I think the following scenario may be all too familiar to many of us. You search and dig on the MLS, and you find what could be a potential deal. After a bit of due diligence and analysis, you make your offer. But you get outbid time and time again.
The above scenario is not just something that newbies face; it happens to many of us more experienced investors as well. There are many reasons why this happens. Retail buyers are impossible to compete with, for one. There are also lots of people out there who will take smaller profit margins or can do the job for less than what we can. Many also simply do not know what they are doing and make a bad deal. Whatever the reason, the main problem with the MLS is that there is simply way too much competition for a property. In my experience, most of the time a property hits the MLS, the ability to make a deal is often gone.
So that raises the $64,000 question: How do you find properties before they hit the MLS? With marketing, that’s how.
Don’t get me wrong; I look at the MLS every day. As an investor, I have to. Not only do I need to look for potential deals, but I also need to see what the market is doing. Plus, examining properties on the MLS provides valuable experience. How? If I spot a potential deal on the MLS, I will make a note of it and likely go look at the property. This does two things: It shows me comparables on the market and gives me experience looking at properties, estimating repairs, analyzing deals, and making offers. Every once in a while, I will get a hit and get one under contract, but most of the time I get overbid.
Ok, so getting back to marketing. How do you find the deal before everyone else does? Here is what has worked for me.
8 Tips to Find Great Deals When You Keep Getting Outbid on the MLS
Drive for Dollars
Simply drive around your target areas and look for properties that appear, for lack of a better word, unloved. Perhaps it is uncut grass, rotten wood, falling gutters, branches on the roof, papers in the yard or just a generally sad appearance that makes this property stand out from other nearby properties. Makes notes for later research on ownership of these properties. You may find out-of-state owners, tired landlords, or properties in probate. If you drive an area often enough you can even watch properties change over time. I also suggest that you…
Buy a List and Do Some Research
This list could be absentee owners, out-of-state owners, or recent probate and eviction cases. Purchasing lists has been discussed time and time again here on the BiggerPockets blog, so I do not want to go through it again, but these lists work. Experiment and find a niche list that works for you.
So, I have some potential properties that I found by driving around or from a list I purchased. Now what?
Send Out Direct Mail
I hand write a short letter on a legal pad and send it off. It does not have to say much. Just be short and sweet. “I noticed your property and would be interested in buying it.” Works for me, but you should try different things and see what works for you. Again, experiment. Whatever you do, know that direct mail can get some good results if you target it properly. Don’t expect hundreds of responses from your mailings (if you do get that, please share how). But all you need is one.
Here are a couple of other tips on finding the deal.
Get Your Name Out There
Let folks know what you do and what you are looking for. Go to local real estate club meetings, as well as other meetups and events. Hand out business cards. Tell friends and family what you do. Let everyone know you will pay a referral fee. You never know where a deal will come from. I recently picked up a nice property from a colleague in a running group simply because he knew me and knew what I did.
Keep Your Eyes Open
Deals can come from places you are not expecting and when you are not even looking for them. Keep yourself tuned in at all times. You may hear or see something that could turn into a potential deal. I once found a good deal because the mail mis-delivered a niche newspaper I would otherwise never have seen. There was an ad on the back page for a house; I called them number and got the deal. You just never know.
Keep Working It
Many newbies (and some more experienced folks) expect finding deals to be easy. It takes work. Very rarely will someone just hand you the keys because you ask. You have to work at it. You have to follow up and keep trying. Sometimes it can take quite a while to work the deal. People may not be ready when your first letter hits, but maybe they might be on the third try.
Then, when you find a seller…
Be Ready to Act Quickly
Be ready to move quickly if a potential deal comes along. Analyze the property and make an offer quickly. Have your financing ready to go.
Make It Easy
Don’t over-complicate things. Use a simple purchase and sale contract and do all you can to make the seller’s side as smooth as silk. Hold their hand through the process if you have to.
Yes, you can find deals on the MLS, but remember, you are competing with a lot of people who can and will outbid you. If you are constantly getting outbid on the MLS, use the ideas discussed above to get sellers talking directly to you instead of the whole world. It takes a bit of effort, but the results can be well worth it.
What strategies do YOU use when the obvious deals aren’t panning out?
Leave your best tips below!