RE:FINDING A DEAL

For some reason I am having a hard time wrapping my mind around the process of finding a deal.

I assume that I will:

  1. Find a house that meets any of the following criteria
    a. had recent drop in listing price
    b. is vacant
    c. has been foreclosed on
    d.listed on MLS and needs massive updating.

  2. Once I find a property see what updated comps are going for to see what I may potentially get if I fix it and sell it.

  3. have it appraised at it’s “as is” value

  4. caculate profit potential.

  5. Offer 60% of the “as is” current market value?

I see houses on the REO sites and Hud sites but cannot figure if it is a deal or not.

Is there a book specifically about locating deals?

Is there a book specifically about locating deals?

Yes, but I’m still in the process of writing it. I hope to finish it early next year and get out of the REI business altogether. ;D

Seriously, each person’s goals and circumstances are different and, likewise, so are their paths. There are numerous ways to find houses, so we’ll just say “Find Property” as step #1. You need to quickly ascertain whether the property is “good” or “bad”. This is a HUGE step that many don’t do correctly as it depends on a lot of factors. So, in your scheme of things, step #2 is actually step #2, #3, #4, and #5.

  1. Create a preset list of YOUR criteria.

This includes a LOT of things like property characteristics (age, size, type), level of repair work needed (major rehab, heavy cosmetic rehab, light rehab, no rehab), your time required, your financial position, etc.

  1. Locate Properties

Depending on your criteria (and then some), you may drive for dollars, network, peruse the MLS, direct market, advertise, etc.

  1. Determine Worth

Not worth of the property, but worth it in the overall scheme of things. Will it meet your financial criteria? For example, some people may only buy properties that will net them $20k, while others will be happy with $10k or even $5k or even$1k, if they plan to flip. It all depends on YOUR criteria.

  1. Make Offer

If the property is a match make an offer. Usually, it’s good to make a lowball offer initially as you can always work up. However, for certain properties (HUD especially), you need to understand what types of offers will fly and which ones will be a complete waste of time.

  1. Complete Due Diligence

Give yourself as much time as you can between the time you make an offer until the time you are fully committed to the deal to finish your due diligence, like running a title check, nailing down the amount of repairs needed, etc.

  1. Close

If everything is great with the property, you can now close. Note that depending on your criteria, you may just be assigning the contract or even birddogging the deal to another investor, so this step wouldn’t apply (to you).

  1. Exit Strategy

This is actually part of #1 above as you should ALWAYS have an exit strategy first. That is to say, you shoul ALWAYS know what you are wanting to do with a property before you even locate it (for the most part). This step is just the execution of that strategy.

HTH.

I would add one thing. It is absolutely critical to KNOW your market. Forget the silly comps, appraisals, etc. Go look at enough houses (100-200) in your market until you KNOW the market value of properties. Then, when a “deal” comes along, you will know it. This will speed up your entire process and make you a LOT more confident in what you are doing. Also, it is very expensive to get an appraisal on every property that you are going to buy.

Good Luck,

Mike