Finding Off Market Deals for Flipping in 2021

Buying off market deals for flipping is the best way to get approved for a hard money loan.

Here is the #1 question we get from first time flippers:

What can I do to increase my chances to get approved for a loan?

The first answer is always – buy the house you want to flip for at least a 40% discount. If you apply for a fix and flip loan and the house appraises for significantly more than your purchase price, lenders will view the deal as less risky and you will be more likely to get approved.

The best way to get a discount is to find homes for sale that are not on the market.

Buying at market value is the #1 mistake first time flippers make

Successful fix and flips project have a lot of profit margin – and the best way to give yourself room for profit is buying homes off the market. Properties already on the market are probably priced close to Fair Market Value (“FMV”). Sellers who list their properties on the MLS, Zillow, or any popular websites with a RE broker are probably educated about market price and can afford to wait for a decent buyer. It is also probably seen by multiple parties and demand for the deal might drive the price up.

We recommend to buy homes for at least 35-40% discount from FMV. Especially for first time flippers!

You need an edge over other investors. The best way to create it – bid on deals that are not for sale and not on the market. Off-market homes have many advantages:

Less transaction costs
No brokers
No bidding wars
Opportunity to buy at a discount

Here are some ways to buy Off Market Properties (“OMPs”):

Property Scout + Calling Calling Method

This strategy is about finding an area you want to flip in, identify the properties you want to buy – and start making calls to owners and ask them about selling. Here is the process to find deals to flip, off market, in 2 easy steps:

Step 1 – Identify the area, Identify the property

Find the neighborhood that you want to flip in by focusing on resale value (higher the better), places with good schools for families, zip codes that are on the upswing, and places near collages with high natural demand for housing.

The next step is to identify leads (prospective sellers). Avoid new homes and renovated properties – focus on properties that look bad, old, and could use some love. Look at Craigslist ads, “for sale by owner” ads, newspaper ads, and signs on front yards. Drive around the neighborhood and spot a distressed home? Find the owner by running a title search and make a call. Be prepared to make a lot of calls!

Step 2 – Call, email, mail, follow up

Once you have your list of prospective properties, start making calls, and keep notes on each contact to follow up. This part is hard! Some will hang up, some will be rude to you. Keep at it, and follow up monthly on your leads. Grow your list and employ multiple ways to communicate with the prospect. Use email campaigns, texts, mailers (in certain age demos – it still works!) and phone calls.

For more sophisticated users – use targeted Google ads, Facebook and Instagram ads on those prospects for increased results!

Tax Sales, Trustee Sales, Probate Sales and Short sales

Buying properties from lenders directly or properties that have to be sold (from probate or trustee in order to satisfy a tax payment) is a popular way to acquire properties for cheap.

Short sales – when the owner sells the house in order to satisfy a loan payment. The buyer pays the lender all the proceeds and the seller avoid foreclosure. To learn more about short sales you can read here.

Trustee Sale – part of the foreclosure process involves a trustee (person in charge to sell the property in order to stratify the outstanding lean with the lender/s) offering the property at a public auction for sale. The auction is open to everyone – and be prepared to have the money ready when you win the auction! Lean more here.

There are many ways to get off market properties for flipping. None of them are easy. You will have to put in the time, follow up, and be persistent in order to find your first deal.

Use property wholesalers and RE brokers to find off market deals

Brokers and wholesalers are like ‘gatekeepers’ to deal flow in certain markets. Using them to your advantage could be a smart way to find an off market deal for flipping.

Broker relationships

Contact active brokers in the area you want to buy and take them to lunch. Let them know you are in the market for a discounted property. Your goal here is to convince the broker to offer you the property first before it hits the market, or for a referral by the broker for a property that needs to be sold quick, and not going on the market. Pro-tip – brokers in many states are allowed to represent both parties in the transaction, so they are able to earn double the commission. Tell the broker you are not working with an agent and that might give you an edge in securing your first deal.

Utilizing real estate wholesalers for deal flow

RE wholesale is a simple concept. Hustlers who are good on the phone call owners and ask them to sell the property. Wholesalers then ‘connect’ the seller with an end buyer for a small profit – often either by selling the contract or a double escrow. This is a popular business strategy for individual with low capital, by using transactional funding, offering 100% of the needed funds to close a deal. Essentially, wholesalers make money flipping contracts rather than fixing and flipping properties. Therefore, wholesalers just connect buyers and sellers directly for a small fee.

You can use RE wholesalers to purchase properties before they hit the market. Wholesalers always look for buyers to move deals. Offer yourself as an end buyer and follow up weekly with the wholesalers to find off market deals for flipping. Note – be ready to move quickly! Your value to wholesaler is your ability to close quickly once the opportunity is offered. Close deals and the wholesalers will give you more deals.

Referrals from service professionals

There are a few things owners do before they sell the house: a yard sale, calling a contractors to make repairs before a sale, a moving company, termite treatment, and others. The goal – contact service people that have a high chance to interact with homeowners right before they put the house on the market, and ask for a referral.

The service person will provide you with the contact information so you can call the homeowner and place an offer to purchase the property before it hits the market. In exchange, you can offer referral exchange (you will refer to the service person business) or better – cash when the deal closes. Here is how this will look like:

You connect with a moving company and offer $500 for every signed contract to buy a home from a referral.
You get a call from the mover that a family is moving to another town and they placed an order for a month from now.
You call the family and offer to purchase the property for a discount at a fast sale.
Once you lock the property and close escrow – you pay the service person who referred you the deal $500.

Use HM Capital for you next fix and flip

We offer low cost, fast and reliable financing options for flippers. Using hard money lending to fix and flip is a match made in heaven – our closing is fast and with our programs – you can leverage your money smartly. Our terms:

Up to 90% of the purchase price
Up to 100% of the rehab costs
Rates start at 8% and 2-3 points minimum in origination
No minimum credit score (all applications are subject to a credit check)
6-18 Months
First timers welcome!
$50,000 minimum loan amount

Finding off market homes for flipping is hard, no way around it. But it will greatly increase your bottom line and provide you with more than one exit strategy to make a profit.