No matter your goals, your experience or where you are in your journey, the first step to being a successful real estate investor is learning how to find the BEST deals in your local area. If you can do that, you’re well-positioned for success, now and in the future.
- One way to get access to the best deals on the market is by driving for dollars: actively seeking out deals.
- Two types of properties to look out for are For Sale By Owner and Distressed or Abandoned Properties.
- To be successful you need to leverage your social circle by alerting everyone to the fact that you’re a real estate investor looking for deals.
You need to go find opportunities, not wait for them to fall in your lap.
You can find real estate investing deals by working hard and smart. It’s not a lottery. It’s a game you can win.
Too often, people say they want to invest in real estate, but then suddenly hit a wall. They don’t know where to look. They don’t know how to spot good investment properties.
You can enlist a real estate agent to help you find thousands of properties for sale, but is that really the best route? Or do the best real estate investors have other, more direct sources of quality deals that the rest of us aren’t privy to?
The answer is yes—and no. One of the biggest differences between the "average" investor and someone who takes it to the next level is knowing where to look. Where to look for buyers, where to look for properties, and how to get word-of-mouth referrals, that can help you on your investing journey.
So let’s get started with two of the best approaches for locking up the best, most profitable deals in your local area.
Driving for Dollars
Instead of waiting for deals to fall in your lap, hop in the car and drive around towns or neighborhoods of interest looking for potential investment properties. We call this strategy “driving for dollars.” While you’re driving, you'll want to keep an eye out for two types of properties:
1) FSBOs and 2) Distressed or Abandoned Properties.
Let’s talk about each.
FSBO (For Sale By Owner)
While “for sale by owner” (FSBO) properties are a smaller piece of the market, they’re still out there being overlooked by the big boys. This leaves the door wide open for YOU.
Simply hop in the car, drive around your neighborhood or desired investing zone and see what you can find. In virtually every market, you’ll spot at least one or two “For Sale By Owner” or homemade signs. This signals that an owner is keen to sell and haven’t yet been listed by a real estate agent.
Snap a picture, jot down the phone number, or hop out and knock on the door. These deals can be great if you can lock them down. Not only will you avoid paying an agent’s fee, but in most cases, you'll be able to negotiate a solid deal.
Distressed or Abandoned Properties
Keep an eye out for homes that seem distressed or vacant. Distressed properties are just what they sound like—properties in need of repairs, or those that are neglected or abandoned. Generally, the more work a property needs, the more tools you have to negotiate larger discounts.
Here are a few key indicators of distressed or abandoned properties:
- Overflowing mail in mailboxes
- Abandoned construction
- Code violation sticker
- Boarded up or broken windows or broken doors
- Meter box missing or master switch is off
- High lawn and bushes
- Tarp on roof
- Lots of trash, debris or junk in front of house
There’s often a reason why a house looks abandoned or unkept. The seller could be in pre-foreclosure and not know what to do next. Maybe they inherited a home that they can’t take care of, or they may have abandoned it. In any scenario like this, you’ve more than likely spotted a "motivated" seller. Get to them before other investors do, and you could have a great deal on your hands.
If you spot a property that looks distressed or vacant:
- Write down the address of the property.
- Jot down the condition of the property. Is there overgrown grass or bushes? Are there broken or boarded up windows?
- Do a quick property search on Google or Zillow.com so you can get to work assessing the situation. Zillow.com will deliver key info—including the owner’s name, number of bedrooms/bathrooms, square footage, whether or not it’s in foreclosure or pre-foreclosure and the contact details. You may also be able to enlist a real estate agent to help pull information.
Once you get a read on the property, you’ll be able to devise a smart plan of attack. For example, if a property is in foreclosure, you may be able to reach out to the bank and make an offer before it goes to auction.
If the home looks visibly distressed and unkept, track down who the owners are and contact them by mail and phone until you reach them and make an offer. Many times, you can look up the owner’s phone number on whitepages.com. A general rule of thumb is to call three times until you get someone on the phone.
You’ll also want to contact them via mail. Write up a simple letter explaining that you’re a real estate investor and that you buy houses as-is, for cash. Your letter should also include simple next steps if they’re interested in selling. Add your website, a phone number to call or your email address. Make sure to leave the letter in the mailbox or under the front door.
If you want to go a step further, you can knock on the door to see if anyone lives there. If you get an answer, don’t be afraid to introduce yourself to the homeowner and explain what you do.
“Hello, I’m a local real estate investor in the area, and I’m looking to buy a few properties on this street. Would you happen to be selling your home, or do you know of anyone else in the area selling?”
Admittedly, you’re taking a leap here. Will some doors get slammed in your face? Absolutely. But, if you can weather the storm, you’ll likely get a few very profitable “yeses”. And that’s always a win.
Bottom line: this method can spark some killer deals, even if the homeowners aren’t looking to sell.
Word of Mouth
Word of mouth is one of the best methods for finding great real estate deals. How does this work? Tell EVERYONE what you’re doing. Talk to your friends, family, neighbors and colleagues and let them know that you’re looking to buy an investment property or two.
Real estate investing is NOT a solo sport. Everyone knows someone who’s thinking about selling their home, trying to sell or stuck in a sticky situation and needs out fast. If you can be the solution to their problem—if you can take that property off their hands—chances are, you can pick up an amazing property for a great price.
The great thing about word of mouth is that you can have access to sellers before they put their properties on the market.
Let's say Uncle John got wind that the next door neighbor Mary just accepted a job promotion and will be moving to another state. She’ll need to sell her home quickly.
Uncle John knows you buy properties, so he gives Mary your contact info.
Mary contacts you and explains that she needs to move in a hurry. You tell Mary that you’re a real estate investor who buys houses cash and can close ASAP ( . . . which is music to Mary’s ears!).
See what just happened here? The wheels are set in motion for a potential deal.
You can also talk to others in your area who know your neighborhoods and communities well. It can be anyone—a long-time resident, the mailman, a delivery driver in the area, or even a stay-at-home mom who takes her baby on daily walks.
They can be your eyes and ears, always keeping an eye out for signs of potential—the overgrown grass and pile of newspaper signaling an abandoned home, a FSBO sign that popped up overnight or local chatter that the neighbor is moving to Florida.
Build relationships with them. Let them know that you’re on the hunt for great deals and let them know what you’re looking for. They can alert you to potential deals ASAP.
Putting it Together
Start planting the seed with everyone you know. Drive around your neighborhood later today with an eye out for FSBOs and distressed properties. The more focused you are, the better your chances for being able to land a good deal before everyone else gets to take a stab at them.
Finding these deals is the first step to building your portfolio and your long-term wealth. Now, let’s get out there and start looking for your first—or next—great investment property.
The WealthFit staff collectively writes on personal finance, investing, and entrepreneurship.