Driving For Dollars: What is it and does it work?
Driving for Dollars: What is it and does it work?
If you've been talking to real estate investors for any length of time you are likely to have heard the term " Driving for Dollars" - what exactly does that mean ? Many of you probably think I'm talking about Uber or Lyft - and to be honest - that would actually make perfect sense. However, that is not what it means in the real estate world. When investors talk about "Driving for Dollars" we are talking about driving around town looking for deals. It means to jump in your car, select a neighborhood and start driving around looking for houses that you think would make a good investment.
What everyone else is doing
Before we delve into that - let's unravel this a little more. Our purpose in driving around looking for deals is to try to try get a jump on the competition. You see -there are a lot of investors - all of them are looking for the same deals and there can be a lot of competition for these properties. Many times when you reach out to a home owner - they have already been contacted by several other investors. There are many types of marketing campaigns available to try to get a hold of these properties.
You've all seen the signs that say "We Buy Ugly Houses" or something to that effect. These can be useful - but it is a lot of work and requires consistently hanging up signs on a regular basis - something that can be time consuming and slow to get results. There are also "yellow letter campaigns" where you send out a letter to a list of people that might be willing to sell their home -these lists of people can be found in the public records and can be broken down into groups like all houses just about to go into foreclosure - or out of state owners, or people that bought their home over 15 years ago ( and may have a lot of equity) - there are several lists that you can pull and many types of homeowners that you can target. The problem with this is that they are getting letters from OTHER investors too and your letters might get lost in the sea of junk mail they are getting. There are also options like door-hangers, web sites, radio ads - almost an unlimited number of ways that you can market and advertise while trying to find properties to buy. In a market where everybody is vying for the same properties - you need to do something different to snatch them up before other investors get to them .
Driving For Dollars
Enter driving for dollars. This is yet another way to find properties that might have interested sellers. This method is a little different because it can't be automated ( yet.. give self driving cars a chance to gain market saturation) and so not as many investors are doing it. We are looking for properties that are cheap - need to be fixed up and can be resold at a profit- hopefully a good profit. It takes more time and effort - so you cut out a lot of competition right away because most people are lazy and want to take the easy way out. Driving for dollars sets you apart from other investors and puts you in front of houses that most of them are not seeing. Driving for dollars is literally just that .. you jump in your car .. and start driving around looking at houses - and trying guess whether or not any of them have owners that might be interested in selling. Once you identify a house you think is a good target - you write down the address and then maybe some details about it ( so that you remember it later) - you can even take some photos of it for reference later. Once you have identified some properties that interest you - you can then look up these properties in the county records and find out
Owners name and mailing address
Year the house was built
When it was sold last and what it sold for -
What the tax value is
Whether or not it is going into foreclosure
Finding houses in this manner really puts you ahead of the other investors because you are likely the only one looking into this property at the time since they don't really know about it. This is no guarantee that the owner of the house wants to sell it - but at least you get a shot at being one of the first and only people approaching them.
What makes a good deal?
A good deal is a house that we can purchase for very cheap - much cheaper than it's market price. It is a property that typically needs to have some value added to it - like fresh paint, new countertops , and flooring - perhaps repurpose some of the space to make it more usable. Why do they sell for so cheap? Usually these properties have a lot of deferred maintenance or it may have major defects that need to be fixed. In many cases, it's a situation where it may need to be remodeled from top to bottom - or maybe it has fire damage. In either case - we want to pick up something that most people are passing up and and writing off as a "piece of junk". If we can buy that piece of junk , make it into a beautiful home again and then resell it at a decent profit- then its a good deal.
What to look for
There is no one standing out in front of their house flagging you down - so how do you know what to look for? Well - there are certain criteria that we are looking for - Sometimes the house will tell us it's story just by seeing it from the outside. I like to look for homes that have obvious deferred maintenance. I look for overgrown grass - an indication that no one is taking care of the place - this can be an indication that the people living there no longer care about the place and are ignoring it's upkeep. You can also keep an eye out for houses with newspapers stacked up at the porch - this is typically an indication that no one is living there - thought it could just be that they are on vacation or something . When I see tall grass AND piled up newspapers - the story gets a little better. Then I start looking for things like open or broken fences to indicate that no one is maintaining the property. Other things to indicate lack of care could be broken windows, peeling paint, or obvious external damage. The property doesn't NEED to be vacant - a house could have tenants in it that don't take care of the place and perhaps the landlord is tired of dealing with these tenants - but hasn't taken the time to look into selling the place. If you approach them you may get lucky and find out that you got to them at just the right time -
Maybe the tenants are late on the rent again and this is the last straw. Someone like me comes along to offer to buy the place and the owners throw their hands up in the air and say:
"Please - take this headache off my hands"
Another really good indication is that it has boarded up windows and doors- this is by far my favorite ones to find because a boarded up house means that no one is living there FOR SURE - and with no one living there and no rent being collected - this might be a big pain in the neck for someone who has to take the time to go out of their way to keep up the yard ( or face fees from the city) , they still have to pay taxes for it , and possibly even a mortgage. The longer a house sits unused or not earning rent - the more of a liability it becomes. These are the perfect target that I'm looking for. I write down the address and snap a few photos. One lesson I've learned - DO NOT TRESSPASS - I found out the hard way that just because a house looks vacant doesn't mean that that is no one there. People could be squatting in the back yard - and you don't want to surprise someone and find yourself in a pickle.
Does it work?
I have seen some very successful deals come from driving for dollars. I myself had a great experience several years back when I was driving around looking for some property when I came upon a burnt house with a contractor working on it. I inquired about whether the house would be available for sale or not and was told that it had already been purchased and he was there fixing it up for the new owner. I let him know that I was in the market for similar houses and told him that I would pay him $500 as a referral fee and would also let him do the work if he could direct me to one that I purchase. Within a week , he contacted me with an opportunity. It was a house in bad condition available for $55,000 - the owner had died and his family was far away so they didn't want to mess with anything - they just wanted to sell it fast and move on. I purchased it with some borrowed money - put about $5,000 into it and sold it again for $135,000 - one the most successful flips I've ever done. If I wasn't driving for dollars that day - then I never would have found the deal. That is part of the deal - taking action - being pro-active - and putting yourself out there - that is where you find the deals that other investors are passing up.
The early bird gets the worm
It pays to be the first one to talk to the sellers. This is why Driving for Dollars can be so lucrative - it affords you the opportunity to come across properties that most other investors don't even know exist yet. By positioning yourself to be the first person they talk to , you have earned the chance to be the one they sell to. If you can duplicate this process over and over again - you may start finding more and more deals to profit from.
How are you finding your deals? Are there other marketing methods you use that you find to be really effective?
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