How do you source deals? Looking to buy my first property

Question

Hey Everyone,

Hope you're doing well. I wanted to start this post to ask others about how they source new deals for multifamily properties and single-family homes, specifically in the southeast. I've been analysing a multitude of properties the past few weeks (around the 200 - 400k range) and I have a good sense of what to look for (or so I think). Obviously not every property is going to be a home run but a lot of deals I've analysed have struggled to be cash flow positive after crunching the numbers. This is typically due to a high principal and low median rent within the area or its remote and I believe it may be a struggle to find tenants. So, a few questions for those that have been around the block:

What websites and resources are you using to find properties? (I currently use realtor.com and a few others, working on finding an agent for MLS access)

What areas are you typically looking in? (Urban, suburbs, rural) What population sizes and growth rates? Is there a good site to analyse "rentability" of an area?

What key numbers do you look? (I know COC ROI >= 12% and cashflow of $100 per unit at a minimum) Is there anything else I should hone into?

What states and regions of states have you found success in? (I'd like to be close enough to the property should any issues arise but will have a property manager)

Thank you and apologize for all the questions but it's been discouraging to say the least so far. Here's to changing that.

Best,

Jack

Travis Main · Answer

@Jack Honroth

While the MLS remains the largest platform for property searches, it shouldn't be your sole resource. The drawback of relying solely on MLS, realtor.com, zillow.com, or similar listing sites is their widespread popularity. The high visibility of listings on these platforms often leads to intense competition, making it challenging to secure deals that align with your investment criteria.

I highly recommend identifying a target market and cultivating relationships with local wholesalers operating in that area. These wholesalers often possess off-market deals that haven't been listed on the aforementioned platforms. Engaging with them allows you to gain a competitive advantage, as you're not vying with as many investors for these targeted opportunities.

While there are other avenues for accessing off-market deals, many investors are leveraging platforms like investorlift.com. However, it's crucial to exercise due diligence when using such platforms. Frequently, the numbers provided may be inflated. Ensure that the purchase price, rehab costs, and After Repair Value (ARV) are all reasonable and accurately assessed. Sometimes, these deals may lack the margins necessary for a prudent investment.

If you ever need assistance evaluating deals to determine their suitability for your investment goals, I'm more than willing to offer my expertise. Don't hesitate to reach out—I'm here to help.

Jonathan Greene · Answer

The flaw in what you are doing is that it's obvious you are only looking at homes online. Have you seen any in person? If not, stop what you are doing and don't analyze until you look at 10-20 homes in your area just to get a feel for smell, repairs, foundations, etc.

Too many new investors are talking about how many deals they are analyzing when they have never even seen a property. If you can't invest near you, you still have to get a feel for what all the numbers mean and the numbers near you may not be the same as where you are looking.

Michael Smythe · Answer

@Jack Honroth as others have stated, the time to find deals on the MLS has passed!

Which do you think will be more competitive, buying from the MLS or your own referrals?

Per this NY Times article, the average American knows around 600 people.
https://www.nytimes.com/2013/02/19/science/the-average-american-knows-how-many-people.html#:~:text=The%20average%20American%20knows%20about,do%20you%20know%20named%20Kevin%3F

Per the US Census Bureau, the average American moves 11.7 time in their life, which based upon an approximate lifespan of 84 years, works out to be about every 7 years.
https://www.census.gov/topics/population/migration/guidance/calculating-migration-expectancy.html#:~:text=Using%202007%20ACS%20data%2C%20it,one%20move%20per%20single%20year

So, if the average American knows 600 people and they each move about every 7 years, that means that the average American knows around 85 people that move in any given year.

How many of those moves do you want to be involved in?

To maximize the number of transactions you’re involved in you will need to:

• Be Top of Mind when they think about moving - which requires consistent reminders.
• Be seen as an Expert – which requires a consistent message and Evidence of Success stories
• Gain their Trust – which requires communicating integrity

So, start out by listing everyone you know in an Excel spreadsheet.

Why Excel?  Because later, you can easily use it as your mailing list! Create columns for Name, Street Address, City, State, Zip and then contact info: Last Contact, Relationship, Status, Email & Phone.

IMPORTANT: do NOT ask people for THEIR business, ask for referrals! Why? Because they will get defensive if they feel you are pressuring them. Remember, they can always refer themselves😊

Now, make it a goal to call at least 5-10 of these people EVERY day and ask a MAX OF THREE off the list below of who they know that:

• Just inherited a home
• Had a loved one pass away
• Is behind on their mortgage or tax payments
• Has a relative that can’t take care of their house anymore
• Has a house they’re having trouble selling
• Is facing bankruptcy
• Knows a probate attorney
• Knows a bankruptcy attorney
• etc

Why only three off the list per contact? Because on average, we can only remember three things at a time. If you try to go over the whole list, you’ll lose the attention of an average person and they won’t remember anything!

It should only take you about a month or two to contact everyone on your list and then the tough part – you start all over again.

Why the repetition? Because it takes repetition for people to remember things and you have to be top-of-mind when they encounter a potential client for you!

Have you ever been to McDonalds? Of course you have! So, why is McDonalds still spending billions on advertising?

One more tip – people remember stories that trigger their emotions. So, tell a story of how you (or a fellow wholesaler) helped a seller out with their challenge(s). Change your story each month as different stories will resonate with different people AND use each story to emphasize one of your “who do you know…” questions.

As you start closing deals, you will need to reinvest your profits into mailing lists and other scalable activities to grow your business.

One last thing – we recommended you create a Status column on your spreadsheet, now we’ll explain why. If you find someone that seems to know a lot of people needing your services, wouldn’t it make sense to focus more resources on them? Conversely, you will run into people on your list that just seem to be a waste of time, so you’ll want to avoid them. So, create status codes for both of these and a few in-between codes to help you work smarter, not harder.

Linda Labbe · Answer

We are in Ontario and invest in the US so everything we do is remote. We could find nothing if we did not have a strong team on the ground to assist with number crunching puer investigation does not give you a real sense of what the situation is. More then willing to explain what we do if anyone wants to chat. We work in the Detroit Toledo area where the numbers are great

Michael Dumler · Answer

@Jack Honroth, to piggyback off of Nicholas, I highly recommend that you house-hack your first deal. If you haven't already, read "The House Hacking Strategy" by Craig Curelop. With current market conditions, interest rates, and scarce inventory, 95% of MLS properties will not be cash flow positive. I'm sure I sound like a broken record because I say the same thing in my forum posts: today, investors must get creative in their investment strategy to acquire cash-flow real estate! The simple days of sourcing and acquiring traditional long-term rentals are few and far between. You will analyze deals day and night only to run into disappointment. Start exploring/considering creative investment strategies such as house hacking, rent-by-the-room, short-term, medium-term, etc. Happy to connect and chat. Best of luck!

Linda Labbe · Answer

John sent you a pm lets chat

John Anthony Gruska · Answer

Hi Linda!

Id love to learn more

Sheldon Alex · Answer

Hi Jack,That's good that you're getting a feel on how to crunch numbers for properties. The MLS, due to high competition and normally high asking prices, wouldn't be the best option to find deals. There's multiple ways you can source these deals. Besides finding a good investor friendly real estate agent, if you're strapped for cash, then door knocking is a cost effective way to land some off-market opportunities. But if you have a little money to invest, then skip-tracing and contacting property owners is another method. And aside from being creative when investing, whether it's through house hacking or converting a property into a group-home, also check the zoning of these properties. This can give you the opportunity to possibly add more units within an existing property or even build additional units in the future. Hope this helps. Reach out if you need any help! Sheldon Alex

Nicholas L. · Answer

@Jack Honroth

good for you, it sounds like you discovered what is the case in most markets right now - on market properties with debt will not cash flow.

can you start with a house hack?  that is the best way to get started.  and the goal of a house hack is not to 'cash flow' - it's to replace your rent payment with a mortgage payment and build equity.

with that said - lots of investors buy off market and not on.

How do you source deals? Looking to buy my first property

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