Know your Competition – Real Estate Investing

know-your-enemyWhen you read the title of this thread, you are probably wondering where I am going with this article.  This is not about working with or being friends with your competition, although I think that can be valuable.  It is about knowing the deals other people are getting.

I have this terrible habit, it is discouraging most of the time.  Once every two weeks or so, I do my target search, but rather than looking for active properties, I am looking at closed sales.  I basically go through every deal and I do a title search on that purchase.  When the property is bought in an LLC, Corp or with no mortgage you know it is to an investor.

Once I have the name of that entity, I can do another search that let’s me see all the properties they own.  I also check the California Secretary of State web site and see who the owner of the entity is.  Not only does this process make me feel like a stalker (lol) but it gives me an idea of two things: the deals other investors are getting in the market and who is doing the buying and how they are taking title and getting financing.

When we wholesaled House #21 when my friend mentioned who the buyer was, I had no idea who he was.  But when he mentioned the two entities he uses to buy in, I instantly knew he was one of the biggest players in my market.  That made me feel pretty comfortable with the deal automatically.  We also had a good chat and we had both heard of each other, but never officially met (we still haven’t).

The reason I am bringing this up, is I did this search last night, and normally I get pretty frustrated that people out there are getting the smoking deals, the market really has changed.  There was maybe 3-4 deals I would of bought at the prices other investors got them compared to the 20+ I am used to seeing.   This means that the market is getting saturated with other investors and everyone is sacrificing profit margins to buy properties.  Fix and flippers (aka: me) are the first people who have to back out because we have to pay 10% less than a long-term investors out of the gate (can you say closing costs).

Don’t get too discouraged, we do have 1 house in escrow still, and 4 or 5 rehabs going on.  But clearly it is time to broaden our horizons until banks release some more inventory.  I am just lucky that we have the inside track with quite a few REO offices, they should be good for 1-2 properties a month at great deals.

For New Investors

Please do this search, drive-by the properties and analyze the deals.  If nothing else, this will provide you massive encouragement that other investors are out there succeeding in real estate.  Your personality type should know that if someone else can be successful at something, you definitely can be too!

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5 Responses to “ Know your Competition – Real Estate Investing ”

  1. Mike Z says:

    Great Idea. Thanks for sharing. By the way have you look into small multi family deals? In my market the SFH market has gotten crazy competitive and I have found better returns with Duplexes. Just a thought.
    Z

  2. Steve says:

    House #25 is a duplex. The competition is less on them, oddly enough all the numbers pretty much are the same as a house (combined rent, appraised resale value), except their base price is a little bit higher than a single family house.

    I missed out on a sweet deal on a 4-plex that I would have loved to own, but you can’t win them all.

    My hard money lender gets more conservative on multi-families too.

  3. Steve says:

    All my excuses being said, it still is a valid strategy that we have been pursuing. There are not a lot of them though.

    The benefit is, trying to get $700/mo rent from two people is much easier than $1,400-$1,500 rent from one person.

    Plus for resale, if you sell them FHA, you the owner-occupant can get 75% of their mortgage paid for.

  4. Mike Z says:

    Steve,
    Curious what you think of this blog post?

    http://wealthbuildingpro.blogspot.com/2009/11/your-opinion-is-welcomed-as-something.html

    I wrote it based on the fact that I think something is almost fake in the market.

    Z

  5. Steve says:

    Hi Mike –

    I read all of your blog posts last night and I think your post outlines everything that is going on. The government has their hands it.

    One thing we’ve been doing is starting to look at and work on some higher end properties that need repairs. They don’t work on a long-term basis, but they will provide short-term capital and allow us to keep more of the low end inventory in our long-term program.

    No answers right now, it’s very tricky place to navigate. If the market get’s hammered again, which the low-end can’t go down too far, I don’t want to get caught with 15 houses in the system.

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