Are you looking for the perfect deal? (Come on be honest)
Seven years ago when I first started investing in real estate, the big thing that stopped me from buying my first property was trying to find the perfect deal. The more and more properties I looked at the more reasons I would find to the kill just about any deal. It wasn't until about 6 months later I came to realize there is no such thing as the perfect deal. By looking for the ultimate deal of a lifetime, I was just letting myself stay get stuck in analysis paralysis.
Trust me, when I tell you that there is no perfect deal out there. You can loosen up and start looking for good and great deals instead. Then the question quickly becomes "What makes a deal?"
Know What You Want Out of Your Real Estate Investing
To be able to know a deal when you see one, you will need to be crystal clear on what it is that you want out of real estate. Every investor has their own reasons for investing, and to find solid deals, you must know yours.
You'll see flippers who find great potential for generating active income through restoring distressed or rundown homes. Some investors prefer a buy and hold strategy and invest purely for income. Personally, I look for solid cashflowing single family homes that I can quickly wholesale for quick returns. Simultaneously, I partner with other investors to acquire under-performing self-storage properties for my longer term cashflow.
Ask yourself, "What do I want out of real estate?" Choose the strategy or strategies that best fit your needs AND your current resources. When I say resources I mean your time, your knowledge, your money, your credit, and your professional relationships. Different strategies will require different resources to execute, so make sure your resources and strategy are in alignment. Once you have your strategy and access to resources you now have a system for investing.
A good real estate deal is simply one that fits your investing system. A great real estate deal is simply one that exceeds your investing criteria requirements.
There is no clear cut formula for a deal, but here is how I figure it out.
Here is my deal check list:
1) Does the deal hit my specific deal requirements - Specifically, is it the type of property I am looking for? Here are some specific qualities: type of property, location, price, condition, size, etc. If my strategy is buying and holding single family homes, and someone sends me a great office building opportunity, I will not look at it no matter how good it looks.
2) Does the deal hit my financial requirements - In other words, if I do this deal will I get the return on investment that I have set as my absolute minimum. If the answer is NO, then I drop it from consideration immediately.
3) If the answer to first two questions above is "YES", then I take the time to perform my due diligence and collect all of the supporting information to confirm that my first answers are in fact correct.
If after performing all of my due diligence, the deal exceeds my investing requirements, I know that I have a great deal. If it just meets my requirements than I know at least that I have a good deal to work with.
Just Focus on Buying Your Next Piece of Real Estate
All you need to worry about is putting together your next deal. As you take action and create your deal pipeline, talk to sellers, inspect properties, and make offers, your investing system will evolve and your deals will become better and better. You'll be acquiring great deals faster and creating the profits you only dreamed about. So remember, don't look for the perfect deal. Look for a good deal that may just turn out to be great.