most efficient way to weed out potential flip/rental properties

11 Replies

i'm looking for the forum's advice on the most efficient/effective way of weeding out properties. i'll be living in the property for at least a year. while i live there, i'll be living in it (so property can't be a complete rehab), fixing or improving the property, and then either flipping or renting out the property. 

i've looked at about 18 properties the past 3 weekends (i just started 3 weeks ago). the 18 properties were chosen based on 2 broad criteria: 

1) based on pictures, description, and google street view, choose properties close to the metra (in illinois), in a location with a great high school (>=8 score), and in nice(r) neighborhood.

2) look at zillow for an idea on property values in the neighborhood so that i'm not buying one of the most expensive houses in the neighborhood. if i feel the house i'm looking at is somewhat undervalued because it needs work and there's some room for me to flip, then house passes.

this criteria has helped me weed out 100's of properties, but takes me a bit of time.

i'm curious, is this a good start or are there other ways that the full time/professional investors use? i'm new to this and decided it was finally time to get my feet wet. thanks.

If your area is anything like many areas of the US, the MLS takes a good amount of time to review, depending on your criteria. I would try to get access to the MLS through an Agent so you can run good comps to get and ARV on the properties you are interested in.

Having info such as Days on market, sorting by subdivision, and price per square ft. has helped me in my analysis quite a bit.

@Patrick Daniel my agent turned on automated mls emails based on the neighborhoods i'm targeting. other than that, no other criteria is being used. so if i already have an agent that accesses the mls, how does that help me get good comps and arv?

i have noticed the days on market, but quickly found out that has no bearing on how i negotiate price. no sellers so far are desperate enough. interesting note on the price per square ft. didn't even think about that but as i compare different properties in the neighborhood, that'll help me with a consistent value. 

Check comps of recently sold near the property you are considering. Criteria lowest cost to get in and highest return after rehab.

@Nick S. When you say "look at Zillow for an idea on property values in the neighborhood" do you mean you're looking at sold properties, active properties, or the Zillow Zestimate?

I highly recommend that you use Redfin in tandem with Zillow to gauge property values as Redfin is a broker with MLS access and they update their property feeds every 15 minutes or so.

Originally posted by @Nick S. :

@Patrick Daniel my agent turned on automated mls emails based on the neighborhoods i'm targeting. other than that, no other criteria is being used. so if i already have an agent that accesses the mls, how does that help me get good comps and arv?

i have noticed the days on market, but quickly found out that has no bearing on how i negotiate price. no sellers so far are desperate enough. interesting note on the price per square ft. didn't even think about that but as i compare different properties in the neighborhood, that'll help me with a consistent value. 

 When you find homes that seem like good flips, have your agent run a certified market analysis on the home with comps in the same area of the same size with the same amenities. 

The only price that matters is the price that makes sense for you to make a profit that works for your numbers. If the seller doesn't want to sell it for that, then it is not gonna be a deal that works for you. 

I have heard several investors say that they only get one out of every 95-100 offers they make accepted, I dunno how accurate that is for your area, its a little extreme for my area, but good deals will likely be hard to come by. 

For long term, I would look off market and try to get on as many buyer's lists a possible. Generally the deals there have more room for profit.

Best of luck.

@Kuba F. correct, i copy and paste the property into zillow, scroll down to the "neighborhood" drop down, and zoom in to see the zestimates of the surrounding houses. i love this feature. i don't see the same in redfin.  i do notice though that redfin has identical if not the exact same info as the mls listing, which zillow doesn't seem to have. great info, but do lmk about how to find similar prices on redfin like i do on zillow. thanks 

@Patrick Daniel i actually did get one of those market analysis and it was quite impressive but honestly found it useless. not enough to warrant my time to go through. basically i found a property i liked, received the market analysis of comps in the same area with identical features and all that stuff and basically was 50+ pages. i already knew going in where i had to be at, but it was interesting to see that comprehensive report.

....not familiar with a buyer's list but will do some research on that. i think with me being new and having specific criteria (e.g., no complete rehab), thought mls was the best route. interesting. 1 out of every 95-100 offers...interesting stat. 2 rejected offers on the same property, so a long way to go haha. it's very tiring to look at so many properties only to find maybe 1 that falls in your criteria and then only to get rejected. the waterfall of looking at properties to getting an offer accepted is demotivating when i take a step back and look at that conversion rate (i'm a digital marketer full time so i look at it from that perspective). thanks for the responses!

Originally posted by @Nick S. :

@Kuba F. correct, i copy and paste the property into zillow, scroll down to the "neighborhood" drop down, and zoom in to see the zestimates of the surrounding houses. i love this feature. i don't see the same in redfin.  i do notice though that redfin has identical if not the exact same info as the mls listing, which zillow doesn't seem to have. great info, but do lmk about how to find similar prices on redfin like i do on zillow. thanks 

If you meander through my signature to the blog on my site in the footer, there is a post there (5 posts down as of the writing of this post) that details how to get comps from Redfin.  They don't make it easy to find on their site, but once you find it, it's a great resource.

Originally posted by @Nick S. :

@Patrick Daniel i actually did get one of those market analysis and it was quite impressive but honestly found it useless. not enough to warrant my time to go through. basically i found a property i liked, received the market analysis of comps in the same area with identical features and all that stuff and basically was 50+ pages. i already knew going in where i had to be at, but it was interesting to see that comprehensive report.

....not familiar with a buyer's list but will do some research on that. i think with me being new and having specific criteria (e.g., no complete rehab), thought mls was the best route. interesting. 1 out of every 95-100 offers...interesting stat. 2 rejected offers on the same property, so a long way to go haha. it's very tiring to look at so many properties only to find maybe 1 that falls in your criteria and then only to get rejected. the waterfall of looking at properties to getting an offer accepted is demotivating when i take a step back and look at that conversion rate (i'm a digital marketer full time so i look at it from that perspective). thanks for the responses!

 When my wife and I bought our first deal 8 years ago, we got our first offer accepted and it was super excited, but we were so excited that we paid too much. It is good that you have a strict criteria for what you want. I would keep at it and if after a few months of offers, it's still not working, maybe there is another criteria that works for you that could open up more deal potential.

As for the buyer's lists, wholesalers who directly market to people who want to buy their houses will normally not buy the house and then post it on the MLS, unless they are rehabing themselves. If they are just doing a pure wholesale, then normally they will do one of 2 things.

1). Get the property under contract with the seller for a price much below market and then sell the contract (known as an assignable contract) to another investor on a markup. These deals normally never see the light of day (MLS) but have more potential to have room for profit.

2). The wholesaler will actually purchase the home and then sell it to another investor at a markup. They do this for a myriad of reasons, it is often referred to as a double close.

Best of luck!

@Kuba F. good stuff, took me awhile to compare to your screenshots because redfin made it slightly more difficult to do that, but after a few clicks and digging, i found it. thanks!

edit: vote for you!

@Patrick Daniel thanks for the encouragement. i think the competition is increasing because as we approach the summer time, it'll be difficult for me to be competitive. i think i'll be more aggressive come sept-oct. that said, i know i can't use the traditional 70% rule since i'm not going full rehab and rather going the route of livable+small rehab.

after hearing a few podcast episodes of bigger podcast, the double close made more sense and jotted some notes. the wholesaler/buyer's list route will require more research on my end especially as it relates to those with a conventional loan. great point to bring it up!