A field of green houses with one red house. A magnifying glass searching for the red house.

How to Find the Best Real Estate Investment Deals

Ready to buy your first property? Step one: Read this.

Wondering how the wealthiest people in America made their fortunes? Last year, 35 U.S. billionaires made their money in real estate, according to the Forbes 400 list. If that doesn’t whet your appetite for finally getting in on the real estate investment train, I don’t know what will.

Ok, need more convincing? Check out this Forbes article, titled “Why Real Estate Builds Wealth More Consistently Than Other Asset Classes.” It talks all about my very favorite topic, cash flow — and why smart investors don’t bet on appreciation, but rather purchase properties that will (hopefully) generate more income than they cost to own.

Now that I have your attention, are you feeling motivated to take action? There’s no reason why you can’t end up on that prestigious list of who’s who. Of course, it all begins with finding the best real estate investment deals. And while there’s no guaranteed methodology to make this happen, I’m going to share the blueprint Robert and I have successfully used for decades.

Where the best real estate investment deals are hiding

Well, the best deals aren’t exactly hiding, but they also aren’t just sitting around with a flashing neon sign on them begging to be picked. In reality, it takes some serious work to uncover these hidden gems — you know, the ones that will allow you to achieve financial independence. So, let’s dive into the steps we take:

  1. Cash flow, baby

    For us, the winning formula is to look for properties that will yield cash flow AND the potential for capital gains. Why? While we aren’t flippers (we generally believe in holding onto our investments as long as they are generating cash flow and bringing in passive income), we do like having options. And someday, we may want/need to sell—wouldn’t it be nice to do so for profit? Of course!

  2. Determine your criteria

    If you spend some time upfront determining the criteria under which all property options must align, you’ll always know immediately if something is worth investigating or not. For instance, early on one of my must-haves was a property close to my home. And I’d still recommend this for all beginners. It’s important to be able to get to know that neighborhood very well, which is much easier to do when you have easy access to real-time info. In fact, my first real estate investment was so close, I could jog there—and I did so a few times a week to see if other homes were for sale, what the vibe was like, if there were any notable changes in the area, etc.

  3. Start small

    When it comes to your first investment, size does matter—and I firmly believe smaller is better. In fact, repeat after me: I should invest a lot of time and only a little money in my first deal. The problem is, so many people tend to do the opposite. Gee, I wonder why they fail? The smaller the investment, the less risk you face. Isn’t erring on the side of caution a smart practice when you’re on a steep learning curve with your money?

  4. Look for properties with problems

    I’ll bet you weren’t expecting me to say that! But honestly, one of the best things you can find is a property with a problem that you can solve. When Robert and I came across an apartment building in Phoenix with a 37% vacancy rate, could have easily moved right long. Instead, we asked ourselves the following question: “How can we solve this problem?” It turned out the property was being run as a hotel: People could rent a fully furnished apartment for anywhere from a week to a year. However, nobody wants to be in Phoenix in the summer because of the Valley’s extreme heat, so most of the units sat vacant during those months. We did our research and converted the property from short-term hotel rentals to regular long-term rental apartments. The vacancy rate went from 37% to 3%—and the property’s value soared. We were winning on both cash flow and capital gains! Some problems aren’t solvable and it’s best to walk away (or run!), but if you can find a creative solution to fix that problem, you’ll benefit big time.

  5. Get in early or come in late

    Over the years, we’ve learned that we have to keep our finger on the pulse of the market. Why? Because the early bird often gets the worm when it comes to finding the best real estate investment deals. Sellers want to do just that — sell. So be ready to pounce with an offer before your competitors (only after you determine it meets your criteria, of course). Another strategy involves looking for properties that have been sitting around on the market for quite some time — these owners are more motivated to sell (often at a great deal) because they are likely losing money each month they own the property. Helping them offload that burden can be a win-win.

  6. Become a pro at reading pro formas

    A pro forma, a Latin term meeting “as a matter of form,” is a type of financial statement for an investment property. But unlike a cash flow statement representing current income and expenses, a pro forma is a projection of anticipated income and expenses. Most pro formas don’t show actual operating numbers. Ask the agent, since it’s his or her job to gather the information on a pro forma in order to market the property to potential buyers. Once you understand the basic elements, you’ll always be able to get to the information you need. The numbers on a pro forma will tell you whether a property qualifies for further review. If you decide to pursue the property you will then use the pro forma numbers as a starting point for the financial analysis you will do with Rich Dad’s Real Estate Evaluator .

  7. Negotiate based on numbers, not emotions

    Have a maximum figure, a figure you will not go above, in mind before you begin negotiating. When you reach that number, you’ll either need to pull out of the deal or get other concessions to make the purchase of this property economically feasible. So, don’t fall in love with the property because your emotions will get involved and confuse your brain. Instead, you must be ready to walk away from the deal if you cannot come to a favorable understanding with the seller. You’re in this deal to make money, after all.

Ready to Invest in Real Estate?

There’s no time like the present to get involved in real estate investing, but, of course, there’s a bit more to doing it successfully than the few tips I mentioned above. The first thing we suggest we do is download our free eBook, How To Buy Your First Investment Property.

How To Buy Your First Investment Property will :

  • Gain a better understanding of how real estate builds wealth

  • Uncover where to find cash flowing opportunities

  • Explain what makes a property a good or bad investment

  • Simplify how to finance a deal

  • Show you how to close a deal

  • Help you overcome fears that have been holding you back

When it comes to finding the best real estate investment deals, there’s simply no better place to start than this free eBook. Who knows? Your name may one day grace the 400 Richest Americans list!

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