Looking for a Good Real Estate Deal? It’s a Numbers Game

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Real Estate Deal Numbers GameSon, get a business degree.  That’s what my Dad told me to do.  You can’t go wrong he explained.  Any occupation you choose will require some basic knowledge of business.  So did I take his advice?  Of course not.  I was 18 years old.  How many high school seniors do you know that actually listen to their parents?

Instead I decided to major in Political Science.  Now I didn’t do this because I wanted to become a politician or attorney.  I decided to get a Bachelor of Arts degree in Political Science primarily because I didn’t have to do any math to graduate.  All it took to earn my degree was a passing grade in Intermediate Algebra.

That’s a pretty dumb way to select a college major.  But I was going to be a TV news guy.  How much math did I really need for that?

It turns out that the liberal arts program at Arizona State University has a sense of humor.  They cleverly named one of my required courses Political Statistics.  I’m certain there were many unsuspecting undergraduates like me who saw this name and thought its statistics, not math.  How bad could it be? 

The answer is really bad.  What they should have called this class is Inverted Equations and Twisted Algorithms for Political Pollsters.  It would have been easier for me to earn a passing grade in calculus.  I understood about every third word that came out of the professor’s mouth. 

However, this numbers geek did share one interesting factoid that I still remember. He boldly proclaimed that 80% of all statistics are made up.  It was silly math professor humor.  Yet it’s hard for me to read any poll or survey and not think about what my instructor jokingly told us that day.

I was forced to overcome my aversion to math when I started my real estate investing career back in 2001.  Believe it or not, it wasn’t hard to do.  I suppose that’s because the numbers I was dealing with had dollar signs in front of them.  It made it a lot more fun.  But never in my wildest dreams did I think I would find a practical application for the statistics stuff I learned during my junior year in college.

My company has bid on 208 houses at trustee’s sales here in Arizona since the start of this year.  We’ve won 8.  That means we have to bid on 26 houses to win 1.  In the past 12 months we’ve written offers on about 40 houses and have had 4 accepted.  That’s 1 out of 10.

failed real estate bidsThese statistics prove that finding a good deal in real estate is a numbers game.  If you plan to make a business out of fixing and flipping then be prepared to place a lot of bids and make a lot of offers.  You’ll also want to get used to hearing words like NO, REJECTED, DENIED and OUTBID.  Don’t get discouraged.  Just last week we were outbid by $60,000 on one property.  The next day we picked up a house for $1 over the opening bid.

So if 80% of all statistics are made up that means 20% are true.  I swear to you that my data is correct.  Hopefully you’ll find it valuable.  It could be in your market that the good deals come around a little more often.  There’s only one way to find out.

About Author

Marty (G+) is the Chief Financial Officer for Rising Sun Capital Group, LLC, a real estate investment firm based in Gilbert, AZ. His firm purchases homes at the courthouse steps and public REO auctions. They have two exit strategies, either fix and flip or seller financing.

8 Comments

  1. I agree with you that numbers are definitely a little more interesting when that big $ is in front of them. The $ sign makes them instantly more interesting and important…funny how that works out huh? =]

  2. This is so true, it really is just a numbers game. Personally, I am annoyed by some who try to invest in real estate that say there are just too few good deals out there but when I ask them how many properties they have looked at, they often say less than 5. Crazy right?

    Here in the Philippines, the average is you will find a good deal or two in every 100 properties. Sounds daunting but I would rather analyze a hundred properties than be stuck in a job for the rest of my life.

    • Jay, I’ve found that most people don’t want to put in the time to develop their business. It’s all about instant gratification. If they can’t get paid immediately for their efforts they give up. It takes an entrepreneurial spirit to succeed in any business and not too many people have it.

  3. I agree that most want instant riches or instant gratification which is why they fail because they give up when they find out the trust, which is it takes lots of hard work and determination to succeed.

    That said, everyone should keep in mind that the numbers game in RE is only one strategey for acquisitions. Another is developing relationships with those who can deliver product direct. I have deals sent to me and I either accept them or pass on them. I don’t have to play the numbers game making 10 or 20 offers to get one accepted. I’m not saying my way is right and the other is wrong, but I am pointing out that investors have options and those willing to explore them and work hard at developing this strategy can reap the rewards.

    • Makes perfect sense Will, a broker remembered me from a business card I gave her when we met during a tax foreclosure sale several months back. She then referred to me a foreclosed property which I later purchased. It was by far one of the easiest moments in my real estate investing career, no need to analyze several dozen properties. Relationships are also important, if not even more important than doing the numbers.

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