As an active real estate investor and someone who teaches real estate investors, I am often asked by other real estate agents and real estate brokers what is a deal for real estate investor clients.
So, in my opinion, there are really four things that make a potential property a deal for real estate investors. You do not need to have ALL four things, but having more than one makes it potentially a better deal for the investor.
First, you should try to find property that is being sold for below current fair market value. In order to know if a deal is below current fair market value, you need to know or pull comparable sales. What some investors and many agents don’t realize is that houses listed for full price does not necessarily mean that they will sell for full price, but finding deals where they are listed below current fair market value makes them more attractive to start with.
Second, deals should have great positive cash flow. In many markets this is near impossible to find with straight rentals and high loan to purchase price ratios. However, in some markets it is a huge factor and you should know that rent minus mortgage payment is NOT a cash flow calculation. There are more expenses than just mortgage payment like taxes, insurance, maintenance and management that need to be included in a cash flow calculation. In other words, it is not enough to say a house that has $1,000 per month rent and a $900 per month mortgage payment has positive cash flow; it does not.
Third, deals should be sold by motivated sellers. Motivated sellers are more likely to accept offers that are discounted and/or offers that are creatively structured.
Fourth and finally, deals should have owner financing. Especially in our current credit situation, deals that include owner financing are much more attractive to investors than cash (or traditional financing) deals. The challenge is that most deals listed in the MLS will never mention owner financing. You don’t get it unless you ask in an offer.
In conclusion, finding deals for your investor clients should have one–and in many cases, more than one–of the above. The more the better and showing your investors deals that do not have one or more of the above will lead, ultimately, to unhappy investor clients and little or no repeat business.