Deal Finding - what makes it so hard?

Question

We here at BiggerPockets have heard for years, even before interest rates went up, that deal finding is a top challenge. This is despite the existence of listing platforms, off-market deal finding tools, and even our own investor friendly agent finder. So I am curious, what would the perfect deal finding experience look like to you? What is missing from all the deal finding solutions that currently exist? What is the most difficult step along the journey from "I've got capital, a strategy and a plan" to "I found the perfect deal"?

I'd love to hear your deal finding stories!

Glen Wiley · Answer

Two things that makes deals in residential real estate hard:

1. You are competing with emotionally driven buys of primary residences. They will pay high prices to meet needs that are not income producing - they are shopping for a different product that is provided from the same stock that our income properties come from.

2. having deep enough knowledge of the neighborhoods to allow us to recognize a good deal takes a lot of time. Without investing time into research and understanding a neighborhood, REI can be a bit of a gamble.

Jake Andronico · Answer

@Trevor Riley

Great post. Sifting through sooo much information seems to generally be the biggest issue.

At the end of the day it's a straight math calculation, and making an informed bet, but there are also a TON of nuanced reasons that finding a deal is difficult.

Nobody wants to make a mistake, even though that's 100% part of the process of being an investor full time.

For our market, we've created a model that analyzes EVERY property in Northern Nevada simultaneously, instead of needing to plug in one property at a time.

We do this for all single family and multifamily properties.

We can see the BEST investment property available today based on math and analytics, and export that information to investors looking for it.

This saves people a ton of time so they can then make a decision for themselves about the nuanced details of a deal.

There will never be a "perfect deal" in my mind, but something that works best for them at that time, and something they have the upmost confidence in is ideal.

And, math should be a significant contributing factor of that decision making in my opinion.

Jay King · Answer

Unrealistic goals.

Or at least for me always trying to hit home runs. Now I'm going for doubles and triples.

Trevor Riley · Answer

@Jessie Dillon, would you mind expanding on that?  What does a reliable bird dog look like to you?  And what makes it/them reliable?

Matthew Masoud · Answer

Yeah it's mostly sifting through lots of bad deals to find the good one.

First is finding what a good deal looks like, then going out there and hunting.

I'd wager I've spent thousands of hours on Loopnet, redfin, and Excel looking for deals with good returns.

Jessie Dillon · Answer

@Trevor Riley someone who is putting in CONSISTENT work, communicating weekly, not overwhelming themselves by trying to BD for too many different investors, and knows how to accurately run their numbers.

Jake Andronico · Answer

Narrowing the focus I believe is what's most helpful for investors. Knowing what's "not a good deal" or finding out what they do NOT like, is just as important as finding a "good deal" and having a specific buy box.

Understanding your end goal and your buy box to help you get there are incredibly important IMO.

Trevor Riley · Answer

@Jake Andronico Thanks for the awesome response.  I really like your thoughts around turning deal finding into a math problem.   It makes it sounds so easy, and I gather you've built a model that has access to the right data and performs the right math.  Yet, we know that for many investors it is not easy.

What do you think the best possible experience an investor can have that reduces the "sifting through sooo much information" problem, quickly plugs them into a model such as one you've built and ultimately produces a transaction?  I imagine your model isn't set up like a traditional listing platform.

Bradley Buxton · Answer

@Trevor Riley

A good deal is different for everyone. We work with many investors that know what is a good deal for them and many that don't. I think it's easy as a new investor to get stuck on one piece of a good deal and overlook the overall benefits of a deal. For example on BP there are many people that won't buy something because it doesn't meet the 1% rule.  There are deals and plenty of them and many people don't have the capital to buy the good deals.  If you're only looking at cash flow buy in cash. Maybe a there are few good deals with only 5% down?  Real Estate is a long game and it was "easier" the last 10 years pre-covid to buy and cashflow.  Now it's more difficult because investors without a lot of capital is in competition with a lot of other investors and primary buyers that also don't have capital. The game has changed.

Deal Finding - what makes it so hard?

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