If you’ve ever wondered how you can find real estate deals worth investing in, this simple 4-step process will help you refine your search and get you started with investing in your first, or next, real estate investment.
By breaking down the process into Brandon Turner’s LAPS funnel, you can copy & paste this successful real estate formula to start building your pipeline of real estate deals worth investing in!
Resources
Need to find an investor-friendly agent? Make sure to check out this video on finding investor-friendly agents to find your first - or next - rental property: Get More Deals with Investor Friendly Agents
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Transcript
How many deals have you done this year? Is that how many you thought you were going to do?
In this video, I’m going to show you a four step workflow that will guarantee your success as a real estate investor once you implement it.
Multi-Millionaire real estate investor Brandon Turner named this workflow the LAPS funnel, and it’s a fundamental workflow that you’ll need to implement and repeat consistently in order to close on more deals.
So here’s the first step in this workflow. L is for leads. Leads are the properties that fit your investment criteria from the size, the age, the square footage, the number of bedrooms and bathrooms to the location and the investment strategy.
So where do you find leads?
You can find leads on the MLS. This is the multiple listing service. Often you’ll work with a real estate agent to get set up on an automatic property search that lands in your inbox with properties that fit your criteria. You can also find a lot of properties listed on websites such as Zillow and Redfin.
Finding leads using the MLS can be tough sometimes depending on where we are in the market cycle. But I found several investment properties this way and I think everyone should keep active searches in their market. You never know what you might find.
You can also find leads by networking with agents. Sometimes a property might need a lot of work and an owner might be looking to sell “as is”.
By establishing relationships with real estate agents and letting them know what you’re looking for and what type of investing you do - you might be able to work with an agent to get a property under contract before it’s listed on the market.
Another way to find leads is “direct to seller”. There are a lot of approaches to this method, but the most beginner friendly way of finding these leads is by looking on Craigslist, Zillow, and even Facebook Marketplace for properties that are listed “for sale by owner”.
These are often listed by homeowners, but sometimes you’ll find properties listed by landlords and even other investors. If you’re new to working direct to seller, this is a great way to get comfortable talking about property and learning how to speak to sellers.
The next letter in the acronym is “A” for Analyze. A property needs to fit your investment criteria before you get to the point where you’re ready to make an offer. This analysis part of the workflow requires that you have a clear criteria for what kinds of properties you are looking for and to have a solid understanding of your investment strategy.
Although not every property needs to be a home run deal that ticks every box of your investment criteria, you do need to be sure that you’ll be able to make a return on your investment.
Besides knowing what a good return looks like on an investment property, the analysis requires that you’ve gathered enough information about the lead to understand what you’ll need in order to start investing in this property.
Do you know what sort of financing you’ll use? Are there any needed repairs? If you’re buying the property to hold long term, are you going to be responsible for utilities? Do you know how much the property taxes will be once you purchase the property?
So now you have some basic ideas of what it will take to run the property as an investment. And if it’s currently an investment property, what is it currently bringing in as income? If you’re looking to fix and flip the property, you’ll need to know what it’s worth after it’s been renovated. If you’re working with an investor friendly agent, they might be able to help you find this information.
Now that you’ve gathered all this information in one place, you can use online calculators to start figuring out if this lead is worth taking to the next step. I recommend the Bigger Pockets calculators because they’re fairly robust and you can try them out for free.
By plugging in all the properties, income and expenses and various other metrics, these calculators will give you numbers that you can compare against your own investment criteria. If a property meets your investment criteria or is close to meeting it, it’s time to take the next step.
And that next step in the acronym is the P for “Propose”. This is where you put together your proposal or your offer. If the asking price meets your investing criteria and your investing strategy, then all you need to do is get the offer in writing.
But what if the purchase price of the property doesn’t quite fit your investing strategy? Every property has a number that makes it a deal and it’s a good exercise during the analyze phase to see what sort of number would work for your strategy. This gives you the opportunity to see what sort of offers you might be able to make to get the deal done.
For some sellers, speed of the transaction might be their main concern and they might be flexible to move on from a property that no longer serves them. For other sellers, the purchase price might be their only concern, so an offer lower than their asking price won’t be worth it to them, and they’re willing to wait until someone comes along at their asking price.
But you never know if you don’t try.
If you’re newer to real estate investing and you’re working with an investor friendly agent, they’ll be able to work with you to verify if a lower offer price makes sense in this particular situation. An investor friendly agent will run the negotiations for you and help you get the deal done.
If you’re working directly with the seller, you’ll likely be doing the negotiations yourself. For submitting your offer, generally, a verbal agreement followed by a signed purchase and sale agreement is pretty standard. If neither you nor the seller has any experience with purchase and sale agreements, sometimes you could work with a local title company to see if they have the contracts available for your state. Other times you may need to get a real estate attorney involved, depending on what state you’re in.
No matter how you get through the proposal phase, it’s critical that you think of the needs and concerns of both parties in the transaction. Real estate is often about solving people problems over property problems, and if a seller has a certain issue that the sale of this property is going to solve, you offer has to match their criteria in order to make it to the next phase of the process.
Success. Success means that you’ve negotiated the offer and that your offer was accepted. At this point, you have a potential deal in your hands, but it’s up to you to begin the next phase of the process and verify that it will truly work for your situation. It’s important to include a due diligence phase in your offer that gives you some time to verify the property condition and do more in-depth homework to verify your numbers.
If you had to estimate repairs, it’s time to bring in contractors to verify the scope of work and the costs. If you had to estimate insurance now it’s time to call insurance agents to get proposals for ensuring the property. If you find that things are far worse than expected, it may be time to cancel or renegotiate the deal.
Unfortunately, this happens. No one wants to cancel a deal after so much effort went into it. But it’s important to stick to your criteria and continue refining your analysis of the deal as you go through your due diligence phase and use the new information you’re getting to either confirm or deny that this will be a good investment in the end.
It’s true that you could never fail in real estate if you implement this system, but the number of deals you do each year is directly correlated to the number of deals that are in every phase of this workflow.
If you’re looking for more deals, start at the top of the funnel and evaluate and reflect at each step of the process.
You should be periodic reviewing the quantity and quality of your leads, your analysis and your offers. Real estate investing requires that you remain analytical at every stage of the process. Refine and evolve your plan and your execution at every stage of the process.
If you want to learn more about how to continue growing as a real estate investor, check out this next video where I break down the one book that helped me supercharge my real estate goals.