How to Find On-Market Distressed Properties
Let me show you how to find on-market distressed properties.
The first thing I'm going to do is go to Redfin.com.
I like using Redfin for this type of work.
The first thing that I want to do is I actually just want to come over here to the on Redfin tab and I want to click it until the arrow points down and what this tells me is the properties that have been on the market the longest.
Right now I'm going to have vacant lots, I'm going to have houses, I'm going to have apartments, all of that stuff. But I want to come up to more filters on the right and I want to put houses, multi-family, and townhouse.
That's specifically what I'm interested in and now this is kind of my first layer of looking at these.
New build and ready to build properties are not investor specials.
What I want to do is scroll down and I want to look for something that has a lower price per square foot than the other things around it.
This is searching all of my city. You can draw an outline for what area in your city that you invest in and those are the properties that will show up on the right.
The plus mark next to the properties, that's going to mean that it's a ready to build property. I'm going to go all the way to the second page. There's a lot of ready to build properties here. Until I get to one that doesn't have the plus mark. I'm looking at properties that have been on the market a long time. This property's been on 300 in three days but again it's a four hundred thousand dollar property. Not what I'm looking for.
But I see one that's been on the market for 257 days and is eighty seven dollars per square foot. The purple house means that it's for sale by owner.
This might be the perfect property for a wholesaler. There's no agent involved, it's for sale by owner, and we can look at it and see if there might be some upside for an investor to go in and either flip this house, fix it up, use it as a rental, or any strategy that an investor wants.
But we see that this property is below market value. I've also got a property here that is 33 dollars per square foot right and I can look and I can see that this house could use some updating.
These are properties that I could target as a wholesaler. Now I can also get more specific. Redfin has this price reduced and fixer upper tab, so if someone's dropping the price on their property that might mean that you can get a below market value, but there's also fixer uppers only.
I can apply that and I can see all of the properties that have been marked as fixer uppers in my area. Now there are more than six fixer uppers in my city, but Redfin has specifically marked these ones. So it doesn’t hurt to just take a look and see what Redfin has described as fixer-uppers.
Another thing I can do, is if I take off this fixer upper check mark, it's going to go back and I'm going to be looking at 350 plus homes.
And there are a couple of keywords that I like to use. “As is” actually never works for some reason. When I put in “as is” it doesn't work, but when I put in a dash mark in between “as-is” it works.
So now I've got all the properties in my city that are listed as “as is” which are great for investors because the person who's selling that property doesn't want to put any extra money into it. So it may be in poor condition.
As we can see, let's just look at this very first one. We don't even have any pictures of the inside. Here's one for sixty dollars a square foot as is, so this is just a homeowner that wants to sell their house. They don't want to put any extra money into it.
Here's a 31 dollar per square foot one and obviously this is an investment home. No one's gonna buy this property to live in it themselves. So that's one way that you can use Redfin to find properties that are on-market in distressed physical condition.
Some other keywords that you can put in besides “as is” are “TLC, fixer upper, invest.”
I like putting in “invest” because that catches “investment" or “investors.”
You can put in “has potential, needs updates, needs work, cash only” things like that where the agent has written in a description that triggers you to know this property might be a good investment.
Now in order to find properties that have recently failed off the market, I go over to PropStream. If you guys don't have PropStream, you can use it for free for seven days.
And so if you wanted to go in and do what I'm doing and pull this list, you could do that with your free trial or you could pay the $97 a month and continuously do this.
I think that it is worth it because of the information you get, but that link will get you a free trial. So it's completely up to you.
What I want to do is, I've actually saved a search right here and I've just called it “comfort area,” and this outlines the area in my city that I'm comfortable investing in.
So before, Redfin had the entire city and surrounding areas. This search right here is just going to limit to the areas that I feel comfortable, knowing “yes that's a good deal” or “no it's a bad deal.”
All right so now I have a list of 63,500 properties in the city. I can see that 901 of them are currently on the MLS, 293 foreclosures, etc.
I can see a ton of information up here, but what I want to do is I'm going to come to filter and I'm going to look for vacant properties.
That let's us see our single family, multifamily, or multifamily 5 plus, and I want to close that and I want to come to MLS status then I want to hit “failed.”
I can see all of the terms of this search that I'm doing “vacant, single family, multifamily two through four, or multifamily 5 plus” and that it failed off the MLS.
So if I close that, I can see that there's 37 properties in the city that have failed off of the MLS that are vacant right now. One thing that I want to do is, I want to know when this property failed off the MLS and I can see that right here. I can see that this property just failed on August 4th. Now it was listed for $550,000.
Is that an investment property? I don't know if it was worth a million dollars and it failed off the MLS because it was in bad shape and they were trying to sell it for $550k.
Maybe but that's not the type of property that just immediately gets my attention. What I'm going to do is, I'm looking for a property that like this one right here failed off on August 10th it was listed for $175k. I actually know this property right here which failed on August 7th and it's listed for $279k, but something that I know about this property just from looking is that this house has no interior.
This property somebody tried to sell, I believe that it was an investor that wasn't able to finish fixing up this property. I think they probably ran out of money at this phase of the project, and so they tried to sell on the MLS.
They were asking too much for it, and now it's just sitting there. Obviously, this house needs an investor to come in and finish it up. It's literally just that framing, so what I can do when I find a property like this is I can come to MLS details, I can scroll down, and I can contact the agent who listed this property.
It just failed earlier this month and I know this particular property because I'm working on getting in touch with them.
So what I'm doing is calling up this agent and saying “Hey, I'm a local investor. I see that your property at 123 Main Street just failed off the MLS. I can see that it's at the framing stage. Do you think you can reach out to your client, and see if they'd still be interested in selling and maybe accepting a cash offer?”
I could skip trace the actual owner of this property's contact information and pay 25 cents and call them directly. It's no longer on the MLS, and so it is ethical for me to go straight to the owner, not through the real estate agent.
I actually did this, and I kind of did a little experiment.
So I found a property in a similar situation that failed off the MLS was not in the greatest condition. I skipped traced and cold called the owner directly and he cussed me out.
Then I did this and instead of calling him, I called his agent and said “Hey I saw a property failed off the MLS, do you think you could reach out to the owner to see if they'd still be interested in selling?”
She called me back about an hour later and she said, “I spoke to him, and he's interested in selling. He wants $65,000 for the property.”
So when I went directly to him, maybe he thought my call was sketchy or I said something in a way that he didn't like, even though I only said about two sentences before he started going off.
But there was something I think a little bit scammy about cold calling, versus when I went to his agent and she went to him. It was completely something that he was comfortable with and he was willing to sell.
If you're a beginner in wholesaling, I hope you found this post helpful.
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