What Your First Real Estate Deal Should Look Like:
Every week I talk with our members about the first, or one of the first, deal(s) they are working on. The overtone of the conversations are like this:
“Should I be doing this deal? Should I wait for better one? How do I know if it’s going to be okay? I am super limited on funds right now. I’m not sure if this the best use of my money.”
Same thing on BP. If you go to the “Starting Out” forum, it’s packed with detailed questions like this one:
”…I’m new to REI but having been doing research and studying for almost two years now. Now I’m ready to take my leap to see if i can gather all the information and excel in this business. I met and investors who does investing international. He stated that he would sell his two properties to me once I told him I was and investor. One property is 3 bedrooms condo around 1200ft asking $65k and estimated at 74k. Zip code avg list price 174k. The second property 2 bedrooms townhouse 1100 ft asking 75k and estimated at 82k. Being that this is my first time I’m scared to step out there because 1) not sure if it’s good enough deal 2) it felt in my lap too easy for it to be a good deal…”
Make no mistake, this is a great question. In short form it’s “should I do this deal?”
Here is the answer: Absolutely not.
To this day, I only complete an acquisitions when it makes me run to the bank and the whole way there I’m saying to myself “I really hope the seller doesn’t change his mind. This deal is too good to be true”
In most cases, you should look at about 20 deals before you buy the first one (the exception is if you are working with us as a member already, then the first deal you get in will be close to perfect).
I just bought 40 acres in Oregon for $2,500 and sold it for $12,500. We regularly purchase properties all over the county for $100 per acre or less.
When you have a gauge like $80 a square foot or $100 an acre or $500 per lot, it takes all the stress out of those decisions.
Here’s a good tip: Buy like-kind property. If you are buying different properties all over the place, you have to go through a ton of research to see if it’s worth-while.
If you are buying rental houses or sourcing property, work in a single area or county for a-while. Get to know everyone.
Here’s what happens in our office all the time: a property owner calls and says “I ready to sell my property but I want more than you offered.” I review the property and usually say, “this property is perfect for our existing buyer X.” He buys property like this in this area all the time. And we buy it and sell it the same day. No Stress.
Here is some advice: Get your buyers or renters set up before you go looking for property.
Put a posting in craigslist to attract renters or flippers and see how many people call you. You will be amazed.
Your first deal should make you feel like you are the luckiest investor in the world. There should be no stress about the decision at all. You should have the renter or buyer ready to go before you negotiate the deal with the seller.