Where have all the great deals gone?

Question

Being a realtor I check the MLS often looking for that great deal for myself or one of my investor clients in the New Jersey markets. No matter what I change the search info. to I can not find multi. units for less then 140k and that's the lowest, more so in the 200k range. I see that investors on this site often find themselves 80-90k 4 units buildings worth well over 140k making them absoultly beautiful deals to be involved in. Is this just certain areas of the country, one in a million shots or are there other ways to find these?

Appreciate any input.

David Dey · Answer

No, the problem they are dealing with is what makes them more motivated to sell.

The equity based on the 10+ years means 2 things,

1)  It's been 10 years plus since they dealt with the price of the property, so they are probably not current on values which can be beneficial to you.

2)  The 10 years + means they have built up quite a bit of equity which will help to make your deal that much more profitable.

Ex:  In central FL, during the boom when everyone was so pleased with deals 70, 80, even 85 cents on the dollar, I got a deal on a 4br 2ba 2 story historic home 3 houses from the lake for 25k.  I bought it and sold it the next day for 67k.  They put 30k into the property and within 90 days, had the place sold for 169k.

Now people thought I had done an incredible job negotiating, but the truth was that I had paid full price.

When I had asked the owner the old classic question, "if I paid cash and could close quickly, what would your bottom dollar be?"

There response was, "I don't think we could take any less than 25k."

Now I could've probably beat them down to 16-20k but you know the old saying, "pigs get fat and hogs get slaughtered."  25k was just fine.

So why would they be happy with such a low number?

Because over 30 years ago, they had bought the house for 5k!!  In their mind they were making a 250% return.  This is the power of 10+ years of ownership.

Hope this helps

Nicole B. · Answer

Using the MLS solely to find a investment property is not the only way to do it.  From what I have heard, very few deals come from the MLS.

One way to find a deal is drive around a neighborhood that fits your/your client's criteria and look for homes/multi-family homes that are distressed and look like they could use some love.  Odds are, the owners of the property are tired of managing, are out of state , have a poor management company, etc and may be motivated to sell.  Either knock on the door to get the owner's information or find their name and number online.  There are sites out there that allow you to pay a fee for that information.  From there ask if they're interested in selling. It's called "driving for dollars".  You need to get active and get out there!

Another really great way to find property is to network with other real estate investors and/or agents.  Someone might be wanting to sell a property but hasn't had time to list it yet.  Networking is monumental in this arena.

I also suggest you read and learn as much as you can about real estate investing.  The more you learn, the more strategies you will have under your belt to use!

Sam K. · Answer

I agree with everything Nicole said. Hit the streets, carry business cards with you everywhere you go. Post your cards and postcards in supermarkets, laundromats and any place that there's a community board.  talk to contractor, landscapers, the mailman, ups drivers and anyone else that will listen. If you have a budget pull a list and do a mailing. there's tons of info here on BP that can help with that.

Before you know it people will be calling....

Good Luck and keep up posted.

Josh Caldwell · Answer

Start looking in a new market.  In Pittsburgh I can find 4 plexes for less than 100k if I bother to look.  That is the listed stuff, i can get better deals than that with a little marketing.  I know of a deal with owner financing for less than 100k on a 4 plex.

David Dey · Answer

With owners, for example of absentee owner, I point out the tax savings of not taking all of your equity in one shot, which could literally put them into a different tax bracket.  I further explain that with owner finance, they would only pay taxes on the money you receive each year.

If any pushback, I make it clear that we may not just be talking about 5-10k down and a 30 year loan.  We can give them as much as 50% upfront and we can make the financing a short term loan, like 5 years.

(When offering this scenario of up to 50% upfront, you will be working a first-second mtg strategy, where you get a private lender to fund your down payment of up to 50% in a first and have the owner carry the balance in a second)

I should also mention that with a first-second scenario, you can use hard and private money and still get a realistic rate for cashflow purposes via blended interest. (Ex: 100k loan 50k first private loan at 12% and 50k owner second at 0% = 6% blended interest)

I gave an extreme example as most private money can be taken at lower interest and many owners will require an interest rate (though if they don't ask, I don't offer)

If needing more ammo, I do talk about interest and the better return than CD's.

The important thing to remember is to tailor your offer to your sellers needs.  If they need the money, what do they need it for?  Is it better for you to give them the money to get the thing or get them the thing itself.

If you structure it to be a win/win it will usually work out.

David Dey · Answer

Absolutely, that is one of the main keys to high equity deals.

I always ask 2 questions with these type of deals.

1) If I paid cash and closed quickly, what's your bottom dollar?

After I asked the first

2) would you be willing to take any of your purchase price in payments?

I will either get one of three answers, "yes, no, or please explain," afterwhich I explain the concept along with the positives of ownerfinance.

Mark Beno · Answer

@Vincent Crane there are deals to be had in all markets. Move to OTP and see what comes up. We work the north side of ATL and have found deals there. Good luck with your investing!!

Jim P. · Answer

@David Dey

I had the same question.

thanks for the great explanation- makes perfect sense.

Jimmy

Bryan Eccleston · Answer

So the higher equity after 10+ years meaning they would be more likely to sell the property correct?

David Dey · Answer

The reason for 10+ years of equity is because the secret ingredient to high equity deals is TIME of ownership, which builds up property value while giving time for mtg pay down.

Where have all the great deals gone?

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