The information discussed in this article is VERY important and a major step to wholesaling real estate, or house flipping, so take the time to read it carefully.
Hopefully, by now you have assembled a buyers list, located a title company and an attorney to close the deal, and got your Purchase Agreement and Assignment Agreement done and ready.
If not, take the time to complete these preliminary steps before you move on to finding a house to flip. It is vital that you have all of these pieces of the puzzle in place before you move on.
How to Find the Right Kind of House to Flip
First, I recommend you start working within a 10 to 15 mile radius of your home. This is sometimes called a “farm area.”
If you live in a major metropolitan area, like I do, it will be very hard to drive all over town to look for houses. For me, it can take an hour to get from one side of town to the other.
You’ll find that you are spending more time driving than actually looking at houses or actually talking to motivated sellers. Don’t confuse busy work with productive activity.
Get to know your farm area like you know the back of your hand. You can do it easily by working just a few hours on the weekends.
Drive around each neighborhood in your farm area. Keep a log or journal with information about your target neighborhoods. Learn what is selling and what is not. See what areas people are moving into or moving out of.
For wholesaling real estate, you need to identify neighborhoods with houses that are 15 years old or older. A house that has been owned for 15 years should have enough equity so you’ll be able to buy it at a significant discount if it needs a lot of work.
Plus, older houses will need repairs, it will be easier to get them under contract at a deep discount. Keep in mind… we are looking to contract them at around 50% of the ARV (after repaired value).
Basic “Marketing” – Driving & Calling
As in any business, marketing is the key. So, let’s first review how to market and find deals without spending a dime. (In the next blog article, we’ll go over other marketing strategies).
When you start to drive your “farm” area, have a simple voice recorder with you. When you see a “For Sale” sign write down the address and contact numbers in your log. Then call to find out…
- The square footage
- The number of bedrooms and baths
- How long it has been on the market
- The asking price
- Other relevant information
Keep all this information in your log. You’ll quickly learn the approximate market value of houses in the neighborhood.
If all the houses in a neighborhood are newer or in good condition, you need to find a different farm area. Remember, the best flip deals are 15+ years old and not always pretty.
Look for Vacant Houses
While you’re driving your farm area – in addition to “For Sale” signs, look for vacant houses, houses in need of repairs, and overgrown yards.
Record yourself a short memo of the address and describe what you see. You will transcribe that to paper when you get home. Then you will call them and ask the important questions to see if you have a potential deal.
How Do You Spot a Vacant House?
Tall grass or weeds is certainly a giveaway, as is a porch or doorway cluttered with phone books, flyers and coupons from the local pizza parlor. Or perhaps a mailbox stuffed with mail that has not been picked up. Boarded up windows are a sure sign of vacant house.
Time to get brave and bold!
When you find a vacant house, in addition to recording a short memo on your voice recorder, get out of your car and knock on the neighbors’ doors and ask if they know who owns the house.
Attempt to find out how long they lived there, why they moved, how you can reach them, how long the house has been vacant, etc. Get any information you can about the owner and the house.
Tell the neighbors you are looking for houses to buy in the neighborhood, and that you work with a group of investors (these are your “partners”) that will remodel the house then sell it to a good home owner. Chances are they are very anxious to have a “good” neighbor and will cooperate.
Do not forget to ask if they know of any other houses that are vacant or in need of repair in the neighborhood. Leave your name and phone number or a business card. They may think of a house after you leave, and you want to make sure they know how to get in touch with you.
Sometimes the neighbors won’t feel comfortable giving you names and numbers of the owner. In that case, leave your name and phone number or business card and ask them to please get a message to the owner that you are interested in buying the house.
Most of the time, the neighbors of an eyesore/abandoned property will absolutely LOVE you for trying to get rid of that vacant home and clean up their neighborhood. Don’t be surprised if you get referrals from it.
Stay tuned for my next blog article. I’ll cover more ways to find these type of properties…