If you eavesdrop on agents and investors talking around town about the market, you will hear the following phrases:
- “Low inventory”
- “Seller’s market”
- “Days on market”
- “Percentage over list price”
- “No, seriously, those sellers hold all the freaking cards, and it sucks to be a buyer right now.”
The Denver market is going nuts. Basically, if you combine extremely low inventory and housing shortage with high growth, you will find unique market conditions. A “healthy” housing inventory level of six months is 24,000 units on the market, with 5,000 selling per month. We currently have 5,000 units on the market, with 4,900 to 5,100 selling per month. A home priced at the top of the neighborhood will be lucky to last three days on the market before going under contract, for over asking price, with all or part of the inspection and appraisal contingencies waived.
The thing is that we are not alone. Many markets around the country are getting very competitive and tough to work in. The Denver area market is child’s play compared to the Bay Area in California, where prices are 5x higher and the market is even crazier. From coast to coast, this market is what we have to deal with right now, and the question I hear more than any other is:
“How the heck do you find deals in this tight market?”
“What I used to do to find deals isn’t as effective anymore! What do I do?”
Great question! I’ll break down a few ways you can tweak your processes and stand out from the crowd.
When it comes to your business, you need to buckle down and refocus your efforts into the right areas, taking a hard look at your activities and the results they are producing will go a long way to help you stand out in this market.
4 Actionable Ways to Find Real Estate Deals, Even in a Red Hot Market
1. Track KPIs and tweak, optimize, or eliminate duds.
KPIs are key performance indicators, and you should be watching them like a hungry hawk. An example of a KPI would be the number of appointments you are getting based on mailing a certain list. When the market got tighter, more investors began to target off-market deals with postcards to absentees. Increased competition, in turn, led to a reduced response rate for many. This reduced response rate meant the amount of appointments investors were booking went down. Less appointments meant less deals, and less deals meant less money.
Has your response rate—and therefore your appointment KPI—dropped in the last year? Are you tracking it? If not, why? It might be time to cut the cord on hitting the same list everyone else is since response is going way down It might be time to double another method that is working. Cut some, scale others!
KPIs you should be tracking include:
- Appointments from leads that come in
- Offers from appointments
- Deals from offers
- Profit per lead
- Cost per lead
- Average profit per deal
The bottom line here is that if you are not tracking the main profit centers of your business, how do you know what to fix, cut, or scale for better results?
2. Audit your main deal getting methods.
When you take an honest look at what you are mailing out and what type of online marketing you are doing, you need to make sure you are on the cutting edge of what is working. Bandit signs were great until there were 20 signs on each corner. Yellow letters were profitable until owners started getting a dozen a month. PPC was working until every investor in town bid up your terms outside of your price range. It’s time to tweak, test, and get in on what your competition is not yet doing.
3. Go nationwide.
My business changed drastically when I started reaching out to investors in other similar markets to mine throughout the country. Locally, I started getting turned down when I’d ask successful people to lunch to pick their brains. It’s simply the nature of the beast. They don’t want to give any edge to their competition, so free lunch or not, I was getting turned down at every turn.
I was able to solve this issue by reaching out to successful investors in other markets. From Portland to the Bay Area, D.C., New York, and everywhere in between, I started reaching out to individuals to network with directly. Why were these investors so willing to give up information about what’s working in their market? I’m not their direct competition, and I was also freely sharing what was working in my tough market! Finding out what they were sending, who they were sending to, how often they were sending, and their tracked KPIs for each item was absolutely huge for me. I’m friends with most of these people today, and some of us have found our way to many of the same groups, which is next on the list.
4. Find a mastermind.
This term is quite played out in 2017, where every other week another $20,000-per-year, top-end, exclusive, premium platinum secret society is put together. I’m not saying those groups have no use, but you don’t need to drop $20,000 just yet. Forming or joining a likeminded group of nationwide investors was step two for changing my business. Now I can hear from my peers in other markets on a weekly basis! How awesome is that? I can find out what is working in Seattle and tweak and test it in my market. I don’t think it gets much more powerful than that. How about a trusted local group that you can bounce the same ideas off of? There are more than enough deals to go around. This could be an informal group of a few people for free, or it could mean joining a larger, more structured organization for a monthly cost. Paid or not, these groups are worth their weight in gold.
Related: 3 Metrics Crucial for Finding Amazing Apartment Building Deals
So, how can you find deals in a hot market? By first tracking and tweaking your KPIs, then finding out where other investors are having success with their KPIs and methods. Is the Seattle or Portland market THAT much different from the Denver market? If you look at direct numbers like inventory, price points, and market factors, they are very similar. I speak from experience when I say that besides some hyper-local market factors, many markets across the country are very similar, and the deal-getting methods are nearly universal. What works today in Seattle works in Denver and vice versa. Of course, it helps to choose a like-for-like market—I’ll never put Denver up against NYC or Vancouver, nor would I compare it to Memphis, where you can still buy deals off of the MLS and bandit signs still work. A local group is just as effective, but much harder to find. It usually consists of a few friends you have worked with over the years, like mine.
When the market shifts, you have to shift with it. Otherwise, you will be out of business. The methods you used last year are less effective this year, and the ones you used five years ago are now a waste of time. When I started tracking every number in my business, I could start seeing where I should focus my efforts more for better success. When I started getting nationwide and masterminding, my business was never the same!
Learning to find great deals is one of the hardest aspects of becoming a successful real estate investor. In Finding and Funding Great Deals, seasoned real estate agent and investor Anson Young guides you through his tried and true methods for finding deals in any market. Inside, he outlines his own methods as well as other techniques to help new and seasoned investors alike improve their real estate business.
This is not a magic pill that will turn you in to a successful investor overnight; instead this is a practical guide to several approaches to use in each step of your real estate deal finding journey. Hard work required (but not included with the purchase of this book). Finding and Funding Great Deals will launch July 13, 2017 and is now available for preorder here!
What do you do in your market to find great deals despite challenges?
Share your experiences below!