Im new to real estate investing and even newer to Bigger pockets. Im pretty gun-shy on making my first offer on a multi-family based on some bad decisions in the past and I'm looking for any advise or opinions people want to share. My question is this; knowing that there are so many investors on here and in general using the calculators and strategies from this and other forms, what is usually the most common reason a property would still be available when it looks like it would cash flow? Im primarily looking at multi-family out of state as I live in Southern california. Its probably harder for me to grasp the idea of a duplex being a bad investment at $35k but I realize location and other factors will make this type of property a no go no matter what the price. For instance Brandon Turner did an amazing webinar the other day and live analyzed a deal in corpus christi texas that seemed to be a "BUY". It was the first one he chose and it seemed to exceed the loose initial analysis. Im not doubting the analysis or validity or anything like that, im just wondering what im missing. I feel like in this market at this time with the amount of people analyzing deals all day long, that property had to have been analyzed by someone before that. So in a scenario like that; why was that property even available? Or maybe a better question is what did the other people see that I might miss that turned that deal into a bad deal? I constantly hear that its almost impossible to find a good deal today, so why would there be deals (not just that one) that seem to pencil out that are still that easy to find? Any thoughts or opinions are welcome on this.
The main reason is local, experienced investors know true rehab costs and the area. It is easy to say "oh rehab will be 15k" but unless you really know for sure how much you can get for your money in an area, you are partially blind. In addition, you can't truly get a feel for the neighborhood and area online. Google images can only get you so far and listing pictures are going to be shot from good angles and other tricks to make it look better without actually misrepresenting. Maybe no property management company will handle that particular one, maybe it has a problem with bugs, maybe there is major foundation work. Brokers who list these types of deals know how to make them look attractive without technically lying. There are people in Texas whose sole business plan is to market to people in California because the huge price difference.
Beware of Brandon. He caters more for entertainment value.
Due to Brandon's high level position he cannot ever say RE is fully valued. Meaning you be Nuts to buy now.
Before you buy a 🐔 or Turkey from a Memphis TKCompany ask yourself why hasn't a Mephissonian bought your deal.
I was looking at some properties in Fort Worth Texas a while back that I couldn't believe were on market without getting gobbled up.
Then when we went by and looked at them, I don't think I would want any of the neighbors as my tenant. I don't know if I could get my rent from them, and I don't know if a property management company would want to deal with them.
So in that case, if you want to live in that part of town, it is a great deal. If you want to buy it and put some tenants in there with the understanding that IF they pay you rent, that will be great. If they don't and you try to get the rent, you might have some serious trouble.
Also as was mentioned, if you don't know what the tax rates are or are going to be, there can be problems there.
If you are interested in them, I would highly recommend that you book a flight and go look at 10-20 properties in different areas. The money will be well spent for a new investor.
If you are an old pro then you just buy stuff of the MLS and don't worry about it because you have deeper pockets and if the deal doesn't fly, it doesn't matter.
I like to take a look at the area before committing. There are some things you can only appreciate by going there.
I am reading a book about Benjamin Franklin. One of the biggest problems between the Colonies and England is that the people in England making decisions about the Colonies had never been to the Colonies and didn't REALLY know anything about it. England had a pretty big loss on that investment.) :)
@Jeremy Taylor I think you are looking at it wrong. You create a investment criteria for YOU, I create criteria for me, and so on and so on.
Everyone has different criteria so what works for me may not work for you, and vice versa. You mentioned a $35k duplex so let’s use it as an example. Maybe it’s in a terrible neighborhood and maybe it has tons of deferred maintenance. Well if my criteria says I only buy in upscale, Class A type neighborhoods it’s going to be a hard pass. If Joe had a contracting company and he can do the deferred maintenance at cost, plus plans to house-hack for two years, then it could be a buy for him.
Also consider some people have a much better use for a property which allows them to generate more income off the property, and therefore pay more for it.
Then some people overpay because they don’t know what they are doing and likely spending money other than their own. Have you noticed any properties that sit on the market for a year, then finally one person makes an offer and 3 other buyers come out the woodwork? These 3 have FOMO all of a sudden because they think they must have missed something.
The thing to do is just learn how to evaluate properties based on your own criteria and not worry too much about what everyone else is doing.
@Damon Pendleton Awesome reply. I am a new investor as well and been analyzing deals for a couple of weeks now.
All answers here are very informative and really appreciate the time seasoned investors take out to reply to newbies like us. You are superstars!