Many investors recognize the advantages of off-market real estate over listed properties for a number of reasons. I have dealt with off-market sales for over six years and ultimately built an online marketplace around private offers, so I’ve heard all the questions and answers you can imagine. Let’s take a look at some of the specifics of what separates listed and private real estate transactions.

How attractive is off-market real estate to investors?

One of the main advantages of buying an off-market property is that there is often less competition. When working on a property acquisition, time is of the essence and an investor can create better negotiating leverage by having fewer interested parties in the property. Often times, finding an off-market opportunity can provide a clear window to negotiate and buy the property on favorable terms for the investor.

Private offerings often also have unique circumstances. Whether it is a commercial or residential property, there is a reason the owner starts looking for potential buyers. In the commercial space, properties are often sold privately due to the nature of the property and its current tenants. Hotels, offices, businesses and apartment buildings are sold to individuals so as not to disturb current tenants or the business operating on the property. Investors can take advantage of the lack of investor awareness of the new investment opportunity because often brokers only send these offers to their trusted contacts.

Another case that investors can win with an off-market property is when there is something wrong with the property or the owner’s finances. Perhaps the owner is in financial difficulty and is looking for a quick exit. Another case I often see is deferred maintenance or a problem with current tenants – or lack of maintenance. For an investor, this type of value-added situation offers many attractive options. A new owner could rehabilitate the property and raise their rents to current market rates. Sometimes current owners are strapped for cash and cannot make the necessary updates on their own.

What is the advantage of selling privately for owners?

I mentioned the appeal of not disturbing current tenants and keeping business running as usual. However, the main reason sellers prefer to sell privately is the cost of failure. The cost of failure is the risk one takes in offering his property on the market. If the property doesn’t sell in a month, two or more months, it is no longer worth the offer price. Investors have all the levers.

Since off-market deals are most popular with high-end homes and commercial properties, there is a lot to be lost if the market does not bite into the starting bid price. A $ 3 million listed home that doesn’t sell for three months will no longer make $ 3 million on the open market.

Thus, private sale can protect the owner from the cost of failure and allow them to control the process. Most often, a confidentiality agreement is used to protect information about the sale of assets. This offers the owner the protection necessary to extend his brokerage period for a new acquirer.

If off-market properties are not listed, how can investors locate these transactions?

Here are some strategies for finding homes or commercial properties that are not available on the open market.

1. Direct mail marketing

Postcards and direct mail flyers have been neglected in the digital age. If you first identify the neighborhood in which you want to buy property, you can easily get a list of all the addresses and names of your local title company. This list is generally offered free of charge.

Send everyone in your target neighborhood a postcard letting them know you are a ready, willing, and capable buyer. A service such as Lob can facilitate the sending of mass direct mail.

2. Estate and divorce lawyers

Start networking with estate and divorce lawyers. I know it sounds moot, but life happens and people change their lives and the assets they hold. Doing your fair share of local networking can help you find out things that might change. Often, in difficult times, people prefer a smooth and easy sale of their property. A sale that is not public may actually benefit people in such scenarios.

3. Your network of brokers / agents

If you’re ready to buy, making calls to all the top brokers and agents in your target market can help. Let them know that you are ready to buy and that you are active in all brokerage websites and real estate markets. Tell them you only want to be notified about off-market properties. You might be surprised to find that you will be the first to hear about new offers.

4. Contact owners of vacant properties

Having a vacant property can create financial hardship, especially if the property has a mortgage. A good way to research investment opportunities is to contact the owner of a local property that is vacant. Often times, they will be willing to listen to what you can offer. You can find the owner information by contacting your local title company and requesting the owner information.

5. Email campaigns

Create a list of all the real estate owners and brokers in your area who you think may have information on private sales. Send them an email campaign that details your investment criteria and acquisition needs. These people can take note of your needs and follow up when something goes through their desks.

6. Online marketplaces

There are a number of online marketplaces that specialize in offering private / off-market ads, including The PLS, The Top Agent Network, and Brevitas, the company I co-founded. There are a lot of properties that sell through these portals, and the same goes for the residential markets. You might be surprised what happens.

Use these tips to get started on your next acquisition. There are many opportunities to deploy these strategies to buy off-market goods.



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