36min chapter

Real Estate Rookie cover image

How to Find Real Estate Deals (and Analyze Them) in 5 Easy Steps w/Dave Meyer

Real Estate Rookie

CHAPTER

Finding and Analyzing Real Estate Deals in Today's Market

This chapter provides guidance for both new and seasoned real estate investors on identifying valuable investment opportunities in a challenging market. It highlights strategies discussed in a recent webinar, emphasizing the importance of a defined buy box, effective tools, and networking to achieve financial independence through real estate.

00:00
Speaker 2
Well, it sounds like you're off to a good start. And we are going to get into individual deals from each of our panelists and myself in just a little bit. We'll each talk about a deal that we've done recently or about to do and we'll get specific
Speaker 1
about how each deal is pulled off. But first, Kathy,
Speaker 2
I want to hear how you've
Speaker 4
been doing so far this year. Yeah, we have been busy. We have two syndications that we've been raising money for. I'll talk a little bit about how we're doing it. It's an option on land. So we don't really even have to pay for the land till later. So that's been great. And then just like Henry said, there's lots of deals, opportunity out there. There's still a lot of fear. And of course, interest rates are still high. So that means opportunity. Well,
Speaker 2
I want to talk to you about syndications because I've been hearing a lot of news recently about syndication performance. So we'll get into that a little bit. James, let's start with you. Let's dig into your first deal. So tell me how things are going in an overall trend for your business. And then tell me about the most recent deal you've done.
Speaker 1
Yeah, the 2024 so far has been busy. I think it's the redemption year. 2023 was a lot of loading, pivoting. We're going to 2024, which is the year of the disco for us. We have like $16 million to $17 million in our pipeline that will be get up for sale in the next six months. So a lot of properties getting sold. But the deal that I'm most excited about and what I'm doing right now that I'm the most excited about is our JV partnership deals now that we're doing with contractors locally in our backyard in Seattle or across the nation because it's so busy in 2024. I mean, we're buying apartments, we're buying development, we're buying flips. I need more time. And so I'm really focusing on systemizing the investment engines that can free up more time. So it is we started bringing in our season contractors that we've worked with for over five years. And now we are making them equity partners and deals to where it now creates an environment to where I don't have to go to the site as much as I typically do. And so the deal I want to kind of highlight because this is a, it was a great purchase, great experience so far is a property we bought in West Seattle. We paid $740,000 for this property. We bought it on market. No one wanted it. It was a massive fixer to where we had to rebuild the whole thing, including the foundation, relay at the whole house of buried studs out renovation. And because it was a big fixer, there's not a lot of demand right now because people are still a little freaked out by permit timelines and costs. At the time I was really, really busy and I was like, man, I don't want to take on this project. This requires about 20 to 30 job sites for me during the duration of this project. And so instead I brought in a contractor partner where we paid $740,000. He gave me a fixed bid at $310,000. And we are targeting an exit price or just listed at $1.75 million. There's a huge swing. And so how we did this structure and I only had to go to this property two times or three times over the duration of a 12 month construction project. And so what we did is we brought in, we said, how do we free it more time? We brought in a contractor partner. They can, they can really manage the site. He's got invested. We cut him into the equity of the deal. So now our contractors that are seasoned make 30% of our net profit by running that job site. But we structured it in a different way as a developer to where it's really not costing us any money. So on these properties, we secure the deal. We fee it. We take a $21,000 three percent acquisition fee on it. We make a 3% disposition fee when we sell the property. And so by creating these fees and structuring the deal, we sourced the deal, we packaged it, we gave it to the contractor, we are able to charge developer fees during this time. We then came up with the down payment for the property, all cash required. And we are going to make over $264,000 on our equity split. In addition to, we are making $66,000 in development fees, which is going to be a net profit of $320,000. And I only had to come up. I had to source the deal, find the contractor, pair them with it. And then all I had to do was wire out about $210,000 in the deal. So we're making over a 100% return in a 12 month period without having to do the work. So this is the year I'm trying to figure out how to package deals, bring in the right partners, make it rain on it, and then just let everybody do their jobs and collect some more passive income. I am going after time in 2024.
Speaker 3
Just sprinkle some money on it and then watch it
Speaker 2
go. So James, just to make sure everyone understands this. So basically what you did is you went and found a property, you identified the property, you purchased it for $740,000. Then the contractor gave a fixed bid for $310,000. So you still paid the contractor their normal fee. Is that right? Like the normal rehab cost? And then on top of that, the contractor had the opportunity to earn an equity split. Is that the correct structure? Yeah.
Speaker 1
So the contractor is still getting paid his normal quote and we fixed it. And what's happened is by giving them equity, they have ownership in the project where he is there all the time. What we've learned on this project is that the timeline to finish was reduced by almost 20 to 25%. We picked up almost three months on our construction by having invested in the deal. In addition to our change orders amount percentage wise went down by nearly 50% because again, he's invested in the deal. So he gave us a lot better pricing on his change orders. And what we found is if we're bringing people in, we can structure it in a way that we can make the same amount of money, make it an added benefit to our contractor and our partners. And so it's a win-win across the board and it frees up that time to where everyone's winning, everyone celebrating a big win. And there's more accountability on the job site, which you always want when you're facilitating a large construction project. Yeah,
Speaker 4
we've done a few of these as well. And I'm just curious, James, on your deal with the amount of equity that you're giving, is it equivalent to had the project gone three months longer? Are you kind of coming out the same either way because you're giving them that
Speaker 1
30%?

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