What can a newbie do to acquire a house in a competitive market
Engineer · Monmouth Beach, NJ · Member since 2016 · 132 posts · 25 votes
What can a new investor do to acquire a house in a competitive market?
Time is on my side as I am currently unemployed, but have cash and a partner with income.
You can usually trade hustle for capital. For one thing you could purchase a fixer at a reasonable discount. You could then trade hustle for capital by doing most/all of the work yourself to add some "Sweat equity", and as an added bonus you will get hands on experience. The best properties for this are "cosmetic fixers" where the "bones" are in good shape (structure, plumbing, electric, all the important stuff that is not readily visible unless you look close), yet it is a cosmetic wreck; dated finishes, dirty, smelly, ugly, hideous paint colors, etc. These things are easier to fix and add more value because they are highly visable and turn off most sellers. When buying foreclosures where the water was off, my favorite "tell" was a turd in the toilet ... wife says it is disgusting, I say it smells like money. Easy to fix too: 1)turn water back on, 2)flush toilet. If it is a property listed on the MLS, you can sometimes get some info on what to offer from the listing agent and get your offer to the top of the pile by putting it in through the listing agent. They want to double end the commissions and you want a great deal ... give them what they want to get what you want, and watch your own back in very carefully in the transaction (which you should always be doing anyhow). Get pre-approved and become an expert in a market/neighborhood by looking continuously at everything on the market ... that way, when a good deal hits, you will be able to recognize it instantly and pounce quickly, because good deals won't last long.
Another is trying to find a property "off market" by driving for dollars, door knocking and/or mailing rough looking properties, FSBOs, talking directly with sellers or distressed home owners who become sellers. You save them paying RE agent commissions (5-6%) and discount the purchase appropriately. This one can be a bit trickier because not only does it take more time and huevos to execute, but also many of these homes are so distressed that they may not qualify for traditional funding, so you may need all cash, seller financing, private or hard money loans to buy and fix before refinancing to traditional mortgage.
Another nifty trick is that if you look at HUD foreclosure homes (can lookup online) they are normally open to buyers who will use it as a primary residence first before they open it up to investors. Buy it, move in, fix it, house hack it, then after awhile buy another to move in and turn it to a pure rental ... rinse and repeat as necessary until filthy rich.
Finally, you can look a bit further out to the outskirts of town where it is not quite so competitive. This has risks too, though, since these areas tend to be hit first and the hardest during a downturn. You can combine all of the above too, but there is no free lunch ... you'll have to put in more hustle, more risk, or more money.
Whatever the case, make sure you can afford to hold it in good times and bad. The main way people lose in competitive markets is to stretch too far financially to get into a property, then give it back to the bank when things turn bad personally and/or economically. Make sure you are not one of those people.
Good luck to you!
This is going to be a cheap plug, so apologizing up front, but have you ever thought of associating with a national company that can shorten the learning curve, provide motivated seller leads, a system to simplify the investing business, and funding to flip properties(if needed)?
Im with HomeVestors of America, and currently investing in both Chicago and Cleveland. Happy to discuss if this is an option for you in your market. Were 786 strong and nationwide.