Using the MLS To Find Deals That Nobody Knows About | Rentals and Realtors
The MLS (Multi-Listing Service) is a service that allows agents, brokers, wholesalers, and investors to screen their local markets and beyond for certain properties that match their criteria.
Websites like Zillow and Loopnet have a few listings from the MLS, but agents use the MLS to find deals. The MLS contains almost every residential property that gets put up for sale, and it is reserved for people with a real estate license. So yes, you will need to get your real estate license. It will take about 15-20 days depending on your state, but you will need it.
If you don’t have your license and have no interest in getting one, then go to an agent. That is what they’re for, they have access to the MLS and can give you access to the best deal.
The MLS is better than any other listing service because of the exclusivity, the amount of deals, the updated information, and the amount of information that is available to the real estate investor.
So once you’re on the MLS, what can you do to make sure you get the best deals?
- Find a Great Agent
- Set up Automatic Alerts
- Screen out the Duds
- Be Faster than the Rest
- Look for Hidden Value-Add Opportunities
- Make Offers, Fail Often
- Look at Old Listings
- Focus on Distressed Properties
- Make a Clean Offer
- Outwork Everyone
Find a Great Agent
When using the MLS to find deals as a beginner, you may want to find an agent. Not just any agent, a reputable and highly recommended agent. These guys will take a small commission from you, sure, but if you don’t know how to use the MLS, great agents will show you the ropes while finding you great deals.
If you know your way around MLS, you may not need an agent unless you don’t have your real estate license.
Set up Automatic Alerts
If you want to find the deals, you need to know when they come up. The moment a new property enters the market, thousands of people will know about it. You need to be one of them, so you need to set up alerts.
You can get a text, an email, or whatever. Just make sure you know about every new property so that you can screen them quickly.
Screen Out the Duds
This part takes a lot of new investors out. It is something called “analysis paralysis”. This happens in real estate, the stock market, and business in general. So many opportunities, so many things to look at, so many properties to analyze, how do I ever find the time?
In The Book on Rental Property Investing, Brandon Turner explains exactly how to quickly analyze a property without taking much time to see if it should go into your “inspect” pile.
You want to screen properties before you conduct an in-depth analysis. See if the numbers match, if the property seems like something you would be interested in, etc. New deals always come, don’t be afraid to pass on 1, or 10, or even 100. Turner says for every 100 deals he looks at, he will submit 10 low offers, and only 1 will be accepted.
Take too long analyzing properties, and you may never get into the game.
Be Faster Than The Rest
Bigger isn’t necessarily better anymore. Now, speed is the important factor when it comes to making deals. If you want to get a good deal, you have to make the deal before anyone else. Speed is a major player in making deals because people are more focused on closing the deal and moving on than sucking every last dollar out of the property.
You can offer a lower purchase price than someone else, but if you offer at a quicker pace and the seller knows you will close fast as well, there is a pretty good chance that you will get the deal, even if you have the lower bid.
Look for Hidden Value-Add Opportunities
When using the MLS to find deals, you need to look for the hidden value-add opportunities. This means to look for properties that need a little touch-up, maybe some paint, maybe some new flooring, maybe some landscaping, etc.
Doing this can quickly cause your equity to jump, and give you more buying power for your next purchase.
Or, you can turn a 2 bedroom house into a 3 bedroom house by changing an office or something of that idea. An office can appeal to some people, but another bedroom will be worth more.
Make Offers, Fail Often
Piggybacking off of the screening out the duds point, be prepared to have your offers declined over, and over, and over again.
“If you get more than 1 in 10 offers accepted, then you know you’re offering too much!” –The Book on Rental Property Investing
The deal is more important than the property. If you get the right property at the wrong price, you will lose money. It is important to ensure that it is a great deal before you get it. It’s better to submit an offer too low than too high, because a motivated seller may still jump on a low offer.
Look at Old Listings
Speed is key with new listings, because that is what everyone is looking at.
But old listings are forgotten properties, that are potential treasures that are unknown to everyone else. How?
When a property has been on the MLS for a significant period of time, it is probably a bad deal at the price that was being asked. There is a chance that the seller is more motivated to sell it than he was before, because now he sees that everyone is uninterested. The chances of getting a lower price for the property is much greater due to the increased motivation.
Selling a property is normally considered stressful, because there is always the question that sellers ask themselves, “What if it doesn’t sell?” You can take that worry away from those that are starting to believe that question to be true.
Focus on Distressed Properties
Similar to adding hidden value-add opportunities, these properties are a little more noticeable. However, you will be facing less competition, because a lot of people avoid distressed properties. Distressed properties are typically left for flippers and wholesalers.
But distressed properties can be some of the biggest equity gainers and CoCROI returners you can buy. If you have a good contractor or can do the work yourself, distressed properties sell for dirt cheap and sell for top dollar after they’re fixed, leaving you with the profit.
Or if you don’t want to flip, you can buy and hold. When using the MS to find deals, distressed properties are among the best deals out there.
Make a Clean Offer
Anytime you are using the MLS to find deals, you need to make a clean offer, especially since most sellers on the MLS are using an agent. The agent will let them know about all of the contingencies, what they do or don’t want or prefer, and what to do.
A contingency is an offer with a legal reason to back out.
An offer without contingencies is the offer that is most likely to be accepted. You could offer $100,000 for a property, but if you tack on a financial contingency (you can back out if you can’t obtain financing), then someone else could offer $95,000 with no contingencies and there is a good chance that you will lose the deal.
Contingencies can be great for beginners who are looking to limit risk, but they will also limit you from getting the best deals that you possibly can. Always submit a clean offer when you can.
Outwork Everyone
Finally, good old hard work. You have to submit offers and make deals when your competition is relaxing. Most of the competition relaxes when they get ready for the weekend, but offering deals on Friday when all of the other agents are packing up to head out on a weekend trip can yield big benefits.
A lot can happen between Friday and Monday. Work longer hours, do your due diligence, and know the market.
Using the MLS to Find Deals That Nobody Knows About
This article was based on a chapter in the book The Book on Rental Property Investing, written by Brandon Turner of BiggerPockets.
Brandon Turner is the VP of Growth for BiggerPockets, the largest real estate investor community in the country, where brokers, lenders, contractors, investors, and agents all connect and deliver advice. Brandon Turner also runs the Biggerpockets podcast and Youtube channel, and has built up his personal real estate portfolio to around 300 rental units since he began in 2007.
The Book on Rental Property Investing is widely considered the greatest book on real estate that there is. It is credited for its overall analysis of real estate and easy-to-read detail about every aspect about investing in real estate. From financing, to analyzing, to finding deals, to using an agent, to managing, the list goes on with what the book offers. To see the book and the reviews, click here.
