How I've decided to get started

Question

Hey everyone. I thought it would be helpful to document my thought process as I start in real estate investing...mainly for myself but maybe it will help others somehow. Learn from my mistakes, but hopefully my successes too. I'm certainly open to any and all tips as well.

So to jump in head first, after cramming as many REI concepts and experiences into my skull as possible, I've concluded that the underlying skill needed is finding deals, analyzing them and negotiating. This is where I'm starting.

I've been "driving for dollars" with nothing but a pen and paper. I'm looking up the property records on our property appraiser's sight to look for signs of distressed, absentee owners, probate, etc. I don't want to get into any apps as of yet., but I have my eye on a few. I want to hone in and develop my "instincts" for a good deal and learn how to research and identify an opportunity.

Because I know in the current market, it's important to be able to find deals off market. I'm going to invest in a "yellow letter" campaign with someone I found here on BP. From what I can see, in almost every successful story I've heard, it's a numbers game. Get your eyes on as many potential deals and talk to as many people as you can. As I see it, that's how you create success. I know some have scored big on their first deal, but I'm not going to plan on that kind of luck.

I've already developed a relationship (connected with) a hard money lender to discuss their options and how I can find my entry point.  I have others that are appraisers who've been looking to get into REI but haven't had the "guts" to get into it. Maybe if I can bring the deal, they'll bring some capital in a JV.

I've signed up to "bird dog" with a local investor and hope to bring him some deals and see how deals transpire through that to see how the pros do it. I want to start with some wholesaling with the goal of identifying properties that I can dive into myself after a while, hopefully through a JV, but not required.

This is where I am today. I want to develop a relationship with a realtor and a contractor (of which I've gotten some names already) to build out a team, but first things first.

Joe Villeneuve · Answer

You're headed in the right direction, but for me, I would say the three most important "skills" are as follows (with reasons):

1 - Market analysis...not property...Market.  (This tells you "Where" to invest).

2 - How Money Works...basic math applied to money.  These are what is developed into your systems or strategies used, of which not all can be used on all properties to make deals...which means the more you know, the more what others see as "problems", you see as "opportunities".  (This tells you "How" to Invest)

3 - Developing a Plan.  This does not include saying, "I want to flip 3 properties and hold one per year"...that's not a plan.  A plan is "reverse engineered" from the financial position you want to end up at, working back to where you are now, with each step along the way based on being the prerequisite for the next step....kind of like school classes.  (This tells you "When" to invest).

Here's the most important part...all three MUST work together as one.  Each discipline relies on the other 2 for success.

Charles S. · Answer

@Joe Villeneuve lol got it.  Each area on the map will have metrics that'll automatically make the deals stand out.  Love this concept.

Joe Villeneuve · Answer

There is not short answer for this, or one answer for this...but there is one way of doing it.

You have to look at both the entrance possibilities (For Sale), and the two Exits (Flipping/Sold Comps and Holds/Rentals), and apply the entrance options to each Exit Option.  Keep in mind you must separate property groups based on Size/ranges.  A 2500 sf house has nothing to do with a 1200 sf house...even if they are right next door to eachother.

The goal is to find Micro-Markets that work.  A micro-market is one where the successful groups (sf ranges) are clumped together...and consistent in their possible cost and returns.  You may have the exact same house 4 blocks away from one you are analyzing, and they have no impact at all on eachother.  Look at the dividing lines between micro-markets like scattered showers...somewhere, across the street,  it's not raining.

Joe Villeneuve · Answer

You're familiar with the analysis concept of "100, 50, 10, 1"...with one ultimately being the deal you get?  I pretty sure the original person that came up with this can't tell time, doesn't own a calendar, and can't add past 10 in the winter, and 20 in the summer.

By analyzing markets first, by default, you've already analyzed every property within that market...the properties just don't know it...yet.

The key is the map.  You have to define the area on a map...and understand what you're looking at.

Joe Villeneuve · Answer

The size of the market is based on the number of properties with the same profile grouped together.  The micro-market can be as small as a few blocks, or as large as ????

Salvatore Lentini · Answer

@Brad Ruttenberg - another important component.... consistency and persistence.  Set up a habit of sending x number of yellow letters a day.  Instead of sending out say 300 yellow letters all at once, send out.... say 3 or 4 a day everyday.  When you finish, start at the top of the list and do it again.  Then you'll be hitting the same people every 3 months and you'll be able to better manage incoming inquiries.  And you'll have also established a habit.  One of the biggest mistakes investors make with direct marketing is that they only hit their list once or twice and expect miracles.  You need to hit that list 3, 4, 5,6...7 times to start getting serious results.  When I did direct marketing my response rate went up with each mailing.  There are multiple reasons why this works but it definitely works.  Most people give up after 1 or 2 mailings because of underwhelming results.  But you only need 1 deal to pay for multiple mailings.  And more importantly, that one deal gets you into the game :)

Joe Villeneuve · Answer

To me it's obvious...or at least it should be.

Eric Wilkinson · Answer

@Joe Villeneuve What is the size of the market you are referring to in your analysis? Street, neighborhood, city, or metro area?

Joe Villeneuve · Answer

The profile of the micro-market is based on what works.  When a property comes up for sale that matches the "entry" part of the Micro-market (in the size range that works), you buy it based on the required numbers to make it work

Charles S. · Answer

@Joe Villeneuve thats an excellent point about the market analysis.  My question: so after you find the micro-market how do you determine which property works?

How I've decided to get started

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