Buy Box

What it is

Pro investors know exactly what type of property they buy. Amateurs don’t. And without this critical first step, nobody serious will want to work with you, or you become bait for the sharks out there.

Here are the nine factors that make up your buy box:

1. Location. IMBY — in my backyard. Urban beats rural because urban gives you the Kelly Blue Book. You know exactly what you’re getting. Rural is the classic car auction — could be awesome, could really suck. I don’t like guessing.

2. Property type. Single-family or 2-4 unit multifamily. Perfect mix of profitability and control. I’m buying land — the rental on top pays for it.

3. Property class. B-class. These people shop at Walmart. My type of people. Middle class, frugal, houses selling right around the median. I do have a solid foundation of section 8 (C-class) properties because the government always pays.

4. Size. Most of my houses are 1,000 to 1,600 square feet. That’s the happy medium. Any flip could become a rental if the market turns, so I stay conservative.

5. Age. Modern building era — 1950s on. Historic houses can be beautiful but the code book doesn’t apply. They built foundations out of whatever stones they could find. When you open a wall, you better understand what you’re looking at.

6. Work level. Cosmetic when starting. Paint, floors, kitchen and bath touches. Drywall stays on. If drywall comes off, now you’re doing mechanical, electrical, plumbing — everything has to come up to current code.

7. Style. Doesn’t matter. When my first realtor asked if I was looking for a bungalow or a mid-mod, my response was: what the hell is a bungalow? Style is for HGTV shows, not for making money.

8. Price point. Below the median. That’s where B-class and C-class properties live. Buying below median means more buyers when you sell.

9. School district. Already priced into the comps. I don’t think about it separately — it just shows up in the numbers.

Why it matters

When the amateur says, “I’ll buy anything anywhere,” versus the guy who says, “My name’s Ross, I look for houses in this neighborhood, 1,000 to 1,500 square feet, three beds, under $200K” — wholesalers, agents, everyone knows who to call. That’s what a buy box does.

Three things happen: First, it frees up your bandwidth. You can stop thinking about what to buy and use your brain space for finding deals and managing contractors. Second, you build intuition. You’re not just a real estate investor — you’re a real estate investor who buys this type of house in this neighborhood at this price. Do that enough times and you build an ARV radar. Third, you become a cheaper marketing machine. You send direct mail to one neighborhood, you become the guy who buys there.

How it shows up

Pick three neighborhoods. Not all the neighborhoods — three. Learn them like the back of your hand. When somebody calls and says they have a 1,200 square foot house in the area, you already know houses there sell for $200 a foot, roughly $240K. You know it probably needs $15K-$25K of work. 70% of $240K is $170K, minus $20K work, that’s $150K. That’s my offer. Is that the price? Great. That’s intuition. That’s what the buy box builds.

Related

IMBY, base hits, property class, oddbird, range of comps, driving for dollars, direct mail