The best investment property is one you can walk to. But if the deal is super-great, going across the country is OK, but it better be real super-great. If it’s that great, others across the country are also looking at the property. And local investors have already passed on it. You will pay more in expenses when a property is located more than a few minutes away from your main location. Wherever you are, you have to know how to find investment property.
You know your area. The best deals are made, not found. When you see a great deal, you must be ready, and pounce. Have your financing lined up, with cash or a lender you KNOW you can get a loan. If you wait, others will be in line and you will have a multiple offer situation, which by definition, you are NOT getting the best deal. If you wait, you lose.
Educate Yourself
Take some classes in Real Estate investing. Get a real estate license or take the classes that are required, even if you do not get a license. Understand foreclosure law for your investment environment. Understand the foreclosure process in the area you are buying. Attend a RE Investor club meeting, work with bird doggers who can find a deal, find a solid RE agent who can facilitate a transaction that you find. If you are handing the agent a sure deal, get a piece of his commission to help your building financials.
If you understand what you are doing, you can mitigate much, but not all, of the risk. You will at least understand the maximum risk if nothing else.
Look for situations where a deal is available to be made
I have known homeowners that will just give away their house. Why? Because it is in foreclosure, underwater, and they are leaving. Offering them a few thousand for their house can make them the happiest people on the planet. And that could be the best deal of your life, if you understand foreclosures and are willing to take a gamble.
Ask yourself, if a realtor or investor can sell you a deal, why could you not buy it BEFORE they found it? But it at their wholesale price!
Have cash
Often a distressed homeowner only has a few days left before the house is owned by the bank. It could be a $100K profit situation; all you need is the first $125K. If you have it, you make $100K. If you don’t, you have to keep working your full-time job. Save so you can get great deals.
To get a deal, network. Find a local real estate investor club and join. Look in the newspaper for foreclosures. Put out “I Buy Houses” signs; advertise in places that might help, radio, bulletin boards at stores, etc. Some websites sell foreclosure information. Regardless of where you get the information or investment tip, you have to know how to parlay that information into a deal. Every building that exists is a deal, AT THE RIGHT PRICE.
Look for pre-foreclosures, look for buildings that need to be turned around, and look to repurpose buildings. There is no wrong way to make money, but there are many ways to lose money. If you overpay, or overestimate the profitability, you can lose big.
Great Deals Do Not Come Every Day
Be patient, look and study hard, run ROI analysis on multiple ‘test’ properties, and get ready for the deals when they present themselves.
There is a lot of money to be made in properties, but the majority of it comes from legwork, not buying retail…
Be sure to look at my “Coming Attractions” page and see what I have in store for upcoming articles.
Are you currently looking for investment property? residential or commercial? Do you own any now? Tell me a bit about your plans.
“The best deals are made, not found.” I like the way you put this and have not really considered from this angle. I need to though.
I lost several REALLY good deals last year before I purchased my current rehab because waited too long. I’ve done this with stock investing as well. I think it’s worse in RE investing because there are others out there waiting for a deal. I could find the deals, but was scared to take action. It was my first time buying with cash and it was a big deal in my head, in reality it wasn’t. A classic case of ” analysis paralysis”.
The pre-foreclosures are some of the greatest deals. I missed out on a few early on too, but I started to get more aggressive in my searches. I used to send out mailers to 100+ people in foreclosure every week. A lot of research went into the list ahead of time too. Cash is king, but remember a Home Equity line is cash too.