How to Effectively Build a Foreclosure List

Before Writing Your Classified Ads, Read This!

Since the moratorium ended we have seen more foreclosures across the country. With that being said you will want to advertise to homeowners that are entering foreclosure. Moreover, you’ll want to ensure you are reaching out to the appropriate homeowners and touch them repeatedly with your advertising. In order to reduce waste marketing and to effectively spend your budget wisely, you’ll want to filter your foreclosure list. 

How to Filter your Foreclosure List

It will be more effective to have a small list that you can advertise to multiple times than a large list that you advertise to only once. Therefore, it’s going to be important to filter your foreclosure list so only homes that fit your criteria are marketed.

Filter Foreclosure List by Target Area

A foreclosure list can be quite long if you are not filtering it. A great way to start is to filter by your target area. This can be as simple as selecting a few zip codes or a certain distance from your office. If you are looking for a list of 500 to advertise to and the zip codes you have selected only produce 400, you can increase your coverage area. Inversely, you can remove some zip codes in order to reduce the amount of homes in your foreclosure list. However, if you do not want to compromise on zip codes, you can use the additional filters shared below to narrow your list.

Before Writing Your Classified Ads, Read This!

Filter Foreclosure list by Property Details

There will be certain types of homes that will be easier to sell than others. For example, homes that are at least 1,000 sqft or more have a better chance of selling and are likely to be in more desirable areas than homes that are less than a 1,000 sqft. In addition, homes that have at least 3 bedrooms will also be easier to sell than homes with 1 or 2 bedrooms.

This is a quick and easy way to filter your list if you do not want to compromise the amount of people in your target area.

Filter by Price Range

Another way to filter your foreclosure list is by price range. This is going to be useful because there might be homes that might be too expensive and there’ll be other properties that are priced low, that it’ll be a warzone. Instead, look for a good median price and give that range a 50% plus or minus range. Essentially, if you are looking for homes at the price of $200k, your range will be $100k – $300k.

Ensuring your price range isn’t too high or too low will help you narrow your foreclosure list to homes that will more likely yield you profit.

Filter by Type of Property

If you are a return reader, you know that the best properties to invest in are single detached family homes. Therefore, you’ll want your filter to only include this type of property, while excluding mobile homes and condos. Mobile homes are more difficult to flip and condos are the first ones to go down during a market decline and the last ones to go up when home values are rising.

Filter by Equity

This is a very helpful tool when it comes to narrowing your foreclosure list. You can determine what type of home you’d like your list to contain based on how much equity is in the home. You’ll usually want at least a baseline of 20% equity in the home, the more the better. Therefore, if you are still looking to shrink your foreclosure list, you can increase your filter setting for homes with more than 30% or even 40% equity.

Filter by Removing Homes with Second Liens

There is a right way and a wrong way to buy real estate. You’ll want to filter homes with second liens because it’s unlikely the home has much equity. In addition, there are low chances to getting a discount or eliminating the second loan. In this case, you’ll want to completely remove homes with second liens from your foreclosure list.

Now that you have the knowledge to narrow down your search, you can begin advertising to your foreclosure list. Remember, frequency is important, so advertising to your list multiple times is going to be more pertinent than having a large list.

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How to Find Off-Market Properties

10 Strategies on How to Find Off-Market Properties

Learning how to find off-market properties is a skill that all real estate investing professionals should have. Whether you’re brand new or a seasoned investor, you’re always going to be on the look out for these type of properties. 

What is an off-market property?

Off-market properties are the unicorns of real estate investing. These are elusive properties that are highly coveted by investors. They are not listed for sale publicly on the MLS. 

Why would a property not be on the MLS? 

This might be counterintuitive for many people. If you don’t get as much visibility on the property how can one get top dollar for their home?

The first reason is privacy. For example, if a landlord is looking to sell their property, they don’t want the tenants to fear price increases with a new owner or if the deal falls through, why the building they live in can’t be sold. Regardless, some sellers will want to keep their affairs private.

How to Find Off-Market Properties

Secondly, some agents may prefer not to list it. This could be for a number of reasons, but primarily if they’re finding that they’re receiving dozens of offers, it might be more productive for them to handle negotiations between a handful of buyers. 

10 Strategies to find off-market properties

1. Network with realtors and brokers

Most agents and brokers have extensive buyer and seller lists. This helps them continually stay busy as they have a dependable list of buyers and sellers. However, just by knowing a realtor or broker, doesn’t mean you’ll instantly have access to their off-market listings, aka pocket listings. You’ll need to develop a relationship with them while establishing yourself as a serious buyer and investor, so they are bringing deals to you. 

2. Send direct mail

We’re doing this old school and yes I mean flyers, postcards, letter type marketing pieces. This is a powerful way to get off-market properties because some of these homeowners may not have considered selling their home until they read your postcard. So make it convincing, provide a value proposition, a free estimate, something that will get your phone ringing.

3. Connect with contractors

Contractors are likely to be doing work for homeowners who are looking to put their property on the market. If you’re lucky, your contractor may share this information with you. If you have a great relationship with your contractor, they may bring all this information to you. Furthermore, some homeowners may even ask their contractor if they know anyone who might be interested. This is a great resource for finding off market listings.

4. Ask other Investors

Developing relationships is important, especially in sales. If you can establish real relationships with other investors, you might find yourself being able to access some of their inventory. Like most relationships, people want to see the people in their lives doing well. And if you can offer a good deal to your fellow investors, you might be able to get some good properties. 

5. Go for a drive

If you want to take a proactive approach, instead of waiting for someone to bring you a deal. You can drive through desirable neighborhoods and look for homes that catch your attention. You might find some homes that look distressed, talk to the person at that house, start a conversation. If they’re not the homeowner, ask for their contact information. If you can’t, use skip tracing to find out more about the homeowner. You never know what might turn into a deal if you don’t ask first. 

6. Work with wholesalers

Wholesalers are investors who find deals and get them under contract, and try to sell the right to purchase the property to another buyer. Usually, they are looking for cash buyers and will not list the property conventionally. Therefore, it is an off-market property with not as many buyers vying for it. However, one caveat is that there might be a lot of repairs needed for the property before it can be sold. So run your own numbers and see if the deal is viable. 

7. Real estate auctions

These properties can have a lot of opportunities. Sometimes you might be able to buy homes for just the delinquent taxes owed and other times you’ll be able to buy them heavily discounted. The condition is usually that they’ll need a lot of rehab, but sometimes you get lucky. 

These deals usually happen live or on websites now.

8. Public Records

Remember when I mentioned you can find people using skip tracing? If you don’t have that available to you, you can use public records to figure out who owns the property. Figuring out who owns it is half the battle, once you can communicate with the owner you can figure out whether it’s a lead worth pursuing or not.

9. Craigslist to find off-market properties

Sometimes, people are able to list their properties before it hits the MLS. This is important because you can set up notifications to alert you when this happens. Moreover, some homeowners may list their home for sale without using a realtor and you may have a higher likelihood of finding this house if you have alerts set up on craigslist.

10. Word of mouth

Nothing is more powerful than connection. As I’ve repeated numerous times, you’ve got to network. Regardless of occupation, people love talking about real estate. Especially now, since it’s so hot! Many people will talk about deals or talk about someone they know who might be selling. Who knows where that can lead, but you’ve got to follow them. So make sure to network with people and see if you can find new business deals. 

Whatever your tactic, remember to always be a good person. You attract more bees with honey, than you do vinegar. This is an industry where you can help people. Inversely, there may be people who may try to take advantage of you. So before you enter any deal, make sure to run the numbers first.

The Right and Wrong Way to Buy Real Estate

If you are wondering what the right and wrong way is to buy real estate, then you are asking yourself a very important question. You might just be starting your career as a real estate investor or you might not have done a deal yet. Whichever your situation might be, it’s going to be important to learn how to buy real estate. 

There are three rules to real estate investing. If you follow this, you will save yourself a lot of headaches.

Three golden rules of real estate investing

  1. Don’t write big checks
  2. Use someone else’s credit so you don’t jeopardize your own
  3. Only make promises you can keep

Keeping these rules in mind, I firmly believe that there are right and wrong ways to invest in real estate. The wrong way assumes you take all of the risk and use your own money. The right way is risk-free to you, without needing your own cash or credit.

Buying Real Estate the Wrong Way

You might be asking yourself, how can there be a wrong way to buy real estate? It’s not necessarily wrong, but there are ways to buy real estate that opens you up to more liability. This increases your risks and limits your potential. Some ways of buying real estate the wrong way would be by using your own money and credit.  

The Right and Wrong Ways to Buy Real Estate

Buying Real Estate the Right Way

What if you could use other people’s money to invest? This is what I consider the “right” way to invest in real estate.

One strategy is by leveraging the existing financing on the property. Utilizing this strategy allows you to get deals without taking on risk.

Here is a great story of the right way to invest by one of my coaching students:

My student met a seller who was almost in foreclosure. They were having trouble affording the payments on their home. Luckily for my student, the homeowner saw an advertisement and reached out to my student for help. Fortunately, the home was only a few years old and in beautiful condition.

After some research, we calculated the Fair Market Value of the home was $190K, and the seller’s first loan balance was $180K. It wouldn’t have made sense as an investor to pay that amount. In their first meeting, the student was able to educate the seller on the high costs of selling and the amount of cash they would need to bring to the table.

After learning what would happen if they sold their home, the seller decided to deed the house to my student, leaving the current loan in place. Allowing my student to get full ownership rights. The fun doesn’t stop there. The buyer also paid my student the money they would have had to bring to the table if they had sold the house. Essentially, paying my student to buy the house.

Subject-to Method – The Right Way to Invest

The student used what I call the subject-to method. Do you know why the seller agreed to this? Simple, they wanted out. The seller wanted the peace-of-mind and the ability to walk away from the financial strain. By using my subject-to method, the student was able to help the seller out of a very tough situation. This helped the seller avoid damage to their credit.

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