Your screening routine

5 Replies

I’ve been analyzing my market for quite some time now and I was thinking it would be interesting if BP members shared their investment screening routine (i.e. not the criteria of analysis, but the platforms and strategies), more specifically:

  • What is your day-to-day routine to screen your RE market in search of potential investments? (e.g.: looking through MLS, contacting certain people, sending direct mails, etc.)
  • What % does screening the MLS (+other websites such as Zillow, etc.) represent compared to other strategies you may use to find deals (such as direct marketing, etc.), both in terms of # of analyzed properties and # of purchased properties?
  • When performing a quick preliminary screening on those websites (i.e. to exclude obvious bad deals), do you usually use the 50% rule (or similar % rule) to estimate expenses? I would assume it would be too time consuming to try to assess more specifically the operating expenses of each particular house?
  • In relation to my previous question, why do most sites and books recommend estimating certain expenses as a % of rent? It doesn’t seem very intuitive to me. I mean, the replacement cost of a window, or painting a room has little to do with how much rent I expect to get from the property. I would believe it would make more sense to estimate certain costs relative to sqft2 for example (bigger house = more windows and more walls to paint for example). Do you guys use such type of estimate?
Thanks!

@Nilokas Kane most of my "deal funnel" is doelne through automatic notifications and emails. I'm on a couple of wholesaler mailing lists so the know what area I'm looking at and send me properties that fit. I also have a realtor that has me on a few searches and I'll get emails from him as new properties hit the market. As far as analysis, I use the 1% rule as a quick scan. If it doesn't meet 1%, it wont cash flow for me. When it comes to reserves, I dont use percentages for capex, I use real dollars, based on the age and life expectancy of large items (roof, hvac, water heater, and a buffer for other items).
Originally posted by @Jason D. :
@Nilokas Kane most of my "deal funnel" is doelne through automatic notifications and emails. I'm on a couple of wholesaler mailing lists so the know what area I'm looking at and send me properties that fit. I also have a realtor that has me on a few searches and I'll get emails from him as new properties hit the market. As far as analysis, I use the 1% rule as a quick scan. If it doesn't meet 1%, it wont cash flow for me. When it comes to reserves, I dont use percentages for capex, I use real dollars, based on the age and life expectancy of large items (roof, hvac, water heater, and a buffer for other items).

 

Thanks for your feedback, much appreciated. The 1% rule makes sense as a preliminary screening tool.

For your sourcing, does it mean you came to the point where you don't look at the MLS / other websites (Zillow, Trulia..) anymore at all? Do you still use them for other purpose though? (rent estimate, comps, market dynamics, statistics, etc)

For capex estimate, it make sense too, but I believe you're only able to do that at a later stage of the process? (You don't have access to this kind of info at first). So in terms of process, do you jump directly to asking specific questions (such as to estimate capex, etc) when a property passes your 1% test? or do you use other tools / criteria to further filter the results?

Thanks again

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