Sourcing real estate investment properties requires a plan, not magic. Most properties acquired by investors are “on- market,” meaning they’ve been listed with a real estate agent and are publicly available to anyone. So, any sourcing plan should include a strategy for targeting “on-market” homes that meet your criteria. There also is a gray market for “off-market” deals. Here, you might, with heavy emphasis on the might, get a better deal on the property. But “off-market” deals typically require more experience and knowledge to execute. Finding and developing relationships with wholesalers is a good place to start with “off-market” deals. Utilizing a mix of the on and off-market strategies laid out for you in this post will set you up for successful sourcing and help you find potential deals. We'll also take a look at online marketplaces to help you find rental properties.
Finding Deals for On-Market Rental Properties
Even in a tight market the multiple listing service, or MLS, is a critical resource for most professional investors. Buying off of MLS requires clarity, speed and persistence. Clarity in that you need very clear parameters on what you will buy (minimum square footage, minimum bed/bath, maximum property age, required construction materials such as brick, etc.). Speed in that you need to have a system in place so you are notified immediately when a new listing meets your criteria. Persistence in that you must be prepared to make many offers, receive many rejections and follow-up assertively. Here are some tips for landing on-market (or nearly on-market) deals:
Enlist the help of an investor-friendly real estate agent
Most real estate agents primarily work with traditional buyers, however there are some out there who are privy to the needs of investors and may even be investors themselves. You want this kind of agent on your team since they are already real estate investment savvy. They can notify you the moment a property becomes available and can draw on their experiences to give you reliable advice. Meet these agents by attending networking events like your local REIA. You also can find them by finding properties listed for rent in your target area and calling the realtors that are handling those listings. There is a good chance those realtors work with investors.
Reach out to multiple real estate agents in your target market and ask them to bring you deals before putting them on the MLS
A tried-and-true way to make real estate agents want to send you their listings is to offer to buy properties “as is.” This will save the seller the time and frustration of preparing the property for listing and save the realtor the hassle of having to manage the property make-ready process. If an agent can sell a property before it even hits the market, it means a quicker paycheck, less work for them AND a happy seller who may become a grateful referrer or repeat client. Be careful with the "as-is" offer though, since you don't want to buy houses that are more money in repairs than you intended.
Look into expired listings
Realtors have access to all listings that never sold. As opposed to terminated listings, which were taken off the market early by the seller, expired listings are ones in which the property stayed on the market until the listing contract expired. This means the seller wanted their property to be on the market for sale the whole time, but it never sold. There’s a high probability that they still want to sell.
This mind sound obvious, but it can really help you close on real estate deals. If you put an offer on a property and it's rejected, continue to follow-up. Deals fall through all the time. Persistence in following up with the listing agent might be the difference between closing on a real estate deal or not.
How to Find Off-Market Properties
Purchasing off-market properties is undoubtedly a much more involved, tedious process than finding them on the MLS. However, there a few advantages to utilizing this strategy:
- Less Competition: Finding deals off-market is more intimidating, time consuming, and difficult. Therefore, many investors either don’t attempt it or they’re inconsistent in their efforts to do so. This increases your chances of winning a good deal. If you're willing to do the work that no one else will, you'll get the results that no one else will.
- Property owners love it: Home sellers don't like paying a 6% commission fee to real estate agents. You can get a good deal by offering sellers one in return. Bonus points if you offer to make any
Though it is trickier, it is also possible to buy houses off-market. Here are some methods to try.
Driving for Dollars
Once you've determined which neighborhoods you want to invest in, search them for distressed properties aka "drive for dollars." Owners of these properties are likely motivated sellers. Houses that look vacant or like they may need a little TLC are prime subjects. Many real estate investors look for turnkey rentals that need little to no maintenance. However, if your strategy allows for flexibility in paying for major repairs, then include homes that need it in your search. Investors who are handy or know the construction industry can really get good deals this way.
Some key indicators of a potentially distressed property are:
- Tall grass or overgrown vegetation
- City code notices taped to property
- An overflowing mailbox or piled-up newspapers
- Trash pileup
- Boarded up or broken windows
Hire Bird Dogs
Work smarter, not harder. A bird dog is an individual who searches for underpriced properties on behalf of a real estate investor. Using one will increase your chances of finding a good deal. Mailmen, trash collectors and lawn-care workers are prime candidates since they pass by HUNDREDS of properties a day. They often work the same areas on a regular basis, so they can also identify a home that seems to be transitioning quicker than you can by driving through the neighborhood a few times a month.
Put Up Bandit Signs
Bandit signs are the yard signs you see at intersections that usually say something like "I Buy Houses!" with a name and phone number to be contacted. You can buy cheap blank signs and use a thick marker to handwrite your message. Get creative with your signs so they stand out. You'll want to place the signs in or near the neighborhoods you're targeting for investments. Be sure not to place them on someone's property and avoid placing them at big intersections where they're more likely to be pulled out soon after you plant them.
Scour Estate Sales
Estate sales are used by people needing to liquidate several belongings. This need usually arises from events like downsizing, moving, divorce, bankruptcy and death. People conducting an estate sale often need to sell their house itself, and quickly. A simple google search will yield several sites with local estate sale listings. You can also search for estate sale companies servicing the markets you invest in. Let the auctioneers know that you buy houses. Offer them a referral fee and they’ll gladly let you know which clients want to sell.
Send a Direct Mail Campaign
Send direct mail to addresses and neighborhoods you are interested in. Remember, just because someone owns the property doesn’t mean they occupy it. You can use your county’s CAD to find addresses. Handwriting hundreds of letters can be tiresome. Many investors outsource this task to save time (and their hands). The content of your message should be short and sweet. Be sure to convey to the property owner that you’re willing to buy.
Good wholesalers perform every off-market tactic listed here and more to find their real estate deals. These real estate investors know how to find motivated sellers. They'll find a deal under contract at a discount, then turn around and sell it to other investors for a small markup. Typically, these other investors are either fix-and-flippers or buy-and-holders. Flippers want the best real estate deals possible since their strategy revolves around short-term profit. Holders focus more on long-term cash-flow to build wealth. Wholesalers know that they can make more profit from buy-and-hold real estate investors, so they’ll likely bring a qualifying property to you first. You can find these wholesalers by attending networking events like your local REIA, calling bandit signs, or searching “sell my house cash” online. As a rule of thumb, working with other real estate investors is a win for everyone.
How to Find Real Estate Deals Using Online Marketplaces
Up until now, we've talked mostly about offline methods, but into day's day and age there are countless online resources for real estate investors. Let's take a look at some of the best ones to help you find real estate deals.
If you don’t yet have access to the MLS, Redfin is a good alternative to use to search for real estate deals and run comps. It also generally offers more information about a listing and its real estate market than its competitors. Redfin also has the ability to set criteria for what you are looking for in an investment property and sign up for automatic email alerts as soon as one hits the website. Stay ahead of the curve this way.
Talk about finding good real estate deals. Roofstock is an online platform that actually sources real estate deals for investors. The site is focused on single-family homes and does incredible due diligence on each rental property it sells, providing neighborhood rating, school information, and even projected cash flow.
Marketed as the "only real estate platform that works as hard as you do," Carrot helps mortgage brokers, real estate investors, and realtors build high traffic generating websites. They are experts in search engine optimization, and they bring deals to your website so you don't have to find deals. For example, they can help you find motivated sellers, property owners going through the foreclosure process, and even other investors.
There are ample ways to find real estate deals, and no one way fits all. If you're looking to grow your real estate business, start by growing your real estate network. The bigger your network, the more real estate deals you'll get. Also, we always recommend consulting your counsel before you start investing. Remember, the more upfront due diligence you do, the more long-term success you'll see.