Real Estate Deals: What to Look For and Where to Find Them
TL;DR - Create your ideal “buy box” requirements and then find deals through a realtor, online websites, courthouse auctions, or your network.
This is the fun part!
You’ve done all the hard work - saved up for a downpayment, chosen a market, defined your investment criteria, built your team, got financing, and much more.
And now you finally get to look for properties to invest in!
While this step is the most exciting, it involves some work as well.
So before you go house hunting, figure out what to look for in deals and where to find them.
Finding Real Estate Investing Deals
Your “Buy Box”
Before searching blindly for investment properties, it’s important to set up your “buy box”.
Set one and stick with it for 12-18 months before you start wandering around different investment asset classes.
A buy box is essentially the qualities that you’re searching for in an investment.
For reference, here are some buy box qualities to consider:
Price/Down Payment - how much you’re willing to spend
Cash Flow - difference between income and expenses for your property
Cap Rate - annual gain or loss on your investment
Bed/Baths - how many do you want
Year Built - how old is too old
Features - what needs to be included
Neighborhood Rating - high quality or low quality
Nearby Schools - important for families
Tenant Profile - who’s renting your property
Rent - how much is it
Deciding on your buy box requirements early on will allow you to hone your focus. You’ll immediately know if the listing you’ve found is right for you and your family.
Target “Buy Box” Requirements
For your first rental property, you might be confused by all the different options you have to choose from.
Is this cap rate even good? What neighborhood rating should I shoot for? What am I doing with my life?
Don’t stress! Undoor has you covered.
When searching for real estate investments, use these property filters as guides.
>1% Rent/Price Ratio - Price/Rent ratios determine if it’s better to buy or rent a property. A 1 to 15 Price/Rent ratio means it’s much better to buy than rent. That said, this simple rule of thumb does not apply to every market.
>7% Cap Rate - The higher the cap rate, the more you’ll gain on your real estate investment each year. 7% or higher is a good figure to shoot for. If you want to keep things simple, ignore cap rates in your early investment days.
Currently Occupied or Rent Guarantee - You won’t be making much money with your property if no one’s living there. So make sure you already have a tenant or that you’ll be getting one soon. Work with you property manager to get the process started early if the property is vacant.
Price within 3% of Valuation Mid Range - You’re looking for a good total return.
>3 Neighborhood Rating - Ideally, you want your investment in a safe and quality area. This will ensure that your property is appreciating in value year after year. We like to target a cumulative school score of >10 (elementary + middle school + high school scores)
< $3,000 Inspection Report - You don’t want to pay extra for repairs you didn’t see coming. If the inspection report repairs are high, you can price them into your offer. If you have the budget, higher dollar amounts should not scare you away, it is just work on the property.
Good Tenant Payment History - Shoot for no more than two months late on rent and no outstanding balance to be paid. Your property manager, if you do not self-manage, is your best partner for this.
If you follow these property filter guidelines, you’ll be buying a quality property in no time!
Where Do I Find Deals?
Great question! And lucky for you, there are a ton of options to choose from!
Whether you like working with a professional, finding properties online, or talking directly with a seller, there’s a method that’ll fit your style.
Work with a Realtor
The most popular option is working with a professional realtor who knows the area you’re buying in.
Your realtor will set you up with an automated search matching your buy box on the local MLS (multiple listing service).
They’ll have the scoop on all of the latest listings and should have a large network in their city of expertise.
So if you want to employ the help of a veteran real estate hunter, look no further than a realtor.
Use Online Real Estate Websites
Nowadays, it’s easier than ever to invest in an out-of-state property. So if you live in Florida but want to invest in St. Louis, it’s totally possible!
There are a ton of websites you can choose from. The MLS, Roofstock, Realtor, Zillow, and many more.
We use Zillow daily, and like Roofstock for its tenant-occupied marketplace.
Each website comes with its own look and feel, so shop around a bit before settling on one!
Craigslist FSBO
I’m sure you’re thinking, “No way! Not Craigslist!”
And I hear you! But guess what…
Craigslist FSBO (for sale by owner) is full of hidden real estate gems. Why?
Because it has properties that aren’t listed on the MLS, which means not a lot of investors are seeing them.
However, you’ll have to deal with an old and clunky website. And potentially deal with scammers. So you’ll have to decide if the tradeoffs are worth finding a gem.
Courthouse Auctions
This is where you’ll find foreclosure and tax sale properties. Both property types have to go through a public auction in order to be owned again.
You can find some hidden gems here, at a below-market rate as well.
But you’ll probably have to use the money you saved to renovate and repair your new property before you can rent it out.
This is a more advanced strategy and we would not recommend it for someone getting started.
Network with Others
It’s all about who you know. Real estate investing is a people business.
Try to spread your roots as much as you can. Talk to other investors, contractors, realtors, home inspectors, and whoever you can get a hold of.
Find them on Facebook, BiggerPockets, or find them on Meetup.com and meet them in person.
Make sure to tell everybody exactly what property type you’re looking for. Bonus points if you tell them your “buy box” requirements.
By connecting with other real estate professionals and enthusiasts, you’re bound to find a good deal or three.
Now Go Find Some Deals!
These are only a few of the limitless methods to find real estate deals.
But with the “buy box” requirements you now have, you should be able to find an investment property in no time.
So start looking. And happy hunting!
How We Can Help You
Does investing in real estate sound intriguing to you? Would you like to learn more? We’d love to be of value!
At Undoor, we pride ourselves on teaching new and experienced investors how to maximize their gains with minimal stress. Our goal is to help you fall in love with real estate and real estate investing. What we’re most passionate about is maximizing investment gains for people like you.
Do you want to get key insights and advice that’ll help you get ahead of the game? Don’t hesitate to contact us for any and all real estate wants or needs.
