Finding real estate deals doesn’t need to be as hard or as time consuming as many inexperienced investors like to make it out to be. While finding deals is of the utmost importance, the task is not so much as a mountain, but rather a molehill. In fact, finding real estate deals can be boiled down to one thing: knowing what to look for. If you can identify the telltale signs of a home that could serve as your next deal, it stands to reason you will have a better chance at landing your next deal. Makes sense, right?
Only those investors that know what to look for will be able to land a deal — that I am confident in. Of course there are exceptions, but I am not a proponent of blind luck. I am, however, a firm believer in hard work, determination, and a proper real estate education. With each of these in your corner, there’s no reason you shouldn’t be able to find your next real estate deal.
That said, it wouldn’t hurt if you knew what to look for either. At the very least, identifying what it is you must keep an eye out for will tip the scales in your favor. Fortunately, knowing what to look for doesn’t have to be difficult. The perfect recipe for finding real estate deals, for that matter, really only has two ingredients: houses and people. Let me explain what I mean by that.
When finding real estate deals becomes your primary objective, there are two factors that carry more weight than anything else: the property itself and the people that own it. When you put these two things together, you should be able to create a clearer picture as to how to proceed.
It is safe to assume that one of the most important factors to consider when buying an investment property is the home itself. After all, it’s the property that’s the commodity; the asset you will use to make a profit off of interested buyers. Without a product, how can you expect to make money on the backend of a deal?
Now that that’s settled, it’s worth noting that you can’t simply buy any property you are presented with and expect to flip it for a profit. Instead, you have to buy the right property. The fact remains: you need to be able to find homes that people want to buy if you want to make it as a real estate investor. Unfortunately, however, buying the right property is easier said than done. There are simply too many variables that go into a single purchase to come up with a one-size fits-al answer for the average investor.
There is one variable, however, that should take precedent over any other: the numbers. No other factor should carry more weight in an investment purchase than the numbers themselves. How much does the house cost? What’s its after repair value (ARV)? How much rehab work will need to be done in order to make it slightly better than the competition? The numbers are, more or less, the guiding light in every real estate transaction. Only if the numbers make sense can I recommend moving forward with a deal.
You can’t possible know if the numbers will work in your favor if you can’t find a property in the first place. How can you run the numbers if there is no property to run the numbers on? You can’t. Instead, you need to find a property first. Fortunately, it’s not as hard to find the right properties as many often make it out to be — you just need to know what to look for.
If finding real estate deals is currently your main priority, may I recommend looking at those that are, well, less than perfect? As it turns out, real estate investors shouldn’t be targeting those homes in pristine condition, but rather those that need attention.
To be clear, it’s the homes with the best profit margins investors want to target. And while some really “nice” houses may concede with great margins, the majority of deals investors will want to target will exhibit some or all of the following traits:
Far too many new investors look for new homes that aren’t in need of much repair, as their inexperience scares them away from those homes that need a lot of work. Sadly, it’s that train of thought that has ruined too many investor’s careers. It’s not often that you find a home in good condition that can be acquired for less than it’s worth. Instead of looking for the nice homes that don’t need much work, get some boots not he ground and find those properties that need more work. It’s the neglected homes that will come with a much better price tag, and, more importantly, allow you to purchase them under market value. The next time you go out looking for your next deal, pay special considerations to the home in need of some tender love and care. You may quickly learn that finding real estate deals is as simple as scouring those homes that look like they could use some attention.
Finding deals isn’t relegated solely to the properties themselves. While you could argue that the properties are the most important part of a real estate deal, I maintain that they are only half the equation. There is, for that matter, another important variable that needs to be taken into consideration: the home’s owner. You see, investors can only make a living if they are able to acquire properties under market value. And the only way to buy a property with the right margins is to find a homeowner that is willing to do so. That said, targeting the right homeowners is equally as important as targeting the right houses — if not more so.
Nonetheless, it’s of the utmost importance to find great investment properties with owners that actually want to sell. If for nothing else, the greatest investment property ever is worthless to investors if the owner refuses to part ways with the home. You would be wise to remember that: homeowners don’t have to sell to you. It’s, therefore, in your best interest to find those that are strongly motivated.
I maintain that motivated sellers represent one thing more than any other: opportunity. If a seller has reason to sell, it’s much more likely that they’ll want to make a deal. To give yourself the best odds of finding real estate deals, you need to find someone that already wants to sell. The tricky part is that not everyone knows they already want to sell, so you need to know what to look for.
Let’s take a look at some of the reasons homeowners may be motivated to sell sooner rather than later:
As I already alluded to, these scenarios — and many more just like them — represent an opportunity. Their motivation to sell is your benefit — and theirs. If for nothing else, it’s a win-win for every party involved. The homeowner gets to sell the home that’s giving them problems, and the investor gets their next deal.
In order to better determine the seller’s motivation, I recommend asking yourself the following questions:
Uncovering the answers to these questions is invaluable to a real estate investor. They not only suggest an inherent reason for the seller to sell, but they also give you a bargaining chip. At the very least, they can tip the scales in your favor. It’s not until you know what the seller really wants that you can offer them a deal they can’t refuse. Therein lies the true benefit to uncovering a seller’s motivation: gaining insight to what they really want out of a deal. Once you know what it is they covet the most, the easier it will be to give it to them and seal the deal.
Have you had any trouble finding real estate deals? Perhaps you know a different strategy? Let us know in the comments below.