“It’s not who you know. It’s who knows you.”
Your job is to do deals, so you should constantly be looking for them. On market properties (actively listed for sale on the MLS) might have more competition, but they’re also ready to be closed, so they’re a great source for investors.
The key is to make sure you’ve got an effective system to find and close on those properties that are going to make you money, including using tips and tricks that are going to help you along the way.
Let’s start with four quick points for success when you’re looking for on market deals.
#1 GOOD DEALS GO FAST
These deals aren’t your private list of opportunities; they’re a public collection of properties for sale. Lots of people are seeing these properties. Some of them, like you, will be getting emails when these deals hit the MLS (we’ll talk more about that later).
That means you need to be keeping tabs on the MLS. You (or someone on your team) should be checking the MLS once or twice a day. And keep in mind that properties go fast; even if you see a gem of a property right away and act, there’s no guarantee you’re going to close the deal.
And that brings us to tip #2.
#2 DON’T FALL IN LOVE WITH ANY ONE HOUSE
One deal isn’t going to make your entire career. Even if it’s a honey of a deal, don’t ever drop everything to focus on that one deal.
That means even if you do start negotiating on that amazing deal, you should still be looking around for other deals. Don’t stop.
And even if you close on the deal and start rehabbing, you should still be looking. If you’re only able to do one rehab at a time, you can look for wholesale deals.
#3 MAKE A LOT OF OFFERS
I often make 30–35 offers before I get one accepted. Some of my students make twice that number of offers. So don’t be discouraged, and don’t stop making offers.
This is a numbers game. You increase your odds by making as many offers as possible. Be aggressive and persistent.
But that doesn’t mean you should bid on just anything or that you should be willing to pay more than you should just to close a deal. Success will come if you keep making offers that are right for you and pass on opportunities that aren’t going to make you money.
#4 DO YOUR OWN DUE DILIGENCE
My motto is “trust but verify.” This is your business. So if a realtor gives you numbers, make sure you know how they were calculated. Make sure you know your markets. Be familiar with your neighborhoods and schools.
You’re ultimately responsible for the success of your business, so stay in the driver’s seat, even when you’re relying on others to keep your business efficient.
Next, let’s talk about how you know what’s going to be a good deal for you: you need a CMA and an automated offer formula.
What Makes a Good CMA?
First, a definition. Current Market Analysis (CMA): a report done by a real estate agent that tells you what the property is worth.
Your agent should be using criteria you both agree on to figure out a CMA:
- Find comps within ½ mile of subject property
- Not across major roads, in a different school district, etc.
- Within one bed, one bath of the subject property
- Comps sold within 3–6 months
- Same style home (ranch, condo)
- Within 20% square footage
If there are no comps within 6 months, what’s going on with the area? You shouldn’t automatically rule these properties out, but you do need to know what’s going on. Ask how quickly other properties in the neighborhood have sold. Avoid unique properties that require a unique buyer (hobby farms, properties in more rural areas, etc.)
Your agent should give you a report with 9 or more properties:
- 3 or more sold comps
- 3 or more pending sales
- 3 active comps
Automated Offer Formula
In order to quickly and effectively figure out whether a deal will work for you, use the Automated Offer Formula:
ARV x 70% – repairs = maximum offer
ARV is the After Repair Value: what the property should cost once it’s fully renovated and in perfect condition. This is a number your realtor can figure out for you, although you should understand and agree with the reasoning the realtor used to figure out the ARV.
- ARV: $200,000
- Repairs: $30,000
- $200,000 x 70% – $30,000 = $110,000
That means my highest offer is $110,000. I could start with an offer at $100,000 or $105,000, but if I think it’s a great deal and it’s going to move quickly, I might make my first offer at $110,000.
Don’t offer more than your maximum offer—that’s how you get stuck with a deal that doesn’t make you any money.
WHERE TO FIND PROPERTIES
Start on the MLS, but don’t stop there. Explore other sites, using the sources that are the best match for your business.
Check out these sites that list foreclosed properties:
Set up an account on Home Path (Fannie Mae) and Home Steps (Freddie Mac) to see all the properties in your area. You can search by city, county and price.
Top Investor Tip: These properties are also typically listed with a realtor on the MLS, but sometimes the details of the properties (number of beds/baths, square footage) aren’t right on the MLS, which means they might be underpriced and could be a really amazing deal. Check the listings on Home Path and Home Steps to see if you can spot any of these sorts of errors.
Note that houses listed as “first look” are listed for owner-occupants only for the first 15 days. Don’t try to pull a fast one and put in an offer for a first look property.
HUD Home Store lists properties that were purchased with FHA loans originally and have gone bad. The nice thing about this site is that you can make bids online without a written contract. You’re bidding against a computer, so you can submit multiple bids.
Top Investor Tip: The goal here is to get a counter-offer so you can see what they’re willing to accept. If you get an accepted bid, you have one business day to turn in your paperwork. If you go to see the property and decide it’s not a good deal for you, don’t turn in the paperwork and that’ll be the end of it.
You can also look at live or virtual auction sites:
This is a great strategy for investors who have cash on hand or a private loan all lined up. These properties need to be closed on right away, so unless you have the cash making a bid isn’t worth your time.
Make sure your agent sets up a drip that emails you automatically when:
- a new property that fits your criteria is posted on the MLS
- a property that fits your criteria has a price drop
- a property that fits your criteria goes back on the market
You should have 3–4 MLS drips set up for you to review every day.
Don’t rule out the business power of social media. Post about what you do and you just might find property or private lenders. And you don’t need to be pushy. Your friends will reach out to you if they have questions or leads that could turn into deals.
Look through the Real Estate for Sale section on Craigslist. Do key word searches: fixer upper, mold, as-is, investor special. You can also look under apartment listings and contact landlords to see if they’re interested in selling.
You might even try putting up your own ad for properties using terms like no commission, mold, as-is.
The key here is consistency. If you decide to check Craigslist or post, check once or twice a day.
You should have at least three agents looking for properties for you. Encourage your brokers to become known as the #1 experts in their offices for working with real estate investors. That way people will come to your broker first with opportunities, and your broker will in turn share that brand-new property with you first.
Don’t be afraid to share the wealth. Offer your friends and family $1,000 on referrals, to be paid when the deal closes. Put the word out on social media, in your email marketing, and on your website and see what leads come your way.
REIA and Other Professionals
Get to know other professionals. You should be attending at least one meet-up each month for investors in your area. Get to know the key players. You might hear about new deals or meet agents, wholesalers, closing attorneys, inspectors and contractors.
Use those opportunities to build your business.
Did you know there are over 197 land banks in the US?
These are properties in low income areas that are in rough shape. Cities sometimes decide to put these properties in land banks and sell them, usually for less than $10k, rather than bulldoze them.
These properties need a lot of work. But they can be a great investment strategy for renting or flipping.
Our final source is www.myhousedeals.com. This site lists properties from wholesalers and sometimes even homeowners. The quality of the deals usually depends on the poster’s motivation.
Remember, the key here is to be persistent in searching for great deals. Figure out your strategy and then consistently apply it, making offer after offer. And don’t be afraid to revise your strategy as you figure out what works.
But make sure you’re not waiting for that deal to come to you—go out there and find it.