3 Ways to Find a Deal

3 Ways to Find a Deal

“I’m looking for a house with forty thousand dollars of equity, five thousand square feet and a motivated seller who’s open to seller financing…”

You and me both, pal! Every day realtors around the country hear a variation of that statement that expresses a buyer’s interest to land a deal with huge upside. Deals like these exist and they happen every day.  However, they are not happening where most people are looking for them. In this article, I’ll walk you through three time-tested resources that will help you find your next stellar deal.

Before I discuss the resources in detail, I want to clarify that the deals that I’m referring to are the kinds of investments that can skyrocket your net worth and accelerate your wealth if properly executed. For that very reason, they inherently should be somewhat difficult to find. If you could walk into Walmart and buy a vintage T-shirt for $10 but say it was really worth $75—then everybody would do it! Those shirts would sell out quickly and that’s if they even make it to the aisles. Any Walmart employee with some sense would want to buy those shirts and sell them for a profit themselves!

The same ideology applies to real estate investing. If huge deals were just available all the time on Zillow, real estate agents would scoop them up too! If you wanted to buy a discounted t-shirt that you could sell for a profit, you wouldn’t go to Walmart—you’d go to thrift stores and garage sales. The resources I am about to share are the real estate equivalent of thrift shops.

1. Sheriff Sales

A sheriff sale is a real estate auction that takes place at the local courthouse usually bi-weekly (however, different counties have different auction schedules). The sale consists of homes that have been foreclosed on due to death, the inability to make payments, or a breach of contract, which allows for the bank to call the note in its entirety. When a house is foreclosed on, it is brought to auction by the party who had majority stake in the property to begin with, so usually, it is the bank. The bank wants the money they originally lent on the home back and they want to unload the headache that this property has become for them. For this reason, there is opportunity to score a house way below market value.

Let’s make it super easy and say a bank lent $50k and the home is worth $100k, the bank usually stops bidding once they’ve received their portion back. Therefore that leaves $50k of margin for you as an investor, assuming that there’s no repairs. Before every auction there is a list available on the courthouse’s website that includes the properties that will be auctioned off and the information of the lawyer representing each house. It is important to analyze and make sure the numbers make sense for what you’re trying to accomplish ahead of time.

Word to the wise, walk into an auction with a set number that you are willing to pay for a property and don’t waiver on it even if it means losing to somebody else. Many of the people who attend these sales get emotional and bid way more than a property is worth just because they don’t want to lose. Sometimes the best deals are the ones you don’t do and it never makes sense to buy something for higher than what it’s worth—especially if emotions are running high.

Because it is sometimes difficult to win at the auction, my advice is to approach the lawyer representing the property beforehand to see if you could buy it prior to auction. Having it on record that your house was foreclosed on looks really bad for future creditors and nothing at an auction is guaranteed—the current owner could walk out with $10 or $10,000 depending on how high the bids go. By buying it beforehand, you are allowing the current owner peace of mind by defining a set amount they will receive and are assuming the responsibility of what is likely the biggest financial headache in their life. This strategy won’t always work, but I recommend it because many people are willing to negotiate prior to the auction.

2. Direct Mail

Have you ever seen those “We Buy Houses” bandit signs or post cards around town? Believe it or not they are highly effective and are used by wholesalers and real estate investors to garner good deals before they hit the market. These are deals that are created single-handedly from the fact that somebody advertised for them. If you’re looking for a good deal, direct mail marketing is a great resource because you can reach a vast amount of people with a relatively small amount of capital. You only need one deal, so odds are if you send out a thousand postcards somebody will be in the exact situation where selling to you makes sense. While there are expenses associated with direct mail marketing, I believe it is worth it to spend a couple hundred dollars on advertising if it means making tens of thousands of dollars on the backend of a deal.

3. Networking

It’s not sexy. However, getting plugged into the real estate community is arguably the best thing you could do while hunting for a deal. Think about it. There are countless meetups, seminars, Facebook groups, and real estate investors in your community that it makes no sense NOT to take advantage of all of it while trying to score a deal. Next time you see a “We Buy Houses” sign, instead of rolling your eyes—call the number and ask them if they have any deals in their inventory. That’s how wholesalers make money! They find a good deal and then sell it to an investor for a finder’s fee. So make friends with every wholesaler in your area and make an effort to connect with everybody you know who has a track record of doing what you’re trying to do. Often times, people in that position love giving advice and sometimes even have a property in their inventory that they want to unload. The opportunities are endless, however, it is up to you to let people know what you’re looking for and pursue it relentlessly. The deal of a lifetime comes along everyday, the only question is if it’ll be in your hands.

I hope this article provided you with some helpful tools going forward and as always don’t hesitate to reach out with any questions, comments or concerns!

-Max