Why is it advised to find the deal first ?

Question

John Thedford · Answer

I agree with @James Wise

If you want to build wealth there is no better avenue than real estate. Funding is that one issue that faces almost every investor at some time. I have had pretty good success but the reason I don't own more properties...is funding! You never know who you will come across that will help out. Brothers, sisters, aunts, uncles, people from church, co-workers, etc. However, to get them to commit to money you will need to show you have knowledge. You can get that through BP, books, becoming an agent, etc. The more you know and can show to others the more confidence they will have in lending. You will still need SOME of your own cash. If you can show others that you will put your money at risk they will feel more comfortable putting theirs at risk. Now, you know where to start!1. education2. funding3. then...find your deals!

James Wise · Answer

You need money. Don't listen to anyone who tells you to run around trying to find a deal and the rest will just work itself out later...It won't and you will waste a lot of peoples time including your own. Get your finances in order then look for deals within your budget.

Simcha Davidman · Answer

@Darren Landerway I am new to this, as well.  My limited experience has been that nobody's going to want to commit any money to you without knowing what you have to offer or what you personally bring to the table.  In other words, Mike, above, appears to be a seasoned investor.  He might have relationships with investors who know his track record, so they are willing to commit to him finding a deal, because they trust that he will actually be able to find something, and they also trust that he will be successful in the endeavor.  I, on the other hand, do not have a track record of success, and so it is almost unreasonable to try to find investors willing to commit to the possibility of me ever bringing them a deal, and then not really knowing how well I will perform.

A very solid option for you might be to get pre-approved for as large a mortgage as possible, so you know your own price range.  This can be even if you feel you could not afford to go all out.  But you can then credibly go make offers.  Generally, all your offers will have financing contingencies, and my impression is that if you cannot find the financing on time, you can walk.  ***But do not just take my word on that.

Once you have something to show investors, either a deal or a track record, it will become easier for you.

Good luck, and keep on truckin!

JD Martin · Answer

Amen, brother. Few want to admit this, but everyone thinks they have Mad Skilz until they go to find someone to underwrite the endeavor, and then find out that everyone else thinks they are fools. The ability to access capital is a prime indicator of whether you have anything to offer (in the eyes of the underwriters, who are the only ones who count if you're broke) and if your project is likely to succeed.

So back to the OP: in my opinion, you should always have your funding lined up before putting on your shoes. I have bought property that was under contract from some other "investor" right up to the point that they couldn't close the deal, and I'm talking about sub $30k houses. If you can't close the deal on a $30k house, which is not even enough money to buy a little better than fancy car, you are probably starting off in the wrong arena.

Bill Gulley · Answer

@Darren

@Darren Landerwayundefined

Yes, it's pretty discouraging listening to the general populace who are basically deal makers and not real estate professionals, heck, seems like most don't even know business common sense, much less real estate.

If you owned a used car lot in a rural area where pick up trucks were the hottest sellers, then SUV's and very few in the area drove a compact car, when you go to auction, what do you buy?

Are you going to pass on a good clean truck that you can sell for a $5,000 profit for a Fiat 500 that you might sell for the same profit? I hope not!

Who do you cater to in your business?

Does Wal-Mart fill the isles with patio furniture in November or do they stock Christmas items?

If your buyers want 2 and 3 bedroom ranch style homes in the Southeast part of town, why would you jump on what you think is a good deal on a duplex on the North side of town?

The most important thing is to be able to turn your inventory quickly, you cannot be assured of turning deals quickly just because you think you got a deal, if it isn't marketable you're stuck with it.

Spend your time filling the needs of your buyers, not speculating if you can find a buyer.

And, if you'r not actually buying and using guru tactics, then you increased the odds of ticking off some owner, especially if it is owner occupied because you failed to market the place. Understand, wholesaling the guru podcast ways is pretty much an underground business venture, kind of like a black market since you don'y have a license, and more so if you lack the ability and intent to buy using a sale contract. Ticking sellers off isn't a good way to keep a low profile, under the radar, you increase the chance of someone calling the authorities!

These wholesalers are sending you to a turkey shoot, just get close and let it all wash out, bad way to do business, shoot with pinpoint accuracy, target what you know you can move. The only way to do that is to know your customers first, what and where they want to do business.

Like I've said, put the horse in front of the cart. :)

Deren Huang · Answer

There's different ways to skin a cat, no wrong answer. But from personal experience the best way to light a fire under your bum is to get a house under contract.

You will call every single lender, general contractor, insurance agent, closer in 30 miles...

Mike Dymski · Answer

@Simcha Davidman yes those are one of an number of good ways to get started if capital is scarce.  Chad Carson's podcast on BP is a great real life and down to earth example of someone who started as a bird dog.  He targeted finding properties for certain investors rather than getting a large buyer's list.  This gave him a strategy, an education and a track record.  It's one of the best podcasts I've listened to and it's not even pertinent to my investing strategy.

Simcha Davidman · Answer

@Mike Dymski Are you calling the "take action" stream of thought the bird dogs and wholesalers?  I'm trying to find deals first and then money, but to hold for rental income.  (I'm not challenging you - just trying to learn what more experienced/successful investors mean and think.)

Mike Dymski · Answer

Lots of buy and hold or flip investors work with bird dogs and wholesalers.  You don't necessarily have to find permanent funding.  This is a tough strategy long-term but many use it to get started.  The "take action" commentary pushes the first deal(s) along and then doors begin to open.  Being on BP is a big advantage...good luck and keep us posted.

Mike Dymski · Answer

Taking action and purchasing property without funding are two different topics.  The BP hosts encourage the first one and some investors promote the latter.  The premise behind finding the deal first and the money will follow simply comes from the ability to likely wholesale a deal, at a minimum, if it's a really good one.  You will have to find the funding one way or the other (which takes effort) and you have to respect the seller and be able to close.  I'm a proponent of finding the funding first but to each their own...lot's of successful strategies out there.