When you think of how to find an income property, what comes to mind? Is it checking MLS, ViewPoint, or another similar real estate website?
If you said yes, then you’re off to a great start. Every time I talk to first time home buyers or people in the market for their first income property they tell me, “Oh don’t worry, I’m on MLS every day”. And that’s awesome! You should be. Keeping an eye on these sites and watching your local market helps to give you a really thorough understanding of what a fair price for a home in your neighbourhood should be. However, these sites are just the beginning. There is SO MUCH MORE out there. I am by no means an expert in lead generation of real estate deals, but I will give you a glimpse of a few tactics I’ve either used in the past or plan to use in the near future.
Kijiji/Used Victoria
I know I’ve referenced using these sites a bunch in previous posts for gauging you rental market, however, this time I’m talking about using them to find properties to purchase. It takes a bit more digging to sift through the properties that you might be interested in (in contrast to simply throwing some filters on MLS and having the site bring up relevant properties), but your digging could pay off. Big time.
I have still yet to broker a private deal, but it’s on my list of things I want to try in the near future. There is more risk to a private deal, but it could save you a good chunk of money. Especially in markets that often bring competing offers, a private deal will have less eyes on it and therefore less competition. Furthermore, the seller is motivated to sell privately in order to save on commission fees (usually around 5% of the selling price). As a buyer, you don’t pay any real estate fees, but you may be able to work the seller down further in price than you would be able to in a traditional deal because s/he’s saving that 5%.
In terms of risks involved in a private deal, there are a few to mention. To start, you’re negotiating your own purchase price & conditions rather than having a third party (realtor) do it for you. So this may be a more stressful experience. Moreover, you’ll have to either write up the legal paperwork yourself or hire a lawyer to write it up for you. In the latter case, you’ll be paying a bit more in legal fees, but if it saves you $10,000 on the purchase price to broker that private deal, then it's worth it. I would also caution that you find a lawyer that you know and trust if you are going the route of seeking private deals.
Real Estate Agents
I love real estate agents. I have worked with many in the past, some good and some not so good, but ultimately, if you find a good one, they will either bring you a smoking deal, or else negotiate hard on your behalf to save you money when buying. Furthermore, if you are new to real estate, an agent can explain a lot of the legal jargon to you and make you feel a lot more comfortable during the purchasing process. We work with a main realtor right now, but I am always happy to connect with other realtors to explain to them what I am looking for and let them know to send me any decent looking income properties that might come their way. It’s a win-win situation if I end up buying their listing!
Brokers
I haven’t actually done this one personally yet, but I’ve attended real estate investing seminars where they talk about leveraging their broker. What the speakers in the seminars have outlined is mentioning to their broker the type of property they are interested in, and if the broker sees anything that comes along their desk that fits that criteria, they call up the buyer. I’ve seen this in “rent-to-own” scenarios, where an external buyer (i.e., someone else buying) couldn’t immediately qualify for financing, so the broker reached out to the investor (i.e., you) to privately loan the money to the person who wanted to ‘rent-to-own’. It ended up being a mutually beneficial scenario for both buyer and buyer-turned-financer, so it's always a good idea to let your broker in on your investing plans.
Other Investors
This is one that my partner (fiancé!) is VERY good at. I have a few investor friends on my docket (gaining more each day with this blog!), but through his work (finance), he meets a lot of successful real estate investors. With each investor he meets he is really good at building a trusting relationship initially, and then seeking their advice. What I’ve realized with people who invest in real estate is they are always happy to share their knowledge. If they’re anything like me, they’re chomping at the bit to answer people questions and get into heated debates about real estate investing. In the past few months through conversations with investor friends we’ve realized that if they've found a good property but can’t move forward with it due to whatever reason, they are happy to pass it along and recommend it to investor friends. We have had a few situations in the past couple of months where friends have recommended properties to us that had a good cash-on-cash return. So, talk to anyone and everyone that you can about real estate investing. I guarantee at the very least they’ll be happy to listen and offer advice.
Direct Mail Campaigns
Ever heard of direct mail campaigns with respect to real estate investing? This is another one that I’m dying to try but it’s all about TIME. As anyone in sales or business development knows, lead generation takes time. I look forward to the day that real estate investing can be my full-time job and I can actively take part in all of the lead-gen activities mentioned above. But alas, I’m not quite there yet. And direct mail campaigns take the most time out of all the scenarios listed above. Basically, it’s sending out mail to people saying, “I want to buy your house!”.
But it’s more than this.
If you want your mail campaign to be successful, it needs to be personalized. And you want to essentially make an offer right in the initial letter. You also want to choose the houses you offer on, wisely. This might involve driving around the neighbourhood you’re interested in, jotting down addresses of houses that you think could be profitable, and then writing those individualized letters.
And then, you wait.
I’m not sure what the rule of thumb is for percentage of people who respond to direct mail campaigns, but I know it’s not high. So you’re going to have to put a lot of work into only a few potential deals. However, buying ‘off-market’ properties could be the biggest money-saver of all the tactics listed above, so it’s not one to quickly dismiss. Ultimately if you have the time to do a direct mail campaign, I would say do it. Just be prepared to lick a lot of envelopes and wait patiently for a phone call (or two!).
So, what lead generation activity do you think you’d enjoy most? I’d recommend partaking in all of them at some point in your investing future.
Another (highly recommended) tactic you can try is sending your cute golden retriever out to houses to deliver your direct mail campaign. Who can say no to a golden retriever bringing mail!?
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