The two main challenges for property investors for increasing income & building their property portfolio are:
- Getting the money
- Getting a steady stream of good deals
Good deals usually find or attract the money, so it could be argued that good deal flow is the most important aspect of scaling and sustaining your property business empire.
Most people find it difficult to get good deals for the following reasons:
- They are new and haven’t earned the right to get the best deals yet
- They don’t know what a good deal is
- They haven’t got good estate agents working for them to give them the best deals before anyone else
- They don’t know how to market direct to vendor and negotiate the best deals
- They reject too many deals and don’t get offered any more
- They are impatient and don’t build up a good pipeline of deals for later
When you start investing or move to the next deal or strategy level, often you have no concept of the ratios to keep you deal pipeline in good flow, because you don’t know what you don’t know. You haven’t tested the numbers.
How many viewings do you need to do to make a solid offer? How many solid offers do you need to make to get deals accepted? How many estate agents are there locally who can source the best, discounted or value-add opportunity deals? How many possible Joint Venture (JV) partners & financiers do you need lined up to get those agreed deals funded?
Here is a simple (yet rarely done) ‘Pipelining’ technique to dramatically increase your incoming deal flow without any magic tricks or vast experience required.
You see every viewing as an opportunity to fill your pipeline, yet most people when they view a property either don’t offer and forget it, or do offer, get it turned down and then forget it.
So if you make 20 viewings a week that is over 1,000 viewings a year. I’m sure you’d expect to get 10 – 100 deals from that, but…
Those deals don’t fall in your lap.
For every viewing you make, whether you offer or not, put the details into an email and contact management system with basic information of the offer, conditions, common interests with the agent or vendor, how long the deal has been on the market, then, and this is the most important bit:
Put a recurring (never ending) 8 week diary reminder in your diary or project management system (outlook, iCal, google calendar, Asana, Trello etc). It has to be a system based and not paper, spreadsheet based or worse memory based.
Your best deals will not be the ones you get agreed immediately. If they are you paid too much! Your best deals will be ones that have been ‘pipelined’ over months or years and the motivation to sell to you has increased, or the price has dropped, or chains have broken, finance was pulled, deals fell out of bed and so on.
The deals in your pipeline have ‘aged’ and gotten better over time. You actually want deals to be mature, have been involved unsuccessfully in a sales process for a long time. And as such they must be in your pipeline. The best deals out of the 720 we’ve bought or managed have been ones we negotiated on for 2 years or more. We viewed it two years ago, it wasn’t right (likely too expensive), and we got a diary reminder that popped up every 8 weeks to check in to see how the deal was progressing.
Every 8 weeks when the reminder pops up on your phone, simply call or email to your agent or vendor checking in with the progress of that specific deal (that you would have forgotten), and a lower offer, or reminder that you are still ready to buy, or simply a thank you (and then wait another 8 weeks to try again).
Once you’ve been doing this a few months you’ll literally have daily reminders of deals pipelined and a huge deal flow. Each deal ages and vendors and agents become more open to offers, discounts, and/or more ready to sell quickly, all from the work you did in the early viewing days.
And to that end no viewings are ever wasted. When you are new you may worry about getting out there and viewing lots because of your perceived lack of knowledge or experience. The more viewings in the early part of your journey that you do, the more deals you fill your pipeline with to mature later. You either get a deal, or learn something, or cement a relationship with an agent, or you set up a deal for the future to come to you 6-24 months after the viewing (as it stays in your pipeline until it is sold).
You might have one in 5 or one in 10 or even one in 50 viewings that turn into a deal. Track your numbers. After all, the following things WILL happen with deals you thought you were going to get, but didn’t:
1. Getting let down/messed around with deals and finance falling at the final fence.
This is NORMAL. A pain, but normal. It is not you or that you are a failure (unless you are repeating a pattern/mistake). It is simply the (numbers) game. If you have tracked your numbers and you know your ratios, you accept it, stay patient and just keep filling your pipeline.
People can over-hedge or over rely on results from only a few people/agents/partners, and then take it personally when everything they pinned their hopes on goes wrong.
2. You need back up buyers, financiers, agents/deals, tenants for your multi-lets, refurb teams, etc.
You need a good pipeline of all of them, not just good deal flow, so you negate and de-risk 11th hour let downs and you can negotiate from a position of strength and not desperation.
So start it now, early, and keep growing your pipelines. The bigger the pipeline you build, early, in the first few months, the bigger the pay-off and back up plan to you later down the line. Don’t be picky to start just get the numbers up; you will learn as you go the best agents and vendors. You can get fussy and selective of your time later, once you have the experience to spot the kinds of deals that you know never get through. .
You will get more deals & finance when you don’t need it ironically, & a pipeline of deals & buyers gives that air of certainty people are attracted too. Plus you become less reliant & desperate on the deal you are chasing which will force errors, overpayment & unfavourable terms you will regret later
3. The challenge many have is that you start with all the passion & energy but because building this pipeline is ethereal
& can’t not be immediately seen, you slow down when you think you have what you need, that one great deal that will save you, and then all of a sudden you don’t.
You should keep the viewings up no matter how long it seems to be taking you to get a deal. You will have moments in the year when you feel like you are getting nothing, it could last months, and then bang you get a few deals in a short space of time. But you don’t if you stop.
You have to set, to forget. You work hard enough not to have to work hard. Stay persistent but patient and the deal flow comes from the size and aged nature of your pipeline.
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