So you’re just starting out as a real estate investor. You’re ready to look at properties and make offers. But how do you find those properties?
Let’s talk about what it takes to find properties—including strategies that save you money in the process.
First, where exactly are you looking for these properties? Don’t assume your market is just the city or county you live in. You might need to consider some of your neighboring counties as well. Do some research to figure out whether you’ve defined your ideal market.
Start by choosing 5–10 markets to evaluate. You can learn more about your surrounding area if you google the primary statistical areas Wikipedia page; it will give you the population of the metropolitan statistical areas around the US.
Once you’ve chosen your 5–10 markets, find out the following information about each market:
how many potential listings are in the MLS (realtor.com)
how many buyers are actually buying (listsource.com)
potential inventory (listsource.com)
Your goal here should be to find balanced markets that aren’t overly competitive. Ideally, you should have a base market of 1–2 million.
Ok, once you know your market you’re ready to find properties within that market.
EXHAUST ALL THE ON-MARKET DEALS
Always start with on-market deals. Why? They’re free. They’re easy. Since they don’t cost you anything, you should exhaust your on-market resources before you do anything else.
Check out these websites that list on-market deals. Try all of them. Why not?
These sites are all a little different. Some of them focus on foreclosures. They all have different filters and search options. But they’ve got something in common, too: they’re free. So use them. They don’t require a marketing budget. You don’t have to spend time designing bandit signs. Just think of the time you’ll save.
What you will have to spend time doing is writing offers. 25–30 of them to be exact. That’s how many offers you usually have to make in order to get 1–2 properties.
Some of these websites list properties that are going to require a real estate agent’s involvement: the MLS, homepath.com, homesteps.com, and hudhomestore.com.
Other properties aren’t listed on the MLS, and you’ll be able to make offers directly through the website without using a real estate agent: homesearch.com, xome.com, auction.com, and hubzu.com.
And don’t assume every property on these sites is going to be right for you. You’ll want to figure out which ones are in the neighborhoods you’d like to do deals and which fit your investment plan (wholesale, rehab, rental).
NETWORKING FOR DEALS THROUGH REIA CLUBS
Ok, once you’ve exhausted all your on-market possibilities you should rely on the networking you’ve been doing.
Make sure you’re attending your REIA club meetings every week and setting up times to meet with the people you get to know. Get on the wholesalers’ lists. If you meet home investor franchisees, get on their marketing lists. They might just call you up with the opportunity you’ve been looking for.
OFF-MARKET DEAL FLOW
Off-market deals are often true gems. It just takes some effort to find them. So the real question is, what’s going to get you the best list of properties?
This is where your marketing budget comes in.
Some of those properties will come from general advertising you do—social media ads linking to your website, bandit signs with your phone number (my advice: put up bandit signs on Friday and take them down on Sunday). Property owners will contact you through these channels to put themselves on your list.
Then there’s direct mail marketing, and you’ll need a list to send your mailing to. If you use Accelerated Investor Office, you can pull a strategic list focused on the specific owners and property types you want to target.
And when people respond, then the fun really starts. The key is to be ready for those calls.
TIME TO MAKE AN OFFER
Always start with a verbal offer over the phone. Your goal here is to make sure you’re in the same ballpark as the owner. I recommend starting with an offer at 80% ARV so the offer knows you’re serious. Include a repair estimate based on what you can learn about the property from talking with the home owner.
If you and the owner are on the same page, then email the offer so you’ve both got something in writing. Make sure you explain that your offer is subject to inspection. Your offer should be appealing—you can close in two weeks and pay all cash.
Once you’ve got a signature on that offer (visit the property or mail it), you need an inspection. Hire a contractor to look the property over and give you an estimate.
At this point you should adjust your offer. There are going to be fixes you didn’t include in your estimate. Go back to the owner and and renegotiate your offer for a price that’s going to work well for you.
Remember, you’re going to need to make 25–30 offers to get 1–2 properties (at least initial offers, not offers that include an inspection). You might as well start practicing.
That’s what investing is all about, after all. Getting out there and making offers on properties. So go to it!