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A Guide to Finding and Buying Profitable Off-Market Deals

off-market deals

Summary: Properties purchased as off-market deals generally offer superior returns when compared to properties listed for sale on the multiple listing service (MLS). In fact, in our current portfolio, greater than 1/3 of our properties were purchased off-market. In this post, we explore why off-market deals exist. Then we explore how to best position yourself to gain access to this prized species. 


People frequently point to the inefficiencies of the market as the reason why real estate investing can be such a lucrative business.

Properties are poorly run by small-time investors, leading to under-market rents and untapped hidden value. An experienced real estate investor can purchase a good deal and force appreciation dramatically, almost overnight. 

This is why people say you can make money the day you buy a property as long as you “buy it right.”

Most new investors know about buying properties off the multiple listing service (MLS). This is a public listing real estate market where both agents and even homeowners put their properties up for sale. It’s easily searchable by using available apps. (I’m sure most if not all of you have used apps like Zillow or Redfin at some point!)

But did you know there’s a whole other type of deal besides those found on-market through the MLS? These are deals that aren’t publicly available. They are deals that are often only sent to a few investors at a time, if even that.

These are off-market deals.

So what is an off-market deal and how can you secure one for yourself?

In this post, we cover why off-market deals exist and where to best source them. We also give you real-life pointers on how to create your own funnel for off-market deals.


What is an off-market deal?

Off-market deals are the deals that never make it to the MLS. This is because the owner chooses to sell the property without putting it on the public market.

As a consequence, he/she often gives up the possibility of getting the highest price for a property. Choosing to sell-off market limits the purchasing pool and (usually) the ability to obtain multiple offers.

Selling a property without listing it to the public on the MLS may seem counterintuitive to a new investor. Why would a seller want to sell at potentially a lower price and give up the option of getting multiple offers?

In reality, though, it’s a fairly common practice because it can offer additional benefits to the seller beyond just the price.

Often the seller has special circumstances. Maybe he/she is in the middle of a 1031 exchange and needs a rapid close. Sometimes he/she is going through a divorce and needs quick access to cash or to liquidate assets. Sometimes a property has been handed to heirs after the death of a family member, and they have to sell it to access and divide the funds. And sometimes the seller is just in financial trouble because he/she hasn’t been running the property as a business, has fallen behind in mortgage payments, and is trying to avoid foreclosure. 

Sometimes a seller decides to list a property off-market due to factors related to the renters. For example, we once got an awesome deal on a property because the seller no longer wanted to deal with one renter who was giving her trouble. Sometimes sellers also don’t want renters to know a property is for sale until the last minute (so they don’t purposefully damage things). Along those lines, we were previously under contract for an off-market property. For example, with sellers who do their own property management and didn’t want to disturb their tenants with multiple buyers.

Sometimes a seller just doesn’t want to go through the whole selling process (and risk multiple offers falling through). In that case, that secures a greater likelihood of a rapid sale. (Because the wholesaler or agent can just take the property to their favorite buyer who he/she knows has the funds to purchase the property and won’t back out.)

As you can see, there’s a whole host of reasons for a deal to be off-market.


Who has off-market deals?

The main source of off-market deals will be your real estate agent. But, not just any real estate agent. You need to find an investor agent.

We covered this topic in a previous article. In brief, most real estate agents are focused on the residential home-buying market and do not specialize in investment/off-market properties. So, if your agent isn’t bringing you off-market deals, then you probably need to find a new agent.

We have established relationships with multiple investor agents in several different markets to ensure a steady flow of deals coming our way.

Other sources are wholesalers, estate lawyers, contractors, and property managers. For example, property managers are often one of the first to know about off-market deals since owners who use the property management group will notify them when they are planning to sell a property. Therefore, you should let your property managers know you’re in the market for another rental and give them your criteria so you can access their deal flow.

Last, really anyone you come in contact with is a potential source of deals. You just have to let it be known that you are in the market for off-market properties so people will think of you when these deals cross their desks. For example, a close friend of ours recently told us about a relative who was looking to unload some properties. She could have brought the deal to anyone else, but she thought of us first because she knows we are always looking for deals.

So, get out there and tell everyone you know!


How do I get access to off-market deals?

One of the keys to getting access to off-market deals is relationships. You must spend your time building your network and fostering relationships with your agents and other purveyors of off-market deals. Ultimately, you want the relationship to be good enough that the person with the off-market deal chooses to bring you deals over anyone else. They have to want to work with you.

How do you do this?

One of the most important things to do is to be decisive and responsive. If an agent sends you a deal, respond quickly with a clear decision. If you know the property doesn’t fit what you want, let them know. Beyond that, let them know why so they can send you more appropriate deals in the future.

But if you’re interested, respond and ask for more information or to have a quick call to discuss the deal. Do not waste their time. And do not waffle. This is important because if they’ve only sent the deal to you, they aren’t getting it to other potentially interested buyers while they wait on you. This means that the seller could be frustrated with a lack of speed and give the deal to someone else or decide to list it on-market. This will cost your agent the opportunity to sell the property.

Another key is to let it be known that you are currently in the market for deals and be specific about what you are looking for. You could tell your agent, for example, “I’m looking for a 4-plex located in an up-and-coming neighborhood that is priced under $400,000 and will cashflow at 10% cash-on-cash after rehab.” Your agent now has a fairly clear picture of what you want. Therefore, he/she will be much more likely to think of you when that specific property comes up as an off-market deal.

You also want to become your agent’s best customer. This means that not only are you responsive and decisive upfront when evaluating a deal, but you also follow through when you’re under contract as well. If you are under contract on a deal, make sure you are in constant communication with your agent and don’t flake on them. Show them you are reasonable to work with. Show them that you are a serious investor and don’t get emotional about things that don’t matter. If you are easy to work with, reliable, and responsive, and you follow through with commitments you make, your agent will want to work with you again. (This doesn’t always mean you buy every deal though!)

Another way to approach relationships over time is to figure out how you can add value to your agents and others on your team. For example, you can introduce your agent to other investors. You can help your agent build their network of property managers and contractors to give to their other clients by telling them when you find an excellent team member. If you do that on a regular basis, your agent will want to help you be successful. As a result, the off-market deals will likely start flowing to you on a regular basis.


What to do when you’re offered an off-market deal

Much like when you find a deal on the MLS, the key here is you must find out all the variables to plug into your COC calculator. If the property is a good one, you must act quickly and decisively to lock it up. If you waver, your contact may just take the property on to the next investor (if he/she hasn’t already). Or the owner may just choose to list the property on the MLS, at which point you may have to compete with multiple buyers in a bidding war.


A unique issue with off-market deals

One potentially complicating factor to be aware of with an off-market deal is that occasionally, the agent who brings you an off-market deal is representing both sides and collecting both the buyer and seller fees. 

For example, let’s say your agent brings you a great duplex that she previously sold to a client who now needs to get rid of it. The seller may be in financial straits and need a quick sale, a fact the agent will likely share with you when you are presented with the deal.

When your agent comes to you with the deal like this, it will already be tagged with a pre-negotiated price that both she and the seller have agreed upon. Since your agent is also incentivized to get the off-market deal done, the price will likely be a good enough deal that you as a buyer are interested because it represents a discount off of what the price would be on the MLS. But that means negotiating further is usually off the table. After all, if you aren’t interested, the agent likely has other investors to bring the deal to. In this case, you will most likely need to agree to the predetermined price to lock up the property and move forward.

If you do decide to move forward (and we’ve done this plenty of times!), just remember that the agent represents both sides in the transaction. You want to be extra careful to make sure you get everything you need during the due diligence and inspection period and are comfortable enough with the deal to move forward and purchase it after everything is said and done.


What happens after you’ve locked it up?

After you’ve locked up an off-market deal, in most cases, things move along much like they do with a conventional deal. You can get a loan. You generally have the opportunity to get an inspection (unless they waive it as part of the contract), and you have a chance to do your due diligence by reviewing leases, etc. In the end, if everything looks good, then you move forward and purchase the deal.

Now, just to make it a bit more tangible, let’s cover some of the off-market deals we’ve done to show you why investors covet these types of deals so much. 


An overview of a few of our off-market deals

The first off-market property we ever bought was near a golf course, north of Seattle. The owner (who was also a real estate agent) had purchased the duplex near the peak of the market in 2005 for $370,000. The units were significantly under-rented and as a result, she was underwater each month and eager to dump it. 

Our agent brought the deal to us in the summer of 2015 for $350,000 and had even pre-negotiated for us to receive a $7,000 credit to replace the roof. We recognized the rents were significantly under-market at the time of purchase. We knew that the property was being undervalued in part because of that.

Not even a year later, an identical duplex a couple houses down sold for $441,000. During the time we owned the property, we didn’t do any major rehab work. However, we did increase rents to be in line with market rates. We eventually sold our property in 2019 for $490,000. This is an example of making money on the day you buy because we were able to purchase the property (with a new roof!) for well under market value. 

Let’s shift gears and talk about one of our Spokane deals. In 2017, we bought an off-market duplex for $140,000. It was 2 beds/1 bath on each side and didn’t need any rehab. Since we owned similar units in that neighborhood, we knew we could easily rent each unit for $800 for a total of $1,600/month. This was close to our target 10% cash-on-cash return, so we immediately locked up the property. In 2019 we sold the property for $195,000, and 1031 exchanged into a different deal.

Hopefully, these examples of off-market deals have given you a taste of how profitable off-market deals can be. (And we haven’t even discussed the tax savings that each of these offered to us!) Because they often represent a significant discount, buying an off-market deal presents a chance for you to take a big step-up in wealth in just one deal.


Action Plan

  1. Get your financing in order and find a lender for pre-approval
  2. Find an investor agent and work to become your agents’ favorite investor
  3. Start going to meet-ups and real estate investing conferences to meet wholesalers and to network with agents and other property owners
  4. Let your property manager (and anyone you interact with in real estate!) know you’re interested in deals
  5. Start buying off-market deals and growing your wealth.

Have you bought any off-market deals? Tell us about your experience!

Do you want to learn how to creatively fund your real estate portfolio and achieve financial freedom? Join the conversation! Follow our Semi-Retired MD  Facebook page and join our Doctors or Professionals  group!

Semi-Retired M.D. and its owners, presenters, and employees are not in the business of providing personal, financial, tax, legal or investment advice and specifically disclaims any liability, loss or risk, which is incurred as a consequence, either directly or indirectly, by the use of any of the information contained in this blog. Semi-Retired M.D., its website, this blog and any online tools, if any, do NOT provide ANY legal, accounting, securities, investment, tax or other professional services advice and are not intended to be a substitute for meeting with professional advisors. If legal advice or other expert assistance is required, the services of competent, licensed and certified professionals should be sought. In addition, Semi-Retired M.D. does not endorse ANY specific investments, investment strategies, advisors, or financial service firms.


Hi, we’re Kenji and Leti

we provide coaching and mentorship for doctors and high-income earners

Several years ago, we were newlyweds working as full-time hospitalists. On paper, it looked like we had everything: the prestigious careers, the happy marriage, the luxurious rental home, the cars, etc.

But in reality? Despite having worked for several years, we had very little savings. Despite our high income, we had very little freedom in terms of time or money.

One thing was clear: we had to do something.

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