Acquisition Strategy

[Justin Burns]

Hello All,

I am a new to REI, in the sense that I have not done my first deal yet, but I have a plan. I am also soaking up additional information here and planning my networking process, but had a couple of questions.

When marketing to acquire a property to flip, there are obvioulsy as many methods as there are people. You could use an MLS realtor, a wholeseller, mailings, driving for dollars, signs, auctions, and the list goes on.

Since this is a numbers game do most people use multiple methods or do they find one or two that work and stick with that until it doesnt?

Secondly, I am in the Dallas area so this would probably be for the folks knowing that market. Are the margins large enough to insert a wholeseller or an MLS agent into the mix, or are you guys finding it so tight that you have to do your own marketing? With that question I realize that there are a lot of other variables that come into play, but just in general.

Thanks very much for the assistance.

[Hattie Dizmond]

@Justin Burns And the answers to your questions are as varied as there are REI's in the Dallas area! ;-) Let's start with a few questions for you...

1.  What is your primary strategy going to be?  (i.e.  Fix & Flip, Turnkey Buy & Hold, Rehab & hold, etc.)

2.  Have you identified your primary target area?  The DFW area is so large and so varied that I highly recommend identifying a "farm" area and becoming an absolute expert on that area, before you consciously expand to other areas.

3.  Have you determined your targeted property type and criteria?  (i.e. configuration, size, price point, etc.)

4. What type of funding do you expect to leverage for your initial strategy?

Those are very important questions to know the answer to, before you launch your plan.  Some of those answers will determine the answers to your questions.  What do I mean?

Well, if your initial funding strategy is traditional mortgage, you'll have a difficult time in the REO market, because there is such a proliferation of cash buyers in the Metroplex.

I can give you some generalizations about the Dallas market. #1 areas of high desirability have less than a 30-day inventory. Areas of median desirability are around 45 days. Overall, including the areas of low desirability, inventory in the Metroplex is only about 2.5 months. That's near historic lows and has remained consistent at that level for most of the year. The result is that there simply isn't enough inventory in highly desirable areas to meet demand. #2 desirability in the Metroplex is most closely tied to the quality of the school district, much more so than to the proximity to employment and other amenities. #3 The problem with MLS listings is the competition, tied directly to the lack of inventory. You can still find good REO deals via the MLS, but you need to be prepared to make a strong, qualifying offer almost as soon as the listing hits the service. I'm talking about within an hour. That offer needs to be all cash, with little to no contingency. Otherwise, you will simply be outbid with a stronger, more favorable offer. #4 Some areas lend themselves better to driving for dollars. The lower end the neighborhood, the more likely you are to find distressed properties. Since it's a numbers game, you still want to find lots of properties to contact.

Answer the first 4 questions I had for you, and I can better answer your questions with specificity!  ;-)