April 28, 2016

046 How to Find a Great Deal on a House to Flip

28 minutes

I get many emails from listeners and readers about getting a

great deal on rentals or flips. They see the deals I am getting and

that I have 11 flips in one of the hottest markets in the country

and wonder: how can I do that? It is not easy, it takes experience,

and it can be stressful having that many flips at once. There are

ways to flip houses in almost any market, and almost anyone can get

a great deal on a home. It is not as simple as contacting a real

estate agent and expecting them to send you ten amazing deals that

same week. In this episode of the Invest Four More Podcast, I talk

about how I was able to buy my most recent flips, and many tips on

how others can get a great deal on homes.

Can you get a great deal on flips in a hot market?

As many of you know, I have stopped buying rentals in Colorado.

Prices are too high and I cannot make as much money on them, as I

used too. Even though I have stopped buying rental properties, I

have not stopped buying flips. I have 11 flips now and I am buying

a 12th tomorrow. I am getting my systems in place to handle that

many flips, including new contractors and management of those

contractors. On this podcast I focus on how I got those deals and

how I am able to still flip houses when inventory is tight. The

reason I can still flip in a hot market, is I do not care about the

long-term prospects of a property when I flip. I plan to be in and

out in 6 months or less. With rentals, I plan to hold the property

for years and I am much more picky about what properties I buy. I

use the same techniques in a hot market to buy flips, as I do in a

down market. Although there tend to be less REOs, short sales and

auction properties in a hot market.

How I determine whether to flip a house or hold it

as a rental.

Do you need to be an agent to get great deals?

I am a real estate agent, which helps me get many good deal. You

don't have to be an agent to find deals, but it certainly helps. If

you are not an agent, you need to have a very good agent to help

you. The agent does not have to be the most experienced, or know

everything about investing, but they need to be able to work

fast.

How to find an investor friendly real estate agent.

How do I get awesome deals to flip?

There are a few things I do to get awesome deals.

I know my market very well, so that I know what a good deal

is.

I act very quickly when a good deal comes up.

I rarely have any contingencies.

I make cash offers, even though I sometimes use financing.

Acting fast and making very solid offers with no contingencies

are the biggest things that get me deals.

If you want to see exactly how I search the MLS, what I look for

when looking at properties, check out my quick start video

training.

Quick start training

If you liked this episode, be sure to leave us a review!

The podcast is really starting to take off! Thank you all who

listen and reach out to me. If you know of anyone who might be an

interesting guest send me an email:[email protected]. If you enjoy the show, be

sure to leave a review on iTunes!

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Don’t forget to get entered into the contest for a Blueprint by

leaving a review! Mark Ferguson author page

Transcript

[0:00:58.8] MF: Hey everyone, Mark Ferguson

with Invest Four More. Welcome to another episode of the Invest

Four More 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, [email protected], 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.

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