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In his early days as a real estate investor, Mike Zuber started to establish a set of criteria for the types of properties he’d consider buying. Among other things, he wanted single-family homes, with three to four bedrooms, in specific zip codes in Fresno, California. By sticking to that list, he told Business Insider, he was able to scale to more than 100 cash-flowing units, which allowed both him and his wife to quit their full-time jobs.
This strategy, known as the “buy box” strategy, has allowed many new investors to gain a foothold in the industry and grow their portfolios.
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“Most new investors are all over the map,” Zuber told BI. “The first step any new investor needs to do is focus. If you’re going to be a buy-and-hold investor in a new area, get a buy box and make it hyper-focused.”
There are several steps experts suggest taking when beginning to define your buy box. The first is to drive through various neighborhoods, attend open houses, and look at as many existing rental properties as you can. This will allow you to get a feel for the area, as well as the demand and type of resident you’re likely to attract.
Next, they suggest doing your research. Looking into the area’s plans for infrastructure, employment growth, and community growth can help determine the potential future value of your home, they told BI. So spending a few hours digging up a city or county’s 10-year strategic growth plan is well worth your time.
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“Being a bit more rigorous about it can really pay dividends,” Grant Sabatier, a financially independent real estate investor with properties in New York City, told BI. “That’s what I did: I was laser focused on a five-block by four-block radius for a six-month period and then knew immediately when there was a deal that was perfect based on my criteria.”
“The more you know your buy box, the better your chances are at finding a great deal,” Zuber told BI. “You can’t be casual. It has to be purposeful and intentional.”
For Zuber, a great deal is one that has high cash-on-return, or the annual return he makes on a property in relation to how much he spends on that property over the course of a year.