Much is said and written about how important speed is in real estate investing. It's true in a limited number of aspects but has nothing to do with investing success in most aspects. What's important is knowing when speed is appropriate and when waiting is more important to finding the best deals.
There are two times during a real estate transaction that speed is the key to closing great deals. First, is when you are looking for distressed sellers. These people need to sell a home fast. When you're looking for a property, the first thing you should do every morning and throughout the day is keep an eye on MLS listings, craigslist listings, and anywhere else that you scour for leads.
When a hot lead comes on the market, you want to be the first person to make an offer. You want to have an offer in front of the seller that is compared to all other offers that come in. It doesn't need to be the best offer but it does need to be an offer that clearly states that you will close the deals fast. Then you sit back and wait.
Being patient and having multiple offers out there is the critical strategy to being successful. What you want is to have the last offer on the table instead to the best offer on the table. When it comes to distressed sellers, they have few options available.
The property is often run down and they can't afford to repair it. Retail buyers aren't interested in buying a property in need of serious repair. All of their cash is going into the down payment and closing costs. The serious investor has cash on hand to close the deal fast, make repairs, and put the property back on the market in 60 to 90 days. These are the properties that can be bought for 65% of market value because no one else is interested. These investors have the last offer on the table instead of the best offer.
When an acceptance to sell comes in, it then again becomes a time for speed. When you have the last and lowest offer on the table, the seller will wait until he or she is completely out of time before they agree to sell. You need to be able to close the deal in a few days. As little as three days and I've seen it done when the offer is accepted in the morning and the deal closes in the afternoon (most states have a cooling off period that favors the buyer but not the seller).
To many, this strategy may appear to be predatory but if you do it ethically it's really a win-win scenario. The seller gets out of a property they can't afford to stay in and as an investor, you get a bargain property that retail buyers have no interest in looking at a second time.
Too often, I see investors measuring their success by how many deals they can close in a week or a month. These tend to be small time thinkers that forget about offers they made a month or even several months ago. It's the offers that were made several weeks or months ago that will bring the most profit and hence the most success. Always have a reserve fund ready to go for the forgotten deals that will turn the best profit for you as an investor.
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Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.