How to Sort Deals from Real Deals | EREI 26

Are  you someone who buys deals, or do you shop for deals? If you don’t now how to recognize a real deal, then you probably don’t even know which one you are. Successful investors are usually people who shop for deals. These are people who can separate deals from real deals, and they only give their time to the deals that are real. Today Matt discusses a 2-step process for sorting deals from real deals, so you no longer have to waste time guessing which is which. Enjoy!

 

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Podcast Transcript:
(Voice Over):  Epic Real Estate Investing Podcast Episode 26. Without further delay, your guru.  Sorry. Your guide to a better life, the real estate investor, Matt Theriault.

Matt Theriault:  Hello.  Greetings from The Epic Real Estate Investing Podcast.  The podcast that will show you how to build wealth through creative real estate investing.  That’s what we will discuss today and for a long time to come so you’ll have the option to realistically retire in the next 10 years or less.  And enjoy the good life while you’re still young enough to do so.

My name is Matt Theriault, author, full time real estate investor and family man.  If this is your first time listening to the show.  You want to do two things.  First of all, welcome.  I’m glad that you’re here.  I’m glad you found us but first you’re going to want to go back to Episode 1 and listen for the ground rules of the show.

Two, I want you to download the Free Real Estate Investing Course – How to Do Deals, No Money Required.  You can get at FreeRealEstateInvestingcourse.com.  I made the domain name really complicated.  Right? FreeRealEstateInvestingcourse.com

It’s a step-by-step course of where I unveil the mystery around doing deals with no money or credit.  That’s yours for free at FreeRealEstateInvestingcourse.com.  I’m going to get you started right.

Okay so I’ve got a lot of questions regarding our last episode or particularly with regard to one of my last comment.  One of my rules of thumb is for me is if I’m buying more than one of seven deals, I’m probably paying too much for real estate.

Chris form St. Louis had a question about it.  Lawrence from North Carolina, Steven from Baton, Melissa from Chattanooga, and Charity from Seattle, they all ask me in their own way to expound on this.

Based on the amount of people that subscribed to this show, I mean I’ve come to learn that you know five people emailed this question to me.  I’m pretty sure at least 500 more thought about it.

I’m going to expound on their question but you know before I do, I should back up just a little bit.  I mean I used the word “deal” pretty loosely in my conversation. I should probably practice using the word “opportunity” a little bit more often as opposed to “deal” but you know it’s just a real estate word.

That’s kind of what I’m kind of used to saying or what I’m used to using but you know anyway let’s define what an actual deal is first.  A deal is really any opportunity that you can afford that will move you towards your goals and your goals being either cash or cash flow.

Now there will be different measurements of deals that will cross your path. I mean there are different variations and different sizes meaning some deals will move you towards your goals faster than others.

I mean for example, I mean I can put $50,00 into this fix and flip. I’m going to receive $20,000 of profit or I can put $50,000 in and receive $30,000 profit. I mean both deals are deals indeed.  Right?

But if you can only do one, which one will you do?  Of course the one that pays more but what if they aren’t presented at the same time? What if you can’t compare them side-by-side?

What if the smaller deal comes across your desk a couple of weeks say before the bigger deal?  How will you know whether to pass on that first deal or not?

Well the answer is you won’t know whether to pass or not unless you know exactly what you’re looking for.  Unless you know what a deal looks like.  Successful investors, they have specific criteria’s as to what to what a deal is to them or not.

Before you speak with one more motivated seller or submit one more REO offer or bid on one more auction property, it would be very wise to sit down and find the parameters of what a deal is to you and what is not a deal for you.

I mean once you do that.  You can then move from that novice mindset of being a buyer of deals to that of an expert mindset being a shopper of deals.  You don’t want to a buyer of deals.  You want to be a shopper of deals.

You know investors (or) successful investors; they live for the hunt, the thrill of closing great deals.  They love that sensation.  That’s what they’re really after and the act of searching for great deals is just as important to them as acquiring those great deals.

That’s the excitement.  They’re shoppers.  They’re not buyers.  They understand that it is just far better to miss out on a good deal than to buy a bad one.

I’ll repeat that, it’s far better, far better to miss out on a good deal than to buy a bad one.  I mean the shopper’s mindset it provides two significant advantages. I mean first you get to enjoy the part of investing that you will be doing the most – searching for deals.

The constant pursuit of finding the great deal.  Now the market is cyclical. I mean you all know that.  I’m not telling you anything new there.  It goes in cycles.  What I specifically mean is that there will be times of great abundance where opportunity seems to be everywhere.  There will be times of great scarcity when you can’t seem to find a deal to save your life.

This is going to happen just the way it is.  It’s part of the game.  By being a shopper, the times of abundance will never lead to recklessness.  By being a shopper, the times of scarcity will never lead to impatience and impulsive decisions based on lack.

That leads us to the second avenge of the shopper’s mindset, this mindset protects you.  It protects you and it protects your assets.  Shoppers, true shoppers never feel the urge to compromise their standards.  They stick to their standards.

So that brings us back to knowing what a deal is to you.  You have to define that for yourself.  What are your deal’s standards?  What are you going to shop for?  What are you looking for?

As soon as this podcast is over, I want you to sit down and write down your definition of a deal.  I want you to get specific. I want you to write down your deal standards so you’ll ask yourself the following questions.

Am I looking for cash or cash flow?  What’s my intention of my investing?  Am I looking to create cash or am I looking to create cash flow?

I mean ultimately I hope all of you have your eyes on creating cash flow.  Passive income. I mean that’s how the wealth is truly created. I want you all to be wealthy but depending on where you are in your real estate investing journey, you may need to create some cash before you can create some cash flow.

Or maybe you’ve got a good chunk of cash to work with then now you want to turn it into a residual income.  You have to answer that question for yourself: are you looking for cash or cash flow?

Because it’s really important as it can dramatically impact what you’re going to pay for a property.  Don’t underestimate this question.  Cash or cash flow?

Second question: what type of property will you are looking for that will create your cash or cash flow?  Single-family residences, duplexes, condos, multi-family buildings, commercial buildings?  Establish what type of property is going to be that’s going to help you get to your cash or your cash flow.

Third question: in what area am I willing to search for these properties?  Is it your immediate neighbourhood?  Is it your subdivision? Is it your zip code?  Your city?  Your country?  Your state or is it another state?  You know what areas are you willing to look into finding the types of properties that will create your cash or cash flow?

Fourth question: what price range are you going to look in these areas? I mean it’s defined as anything say between $50,000 and $100,000 or anything priced below the median or anything priced below replacement cost?  Or maybe you’re looking at luxury homes?

Whatever.  Establish your price point.  After you’ve answered to those four questions: cash or cash flow, the type of property, the area that you’re going to cover, and the price that you’re going to work within?  You now have your investing standards.  You have your deal standards.

Now you can be a shopper of deals.  Now you know when the deal comes across your desk whether to take it or not.  It really is black or white.  You’re going to run each deal through your standards.

In other words, you’re going to qualify each deal.  That’s the way you qualify the sellers.  You’re going to qualify the deals as well.  If the deal meets your criteria, you’re halfway there.  Okay?

So what’s the second half? Well if the deal meets your criteria, how will you be able to sort the deals from the real deals?  Because remember from our last episode, most deals you come across will not be deals or specifically won’t be deals for you.  The second part of that was the centre of every real deal is the seller’s motivation to sell.

So the first half of being a shopper is qualifying the property.  Does it meet your standards?  Does it meet your criteria?  The second half being a shopper is will the seller meet your terms?

This is an additional criteria you’ll have to answer into your deals standards.  What are your standards with regard to an acceptable return on your investment?  For example if you’re looking to create cash from a deal, what is the minimum amount of cash you’re willing to accept?  What’s the minimum amount you’re willing to work for?

I mean maybe your terms maybe expressed in 20% return on my investment in 90 days or less.  If those were your terms, it would be a very simple calculation as to whether a deal was a deal or not, whether a deal is a deal or real deal.

You would be able to tell that if those were your standards or your minimum standards.  Can I purchase this property low enough to return 20% the money that I put into the deal?  That’s a yes or no question.

Can I or would I be able to get my money out and do it in 90 days or less?  If the deal requires you to put say $100,000, first you need to at least purchase it low enough that after all costs and expenses are taken care of, there’s at least $20,000 of profit left over for you.  Second, can you get that $20,000 of profit out within 90 days?

Is there enough market activity in the area to do that?  Are there enough people buying houses to reach the belief that you could sell the property in 90 days or less?

All of the sudden if those are your standards sorting deals from real deals is very easy – the black or white question.  It’s yes or no.  There’s no gray.  Or do you have people on your buyer’s list that will gladly take this property within the next 90 days?

If that were the case then that would be a deal.  If the seller won’t give you the terms you need to make this happen then it’s simple.  No deal.  Next.  Moving on.  Who cares if it could still be a good deal?  It’s not the deal for you.

You are shopper of deals not a buyer of deals.  Shoppers are the most successful investors.  Buyers they get jammed up all the time, all the time. I mean if the buyers that give the practice of real estate investing that risky stigma.  They’re not investors.  They’re gamblers.

Don’t be a gambler.  Don’t be a speculator.  Don’t be a guesser.   Don’t be a buyer.  Be a shopper.  Better to let a good one get away than to buy a bad one.

Case in point, I don’t know about your area but I have a strong feeling this is probably the case of many markets.  Just a hunch. I ‘m not totally sure but I’m pretty sure.  I think it’s a good hunch just because by knowing the nature of people. I mean they get emotionally involved in their investing and they compromise their standards.  They do it all the time.

You know if you have access to the multiple listing services, look at the active listings right now.  Count the number of rehabbed homes that are on the market.  The ones that are on the market that have not sold.  I mean for example right now in Los Angeles, actually I think all across Southern California, you can log on to the multiple listing service and view many.  I mean many turn key rehabbed homes.  The market is flooded with investors or I should say buyers of real estate that fix the properties and put them back on the market.

Because they were buyers, buyers who didn’t buy their deal low enough, they’re unable to sell their deal and get their return on their investment.  The longer the deal sits on the market, the lower their return is getting but the market activity is great in Los Angeles.

People are buying and selling all day long everyday of the month.  People are transacting real estate.  They’re just not transacting the buyers’ real estate.  So don’t get jammed up like a buyer.  Get your return on investment.  You get your return by being a shopper.

You make your money when you buy.  You’ve heard that before but you don’t get paid until you sell.  You got to buy low enough so you can sell.  Define your standards, define what’s a deal, and define your deals standards.  When you see it, you’ll know it.  When you come across a real deal for you, you’ll know it.  You can act quickly.  You won’t have to hesitate.  You can seize it. I mean you would be able to pull the trigger with confidence without hesitation.

Now to answer the questions and comments on what I mentioned last episode, if you’re buying more than one out of seven deals, you’re probably paying too much for real estate.

What I mean is for every deal that meets my standards of which I write an offer, one out of seven of those sellers will give me my terms.  There’s a big clue in there though.  For every deal that meets my standards of which I write an offer, the operative phrase there “write an offer,” I mean if you’re not writing offers then you’re not doing deals.

There’s a direct correlation between the amount of offers you write and the amount of deals you’re going to do.  The more offers you write, the more deals you will do.  I mean everyday I want you to wake up with the intent of writing one offer. Do that. I mean wake up with the intent and follow through.  Write at least one offer.  If you do that, you will do deals.  You’ll do real deals if you have your real deal criteria.  You have your deals standards defined.

So one out of seven, if I’m doing more than one deal out of seven offers, I’m likely paying too much for real estate.  Those are the numbers for me.  They might be different for you but those are my numbers.  Your numbers, they’ll become more and more clear to you as you go but the only way you can get to nay specific number for you is to define what a deal is to you first then write offers.

Create your deal standards and then you’ll know specifically how to sort deals from real deals.  Then write offers that meet your real deal standards.  If you do that, the only deals you will do, the only deals you are going to get are the real deals.

And a real deal defined is you probably write this and stick it to your computer or your phone or your somewhere where you will see it while you’re doing business. A real deal defined is a property that meets your criteria and the seller that meets your terms.  That’s a real deal.  A property that meets your criteria and a seller that meets your terms.

Nothing else will do. I mean it’s a great day when you get to say no to a deal.  I mean it’s just as great of a day as when you say yes.  You see while a buyer never leaves a store empty-handed, a shopper will do so happily.

It’s far better to lose a good deal than it is to buy a bad one. You know contrary to popular belief, buying real estate is not investing.  I mean buying didn’t make anyone an investor more than buying groceries makes them a chef.  Be a shopper of great deals and write offers.

When you find a good deal, write a great deal offer.  Do that everyday.  When you find any deal, write a great deal offer.  A great deal as defined per your criteria, your property criteria and your terms, your standards, your minimum standards for your terms.

Don’t leave the sight of a potential deal without writing an offer.  Write an offer that meets your great deal standards. Do that and you’ll do great deals.  One offer a day.  Simple.  Right?

Indeed.  It is.  Very simple.  That’s all I’ve got for you today so until next time as a very wise person once said, “there is no problem unless we choose to make it one so think carefully before you act.”

To your success, I am Matt Theriault.  Living the dream.

(Voice Over):  Thank you for spending this time with Matt Theriault and the Epic Real Estate Investing podcast.  When you have time, stop by iTunes to leave your comments and let us know what you think of this show. 

And if you haven’t done so already, get started investing today by visiting FreeRealEstateInvestingCourse.com to access Matt’s free course on how to deals, no money required.  Until next time.  To your success, to your success, to your success.