Let’s talk Property Acquisition and filling up your deal pipeline for real estate investing. The way I think of property acquisition is like a funnel. You need to put A LOT of deals into the top of your funnel and the good deals worth buying will shake out the bottom.
There are many ways to find these properties, whether through online websites, your acquisitions manager, a referral from a friend or finding a vacant house in your neighborhood.
Regardless of how you acquire these properties, I want to share the 4 rules I follow when starting out my search for new properties and that I share with new (and some more experienced!) real estate investors.
4 Rules of Big Profit Flips
1) Good deals go fast
Properties listed on the Multiple Listing Service (MLS) that are good investment properties usually have a lot of investors and realtors looking at them, so they go very quickly. These properties get a lot of exposure and it’s the easiest (the lazy man’s way) of finding deals, but there’s also typically multiple offers and a lot of competition, so these deals go very, very fast.
I encourage you to use the MLS to find deals, but also make sure you are using other acquisitions strategies because otherwise you’ll have a lot of competition.
2) Don’t fall in love with any one house
Real estate investing is a numbers game. I could literally care less which houses I buy. I only care that the property meets my buying criteria, so I never fall in love with a house and you shouldn’t, either.
It’s an investment property, you’re not getting married to the house. Don’t overthink it.
3) Make A LOT of offers
If I’m buying a property from the MLS, I typically have to make about 25-30 written offers to get 1 or 2 solid deals to flip, so you have to make A LOT of offers.
If I’m buying properties off market, I typically need about 35-55 phone calls from motivated sellers to buy just 1 or 2 properties. That may sound like a lot of work, but it’s not. It’s just paperwork and talking on the phone.
4) Do your own due diligence
Do not rely on other realtors, wholesalers or investors to do your due diligence for you. These are your properties to flip, it’s your profit to make. Do your own research.
Remember, other real estate professionals like contractors, wholesalers and realtors all have their own agenda and they may make money when their agenda conflicts with yours. Compensation drives behavior. They may be compensated and make a profit when their agenda conflicts with yours. For example, a realtor may tell you the ARV of a property is $300,000 because they want you to buy the house. After doing your own due diligence, you may realize the ARV is closer to $260,000 which throws off all your numbers. Do your own due diligence. Just trust me.
The search criteria that I highly recommend you begin with when looking for new deals starts like this.
Determine what the price per square foot of the After-Repair Value (ARV) is.
For example, most properties in Northeast Ohio where I invest have a price per square foot ARV between $110-130 per foot. So I assume when I’m looking for properties that I can sell my properties for approximately $120 per square foot in most Cleveland suburbs.
A few suburbs like Rocky River or Lakewood can sell for $150-175 per square foot, but they are the outlier. So using $120 per square foot is a very good rule of thumb for me. Talk with your real estate agent, your title company, other real estate professionals and run your own comps and determine what is a good rule of thumb for you in your market for price per square foot.
Once you determine the price per square foot for the ARV, then multiply times 70% and look for properties below that number. Your real estate agent can put a search in the MLS specifically for properties under that price per square foot.
Since my rule of thumb is $120 per foot, for the ARV I’m specifically looking for properties that are less than $80 per square foot, which is about 65% and fits my Automated Offer Formula.
I’m also searching for properties that have key words in the property description, such as “fixer upper”, “handy man special”, “needs updates”, “sold as is”, “vacant”, “foreclosure”, “needs TLC” – these key words are a red flag that the property is being sold below market value.
Flip a House in 7 Days.. or Less?
Until now, I’ve ONLY shared this system with my high-end coaching and mastermind members, but in this new training video, I’m going to show you my simple 3-step system for no cost!