What to Look for in a Property when Driving For Dollars
What to Look for When Driving for Dollars
Real estate investors are always on the lookout for properties that are in need of repairs or that have owners who are motivated to sell. These properties often referred to as “distressed,” can be a great opportunity for investors to purchase at a discount and then renovate for a profit.
One way to find these properties is through a technique called “driving for dollars.” This involves driving through neighborhoods and looking for signs of distress, such as overgrown lawns, boarded-up windows, or notices on doors. Once you’ve identified a property, the next step is to research it to see if it’s worth pursuing.
Here are some tips for building a list of distressed properties using driving for dollars:
1. Add the property to your list
The first step is to add the property to your list. It’s possible to do this with a number of tools, such as the REsimpli app or any other driving for-dollars app. Alternatively, you can simply take note of the property address and add it to a spreadsheet or CRM.
2. Research the property
The next step is to research the property to see if it’s worth pursuing. Look for signs of distress, such as holes in the roof or cracks in the foundation. You can also look up the property owner to see if they have enough equity in the house to make it a worthwhile investment.
3. Filter out low-equity properties
It’s important to filter out properties with low equity, as these are unlikely to be good investment opportunities. As a general rule, it is to target properties with at least 30% equity. This means that the loan balance is no more than 70% of the property’s value.
4. Remove bank-owned properties
Bank-owned properties are also unlikely to be good investment opportunities, as they are typically in the process of foreclosure. Therefore, it’s best to remove these properties from your list.
5. Target properties with motivated owners
Finally, look for properties with owners who are motivated to sell. Homeowners who have owned the property for five to seven years or longer are more likely to be motivated than those who have only owned the property for a year or two. Look for signs that the owner is facing financial or personal challenges, such as divorce, job loss, or illness.
In conclusion, driving for dollars can be an effective way to build a list of distressed properties. By following these tips, you can filter out low-equity and bank-owned properties and focus on properties with motivated owners and high-profit potential. Remember, the key is to do your research and only pursue properties that are likely to yield a good return on investment.