Beyond the MLS: How to Find Off-Market Investment Properties

Here are the typical steps most people think of when buying real estate:

• Properties are listed for sale by real estate agents. 
  
  
• Sellers work with agents to market their properties, which are listed on multiple listing services (MLS) and accessible to other agents and potential buyers. 
  
  
• If you're one of these buyers, you might work with your agent to scan the Multiple Real Estate Listings (MLS), find open houses, and schedule property tours.

However, more investors are finding that off-market real estate properties might be a better strategic choice for more profitable deals. Finding these assets requires more effort. But they offer unique advantages like reduced competition, the potential for better pricing and terms, and the opportunity to find a property that matches certain criteria you can't find among MLS listings.

As an investor, accessing off-market deals can give you a competitive edge and increase your chances of finding a worthwhile opportunity. 

Understanding Off-Market Properties

Off-market properties, or pocket listings, aren't publicly advertised for sale and are typically marketed through private networks or specialized platforms like PropertyReach.

Tip: If you're looking on the MLS and you see a home that's "off-market," that means it's currently not for sale. The off-market properties we're discussing in this article refer to private or direct, unmarketed sales.

There's no one-size-fits-all for off-market properties, and some situations may indicate motivated sellers more than others. Here are a few types of off-market opportunities you might encounter that would indicate motivated sellers:

• Preforeclosure properties: Homeowners facing imminent foreclosure due to missed mortgage payments.
  
  
• Bank-owned properties (Real Estate Owned, or REO): Properties repossessed by lenders after foreclosure, often sold below market value. The bank is usually a motivated seller as it wants to recover losses quickly.
  
  
• Vacant properties: Properties left unoccupied, leading owners to seek quick sales due to maintenance costs or financial challenges.
  
  
• Pre-probate properties: Properties where the legal process of settling an estate has not yet begun, presenting opportunities for quick sales. Heirs or executors are often looking to resolve real estate matters efficiently.
  
  
• Divorce or relocation sales: Properties sold due to personal circumstances, with sellers motivated to complete transactions swiftly and move on—literally.
  
  
• Financial distress sales: Properties sold by owners facing financial difficulties, often seeking expedited sales to alleviate financial burdens.
  
  

If you see any of these off-market properties, it's usually worth investigating further. There are, of course, some categories of off-market opportunities that aren't as lucrative, like luxury properties, development projects, personal use properties, and properties undergoing renovations. You can typically differentiate lucrative vs non-lucrative properties by reviewing property listings, photos, and researching a home's history for any mentions of renovations.

Why Investors Love Off-Market Properties

Many investors are drawn to off-market properties because they provide access to unique opportunities that aren't available on the open market. As they're not publicly advertised, off-market properties attract fewer competing buyers, significantly reducing the chance of bidding wars or inflated prices that have become all too common in today's market.

Off-market properties aren't without their challenges, though. Identifying truly motivated sellers among every off-market property owner is more difficult in practice than in theory, and negotiating without market comparables can be tricky. Market comparables (comps), or sales comps, refer to comparable properties that have recently sold or are currently listed for sale in a specific area. These properties are used to assess the market value of a property by comparing its features, condition, and location to similar properties in the market.

On top of that, off-market properties may not have detailed public listings available, making it difficult to accurately assess their value and potential risks associated with the deal.

Strategies for Finding Off-Market Properties

While off-market properties are less straightforward than those found through traditional means, the good news is that you don't have to go through the process alone. Here are some actionable tips and tricks to help you uncover great off-market opportunities.

Building Relationships With Real Estate Professionals

By building strong relationships with agents, brokers, lenders, and other investors, you can form a strong network within the industry. Your connections can give you insider knowledge about the local market. Plus, the more people who know you're looking for your next project, the more eyes and ears you have looking out for the best possible listing for you.

Utilizing Online Platforms and Databases

Online databases are your secret weapon for finding great real estate deals and making smart investment choices. Tools like the PropertyReach property database give you access to comprehensive property information—including off-market listings, motivated seller leads, and compelling investment opportunities.

Direct Mail, Email, and Cold Calling

If you're looking for a more proactive approach, try reaching out directly to the property owners. To find these property owners, you can use public records such as property tax records, deed records, or county assessor's websites to find information about property owners, including contact details. If public records lack contact information (which is often the case), online property databases and platforms like PropertyReach provide contact information for property owners as part of comprehensive property listings.

Craft personalized messages highlighting why you want to buy their property specifically. Don't forget to mention your ability to close deals quickly—it's super important for motivated sellers!

Evaluating Off-Market Properties

Not every off-market property is a perfect investment opportunity, even if the seller is motivated and there's no competition. Use the following recommended actions to ensure you make informed investment decisions.

Analyze Property Data

Start by gathering and analyzing the property's historical data, including past sales, ownership history, and any legal or financial considerations. Depending on the level of detail you're looking for, real estate websites like Zillow, Realtor.com, and Redfin often provide some historical data on properties. You can also ask your Realtor or broker to pull detailed data from the MLS, or visit the county assessor's office where the property is located for property ownership records, sales history, tax assessments, and property characteristics.

Determine Property Condition and Location

Be sure to assess the property's current condition and how much you might need to invest in possible renovations, upgrades, or improvements. Also pay attention to the property's location relative to amenities (like shopping, entertainment, or restaurants), schools and colleges, employment centers, roads, and public transportation. Just as important is the location's economic profile. For example, an up-and-coming neighborhood will offer opportunities different from an established one.

Run Comps on Surrounding Properties

Earlier, we mentioned that negotiations for off-market properties can be tricky due to the lack of comparable properties. To get a better feel for the deal quality, compare the off-market property's features, size, condition, and location to nearby properties with similar specs that recently sold. PropertyReach's comps tool allows you to run a comparative market analysis (CMA) on surrounding properties.

Perform a Property Inspection

If the data looks promising, conduct a thorough property inspection before making an offer. Hire a qualified inspector to assess the property's structural integrity, mechanical systems, and overall condition. Identify any potential issues or repairs needed, and factor these into your investment decision-making process.

Making Offers on Off-Market Properties

Congratulations, you've found an off-market property, and you're ready to make an offer! Making offers on off-market properties requires finesse and strategic thinking. Approach the offer process with professionalism, respect, and a clear understanding of the seller's motivations and needs—especially if they're in a tight financial spot.

Here's how we recommend approaching the offer-making stage for off-market properties:

1. Contact the Seller: If you found a listing from a personal connection, ask them to reach out on your behalf. If you've pinpointed a potential opportunity via PropertyReach, use the Skip Trace feature to access the owner's phone number and email address.
   
   
2. Establish Trust: Prioritize building a good rapport with the sellers to demonstrate your commitment to a mutually beneficial transaction.
   
   
3. Craft a Compelling Offer: With the sellers' needs in mind, tailor your offer. Consider offering flexible terms to make your offer more appealing, such as a quick closing timeline or addressing specific seller requests.
   
   
4. Negotiate Terms and Contingencies: Negotiations are almost always part of the offer process. Negotiate in good faith, focusing on win-win solutions that benefit both parties. Address any contingencies or conditions upfront to streamline the closing process.
   
   
5. Close the Deal: You did it! Once your offer is accepted, align with any involved agents, lenders, and legal advisors to ensure a smooth and timely closing.

By following these steps, you'll ensure an effective, low-stress off-market transaction. All that's left to do is celebrate the purchase of your new property!

Finding Your First Off-Market Investment Property

Many successful real estate investors focus primarily on off-market properties due to reduced competition and the potential for better deals. By building relationships with real estate professionals, utilizing online databases to source listings, and thoroughly evaluating any properties that catch your eye, you can capitalize on these opportunities, too.

Take proactive steps toward expanding your real estate portfolio and achieving your financial goals by exploring the PropertyReach platform. With access to over 156 million properties nationwide, PropertyReach provides detailed property and owner insights so you can find new opportunities while staying vigilant of potential risks.