How to Maximize Your ROI Using Skip Tracing in Real Estate Investing

Real estate investing is competitive, so it’s imperative that you find the right deals to be successful. Traditional methods have their place, but smart, seasoned investor are turning to powerful, data tools to find deals. One strategy you can use to boost your return on investment is skip tracing.

In this industry, you always have to be looking to gain an edge to connect with motivated sellers before anyone else and secure those deals, which tend to be the most profitable. Using skip tracing is no longer a luxury because so many people know about it, which means it’s a necessity and if you’re not using it, you’re already behind. Let's dive into how this technique can transform your real estate investing game.

What is Skip Tracing, Really? (And Why It's a Game-Changer for Investors)

Skip tracing finds people and their information. It’s that simple. In the context of real estate, it means tracking down property owners whose contact information isn't easily available to your average person. Think absentee owners, heirs to a property, or owners of vacant or distressed homes. These are often the individuals most motivated to sell, but reaching them can be tricky.

Why is this a game-changer? Well, your competitors are relying on publicly listed properties on the MLS or some referral within their network. Both are fine, but the MLS and Zillow are especially saturated marketing channels. Skip tracing lets you to tap into a pool of off-market opportunities no one has a clue about. As a report from ATTOM Data Solutions often highlights, off-market deals can represent a significant portion of transactions, often with more favorable terms for the buyer. By finding these "hidden" sellers, you're positioning yourself for potentially lucrative investments that others simply miss.

The Direct Line to Higher ROI: How Skip Tracing Delivers

So, how does finding hard-to-reach property owners translate into a better bottom line? The connections are clear:

• Access to Off-Market Deals: This is the holy grail for many investors. Properties not publicly listed typically face far less competition. Less competition often means a more reasonable purchase price and better negotiating power for you. Imagine finding a distressed property with an out-of-state owner who is eager to sell but hasn't been approached by other investors. Skip tracing makes that connection possible.
  
  
• Finding Motivated Sellers: Owners of vacant houses, properties tangled in probate, or those facing pre-foreclosure are often highly motivated to sell quickly. Skip tracing helps you identify and contact these individuals directly. Motivated sellers tend to offer better pricing to sell a home because there’s a “motivating” reason they need to let it go, and sometimes quickly, which increases your ROI. Industry resources, like those provided by the National Association of Realtors (NAR), consistently point to the advantages of working with sellers who have a strong impetus to transact.
  
  
• Saving Time and Marketing Spend: Broad, untargeted marketing campaigns can be expensive and yield low conversion rates. You know all of those mailers agents send… these yield sensationally low response rates. It’s marketing with a shotgun! Skip tracing allows for a laser-focused approach. Instead of blanketing a zip code with mailers, you're reaching out to specific individuals who own properties that fit your investment criteria. This approach is more efficient, cost-effective, and ultimately, more successful.

Strategic Skip Tracing: Quality Over Quantity for Optimal Returns

Effective skip tracing isn't just about finding any contact information; it's about finding the right information for the right leads.

• Identifying the Right Leads: Your investment strategy should dictate your skip tracing efforts. Are you looking for:
  
  
  • Absentee Owners: People who own property but don't live in it. These can be landlords who are tired of managing a property from afar.
    
    
  • Vacant Properties: Homes sitting empty can be a sign of a motivated or distressed owner.
    
    
  • Pre-Foreclosures: Owners facing foreclosure are usually highly motivated to find a solution, which could include selling to an investor.
    
    
  • Inherited Properties: Heirs may not want to keep an inherited property and could be open to a quick sale.
    
    
  • Owners with High Equity: These owners have more flexibility in their selling price.
    
    
• The Importance of Accurate Data: The success of your skip tracing efforts hinges on the quality of the data you obtain. Using reputable services and cross-referencing information when possible can save you time and effort. Inaccurate phone numbers or addresses are a waste of resources.

Your Skip Tracing Playbook: Steps to Success

Ready to implement skip tracing? Here’s a simplified playbook:

1. Build Your Target List: Identify the types of properties and owner situations you want to target (e.g., driving for dollars to spot distressed properties, pulling lists of absentee owners from county records or data providers).
   
   
2. Choose Your Skip Tracing Tools/Services: Numerous companies offer skip tracing services, ranging from single searches to bulk uploads. Some popular options include dedicated real estate data providers and specialized skip tracing platforms like Lead Sherpa. Research and choose one that fits your budget and volume needs. Many real estate investing forums and publications like BiggerPockets often feature reviews and discussions about various skip tracing tools.
   
   
3. The Art of the Approach: Making Contact Effectively and Ethically: Once you have contact information, your approach matters.
   
   
   • Be Respectful and Empathetic: Remember, you might be reaching out to someone in a difficult situation.
     
     
   • Clearly State Your Purpose: Explain who you are and why you're contacting them (e.g., "I'm a local real estate investor interested in the property at [Address].")
     
     
   • Offer a Solution: Frame your interest as a potential solution to their property situation.
     
     
   • Multi-Channel Approach: Consider using a combination of phone calls, personalized letters, and even text messages (while adhering to all communication regulations).

Real Talk: The Costs vs. Rewards of Skip Tracing

Like any investment tool, skip tracing has associated costs. These can range from a few cents to a few dollars per record, depending on the service, volume, and data accuracy.

However, consider the potential rewards:

• Acquiring a property significantly below market value because you reached an unrepresented, motivated seller.
  
  
• Securing a deal with minimal competition, allowing for better terms.
  
  
• Saving thousands on traditional marketing by targeting your efforts precisely.

Even one successful off-market deal sourced through skip tracing can easily recoup your entire skip tracing budget for the year and then some. The key is consistency and strategic application.

Pro Tips for Mastering Skip Tracing

• Consistency is Key: You’re not going to land a deal on your first call. You may not get one from your first list! But be consistent and continue to follow up, provide value, and hone your skills with skip tracing so you build a pipeline of interested people until a deal does inevitably happen.
  
  
• Combine with Other Marketing Efforts: Skip tracing can be even more powerful when integrated into a other marketing tactics like emailing or texting.
  
  
• Stay Compliant: Be acutely aware of and adhere to all regulations regarding contacting individuals, including the Do Not Call (DNC) Registry and the Telephone Consumer Protection Act (TCPA). Non-compliance can lead to hefty fines.

Unlock Your Next Great Deal

Skip tracing is just a fancy term for pulling owner contact information, but it’s a practical way to unlock a ton of real estate opportunities. You can get directly in front of the person who makes the decision to sell a home. Create your list of potential chances and work through it to find the deals, which nets you higher ROI to reinvest and do it all over again.

Stop waiting for deals to come to you. Start actively seeking them out with the power of skip tracing, and you might be surprised at the profitable opportunities you uncover.

Frequently Asked Questions (FAQs)

Is skip tracing legal for real estate investors? Yes, skip tracing is legal as long as the information obtained is used for permissible purposes and you comply with all relevant laws regarding data privacy and contact, such as the Fair Credit Reporting Act (FCRA) if applicable to the data source, and telemarketing regulations like the TCPA and DNC lists. Always ensure your methods and data sources are compliant.

How much does skip tracing typically cost? Costs can vary widely. Some services charge per record (ranging from $0.05 to $0.50 or more for high-quality data), while others might offer subscription models for bulk searches. Services like PropertyReach includes skip tracing for free.

What's the typical success rate of skip tracing? The "hit rate" or success in finding accurate contact information can vary from 50% to over 95%, depending on the quality of the input data and the sophistication of the skip tracing service. However, success also means converting these contacts into deals, which depends on your outreach and negotiation skills.

Can I do skip tracing myself, or should I hire a service? While basic skip tracing can be done manually using online search engines and public records, it's often time-consuming and less effective for bulk searches. Professional skip tracing services have access to vast databases and algorithms that provide more accurate and comprehensive results much faster, making them a worthwhile investment for serious investors.

What are some common red flags with skip tracing data? Red flags include consistently outdated information, a high percentage of disconnected phone numbers, or data that clearly violates privacy regulations. It's wise to test a small batch from a new service before committing to a large volume.

How can I measure the ROI of my skip tracing efforts? Track your total spend on skip tracing (service fees, cost per lead). Then, track the number of deals you close that originated from skip-traced leads and the profit generated from those deals.