How to Find Off-Market Properties
Finding off-market properties is a goldmine for real estate investors, offering opportunities to secure deals that haven't hit the open market. These properties can often be acquired at a discount, as there is less competition driving up prices.
Strategies to Find Off-Market Properties
Network with Real Estate Agents
Establish relationships with agents who specialize in your target area. They often have leads on properties before they are listed.
Direct Mail Campaigns
Send personalized letters to property owners in your desired locations, expressing interest in purchasing their property.
Online Platforms
Use online tools and databases like Zillow , Facebook Marketplace, and Craigslist to identify potential off-market deals.
Wholesalers
Work with wholesalers who specialize in finding and selling off-market properties.
Real-Life Examples
#1: Direct-to-Agent
My second real estate acquisition came out of the blue. My long-time friend, golf partner, and realtor-of-choice helped me land my first property. Then, a few months later, he sent me a Zillow listing of a condo for rent.
I called him asking why he'd send me something to rent. He said, "I have friends moving to South Carolina. Their condo is in this complex and has this same floor plan as what I'm showing you. It is entirely recently updated with Luxury Vinyl Plank, new bathroom tiling, and a new kitchen, so you can rent it for a higher rate than this listing. I'm going to put it on the market, but you have first-dibs at it before I list it. Do you want it?"
I underwrote the opportunity, the numbers were fantastic, so I pulled the trigger.
#2: Wholesaler
This is my preferred strategy, because I would much rather pay a wholesaler an Assignment Fee than spend the time and effort developing my own lead-generation/closing pipeline.
I've gotten four properties - and growing - from wholesalers.
Here's what I've learned:
- Not all wholesalers pay attention. If I give you my buy-box saying I'm looking for a 3-bed/2-bath minimum with very little to no renovation, an existing loan at 5% or less (because I want to acquire it subject-to), then why the heck is a wholesaler asking me if I'm interested in a burned-down end-unit that's a full gut?!
- Good wholesalers are worth every penny of the Assignment Fee. A wholesaler finds and closes a deal, locks it up on-contract, and then seeks to assign that contract to an end-buyer or investor. The process of assigning that contract entails a wholesaler commission in the form of an Assignment Fee.
- Respect the process. Not too long ago, I made the mistake of complaining that a wholesaler's Assignment Fee was "hidden" among the total Entry Fee costs. The fact is, I shouldn't care. If underwriting works with the total Entry Fee, then I simply shouldn't care what part of that Entry Fee comprises the Assignment Fee. Let the wholesalers do their jobs, and leave it at that.
- Be open, honest, and transparent. This goes with every transaction. If you want to maintain a partnership with a good wholesaler, then act with complete integrity. You can screw someone over exactly once in this industry; your reputation preceeds and follows you, so take care to cultivate it.
A Note about Entry Fee
I mentioned Entry Fee earlier, and I feel I need to dive deeper into what goes into this:
- Cash to Seller - how much does the seller want in cash at the closing table?
- Arrears - how much needs to go toward reinstatement a mortgage?
- Cost of Acquisition - if via a wholesaler, how much are they charging to assign the contract to you? if via an Agent, how much is their commission?
- Closing Costs - how much does it cost to close the property?
- Renovation Costs - how much does it cost to bring the property up to where it needs to be to get the desired After Rehab Value?
- Holding Costs - how much do you have to have on-hand to cover expenses while getting the asset ready for disposition? This includes principal and interest on loans, utilities, taxes, insurance, and association fees
- Marketing - how much do you need to pay to disposition this asset?
If you underwrite the opportunity and find it's a profitable venture, don't go digging around asking the Wholesaler to cut their Assignment Fee.
Conclusion
Finding off-market properties presents a unique and lucrative opportunity for real estate investors to secure valuable deals without the intense competition of the open market. By leveraging strategies such as networking with real estate agents, launching direct mail campaigns, utilizing online platforms, and collaborating with wholesalers, you can uncover hidden gems that might otherwise be overlooked. Real-life examples demonstrate the success of these methods, underscoring the importance of strong relationships and transparent practices in the industry. Now is the time to take action—connect with agents, launch your mail campaigns, explore online platforms, and engage with reputable wholesalers.
The off-market properties waiting to be discovered could be the key to your next profitable investment. Don’t wait for opportunities to come to you—go out and find them!
