When I first started in real estate back in 2005, the common wisdom was there were\u00a0no deals to be found worth buying on the MLS. This was partially because I started in Eugene, Oregon, and the coasts are particularly expensive. Indeed, buy and hold is harder in high-priced cities, and it usually is harder to find any sort of good deals on the MLS in such places. It was also during the middle of a boom, which made it all the more difficult.<\/p>\n
However, when I moved to Kansas City just after the crash, the MLS was a gold mine.<\/p>\n
Cash flow markets in the Midwest and South present a lot more options than the more expensive markets. Although that doesn\u2019t mean it\u2019s impossible in higher-priced\u00a0areas, it just requires more work to sort out the diamonds from the coal.<\/p>\n
The first step is to decide whether to become an agent or not. It does take some time and money to become an agent, and there are a few continuing costs and hassles. But being an agent will 1) allow you access to the MLS and 2) save you\u00a0half of the commission on purchases. I would highly recommend either finding a great investment-minded real estate agent or becoming one yourself.<\/p>\n
The key with buying investment properties on the\u00a0MLS is speed and volume.\u00a0For this reason, you must either have access to the MLS or work closely with an agent. If you do not have access, your agent should set you up to automatically be sent all the new listings in your target market as they are listed.<\/p>\n
One important note for\u00a0wholesalers and flippers planning on selling\u00a0without doing a rehab: You need to be\u00a0aware of any deed restrictions or earnest money problems that may exist. For example, Fannie Mae and Freddie Mac require 10 percent down for cash purchases. This puts you at a lot of risk because you are not going to get your earnest money back if you back out after the inspection period.\u00a0Furthermore, Fannie and Freddie\u00a0also have a deed restriction that\u00a0means you can only sell or finance a property\u00a0for 20 percent more than you bought it for during\u00a0the first 90 days.<\/p>\n
The early bird gets the worm — and the early bidder gets the property. It is not uncommon for properties to be mis-listed, sometimes ridiculously\u00a0mis-listed. This is especially true for REOs from\u00a0HUD, Fannie Mae, Freddie Mac and occasionally\u00a0some of the big banks.<\/p>\n
HUD, Fannie Mae and Freddie Mac unfortunately have investor restrictions and only allow owner occupants to offer for the first 20 to 30 days. Still, you want to make offers on any mis-listed property as soon as it comes on or is available to investors. I recently heard a podcast where the person being interviewed said the last three great deals he had bought were on the MLS and came up near the end of the day on Friday. Everyone else apparently thought they would just look at the property on Monday, but he made sure to get the offer in that day.<\/p>\n
Regardless of how quick you are, unfortunately these properties will often get multiple offers and go \u201chighest and best.\u201d It’s just part of the business, so be prepared to deal with it.<\/p>\n
One time, we went $24,000 over asking and got a property that had\u00a0at least $40,000 of equity in it. Another time, we went $33,000 over asking on a duplex and missed it. It was listed for $32,000, we offered $65,000 and it sold\u00a0for $93,000!\u00a0And you know what? It was still a great deal at $93,000. That’s how badly some properties are mis-listed.<\/p>\n