When done right, a career in real estate investing can be your most valuable source of income. However, one subject that first-time investors find challenging is finding real estate deals before they get snatched away by another investor. Instead of making an offer on their property of choice, investors find that they need to make multiple offers on multiple properties just to secure one deal. For some, this could lead to frustration and changing careers. Those who stick around, however, will ultimately learn the hidden ways to find real estate deals and potential investment properties. In this blog post, we’ll introduce you to one of these hidden property search strategies that successful real estate investors often keep to themselves – driving for dollars.
What Is Driving for Dollars?
When first hearing “driving for dollars”, many might think we’re talking about Uber or Lyft. And while that could actually make sense, it’s not the case in the real estate world. When real estate investors and agents talk about driving for dollars, they’re talking about getting into their cars and driving around to look for deals. Hence, this is a real estate investing strategy that means driving through specific neighborhoods in search of properties that would make for a profitable investment. You could say that this strategy is more about making an investment opportunity than taking advantage of one that already exists.
Before the days of the internet, Multiple Listing Service, and websites for finding investment properties for sale, this real estate strategy was the main source of deals. For those who find mass direct mail too expensive, cold calling too nerve-wracking, and online paid ads too complicated, driving for dollars can be a great way to get your boots on the ground and get started in real estate investing even if you have little money and no experience. In fact, successful investors have used (and continue to use) this strategy to find deal after deal before their competition in the market. So, how exactly does it work? And why should you still consider it in today’s real estate business?
Related: How to Get into Real Estate with Little Money and No Experience
Why Drive for Dollars in 2019?
Before we delve into how it works, let’s unravel this real estate strategy a little more. You might be asking yourself “why should I choose to drive around searching for deals when there are many other ways that allow me to find real estate investments?” Well, there are actually many benefits to including this in your property search strategy. First off, it’s an affordable way to look for deals near you. Not many investors – especially beginners – are interested in out-of-state real estate investing. If that’s the case and you want to invest in your local market, why hire an agent to look for deals for you, when you can find them yourself from the comfort of your own car. This will cost you nothing more than gas and time – both of which you can afford when just starting out.
The second benefit of driving for dollars has to do with the type of real estate properties it allows you to find. When you drive around searching for investment opportunities, you’re mainly looking at off market properties. Successful real estate investors know that some of the best deals out there are not even listed on the market! This is mainly because these properties aren’t seen by the public. In addition, these properties are commonly sold at below-market value (which allows investors to enjoy some savings). Plus, sellers of off market properties are often motivated to move forward once they get an offer as they won’t likely get another one (which means you can close the deal faster). Many times, these real estate deals are right in front of you– you just need to hop in your car and look for them.
Finally, driving for dollars is not only a cost-effective real estate strategy for finding potential investment opportunities, but it’s also a great way to get familiar with the neighborhood. When it comes to real estate investing, the location of your investment property is the key to your success. While driving, pay attention to the physical condition of properties and the visual characteristics of the neighborhood. This can offer insights not accessible from a spreadsheet and will teach you more about the neighborhood so you can make a more informed decision of whether it makes for a good investment location. Every time they hop in their car, successful investors take it as an opportunity to stay up-to-date with their investment location and, ultimately, find new deals for real estate investing.
You can start looking for and analyzing investment properties in your city and neighborhood of choice using Mashvisor’s tools. Click here to get started!
How Does It Work?
Step 1: Pick an Area and Focus on It
Before getting in your car, you need to have established which area you want to drive around in to look for houses to buy for real estate investment. This will depend on your search and investment criteria. For example, if your strategy is to buy a house to fix-and-flip, you need to target neighborhoods where property prices have risen significantly, but there are older homes that need renovations and upgrades. On the other hand, if you’re planning to buy a house and turn it into a long-term rental property to generate rental income and cash flow, you need to target neighborhoods that have great rent to value ratios.
If you’re unsure how to find neighborhoods with characteristics that match your investment criteria, use Mashvisor’s Heatmap Analysis Tool. Simply enter the city where you’re planning to buy an investment property and select your criteria (listing price, traditional and Airbnb rental income, traditional and Airbnb cash on cash return, or Airbnb occupancy rate).
Once you activate the tool, it’ll show you how investment properties in specific neighborhoods are performing in terms of your selected criteria. In turn, this allows you to focus your property search on neighborhoods where you’ll be sure to find what you’re looking for when driving for dollars. Basically, it runs a neighborhood analysis to assure real estate investors they’re buying properties in good investment locations where they can see a return on their investment.
To give it a try, start out your 14-day free trial with Mashvisor now!
Once you have your target area defined, make a list of subdivisions within that area you’d like to explore. In addition, bring a notebook, pens, and a camera to take pictures and notes of any vacant and/or distressed properties you may find. This will help you remember the properties long after you see them.
Step 2: Look for Real Estate Properties
After targeting a specific location, now you can start driving around looking for houses and trying to guess if any of them have owners that might be interested in selling. You also need to make sure the houses you find show signs that they have potential as investments. A good real estate deal when driving for dollars is a property that can be bought for a cheap price – much cheaper than its market value. To find these deals, all you need to do is keep an eye out for distressed properties that appear to be vacant or abandoned. Why should you focus on these properties? These properties have a lot of deferred maintenance or may have major defects that need to be fixed. Meaning, a savvy real estate investor can buy them for cheap, add value by repairing them, and then resell them at a decent profit margin.
Related: How to Make Money Flipping Houses – Tips for Maximum Profits
When it comes to driving for dollars, the secret to your success is knowing what to look for in properties and paying close attention to details. Unkempt properties are typically an indicative sign that owners don’t care about them or have other priorities. So, what are the signs that real estate investors should keep an eye out for? Here’s a list of a number of things to consider:
- Overgrown grass: a sign that no one is taking care of the place
- Newspapers stacked up at the porch: a sign that no one is living there
- Open or broken fences: also indicate that no one is maintaining the property
- Broken windows, peeling paint, or obvious external damage: a sign that the homeowner or renter has probably moved out
- Boarded up windows and doors: means that no one is living there for sure
- For sale by owner signs: these won’t be listed on the MLS or other public listing services and get overlooked by most agents and buyers who are too reliant upon technology
Whenever you drive past distressed properties that show any of these signs, take pictures, write down the address and any notes that may come in handy later on. You never know – these might just be your next real estate investment deals.
Step 3: Research, Research, Research
After you’ve identified some properties that interest you for real estate investing, now it’s time to do your homework to find the property owner. Beginner investors wonder how to find out who owns a property as it is not a simple task. First off, you need to keep in mind that the properties you find when driving for dollars don’t NEED to be vacant. A house could have tenants that don’t take care of the place or the landlord is tired of dealing with these tenants. Simply knock on the door and, if anyone opens, start by seeing if the person you are speaking with is the owner and go from there.
If you find that the owners aren’t living in the property, it’s time to go through the addresses you have and look them up in the county records or your local appraisal district website. This is how real estate investors get the information needed to contact the property owner including:
- Owners name and mailing address
- Year the house was built
- When it was sold last and what it sold for
- What the tax value is
- Whether or not it’s going into foreclosure
You want to make sure you’re not targeting bank-owned homes for this strategy. This is because major banks have strict procedures for selling houses which include using a real estate agent to list the house on the MLS so they can sell for more. So if you find a vacant bank-owned home, scratch it off your list as it’ll only be a waste of time trying to buy it before it is listed.
The last part of your research when driving for dollars is to verify that the real estate property has equity of some sort that you can release. You can do this by checking if there are any outstanding mortgages or liens on the property.
Related: The Beginner’s Guide: How to Calculate Equity in Real Estate
Step 4: Reach Out to the Property Owners
Once you find out who owns a property that you’re interested in buying for real estate investing, the last thing to do is to contact them. If you know where they now live, send them a simple letter or postcard stating that you want to buy their property in “as is” condition and that you’re willing to pay all cash. Furthermore, let them know of your ability to close fast and to do anything to make the process easy for them. This should be enough to start a conversation. You can also try email – if possible – but real estate investors who have succeeded in driving for dollars believe that a personalized, handwritten letter can be more powerful in turning owners into motivated sellers.
Once you get in touch with them, have a list of questions ready to ask while you wait for their response. Is there a mortgage on the property? How much do they owe on it? How much do they think the property is worth? Can you see the interior? How quickly would they like to sell? The more information you can find out from the owner in the initial conversation, the better. You can use this information when running the numbers and calculating your ROI to find out whether this is truly a good real estate deal before you invest your time and money on it.
You’ll come across owners who don’t want to sell. But if you haven’t received the response you were hoping for, don’t give up! A common practice to succeed in the driving for dollars real estate strategy for the long-term is to continually follow up with owners. Some investors send out a recurring mail piece once every 3 months throughout the year. You’ve already spent the effort researching and driving to find these properties, so you might as well spend a few extra dollars and continue to market to them.
Is There an Alternative to This Strategy?
Yes – actually, there’s a way to drive for dollars without actually needing to drive! You can do that by using the Mashvisor Property Marketplace. You can call this an all-in-one tool as it allows you to do the previous steps of driving for dollars in one place. With this tool, real estate investors can:
- Find off market properties including vacant foreclosures, tenant-occupied rentals, and more in any city/neighborhood in the US housing market. You can also use helpful filters to narrow down listings to match your criteria.
- Easily identify property owners by getting access to data including their addresses, emails, and phone numbers. You can also directly connect with property owners through the platform to quickly start negotiations.
- Get a quick and complete analysis of every property in the Property Marketplace using the Real Estate Property Calculator. Download a PDF report where you’ll get accurate sales comps, rental comps, and an ROI and expense analysis to ensure you land on a profitable investment.
As a real estate investor, you never know where you’re going to find your next real estate deal. It could be from behind your steering wheel or from behind your laptop screen! For an easier way to find the best real estate investments in your area, visit the Mashvisor Property Marketplace now!