Real Estate Investors is a very broad term. This could describe someone who owns one $5,000 rental house in Detroit or someone who owns hundreds of multi-tennant commercial buildings across the country. One of the biggest challenges beginners face, is all the options there are out there.
On top of all the options, it seems there are hundreds of self proclaimed real investor gurus who are selling you information on how they became rich (or at least how they made money once). This leaves beginning and experienced investors confused on their strategy.
The first step is, you need to have clear definitions of what you are looking for:
For example, what we are looking for is very specific: we want to buy a 3-4 bedroom bank owned house with 2-3 bathrooms at 70% or less on the dollar less repairs. The year the house was build should be from 1945-1975. That house needs to be in a neighborhood that I would feel safe walking through at 10pm at night and it needs to be within 30 minutes driving of my house (with some cities completely eliminated). The are also needs to have recent sales within 3 months to support the value and buyers who desire to live there.
When we first started, we just would drive 10+ properties a day. Some days we would go 1.5 hours away. We had no idea what was good and what was bad, we where expecting a deal to find us. Now we know without walking into a house, that is in our above sweet spot, what it will sell for (within 10%) so it makes the job easy. I typically can eliminate most of the properties that don’t fit this criteria without even looking at them, so I save time by only going to the top properties.
You’re sitting there saying, well everything you buy doesn’t fit this criteria and you’re right. After we bought a couple properties in that criteria, the odd deals started to find us. Sometimes they fit our sweet spot, other times they are way out of our normal business practices. Sometimes those deals make sense other times they don’t.
As you can tell from the above statement, you probably won’t find me pursuing a short-sale or a probate deal. That doesn’t mean there is not money in pursuing those deals, it just means I am expert at dealing with banks and REOs. If I cannot find the desired amount of deals that fit my above criteria I need to start to get more creative.
The other thing you need to mindful of is what is the standard for your target area. If 75% of the homes are build between 1890 and 1920 that should probably be your focus. If there area lot of 3 bedroom 1 bathroom homes, you don’t want to step too far outside what is normal for the area.
Set a criteria and stick to it. If you are struggling to come up with something, read my last post and search the MLS and see what other investors in the area are buying (cash sales) and copy their criteria. You will see trends.