My market is like a lot of other markets. We have an active investors group with a lot of educated folks that earn their living as real estate investors. So there is a lot of competition here for good deals. I have a few tips for finding houses and making offers.
Where Do I Find Houses To Make Offers On?
A lot of investors have alerts set up on their phones or computers that notify them once or twice a day when new listings come out on the MLS or the “hot list”. If a house hits the market that is a really good deal, it’s not unusual to have multiple offers on the property in the matter of a few hours. I personally don’t like to get into a bidding war with other investors, so I usually don’t chase these houses. I much prefer the “low hanging fruit” such as probates and absentee owners
If you decide to search for property on the MLS, you might look for houses with high DOM (days on the market) and ones that have big price reductions or discounts. If you can find a house that has gone past 120-180 DOM and needs a lot of repairs, there is a much better chance of putting a deal together not only with a bank but with a motivated seller.
Direct Mail Campaigns
One of my main sources of leads comes from my direct mail campaigns. I have used direct mail successfully for many years. It works especially well for certain niches in real estate. With direct mail, success is in the follow up. I think this is where many people go wrong. Real estate investors send out a letter or a postcard or two, and then they just quit before they see results.
Networking can be a valuable source of leads. Make it a point to tell everyone you know or come in contact with about your business. Perfect your “elevator speech”. It should start out with “I help folks….” I often get leads from friends and acquaintances. Be sure to attend your local REIA meetings. Most large cities will have a REIA Group where you can network with like-minded people. Get out in your community and join a couple of local business groups that aren’t associated with real estate. The more people that know what you do, the greater the chances you will be the one they call when someone needs to sell a house quickly.
A Basic Website
If you don’t have a website, it should be one of the things you put on the top of your “to do” list for this year. All you need to get started is a basic website that tells folks what you do and that collects your visitor’s name and phone number or email address. Include some helpful articles for sellers. A website will give your business credibility even before you are getting leads from it. Include the URL to your website on all of your marketing pieces as well as your business cards.
How Do I Figure Out How Much To Offer?
If you ask half dozen investors how they determine how much to offer when they want to buy a property, you will most likely get 6 different answers. There are number of things to take into consideration such as the neighborhood and the condition of the property. But most all real estate investors use 70% formula in the equation. For anyone that is not familiar with this formula, this very simply is the percentage that an investor will be willing to pay for a house.
70% of the after repaired value (ARV) – repairs = the maximum allowable offer (MAO)
One of the first things you need to do is to get the “comps” for the area. Be sure to look at all of them, not just the one house that sold for a whole lot more than the rest of the houses in the neighborhood. You will want to know what an average house is selling for. Also be sure to look carefully at the low comps. This is likely what other investors are actually paying for property in the area. There are no shortcuts when you are trying to figure out what to offer for the property. Time and experience will help you feel comfortable making offers, but you always have to do your homework.
Photo: Tim LindenbaumThe Basics: Tips for Finding Houses and Making Offers by Sharon Vornholt