Finding the First Deal

[Joe P.]

Hi all -- I'm just wondering how folks are finding their deals, whether they be a first purchase or ongoing.

I'm struggling a bit with finding the right deal to snap on. I've made two low-ball offers which were (rightfully) rejected, but I just can't seem to find something in my niche. I can't tell if my criteria is too stringent, if I need to work with a wholesaler to find the right deal, or maybe inventory is low and things are slow right now.

Looking for your guidance and thoughts -- I'm ready to get this going (all systems in place, evaluation criteria set hopefully correctly, pre-approved, cash-ready, et al), but the right deal in my area just hasn't presented itself. I'm working with a realtor in both PA and NJ.

[Erik W.]

Two offers rejected is not unusual.  Here's what I mean.

"Deals" are rare.  There are thousands and tens of thousands of investors you're competing with who have been in this game longer than you and know more than you do and have all their systems and money in place, just like you, so the question is how will you beat them and still get a deal?

You can buy anything if you raise your price or lower your standards.  I suggest doing neither.  This is how newbies overpay and get discouraged when profits are small or non-existent.

Rather, you will win with hustle.  This is what real estate investors refer to as "the grind."  Find 100 properties.  Screen them from a 10,000 foot view (how many sq ft, what's the neighborhood like, # beds, # baths, rent to "all in" criteria).   That will probably eliminate 50-70.  Of those, contact Sellers and find out how motivated they are.  That's really the next most important thing to know.  This is the 5,000 foot view.  That will probably eliminate another 20 or so....wishy washy sellers who think their property is worth more than it actually is or dig their heels in regarding what you have to buy it for to get a deal.

Then schedule to meet only with motivated Sellers.  Likely only 10 properties left now.  Half of those properties will be worse than you thought and the Sellers won't budge.  Make your offers to the remaining 5, confident that you have found a property that is priced right to be a "deal."  If one of them gets accepted, you did well!  If they all get rejected....rinse and repeat.

They don't call it "the grind" for nothing!  ;-)

Once you've done this a few times, it gets easier.  You'll get better at weeding out the bad deals quickly.  A new investor can expect to take from 1-3 years before really getting into the groove.  Others try to short-cut the process and overpay.  I did up front and I regret it.  Now I have very narrow criteria, and I'll look at about 100 houses for every 1 I buy, using the exact process above.

Good luck!

P.S.  No offense to realtors or those who use them, but few of them are motivated enough to arrange the number of showing and offers you will need to do to find good deals.  Most agents I've worked with fall by the way side after showing me 5-10 properties if I don't buy one.  Oh well... I need to lay eyes on at least 20, after I've weeded out the other 80 per 100 properties that don't fit my numbers.  Be sure to ask your agents how many properties they're willing to show and if they have a certain expectation of showings to purchases.  No sense working with an agent who doesn't know how investors work.  A good "investor friendly" agent will know which properties are good deals and won't waste your or their time showing you crap.