Where are the deals?

[Elizabeth V.]

Hello! I'm relatively new to investing. I became an accidental landlord when my house couldn't sell in the down market. Several years later I purchased a condo not knowing how to analyze deals, but knowing it was cash positive. 

I'm in the market to buy another property. I've been keeping an eye out for Atlanta, Athens, and Winder, Ga. The problem is, when I use the advice of the BP folks-- to calculate as if I'm financing even if I'm using cash, to leave room for vacancies and property managers even if I won't necessarily use a manager, etc. -- I get NOTHING that is over 12% ROI. Even if I fudge the numbers so that I'm paying a ridiculously low amount AND don't have payments, I still don't get 12%. 9% seems like a miracle.

The BP folks say you have to keep looking, but honestly it is absolutely exhausting to not find anything day in, day out. I met with wholesalers who never got back to me (wasting my time). One wholesaler sends me deals, and then has NEVER been able to let me view a property because he gets "too busy." So he wastes my time. FISBOS have taken a lot of time to check out, and then the owner reneges or doesn't want to accept an offer that would lead to a cash-positive deal. 

The super cheap deals in the Atlanta area tend to be in very sketchy neighborhoods. More decent "up and coming" neighborhoods such as Kirkwood and Edgewood seem like there's no way they could be even cash positive, let alone a 12% ROI.

So investors, where the deals? 

I feel like I'm doing a lot of looking and analyzing, and getting nothing out of it. It's depressing. 

[James C.]

Elizabeth,

When things aren't going.... go back to basics.

First thing, take a look at your model and make sure your assumptions and calculations are correct. Spend some time going over them... like put in a 10,000 house and 10,000 rent... what do your numbers look like? if you aren't seeing 100% then maybe the calculations are wrong. Conversely, put in a 10,000 house and $10 rent... you should get a very low number. 

Also, if you are assuming all cash, then your ROI is going to be low. $1500/mo rental = $18000 before expenses/ $100,000 cash in, is 18%, if you assume 50% in expenses then you are looking at 9% ROI all cash. You probably won't find $1500/mo for 100K where you are looking. You may need to either lower your hurdle rate, put less cash in, or find another market.

Every method you describe for finding property is passive. You don't mention going out door knocking, driving for dollars, mailings etc. So, in effect you are waiting for properties to come to you. Most serious investors are minimizing passivity and increasing activity. 

If you find a wholesaler who isn't playing ball, pull a CeeLo and "forget him". An alternative is to make an offer sight unseen (contingent on inspection, etc.), and if you don't like it, then fail the inspection. Get a bank of wholesalers... not just one. Ditto for FSBO's. There is a reason they aren't using an agent. They think they know more, can save $, etc. Mostly, they are pig-headed, so quit trying to teach them to sing... time is your best asset with them... talk to them, let them stew in their own mess for some time, then go back. I find FSBO's marginal anyway.

Brandon Turners quote about 99+% of the properties on the MLS won't cash flow, but there is a price that 99% would cash flow. An option is to find that price, and then offer on every one at that price (with appropriate contingencies).

If real estate were easy, everyone would do it. Keep at it, keep working, try something new, different, and maybe uncomfortable... you'll get there. Effort = results.

Good Luck!

Jim