If you’re a real estate investor looking to grow your portfolio, as well as increase your net worth, you will want to avoid buying expensive, full market value properties. Your goal should be to seek out low-cost real estate. By that, we mean properties that are typically distressed or that have a motivated seller for one reason or another. These two scenarios can create a situation where you can buy cheap, yet profitable rental real estate
How do you find cheap real estate? Cheap rental real estate is found by seeking out off-market properties that are below market value. This is accomplished by sending direct mail to motivated sellers, utilizing the driving for dollars strategy where distressed properties are located, or by contacting a full service investment company that finds low-cost rental real estate for you.
Ways to Find Cheap Real Estate Worth Investing In
There are more than a few ways to find cheap properties that you can invest in, but for today, we will focus on four strategies that have been proven to be highly successful. The goal is to find discounted lucrative deals that will bring in a steady cash flow. The best way to do this is to locate off-market properties. These types of properties are, as the name suggests, “off-market” – not listed, not advertised, and sold by the owner at a largely discounted price that is below the market value. I put together an entire article on the topic if you’d like to do some research at some point – How to Find Off-Market Properties.
1. Utilize the Driving for Dollars Technique to Find Deeply Discounted Houses
This method of finding below market value real estate has been used for years by seasoned investors, as well as those just starting out. It’s a simple strategy that provides positive results. It involves driving through neighborhoods, looking for cheap real estate signs or indicators that reveal the property is distressed. For example, it might show signs of wear and tear, or an unkept yard, or boarded up windows. Essentially, elements that give the appearance that the property is unoccupied.
This technique is actually so popular that an app was created to streamline the process. You can read more about it on the Driving for Dollars App page.
Once a prime lower-cost property has been located, the interested real estate investor can do a few things to secure the deal:
- Put a note on their door with your phone number and an explanation of why you are trying to get in touch with the owner of the house. You may think there is a low chance of them getting back to you, but in a lot of cases, these owners would love to have someone take the property off their hands.
- You can do a search at the public recorder’s office to see if the owner’s information can be found so you can send a note there way explaining your interest and intent.
- Knock on the neighbor’s doors to see if they happen to know what’s going on with the property/owner, and if they happen to have the owner’s contact information.
If you are a foreign investor who is not able to apply the driving for dollars strategy, we did a write up specifically for investing abroad – The Best Strategies for Buying U.S. Real Estate if You’re a Foreign Investor.
Some Information on Funding Your Real Estate Deals
If you have had great luck finding cheap real estate with the driving for dollars strategy, but are slowed down by coming up with the funds to keep buying them, you should read our article on the BRRRR Method for Real Estate Investing. It shows you a successful formula for investing in property after property without having to use money out of your own pocket.
For those who are buying your first property and need the funds to get started, you may be able to easily obtain the needed money from a company we work with called Fund&Grow. They help you get approved for business credit cards that offer an introductory offer of 0% interest. You then turn around and use that money to buy a low cost rental property while there is still zero interest. It’s really a brilliant concept that has helped many investors get started. You can read more about it on our personal Fund&Grow page.
2. Create a Direct Mail Campaign that Reaches Motivated Property Sellers
Some feel that direct mail campaigns are a thing of the past, and digital advertising is the only way to go. However, direct mail has been proven to be very effective. It puts a real tangible item right into the hands of the owner. Pair this with the fact that you would be dealing with an owner who would love to get rid of their property in exchange for a big chunk of money, and you have a recipe for success.
In order for a direct mail campaign to be successful, it can’t be a random mailing. It has to be targeted and very specific. Additionally, the message should be direct and to the point so that the property owners will know right away what your intent is. You may only have a second or two to catch and keep their attention before they decide to toss the mailer in the trash. Here are a few ideas to locate properties with owners who might be motivated to sell at a low price:
Check with the County for Possible Problem Properties
Doing a search at your local county office can bring up results that will provide you with names and addresses of property owners who could be a motivated seller. This would include such things as properties with tax liens on them, code violations, evictions, foreclosures, and the like. The work is worth the effort because you will find that there are a lot of owners out there that are willing to sell at a cheap price to get out of the situation they are in with their property.
Find Cheap Real Estate with ListSource.com
When getting things ready for your direct mail campaign, we suggest giving listsource.com a try. It’s an informative resource that provides the type of homeowner leads that you are seeking. It allows you to set up specific targeted lists that will give your mailing a higher success rate. They update their list frequently to provide you with the most relevant information.
Once you have a potential property lined up, and you know the numbers, it’s always a good idea to use the 1% rule to find out if it’s even worth moving forward on. It’s a simple formula that can save you a lot of money and time. We put together an article that discusses how it’s used. Check it out so you can start implementing it into your routine – The 1% Rule for Real Estate Investing.
Also, if you plan on managing your properties yourself, it would be a good idea to try out software that can streamline the process. Some of our customers have used Landlord Studio for this purpose and it has really helped them out a lot. Have a look around the Landlord Studio website to see if it might be right for you.
3. Look in States That Tend to Have Lower Priced Properties
If you’re looking for lower-cost properties, then it’s best to make sure you’re searching in a state or city that’s not too expensive. For instance, you’re most likely not going to find cheap real estate in NYC, and you won’t find cheap real estate in California either. I’m going to skip to the chase and suggest searching for rental real estate in the state of Texas. This state offers properties that are less expensive than most states, let’s take a look at why this is the case:
Why is Texas Real Estate so Cheap?
Rental properties in Texas tend to be more affordable due to two key factors. First, the state boasts a vast supply of land just waiting to be developed, which leads to a reduction in competition and ultimately lower prices. Second, the overall cost of living in Texas is much lower, leading to cheaper labor and construction materials, which directly influences property costs. You can read all about why real estate is less expensive in this state by heading over to my post – Why is Real Estate so Cheap in Texas? The bottom line is that if you’re looking for states with cheap real estate, then you should head to Texas.
4. Contact a Full-Service Investment Company that Specializes in Affordable Rental Properties
I’ve never had an issue finding cheap real estate for sale near me using the strategies I provided in this article. So, you can try them out for yourself, or even take cheap real estate classes that go into full detail on these strategies and more. Or, you can go a different route and let a full-service investment company do all the work for you. You can even take it a step further, by investing in a new construction property that doesn’t need to have money poured into it because it’s not distressed and run down. You see, Morris Invest spends years researching housing markets to find the most affordable and lucrative locations in the U.S., and we only deal in new properties because we’ve found that the return on investment is much higher than investing in an older turnkey property. If you’re not familiar with turnkey properties, you can find out everything you need from these two articles I put together:
- Are Turnkey Properties a Good Investment?
- Turnkey Properties Explained: Why They Are a Smart Choice for Real Estate Investors
Morris Invest has many lucrative rental properties available in Lubbock, Texas. They’re beautiful houses that already have a 1-year lease tenant in place. Once purchased, you start cash flowing immediately. In addition to this, you can read more about what makes Texas a great place to buy rental real estate in our post on the topic – Is Texas a Good Place to Invest in Real Estate? I also suggest diving into this article – Lubbock Recognized as Recession-Proof City and Maintained a Strong Texas Rental Market Throughout Pandemic, it goes into detail on why Lubbock is the perfect place to own a rental property. If you have questions about the Lubbock housing market, or rental real estate in general, feel free to schedule a complimentary call so we can help you along the way.
Additional Real Estate Articles by Morris Invest
Real estate cheap or expensive, will need to be looked into carefully as to whether or not it’s a good investment. If it is, there are many steps you would need to take to ensure you’re doing all you can to maximize profits. With that said, the resources below will help you navigate through the investment process:
- Fund & Grow Review – Best Unsecured Credit for Real Estate Investors
- Understanding Rent Comparables and Gross Rent Multiplier
- Why Investing in Real Estate VS Stocks is a Smart Strategy
- Top 5 Real Estate Podcasts that New Investors Should Listen To
- Understanding Landlord Insurance Coverage: What Does It Cover?
- Recession Proof Your Investing – An Interview with Jarrett
- Real Estate Investing Tools & Resources for the Serious Investor
- Understanding Tenant Background Checks and Security Deposits
- Top Self Directed IRA Tips That Will Make You Rich
- The Ultimate Guide to Residential Property Management
We Hope Our Information on How to Find Cheap Real Estate Will Kick-Start Your Investment Journey!
Now that you know how to find lucrative properties for cheap prices, you can jump-start your investment career. No matter which strategy you use, driving for dollars, direct mail, or simply contacting a full service real estate company to provide you with a property, you are on a sure-fire way to generating great wealth. I know this to be true because rental real estate is really the fastest and most reliable way to increase your net worth.
If you have plans to start growing your portfolio, whether it’s with cheap real estate that you locate, or new properties, we suggest finding out just how many properties you will really need to become financially independent. You can easily do this with our Freedom Cheat Sheet that was created by Clayton Morris to help those trying to be free from their 9 to 5 day job. You can reach out to the team at Morris Invest if you have questions regarding our Freedom Cheat Sheet, or if you’d like to inquire about our new construction rental properties. We’re here to help you through your real estate journey, no matter what level you’re currently at.
Before you go, get the full overview of this topic with Clayton Morris:
