So you’ve learned about the market and decided which type of property you should invest in. Now it’s time to find properties that match what you’re looking for. There are several ways to go about this and we’ll show you how to find houses to flip.
- Get an Agent
- Talk to Wholesalers
- Look for Auctions
- Join a Real Estate Investment Group
- Search the MLS
- Digital Classifieds
- Additional Options
1. Get an Agent
If you aren’t too familiar with the area where you’re looking at houses, consider adding an agent to your flipping team.
Acquiring an agent can be an effective way to fast track or your search for a house to flip. An agent will know the best places to look for houses to flip, which will allow them to quickly filter options that apply to you, and provide additional real estate investment advice for your property purchase and house flip.
Hiring an agent that specializes in REO, or real estate owned, can also be an efficient way to find rehab properties for your house flip. REO refers to a property that is held by a lender or guarantor as the result of a defaulted loan. Most of these homes will have gone through an extensive foreclosure, and perhaps an eviction process. In addition, the prior occupants probably did very little to care and maintain the property during the pendency of the mortgage default, foreclosure and eviction. As a result, many of these properties are priced lower than the surrounding homes due to their neglected conditions, making them ripe for a house flip.
Many lenders and loan servicers align themselves with a small group of realtors that specialize in selling these types of properties. The key to finding them for your house flip is to work with a realtor who has the inside track on these real estate listings and new rehab homes on the market. You can find them by doing specific internet searches for REO real estate agents and brokers within a specific geographic area.
2. Talk to Wholesalers
Wholesalers are regularly buying and selling, but be wary of their markups!
Wholesalers are in the business of finding rehab properties, putting them under contract and then finding a buyer who will execute the house flip. The buyer will essentially take the place of a wholesaler in the contract, paying a fee to the wholesaler for being the middleman.
Although this is not the most cost-effective method of making a property purchase for a house flip, it can be very time efficient and may save money in the long run. Many wholesalers do this as their full time job and are well connected in certain neighborhoods, and to certain agents and sellers. If you’re interested in working with a wholesaler, you can generally find them in real estate investment groups and through internet searches.
3. Look for Auctions
Estate and foreclosure auctions are good opportunities for a discount purchase. But be on the look out for bidding wars!
If you have the ability to pay cash for your property purchase, you could do very well buying property at a sheriff’s sale, estate or private auction.
Most foreclosure auction lists are published by the county several weeks before the sales. Estate and private auctions are also generally advertised several weeks in advance. By reviewing these lists, you have the opportunity to scope out a property prior to the sale date. Be advised, however, that while you can see the property from the street, you may not inspect it or trespass to get a better look.
Buying at an active auction has its own risk of getting carried away with the bidding. When a bidding war occurs, many bidders forget their pre-auction property analysis and bid far more than they expected to pay. If bidding against others for a property, be sure to set your limit and stick to it.
While there is a great deal of potential for profit, buying an auction property carries another risk. Most auctioneers (including sheriffs) will require you to put 10% of the purchase price down at the time of a winning bid. You will also be required to settle within 30 days of the auction.If you do not settle, you lose your deposit. As such, this method of buying is not for those unwilling to take a risk in their house flip.
Financing auction purchases can be very difficult. Most lenders will require an appraisal, or at least a walkthrough of the property before closing, which is frequently impossible with auctions. You need to be in the position to pay cash, and if desired, finance the property at a later date.
4. Join A Real Estate Investment Group
Try real estate investment forums, LinkedIn groups, and local meetups.
Real estate investment groups have become relatively common in the last several years. There’s probably some in your area, and they might be worth checking out. They can provide education and networking opportunities that may be useful while searching for a house to flip. Additionally, real estate listings often appear on the websites and monthly newsletters of these groups.
There are also many online forums that can assist you in making a property purchase. Sites such as BiggerPockets offer a wealth of information on real estate investment opportunities. There are also several real estate investment groups on Facebook and LinkedIn. Many of these groups also give you access to meetups, where you will have the opportunity to meet face-to-face with other investors and potential property sellers.
5. Search the MLS
The Multiple Listing Service (MLS) is a database put together by real estate brokers listing all properties for sale within a geographic area, along with their characteristics and vital statistics.
The MLS is only available to licensed realtors, and can cost more than $100 a month to access. If you’re not a realtor, the best way to get access to this information is to align yourself with one, either as a team member, business partner or as a friendly favor. If you are choosing a realtor to aid in your project, make sure they have access to the MLS.
Using the MLS to find houses to flip provides certain advantages in making the right property purchase. For one thing, most of the properties for sale in an area are listed in one place. Also, the listings will tend to have more information than what is found from other sources.
A recent study found that houses sell faster through the MLS than those sold by owners directly (The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com). Presumably, houses listed on the MLS had much greater exposure than those not listed.
If a buyer looking for a property to purchase is not using a realtor and does not have access to the MLS, there are other sources of information about homes for sale. Sites such as Zillow, ZipRealty, and Realtor provide abundant information on homes for sale in an area. Also, Hubzu.com lists REOs for sale, and has a bidding process to purchase them. However, this information may not be as comprehensive as that of MLS.
If you search for listings by brokerage, you will be able to see all of the listings that brokerage is handling in the area. Generally, the presentation of these listings is very comprehensive. The US Department of Housing and Urban Development also lists all properties it has for sale on their website.
While the MLS can be very helpful in your search for a property purchase, it is still just a tool. Taking a little bit of time and using some ingenuity can give you a lot of the essential real estate investment information, without paying a fee.
6. Digital Classifieds
Are classified still a viable resource for a property purchase? Is there a potential perk of having access to more “For Sale by Owner” properties?
Sadly, the use of the daily newspaper as a medium to sell properties has significantly diminished. While many local papers still run classified ads for properties in their print and online versions, it is not considered the best source for finding a property to purchase. In this digital age and with the competitive housing market, it seems archaic and almost impossible.
Many of the websites listed above in the MLS section, as well as Craigslist, have made the digital search for real estate investment the norm in almost every region of the United States. As discussed above, internet searches can offer access to both listings by brokers and “sale by owners” properties.
If a foreclosed home doesn’t sell at an auction, it goes into the possession of a bank or lender and is then referred to as an REO listing (Real Estate Owned). Because banks have no use for a home, they’ll typically sell these types of homes for a discount. You can find REO listings on publicly available listings on government agencie’s like the Department of Housing and Urban Development, newsletters from lenders, and easily by calling banks and asking if they have any properties they’d like to offload.
A short sale is when a homeowner sells his property for less than the amount owed on their mortgage. If a homeowner is in the position where they need to proceed with a short sale, it is most likely because they need to sell it quickly, and therefore are willing to sell for a reasonable discount. If you are working with a real estate agent, you can ask them to show you short sale listings. You can also find them by networking with wholesalers and other investors or just doing a simple Google search.
Direct to Seller
When the market is thriving, and strong, persistent buyer demand is keeping the time on market for houses at incredible lows, it can be difficult to find a property to flip. Finding a property in a direct to seller scenario is exactly what it sounds like – you can approach a homeowner making them an offer on their home, even if it’s not listed yet. We recommend asking your real estate agent to help you – they can create a specialized offer in writing along with a letter explaining why you want to buy their house to present to the owner. Of course, there is always the potential for rejection, but it doesn’t hurt to try.