Dan, New Investor in St. Louis, MO

[Dan Schnurbusch]

Hello BiggerPockets folks,

Although I originally created my profile a while back, I never got serious about real estate investing until quite recently. After obtaining my law degree from the University of Missouri, Columbia, I bought a house with my wife and started work in civil defense litigation in downtown St. Louis, Missouri. As the son of an amateur woodworker/furniture builder/home improvement aficionado, I have started developing twin interests in home improvement and passive income. Naturally, my earlier exposure to BiggerPockets came to mind and led me back here to formally introduce myself. I don't yet have any legitimate experience in real estate investing, but my professional training has allowed me to become comfortable interpreting, researching for, and drafting contracts and other legal instruments. Additionally, although I can in no way profess to be an expert, I took classes in law school about real estate transactions and finance, and so some parts of the process are not totally foreign to me.

In general, I'm fascinated by the prospect of being my own boss and developing a growing side business that could one day independently sustain me and my family. At this point, I'm most interested in buy-and-hold investment in rental properties, perhaps with a property manager given my day job (although I'm still learning more about the actual time and energy demands involved should one choose to personally manage his or her properties).

I'm certain that at this point I don't even know what I don't know and that simply pulling the trigger will be the biggest step for me (once a suitable property has been found, of course), but what I don't fully understand at this point is how best to find investment-priced properties. I read from an experienced poster that using the MLS and other web-based systems is not always very reliable because most well-priced properties with strong ROI potential will have already been picked over by aggressive investors. I get the impression that networking with wholesalers and other industry professionals might be the best way to make contacts that could lead to well-priced deals. For that reason, I came here hoping to integrate into the BiggerPockets investment community, especially with those who might be living in or around the St. Louis area. The stories of folks on here are an absolute inspiration, and I sincerely look forward to whatever being a part of the BiggerPockets community might mean going forward.

Happy investing!

Dan

[Zachary Schneider]

Congrats, Dan, and good luck! You picked a great time to start getting serious about real estate investing, because 2017 is looking to be a "wind down" of our extremely hot real estate market. If previous trends hold true, then as our market loses the rest of its momentum, we can reasonably expect to see a good 3-5 years of downturn, which presents a great opportunity for prepared investors.

As for your question about finding suitable properties: I'd love to try to help! Just keep in mind that I'm pretty new to this game, myself, so don't take what I have to say as the final word on the subject. :)

Generally speaking, most great investment deals don't come from the MLS, and here's why: most MLS properties are tailored towards consumers, not investors.

Consumers decide what they are willing to pay based on what the emotional value of that property for them. They see their kids growing up there, they see weekends with friends and family, they see cute lil' puppers running around the yard, romantic evenings in, etc, etc. All that makes them willing to pay more, because they want to make those fantasies a reality. It's not just a house, it's a home.

Investors, on the other hand, purchase properties based on what they can afford to pay, as dictated by the actual calculated margins of that property's expected cashflow. Once you have learned the right numbers to crunch to "guarantee" a great deal, you will be able to analyze any given property and calculate exactly what number you need to beat in order to meet your cashflow goal. If you can't purchase the property for less than that, then it's a bad investment.

Given the differing perspectives of consumers versus investors, most properties on the open market tend to be poor deals for investors. That's not to say that good deals can't be found, of course! You'll just have to be more creative and more determined, and you'll definitely have to accept that the vast majority of offers you write will be rejected.

Again, take what I'm about to say with a reasonable degree of allowance for my own inexperience on this subject, but if you are searching for deals on the MLS I would recommend seeking out older listings that haven't seen much action. Finding those homes that have been on the market for six months and/or have had multiple deals falls through might be the ticket to finding a highly motivated seller. Whether they simply can't afford to hold on to that house any longer, or don't have the time to keep waiting around for their fantasy offer, these sellers might be more willing to take a "lowball" offer just to get a done deal.

Other venues include FSBO's, auctions, private sales from other investors (network!), and even good old fashioned canvassing. Knock on doors, make calls, drop mailers, etc.

Just, whatever you do, don't forget that you are an investor! All of our offers need to be based on what your calculations show the property to actually be worth to you. Hard numbers! And remember that those numbers can (and often should) change. If you inspection reveals that previously unexpected repairs are needed, your counter-offer should reflect that. Likewise, if the property turns out to be in much better shape than you expected, thus making your calculated expenses much too high, you might consider dealing in good faith and raising your offer to reflect that. Of course, that's just my perspective: get a good deal, but also deal fairly.

I hope that this has been at least somewhat helpful for you! Congratulations again on making such a great decision, and good luck in your ventures! If there's ever anything I can do to help, don't hesitate to reach out to me. :)