As a beginner, it can be hard to be proactive. It can be hard to figure out what a good deal even looks like.
Why, if there is a good deal in my midst, wouldn't a more experienced investor immediately get it? I live in DC which is a very tough market to compete in. What chance do I have, being very conservative, having bought nothing before, having little to no connections at all, over someone who is established, connected, knowledgeable about the area, risk tolerant, and ready to pounce?
I have no problem being patient, if there is indeed something to be patient for. I don't mean this to be a depressing question. I just want to know realistically and logically why, if there truly is a great deal out there, it wouldn't get bought by one of the hundreds of more experienced investors right away who know the business inside and out.
Different people are looking for different things. I bought the perfect rowhouse (for me) last year in DC that was in great condition (no reno necessary) but not renovated recently with the super popular modern open concept first floor which allowed me to hang a door in the dining room for $100 and convert it into a bedroom collecting $850 a month for rent.
The property was on the market for 4 months last summer and @Russell Brazil was able to negotiate $50k off the sales price in a "seller's market"... why didn't someone snatch it up? I don't know. It's odd because I almost met the 1% rule in the DC market which isn't supposed to cash flow.
I guess you have to look for what other people don't see. I don't know why no one made an offer on this awesome rowhouse that I now live in for free and make $2000 a month by renting out the other bedrooms, but I am glad no one saw the potential in this house that I did.
@Jared G. Great question. There are a lot of reasons as to why other investors might not pick up a deal you may find yourself. Below are a few solutions that may clarify this:
1. Investors may be stretched too thin and are unable to take on another project
2. As you build up your portfolio, scaling is the next goal. Meaning doing 1 deal is not enough. Often times package deals are of interest, rather than investing in 1 deal at a time.
3. Labor costs increases. This can force rehab rates to go up. However if you are able to rehab for less or do it yourself, this deal could work for you.
4. Typically there is a portfolio increase and offload season for investors. The market in your area may have more investors selling than buying.
5. Some may be waiting for a significant market turn. Which could never happen. Make sure to only buy what makes sense when you are able to take on the risk. Waiting forever can lead to lost of missed deals.
Hope that helps!
Different people are looking for different things. I bought the perfect rowhouse (for me) last year in DC that was in great condition (no reno necessary) but not renovated recently with the super popular modern open concept first floor which allowed me to hang a door in the dining room for $100 and convert it into a bedroom collecting $850 a month for rent.
The property was on the market for 4 months last summer and @Russell Brazil was able to negotiate $50k off the sales price in a "seller's market"... why didn't someone snatch it up? I don't know. It's odd because I almost met the 1% rule in the DC market which isn't supposed to cash flow.
I guess you have to look for what other people don't see. I don't know why no one made an offer on this awesome rowhouse that I now live in for free and make $2000 a month by renting out the other bedrooms, but I am glad no one saw the potential in this house that I did.
First, one person's junk, is another person's antique.
Specifically:
"Why, if there is a good deal in my midst, wouldn't a more experienced investor immediately get it?"
Answer: Many reasons, not the least of which is, one person's junk, is another person's antique.
"I live in DC which is a very tough market to compete in".
Answer: This is where I usually walk away. Much like when someone says "it sounds too good to be true...", which are the words of the truly ignorant and lazy. (I'm NOT saying you are)
"What chance do I have,..."
Answer: None, until you gain enough education to answer you own question
being very conservative, having bought nothing before,
having little to no connections at all, over someone who is established, connected,
Answer: and, what's your point?
knowledgeable about the area,
Answer: There are more than one area....lots more.
risk tolerant, and ready to pounce?
Answer: So learn what risk really is, and get ready to pounce.
There really is not such a thing as,"this exactly is a good deal", but if it is a good deal to you then you should know why.
I will give you one example:
I found a 5400 duplex that had been on the market for 2 years with an asking price of $50K. Somehow I was able to negotiatiate the price down to $13,000.00 and I knew all I had total at the time was $18,000.00. With escrow fees and a few other expenses everything came out to $15,000.00.
I knew there was nothing more I could do except get the property but it was in disrepair. 3 years later someone offered me $150K and its market price was $179K. I had the good sense to picke up at a bargain price and hold on to it even through all it was doing was parking my money but not earning any income for me. Could I earn money with it now, Sure can and HUD rental prices have moved up to pay me $1,200.00 per unit as compared when I purchased it even had I been able to fix it up the rents would not have paid more than $700.00/mo. per unit.
You have to learn to be fluid and not view real estate investing from such a robotic point of view.
So many people ask me how do you become a millionaire real estate investor? My answer is that there are one million ways but they all require you are not foolish enough to lose money especially repeatedly. Will you make mistake, miscalculations? Probably and you will take a lose now and then but overall you do need to come out on top.
So if you are not guaranteed suceess you are not even going to try? My opinion is that it is that attitude that will keep you for succeeding. You can't win if you do not get in the game, period, and absolutely no one is ever given a guarantee no matter how successful they have been in the past. Your succeess is meansured by one deal at a time. You could have been tremendously successful up to a point and then one bad deal if bad enough can wipe out all of your previous successes. This is why you see that not only beginning investors are hear on Bigger Pockets but experienced ones as well.
You just never know. People right from here, Bigger Pockets, have helped me make a lot of money and I too have helped them with a thing of too so it pays to get and stay connected.
I would suggest you get ride of the presumption that you can't do anything because you are just starting out, and if you find what appears to be good deal to you then think of all the ways you can use that to your advantage.
Remember 10% of something is more than 100% of nothing.
The real question is why wouldn't you be the one snatching up that great deal that you've found? The reality is, when a newbie stumbles on a great deal, they run the numbers, they call their lender, they build a spreadsheet, they ask their friends to come walk the property with them, they post on BP and wait for strangers to verify whether or not this is, indeed, a good deal.
An experienced investor just scoops it up right away.
Yes, you should do your due diligence and you should know exactly what you are getting in to. That said, experienced investors know their market, values and neighborhoods and they don't have to spend a week vetting a deal, they know immediately and they write offers that get properties under contract, protect their interest and THEN they do all of the stuff that newbies do before they write an offer.
@Jared G. Deals aren't waiting around to be snatched up. YOU create them by seeking out motivated sellers and solving their problems.
My advice to get started is learn about a problem (debt relief) and a solution (lease options) then go out and look for sellers who need that problem solved. Once you master that you can move on to another problem and solution until you know how to solve enough problems that you are making the amount of money you want.
One of the biggest obstacles to making a deal happen is lack of creativity. There isn't a property out there, for sale, that can't be turned into a good deal, if some investor can find a creative way to make it happen...and the other party involved agrees to it.
Yep, what @Doug P. beat me to.
My best deals weren't snatched up by someone else... because there wasn't anyone else. There was no for sale sign in the yard and they certainly weren't listed with an agent. It was me and them and a problem they needed help solving.
Identify a couple neighborhoods in your area and get to know the owners. Add value. Be friendly. I focused on a couple plex neighborhoods for about 50 specific units with about 8 different owners. Takes time, but I bet I will be top of mind when they decide they've 'had it'.
@Jared G. You have some good questions. Let me address the being proactive and a good deal. It sounds like you are looking at properties that have already been listed for everyone to see. It would be best to proactively develop some "off-market leads". If you have the budget to use mail, this is a great way to contact people who share the characteristics of people likely to be ready to sell their home.
Absentee owners with equity is one widely recognized groups. Depending on your market area, this could be a great target.
If you are in a super-competitive marketplace, these guys might already be getting dozens of offers. You can be proactive by choosing other segments such as Seniors with Long-time Ownership (ready to downsize or transition to assistance) or Homeowners with Low Financial Stability Scores (FSS).
The key here is to let them know how much easier it will be for the owner to sell to you rather than putting it on the market to sell the more traditional way.