If you have ever heard Billy Epperhart speak, you have heard him say, “You make money when you buy, not when you sell.” One of the first items on a list of how to find real estate deals is to look for a property that already has value. You want to purchase property for LESS than it is currently worth. Billy always tries to purchase real estate at eighty cents on the dollar, or 80% of the property’s real value, even after the repairs. This means you have 20% equity in the property right off the bat—it already has value.

There are a number of ways to determine the current worth of a property, but that is for another blog. And creative real estate financing can help you get some hot deals in a hot market, but that is also for another blog. Today we are concentrating on how to find real estate deals—WHERE are the bargains to be found—no matter where you live.

The advantage of residential properties, mainly single family homes, is they can be bought with a regular purchase, non-commercial mortgage, and the total cost is obviously much less. The price of a single-family home is significantly less than a small apartment building would cost you. Even though there are more units with an apartment building, the entry costs are lower and the management is easier. Single-family homes require less money down and don’t need to be sold to another investor when you are ready to sell. Also, people who are purchasing a property as their primary residence are willing to pay more than an investor will, meaning you will make more when you sell.

This is major when looking into how to find real estate deals. Some people say location, location, location is most important, and although location is extremely important, a bargain generally depends on the seller. A seller can be in a hurry to offload the property for a number of reasons and you will see their anxiety in the listing price of the property. If you are looking at properties in a neighborhood where the listings are at or over $200,000 and you come across a property for $150,000, they are waving a bargain flag at the market. Do your due diligence by checking the size and condition of the property, but don’t hesitate because other investors can see that bargain flag too. Out of town owners, divorce situations, settling of family estates can all be circumstances which motivate a seller to settle for a discounted price. Even though you don’t want to take advantage of someone, you could actually be helping them out while getting a good deal at the same time.

Related Post: Real Estate Financing 101

A foreclosure is when a person who has financed a property has not made their payments in a timely manner. The borrower is notified that the foreclosure process will begin if the loan is not brought current. The property reverts back to the lender who must offer it at a public auction. The public auctions can be problematic because the bank might be bidding against you to drive the price up. Also you don’t generally have enough time to get an inspection or examine the property to make a wise decision. Billy likes to buy foreclosures after they have become (REO) real estate owned by the lender who will have room to negotiate, since owning property is not their business. Waiting for a lender to unload foreclosed properties is how to find real estate deals without too much searching.

The opening paragraph has one part of Billy’s formula for purchasing investment properties. To be more specific, he wants his total investment to be no more than 80% of the as-repaired value. This includes purchase, repair, carrying and possibly selling costs as a protection for you and your property. You can easily check this percentage of a property by looking at the tax assessment records. Properties are tax assessed at 20% less than their current value, so with this information, a hot deal will be less than the assessed value of a property.

The formula for rents in the area will also guide you in how to find real estate deals. The gross monthly rent returns should be 1.5% of the property. If the property sells for $150,000, the rent should be $2,250. This amount will keep your margins in a comfortable place. If you intend to rent the property, the area must be able to sustain the projected rent price or you will need to find a lower-priced property. Generally, the best cash flow comes from low-to-moderate (not crime ridden) income neighborhoods. In these areas there is a low entry point as far as costs and you can price the rental at the high end of the rent scale. If you can’t buy a property for less than its worth, you are probably trying to buy in the wrong market.

Use a real estate agent for your investing. Spend extra time to find one who is also an investor and will understand the entire process better than a retail agent. They could also be helpful in finding some creative real estate financing. Give them your formulas and let them feed you the qualifying properties—they will be glad to do the leg work when you purchase multiple properties. They will also have good connections with contractors and property managers, if they are not actually property managers themselves.

Determine whether an agent is looking for a quick sale, or a long-term relationship with an investor and avoid the quick sale agent. With access to MLS, let the agent use their resources to do the work for you. An investor agent will be a valuable part of your team. When you use an agent to screen properties for you, your time will be stewarded well. You could actually look at 100 properties while someone else looks at 2. Find a GOOD real estate agent.

Related Post: 4 Strategies to Secure a Property for Less

These are just 5 of the ways to get hot deals in a hot market. Real Estate investing is by far the best way for you to earn passive income, pay off your debt, and/or live financially free. If you have any of those as financial goals, check out the additional resources below.

For More Information:

Real Estate Workshop-October

Real Estate Masterclass

Strategic Real Estate Investing

This post was originally published on January 11, 2021 and has since been updated to serve you with more comprehensive content.