The Real Estate Buy Box: Meaning + How to Use It

What is a buy box in real estate? In this article, you’ll learn all about this crucial tool and how to target the right properties for your investing goals. With our template, you’ll even be able to create your own buy box—one that saves you time, money, and unnecessary headaches. Keep reading!

Summary:

• A “buy box” is a set of criteria investors use to filter, analyze, and buy real estate investments that match their goals.

• Price, location, property type, passivity, and returns are some of the main factors to consider when building your own buy box.

• Having a buy box helps you stick to a budget, avoid “shiny object syndrome,” and save time when analyzing properties.

What is a Buy Box in Real Estate?

A real estate “buy box” is a set of predetermined criteria that helps investors filter potential real estate investments so they can buy the best property. This can include factors like price, location, property size, property type, passivity, and more. Experienced real estate investors use their buy box to quickly qualify potential investments and pass on ones that don’t fit their needs. 

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The Factors of a Buy Box

There are a few key areas every buy box should touch on. Make sure you address these factors, but feel free to include others, too!

1. Price

Look at your budget to determine how much you can reasonably afford, how much you want to spend, and how much debt you’re comfortable taking on. If you’re unsure, talk to a lender and get pre-approved for a mortgage!

2. Location 

Do you want to buy your property locally, or are you open to remote real estate investing? If you’re looking at other markets, be sure to set criteria for the area, too. Consider economic and real estate-related factors like population growth, median household income, and rental demand.

3. Property Type

Choose the type of property that best aligns with your investing strategy. Do you need a single-family home to rent out on Airbnb or a multifamily property you can house hack? Do you want a residential property that houses regular tenants or a commercial property you lease out to businesses?

4. Passivity 

How much time do you want to commit to your investments? Properties like turnkey rentals are significantly more hands-off than something like an Airbnb, as they already have property management and tenants in place (and much lower turnover and maintenance!).

5. Returns

Are you shooting for a specific cap rate or cash-on-cash return, or do you have a monthly cash flow number in mind? Make sure properties are hitting these marks as you’re running the numbers!

Buy Box Example and Template

What does the “typical” buy box look like, and how do you build your own? Here’s an example of a buy box an investor might use:

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Ready to create your own buy box? It’s easier than you probably think! Use the template below and update it as your strategy and goals evolve:

How a Buy Box Stops You from Buying Bad Properties 

If you’re not careful, you could easily end up with an investment that creates more headaches than you bargained for. Having a clear buy box helps you with the following:

It Keeps You Within Budget

Getting specific with your budget ensures you don’t overleverage yourself or get stuck with a monthly payment you can’t afford. If a property falls outside your budget, negotiate it down to an affordable price or simply move on to the next deal!

It Deters Shiny Object Syndrome 

There are many different real estate investment strategies to choose from, but you only need one to start! If you stick to your buy box, you’ll only buy properties that fit your strategy and long-term goals.

It Helps You Invest Faster

There are over a million properties currently for sale across the US. Rather than analyzing anything and everything you come across on Zillow, use your buy box to create parameters, filter listings, and analyze properties that are actually worth your time!

Common Buy Box Mistakes 

A buy box only works if your requirements and expectations are both clear and realistic. Being too broad could cause you to waste time looking at properties that aren’t quite the right fit, while being too specific could cause you to unnecessarily weed out good options.

Another area where investors go wrong is choosing one strategy and expecting unrealistic returns. Typically, the lower your investing risk, the lower your reward (and vice versa), so if you want bigger returns, you’ll likely need to take bigger swings!

Finally, your buy box shouldn’t be completely static. You’re going to evolve as an investor, so update your buy box accordingly.

Build Your Buy Box and Stick to It!

A buy box is an essential tool for every real estate investor. Build yours using the template above and stick to it when browsing for deals, but don’t be afraid to tweak it over time. As your investing strategy and goals change, your buy box should, too!

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What Is a Buy Box in Real Estate FAQs

What Is a Real Estate Buy Box?

In real estate, a buy box is a set of criteria you use to find investment properties that match your long-term goals. The typical buy box covers price, location, property type, returns, your level of involvement, and any other factors that are important to you.

What Are the Criteria for a Buy Box?

As an investor, it’s up to you how broad or specific you want to be when creating your criteria. Most investors will determine a rough purchase price, a market (or neighborhood) they want to invest in, the type of property that fits their strategy, their desired returns, and how active or passive they want the investment to be.

How to Create a Buy Box for Real Estate? 

There’s no one way to create a buy box. The process can be as simple as jotting down a few details about the kind of property you want to buy, or you can use the template above and fill in your budget, location, property type, passivity, and returns.