Real estate investing success is an inevitability when you focus all your attention on the single most important thing.
There are many activities that will demand your attention as a real estate investor; however, there’s just one, maybe two activities that are critical to making it happen.
I talked about these two things in the previous article of this series – marketing and securing funding for deals.
We’re focusing this series on the former – marketing. In real estate investing, that means finding deals.
One of the easiest types of properties investors make a killing on is vacant houses. Home buyers and renters, consumers, once a finished product. They want a that is already newly painted, carpeted, then ready to move in. Above and beyond this they wanted at a fair market price.
So vacant homes present such a great opportunity because often times there are so many issues with the home that they make a horrible buy for consumers. Vacant homes may have rodent infestations, roof damage, mold problems and a lot of other issues that make them the neighborhood eyesore.
Your job is to take control of the home and either make a small profit by wholesaling into another real estate investor or doing the full rehab treatment and yourself and selling it for retail price or renting it out.
Focusing your attention on vacant homes can be one of your best ways of making maximum profit as a real estate investor because you can get these properties for pennies on the dollar.
If the trick is finding these properties. To do that you need to do great market research.
Market Research for Real Estate Investments
There are generally four different types of areas you can choose from as a real estate investor.
This is the worst kind of area you can invest in. War zones have higher rates of drug and other crime activity.
These areas often have poor performing schools which means that families are not likely to move to these areas. As a general note, you want to stay away from extremes when choosing properties and neighborhoods to invest in.
War zones are on the end of an extreme, so homes are not likely to move fast in these areas – and honestly, you probably don’t want to make it your business to visit these areas too often.
I love investing in working class neighborhoods. These areas may be lower income but they are generally safer and they make great rental and rehab areas.
When you’re first starting off you will be working with smaller numbers of available funding so choosing working class neighborhoods to invest in is smart because you can get into deals at cheaper prices.
This is the other sweet spot for real estate investors. Middle class neighborhood are great for most American real estate consumers. Usually, everything residence need to build a family and live a good life are in the neighborhood. Schools are usually better in most middle-class neighborhoods, which is attractive to families. So you should be able to flip properties quite easily middle-class neighborhoods.
This is the other end of the extreme that real estate investors tend to avoid. Homes don’t move as quickly neighborhood and you don’t generally find great deals in these neighborhoods.
Beyond that, if you do find a great deal you need to understand what rehab fixes to focus in on to attract a quick sale to the luxury home buyer. These are things that beginning investors are likely not going to know, so you would do better to stick with the lower to middle class neighborhoods.
Know Your Inventory
Every good car salesman knows the available inventory on the lot. In order to stay on top of what’s on the lot, they usually recommend walking the lot every morning to see what new inventory has arrived and what cars have been sold.
The same is true for the successful real estate investor. To find your first juicy deal, you need to ask yourself a few great questions.
What’s On the Market?
Your first and primary job as an investor is going to be market research. You have to stay on top of what deals are available before other real estate investors snatch up your deal. You should wake up every morning and ask yourself “What’s on the market?”
What’s the Average Listing Price?
Vacant houses present one of the very best opportunities for a real estate investor to acquire properties that cost pennies on the dollar and make a king’s ransom by flipping them.
To learn more about the vacant house inventory in your market, market research is important.
Search for the area where cheap vacant homes can be found easily and sold quickly.
This means finding out where most real estate investors are buying and selling. You can go about finding this information out but searching for that area in your city where the most cash sales are taking place.
When homes are purchased for all cash they are cash sales. You want to know where the cash sales are happening because these are done mostly by real estate investors.
If you can find out where cash buyers are buying in your area, or any area for that matter, you have tapped into a gold mine of opportunity.
Let’s take a look at how you can find cash buyers in your area.
Find a Real Estate Investment Focused Realtor
A good real estate agent is going to be critical to your real estate investment market search.
Meet with several, go to their office, explain what you’re trying to do.
Call on Saturdays to get newer real estate agents.
One way you may approach a realtor is by saying, “Hey, I’m a real estate investor and I am looking for an awesome realtor to work with. I send out thousands of mailers each month and most of the people that I talk to cannot sell for the price that I would be willing to pay but they would make great listings. I could definitely recommend them as a potential listing for you. All I ask in return is you run some comparable sales for me and also pull all of the cash sales from the MLS for the past 3 to 5 months.”
Some realtors may be busier than others, so you may offer to pay $25 or so for 10 or 15 minutes of their time to pull some reports you need.
Have them do a search for all the sold listings for the past 3 to 5 months.
You can do the search by starting with some of your top target areas, maybe 10 to 20 zip codes.
You can then narrow your zip code search down to the best 3 to 5 that fit your criteria.
If you’re looking for the big profit deals, you’ll likely find them in the lower income, working class level neighborhoods, like we mentioned earlier.
You want to invest in the areas where there are both deals and lot of buyers, where houses are selling fast. The lower income to middle class income areas are likely going to move faster for sales.
Your realtor can pull reports of sales in certain zip codes where sales activity is strong. You can then determine if the neighborhood or zip code that you like is better for rehab or rental deals.
Valuable Search Resources
You can look up potential inventory for each area on Listsource.com.
You use this site to see how many homes are owned free and clear and/or have a lot of equity in the home. This is great to know because you can make offers to motivated sellers in these areas and get them at a better discount than others.
When you have an area with lots of high-equity owners and good sales, but not super-high sales, you would probably want to choose that area to focus your investment search in as opposed to the area where there are more sales in because this indicates a higher level of competition among investors.
This means that if you drive-for-dollars, mail postcards, or use other marketing strategies to hunt for deals, your efforts will likely be more fruitful in the less competitive neighborhood.
You can also pull absentee owners from this site as well. You can use this information to send direct mail postcards and letters. Most absentee owners are land lords.
You want to find the area that has the most absentee owner sales over the past 3 to 5 months. You should then target in on this area because that’s where people are buying!
Once you have results from this search, you can use an Excel spreadsheet to sort the data by zip codes and find out how many sales were in each of the zip codes and the sales prices of each area.
When decided which three zip codes to focus in on, just stay away from both extremes, the lower end and the higher end of the sales list.
You can also search FindCashBuyersNow.com. You can use this site to pull all of the cash sales for a specific area.
Keep Track of the Data
Make an Excel Spreadsheet and start keeping track of key data that helps you analyze the inventory.
You want to narrow your focus down to about 3 zip codes where you start implementing your marketing strategies.
3 Steps to Start:
Shop the MLS
This is where you will need your realtor’s help. You can only access this if you’re a licensed realtor. You want your realtor to pull a list of all the cash sales for the past 3 – 5 months, for the entire area you live in.
For example, if you live in Westminster, Maryland, you’d want your realtor to pull cash sales for all of Westminster and all surrounding suburban areas.
With the MLS, you have a tool that can pull a lot more information than other tools have available. For instance, you can easily pull the square footage, number of beds and baths, sale price, days on the market, and many other features of the property you’re looking at.
Other databases may only provide the address, sale date, and sale price. Find the best real estate agent in Westminster now.
Start Sending Direct Mail
You can mail residence in the zip codes asking if they are looking to sell their home and you can mail or call absentee owners when you gather their information to identify potential buyers.
It gets identify buyers because these will likely be real estate investors and if you’re looking to wholesale properties you will need to have a solid roster of potential buyers of deals that you find.
Start Looking for Vacant Homes
You may also and drive for dollars. You can find vacant homes by some telltale signs including, high grass, unkempt landscaping, a full mailbox, a boarded-up window, and other visible signs that make it look like the house has not been cared for.
These are just some of the ways you can go about finding vacant properties that may present great real estate investment opportunities.
If you think you want to start the process of investing in real estate in the Westminster, Maryland area, contact Utz Real Estate, as we focus on helping real estate investors in this area!