A multiple listing service (MLS) is the most common place to find residential homes for sale, but it isn’t the best place to look if you’re hunting for an investment property, or a low-cost fixer upper. Experienced investors find off-market properties so they can find a deal that makes sense from a cashflow standpoint. Here are some of the best ways to find off-market properties for below retail value.
There’s a reason seasoned investors can make the process of finding properties look a lot easier than it actually is. And that reason is their network of contacts know to go to them with deals. While networking can take a lot of work upfront, it can have major payoffs when contacts know which properties you’re searching for and come to you first with deals.
Search online for local meet-ups or groups with other real estate investors. Join online forums and hunt for websites that allow you to join local mailing lists of those selling off market properties. And don’t forget to let your own social circle know you’re in the market for a property — you never know who may hear of something and clue you in.
Real Estate Agents
Real estate agents can be a great source of off market leads, but you’ll want to look for one that is skilled in working with investment properties. A good agent has a vast network, and that means that when their client’s Uncle Jerry is looking to quickly sell a property, they may get the listing, and you want to be the person they call next.
For best results, be specific about what you’re looking for — not only the location and size of the property, but how much of a discount off retail value you’re interested in. Make sure to do this early so the agent knows to come to you first before listing the property. If it’s a good fit for buyer and seller, the sale may be quick and a win-win for both sides.
Builders / Contractors
Like real estate agents, builders and contractors can have a great pulse on homes in your area. They may even know of owners who have abandoned a project mid-job because of issues with financing or other circumstances. Whether the property is an unfinished new build, or an older one in need of major repairs, you are then able to contact the owner with an offer to take the problem property off their hands.
Rather than trying to find off market properties yourself, work with a wholesaler who serves as a middleman to find them for you. Wholesalers are especially good at finding off market properties. They put the property under contract and then assign that contract to a new buyer (possibly you!) for a fee. While you won’t get as discounted of a deal as if you’d found the property on your own, you’ll still usually pay well under market value. Even if they don’t have a deal for you now, wholesalers are great contacts to have. By knowing what you’re looking for, they can contact you later if they come upon a deal that fits your criteria.
Real Estate Auctions and Public Records
Real estate auctions are another great way to find off market properties. You can find out about them through an online search. Foreclosure auctions are held for homes in which the owner can no longer make the mortgage payment and the lender is selling off the property to recoup the loan amount. While the exact process is handled differently in each county, foreclosures are usually sold as is and at a deep discount. And, the number of foreclosures is likely to increase in 2020. If a homeowner fails to pay property taxes for several years, the local authority may place it under a tax lien auction which functions similarly to a foreclosure auction
In any of these cases, there is considerable risk — you are not usually permitted to inspect the home before you purchase it. And if an owner neglected to pay the mortgage or taxes, it’s likely they also deferred a considerable amount of maintenance. Be sure to get a good enough deal that it’s worth the risk, and expect to foot the bill for some major repairs. Bid carefully, do your research, stay under budget, and if possible, ask a fellow investor to show you the ropes before bidding on a property at your first real estate auction.
By searching public records online or in the newspaper, you may be able to find which properties are pre-foreclosures or short sales in order to contact the owner and present a deal before the property goes to auction. Public records are also a great way to do research prior to attending the real estate auctions mentioned above.
Driving for Dollars
Believe it not, those cruises around your city can have a major payoff if you’re using the opportunity to search for good investment properties. Driving for dollars is a popular investor technique in which you identify distressed or neglected homes while driving around. Jot down the address and then use public records to find contact info for the owner — whether that be a phone number or an address to which you can later send a letter proposing to buy the home.
Find homes where the driveway hasn’t been cleared several days after a snowstorm or ones in need of a new roof. Investment properties with “for rent” signs in the yard or sitting vacant for several months may also be a good indicator of a landlord that is having a tough time renting and may be open to selling. The same goes for homes that have been for sale for several months with no movement.
Knock on Doors / Direct Mailers
Similar to the “cold call” method of driving for dollars, you can simply knock on doors or direct mail owners and show interest in buying their home. In these cases, it’s a numbers game. You may send out thousands of direct mail pieces for just one successful lead, but that lead will make it all worth it.
You can purchase mailing lists for specific zip codes or criteria on several websites. If you’re tech savvy, you may even be able to comb through online public records to generate your own mailing list of pre-foreclosures, etc.
There are plenty of websites designed specifically to connect properties with investors. Plus, they provide helpful information about cap rates, cash-on-cash returns, and property analyses. Some of the most popular include LoopNet (for commercial real estate), Auction.com (for auctions), or even the real estate section on Craigslist.