We’ve got a major problem…
Real estate is becoming cool again.
That’s right. It’s becoming cool. Chill. Awesome. Hip. Trendy. Fonzie-like.
People are flocking to real estate once again to build wealth, and while I’m excited to see so many more people choosing to take their financial future into their own hands, I also recognize that this is a problem.
The more people want to buy real estate, the harder it is to find deals. It’s simple supply and demand.
Therefore, the way investors found deals in the past is changing rapidly. Unlike the previous seven years, today trying to find a deal on the MLS with a real estate agent is almost impossible. (The MLS is the collection of all houses in an area listed for sale through a licensed real estate agent.)
Instead, savvy investors are changing their acquisition methods to find great deals. After all, if you want what no one else can get, you’ll have to do what no one else will do to get it.
Are you ready to do what it takes to find a great deal?
If so, here are seven clever strategies you can use to find a great deal!
Okay, let’s get to the seven!
1.) Driving for Dollars
Have you ever been driving in your car and noticed a house that made you think, “boy, that house needs some work!”
If so, then you are already proficient at “driving for dollars!”
Driving for dollars is the practice of getting in your car and driving up and down the streets of neighborhoods you want to invest in, looking for potential deals. Then, you simply try to buy those properties!
But… what does a “deal” look like?
Typically, when driving for dollars you want to focus on properties that look distressed, vacant, or transitioning negatively. For example, a property with 18″ high grass is an indication that someone doesn’t care about the property much. A mailbox stuffed with old, wet pieces of mail shows someone might not live there. A tarp on the roof that seems to have been there a while shows the house might have some problems that the owner can not fix.
While driving in the neighborhoods you want to buy in, you’ll likely encounter dozens of potential properties. Write down the address of each one, including notes about the condition and snap a photo as well. When you get home, do some digging into the public records to see who owns the property. Many times you can even do a reverse-phone number search to get the owner’s number. Or perhaps you just want to write a letter offering to buy the property and mail to the owner’s address listed on the tax records.
Driving for dollars is one of the lowest cost methods to find potential properties because it involves nothing but a tank of gas and your time, which makes it great for those looking to get started investing in real estate but who have limited funds. It can also help you get to know your prospective neighborhoods really well, which will help you make smarter decisions about your real estate.
2.) Direct Mail
Have you ever received a piece of “junk mail” in the mail?
Of course you have! You get them from car dealerships, credit card companies, local businesses, and more.
Direct mail is the act of sending out a large number of targeted letters or postcards to people who might be interested in selling their property, knowing that a small percentage will call you to talk more about the possibility and a small percentage of those will end up actually selling you their properties.
While this may seem, on the surface, to be a lost cause, direct mail marketers know that the proof is in the percentages. If they can get, for example, 5% of those mailed to call, and if they can buy, for example, 5% of the homes of the people who call — they can still make far more than those letters or postcards cost. Let’s say that a wannabe landlord sent out 1,000 letters and got 5% of those people to call for more information, resulting in 50 phone calls. Now let’s say that 5% of those 50 phone calls resulted in a property being purchased, or 2.5 homes (okay, since you can’t really buy half of a home, we’ll round down to two homes).
So, could you spend the money needed to send 1,000 letters if you knew you were going to buy 2 properties? If those deals are as financially solid as they should be, I hope your answer is YES!
It’s easy to see why flipper’s and wholesalers might do direct mail — because they get paid back right away when they sell the home. Buy and hold investors, on the other hand, do not quickly sell so they don’t see that money spent returning to them soon. However, if you consider the cost of direct mail just part of the investment (think of it as “additional closing costs), then it’s hard to not want to try this method out.
Now, who is actually saying yes to selling you their properties through direct mail?
Typically, it is motivated people who can’t or won’t sell with a real estate agent. It might be someone caught in a nasty divorce just trying to liquidate the property as fast as possible. It might be someone who is in danger of losing the home to foreclosure. It might be someone who inherited the house but doesn’t want it. It might be someone who tried to be a landlord but failed miserably and now has a deadbeat tenant who won’t pay rent and won’t leave.
Do you see a pattern here?
Direct mail marketing is about finding people with problems and solving their problems. You are not taking advantage of anyone or trying to trick someone into selling their house. You are simply canvassing a large number of people and trying to find those who you can find a win-win solution for all parties.
There are a number of different “lists” you can buy and mail to, but the most common is typically the “absentee” list. This means that the person who is on record for owning the property does not actually live at the property. You can find and purchase these “lists” from companies like ListSource.com or MelissaData.com and send letters, postcards, or whatever you think will work the best to secure you a deal. Typically, you’ll spend around $.50 for each postcard or around $1.00 for each letter, but this can depend on how much work you do yourself and how much you outsource.
One final note about direct mail marketing: success is found in repetition.
It is unlikely the person you are mailing to this month will respond with a “yes.” Trust and brand recognition need to be built first! We’ve all heard it said that before someone buys a product from a company, they need eight interactions with that brand. The same is true for your direct mail, so I would encourage you to mail regularly and to the same list. Some direct mail marketers send letters monthly to the same list; others send quarterly. You will likely find a solution that works well for you, but the point is: repetition is key! If John Homeowner gets a letter from you every month for a year and suddenly realizes he needs to sell fast, who do you think he is going to call? Some stranger from an ugly yellow sign taped to a telephone poll by the laundromat or you, the company that has been reaching out for 12 months?
For a much more in-depth look at direct mail marketing, check out The Ultimate Guide to Using Direct Mail Advertising to Grow Your Real Estate Business.
3.) Eviction Records
I’ll never forget my first eviction.
Cockroaches. Filth. Anger. A crazy lady. And a hefty bill at the end.
As any landlord reading this can testify to, evictions are not fun. They are messy, stressful, time-intensive, and expensive! During this period of time, many landlords begin to question why they are even in this game to begin with.
And this is why targeting landlords who are in the midst of an eviction can be so powerful! They have a problem, and there is a great chance they will be motivated to get rid of the property as fast as possible. Had someone talked to me while going through my first eviction, I would have seriously considered unloading the property right then and there.
So, how can you target landlords who are going through an eviction?
That’s right, evictions are part of the public record in most counties of America. In other words, you can take a trip down to your local county administration office and ask to see a list of the current evictions taking place. Different counties and states do the evictions a little different, so I can’t tell you exactly how to track down the list of evictions in your area, but if you ask around enough it shouldn’t be hard to find.
Then, make some phone calls or send some letters! (See #1 and #2 above.)
4.) BiggerPockets Marketplace
What if there was a single source online where real estate investors came together to buy and sell their properties?
Well, what a coincidence! There just happens to be that very thing and we call it the BiggerPockets Marketplace. Every day, dozens of listings are posted, and real transactions happening as a result. You can post an ad for either something you want or something you have.
Looking for a certain kind of property in a certain area? Make a post!
Looking to sell one of your properties? Make a post!
Looking to partner up with someone? Make a post!
The beauty of the Marketplace is in its connection to the “Keyword Alerts” on BiggerPockets. The Keyword Alert System is an easy-to-use tool on BiggerPockets that allows people to get automatic notifications when certain words are used in the BiggerPockets Forums or Marketplace. For example, I have “Hoquiam” set up as a Keyword Alert, because that is one of the towns I invest in. Should someone go into the Marketplace and make a post about a property they are selling (or want to buy) in Hoquiam, I’ll be notified instantly! Thousands of Keyword Alerts have been set up, and the vast majority are for specific city names for this very reason! So go ahead and post a Marketplace ad today letting the BiggerPockets world know what you are looking for, and be sure to use the city name in your ad.
You never know who is looking to sell you a deal in your area.
In the “good ‘ol days,” people used the newspaper to place classified ads. While the newspaper might still be effective in some areas, a new business has emerged that is quickly putting newspapers out of business:
Craigslist is an online classified section that is free to post and free to browse, so makes a great resource for finding real estate deals.
There are three strategies I want to share for using Craigslist:
- Search for Sellers: Perhaps the easiest and most passive way to use Craigslist is to simply search the site for real estate postings in your area. You can do this fairly easily and can even automate the process so new leads are sent directly to your email inbox that contain certain words that you choose (you can do this through IFTTT.com). The problem with this strategy is that there are a lot of folks doing this. If you want to get really creative, you need to go on the offensive, which brings me to #2…
- Post an Ad: Why wait for the deals to come to you? Instead, post an ad that says you are looking for a house to buy. Make it big, make it flashy. Get people’s attention!
- Search for Landlords: Perhaps my favorite use of Craigslist is actually in contacting landlords who are posting on Craigslist. Landlording is not easy, and as I often say: 90% of landlords out there suck! Many landlords lose money year after year and are only hanging onto the property because they know it would be hard to sell without fixing it up. Therefore, you can use Craigslist to search for rental listings that appear to have been placed by “mom and pop” landlords (not professional property management companies.) Most likely, the landlord put their phone number directly in the post… so call them up! Explain that you are looking to invest in real estate in their area and saw their post, and although you aren’t interested in renting it, you are interested in buying a property. Even if they don’t want to sell that particular property, there is a chance they will have something they want to sell OR know someone else who does. Worst case scenario, you build a relationship with a local investor! Maybe you’ll even gain a mentor out of the deal!
Craigslist truly is a no-brainer when you are on the hunt for a good deal. Not only is it free, it’s also where people go to buy or sell things. So why not take 5 minutes today and find a great deal on Craigslist?
How great would it be if you could sit at home while someone else was out there, pounding the pavement, looking to bring you a killer-good deal?
Well, that’s exactly what could happen if you get your deals from a wholesaler!
Wholesaling is the business of finding incredible real estate deals (usually through the methods I’ve already talked about), putting those deals under contract, and selling (or assigning) that contract to another investor for a slightly higher amount.
For example, the wholesaler might find a deal and put it under contract for $110,000 and sell that deal to you for $115,000, netting a $5,000 profit for him/herself and helping you get a great deal.
The key to working with wholesalers is this: find a good wholesaler! This is actually trickier than it sounds, as there are a LOT of wannabe wholesalers out there who claim to know what they are doing but really don’t. Wholesaling is one of the most difficult real estate “jobs” because you have to be great at almost every aspect of the transaction (marketing, analyzing, communication, sales, negotiation, etc.), but it is consistently taught by real estate “gurus” as a get-rich-quick way to build wealth with real estate. However, if you are able to connect with a great wholesaler, you truly can get hot deals delivered straight to your inbox.
To find wholesalers, I’d recommend:
- Call the numbers you see on those ugly “bandit signs” on the site of the road
- Go to every real estate club in your area
- Create a Marketplace posting on BiggerPockets (See #4 above.)
- Train your own wholesaler how to find you deals!
Finally, the last method to find great deals is what I call “passion,” and it’s hard to describe exactly, but here’s the gist: people want to help you achieve your goals! Once you let the world know what you want, other people will help you get it!
Let me tell you a quick story. When I was 24 years old, I had just finished reading Ken McElroy’s book The ABCs of Real Estate Investing and quickly fell in love with the concept of investing in apartment complexes. At church the next morning, I mentioned my newfound love of apartment investing to a nice older couple who told me that they actually had an apartment complex they were looking to sell!
Now… was that luck or was that something I did?
I think both. As the quote goes, “The harder I work, the luckier I get!” I didn’t ONLY tell this one couple about my goals — I told everyone I knew because I was so passionate about it! This is the concept of finding deals through passion. Let your goals and passions be heard, and amazing things can happen.
(P.S. To read the entire fascinating story of how I bought that 24-unit apartment complex, check out the brand new Kindle book from BiggerPockets, How We Bought a 24-Unit Apartment Complex for (Almost) No Money Down: A BiggerPockets QuickTip Book. It’s only $.99 at Amazon, and you can read it in under an hour!)
As real estate grows in popularity, you have two choices:
- Sit out and wait until the next crash or
- Do what needs to be done to find a deal.
I know which option I’ll be taking… do you?
Let me know what you think by leaving a comment below. Let me know what method you plan to take to get your next deal!
(P.S. And don’t forget to join me for this week’s webinar!)
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.