How to find distressed properties to rehab

Question

Me and my partner have struggled finding our first property to rehab here in the Miami/Broward area in South Florida.

1. We started looking for REOs in the MLS but found prices kind of high and a lot of competition from other investors making it a bid war and most of the time rising the price above listing price which at the end did not make any sense to invest on it.

2. Then we started offering higher prices with the expectation to reduce it based on the inspection, however this was unsuccessful since sellers were firm and with little room to negotiate.

3. We have thought about going online for auctions but we are not very familiar with this field and do not know how to do the right due diligence prior to offering to an action property. Based on the risk we have heard buying auction properties we have stayed away until we are more knowledgeable in this area.

4. We have also been trying to find wholesalers in our are but so far we have not been lucky. We haven't found a good way to build our network if wholesalers.

We were just wondering what strategies are most effective in finding distressed proprieties to rehab based on your experience. How do you guys find most of your properties and what strategy has proven to work in the South Florida area if you know.

Thanks!

Rick H. · Answer

Ok, in the spirit of disrupting, have you and your partner considered why you two are partnering up?

What skills do you each bring to the table? Does one bring capital and the other bring renovation skills?

Once people have exoerience buying and rehabbing properties, marketing is by far the biggest area of opportunity for would-be real estate players.

Lack of deal flow is your current dilemma and wishing won't fix that by itself.

With as many people (with piles of dough) chasing a finite number of deals, you really need to have a marketing expert as part of your team. And, it's going to be difficult to get up to speed in a reasonable timeframe.

If you are willing to buy at current price levels and speculate on appreciation the MLS and auctions might be acceptable. However, this will not provide sufficient margin for many if not most resale opportunities.

So, that leaves marketing. Specifically niche marketing. After nearly 40 years in this game it's still the same: the riches are in the niches.

Jay DeCima · Answer

Enrique

I posted the following on a forum yesterday.  Hope you can use it.  I have done this for 40+ years and 200+ homes

Post:

Let me make a slight change in what you are looking at that can have a huge effect on your investing. Instead of a 4-plex, start thinking just a little differently.

My biggest success over the years came from buying GROUPS (5-8 houses) of older homes on a single parcel, in older, blue collar parts of town (not slums). Because banks will not finance these types of properties, 90% of the time I got seller financing (on over 250+ rental homes I had at my high point). The seller knew he/she would be taking back the financing. I did not have to talk them into it. My down payments usually were around 10%.

On many of these notes (money I owed previous seller), I bought back that note at a discount. This strategy is worth big bucks when you do it right. I purchased a $77,000 note (that I owed) for $41,500 just 31/2 years after I signed it. You’ll never get this opportunity dealing with banks.

I suggest you read up on a few kinds of investing you are interested in and then pick the one you think would be the best for you, and one that will not require a boatload of cash to start. Then find the best mentor or expert you can in that kind of investing. Learn from that person and stay focused on their kind of investing. Find some of these mentors on a Google. See how many pages of results pop of for them.

Good luck.

Fixer Jay DeCima

Andrew Detwiler · Answer

Good idea @Josh Caldwell -   Filter your list to those that have higher equity and have bought their home long ago.  Targeting this demographic will result in a more specific response.  GoBig @Enrique Alamo -

Josh Caldwell · Answer

Try direct mail to people who bought their house more than 40 years ago.

Mark Elliott · Answer

hi enrique. there are several ways to find flip houses. i do a lot of driving around and looking. even when i am not necessarily on a real estate mission, i look around. in summer, look for the houses with high grass, papers piled up on porches, and a general look of " not lived in". go to www.hud.gov. this is the website for the hud houses for sale. one good rule of thumb is that where there is one house abandoned, there is another. go look at each house on this list. then drive around the neighborhood. my bet is that you will find another one in the same neighborhood. go to you local municipality. ask them if they keep a record of houses that are vacant in the area. then go look at those houses. finding the owners to abandoned houses can be tricky, but not impossible. i an doing a flip house in buffalo, ny right now, i can tell you of 4 houses in the same neighborhood right now, that are NOT listed on the MLS. keep one thing in mind......" your best deals are the ones not listed".

Anthony Dadlani · Answer

Auctions are one of the best ways to find below market properties. Of course there are pros and cons to that type of purchasing, but there can be tremendous upside as well.

Best regards,

Greg Grant · Answer

I would also be interested in any local meetup information.

I have been researching and speaking with some wholesaler's, but some of them don't seem to be too knowledgeable in the actual rehab costs.  For instance, they may say a property needs 5-10k in rehab, when in reality it needs 20-25k, to make a decent margin.

Enrique Alamo · Answer

Hi @Curtis Smith, thanks for your advise. Could you please send me the info for the meeting?

Thank you!

David Fernandez · Answer

Hi Enrique, we are on the same boat. I have the capital and some flipping experience (not a lot yet, but some), but I am unable to find good properties in South Florida.

Prices have increased a lot since the crash, inventory is down, and this situation creates a bidding war between some investors. The market has started to cool off a little in some areas though.

My 2 cents, dont buy a property that does not make sense looking at your numbers (dont overpay) just because you have the itch of doing a flip. If you stay active in your local REIA, doing direct mail campaigns, or any other type of lead generator strategy that works better for your, you will soon find a good property.

How to find distressed properties to rehab

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