Learn What is Driving for Dollars?
Learn 'Driving for Dollars' - a hands-on approach to real estate investing. Navigate through neighborhoods, identify distressed properties, and understand the success rate and profitability of this unique strategy.
Driving for Dollars: A Comprehensive Guide
In real estate investing, various strategies are employed to identify and capitalize on lucrative opportunities. One such approach, particularly useful in the early stages of one's real estate journey or in competitive markets, is called 'Driving for Dollars'. This technique involves physically navigating through neighborhoods, spotting potentially distressed or vacant properties, and making an offer to the homeowners.
'Driving for Dollars' within the real estate context doesn't involve driving jobs such as food delivery, parcel pick-ups, or ride-hailing services. Instead, it's a targeted and proactive strategy for real estate investors to identify and capitalize on profitable opportunities in the property market.
Driving for Dollars is especially relevant for individuals looking to break into real estate investing. This method provides a hands-on approach to identifying off-market properties, typically bypassing the competition that arises with properties listed on public platforms such as the Multiple Listing Service (MLS). The strategy can yield high-value deals, particularly in hot markets, where other sourcing tactics may not be as effective.
Driving for Dollars typically involves six steps:
- Target a neighborhood: Choose a neighborhood that shows potential for profitable investments.
- Plan a driving route: Be strategic about your route to avoid missing potential property deals or covering the same areas repeatedly.
- Drive and look for distressed properties: Spot homes that show signs of distress or vacancy, such as overgrown yards, boarded-up windows, or significant disrepair.
- Make a list of properties: Document the addresses of potential properties, noting their condition and any other pertinent information.
- Investigate each property later and find out who owns it: After the driving session, research the property details and identify the owners through public records or property owner locator services.
- Contact homeowners and pitch your offer: Reach out to the property owners with an offer to buy their property, using methods such as handwritten letters, phone calls, or email.
Success Rate and Profitability
Driving for Dollars can be profitable when you're able to procure discounted properties in neighborhoods with high property values, low vacancies for rental properties, and low crime rates. The idea is to buy low, fix up the property, then resell it for a profit or rent it out to earn passive income.
The success rate of this strategy depends on various factors, including the number of prospective deals identified, the rate of successful contact with property owners, the response rate from homeowners, and the acceptance rate of your offers. A conversion rate of at least 1% (response from about 1-in-100 homeowners) is generally considered successful for a Driving for Dollars campaign.
To effectively perform Driving for Dollars, you need to be prepared and strategic in your approach. Here's a step-by-step guide on how to do it:
- Pull together your driving for dollars supplies: Stock your car with necessary items such as food, water, a phone charger, a notebook and pen, and a camera. A driving for dollars app like DealMachine can be helpful in tracking your route and storing property information. A digital map and physical atlas can ensure you don't lose your way, while safety vests can make you look less suspicious when investigating properties.
- Pick your target neighborhood: Choose a working- or middle-class neighborhood where the median home value aligns with the larger metropolitan area. Luxury neighborhoods might not yield great flips due to high property values and few distressed properties. On the other hand, neighborhoods with too many distressed properties could make reselling difficult. The ideal area is one where home values are on the rise, but some homes might be old or outdated. These areas typically border hotter housing markets or might be a colder subdivision within it.
- Plan your route: Be strategic about your route to avoid missing potential property deals or covering the same areas repeatedly. Utilize tools like Google Maps, Waze, or a GPS device to navigate unfamiliar neighborhoods and ensure you don't miss any potential properties.
- Drive and look for distressed properties: While driving through the target neighborhood, keep an eye out for properties that exhibit signs of distress or vacancy. These signs may include overgrown yards, boarded-up windows, or significant disrepair.
- Make a list of properties: As you spot potential properties, document their addresses and note their condition or any other pertinent information. A camera can be useful for taking photos of the properties for later reference.
- Investigate each property later and find out who owns it: After your driving session, conduct research on each property to gather more information and identify the owners. Utilize public records or property owner locator services to find the contact information of the property owners.
- Contact homeowners and pitch your offer: Reach out to the property owners with an offer to buy their property. You can choose to send handwritten letters, make phone calls, or send emails, depending on your preferred method of communication. Tailor your offer to each property's condition and the needs of the homeowner.
Useful Tools for Driving for Dollars
To enhance your driving for dollars process, consider utilizing the following tools:
Target a neighborhood
- PropertyRadar: This website and mobile app allow you to search for properties in specific neighborhoods based on various criteria such as price, condition, and more. It provides detailed property data including owner information, tax history, and recent sales data.
- Zillow: A popular real estate website and app that offers similar features to PropertyRadar. It allows you to find properties in specific neighborhoods and provides recent home value estimates.
- NeighborhoodScout: This website provides comprehensive information about neighborhoods, including demographics, crime rates, and school quality. It can help you target specific types of neighborhoods based on your investment goals.
Plan a driving route
- Google Maps: An essential tool for any driver, Google Maps allows you to create customized driving routes, view real-time traffic conditions, and get accurate directions.
- Waze: Similar to Google Maps, Waze provides real-time traffic updates from other drivers. It can help you avoid traffic jams and arrive at your destination on time.
- GPS device: Consider using a dedicated GPS device to navigate unfamiliar neighborhoods effectively and ensure you don't miss any potential properties.
Drive and look for distressed properties
- Driving for Dollars app: There are several dedicated driving for dollars apps available, such as DealMachine, Propstream, and BatchLeads. These apps help you identify distressed properties, track your driving route, and facilitate contact with property owners.
- Camera: A camera is a valuable tool for documenting properties that you find. It enables you to capture images for later research and provide potential buyers with visual information about the property.
- Notepad: Carry a notepad or use a smartphone app to take notes about the properties you come across. This information will be helpful for further research and when making offers to property owners.
Make a list of properties
- Spreadsheet: Use a spreadsheet to organize the information you collect about properties. This allows you to track your progress and easily identify the most promising properties to pursue.
- Property management software: If you're managing a large number of properties, consider using property management software. These programs help you track your properties and efficiently manage your finances.
Investigate each property later and find out who owns it
- Public records: Public records are an excellent source of information about property owners. You can access them online to identify the owners of properties you're interested in.
- Property owner locator services: In cases where public records don't provide sufficient information, property owner locator services can help you find contact details for property owners.
Contact homeowners and pitch your offer
- Letter writing: Handwritten letters can add a personal touch to your offer and make you stand out from other investors. They provide an opportunity to explain your offer and address any questions the property owner may have.
- Phone calls: Direct phone calls offer a more immediate and personal way to contact property owners. They can help you get quick responses and engage in conversations about your offer.
- Email: Email is a convenient method for contacting property owners, especially when you need to provide detailed information. It allows you to send documents and other relevant materials efficiently.
By leveraging these tools, you can streamline your driving for dollars efforts, maximize your chances of success, and identify lucrative investment opportunities in the real estate market.
The most valuable tool for property valuation is Remetrics. Remetrics pulls in data about the properties you find. It then analyzes the deal so you know whether or not the deal is a good one. Or, what the numbers look like to make it a good deal for you.
By leveraging Remetrics, driving for dollars investors can access accurate and up-to-date information on property values, comparable sales, rental rates, and market conditions. This data can assist you in assessing the potential value and profitability of their investment properties, guiding you to make informed decisions about purchase prices, renovation budgets, and expected returns on investment.
Pros and Cons of Driving for Dollars
Like any investment strategy, 'Driving for Dollars' has its share of benefits and drawbacks.
- Flexible Schedule: The strategy can be executed according to an investor's personal schedule.
- Unique Opportunities: By being on the ground, investors may identify distressed properties not yet listed on public databases.
- Tax Deductions: Certain expenses incurred, such as fuel and vehicle maintenance, could potentially be tax-deductible.
- Time-Intensive: The method can consume substantial amounts of time without guaranteed results.
- Operational Costs: Costs such as fuel, vehicle maintenance, and potential wear and tear can add up.
- Safety Concerns: Investors need to be cautious of personal safety while surveying unfamiliar neighborhoods.
Prospecting Methods: A Comparison
When it comes to prospecting for properties, there are several alternative methods to consider alongside driving for dollars. Let's explore these methods and compare them to driving for dollars:
Networking is a valuable method for building relationships with other real estate investors and professionals in your area. By actively engaging with the real estate community, you can develop a network that provides referrals and leads. Networking also enables you to tap into off-market opportunities and gain insights into potential properties not yet listed. However, networking can be time-consuming as it requires active participation and relationship building.
Cold calling involves directly reaching out to potential sellers. While it offers a more direct approach, it can be time-consuming and require persistence. Successful cold calling requires a well-prepared script and the ability to handle rejection. Though it may yield results, the process can be frustrating and unpredictable.
Direct mail is a passive method of prospecting, but it can still be effective. Well-designed and targeted direct mail pieces can generate leads. It's a useful way to follow up with leads obtained through networking or cold calling. However, it may not be as precise or targeted as other methods, and response rates can vary.
Online marketing provides access to a vast audience of potential sellers. Utilizing channels like social media, search engine optimization (SEO), and pay-per-click (PPC) advertising, you can reach a wide range of prospects. Online marketing offers the advantage of targeting specific demographics and interests. However, it can be time-consuming to set up and manage, and costs can vary depending on the platform and strategy.
Driving for Dollars
Driving for dollars is a hands-on approach to prospecting that involves physically exploring neighborhoods for distressed or neglected properties. It provides an opportunity to identify motivated sellers and gain visual insights into the condition of properties. However, driving for dollars can be time-consuming and inefficient, as it relies on chance sightings and may require extensive driving.
To compare these methods, here's a table outlining their advantages and disadvantages:
|Networking||Build relationships, tap into off-market deals||Time-consuming|
|Cold Calling||Direct approach, potential for broad reach||Frustrating, time-consuming|
|Direct Mail||Cost-effective, follow-up option||Less targeted than other methods|
|Online Marketing||Reach a large audience, precise targeting||Can be expensive, requires management|
|Driving for Dollars||Identify motivated sellers, visual insight||Time-consuming, relies on chance sightings|
It's important to recognize that the best prospecting method depends on individual circumstances and preferences. Combining different methods can enhance your chances of finding new leads and generating successful sales.
By considering alternatives like networking, cold calling, direct mail, and online marketing, you can employ a more efficient and targeted approach to prospecting. While driving for dollars offers the advantage of a hands-on, visual assessment of properties, it's crucial to assess its time-consuming and potentially inefficient nature.
Remember, the key to effective prospecting lies in utilizing a combination of methods tailored to your specific needs and goals.
While Driving for Dollars can be time-consuming and requires patience and persistence, it is a viable strategy for new and seasoned investors alike. Especially in hot markets, it can yield great deals and provide a competitive edge over other investors. However, it's important to remember that it's not a guaranteed success and often works best as part of a broader investment strategy. By employing the step-by-step guide and utilizing tools like Remetrics, investors can enhance their chances of success in driving for dollars and capitalize on profitable real estate opportunities.