How ‘On the Money’ is Off-Market Real Estate Investing?
Although most sellers list and advertise their properties to a wide pool of potential buyers and investors using real estate professionals and the Multiple Listing Service (MLS), it’s not uncommon for owners to privately sell off-market real estate.
There are any number of reasons for a property to be sold off-market. (Some off-market properties, for example, may be in pre-foreclosure and have not yet been advertised publicly.)
Also known as “pocket listings,” they may still be represented by an agent, but they aren’t actively marketed online or on the MLS.
Even though the meaning of an off-market property can vary, many are potentially attractive deals for investors. There are advantages and peculiarities to off-market real estate deals over listed properties.
For one thing, an off-market deal means less competition. An off-market opportunity is one with fewer interested parties, offering better negotiating leverage for investors.
In the commercial sphere, properties are often sold privately because of circumstances unique to the property or its tenants. Apartment buildings, hotels, retail spaces and offices are sold privately so as not to disturb tenants or businesses operating on the property. Many of these properties are unknown to investors who don’t have strong broker contacts, so there’s little competition when it comes to acquiring them.
Investors can also benefit if there’s something wrong with the property or with the owner’s financial situation. Maybe the owner is looking for a quick exit. Likewise, a “fixer-upper,” or a property with few or no tenants offers lots of attractive investor options. A new owner could fix the property and bring rents up to reflect actual market rates. Sometimes the current owner isn’t in the financial position to make the necessary improvements him- or herself.
One of the common reasons sellers choose to keep property sales off-market is the high cost of not selling. The longer it takes a property to sell, the farther its worth from the offering price. A house listed for $2 million that doesn’t sell for eight months will no longer bring in $2 million on the open real estate market. Selling privately can protect the property owner from the risk of failure.
How Do You Locate Off-Market Real Estate?
By now you might be wondering if off-market properties aren’t listed, how investors are supposed to locate these opportunities.
One of the easiest ways is to introduce yourself to potential sellers through direct mail. Get the addresses and names of owners in the neighborhood you would like to buy property in (usually free from a title company) and send all the owners a postcard that lets them know you are looking to buy. A good source of investment opportunities are owners of vacant properties, who are often willing to listen to a serious offer.
Estate and divorce attorneys work closely with people who are experiencing changes in their lives. Get to know a few. In difficult times, such as after a family death or a divorce, people often prefer a smooth and easy sale of their property. A sale that isn’t public can benefit people in such circumstances, and attorneys with practices in these areas are good resources for an organized investor.
The top real estate professionals in your target market, brokers and agents, should be notified that you want to hear about any off-market opportunities that come their way. It might surprise you to find that you will be the first one to hear about new offerings.
If you have interest in commercial off-market deals, build your business and personal contacts with local contractors, builders, and other professionals who will contact you the next time they hear about a property where the investor or owner didn’t have enough money to finish the project. These are terrific opportunities for smart investors who can jump in, finish the job, and make a profit.
Having first access to off-market properties can be beneficial to fix-and-flip investors, who may enjoy a tidy return on their investment.
This isn’t to say that there aren’t risks to off-market investing, which means there are advantages to having a real estate professional to guide you, especially for the first few deals.
To learn more, come to our MerrickDamon Investors Club Meetings. Last Saturday of the month (most months) from 12:00–1:30 at 2419 N Dixie Highway, Wilton Manors, Florida 33305. Call 800-516-7550 for details.
If you have off-market real estate to sell, contact us email.