6 Steps to Finding Amazing Deals — Even When They’re Scarce

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Are you still struggling to find good deals in your market? What are you waiting for? I hear it all the time: “My market is so overpriced; there are no deals.” “I looked for a deal, but the numbers do not work.” “I am trying to find a deal with no money down and cannot find one.” “All the properties I look at need work.” “My real estate agent can’t find me good deals.” “The ‘Bay area’ has no deals.”

Are There Really Deals Out There?

There are LOTS of deals, everywhere. There are not as many deals as there were, or perhaps will be, but there are deals. When I was starting to look for additional properties, I made some crucial decisions that became a huge success for me. My original plan was to buy properties, even though they did not cash flow, and hope for the best. After all, the market was going up fast, and how could I lose?

No matter where you are, there are divorces, deaths, foreclosures, landlords who do not have a clue and get their rental trashed, people who do not maintain properties, properties that are not eligible for conventional financing, etc. Odds are, some investors are making a killing right in your backyard. That could be you.

Here are some of the steps I went though. They do not have to be done in order — and can be performed simultaneously.

6 Steps to Finding Amazing Deals — Even When They’re Scarce

Get Educated

I got an education. I am not talking about college or trade school. I went to as many free seminars and webinars as I could. I even paid for some. I must have attended at least two or three a month. Some were multiple day events. Of course, there was a sales pitch at the end, but there were always tidbits of advice that I gathered. Most often, there was a common theme between all of the venues.

Related: Why More Seller Education Will Help You Land Deals at the Price You Want

I ordered several courses and kits from the “Masters,” and some of them were very pricy. I never ordered any that were non-returnable and always charged them on my credit card. After I received the course, I studied it. I went through the materials. I took notes and made sure I got the underlying thoughts. I was too busy, afraid, or not ready to put the plans into action, so I then returned the product and got my money back. After all, what good is a course if I cannot use it immediately, or if it was not my “style” of investing?

If you do not have the time to devote to learning as much as you can, stay out of real estate investing.

deals

Analyze Deals

I analyzed several deals every day. I went to the local version of the MLS and other sites, such as Loopnet, and took the numbers down. After all, from the courses I already took and my internet research, I knew how to calculate ROI, cap rate, rent multipliers, expense ratios, etc. I knew to account for vacancy, management, maintenance and other expenses that are often conveniently left out of the seller’s equation. I requested more information on properties if it was available.

When you are analyzing properties, no building is too small or too large. You are just practicing the numbers game. Create your own spreadsheet that makes it easy for you. Run the numbers forward, backward and sideways. Figure out a price that you would pay. It may be a 500-unit apartment building, and you may only have $10 to your name, but determine a price and run the numbers. Often you will see the price over inflated, but sometimes you will see a deal.

If you do not have the time to devote to analyzing practice deals, stay out of real estate investing.

Understand the Foreclosure Process

The best deals will be foreclosures and other distressed properties, no ifs, ands or buts. Make sure you know inside and out what happens in a foreclosure. Know what a sheriff’s sale is, how to participate in it, how long the redemption period is, how to redeem a property, how to pay for bank auction deals, how lien seniority works, how to put a lien on a property, how to get a lien off a property, how to buy a lien, how to redeem a lien, how liens get extinguished, etc.

The process of learning foreclosures is not just to educate yourself. It is to help you develop a strategy that 99% of other investors either cannot or will not be able to understand. Some smaller title companies may not even understand the strategy, but a solid real estate attorney will.

Understand where distressed properties are listed and found. It is likely not the MLS, but more likely on a real estate investment club email list, public notices, websites that specialize in foreclosures, etc. Look for distressed properties. Look for properties that indicate a lack of maintenance. Please stay out of the obituary section of the newspaper.

I created a simple hour-long presentation about foreclosures that I would give to people in foreclosure. I gave a couple of presentations a week, all free. While I did not actually get any deals from it, it helped me understand the process in great detail. I knew more about foreclosures than 99.99% of realtors. I sent out 100 letters a week, all first class postage, and received a 1-2% hit rate. There are other ways to create leads, but that is the way I did it.

If you do not have the time to devote to understanding the foreclosure process, stay out of real estate investing.

Do Not Expect a Handout

If you think any real estate agent is going to give you a deal where you can make a quick $50K, you are dreaming. If you think you are going to go to the MLS, buy a property and flip it without any work, you are delusional. If you think that you are going to buy a property on the MLS and rent it out by the closing date and make a great return, you must be on drugs.

There are no free rides in this game. Unless you have a plan for a property that is unusual, many other real estate agents have probably already looked at the property you just found on the MLS. The real estate agent could not make money on it, so they passed. The other agents in that agent’s office could not make money on it, so they passed. All those real estate agents called all the investors that they knew, and those investors could not make money on it, so they passed. Many other investors also ran the numbers from the information on the MLS, so they passed. And somehow you think you will buy the property from the MLS listing and make money?

Prior to the property even getting into an agent’s hands, and on the MLS, no investor scooped it up; understand that was the time for maximum profit. That was the deal you missed out on.

Every property can be a deal — if it is at the right price. You need to determine what that price is and get the property for that price. For maximum profit, you should expect to purchase downtrodden property cheap, fix it up, and either rent it or sell it.

If you are expecting to make millions without hard work, stay out of real estate investing.

Make Offers

After you have analyzed 100+ deals, you will start to see patterns. Some are deals, some are not. Find a property in your price range and a solid real estate agent if you need one, and make an offer. Your offer should be based on your numbers, not the seller’s. You are there to make yourself money, not the seller. If the offer gets accepted, be prepared to follow through.

All offers should have a “get out of jail free” card. The offer needs to be contingent on an inspection, HOA document review, financing, etc. unless you have a 100% solid deal. If you are 100% sure it’s a solid deal, drop any contingencies and just buy it. Nothing greases the skids more than a cash offer, no contingencies.

Do not expect to make a low-ball offer and get it accepted on a property that just hit the market that same day. Even if it is over-priced, most sellers, including a bank, will wait at least two weeks between price changes. After a month, all bets are off. Make the offers. Remember, once the property hits the MLS, you have already missed the prime investment opportunity.

One of my first deals was listed on the MLS at $385K. It was a property that originally sold for $430K a few years prior. I explained to my real estate agent that I was having a hard time finding a number with a “3”  in front of it to make the offer. She said, “Then offer $300K,” so I did.

Related: The Stupid-Simple Truth on How to Buy More Real Estate Deals

The place sold for $380K. It did not cost me anything but time, but I learned a bit and overcame the fear of submitting an offer.

If you do not have the time to look at properties and make offers, stay out of real estate investing.

make-offer

Do Not Be Afraid

If you analyzed the numbers and they work for you, make the offer and buy the property. Do not chicken out and get buyer’s remorse while you are waiting for financing. My first 4-plex needed $80K down and about ~$50K in improvements before I could get it rented. It was vacant. It had frozen water pipes that were split and had icicles hanging from them. All the water heaters were frozen. When I looked at it the first time, it was -20 degrees outside, and it was also -20 degrees inside the building. There was no heat, and the property was not winterized.

The mortgage added a $1,700+ a month payment to my expenses. That payment was more than my own house payment. Every day the place was vacant, it cost me ~$75 a day, not including fix up expenses.

I had an advantage — I knew my numbers would work; I just put in the effort to get it rented.

If you do not have the guts to look follow through on a property that works, stay out of real estate investing.

So there you have it.  That’s how you get started in real estate investing.  There are no free rides in life, or real estate, so do not expect any.

What have you been doing to jump start your real estate investments? Have you been doing anything that I just mentioned?

Leave a comment, and let’s chat!

About Author

Eric D.

Eric is a 55 year old, soon to be former, computer professional. He started several years ago to replace his “work income”, with other alternate streams. He is well on his way to retirement at age 56, and is currently making more money at extracurricular activities, than he is working at his full time job. Whether that is Financially Independent, or just old fashioned entrepreneurial spirit, is in the eyes of the beholder.

31 Comments

  1. Jen Shrock

    Great article @Eric D. I just kept nodding as I read from point to point.

    Reading other posts on this site makes me nod all the more at the newbies that just just expect success to fall in their lap because they want it, not because they have worked for it. While I am new and working toward my first investment, I am in education mode while I work on the funding side of things.

    I also agree with the tip on running “practice” numbers. I have done this some and need to make it more of a daily habit.

    I also liked how you framed the niche you carved out for yourself with forclosures and for expressing the sheer volume of education needed just for that one niche. Did you, by chance, have any of your presentations video taped? Something like that could be an invaluable resource to those in learning mode, such as myself, to give a basic overview and direction to look for more in depth education. Sometimes the complexity of forclosures makes it hard to wrap ones head around how to think about them and how to approach learning about them. Any suggestions or guidance would be greatly appreciated.

    • Joseph Nguyen

      Hi, I am also in my education phase and have read & study BP’s “Ultimate Beginner’s Guide to REI”, Brandon’s “No or Low money down”, and Ben Leybovich’s “13 Steps to Valuing your First Multiplex”. I was wondering if you could give us a list of the books / materials you found most helpful/useful in the beginning. Thank you in advance.

    • Eric D.

      Thank you for reading!

      I do not have a presentation video taped. It all takes time, and effort. No one makes a quick $50K without work, or a tremendous amount of risk.

      Foreclosures are relatively easy, once you understand the law. Read the law in your area, and read it again. Then one more time. After a while, it sinks in.

  2. Bud Reynolds

    Eric,
    Thanks for the article. One question – running the numbers to determine the maximum price you would pay for an investment will, in many circumstances, require at least a rough estimate of rehab expenses. Without going in the properties (or obtaining bids), how would you run the numbers?

    • Eric D.

      I typically went in properties, although I did buy one sight-unseen that was later redeemed.

      If you cannot go into the property, you better make sure you have a good idea that you are buying at a great discount. It is not a crime to go to the home and knock on the door. Even if all you get is the door opened, or a peek through a window, it will tell you a lot.

      Most often, what you can see from a drive by, tells you quite a bit too.

  3. Brandon Foken

    “I ordered several courses and kits from the “Masters,” and some of them were very pricy [sic]. I never ordered any that were non-returnable and always charged them on my credit card. After I received the course, I studied it. I went through the materials. I took notes and made sure I got the underlying thoughts. I was too busy, afraid, or not ready to put the plans into action, so I then returned the product and got my money back. After all, what good is a course if I cannot use it immediately, or if it was not my “style” of investing?”

    Is this something you and BP genuinely advocate? If someone purchased Brandon’s No & Low Money guide, but they were too busy, scared and not willing to put what they learned into action – is it possible for them to get their money back? Asking for a friend.

    • ^This. Eric, you said many times throughout your piece that there is no free lunch. Yet you took advantage of the information that experts have taken time to package and distribute (at great expense), so you can get the info for free. BS move. No integrity.

      • Thank you for reading!

        Actually, that is the way they are selling the items, money back if you cannot use the information.

        Not all courses are for everyone, and not everyone can use the information right away, or ever. While I am sure some of the information I was able to use to get the mindset, I do not think I ever used the information directly to get a deal.

        There is no free lunch for the marketers either. They have to find people that can use the product.

    • Eric D.

      Thank you for reading!

      The Gurus are selling their goods with the anticipation that you can use them. If you cannot take advantage of the ‘stuff’, it makes no sense to keep it. Sometimes, it is a clash of your style vs. theirs. Or a larger commitment that you can give. Or even things that might be illegal or unethical in your area, but are standard practice in the Guru’s area. Things like buying a place “Subject To” the sellers mortgage staying in place would be one.

      When you are buying a $1,000+ product, you need to be able to use it, or send it back. If you only pay $39, that is 100% different.

      I do not know about Brandon’s product, you have to understand what you are purchasing and the price paid.

  4. Jerry W.

    Eric,
    I loved this article. It had good sound and realistic advice. Since I have been having trouble finding deals in my town I bought a property in a neighboring town. The added 75 minutes round trip is a pain, but it will cash flow better than anything I have seen listed in my town for the last year. It was a FSBO and he wanted to close and be gone in 2 weeks. The drawback is it is taking a lot of work to fix things the owner did, like putting up sheetrock with one inch gaps on the side, and painting a very orange kitchen 3 times before it stops looking like it was from the 1970s. Of course no contractors are available as it is their busy season so its 14 hour days on the weekend with my marginal skills to get it ready. I have fixed all the leaky faucets, replaced 2 of 3 broken doors, and most of the dog pee smell is gone. Pity it is not close enough to work on in the evenings.
    I would never have been able to pick this place up if it had been in pristine shape. That is the price you pay for getting a property $20K to $40K under the normal price. Since I used my last little drop of money I saved up for the 20% down I need to be looking for an owner finance now. I WILL be making an offer this week. I look forward to more of your articles.

    • Eric D.

      Thank you for reading!

      I have put in many 14+ hour days. When you slow down and only work a half day, that means 12 hours…

      Sweat equity is one on the main ways to get RE equity and profits. You get the labor piece and the general contractor piece when you do it yourself.

      Often hiring a contractor means waiting a month for them to fit it in the schedule, then having someone making $10 an hour doing the work. Yet, you are paying $50+.

  5. Darmi Parikh

    Hello Eric:
    It is great article about knowledge + practice makes you prefect. I love your article about foreclosure. Where can I find more detail information about the same topic. Is there any website I can surf and get more detail about how to work and what to say to owner who are about to loos their home.

    • Thank you for reading!

      Study your own foreclosure laws, in the state statutes. it’s boring, and you have to read it like 100x, but it will sink in. Read a sentence or a paragraph at a time, do not read it like a book.

      I took classes at Learning Annex, my local RE investment club, about 100 webinars, etc.

  6. DONALD KUCZINSKI

    Loved your article, Eric. Really hit the nail on the head. Too many newbies here thinking this is the free lunch ticket. “All looks so easy on television.” As “well on the way to retirement at 56” , you certainly have a great understanding of what’s really involved in this game, I hope you plan to continue writing and blogging in between deals, as you have a special talent in that area as well. Thanks and Good Luck!

    • Thank you for reading!

      I am not looking for deals as much now, just managing and maintaining my properties. I have seen some great deals for flips that I might make an offer on a similar property after I retire. It hard to pass up deals when you know there is easy? money to be made.

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