Investing in real estate is one of the most effective ways of generating passive income and making a good return on investment. However, the first step in buying an investment property is knowing how and where to find property for sale. You can find investment property through newspaper ads, real estate open houses, real estate websites, a real estate agent, foreclosed properties at banks or even real estate wholesalers. Another strategy worth considering is ‘driving for dollars’.
So, what is driving for dollars? Driving for dollars basically involves driving around neighborhoods looking for FSBO (For Sale By Owner) signs or signs of distressed or abandoned homes. Once you discover such off market properties, you can then reach out to the owner and attempt to strike a deal.
So, How Does Driving for Dollars Work?
The first step in driving for dollars is to identify where to buy property for investment. Tools such as Mashvisor’s Heatmap Analysis Tool will make it easy for you to locate neighborhoods that match your investment criteria and real estate investment strategies. All you need to do is enter the name of the city or neighborhood you are interested in. You can then narrow down your search for the best neighborhoods using filters such as listing price, cash on cash return (and cap rate), rental income for either rental strategy (Airbnb or Traditional), and Airbnb occupancy rate. Neighborhoods and areas will be highlighted in a certain color (ranging from red to green) based on how they perform for that real estate metric.
Learn More About How This Tool Works: Real Estate Heat Map: A Revolutionary Tool for Neighborhood Analysis
Once you identify a suitable real estate market for investment, it is time to put driving for dollars into action. Look out for signs such as:
- Overgrown vegetation
- Mailboxes filled with uncollected letters
- Piled up newspapers
- Clear code violations on the property
- Broken or boarded up windows
- No bank owned or realtor signs in the yard
As you drive around the area and identify distressed properties, write down the address and any other relevant information. Don’t forget to take a photo or two of the potential investment property. Such pictures will come in handy later in the buying process.
While driving for dollars, look out for neighbors that could offer valuable information about the owner of the abandoned property. Remember to carry business cards to hand out. In addition, you should look out for any mailmen in the neighborhood. Briefly introduce yourself and explain what you are looking for. Give them a business card and tell them to get in touch if they find a property that meets your criteria. To motivate them, promise a good commission for every referral. Since mailmen are very familiar with their neighborhoods, you are likely to find property leads much faster working with them.
Related: 7 Ways to Find Distressed Real Estate Property
Don’t have time to drive around? Or maybe you’ve found that your local real estate market isn’t the best place to invest in real estate? If so, visit the Mashvisor Property Marketplace. Here you can find and analyze off market properties from all over the US housing market.
What to Do After Driving for Dollars
Research
After completing your drive, start researching the houses you identified on the county’s Central Appraisal District (CAD). At this stage, real estate investors need to filter out houses that don’t meet their criteria. For example, you might want to filter out those properties that are currently owned by a bank. You can easily find your local CAD on Google by searching “[your county name] central appraisal district”.
At times, you will find yourself in a situation where the owner’s address is not available. For instance, you could come across a property that is clearly vacant or abandoned. However, your CAD might be indicating that the house is still owner occupied. This could be due to a delay in updating their records. In such a case, you can use the Deed of Trust from your county’s public records to find the owner of the property. All you need to do is carry out a Google search “[your county name] public records”. The deed of trust will reveal the names of everyone involved in the real estate transaction, including the grantors.
Once you get the names on the Deed of Trust, conduct a Google search for each name. For instance, you could combine their names with local telephone area codes. This could reveal:
- Cell phone or landline numbers of the grantors or owner
- Website addresses
- The new address of the property owner
- Company PDF contact sheets
If you cannot find the property’s owner, reach out to one of the grantors and try to get the contact details.
If you want to quickly and easily find out who owns a property, get access to real estate databases like Mashboard to get this information.
Market to Your Leads
Once you have finalized your list of homeowners, it is time to reach out. You can get in touch using postcards, yellow letters or email. To get the attention of the property owner, your letter should mention that you are ready to purchase the investment property in ‘as is’ condition and with cash. Remember to insert a photo of the property in the body of the letter. If you don’t get a response, send a follow-up letter every 2-3 months. Being persistent and consistent in outreach will enhance your chances of success with the driving for dollars real estate strategy.
Ask the Right Questions
When you finally manage to track down the home or rental property owner, be ready with important questions such as:
- Is there an outstanding mortgage on the house? How much?
- What is their estimate of the property’s worth?
- How fast are they willing to sell?
- Would they allow you to see the interior?
If the property owner is willing to sell but owes too much, it might be possible to do a short sale. However, with the rising cases of short sale fraud, you need to be very careful. Be sure to consult your local bank for clear guidelines on how to purchase off market real estate as short sales.
Related: What Is a Short Sale in Real Estate Investing?
Conclusion
If you’ve always wondered ‘What is driving for dollars?’, you have your answer now. Anyone can learn how to start driving for dollars and find great real estate deals. However, it could take lots of effort and time before getting the condos, single family homes, apartments or multi family homes you are looking for. If you are ready to put in the legwork and follow up on your leads, you will succeed eventually.
To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.