It’s no accident that I’m as successful at buying, renovating, and selling houses as I am. I’ve always had an entrepreneurial spirit and a knack for real estate, but I worked hard to get where I am. But, make no mistake, getting good at my job hasn’t been without a few bumps in the road. In the beginning, for example, I didn’t know how to find distressed properties to invest in. Without a good real estate investor lead generation system in place, I floundered more than I’d like to admit. Now that I’m well-established in my career, new investors approach me all the time about how they can stop fishing for leads in all the wrong places and get some great deals for themselves.
It’s an important question. Without the leads, you simply don’t have a business. So, I always give new investors what they ask for—and then a bit more.
How to Find Distressed Properties in Your City
In my opinion, flipping houses is a good business to be in no matter where you live and invest. Certainly, every market is different and it’s important that you get to know yours. But, the opportunities to purchase undervalued property, renovate with a local demographic in mind, and sell at a price that delivers decent returns are usually there—if you know where to look. So, let’s take a look at where you can start looking for leads.
Buying Lead Lists
Lead lists are a popular lead generation strategy for property investors, containing information on anything from expired listings, foreclosure prospects, absentee owners, deaths, divorces, and any other scenario that indicates a homeowner might be motivated to sell. Unfortunately, the data isn’t always current. So, you run the risk of contacting the same individuals other local investors have already gotten to. This often stirs up more homeowner annoyance than interest, especially if they’re embarrassed or in pain about their situation. Unless you don’t have other options, I suggest you throw this one back and spend your money elsewhere.
If you have the money, the expertise, and the time, advertising directly to homeowners helps them find you as much as it helps you find them. Some of the best marketing tools for investors to include in an ad campaign are billboards, direct mail, radio ads, and TV commercials. Though there are a few uncommon marketing ideas, like using social media, that could work too.
Of course, advertising, whether online or off, can cost you more than a pretty penny. If you don’t have the ability, or the time, to create an ad campaign yourself, you’ll have to hire someone to do it for you. Plus, it takes time to build a trusted presence in the marketplace, even if you’ve got a good ad campaign going. When you’re just starting a career in real estate investing, that’s time you may not have.
Property auctions can provide plenty of opportunities to find fixer-upper homes for sale. These properties typically need work and are priced accordingly, which means the potential to realize a good ROI after the rehab can be substantial. You can find auction properties on lender websites, in local papers, on the Multiple Listing Service (MLS), and in county government notices.
However, competition tends to be strong at auctions, which often drives the purchase price past numbers that leave any room for profit after the rehab—especially if you end up with a property that needs more work than you anticipated. That’s a gamble you might not want to take as a new investor.
Contacting City and County Assessors Offices
Most city and county tax assessors offices have a list of properties on which back taxes are owed. If you bring the delinquent taxes current, and pay any fees and interest that were levied, you get to charge a hefty interest rate. If the homeowner fails to redeem the taxes within a fixed amount of time, you’ll also get the house. Either way, you have an opportunity to make a little money on interest and, possibly, even more on the returns if the property becomes yours.
But, you’ll have to do your own research to find the list of properties that are delinquent on their taxes and not every city or county website makes that easy. And, you won’t get the opportunity to work in a home inspection before the property becomes yours—if it ever does. This could land you with a money pit that costs more than just paying the back taxes. It could cost you your potential returns.
Searching Government Agency Websites
Government agencies, like Fannie Mae, that provide loans to homeowners or that insure mortgages will foreclose on homes just as traditional lenders do if the loan goes into default. By checking the websites for each of government agencies, it’s possible to find foreclosed properties they’re trying to offload at discounted prices.
The issue, of course, is that each agency functions independently and has a different set of guidelines for buying their properties. So, not only will you have to hunt for available homes on multiple sites, you’ll have to familiarize yourself with numerous government agency rules and regulations. That’s a lot of time and red tape to wrap yourself in just for the chance of buying a government-owned home.
Each of these strategies can be implemented in most areas around the country and all are decent at finding leads on distressed homeowners. But, none of them give you enough to really get, and keep, your real estate investing career off the ground. You need a system that finds motivated sellers and drives those homeowners to you.
How Distressed Homeowners Can Find You
There was a time when I utilized each of these strategies to find distressed properties. Unfortunately, I spent more time wishing there was a better way to reach homeowners who needed to sell quickly than I ever did closing on deals. As the saying goes, be careful what you wish for.
Once I became an independently owned and operated HomeVestors® franchisee, motivated sellers started coming to me. HomeVestors®’ nationally-known and trusted “We Buy Ugly Houses®” advertising campaign reaches homeowners in distress all across the U.S. Homeowners call me because they know they’re connecting with an investor who has both the integrity and the know-how to help them keep a bad situation from getting worse.
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