7 Productive Actions to Take While Searching For Your Next Property

30

A recent conversation with a new investor got me thinking about starting out. It has been a long time since I was a newbie, and while things have changed a whole lot, some things will always be the same. If you aren’t going to do the rehab work yourself, you will need to find a contractor. This is only slightly easier than finding Jimmy Hoffa. Unless you have a pile of cash sitting around, you will need to secure funding.

Finding a property can take a long time in this market. But there are lots of things that you can work on while you’re looking for your next deal.

Download Your FREE copy of ‘How to Rent Your House!’

Renting your house is a great way to enter the world of real estate investing, but most first-timers (understandably) have a lot of questions. Fortunately, the experts at BiggerPockets have put together a complimentary guide on ‘How to Rent Your House’. All the skills, tools, and confidence you need to successfully rent your house are just a mouse-click away.

Click Here For Your Free Guide to Renting Your House

7 Productive Actions to Take While Searching For Your Next Property

1. Find an investor-friendly agent.

A residential real estate agent is typically working with retail buyers. They may not understand your focus or your criteria. Finding an investor-friendly agent can help you build your business because they may have a network of clients who are investors and are always looking for the next deal. An investor-friendly agent will build a reputation of being able to sell properties that others can’t and may even be able to help connect you to another client for things like joint ventures. At the very least, an investor-friendly agent won’t balk at writing up lower offers and making offers on numerous properties.

Remember, you can have more than one agent bringing you deals. If your agent doesn’t understand investors, find one who does.

2. Drive for dollars.

When you are first starting out, having a small, specific area to target can help you get a grasp of what is going on in that market. Rather than learning all the neighborhoods of your town/county/state, you can focus on one area and really learn the ins and outs. One of the best ways to get started is to “drive for dollars,” or drive around and look at the houses in your target area. Even better than driving is getting out of your car and walking. Yes, it takes longer to walk a neighborhood, but you get a more in-depth understanding of the properties and their location. Talking to the neighbors can yield an enormous amount of information.

Look for things like tall weeds or grass, weathered door hangers, and stickers on the door informing of code violations or utilities that have been turned off. Check out the status of the roof, siding and window panes. Old windows, metal siding and curling shingles can indicate a lack of interest in the property.

drive-for-dollars

Related: Driving for Dollars Bible: Finding Distressed Properties and Marketing

3. Write an amazing yellow letter.

Driving for dollars is a technique you can use to identify properties that may fit your criteria. But what do you do once you find a property you like? You send them a letter, telling them you want to buy their house. Do you have an amazing letter that conveys your interest?

I have seen recommendations all over the Forums for yellow letters. Some people take an offensive approach: “Your property is ugly and outdated. Here is a list of all the things wrong with it, and you should sell it to me at 60% of its value.” I don’t recommend this approach or use it myself. I have a disconnect to real estate — I have never lived in one home for more than 5 years in my entire life. A house is just a place to sleep. But there are people who have lived in one house their entire lives, and it is hard for them to sell. They see emotional value rather than monetary value. By telling them their house is gross, you are offending them from the outset, and you will have to fight an uphill battle to buy their home.

I tailor my yellow letter to each individual house. I mention what I like about the property and spell out how I can save them real estate agent commission, even though I am a licensed agent. I offer generous move-out terms and put the ball in their court.

The area I target has a lot of older homeowners, so I make sure I give every conceivable way to contact me. Phone, email and street address. I have had phone call responses, and one couple who lives about 12 houses down from me even walked over to my house to talk to me about their home. It turns out they built the house, have lived in it since 1968 and raised all their kids in that house. How do you think they would have reacted to a letter telling them how ugly and outdated it is? They don’t really have plans to sell right now, but they are keeping my letter for when they do.

4. Build up your credit score.

Like I said earlier, unless you have a giant pile of cash sitting around, you will probably need a loan. Lenders are happy to give you a loan, provided they feel you will pay it back on time. Your credit score is built on your past financial experiences, and the higher your score, the more confident a lender is that you will give them their money back.

Related: How to Improve Your Credit Score

When was the last time you looked at your credit score? You are entitled to one free copy of your credit report every calendar year from each of the three credit reporting agencies. They are required by law to give this to you and have set up a website to comply with this law. You can choose to get the reports from all three agencies at once, or space them out every 4 months to continually monitor your credit. Either way, it is a good idea to comb through the report, making sure all information is correct.

If there is any incorrect information, dispute it immediately. Stay on top of the process to ensure than the information is removed from your report.

Look at your open lines of credit. Do you have a good mix of credit lines, like mortgage, car loans and credit cards? If you have a significant amount of credit card lines open, you may appear like a higher risk. Do you have cards that you don’t use? Close them out. One exception is to keep the card you have had the longest, as it establishes the length of credit history. A longer history makes you look better, as long as that history is positive.

relationship-lenders

5. Establish relationships with lenders.

Most mortgages are sold as investment vehicles called mortgage-backed securities. Every mortgage that is sold has to comply with Fannie Mae/Freddie Mac regulations. But not all mortgages are sold. Sometimes a smaller lender will keep a loan in-house, known as a portfolio loan. Portfolio loans have different criteria — pretty much anything the lender wants. Having a relationship with a local lender who offers portfolio loans can be a huge asset to your business, but that relationship doesn’t happen overnight. Start by opening a simple account with the lender: checking, savings or both. Sign up for every free program they offer, like bill-pay and direct deposit.

Not everyone invests in real estate through a business entity like an LLC, but if you have one or are considering creating one, get a business account at your local bank as well. Talk to your business banker, and let them know what you do and what you are looking for.

6. Find a contractor/property manager.

If you are purchasing properties that need to be renovated, start looking now for a good contractor. Tell absolutely everyone you come across what you are looking for. There are good contractors out there who do good work, don’t cut corners and deliver what they say they will deliver. They are just very difficult to find. Start looking now, and you may actually be able to find one before you need them. The same thing goes for a good property manager. They are only slightly easier to find than a good contractor.

7. Join a local REI group or meet up.

Nothing can replace the personal connections you make at a face-to-face meeting. Find a local real estate investment group, and attend a meeting or two. Network with other investors in your area. They may have recommendations for you regarding agents, contractors, title companies, etc.

There are many steps that are transaction-specific and cannot be done until you are under contract on a property. But there are lots of things you can do while you are looking for your next deal.

Are you in between deals? What things are you doing to build your business during your downtime?

Leave me a comment, and let’s discuss.

About Author

Mindy Jensen

Mindy has flipped numerous homes in the past 10 years, one at a time and doing much of the work with her husband. She lives in Longmont, CO, and is always looking for an ugly duckling to turn into a swan.

30 Comments

  1. Great Article, as a real estate investment supplier, I have found the most important part is the property management company that handles the property. If they are able to find a quality tenant then everyone succeeds in the property investment!

  2. Donna Paget

    Thanks, Mindy!
    Something else to think about is visiting or joining a local BNI (Business Networking International). Most groups are 20-50 members. The group consists of one of each business. The cool thing about BNI groups is that you get really knowledgeable about each of the business owners and many of the businesses are local trades (plumbers, electricians, realtors, roofers, tree guys, general contractors, etc.) There are some rules that are annoying, but the connections and reliability of the relationships can be invaluable.

    I hear on the podcasts all the time that Brandon and Josh can’t find reliable contractors. BNI members commit for a year, so you really get to know your fellow members. You can even visit other groups to meet other small business owners in the trades you may need.
    When I visit my daughters in other cities, I try to attend the BNI meeting so I can gather business cards and make connections for when I need help with projects in those cities.
    I have been working with my general contractor I met in BNI on my present flip and I’m super satisfied. I’ve used the pest control guy, the carpet cleaner, the house cleaner, the painter and the landscaper! All from one location!

  3. Marcus Thie

    Glad you shared because i know there are a lot of folks like myself on here who are waiting to do there first deal and this gives them actionable steps to move closer in the meantime. I have saved it to my reading list!

  4. NormaJean Cupp

    Great article! No down time here- there is always something to read/learn/do. Thanks for sharing the list, Minday.
    I am also interested in learning more about the BNI’s that Donna mentioned. Sounds like a great place for leads. Thanks, Donna!

  5. dena price

    HELLO!!
    I am working on paying of all debts and trying to create a great looking credit portfolio.
    My question is this: Does it hurt you to close down some of your unused credit cards (as sugested above)?

    I ask this, becaue somewhere I remember hearing that closing down your own credit cards or revolving credit accounts can hit your credit in an adverse action.

    I am wanting to close all the ones (that are not in use or have great length of history and high LOC) that charge annual fees and we hae not used them in years because they neer increase your LOC and the APR is crazy high.

    Any help in this direction would be most appreciated…

    Happy hunting,finding, buying and selling!!!!
    Dena

    • Mindy Jensen

      Hi Dena.
      All the research I have done points to reducing your credit cards has a positive impact on your credit score. If you have cards with annual fees that you don’t use, close them out. I would caution that you keep the one that has been opened the longest, but if it has an annual fee, that is something to consider vs. one that doesn’t have a fee and has been open a similar amount of time.
      If the card in question doesn’t have a balance on it, the APR doesn’t really matter. There are two schools of thought on paying off cards – the debt snowball method and the highest interest first method.
      Debt Snowball method is Dave Ramsey’s way to pay off debt. If you have many debts, it can seem overwhelming to keep paying and never really see any difference. He suggests you make minimum payments to all debts, except the one that has the smallest balance. You aggressively pay this down, then once it is gone, you take all the money you were putting toward that debt, and put it toward paying off the next lowest balance. This way, you are seeing progress and it can be very motivating to someone who has a large amount of debt.
      The highest interest first method is to take all debt, compare interest rates and see which one has the highest rate, and pay that one off in the similar fashion as above. Once that highest interest rate is paid off, then you tackle the next highest rate, and so on and so on.
      While you do want a healthy balance of debt types, secured debt like a mortgage looks better on your credit score – provided you are current on your payments – than unsecured debt like credit cards.

      • dena price

        Thank you Mindy!
        Since I posted I have been doing some research too and have found about the same thing. I was just not sure an kindness.

        We have take our debt and moved it all over to 0% cards with minimal fee for transfer that was definitely less than the interest that was going to start being charged next month. So I was able to do that and then I found out something very interesting today.. In looking to close the Capital One cards that have annual fees, they never increase balance and interest rate is not so good… I found that if you have more than one card with them you can close the one not being used, TRANSFER THE LOC for that card to the one you are keeping open (and all debt, etc… would transfer but we had none on any of these) and keep the history.
        I was really happy about that as then the Credit availability did not drop in raio to what is being used and effect the score that way.

        So even tho we opened new transfer cards, they all have 0% interest for 21 months and we just swaped out the debt to those cards from the others. We will take a bit of hit for the new accounts and inquires…. but we are in process of clean up and sometimes the achievement in the long run is worth a few points.

        I also used a credit tracker to see what would happen with all the above movement and it only dropped 4 points. So not bad. Now we will see if that actually hold true! lol!
        Thank you for your input and time in responding!

        dena

  6. William Allen

    Absolutely close out the cards you don’t use that have an annual fee. It shouldn’t have much affect if any on your score.
    Good article, I enjoyed it! The only other thing I would be doing is to continue looking for that next deal.

  7. dena price

    @ William – Thank you so much! I appreciate it.

    I agree… while I am doing all of this and learning with podcasts, etc…. I am looking for deals too… and streamlinging my ‘process’ of finding which type of deals in 2 states…. Somedays I think my head is going to explode! lol! Thanks again!

    @ Mindy: This was a very helpful article and came at a great time for me! THANK YOU!

  8. Good points to keep in mind before searching for properties. From my point of view, and from an investment point of view, investor-friendly agents can make the entire process easier as well as open doors to new investment opportunities.

    • Mindy Jensen

      Thanks for reading, Andrew.
      Before I was an agent, I would ask agents if they had investing experience or experience working with investors. I got some pretty funny looks.
      I paid cash for a house when I was 30 years old. It had been on the market for a long time, and I went directly to the listing agent to write up the offer. (Hit the mark on being embarrassed by the offer so it was low enough…)
      After closing, I told the same agent that I was an investor, and did she know of any other houses like this? Her response? “Well, I can sign you up so you automatically get listings when they appear on the MLS.” I was thinking “well, don’t hurt yourself trying to help me.”

  9. mike kelley

    Here is a tip that has worked well when vetting a contractor.

    Local fire station is a great place to start.

    I am a local fire fighter who invests in Real Estate. I understand most of the moving parts to the rehab but to better manage my time I look to outsource when I can. From my experience, I work with all types of contractors. Heating/Air, Plumber, Electrician and so on. These guys are ethical and trust-worthy plus they can sometimes charge slighty less than retail because their job skill is not the primary source of employment.

    Hope this helps to push some work to my fellow firefighter. Try it out and see…

    Thank you

    • Justin Ellis

      Mike, it’s so true! One of my best friends is a fire fighter and when I need something done the FIRST place I check is with him. He’s always go someone that he can set me up with that does whatever I’m looking for on the side at a great rate, with integrity and the work is always great. I guess I never thought of it as a place to LOOK for contractors because I’ve always had this connection but what a great idea! Thanks for sharing

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here

css.php