Answer: “I feel your pain. It’s not easy to decide exactly where to start buying investment properties.

When I first got started, I was literally driving all over the city looking at properties. I didn’t have any business looking at some of those homes.

It is best to pick what is called a “farm area”. This is a neighborhood where you put your stake in the ground. Where you seriously concentrate your efforts on finding deals.

A farm area is an geographic area in which you intend to buy and lease properties. Why would you want to concentrate your efforts on certain neighborhoods at the exclusion of others? One of the major reasons is so you can learn your market very well. When you do business over and over in certain areas, you learn what properties are worth. You learn what your leasing customers in those areas are looking for. What they are willing to pay.

Another advantage is operational. When your properties are concentrated within a small area, it is easier to manage than if you have properties scattered all over your city. Maintenance becomes easier for your workers to handle when all your projects are concentrated. Making trips to properties becomes easier. Hopefully, your neighborhoods will be within a manageable distance from your home. We recommend that distance be less than 10 miles.

How large should your farm area be? Our recommendation is that you start out with an area of 1 to 10 square miles. Your farm area does not necessarily need to be within one contiguous area with neat boundaries. You may have many islands within one main area.

Here are few pointers on finding that ideal neighborhood: Have you ever heard any of those “You know you are a redneck jokes”? In many senses, you will know you are in the right neighborhood for good rentals if you see some of the telltale redneck signs in the neighborhood: For example, cars parked up on blocks, or old beater cars and trucks.

Some other clues are that it’s an older neighborhood. Even though newer construction is good in terms of being lower maintenance than older construction, the price per square foot of newer construction is also higher. Anything newer than mid-1970’s is questionable in terms of getting a strong enough rent to obtain adequate cash flow from the property.

In fact, a good rule of thumb is that the rents should be 1% to 2% of the total price of the property. Once the rent gets lower than 1%, its cash flow potential is dubious. If you can find a number of properties in a neighborhood that meet that criteria, you have found a good candidate.

Look for rental properties in neighborhoods where average, blue-collar families want to live. We stress families, because you want long term tenants. Turn over is expensive. That is why we don’t like student rentals, room mate situations, or other arrangements nearly as much as average, blue-collar families.

It’s ideal when the other real estate investor is motivated to sell that property. If the real estate investor has lots of money, no urgencies, he’s not in a hurry, he doesn’t have a good reason to get you a great deal. You pass on a deal like that.

But if your other real estate investor needs a quick sale, so they can make their car payment or their house payment, or buy groceries – that’s a motivated seller.

You can find these other real estate investors at real estate investing association meetings, and at the websites those real estate associations have up. You can find these people by networking at those meetings.

You can find this other real estate investors by looking for their advertisements. There are two kinds of ads you want to look for. One is the ad that says “must sell, quick for cash investors special”, so they’re trying to sell the house. There are other places where they have ads up saying they want to buy houses.

Look for bandit signs that say “I buy houses”, or ads at the newspapers that says “I buy houses for cash”. Call that person because sooner or later they’re going to have a property they will want to sell quickly for cash. Your opportunity will come when they want to flip a house quickly.

These real estate investors typically have a buyer’s list, and they like to send out email. Get on their buyer’s list. Check on these people regularly. Robert Elder tells about a wholesale seller who, when he was first getting started in wholesaling, brought him seven houses in a row. He bought every single one of them. This guy liked selling to Robert because the other real estate investor knew Robert was quick and reliable when it came to closing. Robert knew the this guy would bring him good deals. It worked great for the both of them.

You never know where you will find a great wholesale seller. You could find these other wholesalers when you’re out looking for houses. Talk to people. Network with, and don’t worry about the fact that people might be competing with you. Focus on instead of how they can help you, and how you could help them. And if you could help them, you know, chances are you’ll make money also.
To find more tips and techniques for finding great deals, go to www.replaceyourpaychecknow.com.

Please write a comment on the article – I’d like to hear your thoughts.

Because it’s a little bit different approach than people are used to, many people get frustrated and move on to something else. You can simply have your realtor do all the computer work for you. The problem is that the selling realtor doesn’t make much money on these deals, so with all the hassle it’s hard to convince them to do the work for you.

But it’s well worth keeping an eye on this site. Last year, I bought a 3 bed 2 bath house for $10,000 from this site. I couldn’t believe my good fortune. I ended up selling the property and making a quick $8,000. Not bad for not doing one lick of work on the property.

So take a look at what properties are on this site for your city. If you are in a high-forclosure state like Michigan, Florida, California, or Ohio, you will probably find dozens of properties.

Here’s another great question from a subscriber…

Question:  “What’s the best way to find bank owned (REO) properties?”

Answer: All realtors are not the same.  You need to find realtors who work primarily with investors.  These are the realtors who are going to work with what are called REO’s, or bank owned properties.  An REO property is a bank term that means Real Estate Owned.

Banks that hold REO properties are motivated sellers.  That’s why we focus on these types of properties. 

When bank takes properties back, like Deutsche bank, they typically find one realtor in a given city or area.  They will list most or all of their properties with that one realtor.  Only a handful of realtors in a given city will list most of the bank owned properties. 

What most people don’t get is that the listing realtors for bank owned properties generally like to list houses, but they generally sell these properties.

You have to find another investment realtor who will represent you as the buyer.  This type of investment realtor wants to sell properties to investors.  They generally won’t be the listing agent. 

There are a few ways to find an investment realtor to help you find cash flow properties.  Look for realtors who advertise “investors special’’ properties. You may also find those realtors at your local real estate investor association meetings.”

Robert Elder comments, “In 29 years of buying houses, the single most common source of buying houses for me has been realtors that were selling bank owned (REO) properties because when the banks takes a property back it becomes a problem to the bank.  The problem is the bank has taken back that house, that business property, or that four flex.  We the investor, by making an offer, are the solution to the bank’s problem.”

If you are making an offer to buy John the homeowner house, it’s a much more emotional decision to cut the price ten thousand dollar.  Why?  That’s ten thousand dollars less money in John’s pocket.  

On the other hand, if you are making an offer on a bank owned (REO) property, the is much less emotional about that decision.  If the bank cuts the rice ten thousand dollars, it’s not going to come out of the banker’s own pocket. 

Please make a comment below on this article…I’d like to know what you think. 

Most real estate investors like Robert and I are busy.  I’m guessing you are busy too.  If you are like us, you have a lot of opportunities to chase, and only a certain amount of hours in a day. 

When it comes to finding deals, I can use all the help I can get.  And one of the most under-rated methods for  finding deals that doesn’t cost you anything until you pay for the property – until you buy the property – is using the bird dog. 

Bird dogs can bring deals to you. They can put tons of thousands of dollars in your pocket. So, the question is, what is a bird dog? A bird dog in hunting is a dog who finds birds for hunters. It points right toward the bird to aid the hunter.  And the hunter will take it from there.  A bird dog in the real estate investing business is essentially the same thing.  He finds the opportunity for the investor and guess what, the investor takes it from there.

Bird dogs typically get paid when you buy the deal.  They don’t get paid just for sending you a list of 250 for sale by own properties.  That’s not the purpose.  The purpose of the bird dog is to find a deal that you actually like, right?  A cash flow property that you would actually buy. 

To put this system to action right away, you basically have to these steps. The first thing is you have to come up with an offer for the bird dogs.  In other words, how does the bird dog get paid?  They always want to know that.  They want to know how they are going to be paid.  The most common system in paying bird dogs is to give them $500 to $1,00 dollars for every  property that you buy. 

Step 2 is to actually go out and look for the bird dog.  By far and away the best way to find a bird dog, or a dog for that matter too, is to go to craigslist.  You know that you can place free ads on craigslist.com.  Go into the miscellaneous employment.  You know people that look in this section of craigslist are looking for ways of making a little bit of extra money. 

When I put up an ad like this, I usually get close to 100 replies within a few days.  You just need to reply back by email. 

Here is an example of an advertising that you can post up there.  You could say "Hi.  I buy houses in where ever you’re from.  I’m looking for someone to help me find more houses to buy.  Here’s the deal, I’ll train you to know what type of properties I’m looking to buy and all you have to do is tell me about houses that looks like that. If I end up buying that property I’ll pay you $___ dollars.  You don’t have to negotiate with the owner or anything like that.  No sales will be required.  All you have to do is find a deal for me, and I’ll take it there.  Call me at 5551212 or whatever your number is for more details."

That’s a simple ad you can put up in craigslist. You put it up there as many times as necessary to find your bird dogs.  And you will get multiple bird dogs from one ad. 

Step three is to put your bird dog to work.  Give them some ideas as to where to look for motivated sellers. 

They can scan the houses for sale on craigslist. One thing to really look for are ads in the real estate section where people are advertising real estate for sale.  Look for ads with all lower case, where people are not very careful about what they are tying. Misspelled words, poor grammar, and no photographs are a plus.  This is a clue that you’ve got a motivated seller there, or certainly someone who’s not very sophisticated.

Avoid properties that are listed by realtors, or ones that are clearly being sold by another investor. That’s  not something that’s going to be useful to you. 

Your bird dog can also  tell you about vacant properties they see. You know, the one with the grass are grown up, or for instance properties that have received a notice of violation from the city.  Give your bird dog a specific list of the types of properties and the types of deals that you’re looking for.  Tell them how they can find those properties. 

Have them email you the leads they get. 

And if you are wondering if this really works, Robert and I had a student in wealth school who started working with the bird dog and she made a real nice profit. Her bird dog brought her a deal that ended up making her $10,500 in seventeen days.  No rehab work was done.

You’ll find more about other ways to find great deals in www.replaceyourpaychecknow.com. 

Do me a favor and write in a comment about this article.