Hey everyone, Mark Ferguson with InvestFourMore. Welcome to another episode of the InvestFourMore Real Estate Podcast. Glad to have you listening as always, happy to try and provide information for everyone and help you out in your real estate investing or becoming an agent or becoming more successful at either one.
Today, I want to talk about how to get a great deal on properties, what I do, what other people can do to find awesome deals below market whether it’s a flip, a rental property, I get a lot of emails from people asking me this questions and I’ve written a lot of articles on it but sometimes just speaking it out, telling you with my own words how I do it might help a little more than reading articles.
So before I get into that, want to think everybody who has been buying my new book, Build a Rental Property Empire
, it’s been doing awesome on Amazon, have a lot of great reviews. I want to thank everybody who took part in the contest who provide review, we gave away a couple of Complete Blueprint to Successful Real Estate Investing programs. Really fun to do that and really loved all the positive feedback.
I’ve had a lot of great emails from people who loved the book, one lady said she was going to give it to her son and buy a couple more copies as closing gifts for some of her clients, that was nice to hear that. That’s available on Amazon, in paperback or ebook, so is my Fix and Flip
book, Fix and flip your way to financial freedom.
And in the following months, I’ll be coming out with my real estate agent book, How to Make it Big in Real Estate
, in paperback as well. So I’m completely rewriting it, it’s in the editing process right now and hopefully that will be out soon so that will be in paperback too, and I’ve got a few more things up my sleeve that I will be coming out in the near future.
All right, getting started on how to find a great deal. The first thing I want to do is go through some of the properties I bought recently and tell you exactly how I bought them to give you an idea of how I’m doing it and what is working for me. I think that’ll help people get an idea, I’m not just spouting theories out, this is stuff I’m actually using right now. All of these properties I’ve bought this year and in a very hot market in Colorado where we have one of the highest appreciating markets in the country.
So the first property I want to talk about is some land I bought. I bought 34 acres about a month ago, maybe it was six weeks ago, time goes way too fast but I bought it for $90,000 plus I had to pay $28,000 for a water tap. I got 34 acres with the water tap for $118,000 total. In my area, that was a steal, that property’s probably worth $200,000 right now if I really wanted to sell it. It’s got a little pond on one side of it, there’s no oil or gas wells on it, just flat land and view of the mountains, really cool little property.
My plan for this property at the moment is to try and turn it to about a seven lot minor subdivision, have seven five acre give or take a little bit lots and I’m going to the process now of talking to the county, talking to the closest little town to see about water, any fire hydrant requirements, things like that. Once I get passed that stage, I’ll decide if I want to proceed with the subdivision or just maybe flip the land real quick.
To go through with this subdivision, I would have to meet with the county, the engineers, the planning and zoning department, which is actually a free meeting and then they would go through with me about everything that’s required, the whole process and it’s supposed to take about six months to create the subdivision if I do everything on my end in a timely manner.
The cost wouldn’t be too high with a county and all that part maybe $5,000, $10,000. The real cost would be, I have to provide water taps for each slot which will actually be more than $28,000 because the cost is higher now than that tap I bought. But individual lots should be worth over $100,000 each I would guess if I can make all of this work right.
So I’ll keep everyone updated on how that works and how that progresses. But how did I buy that property? I was sitting at my computer looking at my hot sheet on the MLS. The MLS is the multiple listing service and the system that realtors use to see houses that are for sale. Just about every house for sale the real estate agent list is in the MLS, it’s not something the general public can see in most cases.
Zillow, Trulia, Realtor.com, they don’t have every property in MLS on their site, in fact they can be very slow to update it and there are many properties on there that appear to be for sale that are actually under contract or even sold. So the MLS is much faster, much better system than the sites you find online.
All right, and the hot sheet is the list of new listings that pop up from the last time I searched. So my MLS automatically figures out the last time I searched for my hot sheets and pulls up all the new listings since then. I can look at specific towns or zip codes or whatever I want on the hot sheet. Usually our market is so tight right now that I just pull up everything in my county for new listings.
If I’m checking a couple of times a day, it’s not very many properties to look at like 10, maybe 15. So I go through those a couple of times a day to see what new listings have popped up, if any prices have changed, if any houses have come back on the market. And normally I don’t look for land. It’s not something I’ve been wanting to do, it’s not something that I have my radar at all but for some reason I was looking through my hot sheet and I saw the county road it was on, and I knew that was a decent area and I saw $90,000.
So I’m like, “Hey, any piece of land under $100,000 is probably a pretty good deal.” So I checked it out, looked at it, I saw it was over 30 acres. I’m like, “What is wrong with this property, what is going on? There’s got to be something wrong with it.” I actually told my assistant to write a full price offer right then before I even drove out to see it. I told him, “Write it up, send it out to the agent, I’m happy to pay the water tap,” because the listing price was $90,000 but they mentioned you have to pay a $28,000 water tap fee on top of that.
I said, “Go for it, write that in there too, I’m happy to do it.” So we sent that to him and I did put a five day inspection clause in it because I hadn’t seen the property yet and I knew I probably couldn’t get out there that day, I was super busy and had some other things going on. So we sent that to the agent and his response was, “Okay, thanks for the offer, we’re pretty busy right now, we’ll get back to you in a couple of days.”
I’m like, “Okay?” I said, “It’s a full price offer with basically almost no contingencies except a small inspection period.” He says, “Okay, I’ll get back to you in a couple of hours.” So I don’t know if this agent just thought he undervalued it or what was going on but they came back, they accepted our offer that day. I went out to look at the property I think the next day it was better than I thought it would be.
I mean there was just nothing wrong with it, totally fine. So we went forward with it, bought the property and that was a simple process. I had a small inspection period, had no financing, I actually paid cash for that property because it’s a little tougher for me to get loans on vacant land and I had a line of credit available where I paid cash for it.
Now I’m in the process of refinancing it with my local portfolio lender, hopefully that will close here in the next couple of weeks so I can get some of that money back out and use it for other things. But very simple, just acting fast was how I got that land, I’ve been telling some other people in the area, the investors about how much I paid for it and they’re like, “What’s wrong with it?” Every time I talk to them. Really excited to see how that turns out.
All right, another property I bought recently, actually I have it under contract is one that came up on MLS again it had a list price of under $150,000 in a town where the cheapest property for sale at the time was about $220,000. So I knew it was a good deal from the beginning. I setup a showing as fast as I could, it was about 40 minutes away from me, so it’s pretty far away but I dropped everything, drove out there, looked at the property.
It was occupied, talked to the owner a little bit, the house was in really decent shape. I mean it needed a little bit of updating but nothing wrong really, the owner just wanted it, he needed to get rid of it fast and he wanted to rent it back for a week or two after closing, I said, “I’m fine with that.” I made an offer right away, full price, no inspection, I try to do no inspections if I can because it really gives me an advantage.
No financing contingency, although I am going to be financing this one I’ll tell you how, and then 30 day close, I put in the offer and we sent that in the same day. The agent came back and said, “We’ve got a few other offers, we really like how clean your offer is but the other ones are higher, is there any way you can come up more?” So I looked at the numbers, figured I could still make money at $155, raised my offer up and they accepted it with a shorter close date, so I had to close a little sooner.
So I’m like, “Okay,” I got everything signed, under contract, went and talked to my lender and they said, “We can’t close that fast.” This has been happening with my lender a little bit lately which has been a little frustrating but their close dates have been way out even in my fix and flip loans which is usually very fast. So I put in the contract that I’d pay cash but I may use a portfolio lender to finance the property, there wouldn’t be any appraisal, no financing contingency at all if I could find a lender I’d pay cash.
I didn’t quite have enough cash to buy this one since I just bought the land for cash but I approached a private lender or private investor I knew and I’ve worked up some private financing on this property. So got that going, little stressful for a while but we had it under control. On this one, I didn’t do the inspection because I could see the property, I assume there’s going to be more work than I can see there, I always assume that and I didn’t see any major problems.
I think on the last probably 10 houses I’ve bought, two of them asked for inspection on, and that’s it. Both of those I wrote the offer before I couldn’t see them. The land and another house I’ll tell you about soon. But I was 90% sure I was going to buy them, I don’t do that often where I make an offer before I see a property but those two are such good deals that I was 90 to 95% sure I would buy them no matter what they looked like.
So I’m not out there making offers all the time on properties without seeing them and then canceling. I don’t think I’ve canceled a contract in two years, that’s really helped me get more deals too because people know I have a good reputation, know I follow through on what I say, I’ll do. That’s one coming up here soon. Another property, actually two properties I bought earlier this month — I guess that was last month too — were estate sales. Two properties came on the MLS again, right next to each other, kind of built in the 1940’s, 1930’s. One was occupied by tenants, one was vacant.
So our median price in Greeley right now is $250,000. Finding any decent house under $200,000 is really tough. Finding any house under $150,000 is almost impossible that it’s not just really torn up and destroyed. Finding anything under $100,000 is almost completely impossible. So one of these houses was listed for $75,000 and the other one for $102, I believe? I made full price offers on both of them first day. I could not — they wanted 24 hours access when it’s occupied by tenants but I setup the first house that afternoon, went out there, saw it right away.
The tenants in the other house happened to be outside so I started just talking to them, they let me go walk through it, look at that house so I made full price offers right away. No inspection again, no financing contingency but I use the same, “I could use a portfolio lender without any financing contingencies or appraisal or anything like that.” They came back said, “We have multiple offers.” I was not surprised but I was hoping it would be fast. I looked at my numbers, figured out how much I could pay and still meet my profit margins.
So I came in at $118,000 in one and $103,000 on the other. So on one property, actually that one property was listed at $115, that’s right. I just came up $3,000 on one. But on the other one I came up $27,000 off their list price just because I knew there would be so much competition and I could still make good money on it. They came back, said they’re accepting both my offers, they said they had over 30 offers on the properties, there were other offers that were higher but they liked our offer because it’s cleaner, less contingencies, they knew it would close.
So again, the no inspection and no contingencies helped me out, I used a new lender on those properties, a different portfolio lender I had found, they got everything done quickly with no problems, that was great. We closed on them and we’re in the process now of getting the tenants out in one property and the other one we’re going to start repairs on here shortly.
But those houses will probably be worth both over $180,000, both be very nice. So good deals there, really excited to get those, and I know a lot of people contacting me and said, “You’re the one who got those properties?” And they were kind of annoyed because there’s a lot of competition, a lot of people looking at those.
All right, the next house I bought was out in the country again, acreage, had a few acres with it and it came on the market at $110,000, really cheap property. Really cheap. Again, I made my offer right away without seeing — this was the other property I didn’t see because I knew at $110,000, I would buy it unless the house is burned down basically and I did drive by it but it had tenants in it so I couldn’t’ see it right away. Made my full price offer, I did a five day inspection and they accepted my offer before any other offers came in on that one too.
Did my inspection, got them to see the house, it needed some work but nothing bad so I went through with it. That one took a few months to close because they wanted to get the tenants out before they sold it to me, financed that with my portfolio lender and that property will probably be worth over $200,000 with $30,000 in work, maybe a little more than that. So that will be an awesome one. Would love to find more like that but that’s an MLS deal, listed on the MLS like most of the ones I buy are.
All right, another one I bought back in March was a wholesale property, this is the first time I bought a wholesale property and I found a wholesaler, actually they found me, they just kind of emailed every agent in the MLS saying, “They do a lot of wholesale deals if you have clients or investors who you’re looking to buy. We work with realtors, we just give them add your commission to whatever price we tell you.” And I’m like, “Hey, that’s interesting.” I’ve talked to a lot of wholesalers in my area who say they have good deals and try and get some deals done with me but they really haven’t been that great, they haven’t met my criteria.
However one of the first properties, this company sent through to me was a great deal, it was listed for $123,000 is what they wanted, I knew the house was worth over $190, they said it didn’t need much work, paint and carpet. So I went through it, looked at it with them and it was maybe a little more than paint and carpet, but definitely a great deal I said, “Yes, I’ll do it.” We got the paperwork signed, I had to put down a $5,000 nonrefundable deposit plus $3,000 nonrefundable earnest money on the deal.
So they want to make sure I was serious about it. I was okay with that, as long as I closed on their end, which they did. No inspections on these wholesale deals, I was just buying it as is which I was fine with. We’ve been working on that property, I financed it with my portfolio lender, it should be done here soon and I’m thinking it’s worth probably close to $200 after we’re done with it, putting about $20,000 of work into it, maybe $25.
That will be another great one. I’m always looking for wholesalers but they can be tough to find because there’s a lot of people who call themselves wholesalers who don’t really have great deals or don’t understand what a good deal is. So it can take a lot of contacts and weeding through the herd to find a good wholesaler but if you find them, they can be a great resource.
All right, another property I bought, this one I bought a few months ago at the start of the year is one that was listed on MLS again, they had it listed for $125,000, right across from my old high school, it was not bad shape. Had hardwood floors, newer windows, the siding was newer but it needed a new kitchen, new bath, new roof, some other items.
I made an offer right away at $125, no inspections, becoming a broken record but that’s how I do it and they came back, said, “Your offer is great, we really like it but we had a higher offer, would you come up to $135?” I said, “Yes, I’ll still make money on it.” I bought that one at $135, we’re almost done with it, we have taken longer than we thought and it will be worth over $200,000 as well after about $25,000 in work.
So those are the last few properties I bought, as you can see, almost all of them were from the MLS for me acting fast, making offers right away with no inspection. There is one wholesale deal, I also acted fast on that one, the first ones respond to it. That one I got by being very fast. There’s other ways I’ve bought properties in the last few years using auction sites and there’s just so many ways to get great deals, I know a lot of people do direct marketing. But for me, the bread and butter has been MLS, being an agent, being able to act fast, see these properties and go after them right away.
I think a lot of people get frustrated because they check the MLS or they work with an agent and they don’t see these deals the first week or two they’re looking. You have to understand that when I’m finding these deals, they’re not available every day I look on the MLS, it’s not like they just popup every single day, there’s this great deal there that I make an offer on.
I mean I am very selective on when I make an offer on, these deals probably come up maybe a couple of times a month and I am hopping on them as fast as I possibly can. I don’t get all of them, there’s some I miss out on, but some I do get. So being an agent has been a huge advantage obviously and acting extremely fast, been very flexible in my schedule has been a huge advantage and then being able to do no inspection and basically cash offer is a huge advantage as well.
Now, it’s very tricky not doing an inspection if you’re not extremely experienced and know what you’re doing with real estate. I would not suggest brand new investors go out and start making offers with no inspection clause when they don’t have experience with how much repairs cost, what to look for, what major repairs might be or maybe having a contractor go look at the property as well.
You really have to know what you’re doing and yes you might miss out on some properties by having an inspection period, you might not get all the deals that I get, but if you’re just starting out, you don’t need to buy as many houses as I buy either. It might be okay if you buy one house in three months because you can only do one flip at a time and you want to make sure that is a really awesome deal or if you’re buying your first rental property or even your third rental property.
You’re probably not going to be buying eight a year so it’s okay if you have to wait two months or three months to find that really good deal and you miss out on a couple on the meantime because you’re being a little more careful, because you’re not jumping in without knowing what you’re getting into.
Just because that’s the way I do it, that does not mean it’s the way everyone should do it especially if you don’t know the repair costs, what to look for, things like that. It’s very good to have an inspection when you're first starting out, when I first start out, I had inspections done on all my properties, it was not like I just jumped in buying houses this way. So I want to make sure people are careful not just ignoring some of the steps it takes to become successful investing in real estate.
I mentioned auction sites before, I have bought a number of properties from auction sites, a lot of t hose properties were on MLS as well. It takes a lot of patience, sometimes they’re advertised really low price and people get excited but that’s not really what they’ll take on the house, their reserve price is much higher. There’s been some properties where I’ve made offers on them four, five different times before they lowered their price enough for me to get it.
So really, what I would do as a strategy is obviously, use the MLS, check the MLS, check all the auction sites you can, check all the wholesalers you can. I mean there’s a lot of work involved in finding good deals, it’s not easy and if you don’t have or you aren’t a really good real estate agent, you have to have a good agent.
There’s a lot of MLS systems that can be setup to send you properties automatically, agents can send you searches, make sure you have a great agent who can set you up on a search if it’s available. I know a lot of people limit themselves to REO’s or foreclosures. I think the last — I’m trying to think here — eight properties I’ve bought have not been REO’s, have not been foreclosures, have not been short sales. They’ve just been traditional sales. So don’t limit yourself to just REO’s and short sales.
Another things to consider is when you’re looking for a real estate agent, they don’t have to be the most experienced agent in the world, they don’t have to know everything about investing. Your job as an investor should be knowing the numbers, knowing how much you can pay for houses and knowing kind of where you want to buy properties, what deals you’re looking for. The agent’s job should be to act extremely fast for your, write offers for you extremely fast and know that contract writing procedures, those different things.
It’s awesome to have an agent who can send you deals, that’s kind of a bonus, but if you can figure out the great deals and find those deals yourself as well, that makes life so much easier and you don’t have to have an agent who is super experienced because sometimes they’re slower than other agents. The more experience an agent has, the more clients they have, the less time they can devote to individual investors and act really fast for them.
So I think the perfect agent for a brand new investor sometimes is an agent who is newer, doesn’t have a lot of clients, but is super motivated, can act super-fast and devote more attention to the clients they do have. But when you're using that new agent, they might not know a lot about investing about what price you need to pay for a rental, what cash flow you need, how much money you need to make on a flip, what all the costs are on a flip.
So you’ve got to be knowledgeable in that aspect of it and almost teach them what kind of deal you need, what you’re looking for and work the relationship that way. If you’re relying simply on an agent to do everything for you, it’s going to be very tough to make it in this business because those agents who know all that are probably investing themselves like I am.
I am not a good agent to work with if you want to buy flips, or they’ve got other investors they work with who they’re sending deals to as well who they’ve been probably been working for, for years. So really think about that when you’re looking for an agent. And of course, I highly suggest people who want to become serious investors, get their real estate license. I think once you get to a point of you're doing more than a couple of deals a year, your license is just a huge advantage.
All right, last thing I want to talk about is direct marketing, I have done direct marketing in the past, bought a couple of houses that way and we’ve listed many houses with direct marketing as well. Basically what direct marketing is, you send letters to absentee owners, to inherited property saying you’ll buy their house for cash, no commission et cetera. As an agent, I have to disclose I’m an agent on those letters. Some people want to sell their house without putting it on the MLS.
I do not feel good about myself telling someone I’ll buy their house for $50,000 when it’s really worth $100,000. When I did this in the direct marketing, I’d always kind of give people two options, I said, “Hey, we could list your house for this, it will probably sell for this much in the MLS, here’s what all your cost will be, or I will buy it for this, here is what all your cost will be.” Most of the time they’ll get more money listing on the MLS. So that’s why we got to get a lot of listings that way. But once in a while someone doesn’t want to put it on the MLS because the house is a mess, they just want to get money fast, they want to get out of there and those are the ones I would typically buy.
But it takes a lot of effort to pull off a direct marketing campaign, I mean we’re sending out hundreds of postcards or letters a month and the postage adds up very quickly. You’ve got to curate lists, you’ve got to figure out who you’re marketing to, you’ve got to be able to answer your phone and get really good at talking in the phone, do quite a few appointments, it’s not an easy thing to setup.
But it can work out great if that’s what you're really focusing on if you have the time to devote to it. Right now we’re kind of not doing the direct marketing so much because I’m finding enough deals in the MLS and through other means but I’m still doing a little bit of direct marketing on maybe vacant properties I see, houses that look distressed, maybe we’ll send them some letters, some material to see if they want to sell their properties.
All right, so that is all I have got for this podcast as far as finding deals, how I found my deals, some tips for people to find deals themselves if they’re not in the same position as me. Finding the right financing obviously is huge, if you can buy a house with cash, that gives you a huge advantage but there are ways to make your offer very, very similar to cash but use financing as well. Finding a local lender is one way to do that, hard money lenders sometimes can do it in a similar situation as well.
All right, thank you guys for listening, if you have any questions, shoot me an email, firstname.lastname@example.org
, leave a comment on the article I wrote up for this, happy to respond to those as well and as always, please leave a review on iTunes if you like the show, tell your friends about it, love to be giving out information helping people and growing as fast as we can. All right, thanks a lot, have a great day.