One of my favorite methods I use to locate and purchase the kind of properties I buy is to drive around my own town or a particular buying area and scout-out the properties that look like potential purchase candidates.
Let me describe what I mean by potential purchase candidates. These properties are not on the market or at least I' m not aware if they are. They are simply properties that appear to have most of the qualifications I'm looking for. Let's review the qualifications again so that we're all thinking about the same kind of properties.
A. Multi-Units. Group of houses, apartments or combination. Some houses plus several apartments or granny units. Remember, detached is better-Tenants prefer individual units.
B. The junkier the better. Jacked-up cars, spilled garbage, dead lawns and shrubs, overgrown bushes, obvious lack of maintenance. General property neglect is what we are looking for.
C. Lots of people activity. People coming and going, kids and dogs everywhere, plus accumulated junk. A good measurement here is when the total number of cars, running or otherwise, outnumbers the adult tenants. This test will also give you a fairly good idea of tenant priorities.
D. The area should be a good rental location within walking distance to stores and near local bus line if one exists. Generally the type of neighborhood has low to moderate income residents, mostly young working people, welfare tenants and scattered retired seniors who have owned homes in the area for 30 years or more. In smaller towns don't overlook the residential units mixed in with service and retail shops often with back alley entrances.
E. Most of the properties I look for are at least 30 years old. Most will require substantial upgrading of the inside fixtures, but remember, I'm only looking at the outside – no further investigation is necessary or should be done at this time. Let's be patient here.
Do not become involved with tenants or other people around the properties; it's not necessary. In fact, it's bad business! In my books and training tapes I refer to the house detective concept. Use it here. If you must stare or look at the property more than just a casual drive-by glance, park down the street a ways and walk back. Try to do this without being noticed by anyone. I generally look up at the telephone wires and mumble words to myself as I walk around and observe the property. Another good method is to appear to be looking for an imaginary centerline marking the middle of the street or roadway. Anyone can legally be standing in the middle of a public street. Just don't get hit. It could seriously hamper your investment career!
A final point here; while your in the street or anywhere else, always keep mumbling incomprehensible words – just talk to yourself. The tenants and onsite managers who'll be checking you out, won't feel threatened. Cops, narcs, and tax collectors generally appear more dignified and will seldom talk to themselves. This strategy may seem a bit weird at first, but go ahead, do it a few times until it begins to feel natural. Remember, you're only acting. Who knows, you might even get an offer for a stand-in for “Days of Our Lives” or “Frasier.”
After I look over the property, I prepare a simple sketch. Do this in your car. It's best again, not to be observed. Draw the property lines first, then add some little boxes or squares for each of the units. Be sure and write in the street names and available addresses. Often mail boxes in a group will provide the numbers. Make sure your field notes are good enough to identify the property location, because later you'll need to find the location on the County Assessor maps. County maps will not have house numbers. For those properties located in the center of the block, it's best to step off the approximate distance from a street intersection to where you think the property line should be. Close is generally good enough for this purpose.
Some other notes I'll show on my sketches are the approximate square footage's of each unit (just my guess). Also, about what I think rents should be both as is and after fix-up. Last, but perhaps most important, I want to show all the utility (hookups) services to the property. It's very important for me to know: Are the houses or apartments on separate meters for electricity and gas? Do they have sewers or septic tanks?
Sewer manholes are usually present in streets or in back alleys when they exist. Gas meters will show up on the front corner of each house or in groups of multiple units. Most electrical services to older property will be overhead from a pole to mail panel boxes on each unit if individual meters are present. Water is generally provided to rental properties via one or two meter locations. Water, sewer and garbage are not often paid by landlords, however, units without separate meters for electricity and gas are worth less money to me. If I eventually make an offer, I always figure in the cost to convert master meters to individual meters to individual services, which of course will lower my purchase offer.
The next item of business is to take the sketch to a title company or real estate office that has copies (microfiche) of the County Records and obtain the County Assessor parcel number. With this number I go to the ownership file to get the property owner's name and address (where the tax bill is mailed). I always like it best when I find out of town owners, but local or out of town, I ‘m now prepared to write the owner regarding the possible sale of his property.
As you might have already guessed, there is no standard method for doing this kind of work and while I'm on the subject of standards, here's some good advice. Don't waste time looking for standards with anything you do. Just go out and do it! Set your own standards as you go along. This way you'll never be for anything. Your success or lack of it will be based on your own imagination and speed. There's an old saying that people will stand back and let you pass through to your destination if you act like you know what you are doing. Try it. It really works!