HOW TO FIND THE BEST REAL ESTATE INVESTMENT IN A COMPETITIVE MARKET
Real estate is a hot industry right now in San Diego. The market is increasingly competitive as real estate investors are hunting for the best real estate investment.
The real estate markets are prospering throughout the country as well. Forbes reports “as of September 2017, the median list price of homes is up 10% year-over-year, while the number of days on the market and inventory are down 10% and 9% respectively. In hot markets (like San Diego), these numbers soar far higher.”
WHY IS FINDING A GOOD INVESTMENT PROPERTY IMPORTANT?
For real estate investors, knowing the ins and outs of a good deal are essential to a successful and profitable real estate investment. Finding the best investments amidst a competitive market means the potential for higher profit margins.
Here are several tips and tricks on finding the most profitable deals in terms of San Diego real estate investments.
Look Between the Lines
If you’re considering investing in real estate it pays to have a little bit of local knowledge. Think about the areas and neighborhoods that are ‘up-and-coming’, especially those still in the growing phase. As these areas continue growing and starting to prosper, real estate values should appreciate as well.
Craigslist offers a great resource and online marketplace to search for real estate deals. Browse through the classified section. It’s free to browse through the various real estate listing and also free to make a post of your own.
Another online marketplace to consider is the Bigger Pockets Marketplace. It hosts dozens of new listings each day and users can post an ad for a property they are seeking or selling. These investment properties can range from a single-family home to commercial real estate.
When evaluating potential real estate listings, search for those with air rights. Having ownership of the property’s air rights can add a lot of potential value and drive a profitable investment in the future.
FORECLOSURES, EVICTIONS AND AUCTIONS
When a property owner isn’t able to make their mortgage payments, banks and lenders foreclose on a property. This basically means the bank now owns the property and evicts the current occupants.
If you can navigate the process, foreclosure deals can offer investors the best deals in the real estate market. Banks are in the business of lending money and they aren’t interested in taking over and managing foreclosed property.
In order to liquidate the real estate assets, banks often sell foreclosed properties at market discounts. Foreclosed properties often need serious improvements or maintenance, but savvy investors can take advantage of the low purchase price to make higher returns and positive passive income.
Foreclosures end up in the public record, which leads to a competitive nature among buyers. Clever investors will find opportunities with properties in the ‘pre-foreclosure’ stage when the property owner receives their Notice of Default.
Typically, a property owner that hasn’t made a payment in 90 days has three months to make their payment. Then they receive their Notice of Default where the bank goes through the process of taking ownership.
At this point, property owners are often willing to sell at a discount before the bank comes in and takes control. If you can work the deal properly, it can be a win-win situation for both the investor and property owner.
The caveat there is working the deal properly. There is a lot of misunderstanding around the foreclosure process, and investors need to really do their homework and be ready to act when opportunity arises.
Evictions can also present investors with lucrative real estate investing opportunities. They usually turn into a frustrating process for landlords, but results in landlords potentially willing to sell to get out from under the eviction process and records.
Take a trip down to the local county administration office and look at the list of current evictions happening in your area. Targeting those landlords in the middle of the eviction process could result in a discounted price to buy the property, creating an opportunity to invest in real estate.
Along with using the foreclosure strategy, searching for properties at local auctions can lead to great real estate deals for investors. Usually, properties are up for auction if the owner hasn’t paid taxes or the property has gone into foreclosure.
Auctions can bring a lot of risk, but can be a potentially lucrative investment opportunity. You can create a strong flow of passive income through properties found through an auction. Research is again key here as you determine your reservation prices on various properties up for auction. The auction itself tends to be fast-paced and requires investors to make quick decisions. If investors go into auctions knowledgable and prepared, a property from an auction can be the perfect asset to their real estate portfolio.
Finding the best real estate deals and investments takes time and effort, especially in a competitive market like San Diego. As a real estate investor, this just means you need to invest the legwork as well to find the deal that is right for you.
Use some sort of method to filter through potential real estate deals. Cast a wide net, and then consider a funnel-type approach to analyze the various leads and opportunities you find.
Filter the potential opportunities based on your specific investment criteria and requirements. See which properties check all the necessary boxes and present potentially profitable investments.
Build your Network
Another key factor for success in the competitive real estate landscape is your network. In real estate, the ‘early bird gets the worm’ cliche often holds true. Many times it’s the first offer that’s accepted, not the highest.
It’s pays to have real estate agents, mortgage brokers, developers, or other vendors in your network so you can keep a gauge on the market. If you’re keeping contact with your real estate network, chances are you might hear about a lucrative deal before it goes to market.
If you don’t have much of a network in terms of real estate, this is an area where real estate syndication might be a good option for investors. Syndicated deals allow investors to leverage the network and opportunities of a real estate investment company acting as the project sponsor.
Investors can use real estate syndications to get in on the best real estate investments and access deals they couldn’t execute alone.
Contact Absentee Owners
This plays off a similar strategy of getting in touch with the seller before the real estate property hits the market and attracts multiple offers.
Consider approaching property owners directly. Focus on absentee owners who own the rental property but live elsewhere. You never know if landlords are frustrated with their tenants or are short on cash and would consider selling at a good price.
Drive around neighborhoods where you’re interested in buying property. Look for properties that look empty or vacant. Search for the owner online in the county’s public records. You can leverage the public record list from a web service such as ListSource.com
Use Craigslist to search for individual landlords listing their properties. Give them a ring and let them know you’re actually interested in purchasing the property.
When real estate markets are more competitive, investors need to step up their game to find the best and most profitable deals. Other successful investors have used the strategies above to invest and make big returns in real estate. Explore the various strategies above in your local market and get a leg up on the rest of the real estate competition.