Today’s REI Classroom Lesson
Today, Dave Pelligrinelli explains why it’s beneficial to have deals in the works and not attach yourself to any particular deal.
REI Classroom Summary
Dave comments on how to analyze not only your active deals but also deals you didn’t get so that you can see what offer they took and if there were repairs done.
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Mike: Welcome back to the FlipNerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Dave: Hi, FlipNerd fans. This is Dave Pelligrinelli from AFX and TitleSearch.com hosting this recent edition of the REI Classroom. Right after this break, we’ll get right into our first topic.
Mike: This REI Classroom real estate lesson is sponsored by UglyOpportunities.com.
Dave: It’s Dave Pelligrinelli at REI Classroom. We’re going to talk about money balling your REI deals and analyzing your deal pipeline. If you’re working on real estate investment deals, a very common pursuit is to work on one deal at a time. What we’ve seen is successful investors have a deal pipeline where they have multiple deals in the pipeline at any given time.
We like to see five to 10, maybe even a dozen deals in your pipeline for many reasons. The most important thing is to not attach yourself to any one particular deal. If you have multiple deals in your pipeline, you won’t become emotionally attached or too focused and obsessing over one particular deal that you that you have to do. If you’re only working on one deal or looking at one property, what you’re going to find is that attachment might force you into making a bad decision on one deal when there may be other deals to compare with.
Look, if you have five or 10 or 12 deals in your pipeline, you can compare between those deals as you’re working them through the process. You may find one deal falls out of that pipeline because maybe the price is too high. You may find one deal that you eliminate from that pipeline because you discover that there are liens on the property that you can’t mitigate. You may find one deal that the physical condition of the property has issues with it, maybe there’s a foundation issue or the AC or the mechanicals have some problem. If you’re only working out one deal, you might mentally gloss over that and say, “Well, it’s not that bad,” and still force yourself to do that deal because that’s the only one you’re working on.
So having multiple deals will keep you from forcing yourself into a bad deal. Plus it gives you the opportunity to compare deals within your own pipeline because you’ll intimately know the details on those five or 10 different properties. You can say, “Well, this one’s got a better potential retail upside than the other one or this one has a better chance of getting your financing, or this one has a better chance of having less obstacles to getting the deal done.”
The other advantage of having multiple deals in your pipeline is after six or eight months of working on deals, you might have 100 potential properties that you’ve looked at that you can analyze on the spreadsheet to see which ones became better prospects, which ones became higher margin potential. In that way, you can use those examples to model to find the next batch of deals on month nine or 10. You can also backtest your none purchase property. If you have 100 deals you’ve analyzed in six or eight months, maybe you’ve done two or three deals. The other 98 you can backtest those to see what happened if you bought those deals. What did those properties sell for, what problems came up for the buyers that did get the deal? Did they have to put in a new chimney? Did they have liens they have to pay off?
Think about that movie “Moneyball” where they took the baseball industry and used analysis on every little detail of a baseball player to see if the player or the team could improve the results by looking at the little details. Little data points you can use on your deals, how much time does it take to make the deal? What seller activity do you see? What answers do you get from the seller on questions? Where is the location? What is the prior lender on the property?
Any little detail you may not think is important, even the color of the house might be important at some point. So once you have multiple properties in your history of the spreadsheet, you can backtest those and see what analysis can give you as intell. for your future deals. That’s a way to analyze your deal pipeline, money ball your deals. Make them so that each deal, even if you don’t conclude it, becomes a valuable resource for making future decisions.
Thanks again for visiting. This is Dave at REI Classroom. Look again for another great episode coming up soon.
Mike: HomeVestors, the We Buy Ugly Houses folks, is a franchise system of hundreds of real estate investors that has purchased over 65,000 houses. If you’d like to learn more about the most powerful real estate investing in existence, whether you’re a pro or looking to take your business to the next level, or whether you have no experience at all, but a burning passion to be a successful real estate investing, please visit FlipNerd.com/ugly to learn more.
Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers, or affiliates. Please consult a professional before making any investment or tax decisions, as real estate investing can be risky.
Are you a member yet of FlipNerd.com, the hottest investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business and you can start networking with thousands of other investors just like you. Get your free account now at FlipNerd.com.
Please check out the FlipNerd family of real estate investing shows where you can access hundreds of expert interviews, quick tips, and lessons from leaders across the real estate investing industry. They’re available at FlipNerd.com/shows or simply search for FlipNerd in the iTunes store.
Dave: Hi, FlipNerd fans. This is Dave Pelligrinelli from AFX and TitleSearch.com hosting this recent edition of the REI Classroom. Right after this break, we’ll get right into our first topic.
Mike: This REI Classroom real estate lesson is sponsored by UglyOpportunities.com.
Dave: It’s Dave Pelligrinelli at REI Classroom. We’re going to talk about money balling your REI deals and analyzing your deal pipeline. If you’re working on real estate investment deals, a very common pursuit is to work on one deal at a time. What we’ve seen is successful investors have a deal pipeline where they have multiple deals in the pipeline at any given time.
We like to see five to 10, maybe even a dozen deals in your pipeline for many reasons. The most important thing is to not attach yourself to any one particular deal. If you have multiple deals in your pipeline, you won’t become emotionally attached or too focused and obsessing over one particular deal that you that you have to do. If you’re only working on one deal or looking at one property, what you’re going to find is that attachment might force you into making a bad decision on one deal when there may be other deals to compare with.
Look, if you have five or 10 or 12 deals in your pipeline, you can compare between those deals as you’re working them through the process. You may find one deal falls out of that pipeline because maybe the price is too high. You may find one deal that you eliminate from that pipeline because you discover that there are liens on the property that you can’t mitigate. You may find one deal that the physical condition of the property has issues with it, maybe there’s a foundation issue or the AC or the mechanicals have some problem. If you’re only working out one deal, you might mentally gloss over that and say, “Well, it’s not that bad,” and still force yourself to do that deal because that’s the only one you’re working on.
So having multiple deals will keep you from forcing yourself into a bad deal. Plus it gives you the opportunity to compare deals within your own pipeline because you’ll intimately know the details on those five or 10 different properties. You can say, “Well, this one’s got a better potential retail upside than the other one or this one has a better chance of getting your financing, or this one has a better chance of having less obstacles to getting the deal done.”
The other advantage of having multiple deals in your pipeline is after six or eight months of working on deals, you might have 100 potential properties that you’ve looked at that you can analyze on the spreadsheet to see which ones became better prospects, which ones became higher margin potential. In that way, you can use those examples to model to find the next batch of deals on month nine or 10. You can also backtest your none purchase property. If you have 100 deals you’ve analyzed in six or eight months, maybe you’ve done two or three deals. The other 98 you can backtest those to see what happened if you bought those deals. What did those properties sell for, what problems came up for the buyers that did get the deal? Did they have to put in a new chimney? Did they have liens they have to pay off?
Think about that movie “Moneyball” where they took the baseball industry and used analysis on every little detail of a baseball player to see if the player or the team could improve the results by looking at the little details. Little data points you can use on your deals, how much time does it take to make the deal? What seller activity do you see? What answers do you get from the seller on questions? Where is the location? What is the prior lender on the property?
Any little detail you may not think is important, even the color of the house might be important at some point. So once you have multiple properties in your history of the spreadsheet, you can backtest those and see what analysis can give you as intell. for your future deals. That’s a way to analyze your deal pipeline, money ball your deals. Make them so that each deal, even if you don’t conclude it, becomes a valuable resource for making future decisions.
Thanks again for visiting. This is Dave at REI Classroom. Look again for another great episode coming up soon.
Mike: HomeVestors, the We Buy Ugly Houses folks, is a franchise system of hundreds of real estate investors that has purchased over 65,000 houses. If you’d like to learn more about the most powerful real estate investing in existence, whether you’re a pro or looking to take your business to the next level, or whether you have no experience at all, but a burning passion to be a successful real estate investing, please visit FlipNerd.com/ugly to learn more.
Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers, or affiliates. Please consult a professional before making any investment or tax decisions, as real estate investing can be risky.
Are you a member yet of FlipNerd.com, the hottest investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business and you can start networking with thousands of other investors just like you. Get your free account now at FlipNerd.com.
Please check out the FlipNerd family of real estate investing shows where you can access hundreds of expert interviews, quick tips, and lessons from leaders across the real estate investing industry. They’re available at FlipNerd.com/shows or simply search for FlipNerd in the iTunes store.
