New Investor Floundering Around

[Andrew B.]

I am sure this is not a unique situation so I am curious to hear what others have to say about their experience and what they are doing. I live in the Cleveland market which is known to be a strong cash-flow market but has limited upside in terms of appreciation due to flat/declining population.

I spent April 2019-April 2020 learning as much as possible via BP Podcasts, books, articles, and analyzing deals. I was unable to start making offers during that time because we needed to first save more capital and second unload our primary residence (luxury condo that had the potential to turn into an albatross since other units were selling much lower than they were purchased for and we needed to sell that before moving forward in case we needed to bring cash to close). We purchased a duplex after selling the condo and are owner-occupying one unit and renting out the other.

Now that I have capital saved and have our primary home situation sorted out, I have been evaluating deals and submitting offers. In two months, I have run 20 full deal analyses (2-3/week) where I model the acquisition, estimate the rehab, analyze holding costs during the rehab, and model the cash-out refinance and proforma cash flows after rehab/refinance. In addition to that, I am filtering through 10-15 listings a week that I can immediately tell do not fit my criteria. I get the MLS digest emails first thing in the morning so that's literally the first thing I do every day.

Based on the above and since I am new to RE investing and only have a limited amount of capital at hand, my preferred strategy for investing to start out is to full/partial BRRRRs in my local market. I have enough saved to buy two SFHs for around $110k each that would cash flow $100-200/month, using 5% vacancy, 10% maintenance/repairs, 5% capex and 0% property management. So while I could do that, I want to BRRRR because if I buy two ready to rent properties, even with the cash flow generated by them, it will take me 18-24 months to save up enough to buy another one while maintaining sufficient reserves for all properties.

The issue that I am running into is one that I know is common. I can't get any offers accepted on the MLS at a price that makes sense based on how I am evaluating deals. I am looking at B class neighborhoods so I am competing with retail buyers and anything that is priced in the range to make a BRRRR deal work ends up with multiple offers in 1-2 days after listing. I have tried to compete but have lost out on all of those offers. I did get two offers accepted but once I walked the property with a contractor/home inspector, I had to walk away because the rehab was going to be too expensive to support the deal and the seller was not willing/able to negotiate the price down.

The next logical step to me is to find off market properties not on the MLS but since wholesaling is illegal in Ohio, I am hesitant to spend a bunch of money on marketing efforts since I can't wholesale any properties that I can't personally close on.

Right now, I am continuing to research my local markets to see if any of the various municipalities have properties that work but have thus far not had any luck.

My fear is that one, some or all of these things are true:

1. My deal analysis is too conservative.

2. My criteria for properties is unrealistic (B Class neighborhood where I can buy low, renovate, and appraise high enough to get 50% or more of my capital out in a cash-out refinance).

3. My local market doesn't support the strategy I am trying to execute.

4. I am being impatient and need to keep grinding away until I build momentum.

It seems like I have the following options going forward:

1. Continue to evaluate MLS deals in my local markets and hope that the market shifts in favor of buyers in the next year.

2. Change my investment criteria and/or deal analysis assumptions to make more properties work on paper.

3. Look for off market properties not on the MLS using direct marketing efforts.

4. Look outside my local market for a market where BRRRR deals are easier to find.

I feel like I am working extremely hard but have not made any progress. I know @Brandon Turner and @David Greene always talk about the bridge analogy and I don't want to start trying to build a bunch of different bridges but I also am afraid that I am trying to build a bridge to nowhere.

Do any seasoned investors have any advice to offer?