What is your Buy Box? Ok, that’s a bit of jargon, but I’m basically asking, what are your criteria for real estate investing? 

Without getting specific about what types of investments will satisfy your goals, then you’re likely to get distracted by flashy marketing, sales pitches, and deals that won’t help you reach your goals.

This is why we have a buy box – and you should too. In this article, I’m going to describe:

1. What a buy box is (hint: I’m not talking about Amazon real estate here).
2. What’s inside our buy box for investing in Non- Performing Notes.
3. Some guidelines for creating your own buy box for investing.

What is a Buy Box in Note Investing?

First, I’m not talking about the Amazon buy box and how to become a top seller and win this coveted e-commerce real estate. There are plenty of youtube channels if you’re looking for that info. 

I’m talking about a real estate investing buy box, specifically in the world of Note investing.

A buy box is simply a set of criteria you use to determine whether or not you buy an asset. If the asset can check all of the criteria, then it fits inside the buy box and you likely move forward making an offer. If something falls outside the buy box, you are likely compromising on your own risk profile.

What is in Flow State Investing’s Buy Box?

So what is in our buy box? While I can’t possibly go over the extensive list we use, I can hit on some major highlights.

First, we only buy owner-occupied homes. No tenant-occupied properties. 

Next, we buy assets in non-judicial states. This means that our foreclosure timelines will likely take only months instead of years as they can in judicial states. 

We also only buy notes where the value of the home meets or exceeds the value of the note we are purchasing. Our borrowers may be underwater but we certainly never want to be underwater. Unless we’re scuba diving of course. 

Another important element is that we buy 1st position or senior liens.

Some other buy box criteria we use include only buying in cities or towns with populations greater than 50,000 people. 

We also don’t buy certain types of properties like mobile homes or condos.

Finally, many elements of our buy box aren’t as clean-cut and our due diligence process is much more extensive.. For instance, we get boots on the ground to provide a neighborhood analysis and real-time property condition report. Is the home across the street from train tracks or next to a major airport?

Here’s a quick summary of the highlights:

• Owner-occupied homes (no tenant-occupied homes)
• Non-judicial states
• Home value meets or exceeds value of Note
• 1st position lien status
• Population of 50,000 people or greater
• No mobile homes or condos
• Quality property condition
• And much, much more

Again, these examples are only some of the highlights. They certainly don’t include our full due diligence process. But they do help streamline our note analysis process. 

Having clear criteria in our buy box also helps us know that we aren’t speculating. We know what works and we stick to it.

Do We Ever Diverge From Our Buy Box or Investing Criteria?

When talking to potential partners, I get asked all the time if we ever diverge from our buy box.

“What about buying in New York, would you ever consider it?”

“What if we plan to flip the property if we take possession of the house? Can’t we look for a property that’d be great for that?”

“I’ve heard great things about small, rural towns lately. Considering the new remote lifestyle, wouldn’t we buy notes in low population density areas?”

We’ve heard it all. The answer is simply no, we don’t. 

We don’t diverge from our buy box, at least in the case of our Joint Venture Partnerships or Investments with other people’s capital. Our strategy model is well tested and it’s conservative. 

If we catch a unique opportunity that doesn’t quite fit our buy box but we think may have potential, we may leverage our own capital to pursue it. But we won’t change our strategy and try new things with our partners.

Creating Your Buy Box for Investing in Real Estate

Finally, what should be in YOUR buy box? With countless investing opportunities out there that can all seem to be the perfect fit, you’re likely going to diverge from what your true investing goals are if you don’t create a list of personal investing criteria or a buy box.

For instance, do you want to mitigate taxes? Accelerate wealth building while you contribute as much income from your W-2 job? Are you seeking to retire in 5 years or 30 years? Do you need cash flow now, or at said retirement date?

Creating this list of investing goals can greatly increase your chances of getting to where you want to go. If you don’t know what you’re working towards, take some time to think about it. Don’t worry, it can change. But you don’t want to be totally off course from the beginning.

For instance, my personal buy box begins with contributing income into a high-yield form of real estate investing, like Notes. I take the profit from that and purchase hard assets, like rental homes, self-storage units, or apartments, to mitigate taxes and create cash flow. I don’t need the cash flow now, so I choose to first amplify my original capital then go for the tax mitigation options. Of course, I also have a portion of my investments (a small portion) in index funds. 

But that’s just me.

What is in Your Buy Box?

I’d love to hear what is inside of your buy box or any questions you have about our buy box. Leave a comment or shoot me an email at Susan@flowstateinvesting.com. 
If you are interested in getting your money working in notes, be sure to join our Flow State Investor Circle. We’ll schedule a call with you to learn about your buy box and share more info on our strategy to take non-performing notes and get them to reperform.