That is like preparing a shopping list before you go to the grocery store. A shopping list is nothing more than a series of decisions you have made in advance of your trip to the store. As a real estate investor, you need to prepare a detailed shopping list so you don’t waste huge amounts of time looking at properties that you’ll never end up buying because you don’t have any clear criteria.
The single most important factor in finding good deals on OKC rental properties to buy is to have a very clear vision of what you are looking to buy.
Once you are clear on what it is you want, you will begin to attract the opportunities and the people who have those types of opportunities.
For example, right after I had purchased my first investment property, I decided that I wanted to find more duplexes I could buy with the owner financing the purchase for me. I very quickly found a realtor who had just this type of property for sale. I bought it, and several other properties from that same realtor. That realtor also had clients with similar properties, and I purchased several of those properties.
This article is about how a real estate investor can find deals on rental properties in the OKC market by working with a realtor. There are countless other ways to find good real estate deals, but working with realtors 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. Most people just don’t have the time to send out the letters, post the bandit signs, etc. to get sellers calling them.
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. It’s also nice to buy properties with built-in equity.
In fact, you should demand that your deals have some built-in equity.
I like deals with 30% equity from the start. What that means is that you have $42,000 invested in a property that will be worth $70,000 in rent-ready condition. That usually means I have to buy properties that need work. Sometimes, extensive work. But those deals are out there.
Imagine how much more quickly you will be able to pay off your properties if you can buy them way below market value instead of paying the market value. And yes, your realtor needs to be finding these deals for you.
That usually means you need to look at a good number of properties and quite a few offers. You need to find a realtor who will be willing to hang in there and make several offers without getting a contract.
Working with OKC Realtors to find Rental Properties
Realtors can be a tremendous source of leads to buy OKC rental properties, and specific information about the real estate market. There are a number of advantages:
- Information. Realtors are a tremendous source of information about the marketplace. 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. They should be able to provide you comparable sales information about specific properties.
- Leads. Realtors may put you on to some excellent leads. Realtors talk with other realtors. Some realtors are an excellent source of pocket listings (i.e., those that are not yet listed on the MLS).
- Motivated. Realtors don’t get paid unless you buy something. That means they should be motivated to find your deals.
Here are some of the drawbacks:
- Competition. Once a property is listed, any realtor with access to the MLS may know about it. If it is a great deal, it 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. The investor with a real estate license has an advantage in this sort of competition.
- Negotiation. It is almost impossible to negotiate a deal that involves seller financing with any success when you have a realtor (or two) in the middle.
- Compensation. Realtors have a big problem in working for free. Do you blame them? If you are making the right offers, they will be low. A good investment realtor will find you properties in which your offers will have a good shot at being accepted. Otherwise, they will be making way too many offers that don’t get accepted. They don’t earn any commission that way.
Bank Owned Properties
Remember I mentioned that you tend to get better deals when making offers on properties in rough condition? Bank owned properties (called real estate owned [REO]) are usually in very rough condition. The reason that they are typically in rough shape is that they have gone through a foreclosure in which the bank has taken back the property from the owner due to non-payment. This is not a quick process, and usually takes a year or more. Many are not livable, so they need an investor to purchase them and make the needed repairs.
Banks list REO properties with realtors. I have purchased a number of properties.
The degree to which good REO deals are available depends upon how healthy your real estate market is. In general, the healthier your market, the fewer the good REO deals will be available. Currently (2019, the time of this writing), the market is good, and the supply of REO properties is low. 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 REO opportunities.
During the tougher times (i.e., more foreclosures), such as the financial meltdown of 2007-2008, foreclosure properties are much more common. And, you will face less competition from other real estate investors, and therefore you will find better buys on REO deals.
Finding an Oklahoma City Investment 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. Some realtors perceive that an investor will work them hard, and may not ever end up buying a property through them. A good place to find investment realtors is at your local real estate investor association.
Example of using a real estate agent to make offers. When I was looking for a realtor, I contacted the real estate brokers for the four largest real estate companies located in the areas where I wanted to buy properties. I asked them if they had any aggressive new hires. I let them know I was looking to buy about four properties a month. One of the companies referred a very capable agent to me. I let him know exactly the type of property I was looking for. I didn’t jerk him around, and he was glad to present offers for me.
Advice on Buying Listed Properties
- You must have your financing firmly in place before you start making offers on listed properties.
- 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 bank-owned properties in distressed condition so you can get a good discount. The best way to make a quick deal with the bank is to make an all-cash offer with no contingencies. If you are just starting out, you might want to make your offers subject to inspection. If you put too many contingencies in the contract, your offer is not likely to be accepted. This is called wasting your time. This means you need to get good at quickly evaluating properties to determine repair costs, and be ready to make those offers. Refer to the unit on repairs and renovation.
- If you try to go around a realtor to purchase a property directly from a seller when there is a valid listing agreement in place, you might find yourself in legal trouble. When they have a valid listing agreement with the seller, the seller will need a release from that listing agreement to sell the property without paying a commission. If they don’t get that release, the seller (and even you as a buyer) can be sued for the full commission.
- Working directly with a real estate agent who lists REO properties is certainly a worthy goal, but may be a bit of a challenge for a beginner. I recommend that you find a real estate agent who specializes in buying investment properties. If they specialize in buying REO properties, that’s even better.
Give us a call if you would like to talk with an investment realtor to help you locate a rental property in the OKC metro area.