How to Find Real Estate Deals Under Market Value ($$$)
Regardless of whether or not there is competition in your local market, if you are willing to go the extra step and work harder than the other real estate investors, you will be able to find houses to flip and get in touch with property owners that have not spoken to anyone else about selling their property.
Being first on the scene of new real estate deals in the “bargain” category requires strategic thinking and planning. For more about how to find properties keep reading, or check out our free, all inclusive guide, Flipping Houses 101.
Pick A Real Estate “Farm” and Stick To It
Focusing your efforts on one area is key to finding deals, building relationships, and becoming the “go-to” real estate investor. Many investors spread themselves too thin in the beginning and they never gain any local traction when it comes to having a constant flow of properties to flip.
Your real estate market will differ depending on where you live, but make sure to choose a target area with at least 300 homes. It is also important to pick an area where there is investment activity. Look for homes being rehabbed, limited REO’s and short sales, gentrification, and active buyers.
Once you’ve identified your ideal farm neighborhoods, it is time to start identifying vacant and/or distressed properties.
What Types Of Properties make the Best Investments?
An important part of identifying investment properties to flip is being able to locate them by common traits and characteristics. While vacant properties often have the lowest asking price, it is very probable that many non-vacant homes will also fit the criteria for a good deal. Most properties are not so distressed that someone passing by would notice them as a potential deal — unless they are on the lookout! Use the following list of indications that a property is being neglected to spot one in your farm area. You’ll begin to notice homes that probably have owners looking to sell, even if a “For Sale” sign isn’t there.
Characteristics of Good Potential Properties to Flip:
- Weeks or months of mail jammed in the front door or piled up
- Overgrown grass, hedges, and landscaping
- Excessive flaking exterior paint
- Rotted or exposed wood
- Lockboxes on doors, railing, or poles
- Boarded up basement windows
- Outdated exterior design
- Zoning/municipal notices posted on windows and doors
Most importantly, compare the home to the rest of the block. You’re looking for a wide gap in quality between the property and the rest of the neighborhood. If it looks like a good opportunity to add value, write down the address.
Do Your Research And Due Diligence
“It is not the lack of resources, but rather the lack of resourcefulness that truly prevents real estate investors from reaching their investment goals.”
Some of the strategies and techniques below may be different for your market, but that should not deter you. Having an open mind and thinking creatively about how to find new leads is key to real estate success.
Now that you have a list of addresses, what do you do next? It is time to cultivate those leads to get as much detailed information as possible. The more information you can compile, the faster and easier it will be for you or your team to find the owner:
- Search your county court house or online public records
- Lookup the tax record account online
- Have your realtor search their public records access (often times the MLS will have property information that is not available to the general public)
- Use 411.com or other online reverse address lookup services
- Use pipl.com if you can only locate someone’s name with no matching contact information
Some of the above steps will require further research. Don’t shy away though, as this is the step where most other investors give up. Your persistence will pay off. Pick up the phone and contact key people in your market to see what websites and resources they know of. Call realtors, mortgage brokers, title agents, attorneys, appraisers, etc. Remember, this is the part that requires some digging and right-brain creativity. The way your market’s public records are stored and accessed will be different depending on where you live, but remember that there is a path and way to get to the root of what you are searching for. Spending time in this area can lead to finding leads that are otherwise inaccessible to the rest of the market.
Making Contact with Property Owners
Now that you have a list of names, addresses, and possibly phone numbers, it is time to develop a marketing campaign.
Below are a few techniques that have proven to be successful.
Send A Letter
For all addresses that you have, send a letter. One of the simplest and conversion-tested letters is as follows:
Re: 123 Main Street, Town, State, Zip
I am interested in purchasing your property.
Please contact me.
Your Phone Number
Pretty simple, right? Most people over-complicate this step and write too many details. Quite simply, if the owner of the property has interest in selling, your letter cuts right to chase and also incorporates a level of curiosity — a key component of good marketing.
If you do not want to send these letters manually (printing and then hand writing envelopes), there are many great mail services that will automate the process for you. You will first need to put your addresses into a spreadsheet (such as Microsoft Excel) and then upload them to a website. Often times the cost is only a few cents over the price of a stamp. Check out Click2Mail.com and make sure to click on Letters & Flyers and follow the onscreen instructions.
Knock On The Neighbor’s Door
Neighbors sometimes have information that you will not be able to find anywhere else. Learning how to approach neighbors and develop a relationship is another great technique. Not only will they take you one step closer to the property owner, but if they know you buy property in the area, and they see value in what you are doing, they could become a good source of referrals for your investment business in the future.
Feel free to use the script below until you get comfortable approaching people. Remember to relax. You are there to help get rid of the vacant, distressed house that is dragging down the value of their neighborhood. Write down any information they give you. Ask for the name and phone number of the owner. After you finish talking to them about the vacant property, ask them if they know anyone else that wants or needs to sell their home. Offer them a referral fee. Get them on your team and give them a few business cards. Also make sure to get their contact information as well so you can put them in your database and develop a relationship. The more eyes on the street looking for real estate deals for you, the better!
Investor: Hi, I purchase properties in the area and noticed the home next door. I would like to purchase and renovate the house, but I have been unable to locate the owners. Do you have a quick minute to help me?
Neighbor: Maybe, what is it?
Investor: Do you know how I can get in touch with them?
Investor: Do you know if they have family or friends that still live in the area?
Neighbor: Yes. She has a cousin who lives a few blocks away on Mason Street.
Investor: Did she ever give you a phone number or any way to contact her? Do you know her address?
Neighbor: As a matter of fact she did. Let me see if I can find it for you.
(Neighbor finds a phone number and gives you the address)
Investor: I really appreciate your help, thanks! If they accept my offer, I will get this place cleaned up and the block will look much nicer. By the way, if you know of any other people that want to sell a home, I give a $500 referral fee for each property that I buy. Please keep me in mind. Here’s my business card.
Keep in mind that each conversation will go differently. Don’t worry if it doesn’t always go smoothly. Continue to reach out to neighbors and over time you will refine and enhance your process. Keep this up and soon enough you will have a few key people on your team. These people will have their ears and eyes open to opportunities for you.
There are hundreds of different strategies to find discounted properties.
What techniques have worked best for you to find real estate deals under market value? Have you had any luck in locating owners of vacant property? Let us know what’s worked for you.
Originally published at rehabfinancial.com on February 16, 2017.