Know Your Farm Area
First and foremost, when buying investment property, you need to get to know the areas where you will be making offers. Your “farm area” is the area where you intend to concentrate your marketing efforts. You can get a lot of this information from the MLS (Multiple Listing Service) by doing a search of all the homes that have sold in that area during a specific time period.
Another good way to find out the values of homes in a particular area, is to get in your car every Sunday and hit all of the open houses in your farm area. When I first opened my home inspection company many years ago, that is exactly what I did. I took a coffee mug full of “goodies” (a pen and pad of paper with my company name and logo, some chocolate, mints, a tea bag to make a cup of tea, etc) and gave it to the agent. I introduced myself when I arrived and spent a short time chatting with the agents. In the early years this really helped me to build my business.
Working With Real Estate Agents
You can use this same principal of going to open houses to meet with real estate agents when buying investment property. It will not only help familiarize you with the general area, but it will help you to determine what homes are selling for in your target area. A Realtor that works in your particular farm area is a valuable source of information when buying investment property. When you arrive, introduce yourself and hand out your business card. Let the agent know that you are an investor and that you are doing research in your target area. Ask them if they ever work with investors. If they do, ask them to add you to their list so they can give you a call when they have a house that might meet your specifications.
Agents get houses all the time that are in need of a lot of repairs or are just plain “junkers”. When a Realtor gets a call from a repeat customer that says they have a run down rental in a bad part of town that they have to unload, that agent just cannot say no to this person. They have to take the listing. The agent really doesn’t want to invest a lot of time and advertising dollars on this house to get it sold. If they have a list of people buying investment property that they can call and quickly sell the house to, it is a win-win for everyone. You get a great deal and they look good to their seller!
Agents have “pocket listings” all the time. “Pocket listings” are houses that the agent has just put under contract that has not even made it onto the MLS. It is a brand new listing. In most areas there will be a specified time during which the house must be entered into the MLS; this may be within 24 hours after the listing is received. Whatever this requirement is, there will usually be a short time period where the agent can simply call his or her “list” and try to get it sold. This saves the agent a lot of headaches not to mention that they will get the entire commission. Having an agent on your team that will let you know about “pocket listings” helps to feed your “buying machine” when you are buying investment property. Once again, it is a win-win for everyone.
Working with Landlords
Another thing I like to do when buying investment property to get a general idea of the market in that particular area, is to call on houses for rent. Knowing what a house will rent for in a particular area is invaluable to a real estate investor. If you are looking at buying a rental house and your estimated payment will be $700.00 dollars per month, knowing that they typical house in that area will only rent for $600.00 per month just saved you from making what could be a costly mistake. You have just learned that this is probably not the house to buy. Call a few landlords and see what the average house rents for in your farm area. A wise investor uses all the tools available to him that will help him make a sound decision when buying investment property whether it is to flip or hold as a rental unit.
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