Screenshot 2016-08-12 11.08.36

 

“In the real estate business you learn more about people, and you learn more about community issues, you learn more about life, you learn more about the impact of government, probably than any other profession that I know of.” ~ Johnny Isakson, U.S. Senator, Georgia

Real estate is the most timeless asset of all the investment options available to us. The tradition of investing in lands stretch far beyond the modern society. Real estate is a great teacher, as said by the U.S. Senator from Georgia. In my previous post, 7 Life Lessons That Real Estate Will Teach You, I discussed some of the most important lessons that real estate can teach you. Continuing with a similar approach, this post will discuss some potential methods to identify lucrative rental deals in hot markets.

How to Find Great Rental Properties in Growing Markets?

  • Find THAT deal on a Multiple Listing Service: MLS may not be the best place to start looking, considering that as many as 99% of the listings aren’t deals. However, if you focus on the remaining one percent, it is quite likely that you may find one. Keep in mind that thousands of agents and investors have their eyes set on these deals, which makes swiftness a key in bagging real deals.
  • For Sale By Owners (FSBO): Much like MLS, FSBO is more of a long shot; however, your chances of finding a great deal might be higher, as these sellers rather use secondary listing services. Look for listings that use words like motivated, transferred, owner financed, relocating, and must sell etc. The key is to be able to separate wheat from the chaff and find those small window deals.
  • House Hunter on the Wheels: It may sound much similar to an HGTV show, but you can find some houses driving around your target neighborhood. Believe it or not, some homeowners still follow the age-old practice of trying front-yard sale signs before going to a realtor. However, it doesn’t mean that every single house is a deal, as there might be hidden repairs that are likely to come up after the inspection only. It is worth giving a try, especially for investors with limited liquidity.
  • Craigslist: There are thousands of real estate ads on Craigslist, but if you focus on some specific characteristics, you might still find a bargain. Look out for listings with horrible/unprofessional photos and it doesn’t matter whether it says rent or sell. You can always approach the seller and send them a buying offer instead of renting. On the contrary, you can always post an advert on Craigslist, indicating your interest in purchasing a property or real estate investments in the target area.
  • Create a website inviting potential sellers: Another option practiced by savvy investors is to set up a website inviting leads from potential sellers and buyers. Once you have done the market research, start advertising your website on Google and other online platforms, focusing your target niche markets.
  • Wholesalers might bring in the home run: Unlike the popular belief, it is possible to find a decent deal by working with a wholesaler. In some cases, wholesalers with limited marketing techniques are the best sources of great real estate deals. They often fall short on promoting their listings hence attract fewer buyers/investors.
  • Direct Mail: Don’t judge the effectiveness of direct mail depending upon your personal experience, considering that you often threw them away without taking a look. Direct mail is an excellent method to reach out potential sellers. Instead of sending direct mail to every single address you have in your list, prepare a list of distressed properties or the ones with multiple evictions, and send them direct mail.

Make it Even Better with Self Directed Retirement Solutions

If you are a small business owner or have self-employment activity, using a self-directed retirement plan for real estate investments is another opportunity to grow your investment tax-free.

“Tax-Free Growth!” Is that even possible?

With a Solo 401 k retirement plan or other Self-directed plans, you can invest in real estate, and enjoy tax-deferred growth.

How to achieve tax-deferred real estate growth?

  • Establish a Solo 401 k retirement plan.
  • Purchase a property with the Solo 401 k retirement plan.
  • Use retirement account funds or non-recourse financing to fund the purchase.
  • Solo 401 k retirement plan holds the title of the property and you can sign on its behalf as the plan owner.
  • All expenses associated with the transaction go from your retirement plan.
  • The entire rental income or capital gains achieved from the sale of the property go back to the Solo 401k account.
  • Rental income and capital gains enjoy tax-deferred growth until distribution.

At the same time, if you establish a Roth Solo 401 k retirement plan, you can contribute after-tax dollars, and your withdrawals will be tax-free. In short, your investments grow tax-free and you get to pocket all the returns generated over the next three to four decades.

How do you find hot deals in your area? Let me know

Dmitriy is the founder and president of Sense Financial Services LLC, boutique financial firm specializing in self-directed retirement accounts with checkbook control. He began his career in financial planning and real estate investing in 2000. He owns multiple investment properties in various states and is a licensed California Real Estate Broker. Over the years, he has instructed hundreds of investment and financial planning seminars and has mentored thousands of investors.