The time has finally arrived! You have a business set up, you have a plan for financing it, now how do you go about finding the right property? This post is all about where and how to find a rental property!
As with much of this business, I always say the best way is to hire it out. There are a bunch of ways to find properties that make for good rentals, so don’t think that this is an exhaustive list. One thing I keep learning through this process is that there’s a lot of ways to reach the same end. But here’s a few ways to find potential deals:
- Bank-owned properties
- Finding deals on your own
- MLS (Zillow)
The important part of finding a really good deal is to find one that is off-market. In other words, one that isn’t available to the public yet. So finding deals on the MLS, such as on Zillow probably isn’t going to be your best bet. There’s going to be a TON of competition, or the price is going to be much higher than what you could get an off-market house for. Usually off-market houses are going to be a good bit cheaper than what you’d find for on-market. So the first 3-4 ways on that list are going to be the best way.
Wholesalers are my favorite way to find potential deals.
These are guys who look for deals, but then just pass them on to cash buyers (you). They work to find off-market deals and then make a relatively small commission when passing the deal to you. Finding deals can be quite time consuming, so to have someone else do a lot of that leg work really helps. Plus they can be pretty good negotiators, so they may even get a better price on it than you can! To me, it’s very much worth the time and potential cost savings of getting deals from a wholesaler.
The potential downsides though, are they may have a list of potential buyers and pass their best deals on to them first. So unless you’ve really built a reputation with them, you might not always get the best pick of their inventory. But as you build rapport with them, you can probably get some of their better deals. The best way to build rapport is to follow through. If they have a deal that matches your criteria and you turn it down, that doesn’t look good on you. Be prepared to move forward with a purchase if they find a good deal for you! They don’t want to waste their time sending qualified deals to qualified people and not close the deal.
Bank Owned Properties can come in a variety of ways. Foreclosures, pre-foreclosures, and short sales are all good examples of bank owned properties. Basically they’re a “distressed property” in some way that the bank now owns. Obviously the bank really does’t have much interest in keeping properties, so they’re looking for some way to get rid of them. Typically they can come at some discount as well.
The potential downsides are that dealing with banks can take awhile, deals can fall through pretty easily, and the profits may or may not be there. Plus you have to know the right people in the industry to get a deal.
Finding Deals on Your Own is probably the hardest way, but also the potentially most profitable. Basically you’re a wholesaler for yourself. You can cold call, drive around to find distressed properties, send out mailers, or put up bandit signs (“We buy houses fast with cash” for example), or even checking Craigslist or putting up a Craigslist ad. This may take a lot of time, but you have a better chance of finding properties that others may not, meaning you can usually get them for a better price. You have to make your own offer letters (unless you have someone write an initial one and then you just tweak it), and make a lot of offers to find good deals. Usually if you “go big” in real estate, you end up going this route, but for starting off, this wouldn’t be my recommended way.
Realtors can be a good source, but depends on what they have coming to them. In other words, your goal is to find the pre-market opportunities to get the best deals. Usually realtors deal with real estate that’s already on the market, but depending your realtor, they may be able to find some good pre-market opportunities. It’s at least worth asking! Usually if someone needs to sell a property, they’ll come to realtors first, so there’s a decent chance they can find something good for you.
MLS (Zillow) is probably not the best way to find deals. Again, you’re trying to find the pre-market ones, and anything on Zillow is already open to the market. So your competition would be high, and generally the prices are at market prices rather than the lower pre-market prices. But it’s not bad if you want to practice analyzing deals and running some numbers. And every once in awhile you may find something worthwhile.
1. Find a Wholesaler! The easiest way is to go to a local Real Estate Investing Association (REIA) meeting and let them know you’re a cash buyer looking for properties. Be specific about what you’re after. Network and get to know some of the wholesalers there. Follow up and ask for deals!
2. Get in touch with a couple realtors and let them know what you’re after as well.
3. Be prepared to follow through on a good deal!
4. Start looking at opportunities on Zillow and Craigslist and start running the numbers to see if they’d be a good deal or not. Gives you practice and experience so when a good deal comes along you know it right away.