Where are you finding your deals? - 2013 edition

[Steve K]

I'm having essentially zero luck the past few months finding decent rehab deals at numbers that make sense. Probably averaging twenty cash offers per week and batting a cool 0.00% so far. 250 offers without a single deal seems pretty unlikely so either the market is that tight or i'm simply being too cheap?

I know this topic comes up regularly but figured i'd start the new year version. What's working for you? MLS, direct mail, networking, probate, etc?

[Account Closed]

My deals are still coming from my direct marketing. The main issue in my markets is equity. My markets have so many properties with no equity. Unless I create equity (short sales, sub-2 holds, etc) the pool of sellers is too small.

You're probably being too cheap, but only compared to what others will pay. It may not make sense for you to change your buying criteria if the margins get too thin and risky. The main rehabbers in my farms are working volume and on incredibly thin margins by my standards. A house I need to buy for $85K, they are paying $110K for at trustee's sale. They are doing 5-10 houses a month. The smaller players aim for $15K-20K, even on the $200K+ houses. Just one major repair issue and additional hold time and the deal is toast. I don't get it.

Last year an agent brought me an investor buyer on an almost finished rehab. He paid $95K and gave the agent $1500 for finding the deal. He had the flooring done, for probably $2500 plus some landscaping. He listed it with the agent for $5% at $134K. They got lots of offers in the $125K range, but in the end they couldn't get the appraisal higher than $117K and finally sold at that price, after six months. That's not a deal I'd want. But the investor was using his IRA funds and even a few K is more than he had the month before. Those guys are everywhere right now. Someone with cash, building their retirement fund, not needing to make a killing (or a living), is the the real competition. Add to that the new buy-and-hold investors who think cash flow is rent - PITI. Their purchase prices really skew things too.

I'm at a crossroad about changing my buying criteria. My husband always accuses me of being too cautious and needing overly wide margins. My thinking is that I don't get burned by deals I don't do. But I don't make any money on the deal I don't do either. His point is someone with skills, experience and capital (me) should be able to adjust to the current market. Still chewing on that.