Ask an Expert: Buying a Good Property in a Competitive Market
By: Valeri Khromov
Lets be clear: Its almost impossible to find a perfect deal unless by accident. But its definitely possible to find a good deal if you have a system in place, know your criteria, and have the stamina to follow the system.
There are different ways by which you may search for a good deal as an investor:
- Use the MLS or any other widely available search engine to search for properties.
- Get access to private listings or wholesalers capable of finding real gems.
- Search for properties through alternative ways like door knocking, tax sales, posting bandit signs like We buy for cash, driving around in search of abundant properties, and so on.
- Create deals using your knowledge, expertise, and time.
Regardless of which methods you choose, its important to get answers to the following key questions in order to help you define your search criteria:
- How much money do you have available for investment?
- How much money can you borrow to buy a property? (Talk to your mortgage broker.)
- How much time can you invest into a specific property or project?
- What kind of expertise do you have and/or what kind of project are you comfortable working on?
- Do you invest for cash flow, appreciation, or short-term income?
- What are your key financial criteria for purchasing?
- What is your strategic plan and what kind of property (single-family, multi-family, student rentals, etc.) would fit your plan?
- What is the geographic area you would like to buy in?
If you are searching for a deal in a highly competitive market, there is big chance that you wont be the only buyer chasing a particular property. Good deals always attract substantial attention, and so its critical to your success that you have an ability to recognize the right opportunity and that you pull the trigger by securing the deal in a timely manner.
It is critical to know beforehand if you are buying a good property, and therefore you must know the specific market inside out. Go and see as many properties as you can in the selected area, drive and walk around the neighbourhood, talk to local Realtors. Try to find connections with people who know the area and who may give you good advice on local specifics.
Crunch your numbers on as many properties as you can find to get a proper feeling on realistic income and expenses. Make sure you know whats included in the property taxes, like garbage collections bills, water charges, sidewalk snow removal, and so on.
Be patient, as it may take time before the right opportunity comes up; it takes time to get a good one. Dont panic, and dont try to talk yourself into a purchase that you may regret. Follow your success formula and stick with it.
If you see the right opportunity, just pull the trigger. If its a good one, you have to take action immediately, as others may try to compete with you.
Another way to find the right property is by creating a good deal. This means having the ability to recognize and exercise opportunities that most other investors may not see or be capable of handling. It requires having guts, experience, and confidence, and knowing how to get problems solved.
This means having these areas of expertise:
- The ability to manage tenants effectively
- Knowing how to improve property values either by renovating, retrofitting, or redeveloping
- Being able to improve net operating income (NOI) either by reducing expenses or by increasing income
- Being able to obtain creative financing on the property
In conclusion, regardless of which approach you take to find a deal, there are some common elements for success:
- Make sure you have a strong enough why that makes you cry or a Belize that will motivate you throughout your journey in real estate investing. This business is full of stress, challenges, and hard work. Its inevitable that you will have ups and downs. You must be resilient.
- You have to be willing to continually learn and keep yourself up-to-date on developments in the industry. There is a limited number of organizations that can help you to do so, and REIN is definitely a leader in the field.
- Have a good mentor or a coach who can help you to grow in your business and who will be a catalyst to your success.
- Treat your real estate venture as a true business. Make sure you understand your business and act within it accordingly.
- Have a good team of professionals to support your business. This should include but not be limited to Realtors, mortgage brokers, lawyers, an accountant, property management companies, and insurance brokers. It is fundamental to have these key professionals at your disposal if you are working on creative deals or you require a quick closing.
Valeri Khromov is an award-winning real estate investor and investment advisor (REIA) with over nine years of experience managing portfolio of single- and multi-family properties.