There is no shortage of real estate in which to invest—it is simply a matter of finding the properties that are likely to be profitable. Although much of this is based on the investor’s involvement in and knowledge of the local community in which he works (therefore providing for informational gaps that give some investors a competitive advantage over others), there are some reliable sources for finding investment properties which can be accessed by anyone. This includes, but is not limited to: real estate agents, market listings, wholesalers, and public auctions.
Real estate agents tend to be a good source for finding property for those who are not intimately aware of the real estate available in the community. One would not be hard-pressed to find an experienced real estate investor working through an agent, for those who are relatively new to the process, real estate agents can be an extremely advantageous source of information. It is the job of an agent to be aware of the local property that is available for purchase, and they tend to use software which organizes those properties into a more effective form where the investor can narrow down the options based on price, location, or any of a multitude of other parameters. Although agents can be very helpful, the drawback is that their income is derived from the investor’s pocket.
In order to cut out the middle man, one approach is to subscribe directly to market listings. Although this, too, requires payment from the investor, the market listings do not earn a percentage of the price of purchase of the real estate; rather, there tends to be a relatively small monthly or yearly subscription fee to gain access to a list of available real estate. Subscribing to market listing organizations requires a proactive investor who is familiar with the language and process of real estate investment, and who is himself willing to search for the right property (as opposed to delegating that responsibility to a real estate agent).
Wholesalers can be anyone or any organization which owns a great deal of real estate—enough that each property does not need to be sold at exorbitant prices in order for the organization to profit. The most common type of wholesaler is a bank, which usually has a Real Estate Owned (REO) department to manage all properties owned as a result of foreclosure. Accessing this source requires an even greater familiarity with the process of real estate investment, but the reward is property that tends to be sold well under the market value. It is something akin to buying groceries from an enormous national supermarket, as opposed to the small mom-and-pop store at the end of the block. Sometimes REO properties are auctioned off publicly. This is a forum where anyone can purchase bank-or-wholesaler-owned properties cheaply, but—as all auctions do—it requires competing with whoever else happens to attend on that day, and it can therefore be unsuccessful.
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Based out of Indiana, Jay Redding is a real estate entrepreneur, with experience in single family and multi-family investing.
