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Real estate investors have a wide variety of methods to help them find their next property to invest into. Methods such as direct mail and browsing MLS listings are classic tricks to find a real estate deal, but sometimes seeing is believing. This is why many investors employ a strategy known as ‘driving for dollars.’
Basically, driving for dollars is the act of hitting the streets and physically looking for your next property. Typically this strategy is used to find properties that are distressed and in need of rehabilitation and buy them off-market, which can be great for flippers or people looking to quickly increase the value of a property after purchasing before renting it out.
However, before we dive into the process of driving for dollars, if you want to learn how to finance off-market real estate deals, click the link below to book a free strategy call with our team at LendCity today.
Where Should You Look While Driving For Dollars
Before you go out and start eyeing up properties and driving for dollars, you need to know where to look. For example, a neighbourhood full of newly built homes probably will not have the distressed properties you are looking for, or those properties will already have local investors looking them over while working on other projects in the area.
To help you determine the areas you should begin your search, try considering factors such as:
- Property Age
- Estimated Property Values
- Potential for Growth
- Local Crime Rate
Weighing these options will help you determine how much you can expect to be paying, how much room you have to introduce new value, and the general demand for properties in that area. With those factors in mind, you can narrow your search down to neighbourhoods and subdivisions that meet your desired criteria.
Discover How To Analyze a Properties Cash Flow With This Step By Step Guide
Before You Go Driving for Dollars
Before you go driving for dollars, there are a few things you should keep on hand.
- A Map of the Area You Are Visiting
- A Means of Making Notes (Laptop, Tablet, Pen, and Paper, etc.)
- A Camera
That way you can properly locate and document any properties that may catch your eye and exactly what you would need to do with them.
When Should You Go
Usually, the ideal time to go driving for dollars is mid-day during weekdays. That way the majority of people are at work or school, and you have the time to drive slowly and take in as much information as you can.
As well, you can be even more selective in this process by looking for properties around Halloween or Christmas and singling out potentially vacant properties by a lack of decorations or going out on garbage/recycling collection days and spotting properties that do not have garbage out for collection. As well, you should consider going on bright, sunny days so it can be easier to spot signs of weathering on a home that may be harder to spot on days with poor weather conditions.
Spotting Signs of Neglect
When you are driving for dollars, you need to keep an open eye at all times. Otherwise you run the risk of missing out on key details that could help you identify great potential properties or eliminate poor choices from your consideration.
While you are out, keep an eye for these signs of neglect on each property:
- Overgrown Lawns and Vegetation
- Broken Windows and Siding
- Overfilled Mailboxes or Piled Up Newspapers
- Code Enforcement Taped to The Door
These signs of neglect will help you identify properties that may be considered burdens by their owners, either due to negligent tenants they are not equipped to take care of, or a lack of time to properly care for the property themselves. Often owners of properties like these are considered ‘motivated sellers’ who would likely be receptive to offers from you to take the property off of their hands.
Marketing to The Property Owner
After you have located and taken note of properties that may interest you, you need to make your pitch to the property owner and express your interest in buying the property. However, you do not want to blindly send impersonal mail or leave flyers at the property that may otherwise go ignored. (Especially if the mail at the property has already begun to pile up.) You want to find a direct way to contact the property owner and make a personal approach whenever you are driving for dollars.
Finding the Owner
The first step to making a personal offer towards the owner of a property is to find out who the owner is. Sometimes the property you are looking at will be owner-occupied or the owner’s information will be easily available. However, there are signs you can look for that will tell you in advance if you will need to do additional research to contact the owner. This can include returned mail notices, vacant properties that are listed as owner-occupied or properties with no address listed for their owners at the assessor’s office.
To find these ‘missing’ owners you can utilize public records such as the Deed of Trust to find the owner of the property. Even if they do not have 100% of their information up to date on the record. You can use that as a starting point to mine google for the remaining information you need.
Making An Offer
After you find the owner, go ahead, and send them a letter expressing your interest in their property. Be sure that when you do this, you address them directly and include specifics about the property in question, so they know your interest is genuine.
They may not respond right away, so do not be afraid to follow up every few months to see if you offer eventually entices them.
Financing Your Purchase
Like other methods of buying off-market real estate, driving for dollars can change your approach when it comes to financing. For example, when you try to buy a property off-market you do not have the advantage of an MLS listing to reference for your price. As well, if your lender demands you order an appraisal, the value they determine is more likely to vary from your desired purchase price as opposed to a publicly listed property.
Before you buy, be sure to contact a mortgage professional to help you determine exactly what you will need to purchase the property. For more information you can contact LendCity at 519-960-0370 or visit us online at LendCity.ca Alternatively, click the link below for a free strategy call today.