Investing in real estate can be done simply by driving for dollars

While there are nearly endless ways to find real estate investment deals, one of the oldest and most productive is what’s called “driving for dollars.” While the name sounds simple, many people don’t understand the term or if they’ve tried it, they may not understand how to make it work.

The most effective way to make money in real estate is to find motivated sellers and get the property under some type of contract: buy and sell, lease option, option, or deed contract, to name a few. With the property under contract, the investor-buyer can start marketing the property for sale or purchase it to use for whatever purpose they have in mind.

When the investor drives for dollars, it means that he chooses a neighborhood to “farm” and systematically drives every street, avenue, court and driveway in that neighborhood in search of certain types of properties, usually those that are deteriorated or abandoned. Properties that have orange or red lettering affixed to the doors or windows are also targets, as the city or county has “tagged” these properties as having code violations or a condemnation order.

While driving for dollars, the investor writes down the addresses of distressed properties and then checks public records to find the owner of the property. A skip tracking service may be needed to find the owner, but very often a neighbor will know where the owner has moved. The landlord may not want his address given, so he leaves his business card with neighbors and explains that he gives referral fees on properties he buys. You can then follow up by emailing or calling absentee owners to buy their properties. He always makes low opening offers, as it’s harder to back down on an offer than it is to raise it.

The investor must also call all listed properties that have Realtor signs. These listed properties are rarely good prospects, but that depends on the seller’s motivation at the time. If the seller needs to sell, instead of just wanting to sell, there could be a deal there. When you call listed properties and talk to the real estate agent who has the listing, try to bargain hard for a lower price to see what price reduction the seller will actually give you. We’ve seen 50% price reductions on properties that have been listed for more than 90 days, and no price reductions on properties listed for more than 1,200 days; it all depends on the seller’s motivation.

I suggest that the investor also call all the FSBOs and make appointments to view the properties and meet with the sellers. FBSO properties are often motivated sellers who don’t want to pay a real estate agent a commission to sell their home. There is an axiom in the industry that can be very true: “the smaller the FSBO sign, the better the deal.”

In short, the key to making these offers work is to not believe what the seller says about their final price, make a low offer, and then follow up again and again until the property is sold to you or someone else. Persistence pays big dividends in real estate investing.