Trying to buy an income property where real estate values are high can be challenging. If you couple this with rapid appreciation or a competitive market, it may feel impossible to find a worthwhile deal. Sourcing investment properties out of your local market can be one solution for finding more affordable and less competitive investment properties for sale, but if you want to stay local, you will need to take more creative approaches to finding investment properties in your market.
Going off-market is by far the best way to find income properties for less money than the traditional market. While this method requires up-front capital for marketing and some serious negotiating skills, it can be a reliable way to find worthwhile deals. Start by sourcing a list to market to, which could be vacant properties, properties in probate, out-of-state owners, or distressed properties for other reasons, then send a series of letters or postcards to them. This method of marketing can be an effective way to lock in a deal.
Another viable option is bidding on properties at tax sales or foreclosure auctions. Municipalities will auction properties off on a daily, weekly, or monthly basis depending on your location, many of which are sold far below market value. There are downsides to investing in this manner, including the inability to access the property prior to purchase, but in an expensive or competitive market it can be a useful source for inventory.
It may also be worthwhile to look outside of your target neighborhoods for areas that may have more affordable homes in your local market. While it may not be your ideal investment area, let the rate of return and market opportunity guide your investment dollars.
While there is still a great deal of competition for investment properties with the strategies above, it's often far less competitive than trying to find a property on the multiple listing service (MLS) or open market. Many markets will reach a point when the real estate prices no longer justify the cost for investment purposes. If you can only rent a home for $2,500 a month, an $650,000+ purchase price will never make sense.
Staying local does offer convenience in management as well as comfort with the property's proximity and personal market knowledge, but there are hundreds of markets that still have really affordable real estate as it relates to an investment property. Slowly familiarize yourself with what it takes to own a property out of your local market. Considering experts predict real estate values to continue to rise, this, along with the solutions above, may be the only viable options.
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