Searching for the right investment property and finding it harder than looking for a needle in a hundred different haystacks? We’ve been there. Between random properties cluttering your inbox, promises of impossibly cheap rehabs, and wild ARV claims, it can be daunting to sift through it all and find an actual deal. If you bought the wrong house because you didn’t have a strategy for cutting through the noise you wouldn’t be the first investor to do so, nor would you be the last.
Fortunately, you can unearth the diamonds despite all the rough, and you don’t need any special abilities or magic tricks to do it. Our years in the field have taught us that investors find the most success writing solid buy boxes, doing thorough research, and staying grounded.
It may sound boring at first, but once you’ve started stacking wins we guarantee that following the rules we’ve laid out will be a lot more fun than trying to spot properties with a certain je ne sais quoi. In this article, we’ll walk you through our rules for finding the right houses and show you how to write a solid buy box. By the end, you’ll have an efficient framework to implement when you’re out searching for your next deal.
Rule #1: Define your buy box (and actually use it)
The first thing you need to find a property that’s a ‘yes’ is a tool that quickly tells you when a property is a ‘no’. That tool is your buy box.
What exactly is a buy box? A buy box is the set of criteria that you use to identify properties that align with your goals and resources. These can include price, year built, location, bed / bath number, lot size, amount / type of rehab required, risk / insurance factors (e.g. flood zones, property age), general maintenance considerations (e.g. type of siding, landscaping), and more. The exact criteria you choose for your buy box will vary depending on things like the local market, financing, and intended exit strategy.
Say, for instance, you’re looking for a house to invest in as a long-term rental. Your buy box might look something like this:
< $250K, built 1965 or later, 3 bed / 1.5–2 bath, 1,300-1,800 sq. ft.
Simple, clean layout
Brick or low-maintenance siding
~¼ acre lot
Central HVAC already in place
Light to moderate cosmetic work only
Now imagine browsing listings with that buy box mapped out. If you see a house that meets every single criteria, it’s a maybe. If it meets every other criteria except it sits on 2 acres? It’s a no. Priced at $300K? No. Boiler and steam radiators? Nope. Needs a new roof? No. Built in 1837? Definitely not.
A well-defined buy box allows you to quickly filter through properties and determine whether they warrant further investigation. If a house has any features that put it outside your buy box, you immediately know to move on and not waste any more time. Of course, this only works if you’re strict about your parameters. The minute you start making compromises your buy box becomes worthless, so make sure you stick to it.
Rule #2: Respect the micro-market
We all know that trends in local markets are important, but if you want an accurate ARV it’s micro-markets that you really need to pay attention to.
How do you define your micro-market? Well, it depends. If the house you’re looking at is in a large planned community of very similar properties, you may be able to pull good comps from anywhere inside that neighborhood. However, if you’re in a city where property values can change significantly within a couple of blocks, your micromarket might not even reach the end of the street.
Here are a few pointers for gauging the micro-market you’re working in:
Stay close: The closer the property, the better the comparison (most of the time). Try to stay within the same subdivision / few blocks when pulling comps.
Use visual aids: Maps and photos can tell you a lot about the boundaries of a micromarket and whether you’re dealing with an exception to the ‘stay close’ rule. If the house you’re looking at backs onto a busy highway or looks out over a big industrial park, a house half a mile away that does the same will probably be a better comparison than a house that’s closer but sits on a quiet, leafy street.
Speak to locals: If you’re not familiar with the area, speak to someone who can give you the inside scoop. A local property manager with boots on the ground will know about the factors that affect property values and where prices start to go up vs. down.
A good rule when it comes to ARV in general is to be skeptical and interrogate comps as much as you can. If someone’s promising a high ARV because “houses in the area have been selling for $1M+,” it’s really important to figure out what they mean by “the area.” If they’re referring to an affluent subdivision in a top rated school district on the other side of town, you should take that claim with a full shaker of salt and base your ARV on what the house two doors down sold for instead.
Rule #3: Choose boring houses on purpose
Unique properties can be appealing. They can also be money pits. It’s one thing for the house you live in to be a labor of love, but when it comes to rentals or flips, we’ll take a low-maintenance, cookie cutter house in a safe working- to upper-middle-class neighborhood every time.
Why boring wins:
Easy to comp: Cookie cutter houses tend to sit next to other cookie cutter houses. If the houses nearby are all of a similar age, square footage, and layout, you can feel a lot more confident that neighborhood sale / rent prices are good ARV indicators.
Easy to repair / maintain: Even if an investment property needs major work, a standard layout makes renovations a lot cheaper and simpler. Replacing an entire kitchen costs much less when you can use ready-made cabinets and countertops as opposed to needing everything custom built to fit weird measurements.
Easy to sell / rent: Most buyers and renters prefer predictability over quirks and potential risk factors. Well-kept neighborhoods of similar houses feel safe. Simple layouts are functional and enable people to visualize their own furniture and decor in the space. Plus, cookie cutter homes are much easier to appraise.
What to avoid:
Franken-additions: Houses that have grown from small original buildings to monstrosities with new wings, lofts, decks, and sunrooms of varying ages are often strange, impractical living spaces and maintenance nightmares.
100+ years-old: Even when built with high-quality materials by master craftsmen, old houses are tricky to renovate and maintain. Retrofitting old homes with modern electric, plumbing, and HVAC systems is time-consuming and expensive, and layouts that aren’t catered towards modern lifestyles can limit the property’s appeal.
The best house in a bad neighborhood: It doesn’t matter how nice a property looks, people simply won’t want to live in it if they don’t feel safe. High crime rates and / or lots of dilapidated nearby buildings are risk factors that aren’t worth dealing with.
Giant yards / pools: If you’re investing in a rental property, go for a small lot with low-maintenance landscaping. Renters don’t want to cut their landlords’ grass and you don’t want the liability, maintenance hassle, and expense of a pool.
Of course, you don’t have to avoid any and all properties that are somewhat unique to be a successful investor, but sticking to boring houses is a simple way to cut down on guess-work and mitigate risk, especially if you’re new to investing or based out-of-town.
Rule #4: Be honest about rehab costs
The costs associated with renovating a home have gone up drastically in the last few years. Between labor and materials, you can easily spend $40K+ on cosmetic work alone for a 2,000 square foot house. Major renovations add up even more quickly. If you’re looking at a property that needs work, it’s very important to have an up-to-date, realistic picture of your rehab costs in order to judge whether it’s worth your time.
Your safest bet is to look for properties that are as close to turnkey condition as possible. The lighter the rehab, the easier it is to determine your all-in costs from the outset. If you’re experienced, hands-on, and immersed in the local market, you’ll be better equipped to estimate price and take on bigger renovations, but always keep in mind that more work means more unknowns and therefore more risk.
No matter what shape the property is in, build at least 10-15% contingency into your rehab budget to protect your bottom line from delays and surprises.
Want a rough idea of the dollar amounts you could be looking at? Here’s a quick walk-through list based on national averages (markets will vary):
Bathroom remodel: $6,500-$25,000
Kitchen remodel: $7,000-$17,500 for small kitchens, $25,000-$50,000 for large kitchens
Roof replacement: $9,858 for 2,000 sq. ft. of asphalt shingles; can cost much more depending on materials and complexity
HVAC replacement / installation: $10,000-$15,000
Exterior paint job: $1.50-$4 per sq. ft. ($3,000-$8,000 for 2,000 sq. ft.)
Interior paint job: $1-$4 per sq. ft. ($2,000-$8,000 for 2,000 sq. ft.)
Rule #5: Look for houses with more than one possible exit strategy
When you’re looking for an investment property, you usually have a preferred exit strategy in mind. However, Plan A doesn’t always work out. That’s why it’s important to ask yourself whether a property could work with at least two different exit strategies before writing your offer. For instance, maybe your initial plan is to BRRRR but refinancing ends up being trickier than you expected; could you flip it in that case? Or maybe you plan to flip but find out a full renovation is going to take longer than you bargained for; is it in good enough shape to wholetail instead?
Some indicators for potential exits:
Flip-friendly: there are recent comps nearby for determining ARV, a mid-tier price point for the area, major systems are <5 years and / or you’ve got the resources to bring them up to standard to avoid inspection drama.
Rental-friendly: ~3BR, manageable yard, solid systems, finishes that can take a beating, an area with steady rental demand and stable / rising rent prices.
Wholetail: good bones, cleans up nicely with cosmetic work, sells to retail or rents quickly if needed.
When life throws curve balls, you need options to stay in the game. If there is only one possible way to turn a profit from a deal, it’s too risky.
Our quick pass/fail test
If you’re new to investing or are doing so from afar, it’s especially important to be skeptical, get second opinions from people who are involved in the local real estate community, and trust your gut when something sounds off or too good to be true. Do not waste your time if you think the property you’re considering might suffer from any of the following:
The ARV is pulled from irrelevant comps.
The wholesaler is promising “light updates” but the photos scream aluminum wiring / cast iron plumbing/foundation movement.
It’s the best house on a block of burnouts.
It’s an HOA townhome with special assessments.
It needs a full renovation, but the wholesaler’s rehab estimate wouldn’t cover paint + carpet.
How to write your buy box
Now that you know a bit more about the kinds of houses that work (and don’t work) for investors, you’re ready to write your buy box. Your buy box is going to vary based on your local market, resources, experience, and preferred exit strategy. For instance, if you’re a first-time investor you’re going to want to write a specific buy box that rules out all but the most fool-proof properties. If you’re a full-time pro who does tons of deals, your parameters might be a lot looser.
Here are some examples of buy boxes based on different situations:
Out-of-state rental (busy professional):
Let’s say you’ve moved to the big city for a job but you want to invest in a rental property in your hometown. You don’t get back too often and you’ll be relying on a property manager. You can devote a few weekends to painting and redecorating the place, but you don’t have time to oversee a big renovation. Therefore, you want to minimize potential for surprises and keep maintenance as simple as possible. You’re paying cash and your total budget is $350K. Your buy box might look something like this:
Built 1980 or later, <$300K, 3 bed / 1.5-2 bath, 1,100–1,600 sq. ft., ¼ acre, no pool, central HVAC, B-C neighborhood with tight rent comps, light cosmetics only.
Local flip (hands-on):
Now let’s say you're a carpenter who mainly does work in residential buildings for a developer but you’ve decided to flip houses on the side. You’re going to do most of the work yourself in your spare time to save on labor and you’ve got good connections with local plumbers, electricians, engineers, building inspectors, etc. so you know who to call for anything beyond your expertise. You’re planning to finance through a hard money lender who you’ll pay back within 6 months. Your buy box might look like this:
Built 1950-2000 in an established subdivision, 3 bed / 2 bath, 1,300–1,900 sq ft, 2-4 recent reno comps within 0.25-0.5 mi, 4-8 week scope, plan to replace at least one major system or shave ARV.
BRRRR / Wholetail / Wholesale (full-time investor):
You’re a full-time investor who owns rental properties and does wholesale deals, flips, and everything in between. You’re immersed in the local real estate ecosystem and dialed into the market. You’ve got a good sense of both rental and retail demand in various neighborhoods and a rolodex full of potential buyers for different types of properties. You finance most of your deals using lines of credit backed by free-and-clear assets or through private lenders. Because this is your full-time job you’ve got time to look at properties that other investors wouldn’t bother with and see if they have any potential for you or someone you know. Your buy box might look like this:
Dated but solid systems, class B-D neighborhood, cookie cutter layout, rents / sells fast after light rehab, sale price <60% ARV.
Whatever your experience level or investment goals are, make sure you’ve thought through the ‘why’ behind each of the parameters in your buy box and whether they make sense for you and the market you’re investing in.
For example, if you specify that year-built should be 1975-2005, why? Is it because you want to rule out potential for cast iron plumbing and old wiring while ensuring that the house is still in an established neighborhood? That makes sense if all the newer builds in your area sit on the outskirts of town and don’t sell as quickly, but if you’re in an area where it’s common for a house built in 2018 to sit next door to a house built in 1945 and have access to all the same amenities, there’s no reason to rule newer homes out.
When writing your buy box, it’s important to think strategically about the local area and consult someone who knows it well if you’re not totally familiar. You want to make your search simpler but you also don’t want to arbitrarily rule out good properties for no reason.
The bottom line
Saying no to the wrong house is just as important as saying yes to the right house. After all, you can’t lose money on something if you don’t buy it.
Knowing which house is right for you is a matter of self-awareness, critical thinking, market knowledge, and discipline. The best investors stack wins because they stick to the micro-markets they understand, choose boring houses, underwrite using realistic rehab estimates, create buy boxes they could explain to a fifth grader, and aren’t afraid to say no.
It’s important to recognize knowledge gaps and seek information from trusted local experts where needed. Looking for help from someone with boots on the ground in your market to write your buy box or scope out properties? Reach out to one of our agents to get started.
