Hello All,
I am a new investor and looking in Upstate NY for my first rental. I am currently working with a broker and she said the below statement that really changed the way I view properties under my search criteria.
"If the property has been on the MLS for more than 3 days - it probably wasn't a deal to begin with."
I would like to hear your views on this as well. Do you look at how long a property has been available for sale? Does this sway your decision to buy the property in the first place? I work a full time job and I find it a bit difficult to have enough time to analyze/visit/evaluate properties as soon as they hit MLS. Any other buyers with a full time job that can chime in on their process please?
@Mo Farraj
Personally, no, that situation wouldn't affect me. I do look for properties that have been on for quite some time (3 months +) as those sellers may be getting desperate and wanting to deal more.
As for it being 3 days or so, could just be not fit for someone's portfolio or they're funds are tied up and they're not able to execute. If the numbers work for you then go for it. Could still be a good deal.
@Mo Farraj As it's been said in this forum, you will be hard pressed to find a deal on the MLS. But, as I've heard @Brandon Turner say, "Investors don't find deals, they create them".
Each day on the MLS is a bargaining chip for you to use to your advantage. Make an offer that is just good enough to start a conversation, and move on from there.
I hope this helps. Good Luck.
It is a numbers game. If you make enough offers, some deals, even the MLS deals, will hit.
Hi Mo!
We are in the same market if it's in Brooklyn and I have 21 years of experience here, especially with 3 to 4 Unit buildings, particularly Brownstones.
Days on Market is just one Metric of a bunch of others that you SHOULD be paying attention to.
What a lot of people in our market don't really understand is that you really need to look deep into a target property and then you might discover the true value.
As an example, in 2008, I identified a 3 family in Clinton Hill which needed a gut renovation and was selling with an asking price of $1.25 Million.
I can't really remember the DOM, but I believe it hit the market about a week or two before I put in an offer.
What the owner and the Listing Agent DIDN'T know was that they were selling a 4 FAMILY brownstone, not a 3 FAMILY.
The Owner didn't realize it or didn't remember had she known that it was converted from a 4 Family to a 3 Family a LONG time ago. It was still legally a 4 Family but was configured as a 3 Family.
It still had 4 Gas Meters which would be used for 4 legal kitchens and 5 electric meters, one per legal unit and one for the common electricity.
The conversion wasn't filed and therefore none of the meters were reduced in number. They just duplexed the Garden floor with the Parlor Floor and kept 2 rentals.
I immediately put in an Offer, $50k for a seller's concession, and had an accepted offer in a day.
When I bought the building as a 3 Family, it appraised for $1.2 Million, which was the listing price and my Contract price.
Right after I got the keys to the building, I added a kitchen to floor that was missing. The kitchen wasn't working because I did not hook up the plumbing.
I went to a bank to re-appraise. I pulled the Certificate of Occupancy, had it certified by the Dept of Buildings, and handed to the appraiser. He appraised it at $350k above my purchase. The appraiser never checked if that particular kitchen had running water, not that it would probably matter.
I then took the $350k out as an Equity Loan and gut renovated the building.
Not a bad return for 2 months listed on the MLS by a prominent Brokerage firm.
DOM is a consideration, but is one of slew of different variables that you should be researching and analyzing, especially in our market.
BTW, I don't flip in Brooklyn either. This property is now worth close to $3 Million today. The total profit is over $1.5 Million in the 11 years I held it, not including the cash flow of over $4k per month today.
Funny how so many Investors think you can't make money in Brooklyn. It's not easy, but if you know what you are doing, there is a ton of money to be made.
The best deals in the MLS are the ones that got passed over then had a price drop then had another price drop and all of a sudden it's priced good but everyone already seen it.
For example here is one of my clients deals. It was originally listed $650k more then 6 months prior then over time dropped to $550k we got it $530k plus close credit. Deal ended up making six figures of equity after a rehab on re-appraisal. https://www.biggerpockets.com/forums/664/topics/574866-who-said-you-can-t-hit-1-on-north-side-well-almost
@Llewelyn A. I appreciate the reply, and this is extremely inspiring for me to read through.
Regarding your comment about analyzing deep into your target property - what are some other metrics you may look at when a property has been on the market for 50+ days? I live in Brooklyn but hoping to start by investing in upstate NY to gain some experience before taking on bigger projects, what are some things I should be looking for or checking off to make sure a property is worth the investment?
Thanks,
Mo
In my opinion, you have to have a lot of GENERAL Business Knowledge. In other words, how to run a business successfully.
Despite the fact that mostly everyone calls these properties INVESTMENT properties, THEY ARE NOT.
What you are buying is a BUSINESS. How do I know it's a Business? Because you normally perform the daily operations of the business and you get BUSINESS deductions such as Depreciation.
Investments like Shares of Stocks do not give you business deductions and you certainly cannot take depreciation on it.
Therefore, the two are different despite the fact these Properties are called Investment Properties!
2nd, you have to know the Market you are investing in VERY intimately.
I know the Brooklyn Market VERY well. So well, that I can go into a property and know that is is advertised incorrectly just by walking around the building.
I also know the rental market extremely well. I know how much each apt can rent and I know each expense.
Not only do I know that, I also can very much PREDICT the rental increases and the Expense increases.
I have a saying, if you can PREDICT it, you can PROFIT from it.
But if you can't predict it, you are shooting blindly in the dark.
One of the things about NYC that I absolutely do is examine the major Real Estate Projects in a target area.
If there are not at least 3 positive developments, for instance, in the Clinton Hill area where I invested in the above example, there were:
1) Barclay's Stadium and a LOT of other planned buildings called Atlantic Yards
2) The rebuilding of the World Trade centers which would have thousands of high paid employees within reach of Clinton Hill
3) The Navy Yard, which expanded with billions of investments, including Steiner Movie Studios and a whole bunch of other businesses
PLUS A LOT MORE.
Then there were the replacement of "poor" stores, like Dollar Stores and others of that nature with Artistic Coffee shops, eventually Starbucks opened.
There are so many clues that help you that it is soooooo surprising how I keep hearing from people that you can't predict the future... and yet it slaps you in the face and they still think you can't predict it.
I try to tell people that even a squirrel understands how to predict the future otherwise he would starve to death by the time the winter comes and he never buried his nuts where he can get to it!
So, be an EXPERT at Business.... after all, you are buying a business.
Know your location of investment to that expert level as well.
Don't keep your eyes closed because you don't want to do the research that will help you predict the future because you feel it's unpredictable.
Imagine you lived in Detroit 20 years ago. You watched the Domestic Automobiles decline for the next 10 years, but you closed your eyes to the fact that Detroit was 90% dependent on Auto.
How could you say that it was unpredictable?!
Remember that Billy Joel song, "Allentown?" That song was written WELL before Detroit went bankrupt but yet it was the same scenario...... the one industry, in this case, the Steel Mill, went away. And so did the value of properties.
So if you are investing in Upstate.... be a Business Expert and know the Industry incredibly well, because there will only be a few industries that upstate will have.
At least that's my opinion!
@Llewelyn A. You make some very great points here Llew, thank you very much for all the advice. I agree with all you mentioned, especially in upstate I will be sure to look for towns with a lot of jobs and potential for big projects developing within a few miles of the property.
Off topic but I would love to get your views on leverage. Since i was born and raised in Brooklyn - I very much know how much many areas have appreciated (good luck finding anything near Barclays for under 1M). How do you undertake in these type of projects? Are you using hard money on these deals and refinancing them once you rehab? On the other hand if you take out loans, what would you say is a safe percent leverage of your total portfolio? Ive watched plenty of videos of many multi family investors who say being about 50% leveraged loan to value is safe, what are your views on this topic?
I plan to use cash on all of my deals upstate, however once I move into bigger projects I would like to understand the best way to start using leverage to my advantage.
Thanks,
Mo
@Mo Farraj
Realtors like to sell within the first 30 days
Your talking investment properties so I am assuming you are talking multi family
There are less investors in the market than owner occupied buyers
So I disagree with her statement
Ask your agent to run a list of Multis that have just sold an see what the ave days on market is
Total newb but I just purchased a home on the market over 200 days. It has a new roof and new hvac, new flooring etc, home inspection revealed nothing major (I.e. just needs new smoke detectors). Bought for $67k, appraiser for $79k and will rent for $800. I think I got a pretty good deal.
@Mo Farraj that is not necessarily true. We have found properties that on the market for 45 days that other have missed seeing potential.
Often if you have something to bring to the table such as construction knowledge, management expertise, or if you know the 10 block radius around the property you may be able to remove some risk that have caused others to pass on the property. If not sold right away your negotiating power is also greatly increased making an overpriced property available at a reasonable price. In the first week a seller may dismiss a low ball offer, after a few weeks they may be very open to a lower price.
@Amber Gonion Great points Amber! Since I have a FT job, I’m hoping to find potential in properties that may sit a bit longer and give me a bit more time to analyze. In the end like you mentioned - it all comes down to math and things other investors may overlook.
@Mo Farraj it is hard to make a blanket statement like that, but I do agree the best deals will sell immediately in a good market. That is because investors (like me and others) watch every new listing and we know to jump quick if it is a great deal.
It may sound difficult to move that fast, but after you analyze enough deals, you start to just "know" what a good deal looks like. As a new investor, take your time and don't be pressured. It is better to take your time and get a mediocre deal than to jump into a bad deal.
@Mo Farraj
it would depend on the market. in raleigh, nice houses do sell in 1 to 3 days, but in other markets houses can sit and still be good deals after a week or more. if you are looking for buy and hold, then you do not need to buy below market value. depending on how the numbers work out, buying at market may still work.
personally, I have bought many houses through agent and MLS that cash flow and have appreciated. some of it is market determined. in my area, it is much more difficult to find deals that make smart on paper.
@Mo Farraj I do agree with what she said. The longer a property sits on the MLS the worse it is for the seller. This can mean that the asking price is to high for the market or any number of things. If this is the case normally I would recommend checking the area for comparable recently sold properties and see where yours differs.
@Mo Farraj
For me, DOM matters somewhat as the longer a property sits, the more motivated a seller may be. With that being said, it really doesn’t matter what the property is listed for as I’m gonna do my own due diligence and make a offer that works for my numbers. Realtors many times will list a property well off what it’s really worth due to several factors (might be new, might not have done accurate research on the market, etc.), so I really don’t pay much attention to list price; I make offers based on what works for me. I don’t always get my offers accepted, but I most definitely won’t overpay for a property. If a property flies off the shelf in 3 days it might have been underpriced, and in instances like that, me personally, I’d advise my client to wait at least 5 days before accepting a offer as you may get several more offers in if the property is getting that much traffic right out the gate.
@Ned Carey
Took the words right out of my mouth lol
We actually target properties once they are 60+ DOM. Typically the Owner/Agent realizes the price is a little too high, neighborhood not just right, house missing that certain thing. They had 1-2 price cuts. Most likely retail buyers cant/wont buy it so its investors. Plus, closed sales from the time they listed start become public. Thats the real ammo, you have data.
@Mo Farraj
I work full time and invest out of state.
The real question is WHY the house is on the market for a long time. There is a reasonable presumption that the more days on market the worse the property/deal is. However, this is not always the case.
I saw a triplex on the MLS that looked solid--though overpriced and had been on the market for 300+ days. Tried on multiple occasions to see it with my realtor but listing agent was awful and the owner was even worse so we could never get a showing. Eventually I talked my realtor into cold-calling the house, met all the tenants who gladly showed us every room in the house, and told us the landlord was in and out of rehab, going through a divorce, and would come asking for rent in cash in the middle of the night. Most importantly, the listing agent later told us that we were the ONLY people of all who inquired who were able to actually see the place in the 300 days on the market. Knowing the seller was likely highly motivated, I was able to get the house for 88k instead of 130k+. Nice house that cash flows like a champ with good tenants. This is likely the exception but illustrates a few points:
-You need to find out why it's been on the market for a long time;
-Some homes on the MLS are listed so poorly that they're doomed from the start;
-Sometimes you have to go the extra distance when others might be deterred;
-keep an open mind when looking at properties that generally meet your criteria but have a bad MLS picture, high days on market, or other "flags", you usually have nothing to lose by digging a little further and you might get lucky where others just see a flag and immediately move on.
I must admit that it does make me pause. However I am interested in finding those diamonds in the rough that everyone else is missing so I view it as a treasure hunt. The house I now live in was on the market for over a year due to the fact that the price was too high, the termite damage, and everything else that was wrong. I bought it for 30,000 off the asking price and then after totally renovating EVERYTHING (wiring, new ac units, piping, sheet rock, etc, etc.) I'm in at 150,000 and it just appraised for 224,000
The longer the property is on the MLS the more room you have to negotiate. No need to rush to get deal as soon as the hit the MLS. Those deals probably will go over asking which draws in emotional buyers not investors.
@andy
@Andy Brown Thank you for your reply, I am very interested in your strategy of house picking since you also have a FT job. Do you do most of your research from MLS posting your agent sends you? Do you cold call or send letters in the mail about buying properties? What has been the most effective strategy for you since you are busy on weekdays?
Thanks,
Mo
I love lazy realtors! Whether they list a property incorrectly, don't know how to fill the forms out, over price it, don't ant to actually measure the actual sq footage, don't understand how investors buy (for properties that don't qualify for a residential loan), skip bed/baths in an illegal unit, don't have enough experience to understand market rents/value ect ect ect.
Lazy realtors are where some of my best buys have come from. It takes so little for someone to get a realtors license and when they don't know anything, they have to fake the owner out who is as usually as clueless as the agent.
@Mo Farraj I find the longer the property has been on the market the more room for negotiations. Had a client put an offer on a property that’s been on the market for over 120day in our area average was 21days we got it for 30% below market. While it can be difficult to find deals on the mls it is possible. Happy Investing!!
Hello Mo,
I haven't replied much in this forum but today I decided was the beginning to do so. I know you are searching for a real estate investment transaction and using the MLS and/or a real estate agent. I'm not sure if I missed anyone's reply as to an exit strategy and your intended use for this investment. Did I miss that this is a buy and hold i.e. becoming a landlord? Is it a buy, fix, flip? Is it a Brrrr? RE investing has many ways to ==> profit!
As all RE investors know on "SFR's", is that you make your profit on the way in not on the way out. Let's say you plan to buy and hold and want to become a landlord...A simple metric is to know the local rental market where this property is located (can also be found on CraigsList). For example, if this is a 3/2 two story detached and the real estate professional tells you that rents in this area for these bread and butter 3/2's (under 1,500 sq. ft.) are $1,400 on avg. per month. A simple REI rule is the 1% or 2% monthly rental vs. the asking price....does this property pass either one of these two metrics, if not, assuming everything else is fine with the home and repairs going in aren't necessary or little, then the price point (maybe) where you walk away shouldn't be higher than $140K ($1400/$140,000 = 1%). However, nothing is preventing you, through your agent, to place a purchase offer for $120K or $130K, especially as the DOM continues to grow.
If you plan to buy and hold and this one particular home is in the targeted RE market that you want to be in or have knowledge of, then move a little closer to getting "and learning" about some basic metrics dependent upon your investment intent. Basic formulas or using the BP calculator(s) I'm sure will be beneficial to you. Are there any Real Estate Investment groups in your area?
I was questioning if I should have replied to your question today in the forum. I'm glad I forced myself to do so.
Good Luck.
Dave