Many new real estate investors get their initial education from one of the many info products that have been developed over the years – and there is nothing wrong with this approach. In fact, a few of these info products are collecting dust in my office right now. What’s interesting to me is how much of this information has become out-dated in such a short period of time.
During last decade’s boom years in the real estate industry, investors had to learn how to “mine” for the really good deals. This usually entailed marketing to distressed sellers who were desperate to sell or were willing to hold back a note. Just about everybody has seen the bandit signs around certain intersections with messages like “We Buy Ugly Houses” or “Sell Your House in 5 Days.” This is all about finding sellers who would potentially sell their house for less than market value or who have the potential to structure a short sale on their property.
While finding distressed sellers is still a viable strategy, the question real estate investors have to ask themselves now is whether it’s the best strategy. With the glut of foreclosures on the market, there is an unprecedented opportunity to capitalize on REOs, HUDs and other properties that are (or have been) listed on your local MLS. It’s been my experience in recent years that the need to find individual distressed sellers isn’t worth the effort and expense – banks have become the new distressed sellers and the opportunities are incredible.
I have talked to a handful of newbie investors in recent months who have just completed an education course (that was developed 5 years ago) and are out there marketing for distressed sellers. Again, there isn’t necessarily anything wrong with this and the viability of this strategy will differ from market to market. However, you have to ask yourself whether chasing down these types of deals makes sense when there are so many other readily available deals that can be negotiated. Why would I spin my wheels for 5 months negotiating a short sale when an identical property down the street can be purchased for the same price from a wholesaler who happened to negotiate a great REO deal?
Our real estate market is a very dynamic market. What worked a year ago doesn’t necessarily work today. I’ve been a full time real estate investor since 2005 and can honestly say the investing landscape is vastly different than when I started. As investors, it’s important we pay close attention to changes in the industry so that our time, energy and profits can be maximized using strategies that make sense in today’s market.
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Article Author: Ken CorsiniKen has written 42 articles for us.
Visit Ken's Website: http://gainvesting.com
Ken Corsini is the founder of Georgia Residential Partners, LLC - a real estate investing firm based in Atlanta, Ga focused on creating turn-key investments for investors all over the country. He has a business degree from the University of Georgia, a Masters degree in Building Construction from Georgia Tech and is a licensed contractor in the state of Georgia.. He has been investing in real estate since 2005 and has been involved in hundreds of investment related real estate transactions since this time.
Joshua Dorkin
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Great post. I started real estate investing in 2001. The best deals were “mined”. I was a door knocker. I’d hit 60-80 doors a weekend – all homeowners in foreclosure. Then I got my real estate license in 2007. Why? Because all the best deals were on the MLS – REO and short sales. I now have access to the deals AND get paid to find them.
great post.
i can never understand why people would not just work with the banks and instead waste time with the emotionally attached sellers… the houses i have gotten have all been through banks and have still gotten great deals..
Very well said and I completely agree with you. Things can and do change so often and rapidly that you must be willing and able to adapt.
When I started the strategy was completely different than it is now. I do still see educational products being sold for strategies that don’t work well in today’s market. Those new investors usually end up my bird dogs
Those investors usually end up on BiggerPockets – trying to learn how to invest successfully.
Excellent point.
This is why I get a little confused when I look around and see other investors doing this while cannot be bother to waste my time. I am doing just fine mining the MLS for foreclosures. I don’t even bother with short sales. They are another big waste of time unless you have a foot in the door with the lender.
You have a great point Ken,
I would like to also agree that your approach is going to need to be tailored to your market. I began investing out in Fresno, Ca in 2009 and from what I have seen the best bang for my buck has been the consistent use of Bandit Signs to find distressed sellers. You do stumble across alot of Short Sales and so forth but you still find true blue sellers desperately needing to sell,and with some patience and a little negotiation skill, you can land you what I like to call an elephant! REO’s in our are not as good for the most part you are seeing the majority of these properties at market value, minus the cost of repair leaving no real margin to make any money. And every so called investor out here is linked up with an agent and are over paying and driving up prices in bidding wars on these REO’s. So I know for us this strategy is not a viable one, also the Short Sale game is a tough one requiring even more patience than if you are buying directly from a distressed seller. We have made offers on a number of Short Sales to find out 4 months later that the bank rejected our offer. My partner and I are now shifting focus to online marketing and looking to join online networks and the use of our own house buying website. we see alot of other investors taking this approach, and I am starting to see why. Automated marketing, generates leads no matter what time of day, and you can out source all of the work. It is 2011 and like said before signs are wonderful, but maybe you want to consider this approach for your business.
Like any market, real estate is dynamic. Because of the tight competition among real estate owners it is important that you make sure that your strategy is up to date. Real estate investing strategy is constantly changing.