As the market heats up, it becomes more and more fashionable to find off-market deals.
But, not all "off-market" deals are worth buying. In fact, a huge portion of off-market deals aren't on the market because... you guessed it, they want more than the property is worth.
But, it's also true that most on-market deals will sell at or above market value in today's hot market. .
So it's a catch-22. Most off-market deals want more than the property is worth, but if it goes on the market, it will definitely sell at full value. So what do you do?
Even if 90% of off-market deals are a waste of time, that other 10% of the deals might sell well below market value, whereas anything listed online will definitely sell at market value. So, there is still some opportunity for money to be made.
Here's the key though...
You are Looking for Investment Deals All Wrong
You don't even realize it, but you're probably looking for deals wrong in the first place. That's why you now are trying to find off-market deals.
Even in this hot market, the most successful investors are still finding 60% or more of their deals on the open market.
If they can do it, why can't you?
You're Reading Too Much
You've been studying and learning for 3 months, 6 months, or even a year or longer.
There is such thing as learning too much about real estate. That's why you're trying to find off-market deals, because you're analyzing the deals to death until nothing works anymore.
Which leads into the next mistake you're probably making...
You Haven't Found Your Investing Niche Yet
Some days you look at multis, other days you look at flips, and then some days you are learning about wholesaling.
I get it, it's tough. I've identified somewhere around 800 real estate investing niches, so picking one can be tough.
People make money wholesaling, flipping, renting, commercial, residential, large unit, single family, and more. The thing is, they don’t make money in all of them.
By dividing your attention you are holding yourself back. Pick ONE and go with it.
Here is the Key to Investing in Property
It’s really simple. There are three steps to get started successfully as a real estate investor.
- Find good deals.
- Analyze those deals.
- Close on them
OK, I'm being a little bit facetious, but my point is to show that it's not difficult. But, the real key is...
You Need To Find The Value That Others Miss
Everyone has the same strategy - find a property, do some cosmetic upgrades, sell for profit.
That just doesn't work that much anymore.
You need to find the creative way to add value. Maybe you convert an office or an attic into a bedroom. Maybe you change the layout.
Whatever it is, the creative solutions will be what makes you money in the competitive market.
Finding Off Market Deals
Off-market deals will still always be better than on-market deals, but without thinking creatively, you'll still struggle to get deals done.
With that in mind, here is a comprehensive list of how to find deals without using the MLS.
1. Pocket Listings
This is a deal that an agent or broker has but hasn't brought it to market yet. This is more common in commercial deals and also residential deals that aren't very marketable.
There are a few reasons why a seller may not want to openly market the deal. The biggest of which, is they do not want to spook the in-place management or tenants. If tenants are afraid their rents will jump, they will start to move which lowers the Net Operating Income of the property and makes it less marketable. The management
It sells the deal almost immediately, the broker can probably get near the asking price (or they would put it on the market), and it sells virtually instantly which makes the broker look good.
So get to know some high-powered brokers and get on their buyer's lists.
2. Direct Mail
Some people hate it while others swear by it. Essentially you buy a mailing list, write letters to the owners, mail it out, and hope to get a call.
The response rate is low, around 0.5%, but people who direct mail look at it another way - for every 1000 homes they mail to, they get 5 calls and probably close one deal.
That's really not bad if you think about it.
I personally sent out a direct mail campaign this year and had a response rate of over 3%. I closed a 20%+ cash on cash deal and sent less than 1,000 letters. So, it's totally possible to create a great campaign with great results!
3. Driving Neighborhoods (and following up)
This works for both residential and commercial. Choose a market, drive around, and write down all the properties that appear to be in distress.
If the property is in distress, the owner is probably motivated to sell.
What are signs of distress? Glad you asked.
You are looking for abandoned vehicles, overgrown grass, or things such as damage to the property that appears expensive and/or old.
It could be a tarp over a roof, siding that is falling off, etc. If you're looking for off market deals, you need to approach sellers directly. These are the kinds you want to meet!
4. Cold Calling
If you have a list of potential properties that are distressed, you can look up their information and contact them. The most obvious way is through direct mail, but you are more likely to get through to them with a call.
There are a lot of services online that can help you get their information. Generally, tracking a person's phone number with just an address is called skip-tracing.
5. Property Management Companies
Management companies usually have their hands in a lot of places in a city. They generally know all the streets, neighborhoods, and even the major players in those areas.
So, when something is about to come up for sale, they may be one of the first to know about it. If you have a good relationship with a property management company, you may be able to get an introduction between yourself and the potential seller.
Taking it a step further, if they manage any properties that are in bad shape, they might be willing to help you talk to the owner, especially if you have some capital to invest in improvements.
6. Eviction Court
This is a unique one and very few use it. But think about it logically.
People who are currently going through an eviction may be fed up with rentals and be looking to sell. You're there at their absolutely weakest and they might just be willing to sell it to avoid the headache of these tenants.
7. Create a Website
People always take you more seriously if you have a professional looking website. In fact, it's gotten to the point that lack of a website will actually hinder you from succeeding, even if it doesn't generate much traffic or sales.
But, if done right, a website can actually generate leads. In fact, I generate several leads per month from my 'sell my house fast' type website.
I like to use a service called Investor Carrot because it's perfectly optimized for creating leads from motivated sellers. Also, it only takes about 5 minutes to set up a website.
You can get a free demo of investor carrot here.
7a. Create Great Content for Owners
Having a website is a requirement, but if you want it to generate traffic, name recognition, and leads, you need to create content for your target audience.
People tend to talk to other people like themselves, and that's true for how they write as well. That's why accountant and attorney websites are usually so terrible because they are focused on impressing other attorneys and accountants!
Flip it around and focus your content on your target audience. If you want to buy single-family homes, create content for people who are trying to sell a single family. Same is true with multifamily.
8. Title Company
Title companies are very knowledgeable about the market. Having a good connection in one could help you find a ton of potential deals!
They know all the major players in the market, know all the investors, know all the mom and pops that can't manage anything.
They are a perfect source for off market real estate leads. Plus, you'll bring them extra business when you close the deal.
9. Landlord or Apartment Association Meetings
Networking is always a great way to find off market property listings. One of the best places is landlord meetings or apartment meetings. You'll be networking directly with other people who own property, and they may be willing to sell.
Savvy landlords may not be willing to sell for a steep discount, but they might be in a position to offer owner financing. So, even if you pay fair market value for your off-market property, you'll possibly walk away with great owner financing terms so the landlord can avoid paying a ton of capital gains.
10. Real Estate Investing Meetings
If another investor knows about an off-market deal but doesn't have the money to get it done, they may be willing to tell you about it.
11. Start a Podcast
Similar to creating a website, a podcast is a great way to meet other real estate professionals and start building those relationships.
Podcasts are generally interview style and you get to interview experts. Even though you may not be the expert, you get some of their credibility every time someone comes on your show.
The more people who see you as an expert, and the more people who know your name, the more deals you'll have.
12. Tax Delinquencies
If an owner can't pay their taxes, they probably want to sell before giving it to the city.
This is generally publicly available information and you can get it from the city. There are also services that compile lists for you to use so you can mail or driving by.
13. LoopNet or MLS
A lot of people believe LoopNet or the MLS are terrible places to find deals. There will undoubtedly be a good deal here or there on these services, you can also use them to get to know some of the brokers in a new market.
Ask the brokers for references to good property managers then ask those managers for references to more brokers.
So, internet listing services are a good way to get a conversation going, even if you don't ever close a deal from it.
They tend to get around and know all the major communities and property owners in the area. You could ask for some insights into different areas, which are full and which are vacant, and which ones have problems.
BiggerPockets is focused more on the single-family side, but may also be a great place to find other professionals.
Relationships rule everything in real estate. Do we really need to go into detail about why you need to be at every networking event in your city?
17. Create a YouTube Channel
YouTube is the #1 video search engine. People often search YouTube because it's a lot easier to convey a message in video than in writing. So, if you are trying to reach a target audience, it's a great idea to create video content for them.
18. Bankers and Brokers
Mortgage brokers and bankers may not know who wants to sell, but they will know all the major owners and sellers because they've probably worked with a lot of them.
Look for properties that are for rent. A listing means there is a vacancy. It's usually just part of ordinary turnover, but if you see a property being listed a lot, there may be a problem.
20. Start a Meetup
People love networking. In addition to attending other networking events, you can create your own. Since it's your event, you will have the stage which builds your name.
21. Find a Bird Dog
Take any one of the categories in this article and get another person to do it for you. In return, you'll compensate them for every deal closed.