Tips To Close Your First Deal
By Paul Esajian on May 17, 2019
Getting from point A to point B in the world of real estate can be a frustrating experience. You have all the tools to succeed, the motivation to work and the drive to keep going, but no deals to work on. You are desperately trying to dip your toe in the real estate waters but haven’t quite found the right situation to dive into yet. Instead of forcing a bad deal you should take a step back and evaluate your
plan.
As obvious as it sounds, your goal should be to generate revenue and not simply own a piece of real estate. Too many new investors get caught up in finding a property that they forget about the numbers. Your first deal will set the tone for almost everything else you do in your business. Here are five tips to help your business get started on the right path.
- Get Finances In Order: As an investor, everything revolves around your finances. You should know where you will get your capital from, what your purchase price limit is and what rate of return you can expect. Your finances will impact the markets you look in and how you will structure your offer. There is a huge difference in an offer backed by personal capital or hard money as opposed to lender financing. Your terms will change and the time to close will be reduced. It is essential that you get everything about not only your funds to close, but your personal capital in order prior to getting too far. You don’t want to have to juggle money between funds or go back to a private lender and ask them for more money to make an offer. Everything on the financing side should be in place prior to looking at any property.
- Know Your Limitations: One of the biggest things new investors need to understand are limitations. Anybody can have a plan, but if it is not realistic you will be left disappointed in the results. Start by understanding your personal limitations. You may have a background in the trades, but that doesn’t necessarily mean you can do all the work on a property. When you run the numbers, you will save money by doing most of the repairs, but when you take ownership of the property it may be a different story. This has a trickle-down effect on your bottom line and would have changed your offer price, and even if you would have pursued the property in the first place. You should also keep your expectations in line with reality. Not every real estate deal will be a home run. The deals with massive profits, like you see on TV, are the exception and not the norm. There is plenty of money to be made in real estate, but not on every deal. Understanding your limitations and knowing your expectations will help you run accurate numbers and find deals worth pursuing.
- Numbers Over Emotion: All your investing decisions should be driven by numbers. You can make the case that you almost shouldn’t even look at the never fall in love with a prospective purchase. Emotion can cloud your judgement and lead you to properties that don’t have the highest upside or overpay when you know you shouldn’t. You need to know, and understand, the numbers inside and out before making an offer. Just one oversight, or overexaggerating, can change everything with the property. A property that you thought would net a certain amount can be completely different when you plug in the right numbers. You can have your property preferences and love everything about it, but you also need to know where to draw the line. Always let numbers guide every decision you make.
- Look At Houses: The more you know about real estate the easier it is to make decisions. Even if you own a home and think you know different markets you should still look at houses. Every weekend is an opportunity to improve your knowledge about a market, or simply on different types of properties. You will see new styles, what works, and what doesn’t in particular markets. There are always plenty of open houses you can attend with all kinds of different property types, styles and layouts. You never know when you will see something that you can use on your next rehab or something you want to stay away from. If you want to be in real estate, you need to study your craft and look at as many different types of homes as possible.
- Make Your Offer: Never be afraid to make the offer you see fit on a property. As long as you do your diligence and understand demand, you should make any offer you want. Once you make an offer, you can’t take it back. Instead of worry whether you will insult the seller you should rely on your numbers as a guide. Getting the offer accepted at the price you want can literally save you thousands of dollars on the back end. This doesn’t mean you should lowball every offer, but if the data is on your side don’t be afraid to start low and work your way up.
Starting anything new is always filled with challenges and apprehension. Once you have success with your first real estate deal, it will drive you to do more. Use these five tips to start your investing career on the right track.