How to find houses cheap like the professionals.
Figuring how to buy cheap houses is in my opinion the number one skill that will allow you to become a successful real estate investor and is a key in any how to invest in real estate course, or at least it should be. Cheap houses for sale are everywhere once you know where to look and are willing to put forth the effort by developing an ongoing system for finding them.
This site is dedicated to helping people learn how to invest in real estate and our goal is to offer a number of tools, training and education toward that goal. This article about finding a low price house for sale is one of the fundamentals that you should build your real estate education on. I guess you can call it part one of real estate investing for beginners.
Before I get too far into this, if you started on this page and do not already know why real estate is the best form of investment please {CLICK HERE} to read the article on our home page.
Finding the cheapest houses is important whether you are looking to purchase your primary residence, rental properties, flipping projects or looking to start your own wholesaling business. Your goals are a little different in each of those and you have more flexibility in a primary residence or a rental property as far as paying a little more goes, although why would you want to? If you are flipping a home or running your own house wholesaling business then you absolutely have to find the cheapest home prices you can if you are going to make it.
Multiple Listing Service (MLS)
We will start with what most non real estate investors probably think of first when they think about trying to find a house for sale. Excluding contacting a realtor of course, which will probably do this anyway. Most people think of MLS as the place to go to find a home for sale. Which it is.
The problem is MLS typically DOES NOT offer the lowest price houses. Sometimes homes are put on the MLS that a cheap houses but those typically do not last very long. Realtors, investors and the average person scour the MLS quite literally every second of the day. Even if a cheap house for sale should pop up you can bet there are dozens of other eyes on it just like yours.
You have to be fast and REALLY lucky to find a good real estate investment properly using the MLS. If you do see one and if it is actually a good deal you will have to move fast with an offer. What I have found using MLS that I eluded to a little bit in the last sentence is that if I am able to get to the offer point first it is probably because it was not really a good deal and the more experienced investors recognized it faster than I did.
Bottom line, I would look at the MLS but I would not count on it if I am looking for a house to flip or wholesale. You can still find investment properties on MLS if you do not mind paying a little too much. Keep in mind when I say slightly overpaying I DO NOT mean paying more that the house is worth. I still will not buy an investment property unless I have built in equity. I want a deal
Wholesalers
Some people in the investment community hate wholesalers. I do not, they can really help new investors.
Just in case you do not know what a wholesaler is let me give you a short definition. A wholesaler has typically
done all the work to set up a way to find cheap houses and they want a cut for doing that. How much that cut is varies. I would say between $2,000.00 to $10,000.00 depending primarily on the overall value of the house in question.
A wholesaler typically eithers purchases the house or gets it under some sort of binding contract they can pass on to you. I like to work with wholesalers that are typically large investors that have actually purchased the house. You will have to pay a little more because they will have more invested in the property as compared to a smaller wholesaler that just gets the house under contract and then assigns it to you.
I think the reason some investors do not like wholesalers are two fold. One is they are competing for the same houses the investors are with no intention of buying them which means the investor may ultimately be negotiating against themselves if they are not careful. The second reason I think the investment community does not like wholesalers is because some of their contracts are dubious to say the least. There is also a lot of grey area in what is legal especially if you are working in multiple states.
If you want to be a wholesaler make sure you understand the law. I would recommend a good real estate attorney if you are serious.
But, for our purposes as a small investor they are great. Many small investors do not want to put forth the effort to build a network of cheap house leads coming in which means working with a wholesaler can be a perfect solution to all involved. If you can become friends with a wholesaler you might even be able to get them agree to more of a finder’s fee as opposed to a normal wholesaling agreement. This just means that the wholesaler never takes control of the property or any paper that gives them control. You could still pay them their normal cut or maybe a reduced one since they have less effort.
The advantage to you and the home seller is this is a much cleaner way to do business. The advantage to the wholesaler is they have no risk and do not have to worry as much about doing something illegal. The major disadvantage is to the wholesaler because they are effectively relying on a hand shake agreement between you and them for you to pay them their cut.
I guess you could come up with some sort of contract between you and the wholesaler for their finder’s fee. Just be careful how it is worded. Again, I recommend getting an attorney to help you.
Third Party Software
There are sites and services that will help you sort through a lot of data and have it delivered straight to your inbox or to the screen with an active search with potential cheap houses to buy.
As I am writing right now I pulled a site we use and it is analyzing over 6.5 million houses for potential matches based on our criteria. There is LOTS of customization with the service that can find about any type deal you are looking for. As I said it is highly customizable and can really shorten your search.
Because of the power of the software they have made videos to help you fully utilize the complete power of the software.
This is a great short cut, starting point or an add on to help you find the investment properties you are looking for. Again, based on the criteria you enter.
Just to give you an idea of some of the filters, you can search for Motivated Sellers, Negotiable Deals, Cash Deals, Wholesale Deals, Underpriced Deals (I like this one) For Sale by Owner, No Relator, Landlord Ready, Landlord Tenants, etc…
There are a BUNCH but rather than rehashing another article here you can click below to see the power of the software.
You can CLICK HERE for more information.
Auctions
Auctions can be a good place to find cheap houses for sale to purchase as a real estate investment property. They are two primary types of auctions I am referring to when I speak of auctions here. One is a foreclosure auction the other is some sort of an estate auction. The foreclosure auction often will have the best prices but you could run into so title issues if you are not careful, again consult your attorney before attending a foreclosure auction.
I like auctions and have purchased properties at them. I prefer the online auction to the in person auction but that is really just a matter of personal preference.
Although you can get a good deal at an auction there are a couple of things to keep in mind.
- You will probably have to pay for the house in 24 to 48 hours or lose your deposit which is required before your bid.
- You will probably not be able to get financing going into the auction and since you have to pay for it completely so quickly there is really no time to get any normal bank financing in place. You might be able to borrow money against another property to use, other than that you will need cash.
- Many times you do not get an opportunity to do a proper inspection. This means you could buy a cheap house only to find out the foundation is collapsing. There are no refunds, you own the house good or bad so BUYER BEWARE.
I still like auctions but you are taking a substantial risk if you cannot at the VERY least do a walk through before the auction. I recommend an actual home inspection but at least a walk through.
Auctions may not be for the new investor even though there are deals to be had. I will admit that I started fairly early purchasing real estate at an auction in my real estate investing career. My first one was going to be a flip but I misjudged my expenses, ended up with a great rental property with built in equity though. Guess I cannot complain.
Direct Mailings
Direct mailings to me are the shot gun approach to finding cheap houses. The way the process works is you find an area you want to target. Typically (refer to our home page), you want an up and coming area that has houses for sell in the ideal target rental range of the greatest number of renters in your area. Then, mail everyone in the area a letter or post card telling them you are an investor interested in purchasing certain types of houses. To get the best deals you will probably have to say you can close fast. You might also want to include you are looking for houses that need work, otherwise you may get a bunch of responses from people want to sell their homes at a premium which is not what we are looking for. Of course, this is if you are looking for investment properties.
I probably would not use this method looking for a home to flip. Flip deals are special because of how cheap you need to get into the house. I think there are better ways to find a potential flip deal that is more targeted even if you want to do the mailing method. In fact, see below.
I have never used the direct mail method.
Drive, spot and stop (ugly houses)
One great way to find houses to purchase is to drive around the areas you have targeted and look for
distressed and run down (ugly) houses. This is the rifle approach to the direct mailing shot gun approach method.
To me this method makes more sense than just mailing everyone in a neighborhood. By selecting houses that at least look like they might meet your criteria you have a better chance to find the cheap house deal you are looking for. Yes, you might miss one or two as compared to the direct mailing method but I believe overall this is the better method of the two.
Look for properties for rent by driving by or in advertisements.
I love this method of getting a good deal on a cheap house. In fact, I once sold a property I had to another investor this way. He got a good deal and I got out of a house that I no longer wanted (I had moved to another state).
Basically what you are trying to find using this method is investors who only one a house or two and have become disgruntled with being a landlord. They are really just searching for a way out but have not yet taken the initiative of trying to sell their property. You are going to sweep in and offer them a solution to a problem they did not even realize they had yet.
Why do small investors become disgruntled? Typically they are trying to run their rental property themselves and end up with a bad renter or two and are tired of the hassle of managing their properties.
Normally this method only works with investors not using a property manager, although you never know an out of state investor might sell a property even if they are using a property manager. Never hurts to ask.
Other Investors
Other investors are a great source of leads. They might even have properties they would part with or in the case of a flip they might partner up with you. Keep in mind these are investors so they will want to make something but if you are just starting out it is really no different than using a wholesaler.
You can usually find investor groups in your area by searching Facebook, Craigslist or the internet. If all else fails just call some property managers in your area, they might be willing to help you find who the investors in your area are. Realtors work also, see below.
Advertisements (newspaper, craigslist, social media)
If you are looking to find cheap houses, let people know. The houses are not going to email you themselves or
knock on your door. People need to know what you are looking for and what you want.
Put advertisements in the newspaper, Craigslist or on Facebook saying you ‘buy houses, any condition’.
Reach out to your friends on Facebook, Twitter, Pinterest, Instagram, etc… and let them all know you want to buy houses cheap. Let your social media make you money instead of sucking up all your time for a change.
Cultivating relationships with realtors
Many realtors will help you find deals. You will probably not get the deals you would get if you did it on your own because if a really good deal did hit their desk they would probably have large investor friends they are working with that will snap it up. But they can still be a good resource when it comes to certain types of auctions and in helping you get introduced into the investor community at large.
I have found some good deals working with realtors when I was looking for rental properties but not if I was wanting to flip a house. Just too much competition for their time to pass those deals on to a beginner.
Bandit signs
I put bandit signs here as their own entry even though they really fall under advertising which I spoke about
above. I put them here because they are so different. I actually HATE to see these things up everywhere, but they work. If you want to build a huge number of leads this is probably the fastest way to do it for a newbie.
I would recommend you use a temporary or google voice number on the bandit signs. You will get lots of calls and not all of them may be friendly.
Another thing you can do which I think works great for a newbie is call the number on the sign and ask what houses they have for sale. They have already done the work or finding houses, see if you can get them to wholesale on to you. If I were looking for an investment property and did not have any leads I absolutely thing this is a great idea.
Other
I think I could write for hours more on how to find cheap houses but I am going to close with just a few more very rapidly.
Obituaries. Many times when someone dies there is going to be a house for sale. Kind of a touchy thing to reach out to their family and I do not personally do it but it works.
Divorces. Similar to obituaries but if you are lucky enough to contact the angry spouse you might get a great deal.
Friends and family. Kind of like social media above. Let them know what you are interested in and have them keep an eye out. The more eyes you have looking the more you are likely to find.
Good luck and keep checking back for more information.
Please put comments below if you have any questions (or comments).