In case you have not noticed, the housing market is back. Latest reports show that housing prices have recovered many of the losses suffered in 2008. Our local REIA group has had more and more first time visitors lately wanting to get into real estate, and more and more folks, knowing my background, are asking me how to get into real estate.
Yes, real estate is hot again. It is not quite at the levels that I remember in 2005/2006, but it is getting there. So if you want to get in on this before the bubble bursts again — and it will bust again — you should be acting now.
However, because real estate is heating up and the money is flowing again, there are more and more people chasing the deals. There are still plenty of deals out there, as they come and go all the time. But I am hearing that it is getting harder and harder to find deals.
When a market heats up, smarter investors have to begin to change their strategy a bit. The low hanging fruit is scooped up quickly or simply dries up. The easy and comfortable methods of acquiring deals may not work for you anymore. Deals are now picked up by someone else, and you might not even hear about them until afterwards. Suddenly you are left asking yourself, “Why am I not getting those deals?” Here are some thoughts.
7 Reasons You’re Not Landing Deals Like You Used To
You are not making enough offers.
When a market heats up, you have to be a bit more prolific in making offers. It’s simple: If you are not making offers, how will you get a deal? And with more people chasing deals, you have to make more offers. You are just going to have to work harder and analyze more potential deals.
You are not networking enough.
Some of the best deals are found through word of mouth. You have to have your name out there as to what you are looking for and where you are looking to do it. People will bring you deals, and often these can be the best ones, as no one else may know about them.
You are looking where everyone else is.
Guess what? Everyone is looking on the MLS for deals. Especially the uninformed who pay way too much for something because they just have to have a “deal.” I’m not saying never look at the MLS, but you have to look in other places as well. You have to find deals that no one else knows about. Perhaps driving for dollars, a probate search or a marketing campaign is what is needed.
Your rehab estimates are too high.
If your rehab estimates are too high, you will likely get outbid and lose the deal every time. Why might your rehab estimates be too high? Perhaps you are being charged too much by your contractors. Perhaps you are over-rehabbing. Perhaps your competition can simply do it cheaper. Whatever the reason, it is a good idea to take a look at your rehab costs and always be working to keep those costs down.
Your resale or rent estimates are too low.
In a market that is heating up, price can sometimes be difficult to determine. What will the after-rehab sales price be? What can I get for rents, and what will my cash flow be? Investors are always trying to push these numbers higher, and some are successful. Perhaps you are being too conservative.
You are not moving fast enough.
The old adage rings true — the early bird does get the worm, especially in a hot market. Hot markets mean that there are many, many people chasing the same things. Thus, if a deal comes along, you have to move fast in order to get it. Do you have your funding in place? Can you quickly do a rehab estimate? Do you know what rents or resale value will be? All of these pieces have to be put in place quickly and with precision if you want to succeed in a hot market.
You may not have the right vision.
Sometimes the simple “buy it, fix it, flip it” strategy does not work so well anymore, and you have to change your vision or outlook a bit. Perhaps it now makes sense to add a bedroom or a bathroom or both? Perhaps you should try adding extensive square footage or maybe converting that duplex into a single family home. When many people are chasing the “buy it, fix it, flip it” model, perhaps you should change to “buy it, fix it, add to it, sell it” model.
Eventually, the real estate market will overheat, and smarter investors will again move to the sidelines, like I did in 2007 and 2008 to wait for the bust. When will that happen? Who knows. For now, though, times are still generally good. But with more and more people chasing the deals, you may need to rethink things a bit to stay ahead of the pack.
What are you seeing in your market? Are more people chasing the deals?
Let us know with your comments!