What criteria do you give to your agent?

Question

I'm fine-tuning my criteria to optimize my deal funnel but need help creating GOOD criteria that yields results. My strategy is the BRRRR method, focusing on SFHs. I'm looking for SFH's that make great rentals (smaller, sub 1500 sq ft), are in bad shape, and have motivated sellers. While I could just send this info off to my agents, I'm coming to you all to see what I can do to this criteria to sharpen it and get more specificity out of it. Can I give them keywords to look for to get a wider pool of motivated sellers? (divorce, inherited, quick sale) Is limiting the acceptable financing criteria to Cash and Seller Financing, or removing conventional, VA, and FHA altogether worthwhile? FYI I'm in the Harrisburg, PA and York, PA area.

What works for you?

Whitney Hutten · Answer

@Greg Lott this will really depend on your investment strategy and market.  I like buy and holds (BRRRRs specifically). So I want a 2/1 ranch (or 3/1, 3/2), 10000sqft, garage, in. a B class area, good schools, close to amenities, away from train tracks, powerlines, drainage ditches, where rents at ~1%+ of the ARV. I underwrite to 10% COC for turnkey, 15%+ on BRRRR (all after setting aside reserves), $175+ cashflow, 10%+ ROE, 1.25 DSCR.

Kyle McCorkel · Answer

@Greg Lott

Begin with the end in mind - you want a SFR providing X amount of cash flow.  Typically if ARV is higher (above $150k) your cash flow will diminish (rent to value ratios decrease as ARV goes up).

If ARV is too low (think $75k or less) then *probably* it's not going to be a very nice area.  You'll cash flow more but with more headaches, theoretically.  Decide if you're willing to take on that kind of work/headache.

So for me, I settle into areas with ARV between $75k-$120k.  If you're narrowing down by neighborhood/town, understand what these houses would rent for, and make sure monthly rent divided by ARV (rent to value) is well over 1%.

Then set up your criteria for these neighborhoods.  You might want to just look at all the listings (even non-distressed ones that you aren't considering buying), to get an understanding of the market.  To be clear, don't physically look at them, just look at pics, look at what "good" condition houses in that neighborhood look like, and see how long they take to sell.  Also, sometimes people will price absurdly high just to try and get some bites (there's a lot of idiots out there, don't be one of them) but then the listing will sit for 60-90 days before they start lowering the price.  These can be good to go after 60-90 days because the seller is probably motivated to get ANY offer.

Only go look at the property if a)it looks distressed and/or b)the price is 30%+ below ARV and/or c)it's been sitting on the market for 60-90 days

If a property gets listed, looks distressed, and is priced 10% below ARV, I won't even waste my time.  There will be 30 people going to look at it the day after it was listed, and some idiot will probably over pay for it.  Now if I see that property 6 months later, and I see multiple price drops, maybe it went under contract multiple times and fell through, then I'm gonna swoop in and offer 50% of the original list price.

Ryan Howell · Answer

I can speak from both sides...I like to go off of key words.  For our MLS we can set "or" filters so if any of your list of keywords pop up, it will flag it.  Ideally, $/sqft would be great, but at least for us, we can't set it up that way, but if you're limiting the sqft already, then you definitely want a price limit...it is extremely unlikely that "divorce" would ever be in the MLS listing, but "Motiviated", "investor" etc are often there.  Don't set a minimum sqft limit as if the heat source isn't there, it may be labeled as zero.  Good luck.

Reece Iovine · Answer

You can tell the agent the neighborhoods you want. The max price in that neighborhood you'd pay for a BRRR deal (that way you remove all the more expensive turn key deals), max square footage, beds/baths.

That's probably all I would limit it by in order to make sure you don't miss any good deals due to information in the mls not being filled out.

Greg Lott · Answer

Thanks for the advice, all. I like the perspective of working backwards from what you want to figure out what you need to look for. I will be implementing this. I think this is a good starting point to improve the opportunities that show up in my email.

What criteria do you give to your agent?

Most Popular Reply