I'm a newer investor looking to build passive income through buy-and-hold rental properties. I've set a goal to purchase at least 3 more SFR rentals in 2018 (I already own 3 rentals and one primary, purchased from 2014-2017). Yes, I realize this volume isn't impressive. I'd love to do more. Much more. I suppose you could say I'm setting a realistic goal for myself based on past experience.
Though I've just recently started putting in offers, I spend hours a week analyzing properties for sale in my target market. Currently I'm looking in the Charlotte, NC area. This is a hot, competitive market and I'm struggling to find anything that meets my criteria: decent enough neighborhood that I would live in it, move-in ready or close to it, projected cap rate above 6.5% after expenses (including PM).
I don't mind making tons of offers and getting rejected over and over. I don't want to frustrate my agent, however.
With what seems like sellers' markets left and right, is it moot to spend hours a day scouring the MLS and crunching numbers?
I should add to this that I live in California, and I work a 60+ hour workweek here with the goal of building capital so I don't really have the time, connections, or knowledge to look for off-market properties or remotely manage major rehabs. I admittedly also suck at networking. Introvert problems.
I'm thinking of shifting my target market to a less competitive area where I can get closer to the 1% rule in decent areas with a move-in-ready or very light rehab property.
Do you find what you're looking for on the MLS these days in your target market? If so, what are your criteria? I'm interested in hearing some more experienced stories.
Love BP and its wealth of knowledge! You guys are all awesome!
This is not exactly an answer to your MLS question but I thought of these guys when I read your post...
They are wholesalers from my market who have expanded into the Charlotte market. They might be a source of non-MLS deals for you to consider that have a better chance of meeting your criteria.
Disclaimer: I have not purchased from them and have no affiliation with them, I just thought you may be interested.
In my market the odds of finding a deal on the MLS is like finding a needle in a haystack.
@Jordan Little I personally have bought two properties in the last three years of the MLS, and I have helped quite a few investors buy solidly performing small multifamily here in the Berwyn area. . The first one I purchased was my four unit in Lyons, IL in 2015 which I bought at about a 25% discount. My second was a nine unit apartment building purchased about $125,000 below market value. Being an agent has helped me some as well. This is an incredibly location specific question, but at least here in the Chicago near southwest suburbs I still see solid deals on MLS.
For now I still buy off of MLS but it is getting harder and harder. I’ve been considering other avenues as well but have been putting it off. My only hope is a house so gross nobody will touch it but those are getting to be more and more rare as investors (and homeowners) rejuvenate the area.
@Jordan Little @John Warren I know you are both referring to SFR and small MF but when talking about larger MF if a deal makes it to the MLS you can count on the deal having significant hair. Commercial brokers keep a list of their go to folks (pocket listings) that they show every deal to. If their best customers don't want the deal then they advertise it to their complete mailing list and the wider market. If no takers then lastly it gets to Loop Net or the MLS. There is always a reason a property makes it to Loop Net ...
Loop Net... is that something i should keep an eye on?
95% of the deals on the MLS do not make sense, numbers-wise. Which is awesome. Because I just checked, and in my county alone, there are currently 2,754 single family homes, and 96 2-4 unit multifamily property listings. Using that 95% rule, that means there are over 142 deals out there today I might want to analyze further!
I get dozens of "wholesale" deals pitched to me every week as well. Guess what? 95% of them are ridiculously overpriced as well.
That being said, while I'll look at any deal (regardless of sourse), I usually greatly prefer MLS listings to wholesale properties.
Wholesale deals usually look something like this: "$200k, no inspections, no due diligence, cash only, close next Friday, take it or leave it.". There are so many things not to like about that...
On the other hand, literally everything in an MLS listing is negotiable. Price, closing date, financing, inspections, contract contingencies. You name it, it can all be negotiated. For example, I last year I purchased a home off the MLS. It was overpriced at the list price of $120k, so many of my competitors probably ignored it. I bought it for $96k, rehabbed, and sold for $179k.
All that to say: Don't give up on the MLS as a valid source of deals. Keep grinding, and the deals will come (often when you least expect them!)
I still am able to find myself and my clients plenty of deals on the MLS. You just need to be fluid, you can't expect to get 50% under market value these days. It's 2018, not 2008.
IF the market is selling at 96% of asking price and you can get 90-92% isn't that a deal? Some investors are just way out there between actual and market expectations. Sometimes a reality check is required. And these wholesale deals I'm getting flooded in my inbox are no better war zones being advertised as up and coming and for the price of established cities...please keep that moving
One way to do this is to move fast, and know people, who have listings before they go on the mls. That’s what I did with one of the properties I bought. Just got the offer accepted before it went on the mls
@Caleb Heimsoth Thats easier with an established group of people that can help you get it done. There are no deals in my area (Los Angeles) and I am still struggling to vet people and deals in another area.
I know it takes time, but man can a guy get anxious trying to buy propety.
@Ruddy Anthony Salazar I don’t invest locally myself. The deal I’m specifically talking about was in Cleveland. Got the offer in and accepted a day or two before it went on the mls.
If you're going to invest out of your area don't select a highly competitive area with poor cash flow.
@Eric James Which areas are you in? Been looking at Indy myself.
@Jordan Little Pull off-market lists from MLS. These are properties that are no longer listed either from expired contracts or for whatever reason. Generally you can find a way to get in contact with the owner and see if they are still interested in selling and make an offer over the phone. I’ve had more success with finding deals in this manner than I did with currently listed MLS properties.
@Jonathan McGee How do you pull the list? Is that something you need to coordinate with your Real Estate Agent?
There are excellent deals to be had on pretty much any MLS - but they are usually gone same day, or not long after (which is why it seems like you can never find a deal on the MLS).
Just last week an agent in my office sold a 850k REO SFR for under 600k. Never even hit the MLS. Buyer paid the commission, but at a 250k rake, he didn't mind paying 20k. Pre-market is the way to go, as long as you've got the inside track.. and just so happens I have one.
Originally posted by @Ruddy Anthony Salazar :
Jonathan McGee How do you pull the list? Is that something you need to coordinate with your Real Estate Agent?
Ruddy yes, you'd have to coordinate with a licensed agent to pull this list from their MAAR software for you.
I think it really depends on what market you're looking at, what you're willing to take as an acceptable return and also what kind of terms you're writing into your contract. We did 200 deals on the MLS here in Denver last year alone for one of our institutional investors (all buy and hold). We picked 98% of them up below list price (which doesn't happen all that often in Denver), but they are a cash buyer and take everything as is. If you're able to spice up your offer with things like closing times and contingencies, we've seen people have really good luck getting stuff at a discount.