Finding the "Right Deal"

[Matthew Simmons]

Hi, my name is Matthew, I am from Pittsburgh and I am new to both REI and BP. I am primarily interested in long term buy and hold rentals. I have spent the last 6 mos reading/watching everything I can, to try and learn the craft. I have toured more than 50 Multi-Fam properties and I have honed in on a few that I think have the most potential. However, I don't feel like I'm getting a "steal". To buy the properties I am interested in, I will need to be between 85-90% of the asking price. This is coming from my RE Agent, who is also and investor, and knows my market very well. I feel so often when I listen to podcasts or read about successful investors, it often starts with a "they practically gave it to me...." type story. That isn't happening for your boy. At least, not yet. If I am conservative with my Cap x, management, repair expense and find a property that fits the numbers I am comfortable with; in terms of Cash flow, COC return and Cap Rate etc. does that necessarily make it a "good deal"? I honestly can't tell if I'm being a wuss or just appropriately cautious....

[Dominic Lucarelli]

You'll unlock the most return on your cash buying up the worst properties on the block and making them the best. How you get that deal is up to you. 

Try a new mental approach. Find the best area in Canonsburg, the place you'd like to live the most, and walk up and down that area. Identify the properties you think are THE BEST and THE WORST. What do they have in common? What's different? Once you do this, identify what you'll need TO DO to make A = B. Then take this information to your local Home Depot or Lowe's and ask the contractors desk how much they think it would cost. (This will be your Repair budget) Now, it's your job to ACQUIRE this property. The widely accepted math for this is 

OFFER PRICE = MAX ARV times 0.70 minus Repairs minus Closing Costs

Personally, I find MLS deals too competitive and expensive. I've offered on lots and haven't gotten a single one yet. But I do have one in the pipes... I found the owner of a duplex fixing up his property one day while I walked the neighborhood. He told me his story, why he wants to sell, how much he owes on the mortgage, took me on a tour of the building, and told me what issues the property has. This is INFINITELY the best information you can get. Face to face with the owner. I asked him if he'd be willing to sell to me full price if i pay off his remaining mortgage ($20k) and I make him payments for the rest because I don't like banks. Waiting to hear back from him. I'll do that deal in a heartbeat.