Investor · Cape Coral, FL · Member since 2014 · 64 posts · 31 votes
What is a deal to you and why? I'm sure not every one is strictly focused on the 70% ARV-repairs, 50% (multifamily), or 2% for B&H. The BP boys also mention that these are only guidelines, but what do you all focus on to consider a purchase is a deal.
I ask this because I do not want to start going around calculating said math above, make a million offers and never get anywhere although I would celebrate if an offer where to be accepted. I am curious on how to obtain an "eye" for deals so if you all may add that in to the reponses I would greatly appreciate that. Thank you and have a great day BP!
Numbers and exit strategy...or strategies actually.
First you need to decide what your exit strategies are. Are you a flipper, holder or both. What specific strategies are you interested in, or more importantly are you and your team equipped to handle? Once this is decided, you need to design a system with criteria for analyzing properties to see if they meet your criteria for your strategies. The criteria is always based on your numbers for your market. If one person tells you you should use this method of analysis (2%, 70%, etc...) they are correct...for their market and their strategies. One person's floor is another person's ceiling. What's right for them isn't necessarily right for you.
NEVER offer based on what it will take to get the property. This isn't a contest to see how many properties you can acquire. It's a contest to see how much $$$$$ you can acquire.
Your analysis will tell you what to offer. ALWAYS offer based only on what your numbers tell you (based on your criteria). The numbers don't lie, so don't argue...you'll lose every time. Sometimes the best deal you make is the one you don't make.
I think the "getting to deals first" concept is quite narrow. That is only true if you are all looking at the same deal in the same way. I try to be the smartest buyer in my market and look for ways to make an average deal a good one. So by being more sophisticated or having more tools in your toolbox you are never in a race. For example low interest seller finance is a goldmine for me. I can pay over asking on a 9 to 10% net return property if the seller will finance at under 4%. ( I can't borrow in the USA so can't get cheap money like you locals).
I am often buying cheap money that happens to include a house so I have no competition with those as I am the only one offering to pay full price :-)
I have an agent/broker that I work with and his rep. is on the line too. Even in what may seem a large metro area - people know people. And they remember. I just don't think I'd get too many places UC after a few re-negotiations and I'd definitely need a new agent!
Realize Each Answer Is Unique. If you’re want to find the best deals in real estate, you first need to establish and define what a good deal is to you.
The Deal Is A Win-Win. When I’m looking at a real estate deal, I want to see cash flow, solid returns, strong potential upside and, most importantly, I’m looking for a win-win deal with the seller. I want each seller to walk away from the deal so satisfied that they will want to call me up the next time they have a similar deal just because they want me involved in it.
You’ve Got Multiple Exit Strategies. Part of doing your due diligence is making sure you understand what you’re getting into with multiple exit strategies. What happens if something goes wrong? Do you have a backup plan?
Sometimes You Don’t Know Until The Deal Is Done. Whether you’re looking for capital appreciation property, a flip property or a cash flow rental property, you won’t really know if you have a good deal until you’ve taken over operations for a little while. As much as we will try, we will never find everything when doing our due diligence on a property. It’s not safe to call it a great deal until you start getting the results you expect after taking over operations.
Are All The Home’s Features Useful? Sometimes homeowners will invest into features that are only useful or interesting to them personally and become a detriment when trying to sell. As a buyer, you have to ask yourself if having an in-ground swimming pool in Prince George is really worth the expense.
There are a couple other points in the article but that pretty much sums up my perspective on choosing a "great deal" in real estate.
I've thought a little more about this from a "newbie" standpoint. My first consideration was always - can I get out of this tomorrow without losing money? The answer had to be yes. I could fire-sale this thing tomorrow if my situation required it and come out whole. All of the other factors (location, cash flow, etc.) are very individualized and vary greatly.
The numbers your speaking of don't even exist in my corner of the country... but I would love them. Your posts make a ton of sense and match what I have been thinking in theory. What is the best way for to invest there from afar?