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How to Find More (and Better) Real Estate Investment Opportunities
The most frequent complaint we hear from our fellow real estate investors these days is that there isn’t enough suitable investment inventory. Investors drive neighborhoods, scour foreclosure lists, mail thousands of postcards, risk being fined for planting “bandit signs” on freeway exits, and still can’t find enough good deals. And when they do find an otherwise “good deal,” the excessive time and expense that was expended to locate the deal often makes the Investor question whether the deal is still worth doing.
If the Investor needs to bring in a joint venture funding partner, or fund the deal using a hard money loan, that only makes matters worse.
So what’s the solution? Simple. As an Investor, you must invest where the deals are. But, you might say, “I live in city (or state) X. I can’t invest in city (or state) Y,” which may be hundreds, or even thousands, of miles away.
Our response: “Why not!!!???”
Many of us who are in the business of Note Investing will rarely, if ever, buy a note that is secured by a property which is located in the city or state where we live. We routinely buy notes which are secured by properties that are located in cities which are hundreds — or even thousands — of miles from our homes. Why? Not because we don’t want to invest in the communities where we live. Rather, it’s because investing is a business and we go where the profits are. It’s really that simple.
But, the traditional investor might say, how can I conduct pre-purchase due diligence on potential investment properties? And after the purchase, how can I rehab and manage my properties?
These concerns can all be addressed with the cliche, “Your network is your net worth.”
Note Investors typically favor markets in various — and often distant — cities and states. The preference for these favored markets is often based on factors which include availability of inventory, market conditions generally, and the degree to which local law is amenable to investors.
Pre-purchase due diligence can (and should) be conducted through a variety of means, including a local Realtor with whom the Investor has done business with in the past or with whom the Investor intends to do business with in the future. The savvy and entrepreneurial Realtor will recognize — and be eager to take advantage of — an opportunity to join the network of an Investor who might bring the Realtor many listings (and perhaps even refer other Investors!) over time.
Ditto with contractors, property managers, and others in the real estate business.
Is growing and maintaining a strong network easy? No, of course not. But it’s absolutely necessary if an Investor wants to earn the Big Bucks!
To be successful over the long-term, we Investors must cultivate and rely on relationships with other real estate professionals. The other side of this coin is that we must divest ourselves of the false — and limiting — idea that our investment properties must be within a reasonable driving distance of where we happen to reside.
Note Investors and a small percentage of “traditional” real estate investors have long invested in locales distant from where they reside. For all other Investors who are looking for a solution to their “inventory problem” and for other traditional investors who want to grow their business, it’s time to abandon the self-imposed and false idea that we shouldn’t invest in areas that are distant from where we reside. Our quote of the week, which comes to us courtesy of our colleagues Chase and Robby, should inspire all of us to break free from artificial, self-imposed limits: “There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder.” Ronald Reagan.
Although we admit that investing in distant locales is easier for the Note Investor, given the greater return on investment (ROI) that is typically realized in a Note Deal, as compared to a traditional “brick-and-mortar” deal, this fact, if anything, illustrates how much more important it is for the traditional investor to build and maintain a professional network.
Comments (4)
I'm on the fence.. I know folks who have tried and said never again. I also know folks who are shall we say seasoned investors and actually went to the area they choose and developed a rehab crew there. Seems to be working well for them. I do have the need for more deals but have started marketing more deeply in my local area as opposed to other area futher from home base. As with all things, time will tell.
Anthony Stephenson, over 8 years ago
Kurt,
Thanks for commenting. The question of which out-of-state area(s) a particular investor should focus depends for its answer on a number of factors that are specific to the individual investor. As investors, most of us agree that we should invest in markets that will be the most profitable. However, reasonable minds often differ on which markets those happen to be at any given time.
Among Note Investors, there are a set of investment criteria that generally guide most of us. Investors’ application of these criteria to the same investment situation will, however, often yield very different results. For example, there are states in which some Note Investors simply refuse to invest. Other Note Investors might profitably invest in those states.
In summary, although there can certainly be “wrong” answers to the question, there can also be many “correct” answers to the question. It is this exercise of discretion and judgment, in answering this and other investment-related questions, that will determine an Investor’s success.
Menashe Lapin, over 8 years ago
I would also like to find out how to find investments outside of my community as well please if you have any ideas or any leads to where I can have success please enlighten me. Thank you for your posting never thought about it.
Emanuel Sanchez, over 8 years ago
I agree with your thinking, and I am comfortable investing outside my immediate area, but how do you find those areas that have the best investment opportunities? I am thinking mainly in terms of a good cash on cash return since appreciation is not a given. What cities and towns should I be focusing on? Thanks for your help.
Kurt Pourbaix, over 8 years ago