How do I find my first deal?

Question

I've posted here before and have had lots of excellent advice and feedback, thank you this site is awesome! I have been interested in house flipping for years. I've had some contractors approach me with all kinds partnership deals and some to be a hard money lender but I don't feel that I am really interested in that at this point in time. I finally came up with a budget and decided that I am going to make it happen. I have my own cash / tools / time / knowledge and I am really interested in flipping my first home. The problem I am having is where to start looking to find a deal. I have looked on the MLS and gone to some foreclosure auctions with no real solid leads yet. I am not in the real estate business and do not know a lot of people in it. Where do I look, who do I talk to? Any advice on how you started or how I could start would be greatly appreciated. Thanks!

Monica Breckenridge · Answer

Steve S. Hi Steve, welcome to the group.  There are hundreds of ways to find deals.  Here are a few:

1.  Networking-going to investor clubs in your area's.  Go to Meetup.com to find them
2.  MLS
3.  Auctions
4.  Direct mail to specific neighborhood you want to buy in
5.  Direct mail to non owner occupied houses
6.  Mailing people in probate.  The estate will want to get rid of their houses, and most are fee and clear
7.  Mailing the foreclosure list and doing a short sale to create a deal
8.  Mailing specific people in foreclosure who have equity.  Buy their house subject to the existing loan and bring loan current.  Take over payments and then rehab house and then sell.  Done this many times.
9.  Driving for Dollar-Drive the neighborhoods and find ugly houses.  Knock their door or mail them a letter that you are interested in buying their house.
10.  Realtor-Find a realtor to be your buyers agent to scout for good deals for you.

Jon H. · Answer

After reading your question I would like to provide you with some advise:
1. Make sure you have access to MLS or another website that you can check houses recently sold etc.
2. Any house you buy make sure you're buying it at 65%. Meaning that after you've bought the house, fixed it up and accounted for all your variable cost you are in it 65% of the actual retail value.
3. Time is money. I wouldn't fix the house yourself unless you are a contractor and you have plenty of time on your hands. I would hire it out while you look for the next deal.
4. Finding the deal. Make sure you find a market preferrably with houses in the 85K-150K retail range. These are the houses that sell fast. There are tons of people looking to buy these houses. When you get over 200K your market goes down b/c most people can't afford over 200K. I would find a working class nice neighborhood. Drive around and see if there are any vacant houses. Also you could search for mailing lists in your specific market. Put Bandit signs in these areas. Make sure you have a specific questionaire for people when they call. You'll want to be able to weed out the people that can't do the deal or the deals just not profitable. Once You find the deal at the price point you're comfortable with go for it. 
As for Hud homes/foreclosures you can sometimes get a deal but you're bidding with all the other newby investors who don't market themselves and they drive the price up. Sometimes so much that if anything goes wrong you're not profitable. The key is to find the market where you want to be. Market that area like crazy. exp: Bandit signs, mailers, door to door , flyers, Anything that will get your phone ringing with potential deals in your target area. It might take you several months and several phone calls with misses before you land a great deal. But at the end of the day that one deal if you get it at 65% total will pay for the year. I stress the 65% b/c at that price you pretty much have evaporated all your risk. If you did your research on prices in the area and take all rehab factors into account before you make your offer you will find it difficult to lose any money this way.
**FOLLOW UP IS KEY** If you speak with sellers and they aren't willing to pay you what your offering. Ask them if you can follow up with them in 3 months. Even if they say no follow up anyway. You'd be suprised how many people will come around to accepting your offer after they're property has sat on the market for 3 months. 
TO MAKE IT EASY
You can automate your phone service. You can hire a service to take these calls for you with a specific script of questions you provide. they will type these answers and email you a list of all your calls everyday. This makes it easy for you to quickly sort through the potential and not so potential deals. This costs $1 per min and the typical phone call last 3 mins. So thats $3 per lead. That may sound like alot but in the end the prize outweights the amount you pay in the beginning.

Steve S. · Answer

@Ann Bellamy Thank you I will email you for information on local meetings.

Ann Bellamy · Answer

Mike Jakobczak, $200K is a starter home.  We are a suburb of Boston.  But 200K is a very good place to start on your first rehab, as Steve S. is considering.

The Top school district houses run 300K-600k and up, with a few exceptions, and those price points are not moving as readily as 200-300K.

Mike Jakobczak · Answer

Ann Bellamy most top school districts will always be much higher but at some point on the list you should find good school districts in your price range.  But then again I don't know southern NH

Ann Bellamy · Answer

Mike Jakobczak, in the Southern NH or Nashua area, the top school districts are definitely not in the 200K range.

Steve S., finding the deal is the most difficult part.  Most people just starting out try to find deals in the MLS.  Of course, these deals have been picked over by experienced investors and that leaves new  investors paying too much.

Besides hard money lending, I sometimes partner I with experienced investors in funding deals.  I don't do the rehab, they do, I just fund and discuss.  I can introduce you to some of them at the local meetings.  And sometimes you can get wholesale deals at the local meetings.  If you want to call me or email, I will point you to the meetings and introduce you to some people.  There are some who are reputable and some you definitely want to stay away from.

Ned Carey · Answer

Monica Breckenridge has a good list to start but it only scratches the surface. Search the forums and you will find a lot of ways to find deals.

Here are a few more tired and true methods.
Vacant and boarded up houses
Tax sales
Bandit signs
We buy houses adds in the paper

-Ned

Ned Carey · Answer

Nope not even close. 20% of the deal will go to all the hidden costs;
Closing costs X2
Selling costs
Buyers closing help
builders risk insurance
Utilities until sale
taxes until sale
financing costs
Etc.

-Ned

Robert Creed · Answer

Steve, your question definitely does not have a definitive answer :). It sounds like you're doing a good job of getting your financial ducks in a row. Finding the right property that makes sense is not easy. It's a good idea to surround yourself with depenable and resouceful individuals that will help your project/s be a success (realtors, contractors, fellow investors, etc.). Building these relationships can take time, so at some point you just have to make a decision and weigh the risk vs. reward. The one thing I think you should remember while you are in the hunt for this property is that the profit is REALLY made on the front-end of the flip. Make sure you do your homework on the property.   Personally, my biggest rehab mistakes in my first rehab projects came from underestimating repairs and incorrectly analyzing the ARV. I like to look at those properties ROIs as knowledge and experience since there wasn't substantial monetary gains :). Good luck!

Steve S. · Answer

@monica Thank you excellent advice.

@laurence I am planning on rehabbing not wholesaling

I am going to talk with a few real estate agents who flip houses on their own to get some more info this week.

How do I find my first deal?

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