I just got four fourplexes under contract in what I believe to be one of the most competitive markets ever. In this article I am going to share all the tips and tricks that I used to be able to get all of these properties under contract. Now you may be looking around and thinking you can’t find deals because the market is so competitive. That’s why I want to share my tips for consistently landing extraordinary deals regardless of what the market is doing. If you’re diving into real estate and you want a step by step process of everything that you need to do to go from zero doors to over a hundred units like I have in the last 9 years, then you should check out my real estate investing course.
- Niche
You’ve got to zero in on a niche that you understand better than anyone else. The first niche that I ever looked at was duplexes. I became the best at knowing what a 1 bedroom, 1 bathroom or 2 bedrooms, 1 bathroom unit within a duplex would be able to rent for. I became extraordinary at knowing what renovations, tweaks, or changes I could make to these particular units and exactly what they could rent for. When I was searching for duplexes, I knew precisely what I was looking for, what I could rent for, what my numbers would be, so that I could go into the next steps of this process. If you don’t know your niche perfectly, you’re not going to be successful in finding deals because you’re not going to know what you need to look for. This comes down to:
- Analyzing what it can rent for
- Knowing what all your expenses will be
- Knowing what your vacancy is going to be
All of the numbers when analyzing a rental property for the particular rental that you’re looking for.
I startec with duplexes, then I got into fourplexes, then multi-family 30 units and less. I’m now to the point where it doesn’t matter whether it’s a 100 unit apartment complex or a duplex in the areas that I’m comfortable with. I know I can look at those deals and I am the best of the best at determining what a good deal is and knowing all of the numbers on all of these different properties. I didn’t start that way though! If you know that you want to buy a fourplex or know that you want to buy a duplex, figure out what you need to do to become the professional on that kind of property in your particular area. You need to know exactly what you’re looking for and all the different ways that you can add value. Adding value could be just increasing rents because they’re undervalued or doing renovations or other tweaks to be able to make it so you can increase rents and have a hand up on the competition when you’re shopping out deals.
- Leads
You’ve got to get really good at generating leads. I do this in a myriad of different ways. I’ve got multiple realtors, multiple wholesalers, multiple connections and real estate investing friends that all know I’m always looking. They know my criteria and they are consistently sending me deals. Even with that, I have times where deal flow dries up. One of the ways I market is I’ll go and drive neighborhoods to find properties that I think look like a good opportunity. Then I’ll reach out to the actual owner of that property and see if they’re interested in selling.
Even better, I have Ryan Dossey over at Ballpoint Marketing pull all of the data on the properties that have a ton of equity in them and send out incredible mailers. That’s exactly what I did to find all four of these deals. A lot of my other deal flow felt like it was drying up and so I reached out to Ryan for more mailers. He is incredible, he knows how to create these letters so that people are drawn to them. They stick out above all the other letters that people might send out as wholesalers or realtors to really grab people’s attention.
I did a massive order for multi-family mailers with Ryan. In total we sent probably 800-900 pieces of mail. I worked with Ryan and his team actually filters through the calls and just sends me the qualified potential sellers and I handle the callers from there. This system worked incredibly well. I’ve had extreme success because of the person that I work with. If you’ve hit a point where you don’t know how to market, I’d say this is the best thing you could do because these mailers are incredible for me.
- Motivated Buyers
Step 3 is finding your motivated buyers. You could field calls or pay Ryan’s team to filter the calls, but essentially you want to find those people that are trying to sell. A lot of times when you want to sell, you can become very emotional for a myriad of different reasons. These are the people that I want to connect with because I want them to have:
- Urgency to sell
- Pain points
When they want to sell the property so badly that they are willing to do it at a discount, that is where I find the best deals. As you’re going through these, you’ll get calls from people who are only somewhat interested and the majority of the time, these people are a little harder to get to sell. The sellers that I love are those that are saying things like:
- “I really need to sell because I need to put this money somewhere else.”
- “”I really don’t want to use a realtor, your mailer came at the perfect time because we do want to unload this property.”
- “We decided we wanted to sell now because we saw interest rates are on the rise and we’re worried.”
I love these people because, whether they admit it or not, they definitely are fearful of what the future brings, which gives you leverage to get a better deal on rentals.
- Build Value
Once you find your motivated buyers, we go to the next step and that is building value. The way that you build value is by acting extremely excited about the properties. Build yourself up as a potential buyer by telling them about what properties you already have, you are already pre-approved for this loan, you really need to place your money quickly. Make them feel like you’ve got some urgency as well. If you have urgency, they think they’ve got a buyer.
You want them to feel like they’ve got a solid buyer from the very beginning. A buyer that knows what they are doing and is going to handle the process properly. The more that you can build up their value in you and your enthusiasm for their property, the better off you’re going to be at being able to lock them in. You’ll also be better off when it comes to negotiation because then you’re going to have to pivot from being an excited, motivated buyer to someone who is willing to walk away from the deal if the numbers don’t work for you. They won’t want to lose you so they’re going to be motivated to hopefully bend with you on price so your numbers can work.
You want to be extremely presumptive about the fact that you’re going to purchase the property, that everything is in line for you to purchase the property. On top of being presumptive, you want to build urgency. Say “I want to buy a property as soon as possible because interest rates are going up. Every time interest rates go up, my buying power goes down.”
- Make it a Win-Win-Win
It’s got to make sense for them. When people think about negotiation, they often think “I need to hardball you, this is as high as I’m going to go. I’m not going to budge or pay a cent more for that property.” A lot of times, you can get a better deal when you can convince them that it’s a win for all of you than when you sound like you’re just trying to get a win for yourself. I do this by literally running them through the numbers, showing them where interest rates are going, worst case scenario on your rates, what your cash flow is going to be with the current rents, because hopefully this is a property where you can add value. All of these things make them see that I want to buy the property and I’m paying a premium for what the rents are at, they talk themselves into letting me buy it for lower than where they are anchored if they can see all of these good reasons. I might be the only buyer who is willing to pay this much because interest rates are going up. You build urgency, but you also help them understand that you want to make it a win-win for both of you. You have to show them how waiting will be bad for both of you. You need to tell them “You won’t find a more motivated buyer than me but the numbers just don’t work because of where your rents are currently at.” A lot of times they’ll say you can raise the rents but you would have to wait until leases are up which means waiting while interest rates go up too. If you take on the work of increasing rents and the market flips tomorrow, you’ve got to convince them to work with you at the current rents.
- Contract
It’s time to get under contract. It is so crucial that when you get it under contract that you know what you’re doing. Hopefully you have a relationship with the title company. Hopefully you know how to fill out the paperwork. Hopefully you know how to go through that process. If you don’t, go talk to your title company and learn how on these for sale by owner deals. If you’re using a realtor, they can help you through this. When you’re doing mailers you usually don’t want to use a realtor, you want to do it all on your own unless they’re going to do it for you super cheap. Maybe a couple hundred bucks just to do the paperwork for you but don’t pay 3% to bring a realtor in to help with paperwork. That’s absolutely asinine.
Once it’s under contract, give yourself at least 15 - 20 days of due diligence. In due diligence, you want to be very presumptive with them, but also make it painful. Get as much information as you can from them. Get a ton of stuff that you can beat them up even more to get that price down even lower. Make sure that your numbers work and that you’ve done a proper inspection so this is going to be a good property for you. Finally, after you go through this entire process, you’ll hit the point where it’s time to close. You get your loan done, go to the closing table, you’re all set.
- Repeat
If you’re like me with these four properties, not only did I repeat but I actually did it all at the same time. I didn’t do one and then another and then another. I sent out all the mailers and at the same time I got all four of these under contract and worked through the same process. This is the process that I followed on all of them. I’m really hoping that this process will help you get more deals under contract. If you are interested in my real estate investing course, do that now because the price is about to jump.