Where are all the deals???

Question

Just trying to get a feel for how everyone else feels right now. I'm in Metro Detroit area scouting for my first BRRRR or multi family house hack. I've kept my options open, just focusing on the numbers. Currently I'm looking on MLS and Zillow & cannot find anything that makes sense. Using the 70% rule as a general rule of thumb, then subtracting repair costs from that there is nothing even close that fits this criteria. I've found a handful of deals, but the expenses would add up so high that it turns into a bad deal. The only one I've gotten close to in the last 2 months was an Auction where I lost the bid at 134k where the ARV would have been 210k. Is it safe to say most people get deals off market? Is this just the current market we're in that sucks for investors? With interest rates getting a bump up, everyone in my area is jumping on these houses days after they hit the market. 95% of houses are ABOVE market value & the ones that aren't, are only 10-15% below market value which doesn't work with the BRRRR. Is this the reality of BRRRR? People make it sound so damn easy, but I can't find any deals. Looking for some feedback! Thanks guys

Corby Goade · Answer

There are always deals to be had, but it's much tougher to find them in a hot market. When things are going gangbusters like they are now in much of the country, money is plentiful and deals are hard to find. When the market is in decline, deals are plentiful and money is hard to find. It's all relative and you have to be patient and adjust your expectations. My bit of unsolicited advice would be to NOT adjust your buying criteria based on the market- it's better to adjust your timeline and wait for the right deal. When the market is hot and new investors adjust their criteria just to get in to the game, they either end up stuck at one property because they don't have the equity to move in to another deal, or they end up bankrupt because they don't have the cashflow to hold the property long term, especially through a down turn. Be patient and keep pushing, you'll find something eventually!

Rita Neri · Answer

When I bought a property from a realtor at the closing table, I mentioned to the seller if he ever wanted to sell any of his other properties in the future I would be willing to invest with him again. I keep in touch with sellers. Also I bought a property in an area where people lived in this neighborhood and didn't hardly move. I call up leads in this neighborhood to see if they may be interested in selling. They had lots of equity, and I also keep in touch with churches in the area, to see if any of their people want to sell, I will make a nice donation to their Church. Tell people that you want to buy a house. I was in a pool in Florida and asked the lady if she knew of any 2 bed 2 baths for sale, and she said yes! I ended up buying it for $30K. I sent out a mailing, and a man called me back and said he had a condo for sale, I went to view it, and while there he told me that he had 7 units he wanted to sell in Pompano Beach Fl also, would I like to see it. Well, YES I said, and I am in process of buying it.

Charles M. · Answer

They told me we couldn't get $650 rent for a 3/1 in the "so called" bad area. Now they're asking how did we do it... We created and believed in the deal!

Matthew John · Answer

Corby Goade Sound advice! Everyone around me going through this process is just saying "you will have to settle on something, your criteria doesn't work in this market" I'm being patient because if I don't find something profitable, I won't be able to refinance and pull money out for the next one. This is just taking a little longer than anticipated, but it'll come along soon enough. Thanks for the encouragement!

Robert Plumpe · Answer

Matthew John: I've done 6 deals in my real estate career. All but one of them have been cash money up front. My profile has me listed as a wholesaler...not sure if that is accurate at this point. The one deal that I did that was NOT 100% cash up front was structured initially as a rental with an option attached. The option got executed just before it expired and I used "hard money" for that. I have never used a realtor for any of my deals...always negotiated them directly with the owner. I find that owners selling directly frequently have a MUCH higher motivation to sell than owners who list with realtors. I would guess that a surprising number of realtor listings start with the realtor saying something like..."Let me list is for 1.5x what it is worth, we'll see what happens and what do you have to lose?" That way they get the listing...but a lot of commercial listings never have a sale take place (or it takes YEARS). That indicates to me that the seller is not serious... If you want to get together or discuss things/strategy, I would be happy to tell/show you some of the things I've had success with.

Matthew John · Answer

@Robert Plumpe Great to see you're from the area! Would love to connect. I'm 100% with you on being patient and waiting for a good deal & not rushing into anything. I've been super flexible. From Grosse Point to New Baltimore to Rochester/Auburn Hills down to Troy/Madison Heights. Being a wholesaler, how do you find off market deals? Is it all through creative marketing?@Jeremy England We've checked out every house on the map & I've been focusing on longer term listings first. My problem is, I can only get a 150k mortgage. I'm looking at bottom of the barrel properties. I've put offers on all properties that make sense. Some I look at have mold in the floors, foundation issues, roofing issuesBut you're right, I'm just going to keep my head down & keep throwing offers in at anything that makes sense.

Jeremy England · Answer

@Matthew John I get what you’re saying. What criteria are you providing to your agent. Im just putting myself in a sellers position. If my house needs work, or is out dated and I can’t afford to do it or don’t want to, i know that I will have to ask less. Not 30 pct less, but what I ask for and what I’ll accept could be quite different. Did you offer on all those properties? What are the avg number of days houses are on the market in your area? Look for those that have gone 60 days over that. I know when I sold my home last and it went over what is typical, I dropped my price.

Robert Plumpe · Answer

Matthew John:I would echo what Dylan Tanaka stated earlier in the thread...Looking for properties on MLS and Zillow and such is probably an exercise in futility. Things that are posted there are listed for TOP DOLLAR. I would very strongly suspect that properties that make it onto MLS & Zillow have probably already been looked at by "connected" buyers and they have passed.I deal with commercial properties...EVERY single property I've bought has been "off market" OR directly from the seller. No agents involved at all.I would also counsel that it is better to do NO deal at all than to do a bad one. Just be patient...maybe expand your search area?I deal primarily on the east side of Detroit. Prices have gone up tremendously. Deals are harder to find...but there are still some out there.Good luck!

Matthew John · Answer

@Jeremy England I've gone to roughly 20 properties now (not sure if that's a lot), but I feel my agent getting frustrated because he says my criteria is unrealistic. He has 5 rental properties himself. The one that would have been a steal as a Duplex, can't be done because of zoning issues. The other great one was a Auction & I was outbid even when being a little bit more flexible. Another issue I see with auctions is the 5% premium they take off the top, so that must also be factored in and it hurts. Pretty much everything I look at now is a foreclosure because the agent/owner deals get scooped up by noobs and owner occupants. I think it's just a tough market with a lot of millenial home buyers! For every 1 house there's 10 buyers.

Jeremy England · Answer

Perhaps alot of those folks asking for a price outside your criteria would accept a price within your criteria.