Lately, i've been doing a lot of property research, digging into the sale history of properties and such. I'm constantly running into properties that people have bought for dirt cheap. 

This led me to looking into the property i'm currently renting. 

My girlfriend, her friend and myself pay a total of $1,200/month to live in this small 2 bedroom, 1 bath house.

Guess what the owner paid for it?

$11,000.

That's a 130% ROI per year... As a new investor who's constantly checking out properties, and struggling to find deals that I can purchase for 70% of ARV, with a 10-12% ROI per year, that absolutely blows my mind.

How does one find properties that are so cheap, yet yield such an absurd amount of return on investment?

I found a house 2 months ago for 12k. The owner lived next to another house I owned. So word of mouth.

I have another potential deal coming. This lady has known me for 5 plus years asked me I wanted to buy her house when she moves in with her daughter. I own a house in this neighborhood and have always tried to make friends with people that live around houses I own. So this would be a second off market deal that no one else knows about but me.

Tell people you are a real estate investor, meet your neighbors where you own property. One day you will have a deal fall in your lap that you weren't expecting.

For a while after the mortgage meltdown, foreclosed homes were dang near free. Also, the condition of the property at the time of the sale may have been awful and warranted a very low price. Wholesalers who spend money and time on marketing/advertising will find desperate sellers. Some of the transfers also may not be legit, such as someone moving a home into an LLC, parents passing down property to children, quitclaim deeds during a divorce, etc.

Right now in my super competitive market, just knowing people and having a reputation as someone who will close quickly, with cash, as-is, (and outbidding wholesalers) and also happy to casually talk to just about any random person about real estate is one way that has worked for me to find deals. 

Connect with a good wholesaler who knows and understands your numbers.

Just keep in mind the other potential variables ( slow/no appreciation, deferred maintenance, high crime, etc)

Depends on the area but you need to figure out how to find the sellers/homeowners directly. Like your example, you can easily reach out to the owner and see if they would sell the property or if they have any others they'd like to sell. 

Originally posted by @Corey Rippeto :

Lately, i've been doing a lot of property research, digging into the sale history of properties and such. I'm constantly running into properties that people have bought for dirt cheap. 

This led me to looking into the property i'm currently renting. 

My girlfriend, her friend and myself pay a total of $1,200/month to live in this small 2 bedroom, 1 bath house.

Guess what the owner paid for it?

$11,000.

That's a 130% ROI per year... As a new investor who's constantly checking out properties, and struggling to find deals that I can purchase for 70% of ARV, with a 10-12% ROI per year, that absolutely blows my mind.

How does one find properties that are so cheap, yet yield such an absurd amount of return on investment?

Hang on there, Corey. What condition was the house in originally, how much did the rehab cost, how long did it take? What are taxes, maintenance, and CapEx on the property? How many years did the owner invest in learning this business, mastering the skills and building the relationships needed to make deals like this work? Do you pay utilities, sewer fees, trash removal costs or are these things included in your rent?

Anybody with a sixth-grade education can multiply $1200 by 12 and get to $14,400. Making this sort of thing happen take a whole different skillset.

A wholesaler is your best bet to find the best deals unless you are very networked in the community.  I was skeptical too.  Someone bought a house for 60k that needed a lot of repairs.  Sold it for 200k.  Profit was 50k. Deals are out there.

I’m closing on a 3 bed house today .i Paid 5,500 for it cash . It’s actually really nice and totally livable ! I could rent it after the closing if I wanted to ! In fact the Owners have made it really modern inside and for the last 33 years got it up to par with nice finishes newer carpeting comes with upgraded systems ,with a carport a fenced in yard and newer roof . They are moving out this weekend .

I picked up all my properties very cheap ( I’ve bought nice houses for 10k or less) and I can tell you right off the bat that You are not going to be able to do it like everybody else if you want a smokin hot bargain you must go and do what others won’t and get your hands dirty !

The common thinking in this game is call a professional realtor up ask them to find you a nice property in a good area . They search the mls find you a overpriced house that’s listed at retail price . You then Call up your banker and go in to kiss their A$$ giving them your first born and all the money you piled up over the last half decade . Then you make offers and it gets accepted . Inspections headaches counter offers contingency plans etc later the. Attorneys get involved and by the time you’ve paid out to everybody and their brother you are dead broke!

I’m still fairly green but I could type for hours on how to find these crazy cheap properties but instead I’ll just leave a few thoughts . My secret is DO NOT hunt for cheap properties .... that’s right don’t do that . You’ll waste a bunch of time and effort going in circles banging your head off the wall .Instead hunt for ——motivated sellers ———! Motivated sellers are the master key to getting cheap houses . You market to them !

Lots of marketing and being very aware of your market.

Some people get lucky and stumble across a deal. Most good deals are purchased by people that do two things:

1. Study the market; and

2. Let everyone know they are in the market.

If you know the market well, you'll recognize a good deal when it comes along and pounce on it quickly. And if you are telling everyone and their brother that you are in the market for deals, they will tell you when they come across one. One of my favorite purchases was a hoarder house that was off-market and another REALTOR brought it to me because she knew I was looking for a small investment, that I could close quickly, and that I could be discreet, which was important to the hoarder family that didn't want people to know how they had been living.

I will jump in with the rest. It's belly to belly and talking to people. Nobody posts a 12K house online or puts an ad out for it. When you talk to people they all know a "Brothers neighbor" or "Friends dad" who has an albatross of a house around their neck. They don't have the motivation to move it and don't have the motivation to get it sale ready. Once you are standing there with an offer in hand and they think "$12,000 if I sign here and I can quit worrying about this thing" it's a different ball game. if they would list it they would want 4 or 5 times that amount. I always have as much due diligence as possible done so it's just a "done deal". 

With those houses you usually assume most if not all of the risk. The only stopper is clear title in most cases. Those offers usually don't include "Home inspection periods" and "Contractor quotes". You are usually getting it for land value and if you have to tear down it's a risk you take (Then sell the lot to a neighbor only losing a few grand). You want those deals locked up on first meeting as well. If you make the offer and then say "If it looks good and I can get inside with my contractor Joe we can get this done", it gives them time to go home and think and then they worry you are changing your offer after Joe goes in. They tell their brother and he says "heck I'll give you 12 grand for it, will you take payments?". 

So be ready to do it now. If they want to wait, that's fine, but they knew I was standing there with a 12K earnest money check in hand.... Not the promise of maybe possibly buying it if I like it. 

Good Luck!

@Corey Rippeto Motivation. Motivation is the key to the actual property. Do your due diligence and get on some wholesaler lists etc however don't hope for much there, the good ones are far and few. I can speak from personal experience... It's time in the industry and/or realizing what your good at and not good at and hiring the best to do the latter. I am a data freak and a rapport builder so that is what I do, and how our Agents are trained. I am not a lender or contractor so I don't pretend to be. In a world filled with "investors", you need to be different, understand how to locate potential motivated Sellers and then more importantly how to help them with their unique situation. If you help them they will only want to sell to you because they trust you. It's a full time job, trust me.

Dennis M "———! Motivated sellers are the master key to getting cheap houses . You market to them"

This exactly! At some point when I was a teenager I was working with a guy who had a few rental properties. Back then I thought he was about the richest person you could be.

He took me seriously and spoke to me like an adult. The one pice of advice he gave me over and over and over was "Never buy distressed properties, buy properties from distressed owners" Best advice I have ever gotten.

@Corey Rippeto maybe paid 11k but what about repairs, or where there 50k in back taxes, etc. ?  ALso how do/did I find deals that net me 30% or more, per year, its all about your network . 10-14% net caps now are easy, ( mine are much higher )  get them daily . 

Good Luck