What criteria for deals from Agents

Question

Hello All!

I am starting my BRRRR Strategy journey. I am wondering what criteria you have your agents send you when looking at deals.

Purchase Price

Comps

Rental comps

I am looking at out of state so I guess the more info the better but I do not want to be rude and ask for too much.

Joseph Cacciapaglia · Answer

I figured we just run very different businesses. I rarely do off market deals, so most of my time is spent finding value on the MLS (not always an easy task). Now that I understand how your business is set up, it makes a lot more sense why you operate the way you do. I will occasionally set up auto searches to help educate clients on the market as well. It's just not the way my clients are actually finding deals, and it sounds like that's the case for you too.

Samuel Liapis · Answer

@Joseph Cacciapaglia

I'm definitely not skilled enough at this point to estimate Rehab costs but my contractors try to estimate through pictures.

Joseph Cacciapaglia · Answer

Purchase Price - I can usually provide some insight, but there is no telling exactly what we'll negotiate. Recent deals I've done have gone anywhere from several thousand under the list price to several thousand over. I can give the asking price and my expectations based on where the market is. My clients are getting good deals because they're willing to make a lot of offers. It's the only way to actually know what a seller will accept.

ARV - I'll usually provide a variety of comps, and it's up to the client to select the properties that best match the level of finishes that they plan to execute. Once I've worked with a client for a while, it's easier to give a tighter range, because I know what their projects will end up like. There is no one "ARV" for a property. It depends entirely on the quality and level of the renovation that you perform.

Renovation Estimates - This is up to the investor and their contractor to establish. I know the rules on this vary, but in TX, agents aren't supposed to provide any sort of construction/rehab estimates, unless they're also licensed contractors. I think that learning to make accurate construction estimates is the #1 skill that defines successful BRRRR investors and flippers. You shouldn't be relying on an agent's estimates.

Rent Comps - I provide these in a similar manner to the ARV. I'll provide a range of rental comps, and selecting which most closely match the client's plans is up to them.

In my market, deals are moving too fast to wait for real quotes from contractors prior to making offers. Any decently priced rehab deal will be sold within a 1-2 days of hitting the market. My clients that are successfully making deals today are making offers based on their own estimates, and then using the due diligence period to bring in their contractors. We have a true option period here in TX though, and this method of operating wouldn't work in every market.

Jonathan Greene · Answer

@Joseph Cacciapaglia that auto-email is expressly for the intent of them learning the market in advance instead of focusing on one shiny object that will get 23 bids. My experience has been that the time spent sending comps to prove or disprove a property that a new investor thinks they like is just not time well spent on my end. I have an entire off-market business and those properties are direct-targeted for each investor, but on the market MLS searches are a pre-learning tool so that my time isn't wasted reviewing why a multi that will get 22 bids can't receive a lowball offer. :)

Samuel Liapis · Answer

@Joseph Cacciapaglia

I am thinking about this more from an investors perspective haha. I should have mentioned this. Like in order for me to analyze a property that I may want to buy what kind of criteria should I be asking for. What do your clients ask for?

To make an informed decision on if I even want to purchase I need:

Purchase Price

Estimated ARV

Rehab costs (from contractor usually through pictures)

Estimated rent income after repair.

If these numbers match then I will tour the property with my contractor and determine a better estimate for the repairs. If everything is ok after that I will normally put it under contract and schedule an inspector.

Is that too much to ask for from a real estate agent upfront?

The agent is on my team. Part of my core four.

Joseph Cacciapaglia · Answer

Well, it's not common that I completely disagree with @Jonathan Greene, but I guess we operate a lot differently. I send comps for properties all the time before showing properties. It saves a bunch of time from going to look at deals that will never work. I also video tour properties for out of state clients, so they don't need someone around for showings before I'll do that for them. Most of my out of state clients never even come to town until inspection day, if at all. However, I do ask them to provide proof of funds or a pre-approval before I'll do those things for them.

I also think clients should expect more than an auto search. I typically pick out properties on a daily basis and send them to my investor list. I have the investor criteria sorted, so they're only getting deals that fit their general criteria. Why waste a bunch of clients' time reviewing everything that hits the market, when I can do it once, and then only send deals to the people that they might actually work for? Some of my clients prefer the auto search, because they want to see everything that pops up, but for most of them, they'd rather only look at deals that are a good fit for their budget, strategy, and general investment criteria. The only downside to this approach is that if their criteria are too narrow, they might only get a deal or two sent their way each month.

Lien Vuong · Answer

Can you advise on what city and state the property you're searching for is?

Ari S. · Answer

I think you would be wanting to aim for a 6-8% yield on cost. that would be a good indicator.you can also look at IRR on the project level, so it depends on the area. if you're in A location, then 10-15% IRR would be great (include a safety buffer), B locations should be at 15-20% IRR, and 20-25% for C locations. btw, do you think it's a good idea to get a credit line based on your rental income from another property? for example, if you get $10k/mo from a property in total, then you can borrow up to $120k against your account receivables

Jonathan Greene · Answer

You want them to set up a daily auto-email for you that has the type of property (SF or MF of COM), the price range, and the towns you are interested in so that you see all new listings or back on market options. Do not ask for comps of any kind until you are ready to have someone see the property for you and then they confirm it is an option. No realtor is going to send you comps, out-of-state as a first-time investor, if you don't have a plan for seeing the properties of a Proof of Funds on file. At least, I wouldn't even consider it. Are you buying cash? Do you have boots on the ground to view properties?

What criteria for deals from Agents

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