How to get a Great Deal on a Rental Property

Photo Jun 13, 4 20 57 PMThe most difficult part of beginning your Real Estate investing career is finding a great deal.  The key to my system is finding the right property at 20% or more below market value.  If you happen to be a Realtor it makes your search much easier and cheaper!  If you aren’t an agent there are many ways you can still find a good deal.

MLS

The easiest place to find a property is Multiple Listing Service or MLS.  The MLS lists most homes for sale, but only licensed agents or their staff have access to the system.  However,  the general can still see most properties on MLS through different websites like Realtor.com and Zillow.com.  These sites can be delayed getting the listing information and they usually aren’t as detailed as MLS.

You can search these sites daily looking for a deal or you can work with a Realtor you trust to search them for you.  If you are just beginning to work with a Realtor it would be wise to look at these sites to make sure the Realtor is sending you listings that meet your criteria in a timely manner.  If you find yourself constantly sending your agent listings instead of the other way around, maybe you need a better agent.

Foreclosure auctions

Foreclosure sales are another place to find great deals, but there is huge risk involved.  Every state has a different system for completing a foreclosure and at some point they give the public a chance to buy the property before it goes back to the bank.  In Colorado we use a public trustee who sells the property at a public auction.

There are great deals at the trustee sale, but there is a reason they are great deals. You have to have cash to buy the property.  At our sales you are given two hours to come up with the full amount after you bid.  In some states you have to prove you have the cash before the sale.  That entails bringing stacks of cash or cashiers checks with you to every foreclosure sale whether you buy a property or not.

Not only must you have cash, many times you cannot see the interior of the property before you bid.  The home may be vacant, but it is not legal to break your way in and the home may still be occupied.  If the home is occupied by a tenant and they have a valid lease, you have to honor that lease if they want to stay and keep paying rent.

I don’t need to tell you the risks of buying a home without seeing the interior. The biggest risks come from plumbing leaks, mold or drugs houses where repairs can run into five figures very easily. The other major issue is the trustee does not guarantee clear title. You may be bidding on a 2nd loan thinking it is a first.  I have seen investors who thought they just bought a house for $50,000 only to find out there was a $100,000 first loan on the property they are now responsible for.  There is also no guarantee the taxes, utility bills or liens are paid off.  One way to get an idea of what is owed on the house is to  get an O and E(ownership and encumbrance report) from a title company before you bid.

For Sale by Owner

Properties that are for sale by owner(FSBO) can be a decent source if you are willing to do the work to find them. Checking the paper every day and driving around neighborhoods you want to buy in are great way to find FSBOs. Craigslist is another great place to find FSBOs although it is getting more difficult as more and more agents are using Craigslist to advertise. FSBOs are usually trying to save money by listing the home themselves and avoiding paying an agent. Sometimes the are prices okay and sometimes they aren’t. If you do find a good deal and want to close on it, you can usually find a Realtor who will do the paperwork for you for a minimal commission. It is smart to involve a professional whenever making a large purchase like buying a house!

Other Investors, friends, family

Word of mouth is another way to find a good deal. Sometimes owners are just ready to get out. They have been procrastinating talking to an agent or listing their home for whatever reason. They really just want to get rid of it and have been waiting for the right person to come along and take the property off their hands. If you are in the market tell everyone you know you are looking for investment property and you might just get lucky.

Auctions

Many sites now offer auctions on houses across the country and you do not need a Realtor to buy these properties in most cases.  A few sites to monitor are Auction.com, Hudsonandmarshall.com and Williamsauction.com.  There can be great deals on these sites, but some properties are occupied and many times they also require cash to buy the property.

Direct marketing

Direct marketing is a tactic many investors use to find sellers directly.  Direct marketing includes mailing to sellers in foreclosure or out-of-state.  Many investors put up billboards, advertise in the local paper or Craigslist with a simple add that states “we buy houses”.  This can be a very successful tactic, but takes a lot of time and money.

Non Performing Loans

It is now possible for individual investors to purchase loans.  Many banks are selling their loans to hedge funds and other third parties and some of those companies will sell individual notes to investors.  Here is an article with much more information.

REIA’s

REIA stands for Real Estate investor Association.  They are local clubs for investors who fix and flip, buy and hold or wholesale properties.  These can be a great source of information, contacts and they even advertise properties they have for sale.

There are many ways to find an investment property.  It is getting harder and harder to purchase good deals off of MLS.  If you are having a hard time, consider some of these other strategies to find properties.

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16 responses to “How to get a Great Deal on a Rental Property

  1. Hi everyone, it’s my first visit at this site, and article is in
    fact fruitful for me, keep up posting such articles.

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