Tips for Finding a Great Deal on Your Next Home Purchase
Unearthing the Best Real Estate Deals – A Step-by-Step Guide for Home Buyers
Are you in the market for a new home? Purchasing real estate can be an exciting experience, but it's often fraught with worry and stress. After all, investing in property is likely one of the biggest financial decisions you'll ever make. Fortunately, there are ways to ensure that you get the best deal possible on your next home purchase. Keep reading for some tips on how to find a great deal on your dream house.
With over a decade of experience in real estate, these tips should help you find the right deal for you in any market under any market condition.
1. Find your target neighborhoods.
Set a budget and stick to it. Identify two to three dream neighborhoods that you would want to live in forever that work within your budget. These neighborhoods must be established or neighboring an established area you already know and love. Think parks, beaches, mountains nearby whatever it is that you love to do for fun and within proximity to your work.
2. Study past market data.
Do your due diligence. I can't stress this enough really study the pricing history in the market. First, you should look at past pricing data over the past two years for Sold homes in your targeted neighborhoods. Check out each listing carefully and really understand why it sold for what it sold for. Look for the number of bedrooms, size of the lots, amenities, location, and more. This will take some time so you might want to spend 15-30 min every evening for a couple of weeks looking at past home sales pricing data in your target market.
3. Search listings daily.
Look at lots of deals. Each time I have bought a home I have spent at least a year sometimes two years just looking at every new listing every single day. You can automate this and receive emails about new listings in the areas you are searching in. Now it is time to really look at what is on the market and start to understand the asking prices. Compare these asking prices to the past home sales data and you should have a good idea of what homes may actually sell for depending on size, location, amenities, and more. If you want to find a good deal you need to look at the market every day so that when the right home comes online you are ready to go and confident that it is a great deal.
4. What to look for.
Buy distressed homes. I look for distressed homes that are being poorly marketed by agents or by owners. I look for homes in great neighborhoods listed with bad photos and in poor condition. To be clear I don't look for homes in tear-down condition the bones and the location must be excellent. I look for homes that have great original architectural details but are in need of fresh paint, new kitchens, bathrooms, electrical, flooring, etc. I look for homes that can be restored to their former glory, I do not do complete gut renovations but I am also not opposed. I have found that there is a wide audience of buyers looking for restored homes that do not want to put in the work to restore them. If you are not into older-style homes these same principles can still be applied to more modern-style homes. The bottom line is buying a distressed home and renovating it has more upside in my experience than buying something already done for you and ready to move in.
Look for additional apartments. The holy grail and what I now exclusively look for is to find a distressed home that has at least one additional apartment or permits to build or convert one. This way you can rent the additional unit on Airbnb or find long-term tenants to cover some or all of your mortgage and expenses. This makes your home more of an asset and less of a liability and lets you keep all of the upsides of home ownership including the tax benefits and the increasing property value. If you do find a home with an additional unit I suggest you create a Limited Liability Company for the extra unit to collect your rent to shield your home from liability.
Why is it for sale? Another common theme I have found when finding good deals is that there must be a reason why the sellers want to sell and sell fast. Usually, this is someone who inherited the property and lives out of state, and wants the cash but there are many other scenarios. My rule of thumb is if the sellers are just finding another home nearby it may be a sign that this is not a great deal but it all comes down to the numbers.
Could you flip it? The last thing you want to do is buy a home and find out it is worth less than what you paid for it. I am ultra-conservative in this area. I only buy a home when I am 100% confident that even after the renovation costs I could flip the house if needed based on actual market pricing data and still make a $200K profit or more. This way each home I buy is a home run and if I am ever in a bind I can always sell for a profit. I would never buy a home that eventually will have an upside it must immediately have it.
5. Finding the right agent.
Having a great agent on your side is everything. Finding an agent that returns your calls and texts timely and is knowledgeable about zoning and permitting in your area is what to look for in an agent. Your agent should be able to communicate clearly and know most of the other local agents in the area. You might need to write five or more offers until you find the right home at the right price for you. So you need to find an experienced agent with plenty of patience. If you want to go above and beyond in your agent search ask for some references from past clients. I suggest talking to or meeting at least 3 agents before choosing an agent to work with unless you have a great agent in your family that you can trust.
6. Writing winning offers.
Be the first or the last offer. When writing an offer I never make it conditional on an inspection because sellers with older homes know there are existing issues and favor offers without the headaches of inspection clauses. I still get a home inspection but my offer is not conditional to the inspection. Usually, in most markets you can still back out for many reasons up until the official contract is signed. At the time of my inspection, I also bring in contractors to give me quotes on repairs so I have an idea of what renovation costs will be.
When we bought our last home we put a sight unseen full asking offer on the home 15 min after the listing went live. There were some photos but since we were studying the market, we knew this was a great deal for the area. The sellers had higher offers than ours but our agent Paul advised us to write a cover letter with photos of us in front of the house. I now fully believe in cover letters as this got us the house over higher offers thank you, Paul. The house we bought previously had over 40 offers it was distressed and looking for a fast sale. I did the same homework above and decided based on the recent sales just a few blocks away in another neighborhood that these offers were all significantly under market value based on the location. So I outbid them all and a few years later I made a very significant profit when selling the home.
Older homes usually have some surprises when renovating them so you should budget 25-30% more for renovations than you get quoted for. During this entire process, you should find and talk to contractors. The best way to do this is to talk to friends and family that have done this and get referrals. After many renovations, I have found the best way to keep your project affordable is to find a contractor for each part of the renovation. A great tile guy, a great carpenter, a great painter, and so on. Do not hire a general contractor unless they are in your family, you are building something ground up that requires a lot of permits or you do not have the time to manage the project at all. A general contractor is going to do exactly what I said above and hire out each part of the job and charge you a premium for it. If you are handy you can save money by doing your own demo, sanding, painting, and other relatively easy projects.
7. Timeless Home Design.
If you know you're going to need design help you can find affordable designers and architects to help you. You just bought your home and the last thing you are thinking about is selling it. However, design sells! You should have this in mind when designing your home. I aim for a timeless design for interior, exterior, and landscaping that will sell now and for years to come. This way if things ever do change you are ready to cash out and move on to your next adventure you can do it without another renovation project. The bottom line is to avoid short-term design trends.
Thank you for reading!
We hope you score an awesome deal.