How To Buy A House Like A Real Estate Investor: Part 6 – Finding The Right Property

Sat, May 31, 2008

First – know what not to buy!
Image by superciliousness

Real estate investors use many methods to finding investment properties.

They network with lawyers, bankers, accountants, subscribe to legal publications, and so on to discover investment properties and possible motivated (flexible) sellers.

As a normal homebuyer though, you probably won’t contact lawyers and accountants or subscribe to legal forms to investigate who’s going through a divorce or getting ready to file for bankruptcy.

Let’s then take a look at a few practices and insights investors use to locate a property that typical homebuyers can learn from and use.

What You Should Avoid

Ever see the show, What Not To Wear?

In short, the two hosts are fashion experts who find people who dress out of style and give them a wardrobe makeover that will turn heads and make a person feel in style.

Just as the two hosts tell people what they shouldn’t wear because it’s not in style, so should you avoid houses that aren’t in style. Therefore before you begin searching for houses, you should know “what not to buy.”

Here’s a quick list of houses I would avoid buying. One of the primary factors in considering a property, especially for younger people, should be the mentality that one day you’re going to probably sell it – so buy a house that appeals to the largest community of buyers.

Avoid buying in declining neighborhoods as the value of your property may go down.
Try not to buy a house with less than 3 bedrooms and 2 bathrooms. When it comes time to resell, most family buyers will avoid 1 and 2 bedroom houses.
Cosmetic fix-ups are ok, but avoid houses which require major repairs (such as foundation issues).
Watch out for lead paint.
In today’s buyer’s market, if a seller isn’t flexible or motivated, move on. There’s plenty of sellers out there willing to work with you.
Mold. A little mold is ok, but unless you’re prepared to rip out a lot of drywall and do some serious repairs, say no to mold.
Unless it’s the perfect house or you get a steal, don’t buy where it’s noisy. When it comes time to resell, the noise will turn away a lot of buyers.
Beware of “Sold As Is, No Warranties.” You can expect bank-owned properties to be sold in this way, but if an individual seller is advertising this, beware.

How To Find Properties As A Typical Homebuyer

Realtors

Most people hire a Realtor when looking to buy a home. This is usually a good idea, especially for those homebuyers that don’t know what the terms escrow and a due diligence clause are.

Just remember, Realtors are also salesmen and women, so choose one wisely.

Websites to buy and find houses for low prices

To locate properties yourself, use websites like ZipRealty to find homes online in your price range and desired location. Also, drive around in the location you want to buy in and make a few notes. If you see a house for sale but there are no fliers in the sign’s box, jot down the address and look it up online using either ZipRealty or Zillow.

While you’re on Zillow, don’t forget to look up the approximate price Zillow thinks this property is worth and view sold comparable homes in the area, noting how much they sold for.

Here’s a list of other resources I like that you can use to locate properties on the Internet:

IRS Tax Auctions – homes for sale by auction that the U.S. Treasury Department has seized or acquired for nonpayment of internal revenue taxes
Homes for Sale by the U. S. Government – umm, these are homes for sale by the U.S. Government
REDC – another auction search website
RealtyTrac – one of the better known foreclosure search websites
ForeclosureFreeSearch.com – a not-so-free foreclosure search website (free period is limited)
Bank Owned Properties Directory – search homes for sale by each bank
Ocwen – search REO properties
Realtor.com
FSBO.com – For Sale By Owner search
Craigslist – one of my favorite resources (I sold my last house for free using this website)

Ok, that should get you started.

Scouting

Another option is to scout for homes by simply driving a different way home from work or the store each time. You can also cruise the location you want to buy in and scan for homes (don’t forget the pen and paper – and gas card).

*Bonus Tip #1

If you come across a home that is advertised “For Rent” or “Lease-Option,” don’t hesitate to contact the seller and ask them if they’d be willing to sell. Many times sellers advertising Lease-Options are flexible sellers.

*Bonus Tip #2

If a house appears vacant and there is no for sale signage, don’t assume the owner won’t consider selling the property. Look up who owns the property on your local Assessor’s website, here’s the one for Las Vegas, NV, and contact the seller with an offer to buy their vacant house. Let them know how they could save thousands of dollars in Realtor fees by selling to you.

Again, investors use many methods to find properties to buy. Their best assets when it comes to buying homes is information. They get this information through research and networking.

Most normal homebuyers won’t have the networking in place investors do; however, they can always research.

Entrepreneurial

6 Responses to “How To Buy A House Like A Real Estate Investor: Part 6 – Finding The Right Property”

Barbara Swafford Says:
May 31st, 2008 at 1:11 am
Hi John,

I love the show “What Not To Wear”. The transformations are phenomenal.

This sure is a value based post. I have heard of a few of the links you listed, but not all of them. I’m going to check them out and see what I can learn.

So….you sold your last house on Craigslist? How cool. Will you be sharing your story on that as well?

Barbara Swafford’s last blog post..Be Inspired By Nothing
John Hoff Says:
May 31st, 2008 at 1:32 am
Hey, it’s 1:15am. Aren’t we suppose to be early risers? Yeah . . . I can’t sleep, too.

I hope people find those links useful, I do.

Yup – sold my last house on Craigslist Las Vegas. My dealings with Realtors and that house is a story. Maybe I’ll talk about it in my “selling” series.

Here’s how I sold it.

I advertised the property for sale by owner on Craigslist. I advertised the property at market value price but offered excellent terms. I offered to pay up to 3% (all of) my buyer’s closing costs and as a down payment I would except a 5% down payment in the form of a Zero-Coupon Municipal Bond (bonds you can buy for half the price of it’s face value).

So, she made a 5% down payment to me for spending only 2.5% of her money.

Took me 3 months to snag a buyer.

Perfect example of how most people don’t understand the benefits of offering or getting good terms vs. low price.
John Hoff Says:
May 31st, 2008 at 9:31 am
Oh and if you have an account, a stumble or digg would always be nice if you think others can learn something
Barbara Swafford Says:
May 31st, 2008 at 10:46 am
Yeah, it was a late night for me. I knew I could sleep in, so I was clearing out my reader.

Thanks for the reminder. Last night I thought “this post is worthy of a Stumble”, then I started clicking on the links, got tired and spaced it out. I’m headed to SU

Barbara Swafford’s last blog post..Be Inspired By Nothing
Henderson Says:
March 11th, 2010 at 8:49 pm
This is in my opinion one of the most important steps. I cannot stress the importance of researching before you even begin to look at homes. What’s surprising is that so many buyers just rush into looking at properties without a basic idea of area information, and usually the result is some sort of surprise later they had no idea was in store for them. Why take the chance? Do the research.