We've been learning a lot about trying to buy an investment property and I thought I'd share some of the things we've been learning. We still haven't purchased anything yet, but boy are we ready when we find the right deal. Even though I'm going to focus on real estate, I think these four principles can hold true for any venture.
First off, here's were we're at: we've looked at a lot of property. Our goal was to evaluate 100 different places before we purchased. I don't think we've seen 100, but we've had at least 60 properties put in front of us, ran numbers on at least 40 (probably more), visited over 20 and made one serious offer. We've limited ourselves to duplexes, tri-plexes and 4-plexes, so it's been hard simply finding enough properties. Still, a couple pop up on our radar each week so it's a continual process. Just today I ran the numbers on a duplex in Philomath. It's 4-2 house that's been converted into a 2-1 duplex. The numbers are reasonable and depending on how some of my assumptions actually pan out, this could be a profitable property. Still, even if this one doesn't work out there will definitely be more along the way. This bring us to what Jessi and I have learned during this process.
Patience is needed. Clearly, looking at a 100 properties takes time. There were a couple properties early on that I thought could be good investments, but we weren't ready because we didn't have a confident picture of the market. This reminds me of Excel (What?! Stay with me). I often get people asking me how I became skilled at using Excel. My answer is, "Hours and hours of practice. What I just showed you in 2 seconds took me 2 hours of playing 3 years ago to figure out." Finding good investments works the same way. You need to take the time to learn, experiment ask questions. Sure, we've passed up on some good deals, but now we're ready to jump confidently on an investment when it comes available.
The deal of the lifetime comes once a week. I read this line in a book by Dolf de Roos and it really resounded with me. So far I watched two really good deals go by. Seriously, sometimes I'm in disbelief at how little some people are willing to let their property go for. Of course, that's when I kick myself for not making a stupid low offer. Then I remember that I've already seen two and there's at least two more deals of a lifetime waiting for us.
Fall in love with the deal, not the property. Being that we're looking for investment property it's all about the numbers. It doesn't matter how cute it is. It doesn't matter that isn't in the best neighborhood. In the end it's about the profit, just like any other business. Forgetting this will cause all sorts of pain. Jessi and I have gotten into the habit of filling out a cash flow form before physically looking at any property to decide if it's something we're even interested in. When we view the property, we're looking for ways to add value and save money to make the property even more profitable. Sometimes I'll say to Jessi, "Oh there's a good looking one." To which she dutiful replies, "I don't care. What's it's cash flow." How awesome is that?!
Mentors and cheerleaders are required. With all the ups and downs of finding an investment you really need help. Mentors are great because they can help with advice and knowledge. We currently have a few. Each mentor has an area of expertise that we pull from. Some help us with the knowledge of the local market. Others help us with our negotiating and posture. And finally some will help us with our philosophy in life. Each of our mentors have been where we want to be and are wonderful for seeking advice. This definitely helps avoid common pitfalls.
Just as important are cheerleaders. These are people who root us on and get us excited about what we're doing. We share our trials and triumphs and they are a blast to celebrate with.
We're still looking for our first investment property, so I'm sure more lessons are to follow. Still we think these are valuable and worth sharing now.