The Science of Finding Real Estate Deals

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Finding deals is crucial to success in the life of a real estate investor. I've never met a successful real estate investor who has not made finding deals into a repeatable system. Maybe one can get lucky finding a good deal or two. In bowling, an amateur can luckily strike once or twice but the pro's are the ones who can bowl a strike 5 times in a row or...once in a while, score a perfect game and bowl 12 strikes in a row. The successful real estate investor strikes many times in a row, consistently. Month in and month out, the successful real estate investor finds a good deal.

The key is consistently finding good deals.

How do you find good deals consistently?

Have you boiled it down to a science?

Only science can produce repeatable results.

Donald Trump has his book "Art of the Deal". Art is not repeatable. Science is.

Science can get boring. But boring is good in business.

I learned that from @Brian Burke who has done a lot of fix-n-flips even in an expensive market like north California.

Let me share with you BP Nation, my science of finding deals. My hope is experienced investors will chime in and help give the rest of BP Nation some ideas on how to find good deals. I will be sharing my techniques of finding good deals over several forum posts...even blog posts.

So here we go:

Science of Finding Deals, Post #1: CONCEPT OF THE LEAD PIPELINE

I grew up in a third world country and worse...we were POOR. We didn't have running water in our house. Every time we need water, I have to go out to a nearby pump and crank that thing to get water out and into 2 buckets. As a thin, malnourished kid, it was a lot of work to carry those 2 heavy buckets of water into the house. But I had to do what I had to do.

Most beginning real estate investors view finding deals as getting water into those 2 buckets. It was a lot of work. Every time they need a deal, they have to work hard. That's why getting deals is NOT consistent.

Plumbing and running water is a god-send. Every time you need water, you just turn that knob and out came water. It was easy. It was predictable. It was consistent.

Putting the plumbing throughout the house is a lot work (and in fact, the work is HARDER than getting water into buckets) - in the beginning. But once that work is done, getting water is a heck of a lot easier than getting water by the bucket. It's the same thing in finding good deals in real estate. You need to build a LEAD PIPELINE. In fact, you need several lead PIPELINES. When you do so, getting deals is as easy as turning the knob and out comes DEALS.

What are my lead pipelines?

My biggest and most important lead pipeline is COIN - short for - CENTERS OF INFLUENCE NETWORK. These are people already in real estate, or people who know a lot of people - who can refer you leads. When these influential people think of real estate or they encounter a real estate related problem, they should be thinking of YOU and calling YOU.

An example of a good COIN as a lead pipeline is an EVICTION ATTORNEY. A landlord having evictions is likely a motivated seller. Having an eviction attorney or several eviction attorneys refer you to their clients is a good pipeline because you will get a steady stream of leads from them. (Of course the eviction attorney cannot refer their clients to you - as that will be a violation of attorney-client privilege but the reverse - the eviction attorney passing out your business cards to their clients is totally allowed and legal).

Of course, don't expect for this to work with a single phone call. You have to establish the pipeline. You got to do some work. You got to establish enough credibility with an eviction attorney so the attorney sees you as a legitimate real estate investor and solutions-provider. You got to follow them up.

Let's do the math why working with eviction attorneys makes sense. Let's say a good eviction attorney will have 20 clients. Let's say an average client has 3 houses. That's 60 houses - 60 evictions. What if you get just 1 of those houses? What if you work with 20 eviction attorneys - and each one of them provides you 1 house each in an entire year? That's 20 houses per year - from just one lead pipeline!

What about the more experienced real estate investors out there? What are you lead pipelines?

Account Closed- Good analogies used in post, which are transferrable to the  understanding of the lead pipeline concept outlined.

Yes, as the saying goes....tell people about your REI activities, because you never know if they have a deal in the offering themselves, or know of someone who does.

The bottom line is that people will be inclined to give you leads, because they remember your vigorous self marketing approach to REI which sets you apart from others.

You raised some good points here, Account Closed. Having systems is an important component to a successful REI business. Without systems, I wouldn't have had the good fortune of over 700 real estate acquisitions. But systems must come with a warning label.

I'll illustrate the warning label by utilizing your very own plumbing example. Plumbing allows you to turn on the knob and get water.  But California is in the midst of an extreme multi-year drought. Some people have wells that have run dry and despite the sophistication of the plumbing system they turn the knob and get mud.  If your plumbing has reliably delivered water for many years you've become accustomed to the running water, right? How would you feel if suddenly you got nothing?  Water is necessary for survival so you would start with worry and eventually turn to desperation.

Such is the case in a strong real estate market. Deals are harder to find and the trusty old system can fail to deliver them, or deliver them in such a small quantity that you still go thirsty. So REI is unique. You need a system that is multi-faceted and adjustable to a variety of conditions. You have to employ the right strategy at the right time for your market. Failure to do so will cause you to get thirsty, then desperate which tends to result in getting into deals you shouldn't. Just ask all the folks that were desperate to buy investment property in the RE drought of 2005 how well that worked out for them.

So my advice for RE investors that are struggling to get started, sustain, or grow: you have to look at your plumbing. Re-route some pipes and modernize your fixtures to fine-tune what you are doing until you find what is working NOW in YOUR market.  If nothing works in your market (this does happen from time-to-time) then go to a different market.

What are my lead pipelines?  Foreclosure auctions, online auctions, word-of-mouth, and on the Multifamily side, broker relationships.  The foreclosure pipeline is in a severe drought after years of drinking from a fire hose but is still producing enough water to make some money. Thankfully I bought a lot of rentals I can sell for the next few years during the foreclosure drought so I won't get thirsty nor desperate.  Buying smart is going to be a lot more challenging for the near future.

Wendell, I look forward to your next post in The Science of Finding Deals. Everyone in the game can use all of the ideas we can get to keep up the flow.

@Brian Burke

  Very good post... if one wants a very long career in the RE industry unless they are going to be a sales agent or broker their entire career.. the RE investor will no doubt move from different asset class's as opportunities avail themselves.

Different regions of the country get hot at different times.. WE live in the Jet age one can be on the other side of the country within 6 hours for 350 bucks well in my case I only fly first so that 1200.  LOL...

There are of course some RE companies that have a niche and never left it but they also have some very large scale and staff's etc..

One thing about the bizz though what's great now won't be in 3 to 5 years what was dormant now may germinate in 3 to 5 years..

Governments change the rules and regs  creating opps and taking away opps.. For instance one of my markets in SC  the city is in the process of changing the zoning in the old industrial area to multi use commercial resi  with all sorts of development bonus for Leed  open space,, electric cars  bike paths etc.. transform and entire area.. what has been a waste land last 20 years will now become a new utopia  and the developers smart enough and expeirnced enough  to partake will do very well I predict

And we cannot underestimated the value of networking and gaining a power position in one's field ... once a person or company gets to a certain level ( that they busted their butt to get to ) its amazing how the deals find you...

Originally posted by @Linval T. :

@Wendell De Guzman- Good analogies used in post, which are transferrable to the  understanding of the lead pipeline concept outlined.

Yes, as the saying goes....tell people about your REI activities, because you never know if they have a deal in the offering themselves, or know of someone who does.

The bottom line is that people will be inclined to give you leads, because they remember your vigorous self marketing approach to REI which sets you apart from others.

 Great point Linval.

The key is to be a Center of Influence in real estate. When bankruptcy or eviction attorneys think of a real estate investor, they should be thinking of you - and should be calling you to solve real estate problems for them. Once you achieve that, you will get off-market leads.

Originally posted by @Brian Burke :
So my advice for RE investors that are struggling to get started, sustain, or grow: you have to look at your plumbing. Re-route some pipes and modernize your fixtures to fine-tune what you are doing until you find what is working NOW in YOUR market.  If nothing works in your market (this does happen from time-to-time) then go to a different market.

What are my lead pipelines?  Foreclosure auctions, online auctions, word-of-mouth, and on the Multifamily side, broker relationships.  The foreclosure pipeline is in a severe drought after years of drinking from a fire hose but is still producing enough water to make some money. Thankfully I bought a lot of rentals I can sell for the next few years during the foreclosure drought so I won't get thirsty nor desperate.  Buying smart is going to be a lot more challenging for the near future.

Wendell, I look forward to your next post in The Science of Finding Deals. Everyone in the game can use all of the ideas we can get to keep up the flow.

 As always Brian, your post is so full of wisdom and there's so much to learn from you. This is why I teach my team the need to have MULTIPLE LEAD PIPELINES. If you're over-reliant on one lead pipeline, you'll be struggling if that lead pipeline dries up. I know a real estate investor who was over-reliant on tax foreclosure auctions as his sole lead pipeline. It was good last year. This year though...six months have passed and he has bought only 1 house. Ouch.

Thanks for sharing your lead pipelines.

What about the other smart investors out there? Calling on @Serge S., @Ben Leybovich , @Brandon Turner [email protected] Scott, what are your lead pipelines right now in this market?

Originally posted by @Jay Hinrichs:


  Very good post... if one wants a very long career in the RE industry unless they are going to be a sales agent or broker their entire career.. the RE investor will no doubt move from different asset class's as opportunities avail themselves.

Different regions of the country get hot at different times.. WE live in the Jet age one can be on the other side of the country within 6 hours for 350 bucks well in my case I only fly first so that 1200.  LOL...

There are of course some RE companies that have a niche and never left it but they also have some very large scale and staff's etc..

One thing about the bizz though what's great now won't be in 3 to 5 years what was dormant now may germinate in 3 to 5 years..

Governments change the rules and regs  creating opps and taking away opps.. For instance one of my markets in SC  the city is in the process of changing the zoning in the old industrial area to multi use commercial resi  with all sorts of development bonus for Leed  open space,, electric cars  bike paths etc.. transform and entire area.. what has been a waste land last 20 years will now become a new utopia  and the developers smart enough and expeirnced enough  to partake will do very well I predict

And we cannot underestimated the value of networking and gaining a power position in one's field ... once a person or company gets to a certain level ( that they busted their butt to get to ) its amazing how the deals find you...

 Thanks Jay. I totally agree with you. We need to have multiple lead pipelines. You'll never know what will happen. The government could change the rules. I remembered a time when I used to do a lot of shortsales. It was so easy. Banks became stricter and imposed deed restrictions (now wholesalers can't re-sell a shortsale within 6 months or even 1 year). Good thing I have multiple lead pipelines - otherwise, I would have been out of business. I know a guy who was over-reliant on shortsales - he did a lot in 2005 and 2006. However, his business collapsed in 2007 and 2008 when he got zero shortsale accepted. Ouch.

I agree with you as well on the value of networking. 70% of my deals come from people who know I can close and they forward their leads to me.

Originally posted by Account Closed:
Originally posted by @Brian Burke:
So my advice for RE investors that are struggling to get started, sustain, or grow: you have to look at your plumbing. Re-route some pipes and modernize your fixtures to fine-tune what you are doing until you find what is working NOW in YOUR market.  If nothing works in your market (this does happen from time-to-time) then go to a different market.

What are my lead pipelines?  Foreclosure auctions, online auctions, word-of-mouth, and on the Multifamily side, broker relationships.  The foreclosure pipeline is in a severe drought after years of drinking from a fire hose but is still producing enough water to make some money. Thankfully I bought a lot of rentals I can sell for the next few years during the foreclosure drought so I won't get thirsty nor desperate.  Buying smart is going to be a lot more challenging for the near future.

Wendell, I look forward to your next post in The Science of Finding Deals. Everyone in the game can use all of the ideas we can get to keep up the flow.

 As always Brian, your post is so full of wisdom and there's so much to learn from you. This is why I teach my team the need to have MULTIPLE LEAD PIPELINES. If you're over-reliant on one lead pipeline, you'll be struggling if that lead pipeline dries up. I know a real estate investor who was over-reliant on tax foreclosure auctions as his sole lead pipeline. It was good last year. This year though...six months have passed and he has bought only 1 house. Ouch.

Thanks for sharing your lead pipelines.

What about the other smart investors out there? Calling on @Serge S., @Ben Leybovich, @Brandon Turner [email protected] Scott, what are your lead pipelines right now in this market?

 My pipeline consists of the following:

1. I am open for business in RE if a deal comes along. I am not a believer that a fair market transaction at arm's length is viable in this marketplace. I've always bought when someone needed to get out, and I'll come through again for the right opportunity.

2. I think that RE is frothy enough, at least in the big apartment space I am interested in, that diversification in other asset classes is a good idea now. So, while I am underwriting deals here and there as leads come in, I am focusing on also on development of other revenue streams and start-ups.

Account Closed This is a great thread that I want to say is important for investors of all levels.  One has to create a system and know that you may have to reroute the pipes pending whats happening in the market.  

As a aspiring investor, I know that the pipeline is going to be based on who you know.  RE to me is about making connections with people that are willing to help you and you finding ways to help them.  This is why attending meetups is crucial for noobs like me.

Originally posted by @Ben Leybovich :

What about the other smart investors out there? Calling on @Serge S., @Ben Leybovich, @Brandon Turner [email protected] Scott, what are your lead pipelines right now in this market?

 My pipeline consists of the following:

1. I am open for business in RE if a deal comes along. I am not a believer that a fair market transaction at arm's length is viable in this marketplace. I've always bought when someone needed to get out, and I'll come through again for the right opportunity.

2. I think that RE is frothy enough, at least in the big apartment space I am interested in, that diversification in other asset classes is a good idea now. So, while I am underwriting deals here and there as leads come in, I am focusing on also on development of other revenue streams and start-ups.

Ben, thanks but you did not answer the question. Where do your leads come from? I suppose from your real estate broker network since you're dealing in multi-family? Do you do direct mail?

Originally posted by Account Closed:
Originally posted by @Ben Leybovich:

What about the other smart investors out there? Calling on @Serge S., @Ben Leybovich, @Brandon Turner [email protected] Scott, what are your lead pipelines right now in this market?

 My pipeline consists of the following:

1. I am open for business in RE if a deal comes along. I am not a believer that a fair market transaction at arm's length is viable in this marketplace. I've always bought when someone needed to get out, and I'll come through again for the right opportunity.

2. I think that RE is frothy enough, at least in the big apartment space I am interested in, that diversification in other asset classes is a good idea now. So, while I am underwriting deals here and there as leads come in, I am focusing on also on development of other revenue streams and start-ups.

Ben, thanks but you did not answer the question. Where do your leads come from? I suppose from your real estate broker network since you're dealing in multi-family? Do you do direct mail?

 All but one of my deals in the past 6 years has come in one way or another from word of mouth. When someone has to get something done and want to go with sure thing, they come to me. Always off market. Last time I was able to buy on market was 2007 :)

That's why I do so few deals. That's also why at present time I am choosing to pay attention - yes, but not to focus on looking. My time is better spent elsewhere...like remodeling my house so my wife is happy - BIG score!

Originally posted by @Angel Rosado :

@Wendell De Guzman This is a great thread that I want to say is important for investors of all levels.  One has to create a system and know that you may have to reroute the pipes pending whats happening in the market.  

As a aspiring investor, I know that the pipeline is going to be based on who you know.  RE to me is about making connections with people that are willing to help you and you finding ways to help them.  This is why attending meetups is crucial for noobs like me.

 I agree. However, networking is crucial even for experienced investors like me. The moment you stop networking and learning in this business - thinking you know it all - and you don't need to meet new people...that's the time you'll be in trouble. You cannot have too many people in your rolodex (or in today's language: you cannot have too many contacts in your smart phone). 

I met an experienced real estate investor during the NW Chicagoland BP Meetup. This guy is OLD. He has bought his first deal in 1972 (when I was born!). He has done 4 deals recently with BP members (and he just heard of BP this year). That's the power of networking!

Account Closed

  you young guys crack me up... he is OLD he did his first deal in 1972  LOL>..

Great information. 

But can there be too many pipelines? Or should one work to build as many as possible? I ask that because we hear a lot of advice on BP about being of single aim, about focusing on one thing and learning to master it.  @NasarElarabi had a great podcast and his biggest advice was focus on one thing. 

Can someone comment on the relationship between building many pipelines, but also being of single aim. 

Originally posted by @Ben Leybovich :

 My pipeline consists of the following:

1. I am open for business in RE if a deal comes along. I am not a believer that a fair market transaction at arm's length is viable in this marketplace. I've always bought when someone needed to get out, and I'll come through again for the right opportunity.

2. I think that RE is frothy enough, at least in the big apartment space I am interested in, that diversification in other asset classes is a good idea now. So, while I am underwriting deals here and there as leads come in, I am focusing on also on development of other revenue streams and start-ups.

Ben, thanks but you did not answer the question. Where do your leads come from? I suppose from your real estate broker network since you're dealing in multi-family? Do you do direct mail?

 All but one of my deals in the past 6 years has come in one way or another from word of mouth. When someone has to get something done and want to go with sure thing, they come to me. Always off market. Last time I was able to buy on market was 2007 :)

That's why I do so few deals. That's also why at present time I am choosing to pay attention - yes, but not to focus on looking. My time is better spent elsewhere...like remodeling my house so my wife is happy - BIG score!

Now you get my VOTE...keeping the wife happy AND making money at the same time is COOL!

Brian Burke, Jay Hinrichs, you and me - we're alike. It's funny but word of mouth (I call it COIN - or Centers of Influence Network) is my biggest source of deals too. People come to me with leads. I don't do a lot of direct mail...but unlike you, I still buy off the MLS. On my third post of The Science of Finding Deals, I will reveal how one can compete buying houses on the MLS. Maybe I should post that as a blog. What do you think @Brandon Turner ?

Originally posted by @Devin Scott :

Great information. 

But can there be too many pipelines? Or should one work to build as many as possible? I ask that because we hear a lot of advice on BP about being of single aim, about focusing on one thing and learning to master it.  @NasarElarabi had a great podcast and his biggest advice was focus on one thing. 

Can someone comment on the relationship between building many pipelines, but also being of single aim. 

 Good question Devin.

My single aim is to get as many deals as possible. :-)

I focus on one lead pipeline at a time. Once the lead pipeline gets me deals consistently, I delegate it to someone else to work that pipeline while I focus on developing the next pipeline. By doing this, you will have multiple lead pipelines.

My second posting in this series will focus on that very topic.

Originally posted by @Jay Hinrichs :

@Wendell De Guzman

  you young guys crack me up... he is OLD he did his first deal in 1972  LOL>..

Thanks for calling me a "young guy" Jay. I feel old already with these guys in their twenties trolling around Biggerpockets :-)

Yes  - this old guy I met did his first deal on September 11, 1972 - 10 days after I was born. Which reminds me - he is doing a development deal and he needed $10M. Since you're a developer too, I might call you once I get the info on his latest project so I can get your opinion whether his deal makes sense or if I should stay away.

Account Closed

  would only do a deal that big right here in Oregon.. I have one a 27 home sub that will be about 7 mil and it breaks ground next week..

and yes its the youngsters that keep me going... many of my vendors or clients are younger than my children  LOL...

But this new crop of young and up and coming investors are going to be game changers for sure.. now granted many got into the business in an about can't lose cycle  IE bought at the very bottom and have not experienced a full cycle.. so its all good.

I just hit a lot of singles...

Nice! @Wendell De Guzman   Great answer. That makes sense. 

@Wendell De Guzman   Great new post Wendell!  As you have reiterated multiple times, it is definitely important to use your COIN.  Thanks for sharing and I look forward to the future weekly posts on the science of finding deals.

Hi Wendell,

Yes! A blog or information on how you get a competitive advantage on MLS would be great. Currently I trying to get my leads through getting lists and sending postcard mailers. However, do to limited time, I may have to change my strategy and do more paternerships and jv vs. trying to find the deals. Still trying to figure out what is going to be the best path for me. Thanks for the great posts. Learning a lot.

Amazing information in this post for a young and new investor like myself, seeking that first deal to wholesale or flip through a HML or private lender! Thanks @Wendell De Guzman @Jay Hinrichs @Brian Burke and everyone that has contributed some knowledge to this post thus far!

You're very welcome @Peggy Liu , @Sylvia Pomazak and @Justin Hernandez

Let us know your lead pipelines. Even though you may not have a lot of leads, experienced investors may not have explored what you have you guys have. Let's all help each other get more leads and do more deals by openly sharing our lead pipelines.

Originally posted by Account Closed:

What about the more experienced real estate investors out there? What are you lead pipelines?

 Our lead pipelines are:  

  • MLS (Yes we still use the MLS for leads)
  • Network of Property Finders (We pay for leads)  
  • Network w/ other realtors/brokers sharing pocket & off market deals
  • Wholesalers (I think we're on everyone's list)
  • Preservation company relationship- The relationship sometimes gives us an inside track
  • Drive By- Don't do this very much any more but it's in the DNA to always be on the look out
Originally posted by @Crystal Smith :
Originally posted by @Wendell De Guzman:

What about the more experienced real estate investors out there? What are you lead pipelines?

 Our lead pipelines are:  

  • MLS (Yes we still use the MLS for leads)
  • Network of Property Finders (We pay for leads)  
  • Network w/ other realtors/brokers sharing pocket & off market deals
  • Wholesalers (I think we're on everyone's list)
  • Preservation company relationship- The relationship sometimes gives us an inside track
  • Drive By- Don't do this very much any more but it's in the DNA to always be on the look out

 Awesome! Thanks for sharing your lead pipelines.

We have similar lead pipelines - we still buy off the MLS, brokers email us pocket listings and we're also on every wholesalers' buyers list too. I am choosy of these wholesale deals though. So far, I bought only one house from a wholesaler this year. I want to buy more but most of the deals just don't make sense.

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