Since my wife is a realtor, MLS is the most convenient source for me, as opposed to driving around neighborhoods looking for sellers of distressed properties. Driving around is time consuming and, if found, following up on it is painful. MLS is only clicks sitting at your desk sipping coffee. (I have a fulltime job, so MLS works great for me in the evenings.)
At MLS, I come across a lot of “tlcs,” “as is,” and “motivated sellers.” However, when I see a property sitting in the market for 80 days or 115 days, I wonder why any investor hasn’t snatched it yet, there must be something terribly wrong with it, and I will get stuck if I go for it.
Am I being too fearful and over-cautious? Am I passing on good deals? What should I look for when searching MLS for rehab properties?
I will greatly appreciate responses of those who have MLS experience, both good and bad.
Using the MLS should not be the only source for a rehabber. Realtors are pushing their listings for top dollar. You’ll get the property for exactly what it’s worth in it’s current condition. Most of these properties will have a few cosmetic issues so the realtor will price them a few thousand dollars under the ARV, no discount big enough to make a profit. (The reason why investors haven’t snatched them up)
Check out REO’s, condemned properties, and all of the various auctions- all of which you can check out on your computer sipping coffee.
The absolute best way for a rehabber to find deals is either driving around yourself or creating a huge network of bird dogs. This is the only way to find the “forgotten” properties. I find 82% of all my properties from bird dogs. Sometimes only the next door neighbor knows there is a house hiding under the overgrown trees and bushes.
O Dannythegreat:) , as a novice, I was wondering if you would share where you go to look at REOs and condemned properties online or what kind of search would lead me to them? I suppose the state/county/tax website for condemns? Just takes some looking around on their sites? Where do banks post their REO’s? I haven’t seen that; I thought it was having to get to know the REO portfolio manager at each bank. I may remember coming across a site that provided them, for a fee of course, which has to be unnecessary.
Thanks!
Michael
Edit-OK, I feel lazy and/or dumb. Biggerpockets.com has some REO links, and I’m sure given 5 more minutes, I can find more.
But I’d still like to see your list of links, O great one!
Banks don’t post their REOs, they list them with a realtor. You can find the REOs in the MLS. They will be listed as “bank owned” or “corporate owned”.
Syd,
There is currently a very large inventory of houses in most markets, anywhere from 6 months to 16 months. Therefore, finding properties on the market for 80 or 100 days is not very meaningful.
However, when I see a property sitting in the market for 80 days or 115 days, I wonder why any investor hasn’t snatched it yet, there must be something terribly wrong with it, and I will get stuck if I go for it.
There is only one way to find out if there is something wrong with it - GO LOOK! Real estate investing is not a sit behind the computer kind of business. Get out of the house and look at houses. You won’t get very far in real estate investing if you don’t get out of your house.
Those are both good websites. Small lenders you will have to know the REO manager. Also check out government websites ; IRS, HUD, GSA, and any other three letter acronym.
Your state may have a list of REO’s. Your county or municipality has a list of condemned properties. If you can’t find a list on their website, call the code enforement officer or county/ city/ town attorney. Typically the cities and towns are more proactive about “blighted abatement”.
Thanks, Mike. That’s precisely what I do. However, my question was if MLS is a good source for rehabs considering all investors, especially those investors who are real estate agents, know about these properties.
At this point, my strategy is to select a farm area, drive around in that area, comb through the MLS to assess the properties, and take it from there. I need to raise cash and think rehab-and-resell is a good way to do it.
It can be a source for leads…the deal is what you make it.
Do a search for you TLC’s etc…, and have your wife present offers to all of them. Take a rough guess at the amount of work needed (of course you will inspect to verify the actual costs), and subtract your profit/holding/selling costs to come up with your offer amount. Don’t worry about what the asking price is…work YOUR numbers.
Send out as many as possible, any that bite will be motivated as you are going in low anyway. This is when/where you create your deal. Go look at it, inspect it…and then re-negotiate.
Its will be a lot of work for you and your wife, but at least you will know you have a fish close…
Ive only been investing for about a year now and have done a couple rehabs and flips. I used the MLS to track down my deals and while Im no expert the thing that I figured out is that if there is not a significant “spread” between the ARV (after repaired value) and the asking price than there is no motivation whatsoever.
An example: ARV: $120,000 minus asking price of $80,000 = A spread of $40,000. Lets assume this property needs 15,000 in fix up, and $8,000 in closing and holding costs you should net a $17,000 profit. Ofcourse you dont want to offer the full asking price you should want to try to come in 3-4 grand under to try to maximize the amount of profit this deal can spit out.
Thats the best advice I can give. Always try to find properties that have a pretty solid “spread” between the ARV and the asking price. I learned real quick that I was wasting my time looking at and trying to lowball properties that only had a $10-$20k initial spread between ARV and asking price.
I find that when searching the MLS I have to enter a certain criteria. I usually find some pretty good deals when I search $100,000 or less 3/2 minimum with no less than 1500 sq ft. Granted, the sales price will need to be specific for the area that you are searching, but my areas generally have a fair market value averaging between $150,000 to $230,000. Anything really that I’ve found outside that range usually has major foundation, plumbing or electrical problems. Or, as it has been my more recent experience with the MLS, if the property has sat on the market for more than 75-90 days, there are mold postings or minor fire damage - things of that nature. Most of the investors that I work with won’t go near a place like that simply because of the “underlying” health and safety concerns, but there are a few investors out there who will take a deeper look into the properties and delve in anyway.
I, personally, look for the signs like “Property to sell as-is”, “No seller’s disclosure”, and “Buyer to verify all information”. And then I do a general valuation by running comps and check around realtor websites for more detailed info or pix before I even go look at the property. You have to dig a little deep, but it’s nothing that can’t be done at your desk. There are those properties that you just have to see, but most of the time you can get a basic ideas as to whether or not your interest will even be there before you step foot out the door.
An REO experience:
A recent purchase was a bank owned prop listed with an out of town realtor. Power turned off, no way of telling if plumbing or electrical systems were ok ( this is in Michigan) Bank rejected my first two offers which were both the same amount ( bank reduced price after first offer) I waited…bank reduced price again and then accepted a lower offer from me, 6 months after my first offer. ( Banks are weird like that)
P.A. stipulated that the power would be turned on and proper inspections made before finalizing the agreement.
All turned out OK and I still own the home today. That’s my experience!
BTW - I found this home by driving around, even though I avidly search on the computer.