How much would your real estate investing success increase if you could eliminate up to 99% of the investors competing for your deals? Daniel Ameduri, who bought his first investment property at the age of 18, accidentally stumbled across such an investment competition-reducing strategy when he was purchasing his personal residence.
In our recent conversation, Daniel explained how he leveraged that tactic to grow his investing business. By selecting the correct investment criteria, you can replicate Daniel’s real estate investment strategy and never have a problem finding a deal again.
Step #1 – Identify a Market’s Main Problem
The first step for this strategy is to uncover the property type that no one wants to buy. If you know your market well, you should already have an answer to this question. If not, simply ask around. Speak with local investors, wholesalers, or realtors and ask, “what is the property type that nobody else wants to buy? The one that scares away most investors?”
In Daniel’s market, and maybe in your market too, the issue that every investor runs away from is foundation problems. He said there’s virtually zero investment competition for deals with foundation problems because “no one can get a loan. Bam! Right there, you just got rid of all your paint/carpet/blind fix and flippers. They’re gone.” Daniel also said, “most people are ignorant of what it takes to fix a foundation. Okay, there you go; you got rid of a ton of cash buyers and a ton of other investors.”
Step #2 – Find a Solution
Next, you want to determine how you can solve that issue in a cost-efficient manner, which will require investigating and due diligence on your part. For Daniel, he discovered both the problem and solution completely by accident. So, he’s not being boastful or arrogant by claiming that most investors are ignorant of what it takes to address a foundation issue, because initially, he was as well.
He said, “in Southern California, I came across a foundation problem and I ran. In central Texas, I wanted to buy a home for my family to live in, and they said ‘It has a foundation problem.’ Because I didn’t have my investor mindset on, I didn’t run. I became an entrepreneur problem-solver, which that’s what I should have been as an investor. Because I wanted to live in that home, I said ‘Well, I’m going to find out how much it costs’, and to my surprise, the bids were coming in at $3,000, $3,500, and I was like ‘Wow!’ Here I was, thinking this was a $50,000 problem… Because it’s about the logistics – they’re literally digging holes around the property, jacking it up… Typically, if it’s a two-story, it will burst some pipes or break some things, so a lot of times you have to fix the piping as well, which is another $3,000 on let’s say a 2,000-3,000-square foot home. So, I actually originally discovered this whole problem that was solvable with the purchase of my own residence. Then once I knew that, I smelled the blood; I was hungry. I told that very realtor and everyone I could get in contact with – ‘If there’s a foundation problem, from basically all of central Texas to San Antonio, I want to know about it.’”
Step #3 – Become the Go-To Person for Those Types of Deals
Finally, you want to contact the realtors and wholesalers in your market and ask them to notify you if they come across the type of deal you’re looking for. At first, this will be the specific problem you’ve identified and for which you’ve found a solution. But as your business evolves, you may want to invest in all the deals that your investment competition is running away from, which is what Daniel’s real estate investment strategy is.
When someone asks Daniel what his investment criteria is, he said his response is always “I want what nobody else wants. I want what everybody hates.” That is his standard reply to every realtor, investor, realtor, etc. “I tell them I want to be the guy that buys the things that nobody else wants to buy. I want to get the things that are hated. I don’t care if it’s fire damage or foundation. What are people scared of, what do they hate, what does nobody want, what can no one get a loan for? I’m that guy.”
Since you won’t be able to get a loan on these types of deals, you’ll either have to use all cash or utilize the same strategy as Daniel – seller financing. He said, “what I’m doing is I’m approaching that homeowner who cannot sell his house; he is stuck. The only option for him is a cash buyer, that’s what he thinks but what I tell him is ‘What do you ultimately need from this deal?’ That’s where I start the negotiation. Maybe they need $5,000, maybe they need $30,000. If I can be agreeable to that, the rest is easy, because all I have to do is an assumable transaction; I take over the loan and I tell them ‘Look, I need 18 months to fix and flip this house or refinance it. I can get the foundation people almost immediately, I can have the foundation repaired within six weeks, and then I just need to finish the rest of the property.’”
“I still have an assumable loan, so I’ve never even applied for a mortgage at this point. I’m simply making the payment of the previous owner, but I am legally on the deed; I am the owner, I just don’t have the mortgage in my name. I continue making those payments, and that distressed seller – he’s long gone. And I then sell the property, and hopefully – and usually it works, in this case; and I say actually always it works so far – I’m able to sell the property in under six months… Paying off that loan, so that guy is happy, and I get to make the cash. I never have to go through the nightmare of an application of getting a mortgage, I never had … to write a $200,000 check to buy the property cash… I usually got into the property for less than $25,000, and probably put another $25,000 to fix it up.”
Keep in mind that this is not a no-money-down real estate investment strategy. But it also doesn’t require hundreds of thousands of dollars either. Daniel said, “most of the owner-financing deals I have done, you need some cash. You’re going to need anywhere from $5,000 to about $30,000.”
Daniel Ameduri follows a three-step investment strategy that eliminates up to 99% of the investment competition vying for the same deals.
The first step is to identify the main issue in a market that scares away 99% of investors. Next, research the solution, and the cost, to the issue. Finally, notify the wholesalers and realtors in the market of your criteria and become the go-to person for those types of properties.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.