How We Eliminate 98% of the Deals We Screen Every Week

We screen roughly a thousand deals a week and eliminate about 98% of them. That ratio is not a marketing statistic, it is what happens when you apply a fixed set of filters to listings that were selected by sellers rather than by buyers.

Filter one: the market

Most eliminations happen before any individual property is examined, because the market itself fails. A property in a jurisdiction where the use is prohibited, capped with no availability, or subject to a permit that does not transfer is not a deal at any price.

This removes a large share of inventory immediately. Denver, Atlanta, Charleston and New York City for non-owner-occupied purchases. Much of Hawaii. Large parts of coastal California. These markets have genuine demand and no legal path for the model.

Market-level supply is the second cut. A market absorbing new inventory faster than demand grows will compress rates regardless of how well an individual property is run, and buying into compression requires a basis advantage large enough to survive it.

Filter two: the comparable set

For properties in workable markets, the next filter is whether the comparable set supports the price. We assemble twelve to twenty genuinely competitive listings, same submarket, same bedroom count, same amenity tier, and pull their actual booked nights and rates across a full twelve months.

The most common failure here is a property priced against a comparable set it does not belong to. A four-bedroom cabin without a hot tub or a view is not comparable to four-bedroom cabins that have both, even at the same address, and the seller's price frequently assumes otherwise.

The second failure is a seasonality mismatch. A property whose price implies twelve months of peak-season performance in a market that delivers five is eliminated at this stage, and this is where most seller proformas break.

Filter three: the amenity gap

If the comparable set has hot tub, view and game room, and the subject property has one of the three, the gap has to be funded at purchase. We price that gap and add it to the entry cost.

Many properties that pass the comparable test fail here, because closing the gap costs more than the purchase price discount. A cabin $60,000 below market that needs $110,000 of amenity investment to compete is not a bargain.

This filter is also where physical constraints eliminate properties permanently. A view cannot be added. A beach cannot be moved closer. A lot without space for a pool cannot have one. When the gap is unclosable, the property is capped below its comparable set forever.

Filter four: the stress test

Properties that survive the first three get a full model with a complete expense stack and then get stressed. Revenue at 75% of projection. A disrupted peak season. An insurance renewal 40% higher. For urban and California properties, the long-term rental floor.

A large share of eliminations happen precisely here, and they are the hardest ones to explain to a client who has already fallen for the property. The base case works. The stress case does not. That is a rejection.

• Revenue at 75% of projection, and debt service still clears.
• Three lost peak weeks from a storm, fire or road closure.
• Insurance renewal 40% above the quoted figure.
• Property tax reassessed at the purchase price rather than the seller's assessment.
• For city and California markets, the long-term rental floor.

Filter five: what the seller will actually accept

The last filter is negotiation. A property that works at $60,000 below asking and does not work at asking is only a deal if the seller will transact there.

That depends on facts a listing does not show: how long the property has been marketed, whether there is a mortgage forcing a sale, whether the seller is an operator who knows what the numbers really are, and whether the property has failed inspection with a prior buyer.

Buying under market is the only permanent advantage available. Revenue optimization is bounded at perhaps 10 to 20% against a poorly run comparable. Purchase price is locked at closing, never has to be re-earned, and improves both the cash-on-cash return and the equity position simultaneously. That is why the last filter exists and why we hold it.

What survives

The properties that clear all five filters share a recognizable profile, and it is less exciting than most buyers expect.

They are usually not the most attractive property in the submarket. They are frequently properties with a fixable problem that suppressed the price: dated furnishing, poor listing photography under the current owner, a management relationship that underperformed, or a seller who needs to transact.

They almost never come from a listing that reads well. A property marketed with a polished proforma and strong photography is priced accordingly, because the seller has already captured that value. The opportunity is in properties where the gap between what the property is and what it appears to be is large, and closing that gap is work rather than luck.

That is the whole business, stated plainly. We are not finding properties nobody knows about. We are finding properties whose price does not reflect what they would produce under competent operation, and buying them before that gap closes. Our client Adam's four-bedroom Sevierville cabin at $775,000 is a straightforward example: a below-market basis in the deepest bedroom-count bracket in the country's largest short-term rental market.

Frequently asked questions