I sent this to my list but have had a few people who are in all sorts of markets asking me if you can find a good buy in today's market in a market you may not physically be in. It is a fantastic game to play.
Bit of a refresher as well...
So - how do I find a good/great buy today? Where to start? Is it possible - can you even buy well below list price on a property?
Example by Answer: In Vegas we just did that on a 79k listed single family property.. it is under contract now at 67,500 - who'd have thunk that (I REALLY didn't think they would go below 69k which was the actual sales price for the property in 1997 but they did).
Odds are on your side if you are a cash buyer still - the rest of America are borrowing up a storm....foreigners included now with the opening up on FNAP loans...
Remember - you are ONE person trying to find a great deal (or 10) - either way, you aren't bulk buying, you just need ONE gem at a time...it may take some time but you will find it or them....all the principles are the same as before.
This is the definition of Real Estate FUN if you enjoy analyzing!
Your goal is to find a good property that if you sold tomorrow you would make $$ on. Could you do it in a market you don't know...? Yes, absolutely.
So this email is simply steps to find a good BUY.. Due Diligence is a WHOLE other ballgame and may well end up being the time you find out WHY the property was a "good" buy in the first place (however, you can always re-enter negotiations if worth it).
Caveat: "good" doesn't mean gang and generally if you get a "great" deal and you are buying in a decreasing market, you may be buying into tomorrow's prices etc so do also check area prices.
Steps:
1) Pick ANY location within your market of choice and where house prices meet your budget. Google Drive streets to check for calibre of that - obviously the one with grafitti is to be veered clear of - but look at the type of cars, the cleanliness etc. Is their pride of ownership evident?
If you do not know a city - start in sections - pull EVERY house that meets your base criteria in one of the sites - Realtor.com is great ... For instance - you want SFR Detached (ie eliminating town homes) younger than 1990, 3 br/2 ba, minimum of 1200 sq ft under 120k but higher than 60k (gets rid of mobile homes)... if that produces too many then start reducing further - if it produces too few (Vegas would have almost zero in that criteria), maybe you look at 2 bedders and 2 baths or go older etc.
Once you have a "feel" for quantity within your bracket then step 2.
2) Ask ANY real estate agent to set you up on an automatic email list of EVERY property that comes onto the market in that location meeting your honed in criteria - in Eastern states, sign up for Listing Report (love, love)... AND also to sign you up for every RENTAL property that comes onto the market in that area - use the same criteria - even at cursory glance you will be able to work out broad brush rental yields... that might end your search immediately - DO try to consider taxes, insurance and holding costs (again, East Coast properties are crazy higher in maintenance, taxes etc) when comparing markets...Use GoSection8.com and type in the zip for rental comps - pretend you are leasing a property with your criteria - is there a glut or only a few etc etc... That is what the government will pay, that is a GREAT start for calculations.
3) The next and most important aspect for any property that you are interested in (ie close to schools, shops and transport) - WHO are you buying from...???
4) So - ask for and discover the history of specific properties that tweak your interest... go to the assessor's website- look at the deed itself... Your MOST critical question is WHO are you buying this from and WHEN did they buy and WHAT did they pay (so what are they looking for out of the sale and what margin do you have) - also glean - are you in an investor only neighborhood (if too many, and too many on the market, it is a very good sign neighborhood turned into uncaring neighborhood)
WHY
Your best bet is to buy from an investor who bought in 2010 - 2012 in a fairly solid owner occupied area at dirt cheap prices and wants OUT - and it doesn't matter why - if they are selling only 2-3 years after buying, they are wanting out.....(bad experience or just wanting to play rehabs in the Bahamas...)
5) Look for tell tale signs like "traditional sale", "Equity Seller", "quick close" etc...MOST importantly - DO consider a property that, under "finance considered" reads "cash only" - that means THIS PROPERTY WON'T QUALIFY FOR A TRADITIONAL LOAN... yay! Probably has an illegal addition (but that could be as simple as a covered patio which will cause an FHA loan to be denied),it could have been trashed etc and the seller can't be bothered to fix or is out of money to try. EVEN better - find out if it has already been under contract and fallen out of contract. Price drops are another really, really good indication.
6) Ask the real estate agent to show you what the RENTAL history has been on the property... my DREAM property would be something that was listed at a high rent in 2011, lower in 2012 and now the property is for sale/lease right now...that would be a KILLER for a new investor.... 2 or 3 tenant change overs in as many years? Not taking delight in that but it is a GREAT indicator someone is fed up!
Another favourite indicator is a property where it is tenanted for a ridiculously low amount compared to market - it will always say in an MLS listing how much a property is rented for ... if you have average rents in the area at $1000 and you are seeing $650, they have a grossly underperforming property. Yes, there will be a reason for this and you can find that out in Due Diligence.
7) If you have someone who is an investor wanting out right now, you are also going to bet that if it has sat on the market for longer than 20-30 days, they will be even more eager to take a low ball, quick close cash offer.....the LAST thing they want is to have to wait another 6 weeks for a traditional financed sale to "possibly" go through. They are you. You would want the $$ and to run. Properties either sell in the first 7-10 days or they almost seem "stale" to the market - which leads to...
8) DOM - Days on market - how long has this property been listed... has it bounced on and off market - has it been under contract and fallen out? HISTORY of property will show that - ask your agent to pull that history. Clever agents will remove a property from the market after 2 weeks so it doesn't seem to have sat... so again, ask for the history - that will show if the property was withdrawn....
KNOW EVERYTHING about that property and 20 others if needs be! Call the agent and ask directly - "what is up with this property"?... they would be stupid to tell you but never, ever underestimate stupidity!
Bottom line - if you like a property, find an investor who bought in 2011 or 2012 and is selling, they aren't normally that greedy - lowball with a QUICK close date - offer to take "as is" (you can pull out still during due diligence) - make it as tempting for them as you can ... BE THE DREAM BUYER.
Wiggle room bidding options:
- Quick close - normally a property closes in 30 -45 days.. make yours 10 or even 7 - let the seller taste the money about to come in!
- Shorter Due Diligence instead of 7 or 10 days, why not 5 days or 3 on a good property? It really only takes 1 day to get inspections - and if they have forgotten to have utilities on etc, you are going to be extending anyway!
- "As is/where is" - offer to buy without any fixes to the property
- Lower commission rate your side... if you use the same agent that is selling the property and aren't tied into a specific agent, this could be a winnner - the seller is up for 6% commission otherwise.
What to Offer?
Know what they bought the property for, factor in they got ripped off on repairs (so add 10-15k to that list price) and then ask yourself how much you would feel comfortable to walk away with if you were in their shoes.... answer to that is the precise dollar value that you can probably be accepted for....then offer just below that... if they counter, you are in with a VERY good shot at countering the counter.
AGAIN - remember that most investors in the market place today are borrowers now - there aren't many full cash buyers out there who are willing to do the research.
ASIDE - if any of you want financing, basically just remember 2 years of full documentation of income, 35% down and then you can get a 30 year loan at about 6.5%.....
BIGGEST LESSON YOU CAN LEARN IS THIS: I will place my hand on heart and say that each person reading this knows more than 90% of the real estate agents you will contact. Take the lead and be specific on what you want and find the eager agent to help you.
Hope this helps those of you I have spoken to in the last few weeks....!
Bit of a refresher as well...
So - how do I find a good/great buy today? Where to start? Is it possible - can you even buy well below list price on a property?
Example by Answer: In Vegas we just did that on a 79k listed single family property.. it is under contract now at 67,500 - who'd have thunk that (I REALLY didn't think they would go below 69k which was the actual sales price for the property in 1997 but they did).
Odds are on your side if you are a cash buyer still - the rest of America are borrowing up a storm....foreigners included now with the opening up on FNAP loans...
Remember - you are ONE person trying to find a great deal (or 10) - either way, you aren't bulk buying, you just need ONE gem at a time...it may take some time but you will find it or them....all the principles are the same as before.
This is the definition of Real Estate FUN if you enjoy analyzing!
Your goal is to find a good property that if you sold tomorrow you would make $$ on. Could you do it in a market you don't know...? Yes, absolutely.
So this email is simply steps to find a good BUY.. Due Diligence is a WHOLE other ballgame and may well end up being the time you find out WHY the property was a "good" buy in the first place (however, you can always re-enter negotiations if worth it).
Caveat: "good" doesn't mean gang and generally if you get a "great" deal and you are buying in a decreasing market, you may be buying into tomorrow's prices etc so do also check area prices.
Steps:
1) Pick ANY location within your market of choice and where house prices meet your budget. Google Drive streets to check for calibre of that - obviously the one with grafitti is to be veered clear of - but look at the type of cars, the cleanliness etc. Is their pride of ownership evident?
If you do not know a city - start in sections - pull EVERY house that meets your base criteria in one of the sites - Realtor.com is great ... For instance - you want SFR Detached (ie eliminating town homes) younger than 1990, 3 br/2 ba, minimum of 1200 sq ft under 120k but higher than 60k (gets rid of mobile homes)... if that produces too many then start reducing further - if it produces too few (Vegas would have almost zero in that criteria), maybe you look at 2 bedders and 2 baths or go older etc.
Once you have a "feel" for quantity within your bracket then step 2.
2) Ask ANY real estate agent to set you up on an automatic email list of EVERY property that comes onto the market in that location meeting your honed in criteria - in Eastern states, sign up for Listing Report (love, love)... AND also to sign you up for every RENTAL property that comes onto the market in that area - use the same criteria - even at cursory glance you will be able to work out broad brush rental yields... that might end your search immediately - DO try to consider taxes, insurance and holding costs (again, East Coast properties are crazy higher in maintenance, taxes etc) when comparing markets...Use GoSection8.com and type in the zip for rental comps - pretend you are leasing a property with your criteria - is there a glut or only a few etc etc... That is what the government will pay, that is a GREAT start for calculations.
3) The next and most important aspect for any property that you are interested in (ie close to schools, shops and transport) - WHO are you buying from...???
4) So - ask for and discover the history of specific properties that tweak your interest... go to the assessor's website- look at the deed itself... Your MOST critical question is WHO are you buying this from and WHEN did they buy and WHAT did they pay (so what are they looking for out of the sale and what margin do you have) - also glean - are you in an investor only neighborhood (if too many, and too many on the market, it is a very good sign neighborhood turned into uncaring neighborhood)
WHY
Your best bet is to buy from an investor who bought in 2010 - 2012 in a fairly solid owner occupied area at dirt cheap prices and wants OUT - and it doesn't matter why - if they are selling only 2-3 years after buying, they are wanting out.....(bad experience or just wanting to play rehabs in the Bahamas...)
5) Look for tell tale signs like "traditional sale", "Equity Seller", "quick close" etc...MOST importantly - DO consider a property that, under "finance considered" reads "cash only" - that means THIS PROPERTY WON'T QUALIFY FOR A TRADITIONAL LOAN... yay! Probably has an illegal addition (but that could be as simple as a covered patio which will cause an FHA loan to be denied),it could have been trashed etc and the seller can't be bothered to fix or is out of money to try. EVEN better - find out if it has already been under contract and fallen out of contract. Price drops are another really, really good indication.
6) Ask the real estate agent to show you what the RENTAL history has been on the property... my DREAM property would be something that was listed at a high rent in 2011, lower in 2012 and now the property is for sale/lease right now...that would be a KILLER for a new investor.... 2 or 3 tenant change overs in as many years? Not taking delight in that but it is a GREAT indicator someone is fed up!
Another favourite indicator is a property where it is tenanted for a ridiculously low amount compared to market - it will always say in an MLS listing how much a property is rented for ... if you have average rents in the area at $1000 and you are seeing $650, they have a grossly underperforming property. Yes, there will be a reason for this and you can find that out in Due Diligence.
7) If you have someone who is an investor wanting out right now, you are also going to bet that if it has sat on the market for longer than 20-30 days, they will be even more eager to take a low ball, quick close cash offer.....the LAST thing they want is to have to wait another 6 weeks for a traditional financed sale to "possibly" go through. They are you. You would want the $$ and to run. Properties either sell in the first 7-10 days or they almost seem "stale" to the market - which leads to...
8) DOM - Days on market - how long has this property been listed... has it bounced on and off market - has it been under contract and fallen out? HISTORY of property will show that - ask your agent to pull that history. Clever agents will remove a property from the market after 2 weeks so it doesn't seem to have sat... so again, ask for the history - that will show if the property was withdrawn....
KNOW EVERYTHING about that property and 20 others if needs be! Call the agent and ask directly - "what is up with this property"?... they would be stupid to tell you but never, ever underestimate stupidity!
Bottom line - if you like a property, find an investor who bought in 2011 or 2012 and is selling, they aren't normally that greedy - lowball with a QUICK close date - offer to take "as is" (you can pull out still during due diligence) - make it as tempting for them as you can ... BE THE DREAM BUYER.
Wiggle room bidding options:
- Quick close - normally a property closes in 30 -45 days.. make yours 10 or even 7 - let the seller taste the money about to come in!
- Shorter Due Diligence instead of 7 or 10 days, why not 5 days or 3 on a good property? It really only takes 1 day to get inspections - and if they have forgotten to have utilities on etc, you are going to be extending anyway!
- "As is/where is" - offer to buy without any fixes to the property
- Lower commission rate your side... if you use the same agent that is selling the property and aren't tied into a specific agent, this could be a winnner - the seller is up for 6% commission otherwise.
What to Offer?
Know what they bought the property for, factor in they got ripped off on repairs (so add 10-15k to that list price) and then ask yourself how much you would feel comfortable to walk away with if you were in their shoes.... answer to that is the precise dollar value that you can probably be accepted for....then offer just below that... if they counter, you are in with a VERY good shot at countering the counter.
AGAIN - remember that most investors in the market place today are borrowers now - there aren't many full cash buyers out there who are willing to do the research.
ASIDE - if any of you want financing, basically just remember 2 years of full documentation of income, 35% down and then you can get a 30 year loan at about 6.5%.....
BIGGEST LESSON YOU CAN LEARN IS THIS: I will place my hand on heart and say that each person reading this knows more than 90% of the real estate agents you will contact. Take the lead and be specific on what you want and find the eager agent to help you.
Hope this helps those of you I have spoken to in the last few weeks....!
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