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How to find Good Property Deals
Let’s get real. So real I hope my family doesn’t find this article.
Confession: I like my properties the way I liked men in my twenties. With self-esteem issues.
(avert your eyes Mama!)
And below I’m going to drill in deeper into what to look out for AND tactics that I’ve used to get investment property deals in Los Angeles.
What do Self Esteem issues mean when it comes to Investment Properties?
Every buyer wants a turn-key property, but here’s the thing: every seller knows that.
So sellers with these turn-key gems, price that desirability into their listings and they negotiate harder because they know their property is in demand. Hence my preference for the damaged goods. This goes well beyond just being unattractive. When looking for property deals, here are some things to look for:
- in need of repairs (aka deferred maintenance)
- back on the market after falling out of escrow
- recent price reduction
- listing agent that isn’t a specialist (out of the area and/or part time agent)
- poor listing photos and marketing
I’ll get deeper into each of these below.
Psychologically Banged Up Sellers and Properties
Self esteem issues aren’t always related to physical appearance – wait, are we talking about properties or people!?
For property listings these psychological issues are usually related to rejection – umm just like people – and by that I mean falling out of escrow. And oftentimes the issue could be unrelated to the actual property…for example if the buyer’s financing fell through – which in break-up terms is a “it’s really not you…it’s me”.
Regardless, now the listing has to do the “walk of shame” back on the MLS, which means you have a stronger position should you swoop in on the rebound.
Note: Price reductions are similar to a listing falling out of escrow. It tells me that a seller’s open to negotiate.
Bad photos are a Turn On (when looking for Property Deals)
When I see a property with crappy photos it tells me that the seller hired a realtor that might not be the best at putting their property on the market, which means:
- They haven’t optimized for buyer demand. When potential buyers are evaluating listings online, photos are the most impactful piece of info.
- There’s a possibility that their agent isn’t a listing specialist (otherwise they would’ve gotten better photos before hitting the market). Agents that aren’t listing specialists generally aren’t as experienced in negotiating on behalf of seller clients…meaning you and your agent (who should be a buyer’s specialist) may be able to negotiate a better deal.
Ugly Properties can be an Attractive Investment
I love hoarders. Whenever I am at a showing and the property has crap everywhere, I know there’s an opportunity. Most buyers can’t see past all that stuff and get turned off on the property (bonus points if there are cats or funky smells). What these would-be buyers don’t know is that some fresh paint can do wonders and with a little bit of work you can unleash the full potential of a property like She’s All That. And btw when other buyers get scared off, you end up with a really good deal.
Bad Inspections Lead to Good Investments
First time homebuyers dread seeing the property inspection. Savvy property investors don’t. Why?
Here’s why bad home inspections are usually good news for the homebuyer:
- these can be important issues with the property and now that you know about them, you have options to address them
- repairs scare away other buyers
- you can negotiate a price reduction and/or a seller credit to cover the repairs
- when the seller is privy to the inspection, they now need to disclose that to any other buyers which motivates the seller to work with you to close the deal instead having to go back on the market with a bad inspection hanging over them
- similarly if you get into contract after another buyer performed an inspection, you’ll get the benefit of having their inspection AND doing your own
Using a bad inspection to your advantage means having some understanding on the common issues especially for properties in that area.
In many neighborhoods in Los Angeles, for example, the houses in the area were built by the same builders and share common construction characteristics like foundation, insulation, electrical, plumbing etc. For contractors that work in these areas, dealing with issues that commonly arise becomes routine and they can quickly and reliably give you a quote that makes sense.
If you bring in an inexperienced contractor you may see a drastically different quote (and usually more expensive)…so having good vendors is key so you have confidence that these inspection issues are manageable.
Also your realtor should have good relationships with local contractors so involve them closely when assessing issues from an inspection.
Part Time Agents are your Wingmen for Property Deals
It’s not unusual, for a multifamily property’s listing agent to be the property manager that managed the property for the owner. And that means they’re splitting their time between property management and real estate…which means they’re probably not a true specialist as a listing agent. After all, a “jill of all trades is a master of none”. So it means you could have a negotiating advantage especially if your agent is a buyer’s specialist. It may sound ruthless but getting great investment property deals is about looking for any/all opportunities.
Another similar case is when the listing agent is out of the area (that includes those discount online agents that don’t specialize in a specific market).
A Redfin Hack for Property Deal Alerts
On Redfin look for properties that you’re remotely interested in (even if it’s a little bit above your price range or outside of your ideal specs). Then “favorite” the listing (it’s the button looks like ❤️).
IF any of these properties fall out of escrow, Redfin’s gonna notify you so you can jump on it. It’s way more effective than manually re-checking the listings daily to see if there have been changes.
This actually happened to me on two adjacent four-plexes. I got alerted by Redfin first thing in the morning on a Saturday and sent the listings to my agent. We were able to see the properties at 10:00AM and wrote offers on both by 1:00PM. That Monday we were in escrow (on both)!
Here’s the magic of this tactic though. I found out later that the seller had received offers after ours was accepted, but we were quick and locked up the deal before those other buyers even knew about it.
Caveat: if you find a property that’s PERFECT, we don’t recommend this. Just get your agent involved and go for it (no point risking losing the property because you want to see if it falls out of escrow).
When Negotiating a Property Deal, you’re only as Good as your Agent
You need to have a good agent to take advantage of investment property deals. That means:
- a buyer’s agent that has lots of experience with the specific types of properties you’re after
- someone with a track record in the local markets that you’re looking at
- someone who’s able to move quick with showings and writing offers
- an aggressive and creative negotiator
- someone that can sniff around for deals or nuggets of info that can lead to deals
- a natural networker that’s well connected with industry/municipal experts and contractors so you can get expert opinions on any issues that arise
Here’s something else that great buyers agents will do. They’ll open up the lines of communication with listing agents. That means even if you’re not making an offer, they’re letting the listing agent know that you’re a legit buyer with some level of interest.
Then your agent is checking in with the listing agent from time to time in case an opportunity arises. What kind of opportunities am I talking about? Well if the seller is starting to consider a price reduction OR if the property is in escrow but a smooth closing is looking less certain. These are the developments that can lead to property deals and you want your agent to be on top of this intel.
That happens because your agent is proactive, communicative, and also friendly with the listing agent.
Your Financing Needs to be in Order BEFORE You Search for Property Deals
You don’t wanna go out looking at property, find the deal of a lifetime and THEN get a loan officer trying to get you pre-approved on the weekend. So have the financing conversations early so you know what you’re pre-approved for, what your max monthly payment is, and how much you plan to put as a down payment.
And just like you’ll need your real estate agent to move quick when an investment property deal is on the line, you’ll need the same from your loan officer. That trust goes both ways though so IF you want them to be able re-run numbers and draft pre-approvals on tight deadlines make sure you’re committing to that loan officer too.