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How to get a good real estate deal like a flipper (even if you don’t want to be one)


Justin Pierce is a real estate investor and real estate agent who regularly writes about his experiences buying, renovating and selling houses in the Washington area.

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I’m often asked how I buy homes for pennies on the dollar

A lot of people assume that I have to take advantage of people in distressed situations or use tricks to find such deals, but that is far from the truth

I am very straightforward with sellers about my buying process and the fact that I can’t pay them top dollar for their homes

I usually even tell my sellers how much more money they’ll likely get for their home if they list it for sale on the open market

I’m honest because the last thing I want to do is spend a bunch of my time and resources analyzing the numbers and raising capital for a deal that might fall apart at the last minute after the seller learns the truth

The key to finding good deals is not deceit and trickery.  Those tactics will only result in wasted time and effort

The real goal is finding the right seller and providing certainty and convenience.  There is a lot of work and risk involved in selling a home on the open market.  A seller never knows for sure how long it will take to get a contract or even what the home will ultimately sell for.  How many groups of people will parade through their home before the right buyer makes an offer?  When they do find a buyer there are still home inspections, appraisals, financing contingencies and a litany of other hurdles and hassles to overcome before they actually close the deal

The more of these hurdles you remove up front the better potential deal you can get on the home.  But sometimes just being a ready and willing buyer in front of the right seller at the right time is enough to get a big discount on a home.   Finding an amazing deal really just boils down to finding the right seller.  The secret, therefore, is marketing

Before you commit to this endeavor you should be aware that finding a great deal is all about the numbers.  You can’t be picky about the home.  Your number one, two and three top-buying criteria have to be that the home is a smoking great deal and you’ll have instant equity on day one.  You just might have to live with a certain number of bedrooms or a home on an odd lot.  The more selective your buying criteria the less likely you’ll be successful in your efforts to buy like a flipper.  If you know you have to have a certain type of home or specific things in the home then trying to buy like a flipper will probably just be a waste of your time and effort.  If, on the other hand, you know you’re only going to be in the home a short time and your only absolute requirements is a roof, four walls and a bunch of equity then read on

[More Pierce: The four things you need to know to flip a home] There are about a half-dozen standard techniques used by flippers to find the right seller

Almost all good flippers send out flyers, put up signs, run ads in print and online, set up websites and network with Realtors and bird dogs — people who identify deals for investors for a fee

Many also drive neighborhoods and knock on doors

You’re not going to put together a campaign like that of a full-time flipper, but you could use a hybrid system that costs you little in time and resources and has a fair chance of paying off

You have a distinct advantage over a flipper

We flippers have a lot of costs associated with investment capital requirements, and we have to budget in the costs of buying and selling the home in the same year

I must get a home at a minimum of 25 percent under market value

A nonflipper could buy the same home at 15 percent under market and have an equally good deal.  Imagine that: If you were competing with a flipper for a home, you could pay 10 percent more than they could and still be just as well off

Here are some ideas to help you  build your own hybrid home flipper marketing system: Define your market

Zero in on the area where you would like to live. Define that area as best you can so that you can describe it to other people easily

Older neighborhoods are usually better hunting grounds

Create a mailing campaign. Use a list-buying service to identify homeowners within your search area who have high amounts of equity or who have lived at the address for a long time

Another great potential source of deals are absentee owners, people who do not live in the home any longer

Put together a simple letter or postcard

Make sure you explain in the mailer that you are looking for a home for your family in their neighborhood.  Mail postcards every four to six weeks for at least six months.  Don’t send out just one round;  the first one almost never works

Put up signs. These stupid “We Buy Home” signs you see everywhere work

But you can’t put them out on state roads in Virginia, or you’ll get a ticket

Find out the local rules, or get permission from people to put them in their yard

Drive around your target area. Take note of any homes that look empty and or uncared for

Make a special list of these homes

It may be useful to contact the owners to see if they want to sell

You just might make someone’s day

At the very least, make a special mailing list

Advertise — let people know that you’re in the market. Take advantage of free online advertising

It doesn’t cost you anything to run ads on the many free online classified ads websites

It might even be worth paying to run some ads, depending on your location and the cost

In my opinion, the D.C

area is not the best place to pay for print ads, but it has worked out great for me in some other markets

Network and put out the word

You might try attending some of the many real estate investor meetings we have around here

It may be possible to make contact with Realtors and real estate bird dogs or wholesalers. These people make it their business to find deals for investors

They may do a lot of the work for you

Just beware that there are no real licensing requirements for bird dogs and wholesalers

Ensure that you verify everything they tell you

Check out the For Sale by Owner websites, and call on any yard sign you see in your neighborhood that will put you in direct contact with a homeowner. You can find a great deal here

However, most people who sell their own homes do not know how to value them, and in my experience they’re more likely to overvalue their home than undervalue it

[More Pierce: Why home sellers should pay their buyers closing costs] If you’re not experienced in real estate, then I highly recommend you work with a real estate agent

If you find a deal, you’re going to need someone who can help you evaluate the numbers

Just because you find a seller who’s willing to sell to you outside the open market doesn’t mean that you’ve found a good deal

And you can’t rely on the appraisal

Most appraisers appraise the home for the contract amount, whatever that amount happens to be, as long as it’s justifiable

Residential appraisals usually tell you only when you’ve overpaid

They rarely tell you that you got a good deal

I recommend you get a good Realtor to do market analysis and assist you with the contract and closing process.  A Realtor can also help you create mailing lists

Many Realtors send out postcards

Ask the agent if they’ll mail special postcards to your target area

This might help the agent’s response rate

They can say on the postcard that they have a buyer specifically looking for homes in their area

The agent may find another client out of the effort

Make sure you don’t overpay for a fixer-upper

Ensure you have at least 10 percent equity in the home after you do all of the fix-up

Too many sellers think that if a home needs $50,000 in fix up, then they just need to reduce the price by that amount

Well, if that’s the case, then I highly recommend you buy a home that needs no fix-up

I guarantee you that home will end up costing you more than you think in repairs, and even if your numbers are right, you need equity to compensate you for your risk and effort

Otherwise, save yourself the trouble and buy a home that’s move-in ready

[More Pierce: How to avoid bureaucratic snags when building a home] And finally, don’t talk yourself out of a great deal

I always hear people ask with suspicion: Why would they sell for so cheap? They assume there must be some hidden defect

Do your due diligence

If everything checks out, then don’t be afraid to take a great deal

There’s no doubt this is a lot of work and hassle, but this is how we find the good deals

There is no secret to the process, and anyone can use these techniques or versions of them to find the deal of a lifetime

Justin Pierce is a real estate investor and real estate agent who regularly writes about his experiences buying, renovating and selling houses in the Washington area

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