The Successful Way To Find Off Market Deals

Sourcing my own off market deals has been key to my success as a real estate investor. But it didn’t happen overnight.

Off market deals generally allow you to purchase property at deeply discounted prices. As a result, successfully finding these deals can greatly amplify your returns and ability to scale your real estate portfolio.

It’s no wonder why so many people desperately want to source their own deals.  

But if you aren’t going about finding off market deals the right way you will likely end up buying a bad deal and worse off than if you’d just bought something from the MLS.

The problem is folks tend to overestimate the ease in locating strong off market deals. They rush the process, fail to focus on a specific market, and simply don’t want to put in the work.

Let’s look at how we can avoid that and start considering how to set ourselves up to (eventually) source our own off market deals.

The Three Types Of Off Market Deals

You may believe that all off-market deal flow is the same. But that’s simply not true.

It may sound counterintuitive but there are several types of off market deals that can generally be bucketed based on their level of accessibility.

Let’s look at the three groups I generally think about when I’m referring to off market deals.

Bucket #1: Property Auctions

Property auctions are what I call “quasi” off market deal flow.

Why?

Because the general public has access to it. But they may not know where to find it or may simply not want to buy these deals.

For instance, last week I talked about buying properties from the Detroit Land Bank Authority (DLBA) and how it auctions properties daily. Most folks are aware of this but they may not want to deal with large projects like these or the compliance process of the DLBA after purchase.

You also have tax auctions, sheriff sales, or even public auction sites like Xome or Auction.Com.

These all have varying degrees of difficulty in terms of access (auction sites being the easiest) but they are all available to the general public.

Bucket #2: Wholesaler Lists & Group Postings

The next tier of off market deals comes from wholesaler lists or social media groups.

These are email blasts or groups where deals are regularly posted. Usually you are dealing with a middleman, or wholesaler, who has the deal under contract with the actual owner.

While these deals are still pretty visible, they are far less so than auctions. There is no one group, site, or list that rules them all. So you often have to be in many.

And you just never know where you might meet a new wholesaler.

Heck, just the other month I met a wholesaler on Twitter that I’d never met before. We just did our first deal together last week! 

You never know where your next relationship or deal might come from. It’s a constantly active process you need to stay up on.

Bucket #3: Directly Sourced Off Market Deals

The final tier of off market deals is stuff you can directly source.

I define this category as being direct to the seller. 

That means you either find the seller yourself, or maybe you get introduced to the seller through a friend or tip.

If you can pull it off, these are the best deals to locate. But it’s not easy and it’s unlikely you’re going to start here. I’ll explain why that is later in this post.

3 Common Off Market Deal Hunting Mistakes

Understanding the different types of off market deal flow is going to help define your strategy.

For example, if you are targeting auctions, you really need to stay disciplined with your bid amounts. It’s easy to get swept up in the moment and exceed your max purchase price.

And if you are going after wholesaler lists and groups you’re going to need to sift through a LOT of garbage before finding anything worth buying.

Let’s look at some common mistakes folks make when attempting to find an off market deal.

Mistake #1: Lack Of Market Expertise

The biggest failure, by far, is a lack of market expertise.

A lot of folks I speak with are targeting markets from out of state and trying to do it all. They want to source their own off market deals, build their team, and manage the process along the way.

That’s great, and it can be done. But it MUST start with a strong foundation.

In early 2020 a friend called me about this deal that a friend of his wanted to sell:

I managed to secure it for $37,000 when it likely would have fetched $60,000 or more if listed. 

And I had to act quickly! 

I put about $70,000 into renovating this house and it appraised for $178,000. Today it’s worth north of $225,000 and rented for $1,700/mo.

Without an intimate knowledge of your market, there’s zero chance you will be able to get deals like that.

Too many people fail to understand the market, comps, or how to even properly run their numbers. 

It’s a lot to juggle, especially in a market you aren’t already familiar with. And, while I understand the eagerness to get started, you must take the adequate time to understand where you’re investing.

Mistake #2: Failure To Understand The Process

If you’re buying properties from the Detroit Land Bank you need to understand the process and everything that comes AFTER the purchase.

The same is true with tax auctions, sheriff sales, or auction sites. 

If you don’t, you may find yourself in a situation you didn’t plan for and in way over your head.

I’ve purchased a handful of properties from the Detroit tax auction in previous years. I (kind of) understood that I received these properties on a Quit Claim Deed but didn’t fully grasp what that meant.

I learned a lot about how to convert these to warranty deeds when I went to finally put a conventional loan on the properties. And I even had to clear one of the titles myself to avoid doing a quiet title.

If all that sounds foreign, you likely have some legwork to do before buying an off market deal.

Beyond that, with wholesalers, you need to understand the contract you’re signing and the fact you aren’t dealing directly with the seller.

When it comes to off market deals there’s nobody to help protect you except yourself. So you better be educated!

Mistake #3: Off Market Deal Fatigue

Finally, it’s extremely easy to get overwhelmed by looking at so many deals, especially if you’re signed up for a bunch of wholesaler lists.

It’s not uncommon to look at hundreds of deals before finding one that MIGHT make sense. 

Staying disciplined and pushing through that process is a battle. The last thing you want to do is buy a deal just to get moving and in the game. 

That can end in disaster. 

This is true whether you’re hunting deals on the MLS or off market. 

But the mistake is largely more costly when dealing off market because these types of deals tend to need more work, are harder to assess, and require quick decisions with likely no inspection.

How You Should Be Sourcing Off Market Deals

The good news is that finding success with off market deals is actually pretty darn easy.

Unfortunately, people generally don’t want to put in the hard work and time it takes to get there. 

But if you are willing, here is what I always recommend people do. 

As I like to say, it starts slow and then happens all at once.

Pick A Market And Focus

Most people spread themselves over several markets and sign up for a bunch of wholesaler lists. This is a great way to fail.

The better way is to pick ONE market and obsess over it. For me, that’s Detroit. 

And I can confidently say that I know more about the Detroit real estate market than 99.9% of people.

As a result, I can assess off market deals quickly and know if something is worth pursuing. 

But understanding a market takes time and effort. 

It took me years to truly understand the Detroit market. Then you need to stay up on everything that’s happening and changing.

That’s easy for me because I do this for a living. But if you’re moonlighting as a real estate investor it will quickly become a second job.

Network Like Crazy

Your next step is to network, network, network!

Get into Facebook groups with other local investors. You don’t need to chime into the conversation at first. Just observe. 

Understand who the more active investors are. Don’t ask them for stuff, but just spend time paying attention. 

You can learn a lot simply by lurking.

If there are meetups you can attend, even virtually, do it! You will start meeting people and getting your face and name out there.

Start Doing Deals

While you want to be patient for the right deal you don’t want to be stuck in limbo.

Eventually you want to start doing deals even if they aren’t home runs. This will give you far more credibility with other investors. And you can start chiming in on those Facebook groups with something worth talking about.

Expect there to be criticism or even haters. Take it in stride and don’t let it get to you. The right folks will start noticing and you will earn a lot of credibility by simply being an active investor.

Most aspiring real estate investors never do a deal, so this instantly sets you apart.

Off Market Deals Will Start Finding You

Obviously, this is all a ton of work. And if you aren’t planning to make real estate investing a full time career, it’s probably not worth doing.

In that case, it’s far more beneficial to work with someone already doing it (ahem, like me). That way you get the benefit of off market deals without having to put in all the time and effort.

But if you are set on doing this yourself, and you do all the above, off market deals will start finding you.

You won’t have to drive around, locating potential properties, digging up owner information, and cold calling.

I’ve done that and managed to source a deal that way.

But it’s far easier when your phone rings and your buddy or another investor has a lead for you.

In late 2019 my friend, an agent, called me and said, “Hey, do you want a cheap house?”.

The transaction was set to close in the morning but the buyers walked away from the deal at the last second. 

The owners were living in the home and had a Uhaul packed in the driveway. I told my friend I’d swing by in an hour and check it out.

I ended up paying $14,000 for this cute little Colonial in Cornerstone Village.

There was nothing materially wrong with the home. It had a small hole in the roof but that was it. The owners just needed to sell and I was willing to do the deal quickly.

As a result of the low purchase price this house was not high on my rehab list. I had put a new roof on it (for $3,500… yup!) but that’s it. 

Then it just sat there.

When we decided to move back to California I still hadn’t started the rehab. Prices had moved up in the area and I decided we’d sell this off market to another investor. 

I found a buyer quickly for $50,000 and he renovated and flipped the home for a profit.

My best deals have all happened this way… getting calls from friends, or friends of friends, and fellow investors that have a lead for me.

Eventually, if you do this long enough and are known as an active investor in a specific market, you will get more deal flow than you know what to do with.

Talk about good problems to have!