When the Numbers Don’t Work

As a real estate investor, I tell people in the business that I am always buying. What I mean is that I will consider any property that is available for purchase, and if it seems like a good deal, I will make an offer. If it is a great deal, I won’t hesitate. Some sellers want too high of a price based on the location, size, and condition. I don’t waste time making an offer when their price and my valuation are too far apart, but I still think through the possibility. I like to contemplate lots of deals, because essentially nearly every property is worth buying at the right price. I know I can’t buy everything, nor do I want to. But analyzing hundreds of deals and thinking through the numbers is something I have practiced so much it is almost automatic. When a property comes along that is priced well below the market value, I can spot it quickly and it is a simple decision to buy. It’s easy to point to the great deals that I have purchased over the years and think they are the reason my investing career has succeeded. However, another factor is just as important: being able to turn down a deal when the numbers don’t work.

I usually have a real estate transaction every few months. I get used to the rhythm of buying and selling. Sometimes, like in the fall of 2012, I bought two houses in a five week span, and three in three months. But other times a few months goes by without any

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How I Just Bought a House – Fast

I received a phone call yesterday from a wholesaler in Nashville, TN who said he had just gotten a house under contract and asked if I was interested in buying it. He told me the address, price, and a few facts about the property. The location in East Nashville is close to two other rentals that I own, so I was very familiar with the particular street and the surrounding area. It seemed like it could be a good deal, depending on the condition. I knew he had other investors that he was talking to, so I didn’t hesitate to check it out. Within fifteen minutes of the phone call, I was knocking on the front door.

edwin

The quick purchase, wholesale house

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Why I Invest Near the City Center

I received a phone call a few weeks ago from a wholesaler who had “the deal of the century.” She talked about how it was a can’t miss opportunity because the house only needed a few updates to be an easy flip. She had my full attention. As she was beginning to embark on a rapid-fire detailed list of all the attributes of this moneymaker, I tried to interrupt. Finally I was able to get my question in. “Where is it at?” She told me it was in a nondescript suburban area of town about fifteen miles southeast of the urban core of Nashville, TN. For some major cities, that proximity would still be considered close to town. At this point in time in Nashville, it is farther away than the zip codes where I want to put my money. In fact, that is how I answered the wholesaler. “I don’t buy houses in that zip code.” She didn’t seem to understand my reply and countered, “You could make $50,000 on this deal!” Maybe I could, but I have targeted specific areas of Nashville where I will buy properties, and I don’t stray from that strategy. I told her good luck, and if the deal was as sweet as she was describing it, I was pretty sure she could find an investor who would take it, but it wasn’t going to be me.

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Live at the Foreclosure Auction

The single digit temperatures didn’t keep potential buyers away from the foreclosure auction in Nashville, TN last Thursday, January 8, 2015. There were three properties I was interested in and one I was planning on buying, so I wasn’t going to miss it. Here is my account of the events as they unfolded.

Over fifty people are gathered on the second floor of the Davidson County Courthouse lobby. They are still bundled in coats and hats, warming from the frigid morning. I see ten or eleven guys that are the same cast of characters I spot at nearly every foreclosure auction in Nashville, TN. They have their binders, notebooks, and laptops tucked under their arms. I nod at a couple of them, acknowledging that we recognize each other, and even exchange pleasantries with one of them. But I’m not too friendly. After all, they are the regular competition for getting the property that I want.

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Purchase Profile: Acquiring a Craigslist House

In August, 2014, I purchased an investment house in Nashville, TN that I found advertised on Craigslist. It was a rented single family house for sale by owner, due to a relocation out of state. I responded to the ad by email and requested the address of the property since it wasn’t stated. The address is required to move forward with any analysis, and to see if the deal is worth pursuing further. If I don’t like the location, I forget about it.

Next, I proceeded to do my usual information collection about a property. I look it up on the county tax assessor’s website to find out the lot size, square footage of the house, year it was built, zoning classification, past sales history, and appraised value. This data gives me an introduction to the property and lets me figure out the price per square foot. However, the square footage stated on the tax records is not always accurate, so it is wise to verify the actual area of the physical structure. In fact, the tax records were 600 square feet off from the actual area of my first primary residence.

The house on Craigslist had the two most important  features that I am looking for in an investment property: location near a red hot neighborhood, and a cheap price tag. This house was just a couple of blocks from the historic Germantown neighborhood, and priced at only $72,000.

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Why I haven’t been buying MLS listings

Of the past six investment properties that I have purchased, only one was listed on the MLS (Multiple Listing Service). The recent upturn in home sales and appreciation have increased competition between buyers in Nashville, TN. Any new listings that appear to be priced below their value quickly receive multiple offers so that the bidding rises well above the listing price (as I have experienced).  As a real estate investor, my focus is to find and purchase properties at a discount. Growing my  business is dependent  on finding these deals. Since I haven’t been able to count on a regular supply of good deals from the MLS, how have I been acquiring discounted properties?

I have tried several different methods of purchasing investment properties apart from the MLS. Some have resulted in closings, others have not. I will only discuss the strategies that have succeeded.

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