How to Find Deals in a Hot Market

Buy and hold real estate investing is a tough business. You must commit money and effort to your investments, which is stressful, risky, and time-consuming. Anyone who’s done it will tell you, between repairs, evictions, vacancy, and management, it’s hardly the “passive” cash flow claimed by many.

It’s hard enough when good deals are plentiful, but during a seller’s market like the one we are in now, finding exceptional deals becomes all the more critical to your success as a buy and hold investor. There are always surprises, and having that margin of error can be the difference between success and failure. It’s also critical to have an exit strategy, which you won’t have if you get caught up in a bidding war and pay retail, or worse, more.

But even in today’s market, we’re still buying, thanks to some strategies we’ve picked up over the last couple of years. We use a variety of avenues to find deals, and haven’t focused heavily on the open market since early 2016.

Networking

One of the best things you can do in real estate, or in any business for that matter, is network. When we got started, we networked with everyone we could in order to gain knowledge and experience. In addition to the education we’ve received, these connections have proved valuable as sources of off-market deals that we would not have had access to otherwise.

Right now, everyone is looking for inventory, and the more seeds you plant, the more you give yourself an opportunity to be in the right place at the right time. In the past year, we have bought numerous houses at below market pricing through referrals from local professionals. They called us because they trust us, because we took the time to get to know them personally.

Wholesalers, while hit or miss, can be very valuable. We have bought several off-market houses from wholesalers. Without these connections, we would have missed out on half a dozen deals in 2017, and valuable connections that will serve us going into 2018 and beyond.

But we’ve had even more success by networking with people who aren’t wholesaling themselves, but rather are in a position where leads come to them that they may not be interested in purchasing or wholesaling themselves. Property managers, landlords, realtors and lenders will often have leads to pass on and can be a great source of referrals.

Networking doesn’t have to be done within the industry. In fact, sometimes the best networking is done outside of the real estate community as those of us in the industry are generally going to keep our best leads for ourselves. You can network with anyone, in the community in which you’re investing. Real estate is not a niche product; there are millions of people who own homes, many of whom would entertain the prospect of selling, and many more who know them.

One of our best referrals this year was a $33,000 duplex rented for a total of $800 (about $100 below market), right in the middle of a revitalizing area. This was brought to us by a friend in the industry, who while recognizing the value of the deal, simply didn’t have time to deal with the out of state seller. He handed it to us and didn’t ask for even a penny in commission. Of course, we insisted on paying.

Another one was through a friend who grew up in a neighborhood where property values have skyrocketed and many of the older residents are cashing out. She had a number of friends and relatives in the neighborhood, many of whom fit the “motivated seller” profile perfectly. By having that personal connection, we were able to go after most of these deals with little to no serious competition.

The Internet

In this day and age, the internet is ubiquitous. Most people I know don’t even take a company seriously unless they have a well-maintained website and an active Facebook page, and Twitter, Instagram, and Snapchat is a plus. Establishing a strong social media presence can be a huge part of taking your business to the next level.

Sometimes, people don’t want to deal with the hassle of listing a property on the market, and social media can be a useful resource for finding owners who want to sell. You can find deals on Craigslist, Nextdoor, BiggerPockets, and local investor group websites and social media groups.

Additionally, social media can be a great resource for networking, as you can link up with like-minded investors, and other real estate professionals through adding them as friends, joining groups and organizing and going to meetups.

Nextdoor is a great place to network with your community, and I’ve utilized it to find tenants, contractors, and of course, deals. BiggerPockets is a great place to find deals, as wholesalers, managers, realtors, and owners are often posting their deals on the platform.

Craigslist’s FSBO section for example is packed with deals, and while many are mediocre, occasionally you’ll find a hidden gem. In 2017, we bought 13 houses from Craigslist, including one of our best rentals, a turn key 4 bedroom in a revitalizing neighborhood that rents for $850 per month, purchased for $45,000.

Direct Mail

In 2017, we sold 79 properties, the vast majority acquired through direct mail marketing. We will send out postcards, usually 5-20 thousand of them at a time, inquiring about local owners’ houses. The phone will ring off the hook for a while, and we will scoop up whatever we can get our hands on at a good price. One great deal makes the cost of the direct mailing campaign well worth it. On some of these campaigns we’ve doubled our money. On others, we’ve multiplied it by a factor of about 10.

We won’t go too deep into the details here, but this is a great article on direct mailing.

In July, from one of our direct mail campaigns, we paid $50,000 for a 3 bedroom SFH near downtown that will likely be worth well over $200,000 with some mostly cosmetic upgrades. Market rent is approximately $1,300. This house would probably have sold for 6 figures on the open market.

Just a month later, we bought a 2 bedroom SFH for just $19,000, conveniently located just across the street from a grocery store and a number of other establishments, making it very attractive for a tenant. When we listed this one for rent, we received over three dozen phone calls from interested tenants, one of whom told us she had been watching this exact house sit vacant for months and waiting for an investor to rehab and rent it.

Exposure

It’s no secret that in this day and age, attention span is low, so exposure has to be high. It’s obvious that this is a targeted message when you scroll the internet, watch TV, or even run errands. The companies that succeed are often the ones who seem to be everywhere you look. Having a big shiny office isn’t enough, neither is a good website. The customer (or in your case, the motivated seller) needs to see you constantly. They need to see you when they turn on the TV, browse the internet, and run errands. That can be through commercials, a strong social media presence, a podcast, a billboard, a car wrap, bumper stickers, postcards, and more.

Constantly being exposed keeps you in the customers mind. Unless you stand out in some way, the customer will forget about you fairly quickly. There are a lot of real estate professionals, and a lot of them are on the internet. If you are able to penetrate through those lanes and maximize your exposure on the internet and out in the world, you need the customer to associate you with any of their real estate needs.

We’ve been working on exposing our brand to the general public for a couple of years now, and although this is a longer term strategy that won’t pay off right away, and is difficult to track, we’re starting to get some great feedback. About a month ago (and no, we didn’t request or pay for this), we were mentioned by the speaker at one of the largest wholesaling meetups in Indianapolis as an example of a company that’s doing their branding right. At that point in time, all we had done was blast out thousands of postcards, but this repeated exposure to our name and logo was enough to make an impression. No doubt that earned us some credibility with local wholesalers and will probably lead to many deals in the years to come.

Door Knocking

In today’s world, if you really want to make an impression, knock on someone’s door. If you have more time than money, this can be a great way to set yourself apart from the competition. Pick a target area, put some business cards in your pocket and start knocking. You might meet motivated sellers, you might meet friends and family members of motivated sellers, and if nothing else you’ll meet local residents who will (hopefully) remember your name and face if and when they need a real estate professional in the future.

We found a great property owned by a textbook motivated seller in a highly desirable neighborhood on our first day of door knocking. This was a lucky find and I wouldn’t expect to hit a home run on your first day, but it showed us the potential of going out and talking to people as opposed to sitting behind our desks and waiting for the phone to ring (likely the preferred strategy of your competition).

Cold Calling / Emailing

Cold calling is also a great way to find deals when you’ve got more time than money. Although not as efficient as direct mail, you’ll be more likely to reach an individual than if you were to just send them a postcard. You won’t make as much of an impression as with door knocking, but you can be more efficient by calling from a targeted list. We use cold calling when we have very specific criteria for our next acquisition.

Find a good list and go one by one. Do some digging for phone numbers, email addresses and social media accounts, or use a skip tracing service to track down specific property owners if you want to be very targeted. We highly recommend FindTheSeller as they are usually able to dig up a wealth of information on property owners.

One of the first cold calls I ever made was a call to a local property manager who referred me to a property one of his friends owned, which not only did we end up wholesaling for a $4,000 assignment fee (not bad for a day’s work), it turned into two more deals a number of months later, one being from his personal portfolio. We’re still in contact to this day, and fully anticipate doing more business in the future.

Conclusion

In this market, being aggressive in finding good deals, and more importantly, being disciplined about only buying good deals, are more important than ever. And if you want to beat the market, you’ve got to think outside of the box.