Finding Off-Market Properties to Invest In
Real estate investors are always looking for highly sought-after homes that could potentially offer the highest return on their investment. This may mean exclusive home deals through off-market properties.
It may feel like the demand for property investment is high while the supply is low — making it difficult to find deals — but what you may not realize is that the Multiple Listing Service (MLS) doesn’t account for every property on the market. There are a lot of properties that are sold each month without ever being listed on the MLS, and these off-market listings, otherwise known as pocket listings, could be a great source of leads for those who know how to find them.
In this article, we will be taking a closer look at how you can find and acquire an off-list property. If you are unfamiliar with how you can use your self-directed IRA to invest in real estate give our non-recourse loan lenders a call today.
What is an Off-Market Property?
An off-market property is what it sounds like. It is not listed for sale or advertised, and can be found through alternative methods, like word-of-mouth, through pre-foreclosures, and could simply be a property that an investor is considering selling, but hasn’t made any grand efforts to do so. While you may find that the definition of an “off-market property” varies widely, one thing remains the same: they are generally hot deals that investors are actively seeking out.
Finding an off-market deal can mean less competition and a quick sale. But, if they are not publicly advertised, how do you find them?
Finding Off-Market Properties
Real Estate Agents
While real estate agents are most familiar with properties listed in the MLS, they can also be knowledgeable when it comes to finding off-market deals. To increase your chances of finding an off-market property and getting ahead of the competition, it may be well worth your time to contact a Realtor who is familiar with the market you wish to purchase in.
Since off-market properties are, for better or worse, “exclusive,” you may need to build a repertoire with your agent to prove that you are a serious buyer and investor. Agents will take you more seriously and actually want to bring you deals because they know you can close.
If you’re really serious, then consider curating a list of the top agents in the market area you wish to buy in, and reach out directly to them asking if there are any off-market listings they may be aware of. Leave your contact information so they can get back to you about future off-market listings if none are available at the moment.
Get on Buyers’ Lists
Somewhat coinciding with the above point, getting yourself placed on buyers’ lists will keep you informed about properties that are quietly going up for sale. You are more likely to discover these “pocket listing” deals that sellers don’t want to list for fear of alarming tenants or management.
Direct Mail Marketing
Direct mail marketing can be a highly efficient method of finding off-market real estate deals. You will want to define your target home seller and send out postcards or other ads that express your interest in purchasing their home. This can be helpful because sometimes homeowners don’t even know that they are ready to sell until they are presented with an attractive offer.
In addition to direct mail marketing, you may want to entertain other methods of marketing that will reach your ideal customer, which may also include bus bench ads. Whatever option you choose, remember that finding off-market deals is an investment in time, and you may not see results right away.
Network With Wholesalers
A real estate wholesaler typically puts a property, albeit a distressed one, under contract before assigning or reselling the property to another investor within days of purchasing the property. Networking with wholesalers can be a very good way to find investment deals, but keep in mind that since they act as the “middlemen” in the whole process, you’re likely not getting the same deal you would get if you went directly to the source.
House Flippers
Another great way of finding off-market properties is to talk to investors who are flipping houses. Flippers sell renovated properties all the time, and by keeping in close contact with them, you may be able to secure an off-market property well before anyone else finds out it is available. Keep in mind, however, that you may pay a slightly higher price due to the excellent state of the house which conversely means that you can charge a higher rental rate.
Real Estate Auctions
Auctions can be a great place to pick up off-market deals for a fraction of the original amount. In order to find auction properties, you’ll have to browse through auction websites for deals with potential. Websites like RealtyTrac or Auction.com can be good places for finding a steady stream of off-market properties. A couple of properties that you want to keep an eye out for include foreclosed properties and REOs, or real estate-owned properties.
The foreclosure process varies from county to county but properties are usually sold “as is” for below-market value prices. When looking for foreclosures, gather as much information about the property before investing. They tend to be excellent opportunities, but foreclosures may have liens or other drawbacks that undermine the overall deal potential.
REOs, on the other hand, are houses owned by lenders, typically as a result of a successful foreclosure auction. As before, do your own research on the property and get it properly inspected.
Network with Other Investors
Knowing other investors in your desired market gives you access to hundreds, if not thousands, of properties. This will also put you in the circle of word-of-mouth information that passes from investor to investor. Networking with other real estate investors gives you access to their inventory, their strategy, and whether or not they themselves are looking to sell. The information you gain from working with an experienced investor can put you in a prime position to pick up off-market listings.
Driving for Dollars
Driving around neighborhoods in an area of your ideal market and looking for deals can be a highly effective method. If you come across a property that looks appealing, get in touch with the owners and make them an offer. If anything, you will at least have gotten the conversation started, and if the homeowners consider selling down the road, you’ll be the first person they call.
While driving, you will likely come across vacant or distressed properties, mostly because they are the easiest off-market homes to spot. If you find potential leads, jot down the addresses for later. Find the owner of the property and ask about the status of the home, among other questions about the state of the property, and so on. This should help you determine if you can purchase the property and if it would be a good investment.
Builders and Contractors
Builders and contractors are typically in the know about properties where the homeowner or investor abandoned the job mid-project because they didn’t have the financing to finish the construction. This can be a great opportunity for the investor to swoop in, finish the job, and profit at closing.
Plus, tradesmen are constantly in touch with people in the industry and can lead you directly to pocket listings in your area. You’ll want to be completely transparent throughout your networking experiences, however much it makes you feel like you’re exposing yourself or your goals. Letting people know that you are an investor looking for off-market properties will build trust as well as the respect of other real estate professionals.
Let the Lenders at First Western Help
First Western Federal Savings Bank works closely with clients who are serious about leveraging their self-directed IRA with a non-recourse loan to invest in real estate and other alternative assets. If you are interested in pursuing this venture, we would love to get to know you better! Give our lenders a call and set up a consultation where we can learn more about you and your investment goals. Give us a call today!