Is it really "that" hard to find deals?

Question

I'm new to BP and learning about real estate investing.  I've been trying to read and watch BP videos when I have the opportunity.  I've been casually lurking these forums too.  At this point, I haven't totally committed to investing, but sort of investigating it.

The one thing I've heard many times is that 98-99% of the properties you look at are not going to be investment worthy.  Most properties on the online MLS sites have probably already been picked through.

They also say that every property has its number.  That completely makes sense.  If there is a property sitting out there at $250,000, then my number might be $190,000.  The thing is, is the seller really going to knock off $60,000 just so you can buy the property as an investment?  Those sellers are going to want to extract as much money out of the property as they can.

But...is it really that hard to find investment deals?  I see so many people on BP talking about having 4 or 5 or 100 units.  The back of my mind says, "they are out there," and of course, we (read:  you all) are looking and trying to find them.

In one video, (I don't remember exact numbers) they look at a property that is selling for $125,000.  After analyzing the numbers, he mentions that he might just put in an offer for $70,000 because he has nothing to lose.  Maybe they will bite on it - you never know unless you try.  Looking through the different sites to find the address, that property actually ended up selling for $174,000.

Now, I live in a high cost of living area where property values are really high.  My brain tells me that it's probably going to be hard to find any deals around where I live and so I'd have to start moving outside of my area to open up the potential opportunities.  I know of some RE agents who are selling properties within 24 hours on the market.

But, the question is, "is it really 'that' hard to find deals?"  I'm trying to grasp the extent of the problem before I make the decision.  For some, it seems like deals are plentiful, while for others, it seems like there are no deals at all.

Frank Wong · Answer

Hi Michael,

So to answer your question it's Yes and No.  It's not easy and there are deals out there but it really depends on your skill level.   If you know how to structure an offer and know what you are doing you can get properties.  If you don't know it can be very hard.

Part of investing is knowing the numbers and having the correct analysis the other part is getting the actual offer accepted.  Sometimes investors calculate their numbers wrong which will cause them to underbid a property.  Other times the numbers could be right but they just don't know the proper structure to get the offer accepted.

Your example of $250k and offer $190k is correct.  The seller has not tested the market at $230k, 210k, $200k and they are going to accept $190k?  It doesn't work that way.  Is it possible they would? Yes, it is.  But your analysis has to be correct to support it. Cant just offer something low because you want to. That is where all new investors go wrong.  They think they dictate price.  The market controls the price, not the seller not one buyer.

Nick C. · Answer

To answer your question directly - yes it is very hard to find deals. Finding properties isn't that difficult, but that doesn't make it a deal.

The good news is that it can be done. Don't worry about owning 1 or 4 or 100 units. Properties need to cash flow regardless of how many you have. I'd rather have 0 properties than have anything losing money every month. Unless you want to bank on appreciation, but that's usually a recipe for disaster.

Kyler Cook · Answer

@Michael Davido

There are bad deals, okay deals, and good deals. Tons of millionaires that worked okay deals until they learned the game. The problem for most investors is they don’t network properly, and are too scared to be sold a bad deal instead of a good one. Settle on okay in the beginning. Don’t wait for lightning to hit your hat, or you’ll be standing around for a while.

Ned Carey · Answer

@Michael Davido It is true 99% (or some high percentage) of properties are not good investment deals. You have to look for the right kind of deals. For flip deals you want serious distressed property. If it just needs paint and carpet you are competing against home owners.

Rentals need to be in an area that makes sense for rentals. A mistake a lot of new investors make is looking at houses where they would live. As a general rule you need to look in more modest priced housing.

You also need to consider that this is a particularly strong and therefore competitive market. It is harder to find deals today that it was 3 years ago. The MLS is also not the only place to find deals. I have done hundreds of deals. I think I have only bought 2 from the MLS.

Don't be impressed by what others do. Some of those people may  have a house of cards that will collapse when the market changes. Some may be working their tail off and have no personal life.

You've gotten a lot of good advice here. Good luck to you.

Christian Becker · Answer

@Kyler Cook

Very enlightening. Thanks for these comments.

I’ve started into my first 5 deals. First one I had to fire my PM. Learned a lot.

Next one my inherited tenant didn’t pay for 3 months then left. Learned a lot.

Next 2 needed way more remodel than expected initially. Learned a lot.

Bought all of them at a good discount,so not a huge deal really but could have had great deals and now only have some good ones instead. They’ll cash flow nicely, but my equity has evaporated on a couple. Still learning a lot.

Kyler Cook · Answer

@Christian Becker

I see a guy on here all the time that’s in his 60s. He’s a multi millionaire because he never passed on an okay deal. He has really inspired me that, like any investing, most of doing real estate well is doing real estate to begin with. After you have five properties you’ll have a much better feel for what you’re looking for. Don’t try to be perfect, try to be okay a lot, and you’ll surpass most investors.

Ken Maddis · Answer

Yes, you are probably correct, but it doesn't mean you can't find something that'll work for you. Just a few months ago I spent hours and hours scouring the MLS running dozens and dozens of calculations on dozens and dozens of properties and making some offers along the way. I finally ran across a B class property in a B class neighborhood that sat on the market for months...asking price was dropped from $120k to $110k, and and we won an offer of $101K. Turned out it was a VA foreclosure that needed a face lift (floors, paint, fridge, AC, etc). Put in $19k, it appraised with an after-repair value at $148k and it's rented at $1350/month. If I made any mistake on the property, it might be that I was $50 to $100 too low on the rent.

My realtor said on numerous occasions that he couldn't believe it was still on the market. Compared to some of the more experienced and savvy investors on this site, it might be considered an 'okay' deal, or perhaps a bad deal they would have passed on, but as a brand spanking newbie I'm not at all unhappy. I have equity in the property and a cash flowing rent, and my realtor asked me if he could turn around and sell it after the face lift (we said no).

My 2nd deal we just closed on was similar.

So yes, they're out there, you've just gotta put some time and effort into it.

Jared McCullough · Answer

It's all market based and what you want your investment strategy to look like. If you have a very narrow focused scope (i.e. investment area, purchase price range, condition of property requirements) then your "pool" is small to start with.

For my potential liking (i.e. semi rural small towns, $20-$40k, close enough to self manage) I have found that although the MLS is not full of deals there is always at least 1 to 2 that I am interested in at any given time. I could be potentially getting better deals off market or some other method but I have not found out yet how others are accomplishing this although I have bought (1) at a county tax sale.

I will say that there has seemed to be an uptick in how quickly these houses move. It seems with current inventories at least in my area that any good deal whether $20k or $100k gets picked up pretty quick.

Matthew Irish-Jones · Answer

@Michael Davido finding deals is one of the hardest parts of investing, and the key to all of the other parts.

Joshua Huang · Answer

Welcome @Michael Davido! It's understandable that it seems overwhelming and daunting when competing with millions of other investors when looking for good deals.

I agree with @Kyler Cook that proper networking is important. A lot of excellent deals are found through word of mouth off-market and not on the MLS. You might meet someone probably wouldn't connect you to a good deal today, but maybe 2 months down the road they find something that fits your criteria and reach out to you.

I agree that almost all deals have numbers that make them good deals. Make your analysis and find that number. When structuring your offer, explain how/why you came up with that number. And remember that it's okay to lose that deal, there are plenty of other ones out there. You just need to go look for them.

Good luck!

Is it really "that" hard to find deals?

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