Finding MLS Deals In A Competitive Market

2779042_m

New to real estate investment and trying to find deals on a budget?  Direct-mail marketing has exceptional returns, but campaigns cost thousands and take months for the pay-off.  Website providers such as InvestorCarrot are cost effective, but earning Google ranking for your site requires months of hard work.  Pay-per-click is cost prohibitive on a shoe-string budget.

If you are a budget-conscious new investor, you’re probably looking for deals on the local MLS.  You’ve heard other investors lament “there are no good deals on the MLS” and “there is too much competition.”  Certainly, MLS deals have lots of competition, but even in the hottest marks good deals exist.  Here are some tips for finding MLS deals. You can also check out PennyMac’s  5 Tips For Buying in Competitive Markets.

#1 – Focus On Rehabs

In competitive markets, properties in “good shape” draw offers from cash investors and end-users alike. You have little chance to find a “good deal” on a property that requires no sweat equity.  Chasing these properties is a waste of time.  Not only that, real estate agents listing pristine homes may be offended by “low ball” offers.  If you are an active MLS player, strong agent relationships are critical.

#2 – Follow-Up On Offers

E-mailing an agent an offer one time is not sufficient.  When a property is listed, the agent is sorting through a mountain of offers and yours is just another in the pile.  Call the agent to confirm the offer is received.  Additionally, it is rare for an initial offer to be accepted right away.  You need to follow-up with your offer consistently.  Don’t be discouraged if the house goes under contract with another buyer – buyers back out all the time creating the opportunity to step in. Depending how close we are to a deal, we even follow-up on a weekly basis to find out the status of our offer.  Put together a schedule of how you plan to prioritize offer follow-up.

#3 – Quantity and Quality

New investors often ask: how many offers should I make?  In a competitive market like South Florida, one offer a day will not cut it.  On the other hand, submitting 20 offers a day doesn’t work either: you won’t be able to follow-up and keep track, and spamming agents will damage your credibility.  At House Heroes, we submit between 3-5 offers a day.  Don’t submit more offers than you can follow-up on, or on properties you have no chance or ability to buy.

#4 – Analyze Deals FAST!

In South Florida, 100-150 homes enter the market every day.  You can’t do a detailed analysis on every house.  Do a quick initial analysis, and if it appears like a good deal, conduct an in-depth evaluation. Choose a fast and effective method of reviewing listings.  Redfin allows customizable local searches to find listings and comps for free.  Zillow is better for rent estimates.  There also “for pay” services that allow you to review listings and submit offers.  Give some thought to how you will find listings.  An investor-friendly agent can e-mail you deals directly.  Direct access to the MLS is a great way to review listings, although requires licensing.

#5 – Fix-and-Flip & Rental Criteria

Whether offering on fix-and-flips, or obtaining a rental, you need easy to apply formulas for evaluating deals.  The common formula for flips is the “70% Rule.”  According to the 70% rule, your offer on a property should be 70% of the after-repair value, minus repairs.  For rentals, you need to determine your goal “cap rate” – which is yearly income (primarily rent, minus expenses) divided by your total purchase costs (purchase price + rehab).  As a rule of thumb, investors sometimes assume long-term expense are 50% of the rent proceeds (although if the deal looks good, a detailed expense analysis is appropriate).

 

Get More Real Estate Market Info... Subscribe Below!

Learn more about us and find other resources on selling your house below. Like us, follow us, connect!

Leave a Reply

Your email address will not be published. Required fields are marked *