Learn How Knowing Your Buy Box in Real Estate Helps You Make Better Deals
What is the “why” behind the real estate investments you choose?
How important are the details within your buying criteria?
How do your priorities relate to what you prefer as an investment?
There are stages of each investors career where the buying criteria could be very detailed, and at times the buying criteria may be very open and flexible.
The first step is choosing the buying criteria that is most suitable for you currently.
The next step is knowing why that buying criteria is important for you now. This is important in real estate investing for beginners.
- Will your buying criteria change and why?
Maybe you will sustain a consistent model, or maybe your model will change and possibly include a variety of purchase options.
Regardless of what your buying criteria is, it is important to always know your “why” throughout your investment career.
If you are a beginner looking for your first renovation project, are you prepared for a light, mid or heavy grade rehab?
- I’d advise that you target a light grade renovation every time unless you have done renovations before and now this just happens to be your own.
If you are completing a renovation for the first time, you will want to gain experience by;
1) Staying on budget
2) Properly planning the order of operations for your project’s renovation.
3) Hiring the right contractors with a contingency plan if something doesn’t work out.
4) Having extra contingency funds in case an unexpected repair pops up.
5) If you are using hard money, what the draw process with your lender will look like in conjunction with your financial plans.
6) Effectively timing your project through completion like; 6a) length of time it takes to complete each portion of the project including obtaining permits, 6b) passing inspections throughout the project in order to proceed to the next step, 6c) final prep work prior to listing, and 6d) time on the market before closing.
These are all crucial aspects to understand so that you select projects that fit your capabilities.
If you are purchasing value-add properties or turnkey properties, it doesn’t matter. Your planning is still important. However, you may need to add the time to occupy and refinance the property, etc.
As you gain experience, your plans may scale. Being nimble with when and why you scale, no matter how much experience you have, are the crucial factors supporting your success based upon your why.
Detailing Your “Why”
Just because you gain experience with light grade rehabs, doesn’t mean that you will prefer to transition to heavy grade rehabs. It’s based upon your preference and your “why”.
- Maybe you’ll prefer to enter and exit your projects quickly without excessive planning, which means you’ll want to maintain pursuing light rehabs.
- Or maybe you prefer heavy rehabs that may take more design efforts, time and planning, but due to the increase in profit potential you’ll maintain this strategy.
- Whether you stick to one purchase option, graduate to new purchase options, or you use a combination of purchasing options, know your why.
Effective planning will allow you to scale, timely and accordingly, and effective planning is where your motive should be.
If you are targeting 20 flips in the next year, perhaps your market allows you the options to choose light versus heavy grade rehabs due to availability. Or maybe your market has less choices and you will need to be prepared to conduct whatever comes your way.
Apply an actionable strategy to your investments and apply the appropriate “buy box” that aligns with your target goals.
Overall, your effectiveness is in the detail. Learn how long a project will take based upon the work that is required, and match these details to your financial capability over that time period. After reviewing answer these questions:
- Does the project fit your budget?
- Does the project fit what your current resources can handle?
- Do you have a means to establish the professional relationships in a timely manner if you take on a heavy grade rehab project you haven’t done before?
A good contractor resource in each city are your local building industry associations. Perhaps you should locate and join a few.
As noticed, we started off with you knowing your why and choosing projects that fit your capabilities and planning accordingly. Next lies the importance for you to be able to express your buying criteria to any resource that may be helping you find deals. This could be a realtor, a wholesaler, or a commercial broker.
Effective communication will support long lasting relationships. Ideally these relationships will progress towards everyone’s individual success. Most importantly, these relationships, in real time, will have the least amount of waste if you’re communicating well.
Waste is directly related to time, and time can be wasted, if communication isn’t effective.
The last thing you want is to have is another person researching deals on your behalf, only for them to find out they’ve wasted time evaluating an opportunity that never interested you because you didn’t supply them with efficient detail.
Some of your criteria could include – Location, total purchase price, upgrade level (low, mid or high), occupancy level, gross income, sold or rent comparables, pride of ownership, asset class, cap rate, sold days on market, total square feet, minimum bedroom quantity, unit bed/bath make-up/mix of an apartment building, on-site parking, unemployment rate, access to transportation, cash on cash return, population growth, etc.
As you can see the level of detail can be extensive. The more detail the better. If your source for deals is not detail oriented, be aware of them possibly wasting your time.
Detail is never something that should be unwelcomed in any work atmosphere.
Education, communication, confidence, business acumen, effectiveness, and general efficiency is always in the details.
Thanks for joining us today faithful readers-future leaders!
Love ya and have a great day!
Please comment how your current “buy box” and your future “buy box” and why.
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