How to Find CHEAP Rental Properties (Off Market Deals)

Sharon Tseung 0:02
This is the digital nomad quest podcast with Sharon Tseung. teaching people how to build passive income, become financially free and design their best lives. Hey, guys, it’s Sharon Tseung. And today we’re gonna go over how to find rental properties, and especially finding cheap deals in a tough market. So I know the feeling firsthand, especially in a tough market, it’s really hard to find good deals, when you find when you end up having a ton of competition, a lot of people are bidding against you. And it’s just really hard to get these homes. But in reality, there are actually a lot of deals out there. And you just need to know the different ways to get them. And let’s also go over what a cheap deal is, like I mentioned, right? It might seem like an amazing deal to buy something under $100,000. But that might not always be the case, maybe you buy something for $50,000. But it’s negatively cash flowing, that’s not going to be a cheap property, that’s going to be something that continuously costs you money. So what is a cheap property anyway, what is the type of deal that you want to look for? Well, basically, it’s an under priced property for sale, discounted below market value. Usually, when you get these deals, though, they’re going to be distressed properties, meaning you’re going to need to spend some money fixing it up. Or maybe it’s owned by someone who is in a distressed situation and is motivated to sell because of their financial situation. But even though you’re buying something that needs to be fixed up, usually you’re gonna get it at a good price, because it’s kind of messed up, you can bring the value up with forced appreciation by renovating that property. Now, it’s usually a good deal to buy a property at $100,000, that’s worth $150,000 and market value in a specific area. Or maybe you buy distressed property at $100,000, then put in $50,000 of work. And now it’s worth $250,000, those are generally going to be good deals, one thing you can do is use the price per square footage formula. This lets you look at homes Apples to Apples equally, because you’re looking at it per square foot and not by the total price. So in order for you to calculate it, you’re going to divide the purchase price by the square footage of the home. So for example, if you buy a home at $200,000, and the square footage is 1500, you divide 200,000 by 1500. And you’ll get around $133 per square foot, you use this calculation across all the comparables that you’re looking at. And you can basically see if you have a good deal or not another way you can find a good deal is getting extremely high cash flow for what you’re paying for. So I aim usually for a cash on cash return of 10 to 12%. But maybe you get an amazing deal of 20 or more percent of cash on cash return. Now what is cash on cash return? It’s basically your annual pre tax cash flow divided by the amount of money you put into the deal. So say you get an annual pre tax cash flow of $10,000. And you put in $50,000 into the deal, well, that’s going to give you a 20% cash on cash return. And that’s usually going to be a good deal. Especially if it’s one work, you have some good tenants in place, you have a property that’s appreciating in value, most likely, that’s going to be something that you want to look into. Because in the scenario, if everything is good, you’d essentially be able to make back your money in five years, but also have a cash flowing rental property that has equity in it, that’s gonna keep increasing in value over time. So that’s why it’s important to look at the cash flow numbers and the cash on cash return. Now when you’re looking for cheap properties, you also kind of want to know what your exit strategy is. So even with high cost of living areas, if you’re averaging $1 million per home and you find something at $700,000, you can fix it up at $100,000. It can be a good deal if you’re going to sell it right away. But if you’re trying to use this to cashflow, that deal is probably unlikely to cashflow because of its high price unless maybe you can do a short term rental and get a lot of gains for it. We basically went through this situation of living in a high cost of living area like the Bay Area, California. So we ended up looking at estate and we started buying outside to Florida, Texas and Georgia and more affordable markets. Now we’re at 34 units, which has helped us leave the nine to five world we’ve been able to buy properties at under $200,000 or even under $100,000. I’ve even picked up a property at $23,000 in Texas and one at $14,000 in Georgia. So there are many markets that actually have homes under $100,000. So as a quick recap, you have to kind of see if you want to invest locally or out of state, you want to make sure you understand your exit strategy if you’re flipping or if you’re going to pull that as a rental property. You also want to see if you have good cash on cash return for it as well as you want to see based on price per square footage if you’re getting a good deal. Another thing I want to mention is with rental properties you want to look at locations with appreciation potential. I’ll make another video on this about researching locations but you don’t want to buy in places where there isn’t demand for the area and your home price is likely to decrease He’s now if you’re interested in buying your first rental, whether it’s out of state or not, go ahead and check out remote round riches. There’s a link in my description because we go over step by step how to do it, and we’ve had over 1000 Happy students. Alright, now let’s get back into it. I know this is kind of a long intro, but I just really wanted to make clear what a good deal actually looks like. So hopefully, that helped. And now here are some of the best ways to find real estate at a lower price. First, you can connect with agents and wholesalers who send you deals, this is one of my favorite ways to do it. And usually when you want to meet these different players, you’re gonna have to do a lot of networking. Networking is huge in real estate, because you might meet the right person who’s gonna refer you to the right contractor, or who’s going to send you a deal that you might end up pursuing. This actually happened to Sean and he was able to get a deal and make six figures on it from a flip. Now I mentioned wholesalers on top of agents. And if you don’t know what a wholesaler is, wholesalers get properties under contract and they sell the rights to purchase the contract to a buyer for a finder’s fee. So they’re the ones spending the time to find listings through Facebook ads going door to door and other different things. So you connect with them. So you don’t have to do this deal hunting on your own. Yes, you’re gonna have to pay the finder’s fee. But a lot of times when we buy from wholesalers, it’s usually still a good deal, including that finder’s fee. So in order to meet these different players, you’re gonna want to go to meetup, start connecting with agents and wholesalers, maybe even take them out for a cup of coffee. One of the things Shawn did was when he started going to meetups, and he was just an aspiring investor. He wasn’t a seasoned investor yet a lot of people didn’t want to talk to him, right. So he started volunteering at the meetups as the check in boy so that he could provide some value and then people would be more willing to provide him value as well. When you’re talking to these people, you can let them know you’re an investor, you let them know your buying criteria. See if agents and wholesalers can send you off market deals as off market deals are usually the best deal. And when you’re doing this, you want to make sure you’re vetting the people you work with make sure you’re analyzing numbers, not just trusting their word on it so that you can make sure you’re doing your due diligence and not getting scammed. Number two, you can find deals on bigger pockets. So your pockets is a great resource to find deals because it is essentially the place for real estate investors to connect with each other. I have over 2 million members all interested in real estate investing. That property that I mentioned that I purchased at $23,000 was actually through a wholesaler that I connected with on bigger pockets, you can go into their tools section and then go into real estate listings to find properties in locations that you desire. I would say the annoying thing about that is there aren’t that many good filters like days on the site. But they did add the map on the right to see location which is very nice. If you want better filters, you can get the pro membership to filter for cash on cash and cap rate. You can also go into the forums and you can start connecting with people there to see if you can get some good deals. Number three is Facebook groups. And you’d be surprised what you can get our Facebook group we bought this moldy House Project two years ago at $120,000. We found that one on a Facebook group that property ended up appraising for $330,000 After we fix it up with $80,000 is an extremely good deal. So you can find these different ones on Facebook groups. For example, you can go and search for Ohio investors and you can see their groups like this Ohio real estate investors group or Ohio real estate investors, cash buyers and wholesalers networking group all these different ones are ones where people start posting deals and you might be able to find a good gem that you want to invest in number four is to look on the MLS and this is quite an obvious one but actually we found a lot of good deals through this. So

the MLS is the multiple listing service which is a tool real estate agents used to share information with each other about on market home so most people don’t have access to the MLS so you can use sites like Redfin and Zillow, that pull from the MLS. Another cool thing is if you look at Zillow, you can actually click on more than go to listing type and select by owner and other as well to see people who aren’t working with agents. And these are going to be properties listed for sale by the owner. So this is kind of like looking for off market deals in that way. So what you’re gonna do is look for Ugly homes in nice locations and listings that have been on the MLS for a long time. You can filter this on Zillow, where days on market you can change it to something higher so that you can see that these homes aren’t selling and maybe you can give a lower offer and actually buy the property. This actually happened when we bought our Dallas home I found this listing went pending and then went back on sale because of buyer’s financing didn’t go through though then when it came back on I decided to pull the trigger and put in an offer right away and I basically said look, if you don’t want this offer in X days, I’m gonna pull this offer a way that I could give them some type of urgency because I knew I had the upper hand and their property didn’t go through the last time they were probably more willing to take whatever they could get and make that sale number five is As you can contact homeowners, instead of going to wholesalers, you can basically go straight to the source and contact homeowners to see if they want to sell their home to you. So you can use prop stream, it’s one of the best tools to get these lists so you can contact homeowners. And when you do this, you’re going to want to filter it down, maybe you want to find an owner occupied property, you want something residential, maybe some single family home, let’s say three bedroom, one bath, maybe not on market. So you’re looking at those off market properties. And you can even filter by estimated equity of 35% or more, you can do occupied for occupancy status or ownership, let’s put 10 years or more of ownership. So prop stream lets you filter all these different things. And then you can see all the homes that correspond to it. Once you have these listings. You can do direct mail, or you can cold call these homeowners, you can even go to skip tracing here, which is 10 cents per property to get their phone and email information. Or you could just send out through postcards. So if you’re interested in Prop stream, it’s such a great way to start doing it yourself, you can go through the link in the description below and through my link, you can actually try prop stream for free for seven days. So you can see if you like it or not another way of contacting homeowners is by driving around a neighborhood and directly knocking on their homes to see if they’re going to be interested in selling you their home. Next you can use Craigslist. So I haven’t found a property through Craigslist yet. But there are so many properties that are listed there that could be untapped potential, I have a friend who’s bought amazing deals on Craigslist. So for example, if you go into Kansas and you go into real estate for sale, you could possibly sort by price, you’d have a price minimum. But in a bedroom bathroom count, a lot of times I like to look for has image so I can see what the property looks like that way you can start getting results and contacting those people to see if you can score a deal. Next, you can do auctions. So you can find auctions through local government, real estate agents and online sites like auction.com, or Shawn actually buy property through auction.com as well. But be mindful that you’re gonna usually need to come at it with all cash, they also don’t really allow a home inspection, you can’t really check the interior, you’re just basically buying it as is. So try out these different auctions, you could potentially get a really good deal here as well. Lastly, I want to mention that you can create your own website, I mentioned this, because I do have a blog that I’ve owned for many years now almost six, seven years. And you can actually get a lot of traffic to your website. If you’re able to rank a website for a keyword like I want to sell my home in Kansas or something like that, it can be very powerful, because these are motivated sellers want to actually contact you if you can attract a bunch of these people to sign up for your form, you’re going to have a ton of leads. And when it comes to SEO, Google is going to rank your site. And if you have a good credible website with a high click through rate and a low bounce rate, they might end up signing up for your offering. Another thing is when you’re doing this, you want to get more backlinks. So if more sites are linking to you, especially the ones that are more relevant and high authority, it basically shows that these websites are vouching for you. If you want to learn more about how to build up a site and a blog. I do have a course called Blog launch profit, you can check it out through the link below. And that essentially helps you build up a website to get views to get traffic to essentially build it into a business. I hope you guys enjoyed this episode on different ways to find cheap rental properties. So don’t give up on trying to buy a property especially in these tough markets. You can definitely get something and at a good discounted price. I’ve done it multiple times. I’ve gotten a lot of good deals over the years and having one good deal can honestly set you up for life my $23,000 property I put in $33,000 more that one is worth 100,000 Plus now and it cashflows me about $1,000 a month which is amazing. So I hope you guys enjoyed this episode, please make sure to rate review and subscribe. It really helps our podcast grow. And thanks again. I’ll see you guys in the next one.

Transcribed by https://otter.ai