When I first started in real estate investment, I thought that there were no deals worth buying to be found on the MLS. This was partially because I started investing in Eugene, Oregon. High-priced cities on the coasts are often very challenging to invest in, especially with the MLS. However, when I moved to Kansas City just post-crash, the MLS was a gold mine.
Cash flow markets in the Midwest and South present a lot more options than the more expensive markets. Although that doesn’t mean it’s impossible in those areas, it just requires more work to sort out the diamonds from the coal.
The key with the MLS is speed and volume. For this reason, you must either have access to the MLS or work closely with an agent. If you do not have access, your agent should set you up to automatically be sent all the new listings in your target market as they are listed.
The early bird gets the worm and the early bidder gets the property. It is not uncommon for properties to be misslisted, sometimes absurdly misslisted, especially by HUD, Fannie Mae, Freddie Mac or some of the big banks. You want to find these as soon as they come on. I recently heard a podcast where the person being interviewed said the last three great deals he had bought were on the MLS and came up near the end of the day on Friday. Everyone else apparently thought they would just look at the property on Monday, but he made sure to get the offer in that day.
He go the property, everyone else got to hear the listing agent say “the property is under contract.”
Regardless of how quick you are, unfortunately these properties will often go “highest and best.” That’s just how it goes. One time, we went $24,000 over asking and got a property that has at least $40,000 of equity in it. Another time we went $33,000 over asking and missed it. Come in at the price you think will get you a great deal if it goes highest and best and see what happens.
In 2012, we made 341 offers and bought 35 properties. On the MLS, it’s all about volume. What I do is go on “property tours” with my agent and look at something like 15 properties in my target areas. These areas I know well, so I estimate the repairs and then aim to be all in at about 75% ARV and have a rent/cost ratio of at least 1.5%. Based off of this criteria, I set an offer price and a strike price (a price I will not go above). Then we make all the offers and see where the chips fall.
Sometimes you don’t get anything. Sometimes you get more than you want and have to drop a few. It’s a bit messy, but it certainly can be done. We just had two properties we bought off the MLS appraised for refinances, one we’re all into for $53,000, the other for $56,000. They appraised for $75,000 and $85,000 respectively. So don’t let anyone tell you that you can’t find deals on the MLS. You just have to go about it the right way.
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