How to Get Started in Real Estate – Part 5

How to Find Property

This is Part 5 of a series on how to get started in real estate. Each new installment will be a bite-sized tutorial gleaned from 30 years of investing experience. The goal is to remove as much doubt and fear as possible, so you’ll begin, or continue, the process of creating enough passive income to change your life. If you missed previous posts, you may access them at www.richdoctor.com

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The previous installments were important to set the groundwork for your real estate business. Congratulations on doing the work. Most people don’t look forward to research, optimizing finances and interviewing team members, but that’s the foundation of your future real estate business.

Now for the fun part – looking for deals!

I’m fond of saying that when I have some money (and often when I have none) I like to go shopping. It makes me feel like I’m accomplishing something.

However, I don’t go to the mall or the car lot. I go to the asset store. And typically, the asset I’m looking for is a piece of real estate that will add to my cash flow.

So, how do you find property to buy?

Finding Your Deal

There are multiple ways to find investment property. Typically, you’ll lean heavily on a favorite method, but frequently will utilize more than one.

Let’s go through the list so you can see what might work for you.

Drive the Streets

This is a simple way to find investment property, and it’s easy to implement. Just grab your keys, plug in your favorite podcast, and hit the road.

This is a good way to find hidden deals or opportunities in submarkets that you know well. Knowing the market is a competitive advantage. For instance, you might see a property that looks like it’s in a bad neighborhood, but you know that a new highway is scheduled to be built nearby. That will likely increase the value of the property in the future. Thus, you have an advantage over buyers with less local knowledge, and you can purchase for a discount over future value.

Real estate is a local business, and you can take advantage of that if you know your area.

You might find a property that fits your acquisition criteria, but it’s not for sale. It doesn’t hurt to make an offer to the owner. You never know what might click. We all have seasons of life, and you might just hit someone who is at a time in their life when it makes sense to sell.

One of the downsides to the “driving” method is that it’s not scalable. You only see the properties that you personally can view outside your car window, and that has a limit.

Also, once a property is identified, you must track down the realtor, broker, or owner to get the information you need to evaluate the property. It’s somewhat more labor intensive than other methods.

Use a Broker

Some people have conflicted relationships with brokers. They use their services, but don’t like to pay the commissions. I have a different philosophy.

I pay brokers well because they see infinitely more deals than I do. If they like me, they will share those deals with me.

If I don’t pay their full commission, they won’t like me, and I won’t see their deals.

Pay your brokers and realtors.

This is a great way to leverage someone else’s time and experience. They’re out all day combing the planet for listings or properties to present to their buyers. You get to see the collated results and pick the ones you wish to pursue.

In addition, your broker can be a resource for information, collaboration, and insight on a property that you’re evaluating.

There are higher transaction costs if you’re paying a commission, but it’s a small price to pay for a good deal. Also, you’ll typically only see properties that are in their specialty. So, you might have different brokers for single-family homes vs multifamily or industrial property. That’s okay. You can work with as many brokers as you want!

Using a professional broker is still the most common way to access deal flow today.

Look Online

As technology rapidly evolves, online access to real estate is exploding.

You can now evaluate properties of any type, in any area of the country. Often you can connect with the broker listing that property. Many of the pertinent numbers are listed online, so you can do preliminary underwriting to see if you wish to pursue the opportunity. Increasingly, you can take virtual tours of these properties. The worldwide pandemic accelerated this phase of the game.

Once you zero in on something that meets your criteria, you can contact the broker or owner and begin to gather any information that’s missing. Once you have everything you need, you can visit the property, if you choose.

One downside is that everybody has access to the same information, so you might find fewer “diamonds in the rough.” But it’s still possible. Another downside is that some of the pictures and numbers might not fully represent the true story. That’s why I suggest you visit anything you intend to buy.

Some helpful real estate websites include:

• Zillow
• Trulia
• LoopNet
• Redfin
• Realtor.com

Utilize your Network

If you enjoy purchasing real estate and the benefits that it provides, it is highly likely that you gravitate towards people with the same thought process.

Likely you have friends that are in real estate. You might be in a real estate networking group, or mastermind. You might follow social media groups that focus on property investment or education.

Somewhere in your network is a deal that’s waiting to be found. If you’re looking for a 3/2 single-family home in a particular area, within a defined price range, tell your network. The more eyes and minds that you have working for you, the more property you’ll see. This increases your options, providing you more opportunity.

Your network will also give you clues about where others are buying. This gives you a good place to look for deals. Just because others are exploring a market doesn’t mean you are excluded. They can’t buy everything!

One downside is that your network might be looking for the same thing. That’s okay. Don’t be threatened or overly competitive. Life will provide for you, and there is plenty to go around. Deals will come your way, or you might become partners with someone in your network. Celebrate their wins and find a way to work together.

Use Direct Mail

If you own a house or rental property and have not received one of those “We Buy Houses” postcards, you’re in the minority. This is an example of direct mail.

While 99% of us throw those away, 1% will sometimes respond. Remember that there are seasons of life, and sometimes it’s the right time to sell. Direct mailers know that and are fine with the 99% failure rate, because the 1% makes them money.

These are always “off-market” deals. So, the upside is that sometimes these properties can be purchased for a discount. This decreases risk and/or increases return on investment.
Keep in mind; however, that “off market” does not always mean it’s a good deal.

The downside is that there is some cost and organization required to execute a direct mail campaign. A direct mailing campaign carries non-refundable upfront costs, but if it’s successful, you can recoup your investment and be the proud owner of a new property.

This strategy can be used for small or large properties.

Buy From Wholesalers

If you don’t have the energy or desire to create your own direct mail campaign, you can buy from those that do. They’re called wholesalers.

Wholesalers buy properties at a discount, then flip the property to a new buyer. Sometimes they take possession and sell to you. Other times they execute a simultaneous transaction in which the contract is assigned to you. The wholesaler makes his or her money by taking the difference between their purchase price and yours.

The upside is that they go to all the cost and trouble to source the deals, so you don’t have to. The downside is that you pay more than you would if you bought it directly. But that doesn’t mean you got a bad deal. It might just mean that you got a good deal and so did the wholesaler.

It’s a form of leverage to use the wholesaler to find property for your portfolio. I’ve had folks tell me they were upset when they found out how much the wholesaler made in a transaction. My comment to them was to back out, buy the deal, or become a wholesaler themselves! It’s still your choice and you must decide what’s best for you.

Summary

These are just some of the ways to find suitable investment real estate. There are others, but these are the primary ones.

You’ll find the method that suits you best. Don’t be surprised if that changes as you grow in your business. At the least, if you’re ready to buy, pick one and get started.

Robert Kiyosaki was always fond of telling us that, “You can measure your success by the number of doors you own.”

So, go get some more doors!

To your success!

Tom