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Real Estate Investor Shares Process for Finding Great Property Deals

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  • With less competition, now is the perfect time to buy an investment property, says Mike Zuber.
  • Start by deciding where to buy property and learn all about the market.
  • Then figure out the “average deal” in your area so you can get the best deals.

It’s a good time to get into the real estate investment business, Michael Zuber told Insider.

“Property investors should be more excited about buying this year than they have been in the last two years,” said an early retiree. Over 100 rental properties in Fresno, CA.

Because there is less competition now. Rising mortgage rates and uncertainty about the future of the economy are reducing the number of Americans who want to become homeowners. Fannie Mae Survey in October, just 16% of consumers think now is a good time to buy a home. That’s the lowest of the new surveys.

Zuber interprets this statistic as follows: “His 84% ​​of homebuyers are basically off the market.” This is good news for him and other real estate investors. “As an investor, homebuyers are my biggest competitors. They have low down payments and high interest rates, so it’s hard to compete.”

(Lenders require a higher down payment, typically at least 20%, for investment properties, which is higher than for prime residences. FHA loan or even 0% VA loan.)

For the past three years, Zuber has been unable to find a deal he likes on multiple listing services (MLS).

“There was too much competition,” he explained. “I watched my market every day for three years of his, and the homeowners beat me. They could have paid more.”

He hasn’t stopped buying properties entirely — he said he’s caught some off-market deals — but until recently, it was impossible to get past the MLS. has closed a $203,000 home originally listed at $270,000, he said. Less competition means more room for negotiation.

If you’re a real estate investor, “it’s time to get aggressive,” Zuber said. “Real estate investors make their fortunes in a recession. Many investors have been excited over the past two years, but it was the riskiest time. It will be the perfect time for

That said, you should be a prudent investor and put in the time and effort to find a property that is cash flow positive and increases in value over time.

Here’s Zuber’s four-step process for finding deals:

1. Know where you want to invest and learn the ins and outs of the “buy box”

Zuber and his wife live in the Bay Area but have investments in Fresno, CA.

When I first started looking for an investment property in 2001, I realized that buying a property in my backyard was impractical. The Bay Area consistently ranks among the most expensive housing markets in the United States.

Fresno, about a two-and-a-half hour drive from his home, fit his criteria. It has a large population and a diverse employment base, along with other promising qualities, he said.

After settling in Fresno, Zuber defined what he called a “buy box.” This is the neighborhood or very specific area of ​​the city you plan to invest in, he explained. Most cities are too big to learn everything. For example, if you consider listings throughout Fresno, there are thousands of listings.

“Most new investors are everywhere,” Zuber said. “The first step any new investor needs to take is focus. If you want to be a buy and hold investor in a new space, get a buy box and be very focused.”

A buy box should consist of 20 to 40 active listings. He pointed out that this is not only the specific area they are defining, but also the type of property. Zuber, for example, was specifically looking for 1,250 to 1,700 square feet of 3- and 4-bedroom single-family homes in a particular zip code in Fresno.

Picking up a buy box can take hours driving through different neighborhoods, going to open houses, and researching rental properties. Think about the type of property you want to invest in.Do you want to get a single-family home or housing complex?read some What other successful real estate investors look for in an investment property.

2. Look at your buy box daily for 60 or 90 days to track what’s happening

Once you’ve defined your buy box, learn all about it: what is the average house price, what is the average rent, Time it takes for a house to hit the marketSuch

Spend 2-3 months going through the listings of sites such as Realtor.com, Zillow, and Redfin. Zuber visits Realtor.com daily to keep track of what’s happening in Fresno’s buy boxes.

“The more you know about the buy box, the more likely you are to find great deals,” he said. “It must not be casual. It must be purposeful and purposeful.”

3. Know your average transaction value in the shopping cart box

The purpose of reviewing the list daily for 2-3 months is to give you an idea of ​​what the “average deal” in your buy box looks like. Once you understand what “average” looks like, very transaction.

Zuber is particularly focused on cash-on-cash returns. This is basically the annual return an investor will get on a property in relation to how much money they have spent on that property in that year. It’s an easy way to measure profitability by comparing how much you put in versus how much you put out.

To determine your cash-on-cash return, take your estimated annual net cash flow (this will be your rental income minus your mortgage and other maintenance costs) and how much you plan to invest in the property that year. cash amount (this could be the down payment or the purchase price of the home if purchased with cash).

The “average trade” varies from market to market. Your job for the 60 to 90 days you spend analyzing your buy box is to understand what average means in your particular market.

“In my opinion, you can’t write an offer until you learn what an average is,” Zuber said. “Because if you know the average, let’s say 5%, you can confidently write offers that generate 7%, 8%, or 9% cash-on-cash. The magic of this business is , simply above average yields.”

4. Write a great offer

Zuber defines a “great offer” as one that produces a cash-on-cash return that is 2-3% higher than average.

Using the example above, let’s say the average cash-on-cash return in your market is 5%. That means you get a return of 7-8%. To get to that number, Zuber works backwards.

Currently, he makes about two offers a week.

With fewer people interested in buying a home, now is the perfect time to make an aggressive offer, he said. The competition is leaving and I am very excited about what will happen. I am happy to write many offers and close all great deals.

He added that things like rising interest rates aren’t as important when you’re focused on getting the numbers to work—getting big cash-on-cash returns. % or 11%. In the spreadsheet he has only one variable. “

If you plug in capital costs, property management fees, and all other expenses and you still have positive cash flow at the end of that calculation, it’s a deal worth considering.

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