Last Updated on
Driving for dollars is a term that real estate investors use to describe a technique for finding great deals on houses. You drive around until you find a house that looks vacant or distressed and then attempt to buy that home from the owners. Driving around looking for houses is simple, but the process of buying the home can be very complicated. It is not easy to find the owners of a vacant house. If the house is bank owned it is virtually impossible to buy it and many owners do not want to be bothered.
How does driving for dollars work?
There are a few ways to drive for dollars and I use a couple of techniques myself. The first is to target a specific neighborhood where you want to buy houses. I have targeted neighborhoods where I own rentals and that typically have great rent to value ratios. I do not like to buy the cheapest houses for my rentals, but the more expensive houses are, the less cash flow they usually have. My rentals tend to be valued just below the median sales price in my area.
I have also targeted neighborhoods for fix and flips. I drove down every street in a neighborhood where prices had risen significantly, but there were many older homes. I looked for homes that appeared vacant and not well maintained. Houses that are not maintained indicate the owner does not care about the house, is short on money, or has given up. One of the best ways to make money flipping is to add value by repairing a house.
I also keep my eyes open wherever I drive. I drive a lot as a real estate agent and real estate investor. I am always looking at houses, and while I am driving to those houses, I look for vacant houses or homes that need work. I also look out for FSBOs (For Sale by Owner) homes. Since I am a real estate agent, I can approach For Sale by Owner sellers and offer to list their home or buy it if the price is right.
Below you can see a video of me driving for dollars
What do you do once you find a house that needs work?
Once I find a house that is a possible deal, I write down the address and research it more when I get back to the office. I look in public records to see who the owners are and if they are investors or owner-occupants. My strategy varies based on who the owners are.
If the people who own the house are living in it, I usually send them a letter saying I am buying homes in the area and would love to buy their house. To be honest, I could do much more than this, but I do not have time. If I were super serious about buying a house, I would walk up to the door and try to talk to the owners in person.\
If the occupants are tenants, it will not do any good to talk to them. I want to talk to the owner, and if they are an investor, I have to find out where they live. Public records may give an address, but it may not be current. I send a letter to the owners again, but if I really want a house, I do my best to find their phone number and call them.
What do you do when you find a vacant house?
When houses are vacant, there is a little more work involved in finding the owners. In some cases, it is not even worth pursuing the owners, unless you want to waste hours of time and become extremely frustrated!
If the house is vacant, I try to find an address through public records if the owner is still a person or a corporation. Finding owners of vacant houses is not easy to do. Many times the only address available is the address for the vacant home. There are a couple of ways to find people when you do not have an address. You can search for them on Google and you might find some information on them. You can search for them on social media sites such as:
If you cannot find them on social media, you can try an online people search service or even hire a private investigator. I have been successful in finding many people using these techniques. When the foreclosure process was different in Colorado, we could redeem houses from the Public Trustee using Quit Claim Deeds from the owners of a house. We would find the owners, pay them for the Deed, and then redeem as the owners of the property after the foreclosure. The great thing about doing this was it usually wiped out all the liens and second mortgages once the home foreclosed. However, Colorado changed the laws a few years ago and this is no longer an option. The owner has to redeem the house prior to the foreclosure now.
What do you do if the house is bank owned?
Many people ask how to contact a bank who owns a home that is not listed so they can buy it. The bad news is that in today’s market it is virtually impossible to buy a bank-owned home before it is listed. All the major banks have very strict procedures for selling houses, which includes using a real estate agent to list the homes on the MLS. The banks have to get the most money for the houses they can for their shareholders and investors. Many times mortgage insurance is involved and the mortgage insurance company has to sign off on any sales as well. If a house sells without being listed on MLS, it is more likely to sell for much less than it is worth.
If you see a vacant bank-owned home, especially one owned by a big bank, you are wasting your time trying to buy it before it is listed. You can try to contact the bank, but here is how the process goes.
- You call the bank and ask whom to talk to about foreclosures.
- The bank tells you to call their corporate office and ask them who to talk to because they do not know.
- The corporate office will send you to about 10 different extensions and no one has a clue what department to send you to.
- After a few hours of calling people, you might make it to the right department. It might be the foreclosure department, the REO department, or something else. All banks have different names and do not encourage calls to these departments.
- Once you are finally able to talk to someone who knows what you are asking, that person will tell you that you have to wait until the house is listed.
The only way it is possible to buy a home from a bank before it is listed is with a local bank. In some rare cases, local banks may sell properties to investors before they are listed.
What if the owner of the home owes more than it is worth?
You may find a homeowner who wants to sell but they owe too much to make the sale worth it. It is possible to do a short sale, but you must be very careful! Short sale fraud is the most investigated crime by the FBI right now and you do not want to be investigated by the FBI. I actually tried to get an interview with the FBI regarding short sale fraud last year but was unable to get one set up. The tough part about short sale fraud is there are no clear guidelines. Here are some things to avoid if possible, which make it tough to buy off-market properties as short sales. Short sale fraud is anything that defrauds the bank of money through deceitful tactics.
- Almost all banks require short sales to be listed on MLS in order for them to get the best offer. If a home is not listed in the MLS and the bank is told that it is, that could be short sale fraud. If the home is listed in MLS, then immediately listed as under contract and other buyers are not allowed to make offers, that could be short sale fraud as well.
- Most banks will not allow related parties or friends to sell a short sale to each other. If you buy a short sale from your brother or friend without disclosing to the bank, it could be short sale fraud.
- Anything that goes against what the bank specifically says must happen in writing could be considered short sale fraud if the bank is not notified.
I see short sales sold all the time that could be considered fraud that the sellers and buyers most likely get away with. However, you should be very careful when doing a short sale deal that is not listed on the MLS. I buy short sales all the time, but I do not buy short sales where I find the buyer myself. The short sales I buy are always listed on MLS with another real estate agent.
Driving for dollars can be a great way to find deals, but it can take a lot of time and effort before you actually find a deal. I used to spend much more time going after sellers of houses that were not listed, but in the end, the time it took versus the results discouraged me. To be successful at finding off-market deals you have to dedicate a lot of time and know that for every 50 houses you find, one might be willing to sell at a price that makes sense.