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For any real estate investor, understanding current market conditions is crucial. Right now, most investors are finding themselves in an environment where great investment deals are more scarce while competition is high. In practice, this means that as a real estate investor, you will miss out on many deals on properties advertised on the open market.
To try and mitigate the effects of tough competition, you have two options: One is to try and generate more leads and somehow react faster than your competition. The other—much more feasible—approach is to look for off-market real estate deals instead.
Off-market deals are the real estate investor’s holy grail right now. As getting good returns becomes harder, these deals offer you a chance to secure real estate at a discount while avoiding competition from other local investors.
Here, we’ll do an overview of the main ways to find off-market deals—both with the help of online tools and by building your investor networking skills.
1. Work With Wholesalers
Think of this as a way of casting a wider net in your search for deals, a strategy that’s especially worthwhile when market conditions are tough, as they are right now.
A wholesaler may just present you with a deal on a property that you wouldn’t find on the MLS/through your local agent. Wholesalers are particularly useful for finding investors distressed properties at great prices. By “distressed,” we mean properties that need renovations.
If you’ve flipped homes before and have a contractor you trust who is ready to embark on a house-flipping project with you, great! A wholesaler will often be a great bet for finding you a property that’s off the market and ready to be flipped.
However, there are a couple of caveats to be aware of. You likely will have to act fast: Wholesalers need to close deals quickly, so be prepared for zero-day due diligence in some contracts, which means you’ll have to buy the home as is. Also, be ready with the funds for an earnest money deposit (typically 1% to 3% of the total value of the property).
Bear in mind that the wholesaler needs to make a profit, too, so while you’ll be getting a below-market-value property, there will always be a markup to cover the wholesaler’s profits.
Even with these caveats, the convenience of having an off-market deal brought directly to you means a relationship with a local wholesaler can be well worth it for experienced house flippers.
2. Contact Homeowners With Vacant Properties
A vacant property is almost always beneficial to a potential investor; so much so, in fact, that some investors specialize exclusively in buying vacant properties. These do come with a lot of advantages, and the biggest one is that the owner of a vacant home is much more likely to be motivated to sell than a regular seller. That can mean a great deal for an investor ready to relieve the seller of a property they’re keen to get rid of. After all, it’s not making them any money, and they’re not benefiting from living in it.
The difficult part can be finding vacant homes. In some cases, the seller gave up and took the home off the market. They may have moved away from the area and don’t have any more time or resources to devote to trying to sell the property.
This is where you come in, preferably equipped with a dedicated search tool like PropStream. PropStream lets you search specifically for vacant homes in your target area using thousands of public records. You can also filter your search by vacant homes that are high-equity, which typically will give you an even better deal. And you can do all that from your phone by using PropStream’s convenient mobile app
3. Find Homeowners With Pre-Foreclosures
Something some investors find off-putting about vacant homes is that they typically need at least some work. And some homes will need a lot of work, depending on how long they’ve been vacant.
For those not into house flipping who want a discounted property in good condition, pre-foreclosure is always a great option. Pre-foreclosures will typically be occupied, which means they will be well-maintained, but the owner-occupier may have a burning deadline to sell in order to avoid full foreclosure. That is usually the case with pre-foreclosure homes that have been put on the market. The pre-foreclosure time window is your golden opportunity as an investor.
Some pre-foreclosure homes will be listed for sale in the usual way on Zillow, and other similar listing sites will be marked as pre-foreclosure. Others may be available through your local real estate agent or real estate auction house. But here’s the thing: Those properties are on the market, and you can bet you’ll be facing stiff competition from other investors.
Off-market pre-foreclosure properties are owned by people who have received a foreclosure notice, but they may not have decided what to do. They may still be working with their bank to try and stave off a full foreclosure, or they may be trying to choose the best way to sell their house as fast as they can.
It’s the latter category you should be trying to reach out to as an investor, as you could offer a fast solution to their dilemma. Some pre-foreclosure owners just need the right offer to decide to sell immediately.
You can find off-market pre-foreclosure homes by browsing your local county records or even through local newspapers. Obviously, poring over records and newspapers isn’t something everyone has time for. An online tool like PropStream comes in very useful here: You can search for local pre-foreclosure homes by accessing the same local pre-foreclosure data within seconds.
4. Join an Investment Community
We’ve mentioned heavy competition as the reality of real estate investing today. But that’s only one side of sharing the market with other investors. You might be surprised by how often investors will help others by sharing opportunities they themselves don’t have the bandwidth for or that simply aren’t in the right category for their investment strategy.
This means it’s always a good idea to join a local investment community. You could end up landing a deal or two that you wouldn’t have found yourself—and get valuable advice in the process. A group like PropStream’s Facebook user community connects real estate investors who share their experiences, top tips, and off-market investment opportunities.
Social media generally is a great place to start building your network of fellow investors, although platforms like Meetup can also be a valuable resource, especially if you like meeting with people in real life.
5. Network With Real Estate Professionals
This brings us to our final point: No one builds their success completely alone. The more you can learn from others who are on the same journey, the better. Someone who’s just starting out today could be the next investor success story in a few years’ time. You might even find a business partner in the future.
Fellow investors aren’t the only people you should network with, either. Get to know your local brokers, real estate agents, and property managers. Again, the purpose here is twofold.
On the one hand, the better your relationship with local real estate professionals is, the more likely they are to contact you about potential off-market opportunities. On the other, deal or no deal, you will gain access to valuable industry insights that will help you approach potential leads with better strategy and confidence, manage your own properties more effectively, and get an overall better sense of direction with your investments.
Final Thoughts
Armed with these essential strategies, you can gain access to those coveted off-market real estate deals. Remember: To be successful as an investor, you need to try out multiple approaches to see what works. You also need to know what you’re looking for—for example, an off-market deal may involve a property that needs a lot of work, and you, as the investor, must always know whether you can take on the challenge.
With the help of the right tools, like PropStream’s real estate data platform, you can fine-tune your off-market property search so that you can focus on opportunities that will best align with your strategy and goals.
This article is presented by PropStream
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
