The single most important factor in finding properties to buy is to have a very clear vision of what you are looking to buy. To accomplish your real estate investing goals, you must have a clear target. In another post, I showed you how to determine what properties and Target Operating Area.
Once you know what you want, you just have to find it. This article shows you how to use two main ways to find deals by working with people who get paid to find deals for others.
Not having a clear vision of what you looking to buy is like going to Walmart to look for a good deal on some type of household items, but not clearly defining what you are looking to buy. Imagine looking at every item in the store, and wondering if that item is something that you might need some time. Going to the store on that basis would be obviously be a ridiculous waste of time. That is why we prepare shopping lists for ourselves. A shopping list is nothing more than a series of decisions you have made in advance of your trip to the store.
Once you are clear on what it is you want, you will begin to attract all sort of those types of opportunities. Your mind will come up with more and more solutions for finding the types of deals you are looking to buy.
You’ll start attracting deals like a magnet.
For example, my first investment property was 2 duplexes. I decided that I wanted to find more duplexes I could buy. Once I knew what I was looking for, I very quickly found a realtor and landlord who had a duplex he was trying to sell. It was a great deal, and I bought it. And, I ended up buying several others properties from that same realtor. That realtor also had clients with properties, and I purchased several of those.
The mind plays another critical role in helping you to find deals.
For example, have you ever bought a vehicle, and as soon as you buy the vehicle it seems like you see that same type of vehicle everywhere. You never took notice of that vehicle before then. The reason for this is your mind has something called the reticular activating system (RAS), which is the mechanism which focuses your thoughts. When you decide on what you want, your RAS brings to your consciousness anything that has to do with that thing in which you are trying to find. Other details not related to what you are seeking to find are screened out of our consciousness by the RAS. That’s why it’s so important to know exactly what types of properties you are going to buy.
How to Find Deals
Real estate agents and wholesale sellers get paid to find other people good deals on real estate. We’ll focus on how to best use them to find your deals.
There are countless other ways to find good real estate deals. However, this particular method is one of the most effective methods for someone who doesn’t want to have to invest the time and money to buy properties directly from individual sellers. You could certainly find all the rental properties you could ever want to buy in this fashion.
Finding Great Deals is an Essential Skill
Your ability to generate leads that develop into great deals is one of the top skills to possess because the less you pay for the property, the better your cash flow. Also, you will always be buying properties with built-in equity so you won’t have so much of your own money tied up in your rental properties.
How do you know when you’ve got yourself a great deal? You have to do the math. I’ve written an excellent article about calculating cash flow for a rental property that has a calculator you can download.
To find great deals (i.e., assuming you know what you are looking for), you will usually need to look at a lot of houses and make many, many offers. This means generating good leads, evaluating those leads, and then following up to make offers. Your realtors and wholesale sellers will be bringing leads to you.
Working with Realtors to Find Deals
The majority of properties sold in the United States are listed and sold through real estate agents. Realtors can be a tremendous source of leads to buy rental properties.
For example, I have purchased a number of foreclosed properties through realtors. Once properties go through foreclosure, most lenders list them with real estate agents. These can sometimes be very good deals because they are in poor condition, and are sold as is.
The degree to which good foreclosed properties are available depends upon how healthy the real estate market is. In general, the healthier your market, the fewer the good foreclosure deals will be available. During the tougher times (i.e., more foreclosures), you will face less competition from other real estate investors, and therefore you will find better buys on bank owned property deals. During the times when the real estate market is “good”, you will face more competition from other real estate investors, and it will be tougher to find good foreclosure opportunities.
What are the biggest benefits in working with a realtor to find properties?
- Information. Realtors are a tremendous source of information about the marketplace. In addition, realtors have access to the Multiple-Listing Service (MLS) which is a compilation of information about properties that are for sale, have been sold, listings that are expired, and other critical information.
- Leads. Realtors may put you on to some excellent leads. And, they talk with other realtors in their office. Some realtors are an excellent source of pocket listings (i.e., those that are properties for sale, just not listed on the MLS).
- Bank-Owned Properties. Banks are not in the business of owning property. Holding repossessed properties can retard a bank’s ability to loan out additional funds. These properties must be listed on the banks financial statement as a non-performing asset. Banks generally list their foreclosed properties with real estate agents, although sometimes they are sold through auction sites.
What are the biggest disadvantages of working with a realtor to find properties to buy?
- Competition. Once a property is listed, any realtor with access to the MLS may know about it. Great deals won’t be around long. If you have to wait for a realtor to find out about it, let you know, show it to you, and then write an offer, it may already be gone.
- Negotiation. There will be some back and forth. If it’s a really good deal, this may cause you to lose the deal.
- Compensation. Realtors have a big problem in working for free. Do you blame them? They may be reluctant to submit offers they consider to be “low ball”. And sometimes, it’s about them feeling like they will be embarrassed to present such an offer to a peer. This is absolutely unacceptable. You need to have a realtor who is on your side.
I have worked with several realtors who specialize in working with investment properties even though I have a real estate license. My real estate agent went out to preview these properties, estimates repair costs, and calls when the prices have come down to within striking range.
How Do You Find a Realtor
Be very selective in choosing a realtor. The most important thing is to find an investment realtor – a realtor who wants to work with investors. Some realtors will not want to work with a real estate investor. They may think that an investor will work them hard, and may not ever end up buying a property. A good place to find investment realtors is at your local real estate investor association.
OKC Home Realty Services has an excellent realtor who is always looking for deals. If you’d like to talk with them, call us or fill in the form at the bottom of this page to request information.
Advice on Buying Listed Properties
- You must have your financing firmly in place before you start making offers on listed properties. I have written an article about how to finance the purchase to purchase investment properties Oklahoma City banks.
- Communicate in precise terms to your realtor what types of properties you want them to locate for you. That way, you can focus them squarely on the types of properties in the neighborhoods you want to purchase properties.
- One effective strategy for using realtors is to purchase properties in distressed condition for a discount. The best way is to make an all-cash offer with no contingencies except a take-it or leave-it inspection (i.e, the inspection is just to reveal huge problems, not to nickel and dime the seller). If you are going to make offers on distressed properties, you need to get good at quickly evaluating properties to estimate repair costs.
- If you go to the trouble of looking at a property, make an offer on it. You just never know if an offer is going to be accepted or not. Your realtor can quickly write up an offer which you can electronically sign.
Buying Properties from Wholesale Sellers
A wholesale seller is an investor who purchases properties at a low price and resells them to other investors at a marked up price that is still under market value. The wholesale seller has no intention of holding the property, or to do any repairs whatsoever on the property. Wholesale seller find good deals, and they are compensated for their efforts in finding a good deal.
What are the biggest benefits in working with a Wholesale Seller to find properties?
- They do the work. Doing the work of marketing to homeowners to buy their properties is a job. If you try to do this, you WILL get bogged down. If you have a few hours each week to devote to real estate investing, spend your time working with those who get paid to work directly with homeowners. Wholesale sellers are another source beyond realtors to find deals.
- They should be relatively easy to work with.
- No cost. It costs you nothing to have them contact you when they have a wholesale property to sell.
What are the biggest disadvantages of working with a Wholesale Seller to find properties to buy?
- Is it really a deal? I find that most of deals offered by wholesale sellers are priced too high. The wholesale seller is looking to make just as much profit as they can, at least a $5,000 mark up on the property. For some it’s even more.
How Do You Find Wholesale sellers?
You will almost always find wholesale sellers at you local real estate investor association. Most will have a wholesale buyer’s list on which they should cheerfully place your contact information. Ask to get on their buyer’s list. Most will e-mail you notifications when they have a property for sale. If they have properties for sale, get on their buyer’s list.
Example of buying properties from Wholesale Sellers. One of my friends puts a lot of his properties, now well into the 100’s, into the Section 8 (i.e. government rental assistance) program. He doesn’t advertise directly to individuals to buy their houses. Instead, he buys nearly all of them through either realtors or wholesale sellers.
Advice on Buying from Wholesale Sellers
- As in working with realtors, you must have your financing firmly in place before you work with most wholesale sellers.
- Let your wholesale buyers know what types of properties in which areas you are looking to buy.
- Don’t try to go around a wholesale seller to purchase a property directly from a seller. Many times they will have a contract in place that protects their position. Besides, if you perpetrate that type of unethical behavior, word will get around about you.