels pre sold to a national builder who released 3 mil in EM. 22 mil contract to buy exiting first 5 mil so we are junior but also have a collateral assignment of the purchase contract and other guarantees.. having speed an being the sole underwriter on this one ( ME) based on history( I funded 2 other developments for him one in Colorado one in GA) We got it done.. For the speed and unique set up we got 100k funding fee and 30% apr on the note. One year and lot take downs start mid Nov. so we will start getting paid down then.. 120 days of pre paid interest. then he can payoff at anytime.. But my experience is once the loans are set they tent to go to term.. So not sure what we will make but its far better than the 2 points 10% you see out there in the market today. Relationship Speed and keep in contact with your good clients never know when they will need you.

Ryan Spath · Answer

@Don Konipol

To answer your question yes, there are still deals out there, you just have to know where to look and be ready when they show up.

For context, I’m in Southwest Idaho (Treasure Valley), and I do still see properties on the MLS that qualify as “deals.” It’s not an everyday thing, but they exist. A lot of it comes down to a disconnect between what a property is worth and what a seller believes it’s worth.

Right now there’s a lot of uncertainty in the market, we see it in the bond market, the job market, and overall consumer sentiment. That uncertainty causes people to act emotionally, and sometimes irrationally. For example, sellers might list a property way above market value, watch it sit for months, and then sell at a deep discount. On the flip side, some list aggressively low to move fast and end up leaving money on the table when the property has hidden issues.

Here’s a real example from earlier this year:
A client had 1540 Wardle under contract at $399K. During inspection we found mold, a roof that needed full replacement, and electrical issues. My buyer requested repairs, which the seller refused. The property eventually sold for $375K. Based on my walkthrough and contractor bids, it needed around $75K in work.

If you run the math:

• Purchase price: $375,000
• Rehab: $75,000
• All-in: $450,000
• Selling costs (~9%): $48,591
• ARV: $539,900

If flipped, that’s roughly $39,900 in profit before taxes.
If held as a long-term rental at $1,660 per side, it’d roughly break even on cash flow after factoring in cap x and vacancy but with around $130K in built-in equity.

Not the “home run” deal everyone dreams of, but a solid single that builds both equity and experience.

So yes, deals are still out there, they just look different today. They often come from mispricing, condition issues, or seller fatigue, not necessarily from secret off-market channels.

I’m curious based on your experience, is this something you or clients you lend to would have acted on?

Chris Seveney · Answer

Yes. We receive our deals from those we have done deals with in the past. Brokers, agents, attorneys, preservation companies etc. Also being in the non performing note space it is like sitting on top of the mountain being able to look down at deals as well as if we get a loan on a property that we may be able to take back, its instant equity. Last week we took back 11 properties and total equity in these properties was over $500k.

Jules Aton · Answer

It is misguided for the average Joe with no experience or contacts to think they will be able to quickly live off rental income only. In fact I don't know many who actually get to the level where they can solely live off rental income anyway. I remember the days you describe in original post and while I was never at the level to get the steals I did manage more than a few very good purchases. The good news is I can only assume that at this point in your life, like me, you don't need the "home run" anymore and hopefully are enjoying the glide path.

Doug P. · Answer

@Don Konipol I've always gravitated toward buying on wholesale TERMS rather than wholesale PRICES. Nothing much has changed in that arena in the last 25 years that I've been at this. I can still find $0 down 0% seller financing everywhere, just have to ask for it.

That said. I'm also regularly seeing other investors buy below 70% ARV straight off the MLS and below 50% ARV off-market for houses around the median which is $825k here as of Q2.

Stuart Udis · Answer

Any sign of distress whether it be unpaid property taxes, violations, death of owner, expired permits etc. will result in the property finding itself onto a mailer list sold to hundreds if not thousands of wholesalers and real estate agents. Theres also more lenders servicing the most novice investors. Consequently, SFH's and small multi-family properties whether "off market" or on the MLS are in front of a lot of potential buyers with more access to capital than ever before.

From there, all it takes is one prospective buyer to over project the ARV or under project the rehab cost and that property is off the boards. The person who makes the purchase doesn't make any money in the transaction but eliminates the opportunity for others. Avoiding the properties that attract this buyer pool opens the door to better, less competitive opportunities. Here are a few areas where I still consistently see opportunity:

1. Properties that are listed/marketed incorrectly- the highest and best use is different than how the property is marketed; incorrect square footage; incorrect lot size come to mind.

2. Mix Use buildings- Most investors shy away because they don't understand the commercial component and/or they recognize the financing can be more challenging.

3. Manufacture value through entitlements.

4. Understand your market and provide the missing housing product. Real estate is a copycat business. Investors build to comps and rarely take the time to identify the missing housing product and build to satisfy the need. These opportunities are available in most markets but requires local knowledge- often through transacting at a high volume where feedback can help mold design and new business activity. Everyone underwrites with one use in use/density count in mind but another unit count/unit type pencils better.

Are There Any DEALS Out There ?

Are There Any DEALS Out There ?

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