I was reading and this was mentioned , but I cannot find out what it is? Can anyone explain
From what I’ve heard…
This means you should look at a minimum of 100 houses… put offers in on 10…hopefully have 3 accepted and if your lucky, close on 1…
may be way off key here…
tianyu,
The 100 house rule is that you should look at 100 houses (inside and out) in your target area before you buy anything. The purpose of looking at these properties is to learn the value of properties in your area. Serious investors KNOW the value of houses in theire area and don’t need comps, appraisals, or an internet site to help them value properties in their market.
Jason is talking about one of the guru sayings that you will need to look at 100 houses to buy 1. I think that the gurus are way off on that assertion. Since I KNOW the value of houses in my market, I only look at the ones that will be deals. I look at 3 or 4 properties and buy 1.
Mike
That sounds like a much better explanation…
Thanks PM
Try to stay away from ANY equation.
Equations are designed for math where there are no variables present.
Real estate has many variables.
Yes you can use them to get a small idea of what will work, but NEVER use ANY equation to base an investment decision on.
Math says 1+1=2
Real estate says 1+1= just about anything.
I have never even written 100 offers and I have over 20 properties. This equation would have me writing over 1000 offers?
Unlike the property manager I still use the internet when I buy properties. I dont know how big your market is but in my market, it would be nearly impossible to know enough about values to not use the internet for comps, marketing times, and other real estate trends. I guess I wouldnt be considered a SERIOUS investor though.
It is a good idea to get look at homes or at least study values in the areas that you anticipate buying, otherwise your offers will have no meaning behind them.
There are a huge number of ways of getting that ratio down to 1 in 3 or 4 like the property manager stated. A few of them are:
Knowing your market.
Networking with realtors that know when price drops are occuring or when good deals come on the market, or when they have a motivated seller
Locating motivated sellers before the offer
Locating buyers before you offer ( knowing what and where your buyers want before making offers)
Maybe the 100-10-1 works if your just sending out random offers on random houses, based on a percentage of asking price, but eventually people and realtor will stop looking at your offers and just pitch them. If it were me and I found a property that looked promising I would call the owner or the realtor and see what the possibilities were prior to making an offer, if it doesnt sound like there is any possibility give them your number and tell them to call you if they do become motivated. This will work much better then sending over insulting offers on peoples homes.
Keep in mind NO advice in real estate is concrete, no formulas, or ideas will work for everyone, so you need to come up with your own formula and ideas from experience.
Eric Medemar
I agree with Eric. Rules and formulas don’t apply. Unless your operating in a very small area, looking at 100 houses is not enough to know values off the top of your head. I’d have to look at 100,000 houses every month to know what a property was worth by looking at it. Comps, internet, appraisals and CMAs are much more efficient for finding value. I’d take pushing a few buttons over driving hundreds of miles any day.
Thank you for the help. I guess I am a little overwhelmed by the size of my market (I live in Miami, FL).
In a large market such as Miami you need to narrow it down to much smaller pieces, taking into accont the prices that you can afford to pay and what area seem to have the most potential for future equity growth. You can make money in just about any area. Usually large areas are made up of many small areas of simalairly priced homes. Pick an area that meets your financial needs and start doing something.
On a more philosophical note, many newer investors have a tendancy to be overwhelmed by any market, there is just so much to learn. Humans in general have a strong need to move toward certainty. Most move away from things that they are uncertain of, sometimes without even knowing it. A great way to overcome this strong desire to do things that you might be uncertain of, is to break your task down into much smaller tasks. Smaller tasks are not only more manageable but they can also help create the certainty that you need. The certainty can come by having each step so small that you are certain that you can do it.
A shortened example of this would be
large item Wholesaling homes in Grand Rapids
day 1 call all cash for your home ads, find out if they buy homes, if they wholesale homes, quiz them about the market. Look on signs and in newspaper ads
Day 2 call 5 different realtors and ask for a moment of their time to quiz them about what areas of the market you should be investing in, find out what way they think the market is going, ask if they are seeing many deals,
Day 3. Go and explore some of the areas that the realtors said might be up and coming, or where some deals might be.
Day 4 Go out and look inside some homes in that area.
The list can just keep going but I think you get the picture. Having a list keeps you focused on going forward, rather than on the sidelines overwhelmed by the whole picture.
To get your list take a piece of paper and put your end goal on top and start working backward branching out with legs. So you might start with wholesaling, then break off two legs for find buyers, then find houses, then from the buyers leg put the places you might find buyers, one of the modes to find buyers is to run newspaper ads, then run a leg off of their that says what papers are in your area, then off of the papers, a leg might be find out prices. I think you get the picture.
I hope this helps some, these are a few things that have helped me in the past.
Eric Medemar