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Finding worthwhile properties to invest in can be challenging, especially if your only source is searching on the multiple listing service (MLS). Although the MLS can offer good investment opportunities, it's helpful to have additional sources of investment leads.
To help you expand your search, here are five ways to find investment properties outside of the MLS.
1. Work with a real estate agent
Realtors can be a valuable source of off-market investment properties through pocket listings. A pocket listing is a property that a broker or real estate agent has a signed contract on, giving them an exclusive right to sell -- but the property hasn't been posted on the MLS yet.
There's a brief period before an MLS listing goes live in which Realtors can market the opportunity to their network of buyers. This means that if you have a working relationship with a Realtor, you'll have the opportunity to make an offer on a listing before it's publicly advertised in the MLS.
Most agents take advantage of selling properties as pocket listings because it means quicker closings, less advertising, and a satisfied seller.
I recently passed by a home in my neighborhood that was a great fixer-upper opportunity. A gentleman was outside, so I introduced myself as a real estate investor and asked if he was the homeowner. He told me he was a real estate investor who closed on the home just yesterday. He found the home as a pocket listing from his Realtor and was able to buy it for $125,000. He flipped the house and listed it for sale for $275,000 three months later.
Pocket listings are more common than you might think. Finding a quality Realtor (or Realtors) to work with can help you get a lot of investment opportunity leads.
2. Work with local wholesalers
Another valuable source for off-market investment properties is a local wholesaler. A wholesaler is a real estate investor who directly markets to potential sellers, then negotiates an exclusive right to purchase their property. The wholesaler then assigns that contract to a buyer at a slightly higher price, making a profit on the difference.
Because wholesalers are investors, most understand after repair value (ARV) and will factor repair costs or rental potential into their purchase price, which is typically low.
You can find local wholesalers by networking at your local real estate association or by searching online for "off-market investment properties" and your city. You can also call the number on any signs you see on the side of the road that say "we buy houses" or advertise off-market properties for sale.
But not all wholesalers are considered equal. Some find opportunities more often -- or offer better pricing for properties -- than others. If you do work with a wholesaler, conduct your own due diligence. Don't rely solely on their projections and estimations.
3. Contact sellers through direct marketing
One of the most readily used methods for finding investment properties outside of the MLS is through direct marketing. Direct marketing can include mail campaigns -- sending a series of postcards or letters -- or online marketing such as Google or Facebook ads targeted to a list of potential sellers.
This avenue for finding off-market investment properties can produce positive results, but can also be time-consuming and costly.
Direct marketing campaigns are typically run over several weeks or months, allowing for multiple touches and an increased likelihood of response. This all adds up over time.
You have the option to buy a list of qualified leads to market to, such as properties in probate, properties in pre-foreclosure, or vacant properties. You might even "drive for dollars" -- drive or walk around your ideal investment area collecting addresses for properties to market to.
It's time-consuming, but if your marketing reaches the seller at the right time, it could lead to a great investment opportunity. If you have the time and the funds to create or purchase a list of qualified potential sellers to market to consistently, this could be a worthwhile avenue of finding off-market investment properties.
4. Look on popular real estate websites
Another free way to find investment properties outside of the MLS is by searching online at real-estate-specific websites such as Zillow, Craigslist, or a turnkey real estate investment platform like Roofstock.com.
Zillow is one of the most readily used platforms in real estate. Although most properties for sale on Zillow are actively listed in the MLS, properties can be listed for sale by owner on Zillow. You can set up alerts on Zillow for free to meet your specific buying criteria in your desired investment area. If a new listing is added, you can be alerted immediately, giving you the chance to identify potential investment properties quickly.
Craigslist has more than 60 million users and 50 billion page views per month. Some sellers use it to list their property for sale in an attempt to avoid paying Realtor fees or listing on the MLS. Investors, like wholesalers, often list properties for sale on Craigslist, as well. Although many leads are duplicate listings from properties on Zillow or are listed on the MLS, it's possible to find quality off-market investment properties on Craigslist.
Roofstock has listings for off-market turnkey rentals. Most of these properties have been recently improved or renovated and all of the properties have tenants and third-party management in place. Roofstock is by no means the only option for turnkey investments, but it's one of the largest platforms. Most of its competitors operate at the local level. As always, conduct your own due diligence on any investment. Do not rely solely on the platform's estimations or valuations.
5. Buy from a courthouse auction
If you're looking for investment properties outside of the MLS, another great option is to buy them at a courthouse auction. Properties going through tax sale or foreclosure are required to go to public auction, where you can often buy properties for far below market value.
In most counties, properties going to tax sale or foreclosure sale are publicly listed on the county's auction calendar. Sales are typically held online, although counties require you to go to the courthouse to bid. A small deposit, such as 5%–10%, is usually required from the winning bidder on the day of the sale. The remainder of the purchase price is usually paid to the county by certified check within two to five days, although every county operates differently.
If you’re buying from a courthouse auction, you'll be unable to access the property beforehand, so it's important to ensure you:
- buy at a great price,
- leave room for unexpected costs or expenses, and
- pull the title to guarantee that no liens will remain outstanding after the sale.
It's important to educate yourself on this process and understand what due diligence needs to be conducted to identify and buy quality investment properties at public auctions.
Although there are other methods of finding off-market properties for sale, these are some of the best ways you can find investment opportunities outside of the MLS.
In many cases, it's beneficial to use a combination of these strategies, which makes it easier to find quality investments. Find the method that makes the most sense for you based on the time or funds you have available.
[Update]: See our Coronavirus Resource Center for up-to-date information on how the pandemic is impacting the real estate market.
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