The MLS may seem like a great source of deals…but in truth it’s really hard to find a deal without getting lucky.
If you’re new to real estate investing, you’re likely shooting yourself in the foot with this mistake: You read all about the profit real estate investors make through a blog post or maybe a book and then decide to jump right in. You think, “Okay, I need to find deals where I can increase the After Repair Value by enough to cover all the costs and still leave a nice payday for me.”
Good thinking so far. So you start browsing the MLS because that’s where you find properties, right?
Well, not me. Instead, I go off the MLS and source properties that no one else knows about. Leave the MLS listings for suckers who want to get into a bidding war and lose any potential at massive profits. But how can you find these properties? Keep reading because I’m going to show you how. Let’s dive in.
Wait, What’s the MLS?
Definition: The MLS or Multiple Listing Service collects all real estate listings for sale in your area. Real estate agents had access to the MLS, but now anyone can use it. If you’ve been on a site like Zillow or Redfin to look at the current properties for sale, then you’ve used the MLS.
Why Shouldn’t I Use the MLS?
Look, I get it. Using the MLS to source properties is a low barrier of entry. I mean, all the properties listed on it are there because they’re looking for a buyer, right? But there are a few reasons you shouldn’t solely rely on the MLS for inventory:
Everyone else is doing it, too – When people looking for financial freedom first start out, they usually look for the easiest strategy first. They want the money without putting in the hard work to hone their skills. And because it’s so easy to browse the MLS, everyone else does it too. That means sky-high competition.
You make less profit. – Even if by some miracle you find a potential deal on the MLS, odds are that the profit numbers won’t quite work out the way you’re hoping. A deal like that will have a dozen other investors bidding, naturally driving the price up through a bidding war that helps no one besides the seller. Whoever does buy the property will be looking at razor-thin profits if they’re lucky.
How Do You Find Properties Without Using the MLS?
The goal for sourcing off-market properties is to find houses with problems that need to be solved quickly.
You want to target people who are going through life transitions and the property is no longer in their plans. Or, they’re so fed up with a property they just want to be rid of it. Either way, you must have a strategy for targeting these people before they put in on the MLS, or many other investors catch on that this is a great person to market to.
Here are a few of my favorite types of people to target:
- Probate Properties – this is when someone inherits a property. Often, the inheritors don’t want the property itself and either want to cash out and split the money among the remaining family instead of dealing with the costly maintenance, especially if the property is out-of-state for the majority of the family members.
- Out-of-State Landlords – I love targeting these people because I know firsthand how frustrating renting out properties can be. It can be a headache if you live in the area – let alone if you’re out of state. Often these landlords/owners are just done with the property and are willing to let it go at a discount just to be rid of it.
- Properties with High Equity – People won’t be willing to sell their property at a discount if what you’re offering doesn’t cover what they still owe. If they own it free & clear, they’re more willing to make a deal because all that money goes straight into their pockets. I often stack this strategy with others (i.e., high equity properties with a tax lien over $10k).
The easiest and most effective way I’ve found to source inventory like this is by my Driving for Dollars method.
How Driving for Dollars Works
Driving for Dollars is my favorite method for inventory sourcing because it works so well. There’s some nuance behind it, so I’d recommend checking out the video above where I get into the nitty-gritty, but essentially it works like this:
Hop in your car and start driving through neighborhoods. You can even start in your own neighborhood if you want. You’ll need to look at houses through the lens of a problem solver and not a speculator because you’re looking for homes that are currently occupied but are in a state of disrepair. You’re looking for things like:
- Unkempt lawns
- Holes in siding
- Bad roofs
- Peeling paint
Basically, things that show there’s not a lot of effort being put into the maintenance that goes along with owning a home. Now, there could be any number of reasons the property looks the way it does, but in my experience, there’s typically an issue that could be solved by liquidating the property over to someone like you.
Once I have a list of potential properties, I start researching who the owner is and how to contact them. Some investors like to send postcards in the mail, but I like just calling them up and asking about the property. I know cold calling gets intimidating for some, but the more you do it, the better you’ll get. Real estate investing is a numbers game, so you’ve got to get out there and give it a shot. Here’s the script I use; feel free to tailor it to your own voice.
From there, I’ll either move onto the next phase that we all do: checking out the house, making an offer, etc., or try another property if the owner isn’t interested. Rinse, repeat, profit.
Using the MLS is fine if you’re looking for your own home but getting serious in real estate investing means finding ways to source inventory without stiff competition. Start branching out now to find other off-market strategies that work for you—I’d start with Driving for Dollars that we talked about above!