Tips when Driving for Dollars

Hey there, this is Chris Goff and in this tip of the week, I want to cover a few things you need to know when driving for dollars. Actually… who in the world came up with that saying, anyway? Dollars? I don’t want to just drive for dollars… somehow, the sound of it lessens the importance of actually getting out and physically driving the areas you want to invest in, and that is DEFINITELY not the case… driving neighborhoods is one of the best ways to find bargain properties and there’s simply no substitute for good, old-fashioned boots on the ground and eyes on the prize.

When you start driving neighborhoods, it’s important to start with the areas closest to where you live, or at least be familiar with them. You can expand out from there by researching your local newspaper, real estate agents, other investors, and real estate clubs. Once you start building relationships with other investors, it’s important to ask them where they want to buy properties, especially if you’re wholesaling.

First things first, purchase a map. Remember the old school folding maps that you used to buy at the local gas station? Grab one. Then, begin by drawing circles around the areas that you want to target. Once you have completed those areas, you can use a highlighter and fill in each circle with a different color. When you have driven all of the colored areas, do it again. In smaller markets, this may take a couple of weeks, whereas in bigger markets, it may take months. Why do this? To help ensure efficient coverage, it is important that you to drive the same neighborhoods twice a month, because people’s situations change every day. One day a property is occupied, and the next day it is vacant. Having a physical representation of the work you have done, and progress made is a great tool for tracking and maintaining your plan of execution.

When looking for wholesale deals, stick with the middle to lower priced markets. I call these ‘C’ and ‘D’ neighborhoods. A ‘C’ neighborhood is middle of the road and ‘D’ are lower income but not war zone neighborhoods. ‘B’ neighborhoods are a step up from ‘C’ and you’ll generally find these clustered around bigger chained restaurants and shopping centers. An ‘A’ neighborhood is the most expensive. ‘B’ and ‘A’ neighborhoods are generally great for lease options and seller financing, and while these higher priced markets can produce bigger profits per transaction, the lower income markets can produce more transactions. The middle to lower price markets are usually better overall, especially when starting out, because you find more opportunities for wholesaling here, attracting a larger pool of buyers - including investors looking to rehab properties.

A great tip when trying to determine the location of these different ranked neighborhoods is to utilize Zillow. Go to the map view of homes listed for sale. You won’t be targeting the actual homes that are for sale as leads but look for the neighborhoods with the highest concentration of mid to lower end pricing for the city or area. These are your ‘C’ and ‘D’ neighborhoods, and you’ll want to plan your driving within them.

Although you can work any strategy in any market, the probability of seeing signs of motivation from a vehicle are greater in a ‘C’ area. When driving around, look for houses that appear to be vacant. Vacant houses make great deals. For whatever reason it is vacant, you can count on the fact that the owner is losing money. Write down the address for each potential vacant property. You should write down all FSBO’s and for rent by owners, as well.

Now, here are some signs of a property that is vacant. Some of the obvious ones are broken windows - obviously when you see broken or boarded up windows, it’s probably a good sign the property is vacant. Look for properties that have really tall grass. I have actually seen properties where people do live in them and just don’t mow the lawn, but more often than not, these are distressed situations in one way or another, and have a greater potential to be good leads. Another sign to look for is whether or not the trash cans are out on trash day… A really good tip is to find out the trash schedule and plan your drive days around it. No cans at the curb or even against the house are a good indicator of vacancy. Overflowing mail, either at the doorstep or mailbox, or even no mailbox at all are tell-tale signs of a vacant property. Other good indicators of a vacant property are spotting homes that just don’t have any personal items around like a hose or a potted plant out in the front, no blinds or curtains in the windows, and when visible, locked electric meters are a pretty solid guarantee the home is unoccupied. In general, major signs of distress or neglect, even when the home is occupied, deserve to be noted and followed up on as a potential lead. Remember what I said earlier about situations changing daily. While these properties may not be vacant today, tomorrow could be another story.

There are several reasons why a property would sit vacant. The owner may live out of town and maybe they cannot attend to it, they may not have enough money to repair it, is tired of renting it, or maybe they are in between tenants. Maybe they inherited it and just don’t know or haven’t yet decided what to do with it.

Ultimately, your goal is to learn the market in the areas that you think you want to concentrate on. This means building positive relationships with people you encounter within the community, when possible. When driving, be sure to smile and make eye contact with those you pass on the street. If you can judge the person to be friendly and receptive to conversation, stop and inquire about nearby properties that you have identified as potential leads. Having your business sign displayed on the exterior of your vehicle and a stack of business cards on hand to pass out is always a good idea when looking to build these relationships. Not only are distressed and vacant homes an eyesore within a community, they also attract vandals and opportunistic thievery. There’s a lot to be learned from the neighbors, and I’ve found most are helpful and forthcoming with their knowledge about a property, especially when they understand that you have the potential to improve the quality of their neighborhood and increase property values.

I hope these tips have provided some valuable insight and I look forward to seeing you on the next tip of the week.