Advice on Finding Deals

[Qusai Tak]

Hey BP,

I’m a new investor based in the Columbus, Ohio area, working toward my first flip, and I’m hoping to get some advice from those of you who’ve already been through this. I’ve been learning a lot lately, but I’ve hit a few walls and could really use some input.

I have my real estate license and have been practicing how to run CMAs and analyze properties. I’ve been looking through MLS listings and trying to spot anything that might have potential, but by the time these deals hit the market, the profit margins are usually razor-thin. So far, Facebook groups have been surprisingly helpful for off-market opportunities and would like to hear how would you approach these listings? 

I tried using PropStream to dig deeper, but most of the data I’m pulling seems to be outdated or already picked over. I'm not sure if I'm using it the best way, or if it's just not that great in my area.

I’m wondering—where are you actually finding good deals these days? Are you using driving for dollars, direct mail, cold calling, or leaning on wholesalers? And more importantly, how do you define a good deal when you see one? I’m still building my own criteria, so I’d love to hear how others in the community evaluate things like ARV, rehab budget, and expected returns.

I’m also trying to figure out the best way to fund my first project. For those of you who’ve been in my shoes, what kind of financing made the most sense starting out? Did you go with hard money, use a private lender, or something more creative?

One idea I’ve been playing with is buying a super cheap house—maybe something around $20K—and trying to rehab it out of pocket. The catch is, that would probably mean looking outside of Columbus proper, which comes with its own set of challenges. I'm just not sure if that’s a smart play or a money pit waiting to happen.

Would love to hear what you think. Any advice, lessons learned, or things you wish you knew before your first flip would mean a lot.

Thanks in advance,

[Melanie P.]

For buy and hold real estate I rank your ideas as follows:

1) Wholesalers - A good wholesaler is out of the contract within a day or two of signing it. They have a stable of regular cash buyers who are willing to buy based on what they say and the photographs and cause minimal headache during the transaction. If you do not have a solid plan to handle the money - do not sully your reputation by reaching out to a bunch of wholesalers and then not being able to perform when one brings you a great deal. They'll never forget it. 

2) Facebook Local REIA Groups - The leads are occasionally worthwhile and you have to act immediately if it is a good deal and you're interested as all your competitors learned about it it around the same time as you. My experience has been that these are less experienced wholesalers who do not yet have their own market for moving everything they write so they move it on Facebook. Their inexperience causes transaction disruptions when paperwork isn't right, seller isn't on the same page, weak relationship with the title company, etc. Far more often, the wholesaler has mispriced the transaction and there isn't any money at the end of the transaction, which is why this "great sounding deal" is popping up in multiple social media channels.

3) Direct Mail - It works if you work it but it's A LOT of work. If the question was how to farm a neighborhood to get listing agreements I'd put direct mail on the top of the list. Acquiring ugly houses if you send 100 good mailers to a fresh list you'll get 0-3 responses. 

4) Driving for Dollars - IMHO, driving for dollars is a waste of time. However, be alert for vacant and blighted properties as you go about life and if you get lucky and catch one, send a letter, FB message, stop by and see if a deal can be done. 

5) Cold Calling - Very low success rate. But as a REALTOR you're probably gonna have to do it at some point. One in 300-600 calls will get you to money one day. Cold calling is a contact sport and you must POUND the phone day in and day out to build and maintain a pipeline.

NETWORKING - Get to know people already doing what you want to be doing in your market. You can find them at your local REIA meetings, Facebook group offlines, industry association events, Chamber of Commerce meetings/breakfasts/etc, Start offering financial/real estate/credit building workshops at your church or other fraternal organization you already participate in,. An important addition to your list I'd put at the top.

FUNDING FIRST PROJECT: I encourage you to lean heavily on the Hard Money Lenders who advertise throgh your local REIAs. They know the market and if they're refusing to lend on a proposed deal it's a strong sign that they do not see the dollars you do at the end of the road. HMLs are typically small shops and you can get on the phone with the owner to ask why the deal didn't pass underwriting and they'll explain to you what you're missing. If they rae concerned about your lack of experience you can offer to allow any of their preferred clients in as a JV to increase their comfort level.

You CANNOT and WILL NOT make any money buying $20k houses and rehabbing them on a budget. When a house is that low it needs SIGNIFICANT work and many of its problems will not be apparent to an amateur investor. Buy the highest quality assets you are able. 

Last, I'll leave you with the same advice I've given many new members here. If you do not own your primary home - take care of that FIRST. You will learn so much about home buying, upgrades and maintenance from your own house where the returns are immediate and you won't have your whole investment portfolio at risk in a single flip. Even experienced flippers lose money on flips. It's part of the business.