Friday, February 18, 2011

The Deal

Ever wonder what 'The Deal' is? Everybody is always talking about getting a good deal. Sure, we use it in speech meaning, the truth. Other times (like now) we are referring to bargains, real estate or some form of financial win.

I work with 3 main Realtors in my network of 6 Real Estate Professionals. Each of the 6 has a defined specialty that they have honed for years. If I want to buy a suited bungalow in the SE, I call Tim. If I want to buy a 12-22 unit in Central, I call Val, etc..

But what you, I and everyone looking for a 'deal' need to understand is that we define a deal. And until we know what one is, set the parameters and have a check system in-place, deals will allude us.

The reason why I bring this up is that a wave of AFS (seller financed) properties have come across my desk the last couple of weeks. Three of my friends and associates have brought a total of 24 'deals' my way. Some with as little as $2K down, others requiring 20% down-payments.

Each of these properties is a solid bet and has attractive financing on it, but it is not a 'deal' for me. My core team is able to filter out what I buy based on criteria that I have given them. If a property makes it through my filters, they will present it. If it doesn't, I won't see it. I'm not worried about missing any properties because my parameters are well set. It saves me time and money to have my filter set so high, this way I can focus 100% on the ones that make it through because there is a greater chance that they will work.

With the 24 properties that came my way none worked for me, but they may work for you or your friend - but you'll never know unless you have a system in place to screen them. This is the same for buying a car, selecting a restaurant or taking a trip abroad. It is a matter of honing your unique system; you already have one in place. It is the same system that you mentally check off when you buy your groceries or dress your kids for school.

What got me thinking about all this was the frantic reply we got when we forwarded these properties on to some new investors we know who are just starting to build their portfolio. Rebecca replied right back asking us how little it was to get in, if she needed to qualify for the mortgages, how long she had to come up with the money and similar questions. Now, there is nothing wrong with any of these queries as they are all relevant - but they are not the first ones she needs to ask.

Rebecca was eager to get into a low down deal and was most concerned about catching it, then figuring out how to skin it. Danielle walked her through a system that first identified Rebecca's goals, both short and long-term, and asked the question 'Will this property get you closer or further away from your end goal?' That can be a hard question to answer if you don't have the end goal in mind.

With Danielle's help, Rebecca was able to organize her criteria and make a checklist that allows her to establish what a 'good deal' is for her. She focuses on the numbers and pays careful attention to what is in-front of her today and where the action of buying or not buying, will take her tomorrow.

I know that Rebecca got a lot out of this exercise, but so did we. It forced us to go back to the basics of what we look for in a property and why. The properties that have caused me the most grief are the ones that I bought when I deviated from my plan and acted in haste, chasing that investment down so it wouldn't get away. But, you know what? It had to be done because that was priceless education. I hope sharing this insight can save Rebecca a few dollars of that priceless education every investor pays.

11 comments:

Chris Davies said...

I run into this all the time now that I'm a Realtor. I was thinking of this exact problem today, people calling who have no idea what their filter is. It's important to have a very narrow profile. Nice post.

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I run into this all the time now that I'm a Realtor. I was thinking of this exact problem today, people calling who have no idea what their filter is. It's important to have a very narrow profile.memory foam mattress topper