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My Winning Buy Criteria for an Uncertain Market

Jun 11, 2024

What a $150k loss can teach you...

Hey ,

Something interesting happened during the 2022 market shift — I learned something in my business the expensive way. But it brings me to why and how I am planning to buy everything in 2024.

In this newsletter, I'm sharing my winning buy box criteria and how you can build a resilient business that will carry you through any market too.

 

Inside the Trenches

Why am I buying single family properties right now and why am I so confident in what I am doing despite so much "uncertainty" in the market?

It's simple — a long term investment strategy.

This is a new concept for me, believe it or not. For most of my investment career, I have thought in 4-6 month terms due to me being an addicted house flipper.

I couldn't get off the sauce, addicted to the high of flipping houses and getting large sums of money all at once vs getting tiny monthly installments from cash flow rentals...yuck!

I could not get over the fact that I could flip one house and get $40,000 in 4 months vs getting $250-350 a month keeping it as a rental. Thats 100+ months to make the same money...wtf?!

Yet...in 2022 when the market shifted...

Guess which properties of mine kept paying me, chugging along, and now are worth more? ALL my rentals. All the properties I had kept in my portfolio.

And which properties caused my highest stress, and actually lost me $150k? ALL of my flips in 2022.

  • When the market is going up, everyone is happy.

  • When the market is going down, cashflowing rentals keep you happy.

  • When the market is uncertain, cashflowing rentals keep you happy.

Sure, absolutely, flips can be done in ANY market cycle. I know this first hand, I would also say I am an expert at this stuff, track record proves it.

Do I flip? Yes, of course. Do I keep as much as possible now, absolutely.

In fact, I believe that flipping makes you a WAY better long term rental investor. House flippers see opportunity where landlords typically do not. House flippers smell money when they see a messed up property vs most landlords see headaches and troubles.

The best of the best is being able to force appreciation in a property through rehab (flippers are great at this)… and then figuring out how to keep the property and rent it out for cashflow.

Maybe you have to flip some to keep some, but your future self will always be more grateful for the properties you kept vs the properties you flipped. Trust me on this.

By the way, quick side thought. I DO WRITE THESE NEWSLETTERS MYSELF. Thought I would throw that in there for those of you that may think otherwise. These are my thoughts that I want to share.

With that, I am currently buying a lot of real estate and plan on buying more before the end of the year. In order to insulate myself, I am thinking long-term.

In order to stack the cards in my favor though, I am doing the following:

  1. Investing in markets with strong job growth and preferably experiencing a limited housing supply. Where are people moving to, and where are the jobs going (and growing)?

  2. Focusing on strong rental markets that would love to have a better quality product. Where there is rental demand, there are also renters that would like a nicer home to live in. Most SFR's are 'rent ready' and obviously a rental, but a nicely done rehab can stand out in the market and fetch a higher price point with renters.

  3. Targeting houses fit within the national median house price, which is floating around the $390k mark, give or take. Markets that are far below this are not for me. Markets that are high above this point tend to also be the highly competitive markets or areas I have no interest in investing in.

  4. Buying distressed properties, leaning into rehab/construction, sharpening the pencil, and forcing appreciation. By doing this, I have a solid flip at a minimum and I’m typically buying an undervalued property, thus protecting my downside.

  5. Keeping LTV low. This is only possible if you really force the appreciation (which is hard sometimes), or you leave a chunk of money into the deal.

BUT wait! I don't have a chunk of money to leave into the deal…!

Well, flip some more houses and don't spend all your money so you can then invest that money to keep the best houses you are working on. Simple.

Most house flippers are bad with money, so they either keep dumping it into their business and overhead or spending it on lifestyle creep. Be a better 'investor' and invest the actual money in assets.

But Tarl...how can I keep more houses if I can barely do one or two houses a year? What if I am stuck at eight to ten houses and need those to live and/or pay my team…?

Well...get better. Do better. Find the holes in your business. Systemize and delegate. There are many many people out there who have successfully done this.

But Tarl...I don't want to work 80 hrs a week!

Ok, neither do I, which is why I don't...get better, find out where the holes are, improve. This is not an overnight thing, its a process.

You can make excuses or you can make money, you cannot do both.

 

Announcements

Since there’s been so much interest from my newsletters around the market and why I’m trying to buy and hold everything I can for 2024, I decided to do a free training on this…

Pencil in June 18th at 1pm EST on your calendar and be sure to register here to join the discussion.

Talk soon,

Tarl