Two Bedroom Deals: To Pursue or Not Pursue and How Real Estate Comps Can Make All the Difference

I hear this question often, “Cam, I’m looking at a property but it’s a two bedroom home, should I avoid the deal or do it?” The reality is, there are scads of guidelines in the real estate investing world and a few hard and fast rules to follow, but one of your biggest guides will be what the real estate comps tell you.

When you come across a potential deal that goes against the known guidelines, and trust me you WILL, then it may be time to slow down, take a second look and perhaps reassess your options.

For instance, you don’t want to pass over a possible deal just because you turned a guideline into your unbreakable rule.

I have a case in point for today’s post where a potential deal goes against my own guideline of mainly dealing with 3-bedroom, 2-bathroom houses.

A student of mine asked me about this particular deal. Here are the details:

• 2-bedroom/1-bathroom house
• no transaction history for the past 10 years
• unable to contact the owner
• handful of decent comps in the past 3 months

Now, my student knew that I mainly focus on 3-bed/2-bath houses, but with the activity of 2-Bed real estate comps, he believed that this made it a lead worth pursuing…

What do you think?

I say, GO FOR IT.

In this case, I have to agree with my student. The “green light” is that there are lots of recent 2-bedroom comps which tells me that they’re selling. People want them in that area.

This makes ALL THE DIFFERENCE.

So, why exactly do I have a problem with two bedroom houses? Well the answer is simple.

They’re easy to buy, easy to rent, but can be very difficult to sell.

However, if your plan is to wholesale a two bedroom, and you’ve got very little cash tied up in it – meaning you have little risk (in the event that it doesn’t sell) – PLUS you have real estate comps that prove there are buyers for those 2/1s (most likely landlords)… then go ahead with it!

But first, be sure you know the best comps to use in your analysis.

What Makes a Good Real Estate Comp?

In order to have valid comps, it’s important to know what you’re actually looking for. So let’s take a look…

Location: One of the first requirements is that the comp property has to be close to your subject property.

Good = 1 mile or less
Better = same subdivision
Best = same street
Rural area = same school district; same town

Timeliness of Sale: Next on the list will be how recent the sales were.

Good = 6 to 12 months ago
Better = 90 days
Best = 30 days

Size and Amenities: You must also compare the size of the house and its various amenities.

Bedrooms: same
Bathrooms: same
Construction: same
Style: same
Age: similar vintage
Location/street: similar
Drive by or look at satellite pictures

Finding those hard to locate sellers

So, you now have real estate comps that are valid and applicable. But how can you make an offer when you cannot find the owner?

The answer is the same one that I gave to my student for this particular two bedroom house…there are several ways to locate an unknown owner, but one of the quickest and easiest is to run a skip trace.

What exactly is a skip trace, and how does it work?

When the term was created, it was derived from the need to track down someone who had “skipped” town. In our case, the owner hasn’t skipped town; he’s simply moved away and we’re not sure where.

A skip trace service, like this one here, then searches through different database sources for information that is oftentimes unavailable to the public. A skip trace search will uncover valuable information to help locate the owners of the vacant property.

Luckily for you, the investor, the term skip trace isn’t familiar to most folks, which means…you guessed it…LESS COMPETITION. You’re out there ahead of the game.

Using a skip trace to find a property owner will give you a huge advantage and give you the opportunity to cash in on properties that others simply aren’t able to. By the way, I’ve found that the most difficult homeowners to find usually end up being the best deals.

Why?

No one else has been able to contact the owner and so they’re more likely to be desperate to get rid of the property and now you’re the only one talking to them.

If you’re looking to solve this dilemma and get ahead of the competition, click here to try “Find the Seller”, a skip trace service that has been helping investors locate hard to find owners for years!

My Caveat

One final note I must mention…

Would I rehab this house?

NO! As I stated before, two bedroom homes are more difficult to sell and it’s to your advantage to have as little invested as possible. 

If the home sits on the market while you’re waiting for a retail buyer, you’re now looking at holding costs as well. You DON’T want to be in that position.

So, to bring it all together…

Be sure to double-check that your real estate comps are valid and do a skip trace to locate that owner.

With those tools, you’re ready to whip the competition and put another 2/1 in the hands of those eager buyers who may have even bought the other homes that showed up in the comps.

Your Own 2/1 Dealings

What has been your experience in dealing with 2-bedroom/1-bath houses? Good? Not-so-good? Epic fail? I’d love to hear your feedback! Leave your comments below.

 

Regards,

Cameron Dunlap