Updated: Oct 23, 2020
Savvy real estate investors know that for short term deals, off-market properties are where the largest ROI can be found.
If you want the best deals and the highest returns, you have to get comfortable finding your deals off-market.
In this guide, we'll give you the 10 most effective strategies for finding off-market properties that real estate investors are using right now to close incredibly profitable deals all over the country.
Let's dive in.
What Is An “Off-Market” Property?
If you are knew to real estate investing, you might be wondering, "What an off-market property?"
An off-market property is a real estate property that is not listed on the Multiple Listing Service (MLS).
When we talk about finding off-market properties for real estate investing, we are talking about finding owners who are willing to sell (or can be persuaded to sell) but have not yet approached a realtor to have their property listed on the MLS.
The majority of sellers use their local real estate agents (and by extension, the MLS) to list and advertise their properties to potential buyers and investors.
If you want to find off-market deals, you have to be able to get sellers before they go to a realtor.
It’s actually quite common in certain markets for owners to promote their properties off-market. They might wish to keep their sale private or avoid having to pay ~6% of the sales price to a realtor.
Sometimes referred to as “pocket listing,” an agent may represent the seller and their property, but they are not actively marketing the property using conventional methods, like using the MLS.
A big chunk of the off-market space is actually pre-foreclosed properties, meaning not yet advertised publicly. If you have access to a banker or a lawyer with grey privileged info, you have an advantage.
Additionally, it can simply be a property that an investor is considering selling but hasn’t made a serious effort to dispose of or a final decision. A high offer might tip the scale and get them to sell immediately.
Off-market deals are usually hot deals that investors are actively seeking out, for the obvious aspect of less competition and a quicker sale.
Now that we understand what off-market deals are, let’s elaborate on why you should buy them.
Why Buy Off-Market Properties?
The name of the game with off-market properties is that there is less competition. Less competition means less leverage for the seller, therefore, easier negotiations. This makes the entire sale much faster.
As an investor in any industry, it is essential to understand what drives both sides of the fence: both sellers and buyers.
First, let’s review the concept from the seller’s side.
Benefits of Off-Market Deals to the Seller
You might ask yourself, “why wouldn’t an agent list a property and make it as visible as possible, to attract more buyers and have them bid against each other and get larger offers as a result?”
The answer is simple. Privacy.
For example, If the owner of an apartment building is looking to sell, he would likely want to avoid spooking the tenants into moving out. Selling means the building isn’t performing as well as advertised.
Imagine the building owner ends up not being able to sell - but the tenants have already lined up a new place to move to.
Another example is sellers who are dealing with divorce or financial issues. They don't want this to be publicized for the reputation of themselves or their business.
Some more reasons for selling off-market are:
To create exclusivity. A well-kept secret that only a select few know about creates inquiries, waiting lists, and can potentially increase the price.
To test the waters. In some cases, homeowners just want to gauge interest. They might not be sure whether they want to sell.
To save on agent commissions. ‘Pocket listings’ don't require marketing or advertising, Therefore, less work is needed on the agent's part.
To reduce foot traffic. Sellers simply don't want all the foot traffic and attention that comes with listing on the open market. They aren't interested in constant showings or open houses.
Furthermore, many sellers’ agents will do it for the sake of energy and time-saving. It is common to get a lot of interest from non-serious and unqualified buyers.
This lets the agent act as a sort of gatekeeper - a filter of sorts - limiting exposure of the property to higher-potential prospects. After all, more leads don’t necessarily mean an easier sell. Off-market sellers fully believe that a smaller but more qualified leads list is a faster way of selling and requires less energy on their part.
Sellers may also be looking for more control over the deal.
With off-market properties, homeowners generally have more say in the timing of the sale and how the entire transaction proceeds. They have more freedom to add specific clauses or delaying addendums.
Benefits of Off-Market Deals to the Buyer
Many real estate investors like off-market deals for several reasons. Here are just some of the perks to consider:
Less competition. As mentioned, off-market deals give buyers a competitive edge due to them not being open to hundreds of other buyers. Investors often compete with 2-3 other bidders.
Lower sale prices. Less competition means one thing; lower sale prices. Yes, this coin has two sides, or price, in this case, is a double-edged sword. The seller you face has less leverage because he cannot compare to many other bids, and cause a bidding war, but it also means exclusivity, as mentioned. Play your cards right.
Smooth negotiations. Unseen by most, these properties cause less bidding wars. This causes both buyers and sellers to be more relaxed when it comes to the negotiations. This can lead to very creative, tailor-made contracts, that would never be possible on the open market.
Adjustable transaction times. Very often, off-market sellers not in a rush. As a buyer, this gives you more time for homework and due diligence prior to making an offer. However, certain deals such as pre-foreclosures and short sales may require a quicker closing process. Lack of time is usually compensated by a greater discount on purchase price.
It is not all rainbows and roses. There are some drawbacks to off-market properties we would like to mention.
The Cons of Off-Market Listings
Seller may have unreasonable expectations. You might be dealing with someone who is a bit wealthier than the average American. If the seller has their home off-market for the sole purpose of building exclusivity, they might have an unreasonable price point in mind or be unwilling to negotiate.
Your deal may take longer. In most cases where the seller is not in a rush, testing the market, or is going through a divorce, he will not have a home to move to prepared in advance. If he is unreasonable with the selling price, imagine how long it could take him until he finds a new place to purchase, or even rent.
Difficult and more time-intensive to find. The big elephant in the room. Off-market properties aren't as easy to locate as homes on the open market. They take a bit more leg work and creativity.
You probably are saying “But if they’re not advertised publicly, how can you find hot off-market properties?”
And this is why we are all gathered here.
Here are the 10 best methods currently being used by real estate investors to find profitable off-market deals.
1. Real Estate Agents
Realtors often have both a buyers and sellers list.
Because some of these sellers will only look into selling if current market conditions are favorable, some (very ambitious and hungry) agents may actually cold call owners in the area and turn them into sellers.
Many agents have pocket listings, as we mentioned before. Your goal is to get into that listing for which an agent has exclusive rights to sell and which is not listed on the MLS.
Finding an agent that would like to work with you might be difficult, but only at first.
When you initially start working with an agent, they likely have an already established buyers list that they reveal their off-market deals to.
If you are able to establish yourself as a serious buyer and investor, agents will take you more seriously. The more consistent you are, the more they will want to bring you deals - because they know you can close and are reliable.
2. Direct Mail Marketing
Direct mail marketing simply means sending targeted mail directly to property owners which you hope are selling, or you are able to convince selling.
You will have to do some legwork, drive around, knock on doors, gather address, phone numbers, cold calling, spread flyers, leave door hangers, business cards, attend church meetings, create free workshops, set-up events, and think outside of the box to get leads.
Using direct mail marketing can be a great way to uncover off-market deals. This is because up until the owner received the mail from you, they may have never previously considered selling.
That means you may be the only person entertaining the deal.
3. Real Estate Auctions
Auctions are a favorite source for investors because they provide a great and steady stream of off-market properties to choose from.
In order to find auction properties, periodically browse auction websites for deals with potential.
We recommend looking at RealtyTrac or Auction.com for potential leads.
In addition to scanning online, we recommend to also keep track of auctions at the county courthouse, local lawyers, local HOA’s, accreditors, and private loan institutions.
There are two main types of auction properties to look out for
Depending on the county, foreclosures are handled differently but generally follow the same process. These properties are often sold “as is” for below-market value prices.
Prior to purchasing, or even searching for foreclosures, gather as much information as you can about the property - before deciding to invest. While they can be excellent opportunities, investors who are quick to pull the trigger without doing their homework are usually met with nasty surprises, such as liens or unauthorized occupants.
Real estate owned (REO) properties are houses owned by lenders, typically as a result of an unsuccessful foreclosure auction.
These off-market properties are a fantastic resource and are a second, steady way to uncover real estate deals. However, Like we mentioned a minute ago, don’t take short cuts with your due-diligence. Inspection should still take place.
It is uncommon for a lender to actually make any changes or repairs like a traditional seller might, but it is important to have birds eyes view, and see the entire picture before bidding on the property. If you are careful to mind due diligence, REOs can be a great off-market opportunity.
Before you show up to a real estate auction, be sure you have done your research ahead of time.
Make sure you thoroughly research the neighborhood and property specs and set a budget that you won’t exceed. Following these steps will allow you to have a better filter for your search, increase your focus, and avoid over-stretching financially.
Once you find an attractive property, confirm its auction status, location, and bidding procedure, and be prepared to pull the trigger and act FAST. Due-diligence slow, execute fast.
4. Driving For Dollars
Charge your mental battery, load up water bottles in the car, get your favorite music ready for the day. Driving around neighborhoods can be a fun and effective way to find off-market properties.
The most common type of deals you will come across are either vacant or distressed properties, as these will be the easiest off-market homes to spot.
To find vacant or distressed homes simply keep an eye out for overgrown yards, scattered items in the yard, or boarded-up windows. As you find potential leads, make sure to write down the addresses for later. Using an iPad with Google Maps to pin down homes is our favorite way.
Next, search for the owners of potentially vacant homes in county records using the addresses you jotted down.
If you are able to find the owner of the property, that will allow you to reach out and inquire about the status of the home. Aim to get the contact information, either a phone number or email.
Lastly, prepare a list of questions to ask. These should help you determine if you can purchase the property and if it might be a good investment.
While it can be time-consuming, driving for dollars is an entirely free strategy. We understand that this method is mainly dependent on the area of which you live in. In some areas, people use this as their one & only method.
5. Mass Mailings
A somewhat universal mantra, but used a lot by realtors, is ‘You don’t know until you ask’.
Calculate and measure your ROI, and ROT, because this strategy will cost you both time and money. Sending out mass mailings to homeowners is one method of finding and qualifying leads.
Find a neighborhood or area of town that you’re interested in, and mail letters/flyers to the area’s homeowners letting them know that you’re interested in purchasing their home.
With a lower than 5% average response rate for this method, and even a lower percentage of prospects who will actually close with you, it is important that you partner up with the right printing company, have a copywriter do you ad copy, and choose the right visual design, possibly even working with a designer.
Make sure your flyers or letters are professional and send a good message, rather than a desperate one.
Roofstock(.com) is a company that was established in 2005, and they claim to be the biggest marketplace in the world for real estate investments.
Roofstock is unique if you are a registered user ( a member). They have off-market properties to offer for community members only.
Properties with the “Roofstock Exclusive” tag are only available to Roofstock users so anyone looking at their local MLS will not find them.
These properties have been certified by going through a rigorous process of criteria that includes inspection reports, neighborhood ratings, and financial proformas to help you evaluate the property.
They have an online bidding process that allows for a very fast turnaround on offers submitted since no middleman is involved.
7. Estate Attorneys
Estate attorneys prepare or review all of the documents that are signed at the closing of a real estate purchase. They can inform you of properties that might be becoming available in the future.
Befriend one (or two!) estate attorneys. Build a relationship with them, and work regularly alongside them.
You can meet estate attorneys by joining your local networking groups, or simply searching for them on Google, offering coffee and maybe a financial incentive if the follow-through.
When great investment property opportunities come up, you want to be on their speed dial list.
8. Local Contractors
You can ask the contractors (Electricians, carpet installers, roofers, plumbers, HVAC professionals, pool repairmen, lawn care professionals, etc.) that you regularly work with or others in your area to see if they know of any properties that might be becoming available soon.
They may have been on a job that wasn't able to get finished for whatever reason.
You may be able to step in, finish the work, and gain the profits.
People involved in the servicing of apartment communities may likely have some insider information.
9. Old Listings
Search MLS or LoopNet.com for listings that are over 6 months old. Remember that the older the listing is, the more likely sellers will be to negotiate.
If you don’t have access to the MLS (Multiple Listing Service), try finding a realtor friend to get access, or just look at other real estate portals like Realtor.com, Trulia, etc.
Real estate wholesalers are great friends to have if you’re an investor looking for off-market properties.
Wholesalers are individuals who find deals, get them under contract, and assigning the contract to a potential buyer, and charging that new buyer a fee. Often times, those discounted properties wholesalers find are off-market properties.
Wholesalers are putting properties under contract in every state across the US.
If you have a working relationship with a wholesaler or happen to have friends who know one, they may be able to put you on the contract for an off-market home.
Even if it wasn’t originally off-market, from the moment said wholesaler put it under contract, it’s technically off the market now.
When buying from a wholesaler, he might have already put money and rehabbed the property, but there’s also a chance that rehab or fixing is still needed.
Obviously, wholesalers will try to underestimate the needed repairs to make the deal look more attractive. Remember that they make a living off the margins, and make sure you run your own numbers to verify that the deal still works for you.
Keep in mind, however, that working with a wholesaler is like working with a middleman, meaning you likely won’t get as good of a deal as if you went directly to the source.
We still advise networking with wholesalers, as it is a great way to stay in the loop of off-market homes in your area.
Remember, nurture the relationships. Even if they do not present you with opportunities at the moment, they may reach out to you in the future if something comes their way.
Conclusion and Final Tips
Do a title search to avoid any potential future liens on the property
Conduct thorough real estate market research to make sure that you’re not paying over market value.
Have your financing lined up before finalizing the deal.
As a whole, off-market real estate sales can offer a variety of benefits for investors who know what they are doing.
By having less competition and more creative, flexible negotiations, off-market real estate can provide investors with wide profit margins.
Even beginners with no previous background and connections can do it. As you see, there are a number of tactics investors can employ when they learn how to find off-market real estate deals.
We recommend investors to use more than one strategy at a time. Investors, new and advanced, should always seek to add new deals to their portfolios, and off-market deals are there for the taking.