Real Estate Deal Analysis: How Many Real Estate Deals Will I Need To Analyze
By James Orr
The number of deals that you will need to analyze before you find a great deal varies on several factors including: your particular real estate market, the time of year, how you are finding your deals and your ability to sell and negotiate.
First, let’s look at your real estate market. If you are in a hot real estate market, then houses are selling quickly and there will be fewer motivated sellers. Deals will be harder to come by, but they are there. You may spend more on marketing to get fewer phone calls or you may look at a lot more houses for sale trying to find motivation.
Traditionally, it is easier to find better deals when it is harder for sellers to sell their house. In colder climates especially this is the winter time. It is typically easiest to sell houses in the spring and summer while kids are out of school or are about to be out of school. So, you will tend to find more and better deals in the slower times of year.
How you are actually finding your deals significantly affects the number of deals that you need to analyze before finding a great one. If you are looking in the Multiple Listing Service (MLS) at houses that are listed by real estate agents whose job, according to the seller, is to get the seller the highest possible price on their house as quickly as possible. As an aside, the real estate agent’s job definition may not match what the seller thinks it is, but that is a topic for another day. So, if seller’s who hire real estate agents to get them the best price are all listing in the MLS, how many great deals are you going to find there? Fewer than when you market to find motivated sellers yourself.
Dr. Dolf De Roos, author of “Real Estate Riches”, part of the Rich Dad, Poor Dad advisor series, has what he refers to as the 100:10:3:1 rule. I have found this to be true in my experience and other real estate gurus have similar rules.
What it basically says is that you need to look at 100 houses, to find 10 worth putting offers in on to have 3 offers accepted to actually get financing and close on 1. This is what you can expect if you are looking at properties in the MLS or For Sale By Owner (FSBO).
If you are marketing to find deals, the numbers change dramatically. In a normal market, you may need to look at about 10 to 15 deals to find one or two that you buy.
Finally, the number of deals you need to analyze is also significantly impacted by your salesmanship and your ability to negotiate. You’ll find far fewer deals if your only offer is full price and all cash. Learning how to negotiate a discount for cash and/or getting terms when buying will make non-deals, potentially deals.
James Orr is a professional real estate investor and marketing expert.
You can subscribe to his real estate e-newsletter and access audio downloads, articles, marketing materials and educational real estate videos at his Real Estate Investing blog.
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