It is important that you look at lots of potential real estate investments if you are going to pick a few that are winners, while you avoid the dogs (or should we say “the frogs”?). In order to find lots of potential deals for the top of your real estate funnel you need a big real estate network. You may find that less than one out of a hundred property candidates are worth making an offer on. Of those you make offers on, you may only close on one out of ten (that is if you’re not offering top dollar).
Odds are that if you are like most people you don’t have vast amounts of cash lying around that you can use for just any investment opportunity that comes along. It is likely that you need to be choosy about the offers you make and the deals you do. Most of us would like all of our deals to be great deals. In order to improve the quality of your deals you’ll need to reject the majority of what you evaluate.
At the top of your investment funnel you need lots of prospective deals. These deals need to be qualified or disqualified as measured against your investment criteria. That is the subject of another article. Suffice it to say, you should not, and probably cannot, buy every deal you look at. You must carefully analyze lots of potential investments in order to choose something that really works. As they say, “You have to kiss a lot of frogs before you find the prince.” Don’t be in a big rush to buy something. When looking at big deals, be willing to take a year to find the right deal. Sort through the candidate real estate properties and be willing to reject the majority of them. Take your time. Money can be made on the front end of deal making process by being careful in developing and adhering to your selection process.
Sometimes a deal that looks bad can be turned into a good deal with some negotiating, fix-up after the purchase, and/or by getting the right financing. Don’t reject every deal that doesn’t measure up without first asking yourself: “Can I turn this frog into a prince with a little negotiating and positioning and creativity?” It may be worth the effort to tinker with the terms of the deal. However, don’t think that just a little lip-gloss will turn a frog into a princess. You will have to get some serious concessions from the seller, or the financier (which may be one and the same) in order to make the transition happen. Sometimes a little creativity can make a poor deal wonderful. For instance, you may repurpose a property and, thereby, greatly enhance its profit. Sometimes it’s the ability to envision a higher and better purpose that improves the property’s ultimate value.
Looking at lots of candidate properties is what will help you to develop an eye for good deals and for bad deals. Eventually you’ll know a good deal when you see it. Get used to saying no, no, no, no thank you. Then move on to the next candidate. Be tireless in your search. Do your homework and reject the dogs. (see: https://www.area-info.net/articles/show.php?cty=Salt%20Lake%20City&st=Utah&article_id=1354)
Of course, once you uncover a great deal, be ready to act. Get it under contract immediately. Give yourself some time to do your due diligence if you think the competition is thin by making your offer contingent upon the completion of proper due diligence. However, you may have to take some risk by making an offer without contingencies in order to make it stronger than other offers to ensure your victory. Be quick to do your investigations and learn how to quickly uncover any problems with the property so that you can make strong offers quickly on qualified candidate properties. (see: https://www.area-info.net/articles/show.php?cty=Ogden&st=Utah&article_id=1268)
It’s good to have some money ready, financing sources identified, and your personal finances in order so that you can act quickly. Determine ahead of time what kind debt or leverage you are willing to live with. (see: https://www.area-info.net/articles/show.php?cty=Ogden&st=Utah&article_id=1336)
In order to find lots of candidate investment properties you will need a big network. Of course you can go on line with companies such as Loopnet.com and other real estate sites that can bring thousands of properties your way. You may, occasionally, find a great property on one of those on-line services before the investment herd uncovers them and snatches them out from under you. But, the best properties don’t usually make it to that venue. They may be purchased before they ever get there.
Another way to find great properties is to let commercial realtors, brokers, bankers/lenders, investors, property owners, etc. by the dozens know that you buy properties. Give them a list of the criteria you measure properties against, and ask them not to call unless the property at least comes close to meeting those criteria. In that way you can enlist them to do much of the disqualifying for you. The best two deals that I was ever involved with came from someone who knew I was an investor and thought I might be interested in a specific property. One of them was a friend of my brother’s and another was a real estate investor I know who needed a partner. Both of them brought cherries to the table.
By always networking and getting to know people who work in real estate, you will soon have a plethora of qualified investment candidate properties to evaluate. Then, don’t forget to do your homework before you buy. Of course, be willing to act boldly if the situation demands it. Great deals don’t last long when there are thousands of buyers combing through the candidate properties. Even in this economy, actually, especially in this bad economy, there are thousands of investors sifting through the property inventory looking for the gems.
Even though the economy is terrible it’s a great time to be looking. In fact, because the economy is terrible, there have been many foreclosures in the commercial real estate property market. Some might say the terrible economy has created great deals. For instance, I have some friends that are buying a property that should be valued at several millions of dollars for a fraction of that. It’s a bank owned property that the bank has decided to dump at whatever price they can get. Those friends have looked at thousands of deals before settling on this one. But, once they settled on a deal, they have gone after it in a persistent pursuit mode.
Keep your powder dry. Don’t be willing to pursue a deal just because it’s a good deal. If you hold out for a while, and look, and search, you may find a great deal. That’s how to gain large multiples on your investment capital in a quick time. It’s terrible to see the “great” deal come along, but be unwilling or unable to make it happen because you just tied up all your capital on a “good” deal. Be picky, and patient.
Though it is true that not every deal needs to be a grand slam for you to reach a pleasing level of success, it is nice to know that you were particular enough that you multiplied your results.
Build your real estate network; let people know that you buy investment properties; give them your criteria (so they don’t bring you every frog that comes along); do your homework; and be willing to act with boldness and courage in pursuit of the great deals.
Investing in stocks, real estate, and precious metals is risky and could result in losing money. I am offering ideas for your consideration and education. I am not offering financial advice. Please do your own due diligence. I am not an investment adviser. Precious metals is not for everyone. I promote precious metals. You should do your own due diligence when making investment decisions of any kind. You should consult your own financial advisers before making any investment decision. I make no guarantees that by following any advice or suggestion I might make that you will realize any return. Beware, all commodity markets and other markets carry risk of loss.