Real estate investors are often on the hunt for off-market listings, which can sometimes seem more like unicorns than a sure thing. Acquiring real estate is the primary focus for every successful real estate investor. Fortunately, there are some tips and tricks to finding and closing these elusive off-market properties. Even better, you are more likely to see a higher profit from these deals—which makes the hunt that much more rewarding. Read on for our advice on how to acquire and profit from off-market real estate deals.

What is an Off-Market Listing?

Off-market property listings are not publicly listed for sale on the multiple listing service (MLS) or other traditional marketing channels. Instead, they are sold through private transactions, often without being advertised to the general public. Off-market properties can include both residential and commercial properties, as well as various property types such as single-family homes, multifamily buildings, commercial buildings, and land. Because they are not publicly listed, off-market properties are highly coveted by investors because they can often be acquired at a lower price point than listed properties. This is due to a combination of factors that include limited (or no) competition from other buyers, the seller’s desire for a quick sale, the possible avoidance of paying Realtor commissions, and the fact that the property in question may need repairs and upgrades that prevent it from being able to attract a full market value offer.

Acquiring an Off-Market Real Estate Deal

When you are looking for off-market properties, there are several major avenues to pursue. Each has its pros and cons; seasoned investors will likely also tell you it is best to choose one or two to start, rather than trying to integrate all of these into your strategy at one time.

Networking with Agents

Real estate agents often have access to off-market listings through their network of clients, contacts, and industry connections. Building relationships with local real estate agents and brokers who specialize in the area or property type you're interested in can go a long way toward getting the inside track as the right options become available.

Online Communities

Similar to networking, joining online communities of like-minded individuals can be another way to find off-market deals. You can find these communities via Facebook groups, online forums, and other social media platforms that attract investors, agents, and property owners. These avenues will be beneficial if you put in the time into them. Participate in discussions, share insights, and connect with potential sellers who may have off-market properties available so you can start to forge relationships that will help you on your journey.

Direct Mail and Cold Calling

While this next option has costs associated with it, you may find it to be beneficial to utilize direct mail and cold calls to reach potential sellers. You can send letters, postcards, or flyers expressing your interest in buying properties and ask if they are considering selling. You can also utilize services that will provide lists of phone numbers for sellers who may have properties that match what you are looking for. This approach requires persistence, as well as good people skills when you are talking directly to a potential seller. But they can be helpful in your quest to make contact with those who are looking for what you have to offer.

Property Wholesalers

Wholesalers specialize in finding off-market deals and connecting buyers with motivated sellers. These intermediaries often have access to off-market properties and can help facilitate transactions for a fee or commission by transfering the contract to an end buyer. So while there is a cost associated with using a wholesaler, the benefit is that a good one can speed up the overall process by helping with finding and analyzing the deal, negotiating the purchase price, giving insight into the market, and more.

Profiting from an Off-Market Deal

Now that you have some great ways to find the deals, you want to maximize your ROI. So what are the best ways to do that? Depending on the specifics of your deal, there could be several. Here are some great ways to ensure maximum profit from your off-market deal.

Acquisition Strategy

Purchase price is key, so you want to negotiate a favorable price by leveraging the specifics of why this was available off-market.Do your due diligence when looking at what it’s likely to cost you in repairs, upgrades, and maintenance. Have a clear strategy of what you intend to do with the property long-term, and factor in any property management expenses as well. Finally, aim to acquire the property below market value to create instant equity and maximize potential returns.

Financing Options

Negotiating a great price is one thing, but paying for the property is another. Explore financing options to optimize the capital structure of the investment and minimize financing costs. Consider options such as conventional mortgages, private financing, or creative financing strategies to maximize leverage and cash flow. But most importantly, make sure you know your numbers as far as monthly expenses to repay the financing, any special terms like balloon payments, and so on–so you are not caught off-guard later.

Playing the Long Game

Not every investor is looking for a property to cash flow immediately. Sometimes, you may be looking long-term at how much a particular property might appreciate in value over time. So when running your financials, make sure you are clear on whether you expect to see profit immediately, or if you are satisfied with breaking even for now because you expect to see big gains down the road. If the long game is your style, you’ll want to factor things like property location and area growth into your decisions on which properties make the most sense for you.

Don’t Forget the Taxes

One of the biggest benefits to investing in real estate is the tax breaks that come with it—if you do it correctly. Implement tax-efficient strategies to minimize tax liabilities and maximize after-tax returns. Consult with tax professionals to explore options such as depreciation, 1031 exchanges, and capital gains tax planning to optimize tax efficiency. After all, it would be a shame to put in all this work to acquire properties and build a portfolio, only to miss out on big savings come tax time.

Keeping Your Goals in Mind

When it comes to off-market listings, perhaps the most important thing to remember is that different investors will have different end goals. As you start to pursue your own deals, start by outlining what you want to do with that property in the short-term as well as in the long-term. But no matter what your end goal is, off-market listings offer property investors unique advantages, including reduced competition, access to exclusive opportunities, potential for better deals, privacy and discretion, and opportunities for value-add and customization. By actively seeking out off-market listings, investors can enhance their investment strategies and achieve their financial goals in real estate investing.We invite you to learn more about how we can help you grow your business more effectively in 2024 and beyond. Register now for your FREE Easy Street Offers account.