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In my first few years as a real estate investor, one of the biggest time-wasters I had to deal with was my property research process.
In my mind, if I wanted to feel comfortable sending out an offer on any property, I had to know everything there was to know about the deal (this was my first mistake).
As a result, I would spend a ton of time making sure I understood every possible detail about a property before making an offer. I left no stone unturned.
Now, an abundance of caution isn't a bad thing per se, but I eventually realized this approach was hurting me.
In order for me to run a profitable business, I actually had to close a deal every once in a while. And to close a deal, I had to get some accepted offers.
For every ONE accepted offer I got, I usually had to send out a lot of offers, and I had to do this on an ongoing basis (not one offer per week… but DOZENS of offers per week).
If I wanted to crank out this kind of volume all by myself, it wasn't a good use of my time to spend several hours researching each property before I felt comfortable enough to send out one offer.
The math just didn't work! If I wanted ANY hope of getting anywhere in this business, something had to change.
When you're offering somebody 10% – 30% of their property's market value (like I do), a lot of them are going to say “No.” That's just part of the deal when you're fishing for motivated sellers and offering them virtually nothing for their property. A general lack of acceptance shouldn't take anybody by surprise.
RELATED: How Much Should You Offer For That Property?
Speeding Up the Due Diligence Process
Once I realized this, I knew I had to cut the fat out of my research process.
I couldn't spend a full hour (or more) researching every single property I came across. If I didn't make some drastic changes, I wasn't going to survive as a real estate investor.
After a lot of fine-tuning and experimentation, I could whittle down my research process to what I considered to be the most important factors. These were the essential pieces of information that needed to be known for me to determine:
- Whether Or Not To Make An Offer
- How Much To Offer
This list of “bare essentials,” i.e. – the checklist that I followed in researching each property, is outlined in the video below (Hint: View this video in FULL SCREEN to see all the nitty-gritty details).
RELATED: Are You Using the Best Real Estate Data?
Want to Use My Property Research Spreadsheet?
If you're looking for a “bare essentials” due diligence worksheet just like the one I use, you can subscribe to the REtipster email list and download it for free right here:
Getting to ‘Good Enough'
Now… is this process perfect? No.
But does it tell the story and get to the bottom of the most common issues VERY quickly, allowing me to send out 10x more offers as a result? Yes.
The reason I feel comfortable gathering ONLY the bare essential information is because I have a purchase contract that gives me a “back door”. In order to send out dozens of offers simultaneously and not be locked into each one, there must be a way to make non-committal offers (think of it as more of a “letter of intent”), all while being very clear about this fact and get the seller's consent on this.
By doing this, it has allowed me to get much further in my acquisition process without having to invest countless hours of my time before the seller makes a reciprocal commitment back to me. With this approach, I can make offers on each property BEFORE I know every last detail about it, and put together the remaining pieces after I've gotten each acceptance and before I close on the deal.
Consider this insight from Ken McElroy, author of The ABCs of Real Estate Investing:
“Analysis is paralysis. I move on a deal when I know 70% of everything. More than that takes too long and less is too risky.”
We don't need perfection. We need just enough information to make a reasonably educated offer.
RELATED: The Only 3 Things You Need To Make An Offer (It's Simpler Than You Think!)
From my perspective (knowing how much time can be wasted in the research process), this approach is the only thing that makes sense to me.
Once I get an acceptance, I can invest more of my time into evaluating a deal… but only if I know I've got a serious seller on the line. My goal is to never spend more than 15 minutes gathering the basic data on any individual property before I make an offer. This basic data is very important and helpful, but anything beyond this tends to be overkill (especially when you have no idea whether or not a property owner will actually accept your offer).
Let me reiterate, I'm not saying YOU need to research your properties this way. This is simply my process, which has been formed after years of experience and sending out tens of thousands of offers to every kind of seller you can imagine.
