How Long To Find Your First Deal?
I am currently feeling pretty discouraged. I feel like I have a strong strategy set (one 2-4 plex per year as buy and holds plus a few vacation rental cabins in a nearby town for stronger cashflow) but after looking for almost a year on the MLS, Loopnet and various auction sites I am starting to not believe these deals are out there. I'm halfway through Brandon Turner's "Book On Rental Property Investing" and the examples in there really have me scratching my head.
I will admit I am a bit skittish, at least for my first couple of deals, at buying in a different market. Here (Columbus, OH) I'd say the average for a 4-plex one could get $600 per unit per month for is $400,000-$500,000 in any decent neighborhood. So, additionally, who is buying these properties?! How is anyone making these numbers work?
How long did you hunt for your first deal? I really just want to get the first deal done. I know I'll learn a ton and subsequent deals will go better. I think I could even stretch a little bit on the 1% rule or any other viable metric but I can't go that far.
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When I made the commitment to start buying rentals, I didn't wait very long to buy my first one. Maybe a couple months. My first property was off MLS, a single family 4/3 home in a A-B neighborhood. In all honesty, it was not a great deal. I paid $230k and rent it for $2k, conventional loan. I did get it for about 15% under market value. It was a newer house, I've had to make very few repairs, and the tenants have been great. I bought it 4 years ago, and it's never been vacant. It cash flows $200 - $300 every month (a little more with no repairs), and it's appreciated to around $300k. Throw in depreciation and writing off mortgage interest, and it (sorta) worked out. I would still consider this a bad deal on paper, but.....
In retrospect, that was the most important property I bought because it got me a seat at the table. I hired a property manager (that is now a friend and partner), made relationships with contractors, agents, other investors, real estate attorneys, etc. etc. I bought a couple more properties off MLS after that first one, but since then all my deals (including a duplex I got under contract today) have been off market because I know the right people...
You need to get started, and that in-turn will get you involved with the people you need to know. I'm not saying to go out and make a bad deal, but if you wait for a sure fire home run (which you likely won't find on MLS, btw) you're going to get paralysis by analysis and never get going.