A real estate lead is any property that you’re interested in buying for investment purposes. As a real estate investor, leads are the core ingredient to your success.
Of course, you won’t be able to buy every property you’re interested in. Some won’t be a good fit for your portfolio and some owners won’t be willing to sell for the right price. So you’ll need a lot of quality leads if you want to grow your business.
To do that, you’ll need a solid real estate lead generation strategy. The right strategy will help you find a lot of quality leads and avoid the properties that aren’t worth investing in. This guide will give you a full breakdown of the real estate lead generation process and how you can create a winning strategy for your business.
What is real estate lead generation?
Generating real estate leads is the process of finding off-market properties that are likely to sell for below-market value. Investors and wholesalers target these properties because they can buy them at a low price and make a profit off of them.
While investors usually talk about lead generation as the process of finding any investment-worthy property, the process is more strategic than that. There are three broad categories of leads and each one presents a different kind of opportunity for investors.
Investors use the term distressed properties to mean a few different things, but the most common meaning is a home that has been neglected or is in a state of disrepair. The signs of a distressed property include roof damage, unkept yards, broken windows, dilapidated fixtures, rotting decks or porches, and other obvious signs of disrepair. Some distressed properties even have severe damage, such as condemned homes or fire damaged houses.
The features that make a property distressed are often easy to see, and they severely impact the property’s sale value. While fixing these issues will usually restore a property to its original value, owners usually can’t afford the repairs, don’t know how, or simply aren’t willing to.
As a result, you can usually buy a distressed property at a deep discount, because the cash you’re offering is often more appealing to the owner than keeping a rundown house.
Homes in financial distress
The second type of real estate lead you’ll encounter is a homeowner in financial distress. There are several financial distress factors, but they all share a common theme: a bad financial situation is forcing the owner to sell quickly, usually for less than the house is worth.
Unlike neglected properties, you can’t always tell which properties are financially distressed just by looking at them. A house in pre-foreclosure might be very well maintained while another house that’s paid off might be severely neglected.
Also unlike neglected properties, owners don’t want to sell these properties because they’re tired of maintaining them. The financial situation these motivated sellers find themselves in, such as a divorce or pre-foreclosure, is forcing them to.
Because motivated sellers need to sell quickly, they don’t have the time to make repairs, list with a real estate agent, host an open house, and then wait through a long closing process. As a result, they’ll usually accept a below-market value offer that pays off their mortgage, even if the house is well maintained.
Downsized real estate leads
The final category of real estate leads you can generate comes from people who are interested in quickly getting a property off of their hands. While closing quickly is a common desire for most motivated sellers, owners who fall into this category aren’t typically liquidating due to financial hardship.
Instead, these motivated sellers are the elderly who are downsizing or moving into a permanent care home, tired landlords looking to liquidate their entire portfolio, or family members of a recently deceased person who have inherited a property.
People who are downsizing will often list with a real estate agent, but if they want to close quickly without making repairs to the home, they’ll often sell to an investor if the price is right. Tired landlords fall into the same situation, and they also offer the possibility of buying multiple homes at a discount.
The family members of a deceased homeowner are the most likely to sell at a discount because they may have inherited a home they can’t afford to maintain. They may also be facing a lengthy probate process if their relative didn’t have a will. For them, selling at a discount means they still make money on the property without having to worry about repairs or property taxes.
How to generate real estate leads
Now that we’ve discussed the three broad categories of real estate leads, you’re ready to start generating them yourself. There are several ways to find these properties, and each method is useful in different situations.
Attend public property auctions
Public property auctions are a great way to find homes in foreclosure. Depending on the level of competition in your market, you may be able to buy these houses at a low price. Just know that if you plan to buy a property at an auction, you need to have cash on hand to complete the purchase.
These auctions are also a great way to generate cash buyer leads if you’re a real estate wholesaler. Most of the people that attend these auctions are investors who are looking for a new investment deal. If you make the right impression, you may be able to add a new buyer to your list.
Network with real estate professionals
Many investors find that real estate professionals are among the best resources for generating motivated seller leads. Real estate agents, closing attorneys, and property contractors usually have a good idea of the developments in their local market.
Real estate agents know where to look for distressed properties, landscapers usually have elderly clients who are ready to downsize because they can’t maintain their homes anymore, and closing attorneys can be another great resource for finding cash buyer leads.
Just remember that these individuals are in the real estate business too. If you want to form profitable relationships with them, find opportunities to refer potential clients or other investors to them in return.
Real estate lead generation software
The most efficient way to find financially distressed property leads is to use real estate lead generation software. The software platforms aggregate data from multiple sources, including owner financial insights, demographic information, and property details.
Along with in-depth data, many of these platforms give you several ways to find leads, including quick filters, custom search criteria, and mapping tools that let you target specific areas. You can use these tools to search for properties and build lead lists that are as broad or as niche as you want.
Of course, these platforms do more than just help you find leads. Many offer other efficiency-boosting tools to make investors more effective. These tools include:
- Lead management and scoring
- Skip tracing for finding property owners’ contact information, including phone numbers and email addresses
- Real estate marketing tools, including SMS, cold calling, and direct mail
Driving for dollars
Driving for dollars is one of the original real estate lead generation methods. It involves driving through neighborhoods looking for distressed and neglected properties worth investing in.
It’s a great way to find real estate opportunities because you’ll find exclusive leads that other investors don’t know exist. However, the key to successfully finding real estate opportunities this way is to spend time and effort exploring local neighborhoods.
While this can be a time-consuming task, it’s a highly rewarding one, because it’s the only way to find some distressed properties. Unlike homes in financial distress, there are no public records that announce the existence of neglected homes. They simply exist, waiting on someone to find them.
Driving for dollars becomes even more effective when you combine it with real estate lead generation. Few real estate apps have a driving for dollars tool built in, but the ones that do give you all of the data you would expect from a real estate platform in the palm of your hand. If you have access to this data while canvassing a neighborhood, you can qualify leads as soon as you find them and save yourself time and money.
Virtual driving for dollars
Driving for dollars is a highly effective strategy, but until recently, it hasn’t helped investors break into new markets. Now investors can drive for dollars virtually by leveraging street view inside some lead generation platforms. With these tools, they can generate distressed property leads all over the country. Virtual driving for dollars is also effective for planning routes and identifying properties of interest before making the drive to their neighborhoods.
The best real estate leads for each type of investor
No matter what your investment strategy is, most real estate leads will be a great fit for your business. However, some will likely be a better fit than others. Here are the real estate lead generation strategies that are most successful in each type of real estate investing business.
Wholesale real estate
Wholesaling real estate is the practice of signing real estate contracts, which you then sell to a cash buyer. The cash buyer then closes on the property, adding it to their portfolio or flipping it.
When you pursue this type of real estate deal, your first concern is finding a property that you can buy at a deep discount. Often, the deeper the discount, the higher your assignment fee.
You can sometimes find great deals on probate listings or from tired landlords liquidating their portfolios. However, the properties that most commonly sell for below market value are properties with damage or financial distress. If you want to get more specific, you can also target duplexes, triplexes, or multiplexes, since they’re often attractive options for cash buyers who are building a portfolio of rental properties.
Fix and flip
Fix and flippers buy houses, renovate them, and then sell them to homebuyers or other investors. If you fall into this category, the best leads are distressed single-family homes.
Driving for dollars is a great option for finding these leads because you can quickly qualify or disqualify them based on what you see. Driving for dollars will also give you insights into the neighborhoods around your leads, allowing you to determine which homes will be appealing to homebuyers and which ones won’t be.
Landlords and other real estate investors
If you’re a real estate investor with a buy-and-hold strategy, then the best leads to focus on will depend on the amount of money, time, and effort you want to pour into a home before you start making money on it.
While you may be able to fill your portfolio with damaged, neglected, or condemned houses for cheap, they may not give you the best return on investment, since you’ll have to spend money to fix them. In that case, the best kinds of leads to focus on are single-family homes or multiplexes that are in financial distress but move-in ready.
As we’ve discussed, motivated sellers in financial distress have to sell quickly. Their main goal is to save their credit score by clearing their mortgage debt or avoiding the legal problems that can result from a tax lien. You can usually buy these homes at a deep discount and recoup your initial investment fairly quickly.
You can also focus on sellers who are downsizing, liquidating their portfolios, or selling inherited homes. These leads are great options because the properties are often move-in ready and you can start advertising them to renters immediately.
Expired listings are another great option for investors looking to build their portfolios. These are properties that have been listed with a real estate agent but haven’t sold by the deadline in the listing agreement. While this is usually a sign that the property has an issue that an investor will need to fix, that isn’t always the case. Many sellers need to close and move within a certain time frame, and if their home won’t sell, they may be willing to accept a lower offer.
Finally, probate leads are another great option for real estate investors who are building their portfolios. They involve some extra work since they’re caught up in legal proceedings, but family members will often sell them at a lower price to avoid dealing with probate court.
Understanding the importance of real estate lead generation is crucial to growing your business. Finding the right leads is the first step in the investing process and it will help you prioritize your efforts so you aren’t chasing random properties, hoping for a good return on investment.
In the past, investors had to rely on their network and a bit of luck to hear about properties that were worth checking out. Now, technology has made it much easier to find investment opportunities, because you can generate leads based on nearly any criteria you want.
However, access to this powerful data shouldn’t replace knowing how to pick the right properties to pursue; it should only augment it. Use the data available to you, but don’t blindly generate leads. Be thorough, identify the right kind of opportunities for your business, and take the time to qualify your leads. If you follow those steps, you’ll find more opportunities than you’ve ever dreamed of.