Hi all -- I'm just wondering how folks are finding their deals, whether they be a first purchase or ongoing.
I'm struggling a bit with finding the right deal to snap on. I've made two low-ball offers which were (rightfully) rejected, but I just can't seem to find something in my niche. I can't tell if my criteria is too stringent, if I need to work with a wholesaler to find the right deal, or maybe inventory is low and things are slow right now.
Looking for your guidance and thoughts -- I'm ready to get this going (all systems in place, evaluation criteria set hopefully correctly, pre-approved, cash-ready, et al), but the right deal in my area just hasn't presented itself. I'm working with a realtor in both PA and NJ.
A few ideas:
- Direct Mail to potential sellers (estates, code violations, absentee landlords, etc.)
- Networking with wholesalers
- Auctions (foreclosure, estate, etc.)
- Tax liens
- On Market/MLS Deals*
*You say you're working with "a realtor", but is it one who has a proven track record of sourcing deals for investors?
@Joe P. What's your niche?
As a fellow newbie investor I think the MLS is one of our most powerful resources. I would recommend doing daily searches for properties that fit your criteria. Also having an app like realtor which can alert you every time a property that fits your criteria hits the market is a plus. It's also important to have you're realtor set you up with an alert. Make sure that your realtor fully understands your criteria so that they can help you in finding off market deals as well.
Also consider raising your offers. We all want to buy at the lowest possible price, but it's imperative to understand the the maximum price at which it remains a good deal for you.
@Joe Norman I think you make some good points there. Sometimes in this age with everything right at our fingertips, we forget that hitting boots on the ground is sometimes the best way to get what you want. I'd love to get in touch with a wholesaler and I think I am part of a meetup group, I'm wondering if some of them may come out and speak with me. MLS deals don't seem like good deals. :)
I am working with a realtor but I think you're right -- they don't have experience sourcing deals for investors.
@Tevin E. Taylor I've been scouring Trulia/Zillow but I'd argue there isn't a deal to be had right now, based on my criteria, which is why I questioned my criteria.
My niche would be properties that have been on the market for some time and perhaps need some light-moderate work to shine again. But really, any deal with good COCR is where I want to be. I want to fund this first purchase, to then fund the next one, and the next...
I do not believe the MLS or Realtor.com (the public version of the MLS), or any other public site is your best bet. Besides being an investor for over 20 years I am also an REO agent. By the time an" investment grade" property hits the MLS, it is either already sold to someone on the agents "buyers list" or has multiple offers in short order. If it does not, it is not very attractive. I do a great deal of direct marketing. When I get a response to one of my letters, I can negotiate directly with the owner , perhaps include some creative financing such as owner financing or private money and , hopefully, strike a deal that works for both of us. Going through a real estate agent is very frustrating because most do not understand creative financing and can not explain your offer. Driving or walking for dollars is also effective. Why not contact some of the smaller property manager's in your area and ask them to keep you in mind if one of their clients wants to sell. That strategy has worked well for me. If you are in NJ, I would highly recommend joining the South Jersey Real Estate Association of which I am a board member. We are a non-profit educational group. The networking opportunities are very production.
Two offers rejected is not unusual. Here's what I mean.
"Deals" are rare. There are thousands and tens of thousands of investors you're competing with who have been in this game longer than you and know more than you do and have all their systems and money in place, just like you, so the question is how will you beat them and still get a deal?
You can buy anything if you raise your price or lower your standards. I suggest doing neither. This is how newbies overpay and get discouraged when profits are small or non-existent.
Rather, you will win with hustle. This is what real estate investors refer to as "the grind." Find 100 properties. Screen them from a 10,000 foot view (how many sq ft, what's the neighborhood like, # beds, # baths, rent to "all in" criteria). That will probably eliminate 50-70. Of those, contact Sellers and find out how motivated they are. That's really the next most important thing to know. This is the 5,000 foot view. That will probably eliminate another 20 or so....wishy washy sellers who think their property is worth more than it actually is or dig their heels in regarding what you have to buy it for to get a deal.
Then schedule to meet only with motivated Sellers. Likely only 10 properties left now. Half of those properties will be worse than you thought and the Sellers won't budge. Make your offers to the remaining 5, confident that you have found a property that is priced right to be a "deal." If one of them gets accepted, you did well! If they all get rejected....rinse and repeat.
They don't call it "the grind" for nothing! ;-)
Once you've done this a few times, it gets easier. You'll get better at weeding out the bad deals quickly. A new investor can expect to take from 1-3 years before really getting into the groove. Others try to short-cut the process and overpay. I did up front and I regret it. Now I have very narrow criteria, and I'll look at about 100 houses for every 1 I buy, using the exact process above.
P.S. No offense to realtors or those who use them, but few of them are motivated enough to arrange the number of showing and offers you will need to do to find good deals. Most agents I've worked with fall by the way side after showing me 5-10 properties if I don't buy one. Oh well... I need to lay eyes on at least 20, after I've weeded out the other 80 per 100 properties that don't fit my numbers. Be sure to ask your agents how many properties they're willing to show and if they have a certain expectation of showings to purchases. No sense working with an agent who doesn't know how investors work. A good "investor friendly" agent will know which properties are good deals and won't waste your or their time showing you crap.
I am both an REO agent and an investor. You can't blame an agent for not wishing to work with an investor who wants to look at scores of properties and makes very low offers on some properties only to have those offers rejected. It is not a good use of their time. Most REO agents such as myself have a buyer's list and the property, if it is any good, is already sold by the time it hits the MLS. As I stated in a previous posting, the MLS is not the best source of good properties as it puts the investor in a competitive situation.
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