There are a lot of different ways to buy real estate these days – and the process has been enhanced and made more accessible in recent years by technology. Buying a rental property directly from a seller is an approach that can benefit investors in several ways.
Here are a few of the ways purchasing directly from a seller can help you boost your real estate business and your bottom line. Plus, get some tips on how to get the right real estate investment deal for you.
1. Buying direct from a seller saves you money on agent fees
When you cut those big agent fees out of a real estate deal, you can save big money. Real estate agents may charge between 5 and 6% commission on the final sale price of a property. The seller pays the fee, of course, but that cost is generally worked into the sale price of the property.
When you buy an investment property directly from a seller, you both get to skip the fees. In these situations, sellers benefit from not having to dip into their sale proceeds and rental investors benefit by paying less and getting a better rental property cash flow due to the lowered price. While there are times when buying via a realtor and the MLS may work for you and your investment business, buying a rental property directly from a seller can save you a lot of cash – leaving that money free to be invested in your next deal.
2. Buying directly from a seller cuts out middlemen like wholesalers
Eliminating the middleman is one of the biggest benefits of buying a rental property directly from a seller
Not all rental property investors purchase through real estate agents. Some also use wholesalers to find and purchase rental property. While this approach opens investors up to property opportunities that may not exist on the MLS, it still involves a middleman who ends up taking a cut of what could work into your profits from the sale once you start renting it out. Wholesalers typically charge between $5,000 and $10,000 per deal, depending on the sale price and other factors like how hot the real estate market is.
Avoiding a middleman – whether it’s a real estate agent or wholesaler – makes good business sense as you won’t have to figure their cut into your rental property investment strategy. Whether you decide to put that money into property improvements and upgrades or it means you start earning more money from the investment faster, it’s always good business sense to keep your costs down. Skipping wholesaler fees is one easy way to do just that.
3. Buying directly from an owner keeps only two interests in mind – the seller’s and the buyer’s
The people between the buyer and seller take a cut of the profits, sure. And they can also interfere in the sale itself as you’ve got an additional party who may have opinions about how a sale should go. When you buy directly from the seller, you negotiate directly with the seller. That means you hear directly from them what their needs and wants are as far as the timeline of the sale, the desired price, and any other factors that go into the decision making process and the eventual sale.
You’ll also be able to ask the homeowner direct questions about the property, giving you clear ideas about its history, the state of the home and systems, the neighborhood itself, and anything else you think would help you to know about your impending investment. Clear communication can also help a sale proceed quickly – and a quick turnaround means you’ll start earning money on your new rental property faster.
4. Buying directly from a seller helps build future relationships
Much of what makes a real estate investment business a successful real estate investment business is relationships. You’ll want to build them across the industry, from investor-savvy real estate agents to wholesalers that specialize in both your area and the types of homes you like to invest in. But you’ll also want to build them with everyday people, aka homeowners.
Even a seller with only one home to sell can be an excellent relationship to cultivate. Individual sellers who have a good experience selling you their property will undoubtedly share their experience with others who may be in the same position of wanting to sell their home and skip the normal real estate rigamarole (and that hefty broker’s fee). The bottom line is that you never know where your next real estate investment property will come from, and treating every interaction like one that can lead to your next sale will undoubtedly help you make the next sale.
If you do want to buy your next rental property from a seller, here are a few tips:
Market directly to homeowners
If you’re not going to pay a real estate broker or a wholesaler to assist in finding and buying a property, you’ll have to do the heavy lifting to find off market properties with interested sellers yourself. Here are some ideas to market your real estate investment business:
- Set up a website for yourself and market your services via advertisements (online, in print, on radio or TV, etc).
- Search online listing sites, such as FSBO and Craigslist to find homes listed by sellers.
- Send out direct mailers to areas of interest.
- Sort through county records on tax delinquency.
- Knock on doors to speak directly with homeowners.
- Do a “driving for dollars” tour where you drive around and scout locations.
Of course, all of these approaches require your tie, so while you’re not paying someone to find the deals for you, you are paying in your own time to find the deals yourself.
Invest in leads via a third party
- Hire someone to do your marketing for you.
- Hire a scout to drive around your preferred area or neighborhoods for leads.
- Pay a company for lists of leads.
- Use a service that connects interested sellers all around the US with real estate investors.
Should you buy a rental property directly from a seller?
The bottom line is that when you buy a rental property from a seller, you save money and the homeowner gets to keep more of their profit – it’s a win-win. The trickiest part of the whole process is connecting with the right home and homeowner for your real estate investment needs. That’s where companies such as Sundae come in to give the best possible real estate investment experience to both sides of the transaction.