Step-by-Step Guide to Finding Your First Off-Market Property

So you’ve decided to come to the dark side and pursue off-market properties—congrats. Off-market properties come with the highest upside if executed correctly, they also come with a unique set of risks—namely they are not easy to find. Very few individuals find success with this strategy because it requires time and effort, two things most people are not willing to give up. Ultimately, to become successful you need to take lots of shots at bat and build processes and systems that scale. In the beginning, it may take two or three thousand calls to find your first deal, over time that number will come down to a few hundred calls. In this guide, we break down the most common ways to find your first off-market property. Ready? Let’s dive in!

Why people are in the market to sell

Before we break down the most common ways to find off-market properties we figured it would be important to cover the reasons why people may be willing to sell. Generally speaking, there are three broad categories: 1) they are experiencing a life event currently, have experienced one recently, or are planning to experience one shortly; 2) they are facing financial hardship; 3) they are no longer physically able to care for the property or no longer wish to maintain/manage it.

Life events

1. Having children - most people that are planning to have children, decide to move away from the hustle and bustle of a city to the suburbs. This gives them more space, access to better schools, and an overall better quality of life. Typically they’ll go from a condo, or a small townhome to a single-family dwelling.
2. Empty nesters - after children leave the home, some couples decide to downsize to something a place that is smaller or something located elsewhere. These are the people who spent most of their lives in the Midwest or East Coast and suddenly decided to relocate to Florida.
3. Engagements - when couples get engaged, they typically consider moving in together. Some choose to get an apartment together, but others choose to purchase a home together and sell the property where they currently reside.
4. Divorce - tread lightly here. Most couples who go through a divorce are emotionally charged and want to offload the property as fast as possible to split the proceeds and go their separate ways.
5. Death - this is the most unfortunate situation, the loss of a spouse, child, or parent sometimes results in the sale of property. They want to ease the pain of loss, by releasing the property that holds the memories.
6. Relocations - people who get a new job and are forced to relocate to a new area are often under a time crunch to sell their home. If you can reach these individuals with a fair offer and an accelerated closing date, most times they’ll take it.

Hardship

1. Job loss - this is an obvious one. People who lose their jobs and can no longer afford their mortgages are under duress and thus are more likely to sell their homes.
2. Reduction in hours - this is along the same lines as the item above, people who take a pay cut or a reduction in pay are more likely to sell their homes.
3. **Medical incident **- this one is often overlooked. People who are involved in an accident or become partially paralyzed need an ADU and will sell their homes.
4. Regulatory issues - the short-term rental ban in Palm Springs crushed homeowners and investors who purchased properties with this intention.
5. Compressed margins - over time the profitability of a property should go up, but that is not always the case. The goal of course is to derive cash flow from the property but in most instances that’s easier said than done. New or first-time property owners often underestimate the costs associated with owning and running a rental property and lose money each month. That pain can only be born for so long, and thus they have a higher propensity to sell.
6. Crashing housing values - some owners purchase homes to capitalize on the appreciation of a property. Those who purchased homes at the all-time highs during the pandemic have seen their property values evaporate, and are underwater on the loan-to-value ratio of the home. They are looking for ways to get out from under it and you can step in to help facilitate that.

Maintenance / Management

1. Distressed properties - these are the homes that need a new roof or have fire damage, or structural issues. They’ve reached a state of disrepair and the owners no longer wish to maintain them. Tread lightly here, these properties often have many more issues than you see on the surface.
2. Problematic tenants - the single biggest headache most homeowners/landlords have is problematic tenants. Tenants who use and abuse the property, don’t pay their rent, are involved in illegal activities, and so on. Dealing with tenants gets old quickly, and smaller landlords don’t want the headache.
3. Vacancies - in a similar vein, filling units with tenants comes with its own unique set of challenges. Often landlords with major vacancy rates will offload the property to avoid the hassle.
4. Remote management - oftentimes landlords do not live in the same cities as the properties that they own. As such, when something happens they must travel to address it or pay exorbitant fees to a management company to do so. Again, headaches sometimes aren’t worth it and these owners will consider selling if you present them with a reasonable offer.

Now that you know why property owners may be willing to sell, the next logical question is how you identify or find them.

The most common ways to find off-market properties

On-market MLS Listed Properties

Properties listed on the MLS are priced near the ARV comps in the area, but just because someone lists a property for a certain price does not mean that’s what it's worth or what they’d be willing to take for it. Submitting low-ball offers certainly doesn’t hurt, especially if you attach an EMD check along with the offer. Look for properties with keywords like "fixer-upper," "as-is," "motivated seller," or "cash only", as well as properties that have been on the market for more than 90 days.

FSBO and Craigslist Listings

Owners who decide to sell properties themselves, cannot list them on the MLS. They also typically are unwilling to pay buyer commissions, and thus realtors typically do not show them. As such, they will not get top dollar for the property and likely will not receive much interest from buyers (who obviously wouldn’t know about it). If you show up with a reasonable offer (ballpark of 70%) they may take it.

Driving for Dollars

This is a popular strategy in the wholesaling community. Essentially you walk (or drive) around your neighborhood or area of interest looking for properties that appear distressed, vacant, or abandoned. Make a list of the addresses and then find out who owns the property, and send them a letter. Realtors can be a good resource for locating these properties as well, given they’re constantly out and about.

Networking

This is the typical grassroots approach where you meet with people at your church, gym, club, professional organizations, and social clubs. You’ll want to let them know that you’re in the market for new properties and potentially offer them a referral fee if they find you one. Most people are willing to help out, especially if there is an incentive on the backend.

Real estate clubs & meetups

Admittedly this is probably one of the most effective strategies for finding properties. People who operate at a hyper-local level, have a pulse on the market and are connected to the major players. Rather than connecting with the smaller players that complete only one or two transactions per year, you’ll want to get in touch with the larger players in your area. Tell them that you’re interested in investing in real estate and ask if they would be willing to show you how it all works. Most of the “white hairs” are willing to share what they’ve learned and connect you with the other players in the space, because they had a mentor when they started.

Real estate auctions

Real estate auctions are an alternative option for owners who don’t want to go through the hassle of listing their homes on the MLS. The auctioneer’s goal is to sell the house for as much as possible, and as such will attempt to drive as much demand as possible. Most of the time these homes will sell for less than their market value.

Sheriff sales - After a property has been foreclosed on, usually because of taxes, they go on the sheriff's sales block. Once, or twice a year, the sheriff’s office holds an auction where bidders can place offers on each of the properties listed. The highest bidder wins and there are typically no-assignment clauses, so be careful. Also, the homes involved in a sheriff's sale are usually distressed, so be prepared to clean up a big mess.

Cold calling static lists - These tools provide access to property data, including transaction history, tax information, layouts, and the contact information of the property owner. Calling numbers on a static list is a bit like finding a needle in a haystack, you call thousands of people to find a single property for sale.

Outbound marketing - This is where most of the “gurus” will tell you to spend your time. They’ll say you need to print out direct mail flyers and send them to every homeowner in your area. Not only is it super expensive, but it's also extremely inefficient. Remember that 99% of all homeowners are not interested in selling their homes, so that means 99% of every dollar you spend is being wasted. Not to mention some of the people who live in those homes may not even own it. Here are a few of the other strategies that they’ll suggest you try:

• Yard Sign
• Billboard
• Magnetic Sign for Car
• Radio Commercial
• Newspaper Ad
• Landlord Magazine Ad
• Write a Blog
• Google Ads
• Facebook or Instagram Ads

Before you spend a single penny on any of these make sure that you have your process nailed once someone comes into the funnel. How are you going to qualify them? Do you have the money for the EMD deposit? Are the legal contracts ready? Do you have end buyers lined up (if you’re going to wholesale) or financing lined up (if you plan to buy and hold or flip). These are all things you need to work out before you spend a penny on advertising or else those efforts will wasted.

Probate listings

When someone dies without a will, their real estate typically goes to their next of kin. Local real estate agents often find and represent estates, which can be extremely lucrative. These agents will want to sell the property fast, which means you can get a great deal. However, these properties may require significant renovation so bake that into your offer.

Pre-foreclosure properties

Homeowners who have missed mortgage payments face the risk of foreclosure. By reaching out to them before foreclosure proceedings begin, investors may be able to strike a beneficial deal for both parties. The owner gets to walk away with something (including a more clean record) and you potentially get a great deal!

Eviction records

Evictions can be a downside of owning investment properties, but they also present an opportunity to acquire properties from distressed landlords. By accessing eviction records at the county courthouse, you can identify potential deals.

Tax liens

Tax liens occur when property owners fail to pay taxes. Bidding on these liens is a popular method for finding lucrative deals. Winning bidders must promptly pay the taxes owed, along with interest and fees. Homeowners then have a set period to repay the investor or face foreclosure. You profit either by receiving repayment with interest or by initiating foreclosure proceedings.

Code violations

Building code infractions, zoning violations, or neglect of maintenance requirements can signal owners who are in distress. These owners may be motivated to sell due to the expenses and liabilities associated with resolving these issues, and thus you can score an incredible deal.

Absentee owners

Absentee owners are individuals who own properties but do not reside on-site or actively manage them. These owners may live out of state or even abroad, leading to potential neglect of the property or a desire to divest due to distance and management challenges. Absentee owners may be motivated to sell quickly or be open to creative financing options.

Check out this guide for a more in-depth look at the top methods for finding your first wholesaling deal. If you’re just starting out and don’t know where to start, check out the crash course for wholesaling real estate in 2024.

You found some potential leads, now what

After you’ve created a list of potential properties to go after, you’ll want to find the owner’s contact information via one of the skiptracing providers. They’ll often provide you with a list of phone numbers and email addresses to contact—keep in mind that only one of those is the actual person you intend to contact. When you get them on the phone, you’ll want to follow the cold-calling scripts we’ve outlined here.

Assuming all goes well, the next step is to finance the escrow money deposit (EMD). We’ve put together a list of the most common sources of this funding, as well as the top providers of this funding in our guide on “financing your first real estate deal”. The final step is to work with an investor-friendly title company and closing agent to make sure that the transaction flows as smoothly as possible.

Wrap up - finding your first off-market property

While we’ve highlighted some of the most popular ways to find off-market properties, they’re certainly not the most straightforward. Most require dozens of hours to set up and run weekly. That’s time which could be spent in other aspects of your life. Rather than pulling all of this information manually or hiring an outsourced team overseas to do it for you, we recommend dynamic lists that update in real-time. You’ll still need to call the numbers or hire someone to call, but you won’t need to spend time finding the leads. We provide properties with the highest propensity to sell based on unique combinations of intent signals so you can start dialing right away.

If you’re interested in learning more, get in touch.