Finding the Right Homes at the Right Price!
I love to shop.
Shopping and spending money should be easy--people want our money, right?! But what about when you are looking for a good deal? And it is Black Friday and you are waiting in line for hours and racing 50 other people for the ONE TV that is on sale? That’s about how real estate shopping feels like when you are an investor. Sure there are hundreds or thousands of properties for sale in one city, and if you are a “retail buyer” (aka shopping for a home to live in) you have lots of options. But as an investor you need to find a home that is significantly discounted and has room to add value so that you can make a profit.
The market throughout the United States right now is really hot for sellers. Prices have been going up and in most places there are a lot of competition driving houses to sell quickly and above list price. So how do we find houses and how do we compete with all these other buyers?
One of the best places to buy houses is from within your network. The bigger your network, the more opportunities. The best thing you can do is be open about how you are an investor and always looking for houses. Who knows, maybe your friend’s grandma is about to move into an assisted living center and they are wanting to sell the house. Then you can buy it before it hits the market and all your competition finds out about it. Or maybe you are a salesman and mention to your customers whenever possible that “your wife” invests in real estate. Then they say they have been thinking about moving and they sell you their house...instead of them buying your product (ha, true story! This is how we bought one of our houses).
Networking within real estate groups helps you to meet other investors who wholesale properties. “Wholesaling” is essentially when one person gets a house under contract but then sells it, for a fee, to another person before closing. Sure there is a middle man who gets a cut of the deal, but often these houses are still cheaper than homes listed on the MLS. The point is, people you know are selling--or thinking about selling--their houses all the time. Your goal is for them to know that you want to buy it from them without all the hassles of realtors, showings, and listing it.
There are a lot of different strategies that investors use to market to people before they list their properties. I could do multiple posts on this topic alone, but for this one we will keep it simple. You can find people who are in distress and help them out of a tough situation by buying their house. For example, you can buy properties from people who are in pre-foreclosure and can not make their mortgage payments. It's a win for you because you get the house cheaper and is a win for them because they avoid the foreclosure from going on their record. Or you can buy homes that have been inherited that the kids just want to cash out and not deal with the stress of selling. Or perhaps there are vacant properties with out-of-state owners who just don’t want to deal with it and would love you to take it off their hands, hassle free. Everything from divorce to loss of a job to renter nightmares creates an opportunity for you buy a house at a discount rate, while helping someone get out from a home they can no longer afford or want to deal with.
So how do you find these people? You can purchase or find public lists for some of them, you put up signs that you are looking to purchase homes, or you do online marketing. Some investors send letters to all homes about to go into foreclosure, while others knock on doors of properties that look like they are in distress and the owners are not able to maintain them. There are tons of strategies and investors get creative, but they all have one goal in mind: finding homeowners who are ready to get out of their house in a hurry.
The MLS is the “Multiple Listing Service”, which is just where all officially listed properties with realtors go. It is a central location for everyone looking to sell and buy houses. It is great because there are lots of houses right at your fingertips, but it is hard because they are at everyone else’s fingertips too! But there are good deals to be found, you just need to filter through them.
Foreclosures are some of the better homes to find on the MLS for investors because they usually are fixer-uppers that most homebuyers don’t want to deal with. We buy houses from the MLS and are always working with realtors to find good deals. Since it is competitive the best advice I can give is to not get discouraged. Other people may outbid you or your below-list price offer might be rejected 20 times before you get one that works out. It is very easy to give up on house hunting because of how many people are buying houses right now. But if you are persistent you will eventually get a deal to work out. Don’t get discouraged and buy a house at a higher price than you should just because you are so desperate to buy something. Make a standard number that you look for in profit margins and if it doesn’t work, move on to the next house. Over and over again, until one does work.
4. Be open to multiple areas
One of the ways that we have been able to buy more houses in a competitive environment is keeping our options open in terms of area. We work with realtors in four states currently and are always looking at expanding to other cities with good real estate opportunities. We believe you can make real estate investing work in any market, and having an open mind about neighborhoods, cities, or even states gives you more options to choose from. Obviously, when looking at another area, it helps to choose a place where you have some kind of personal connection with family in the area or maybe a past area you used to live. That way you are familiar with the market and have at least a few people in the area you can trust and even make part of your team.
All of this may seem overwhelming, but don’t stress. Start with one strategy, or start by meeting with a realtor to work with them, and go from there! We are still testing new methods and haven’t tried every strategy to find houses. But whatever route you want to take, be consistent and persistent! It may be a competitive market in purchasing real estate, but there are deals out there. Take action and get to work!