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Locating Lucrative Investment Property Requires Finding Motivated Sellers

Locating Lucrative Investment Property Requires Finding Motivated Sellers

By Rick Sharga, Vice President of Marketing for RealtyTrac

With real estate outperforming most other investment vehicles, it’s not surprising that an increasing number of buyers are pursuing investment properties.

With the rapid appreciation in many real estate markets, investors can realize a quick profit in the short term by reselling a property. Even if a particular real estate market is not red-hot, investors can profit over the long term by initially using the property as a revenue generator—leasing the property while allowing equity to build.

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That doesn’t mean it’s always easy to find investment properties. But with the right strategy for pinpointing investment opportunities, investors can realize sizeable profits even in an overheated real estate market, according to T.J. Marrs, a real estate investment trainer and author based in Vancouver, Wash.

“In general, if you can trade a 20 to 30 percent spread between your costs and your resale price, you can be fairly safe that you’re going to make a profit no matter what, even in a bubble market,” he said, adding that costs include not just the purchase price but other fees and expenses involved in buying a property.

Locating investment properties
The ideal investment purchase involves a motivated seller who has built a solid amount of property equity but doesn’t have the time, money or other resources to sell the property at its full market value.

“There are literally dozens of ways to find properties. But the key is to find a property where there is a motivated seller involved,” Marrs said, noting that one of the best ways to find motivated sellers is to search pre-foreclosure properties.

Although the hidden market of foreclosures and pre-foreclosures has previously been available only to industry insiders willing to sift through public records at the local county courthouse, services like RealtyTrac have made this information easily available online. Visit www.realtytrac.com to search pre-foreclosure, auction and bank-owned properties nationwide.

A property enters the foreclosure process when an owner defaults on monthly loan payments, and the property is scheduled for public auction. The owner can stop the auction during a pre-foreclosure period by paying off the amount in default or by selling the property for a price that covers the balance of the loan.

Many real estate investors contact the owner during pre-foreclosure and offer to buy the property at a bargain price. If a deal is worked out, the owner avoids having a foreclosure on his or her credit history and usually walks away with some cash in his pocket.

“The reason they’re willing to sell is that they are very motivated sellers. And they’re going to lose the property if they don’t sell,” said Marrs.

When contacting the owner, investors need to be aggressive marketers because they are often contacting the owner before the owner has made the final decision to sell the property.

“With any kind of marketing campaign, you need to get a penetration beyond first impact,” Marrs said. “One letter is pretty much useless. Three letters is about five times more effective than one letter to the same lead.”

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