You find a deal ... then what?

Question

I've been watching the webinars, BiggerPockets YouTube videos, taking notes, etc.  The advice is always:

1.  Leads

2.  Analyze

3.  Pursue

4.  Success

Find deals, analyze them, make enough offers and eventually you'll get one accepted.

So, I go onto Zillow and look around my area.  I found a 3 bed/1 bath Single Family Home for $139,000.  Current tenant is paying $1,500/month.  The house could use a little updating.  It's on what looks like a major road.  I analyze the property and could maybe start with an offer of around $115,000 to $120,000.  If I'm overly conservative I could see this being a "base hit" with about $335/month cash flow and an 8.75% CoC ROI.

The ROI isn't crazy good, but, like I said, it's a "base hit" that will get me into the game taking action.

What's next?

Do I call an agent an ask them to put in an offer for me?

Do I schedule a walk-through to make sure the ceilings aren't caving in?

Do I get in my car and do a drive by just to check out the area?

I know some people never see the properties they invest in, but in all the webinars and videos I've seen nobody really talks about what you do after analyzing the deal.  The impression is that you analyze it and make an offer and wait for someone to accept.  I feel like there are some gaps in my process that I want to get covered before I take the leap.

Thanks!

Michael Davido · Answer

This one only came on the market 3 days ago.  I had to sift through 3-4 pages on Zillow before I saw it -- looking for what Brandon Turner calls "hidden potential."  I actually live in a pretty expensive area so I was surprised to see this one priced a little lower.  I'm going to guess that's probably because it's in a high traffic area based on looking at a Google map.

Most of the Single Family Homes are priced in the $300,000 to $400,000 range so they don't often work for renting.  I would say driving around to find the off-market deals is probably a better option to possibly flip.  I don't know if anyone does it, but now that I learned about it I am more aware of trying to find these houses that are vacant, abandoned, or unkept.

Eventually, if I stick with RE investing and get a few under my belt in my local area, I am considering going to where the deals are and invest out of state.

So, it sounds like I should get pre-approved and maybe take a drive out to see where the property is.  That would definitely give me a better feel for the area since I've never been through there before.  And while I'm going out to see it, I can keep my eye open for other properties that I might be able to get off-market.  Thanks!

Joe Villeneuve · Answer

Your statement in your 1st line said, "...The advice is always:...", then you presented the list.  My list was meant to fill the gaps you just mentioned.  There are a lot of gaps.

Michael Davido · Answer

I'm not really sure what you're talking about.  I don't think I referred to a list that "everyone" always advises.  I don't think I even used the word "everyone".  These are the things that Brandon and David teach in their webinars and youtube videos.  I didn't make it up.  I'm just trying to fill in a few small gaps that I had questions about for the intermediary steps along the way to making an offer.

I appreciate that you took the time to reply.  I like the thought-provoking concepts mentioned.

Michael Davido · Answer

I know a few agents.  I'm also working through the courses for myself as well so that I can eventually have access to the MLS and use the "agent" as a complement to my investing.  I think my first investment property would be one that I can buy and hold for the cashflow.  I've been looking around my area, which includes the adjacent counties.  I was figuring that putting in low offers may work in my favor if they are reject.  If I low-ball and get rejected, then they probably aren't motivated.  If I low-ball and they counter, then I get the leverage to reject their counter-offer or accept it.

I have a full-time job, which I'd like to leave as soon as possible.  It provides a stable income while I'm working my way to my first property.  I own my home now so I've been through one transaction, but I have never "invested" where I'm purchasing a property that pays itself off.

It sounds like my next step should be to get pre-approved so that I have an idea on how to deal with financing.  Thanks for the help!

Steve Vaughan · Answer

Wow. If you can easily hop on Zillow and find a 1%er+, you must be in a cf market.

I would go look at the exterior amd neigjborhood and get pre-qualified with a lender.

If it's listed with an agent, you may as well get one, too.  A good one,  preferably from a different brokerage and with an ABR designation.

Don't have a lot of zeroes in your offer.  Your agent just raised your price 3%, so $115k will be out, but use 7s and 4s, not zeroes. $120,740 vs $120,000. Looks like it came from your calculator.

Your agent may not cost you out of pocket, but don't think they are free.  The seller will have to charge more to pay them.

Joe Villeneuve · Answer

First, throw away that list you say "everyone" always advises you to do.  Everyone doesn't advise it, that's just the most common, and the most inefficient.  If you were successful at the first 3 items on the list, you wouldn't have much time left to do the last item.  A common variation of it is this:  Make 100 calls, get 50  good leads (whatever that is at random), make 10 offers, get 4 accepted and make 1 deal.  Right.  Who has the time?  The first person to come up with this idiotic list didn't own an hour glass (that's how long this has been passed around), the the people that continue to pass it, don't own a watch (or cell phone) ... and none of them can tell time.

Here's your new list:

1 - Learn Geometry and Algebra inside and out.  Not just so you can do problems, but so you understand what all the problems mean.

2 - Learn how to analyze markets, not properties, to find the micro-markets you want to invest in (because they will make you money).

3 - Learn how money works.  This isn't how to balance a checkbook or make change (both are lost arts...just stand in front of a cashier and hand them $10.10 to buy something that costs, $8.05, and look at the puzzled look on their faces).  This is an understanding of the left side of the equal sign (from step #1), and understanding how to apply it to REI.  This is where creative strategies (and unfortunately basic strategies) are made and understood.

4 - Learn how to design, and stay with, your own personal REI Plan, based on reverse engineering from your financial goals back to where you are standing right now.

5 - Learn the importance of this number sequence:  1073741824, and how to apply it to EVERY decision you make in Step #4.

6 - Learn, and understand the difference between Total Cost and Your cost.

7 - Learn the value of your cash as a verb, and not a noun.

8 - Learn why Einstein referred to "compounding" as the greatest invent.

9 - Learn how to decide which of the following is the right answer for each deal: 3 + 3 = 6; 4 + 2 = 6; and 2 * 3 also = 6

10 - Learn why equity is dead cash, and how you can give it life again.

Paul Witte · Answer

1) ask around and find recommendations for a good real estate agent in your area.  Get to know them, and let them get to know you.  Ask them to explain the whole process to you in details, and take notes.

2) Get a mortgage pre-approval.  You can ask your agent how to do that if you don't know.  If you have some savings and a salaried job (or a part time job with good income you've had for at least 2 years), that should be pretty easy.  If not, your agent can help you think through other options.  If he/she can't do that, find a different agent.

3) Determine your investment strategy.   Flip?  Buy and hold?  BRRRR?  Something else?  Know your exit strategy options.  Consider the market in your immediate area, as well as anything else withing maybe an hour drive from you.  Some markets are better than others for different strategies.

4) Your agent can set up a search for you based on your criteria.  Walk through lots of properties and run numbers on a lot of deals before even considering making your first offer.  Get in the habit of running your numbers conservatively.  Assume costs will be higher and expenses will be less.  Ask your agent about what extra fees and costs there will be associated with pursuing a lead until you have keys in your hand.

5) BEFORE making your first offer, post a summary of the deal on the forum here and ask for input.  You won't be able to share all the relevant info, but others can tell you whether it seems like you're on the right track or not.

6) Offer!  Your agent will help you.  It's intimidating at first.  Low ball your first offers to get in the habit of them getting rejected--or you end up with a great deal!

7) Be willing to walk away during the inspection period.

Again, cultivating a relationship with an agent at your stage is key here.  Best of luck!