Analyzing Deals for Yourself vs for Others

[Sherylyn Holden]

What is your buy box?

Buying an investment property is unique to every person. You may be wanting to flip, BRRRR, MTR, STR, house hack, etc. There are some questions you need to ask yourself though, regardless of the strategy you decide to pursue. The numbers say one thing, but you need to be undeniably honest with yourself which is harder than it sounds. I've seen people skew their numbers "just a bit" to make the deal look better on paper. Or go "slightly outside their buy box" because they got impatient. When I buy for myself, I accept risks that I wouldn't recommend to everyone because everyone's circumstances and goals are different!

Risk Tolerance

• Let's think of flips and STRs. Are you willing to speculate on an up and coming area for a flip for big money possibly or do you prefer tried and true neighborhoods with less potential profits? For STRs, are you willing to buy in an HOA that might change its rules and ban STRs?

Profits

• How much money do you actually want to make (if any)? Some people are buying for tax purposes, some to replace their full time W2 income, some to break even and have an asset when they retire. Why are YOU investing from a financial lens.

End Goal

• What is your exit strategy? Do you have a backup? By this I mean, if you are a flipper, does your target end buyer have the means to buy this home and do they even want it in the current market environment? If you are an STR operator, think of your guests. Would they want to stay here? Would you? What will you do if your initial strategy doesn't work out?

When I Advised NOT to buy

• Client 1: Numbers worked great, but the permitting risks and HOA risks were too high
• Client 2: Deal only worked if everything went right. Which it never does!
• Client 3: Stretching capital too thin. We all have our own capital constraints. It’s important to learn to crawl before you run!

This is why building a buy box is SO important and really hammer this home with everyone. Your buy box is your north star that is true to your investing strategy that works for you. It can always be adjusted but that focus is key. I hear a lot of people say “I’m open to any deal if the numbers make sense”. With that mentality you’ll hardly ever find a deal! Learning to say no to a deal is probably the greatest skill an investor can earn, but even the best miss this sometimes! I appreciate that we have this forum to bounce ideas off other like minded individuals to see where we might be missing the mark or seeing things with rosy colored glasses.

Real estate is something we don’t need to learn or handle in a silo :)