Approaching Property Investing As A Numbers Game | Propertylogy

Approaching Property Investing As A Numbers Game

By on January 8, 2014

A sniper is someone who is holding a long range rifle waiting for the right moment to fire an accurate decisive shot. “One Shot One Kill” is the most famous phrase derived from the actions of an unforgiving sniper. So glorified is the sniper that many marketers over many industries use a term associated with it for their media campaigns.

It will come as no surprise then that many real estate investors see themselves as operating like a sniper or tries very hard to mimic one. So seductive is this self-image they are trying to achieve that most forget that it takes years of training to truly become one. There are great investors who has the uncanny ability to spot great opportunities and pull the trigger. But if you are just starting out, it is best to get some field training before considering yourself as a property sniper. Because being inexperienced, putting all your money into one investment can become your downfall when you get it wrong.

This is why property investing is definitely a numbers game at the beginning. When you are not really passionate about properties, you might look at one, two, maybe five properties before making an offer. You will then try a way to make a deal favourable to you, fail, and give up. You have failed to recognize that looking at five properties does not even make up the appetizer for investors.

There are usually five stages before you end up with a purchase. The first stage is viewing, followed by shortlisting, then offering, getting financing, and finally buying. The numbers get smaller and smaller as expected as we go down the stages. Depending on your commitment, viewing can have a count as high as 100 and buying has a count as low as 1. For example, an investor may end up going through the stages with numbers like this. 100 views, 15 shortlisted, offers made for 8, financing arranged for 3, finally bought 2. If the count of 100 views seemed ridiculous at first, you will find that it is actually pragmatic when we put the numbers into the stages as shown.

number gameGood deals are not always obvious on the surface, you have to spend time sieving out the lesser deals before making a serious move. If a good deal can be seen from just an advertisement listing alone, it will usually not turn out the way you thought it would. You would also get a lot of competition for these listings as well. And of the offers that you put forward to the seller, you will be lucky of half of them are accepted. Because if there is a weird occurrence of all your offers being accepted, it means that you are being too generous with your offers.

And then for those offers that were accepted by the sellers, you will have to arrange financing to close the purchase. If you have a strong personal income and credit score, you might be able to afford a high leverage for all of them. But for a lot of people, getting high leverage for one or two is already passing with flying colours. When all is said and done, you make that final decision to go through with the number of purchases after reviewing your own cash flow to see if your decision is sustainable financially over the short and long term.

Does the numbers game make sense? Sure they do.

The main reason why beginners can make a purchase after viewing two properties is because they are not being focused on their objectives or just too lazy to view so many listings. They are not too concerned about profitability and just want to get it over with by transacting at a detrimental price. They also spend weekends at the karaoke lounge instead of browsing the market for listings. There is nothing wrong at all with that lifestyle. But don’t make excuses of having no time for viewings when you have time to party or laze around at home watching reruns of old Korean variety shows.

Remember that the more listings you read, the more of them you will find attractive. The more exposure you get on real estate being put up for sale, the more likely you will find good deals that seller are willing to compromise their positions on. The more of your offers are accepted, the more probable that some of them will find happy financiers to fund the purchase. And the more financing that you can get finalized, the more purchases you can make. It’s all a numbers game.

If you look at a lot of properties, you will find good deals sooner or later. But if you have only spent time viewing a couple of properties, soon you will think that real estate investing is only for big players who are able to pull strings somewhere. You won’t even realise that it is a self-fulfilling prophecy when you finally fail and give up.

It is astounding that there are so many people who spend more time making holiday travel arrangements than on making a decision to buy a home. The former last a week while the latter decision can last a lifetime.

The terms “viewing” and “looking” can be subjective to different investors. For many people, a property can fall within their investment criteria just from basic information alone. While for others, it may include a physical visit to have a real look. So how you approach viewing really depends on what kind of behaviour you indulge in investing in real estate. Or you might want to follow a property grading system to speed up the process.

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