One of the toughest parts of real estate investing is actually finding properties—especially if you’re looking for properties in need of rehab. While MLS listings and foreclosures are an excellent source for below-market fix-and-flip opportunities, hunting down deals with great return on investment (ROI) often involves putting feet to pavement. Real estate investors often call this “driving for dollars”—a practice that involves visiting targeted subdivisions with the intent of locating distressed or abandoned properties.
This method can be utilized by real estate investors, wholesalers, and bird dogs alike. It’s especially useful in a hot real estate market like today’s, when listed properties go under contract in hours—with dozens of offers. Driving for dollar helps you find distressed properties off the market, so you can provide the first (and only!) offer.
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Define your market area
Before putting foot to pedal, know what specific neighborhood you want to survey. This depends on your target market area, exit strategy, and multiple other factors. You might want to consider things like:
- Tax assessed value
- House age
- ZIP codes
- Crime rates.
Once you have your target area defined, make a list of subdivisions within that area you would like to drive. You can use Google Maps to create custom maps of your desired area. (Learn how to make those maps here.)
In my example below, I am targeting subdivisions within a certain tax assessed value.
Gather your supplies
Don’t go out barehanded. Before leaving, make sure you have a camera and a pen or pencil. You’ll also want to create an Excel sheet or gridded worksheet with space for the following:
- Property addresses
- Notes—like “boarded-up windows” or “code enforcement on window”
- Photo identification information (so you know which photos map to which properties).
Analyze the street scene
When driving for dollars, you must be vigilant and observant at all times. In general, the best time to drive is from 10 a.m. to early afternoon during weekdays. At this time, people are typically at work and it makes it easier to take your time driving through the subdivision.
This process becomes easier if you are driving for dollars during Halloween, Christmas, or on a trash pickup day.
Why? When Christmas or Halloween is approaching, a good portion of the neighborhood will have decorations of some sort on display. Likewise, during trash pickup day, garbage canisters will be out on the streets.
Vacant properties stand out like a sore thumb, as they won’t have decorations during the holidays or a trash can out front on pickup day.
Look for red flags
You’re looking for a “motivated seller.” Generally, that means you’re hunting down owners who consider their property a burden—and are eager to unload. That might mean that they can’t maintain the property. It also could mean they have tenants who treat the house disrespectfully. When driving for dollars, there are several red flags to note. For example:
- Tall grass
- Boarded up or broken windows
- Mailboxes filled to the brim
- Code enforcement taped to the door
- Piled up newspapers
- Overgrown vegetation
- Deferred maintenance.
Record and research
As you drive the neighborhoods and locate distressed properties, record the address and any additional notes in your printed worksheet. Take a picture or two of the property, as well. Try and take the “best” worst picture of the property as possible—this will come in handy later.
After you finish your drive, return home and research the specific properties you located on your county assessor’s website. Now, review the list of distressed properties you jotted down in your printout. You’ll want to filter out properties that don’t match your criteria—for instance, if you’re looking for high-equity properties, look for deed with dates at least 15 years back. Then, make sure the current owner isn’t a bank. If it is, you’ll likely want to discard the property.
Once you have selected all the properties that fit your criteria, create your final marketing list.
What to look for at the assessor’s office
While the format and presentation will vary between counties and states, here’s what you should find:
- Reference numbers, potentially including account numbers and georeference numbers
- Property location
- Owner information, including name and address
- Prior owner details
- Legal description
- Tax information.
When researching, some investors like to delineate between absentee owners—landlords or people who own inherited properties—and owner-occupied homes, aka personal residences. It is very simple to check which category a property falls under when researching. If the assessor lists the same address for the owner and property, it is owner-occupied home. If the owner address and property address don’t match, it indicates an absentee owner. That means the homes are either unoccupied or used as rentals.
Personally, I mail absentee owners and owner-occupied homes alike.
Market to your leads
Once you have finalized your list, choose your marketing approach—typically, I prefer direct mail, like a yellow letter or postcard. I find custom, invitation-style envelopes and a letter template receive the best response rate.
Select one camera shot from in the field. You will use two versions of this picture. One copy will be inserted into the body of the letter; the other will be re-sized as a thumbnail and printed onto the envelope in the top-left corner. This dramatically improves my response rate—before they even open the letter, they clearly see an image of their house on the envelope. I recommend hand-writing the address, too.
Make certain to use the owner address for your mailing address, and continue to mail leads every two to three months. Remember, the key to success is consistency and persistence. You will yield the best results with repeat mailings.
What if you can’t find the owner?
The more difficult it is to find the owner, the less competition there will be—and that means more opportunity for you. However, if you drive for dollars long enough you will stumble upon circumstances where the owner’s address is unavailable.
How can you market to this lead if you don’t have their information?
Look out for red flags that indicate additional research will be required to find the owner’s address. Some of the more common situations are shown below.
- Vacant property listed as owner-occupied. You drove by a property that was clearly vacant; however, your assessor says the property is still owner-occupied. Typically, this means the assessor’s records are out-of-date—updates can take three to four months, depending on the jurisdiction.
- Mail is returned. Returned yellow letters or postcards that were returned due to failed delivery indicate the owner has moved.
- No data: Sometimes, the assessor’s office shows no data in the owner’s address section.
Not all is lost. These red-flag owners can often still be located.
Use deeds of trust and public records
To find a “missing” owner, pull data from public records and use it to mine Google for owner information. When your assessor lacks sufficient information, pull the Deed of Trust recorded in your county’s public records to identify the current owner.
To find your county’s public records, simply Google search “[your county name]public records.”
The deed of trust will display all parties involved within the transaction—from grantors to individuals with power of attorney. This data is invaluable when attempting to locate the owner of the property.
Mine Google for data
Once you have searched public records, start plugging the owner—and any grantors recorded in the Deed of Trust—into Google. For starters, try searching their full name. If that yields few results, try combining their name with local area codes. This might reveal:
- Landlines or cell phone numbers of the owner or grantors
- Current addresses
- Websites they own
- Company PDF contact sheets
- Social media accounts
If you are unable to locate the owner but able to track down one of the grantors, you can often get the contact information you need by reaching out to them. Sometimes you will find PDFs or About Us profile sections on company pages, and you can use this for updated contact information. If you find a URL they own, you can do a “whois” on the domain and retrieve information that way, as well.
Leave a note on the property
Tape a note to the property’s front door and/or garage in case the owner returns to their abandoned property. You can bet if they find a note taped to their garage or front door, they will read it.
You never know when the owner may return to collect mail or check on the house. You can write the notes manually if you would like, or you can print out a stack of them using a handwritten font. Either way, bring a bunch with you into the field—and make sure to include your phone number, email, and website.
Talk to the neighbors
Oftentimes, neighbors are willing to divulge information on the abandoned property owner. After all, no one wants a vacant property sitting next door and dragging their property values down with it.
If you see a neighbor outside, strike up a brief conversation, hand them a business card, and many times they will provide helpful information.
Hire a skip trace service
If all of the above methods fail, consider utilizing a skip trace service. However, if you take some time to research using the methods discussed earlier, you should not need to use a skip trace nine times out of 10.
Pro tip: Recruit an army of mailmen bird dogs
When driving for dollars, keep a look out for mailmen or delivery people. Approach them on their route, briefly introduce yourself and your business, and hand them a card that explains what you are looking for. Tell them if they find a house that fits your criteria and you are able to close on it, they will collect a handsome referral fee.
Mailmen know what’s going on in a neighborhood better than you do, since they drive or walk specific areas every day. Get to know a few of them and you will be richly rewarded.
Hopefully with a little bit of legwork and persistence, you will discover some lucrative deals when driving for dollars. Take action, and you will reap results. If you have any questions, please leave them below and I will do my best to help.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.