Real Estate Investing 101: What Are Off-Market Properties?


Real estate has historically offered investors opportunities to generate strong, consistent returns. But as with anything in the investing world, the key to success in real estate is buying the right properties at the right price. The most successful investors concentrate on off-market properties in highly competitive markets.

What is an off-market property? In the simplest possible terms, it is one that does not appear on a multiple listing service. Though there are no codified rules governing how multiple listing service systems work, a general rule of thumb states that a property not on a local or regional multiple listing service is not officially on the market.

Examples of Off-Market Properties

Off-market properties can be either residential or commercial. Again, the only criteria are that they do not appear on a multiple listing service. With that in mind, there are plenty of examples. These include:

  • Properties Not for Sale – Some off-market properties are not actually for sale. That might not stop an investor from approaching a property owner with an offer. The worst the owner can do is say no.
  • Foreclosures – Banks do not necessarily have to work with real estate brokers to sell foreclosed properties. And even if they do, they can request that properties not be listed on the local multiple listing service.
  • Short Sales – Short sales occur when owners are attempting to sell quickly in order to avoid foreclosure. Short sale properties often never make it to the multiple listing service because real estate agents find buyers rather quickly.
  • Quiet Sales – Some real estate offers are kept off the multiple listing service because owners want to keep the sale quiet. One example would be a divorcing couple looking to protect their privacy during a difficult time.
  • Auction Properties – Properties being offered in foreclosure or tax auctions rarely make it to a multiple listing service. Instead, a sign is put in the yard in advance of the auction date. An ad might be taken out in the local paper as well.

Off-market real estate transactions are more common than most people know. For investors, off-market properties represent particularly good opportunities to make a good profit.

Off-Market Properties Cost Less

By now you might be wondering why property investors prefer off-market properties? According to Salt Lake City’s Actium Partners, it is all about sales price. Whether an investor concentrates on residential or commercial real estate, off-market properties tend to cost less.

They may cost less because they need a lot of work. In the case of auction properties, a lower sale price might be the direct result of a low tax bill or a low outstanding balance on a mortgage. The point is that real estate investors want to spend as little as possible on obtaining new properties. Keeping acquisition costs in check opens the door to a better return on investment.

The Off-Market Trap

The trap in all of this is being sucked in by a low price only to discover that a purchased property needs way too much work to justify the investment involved. The potential of ending up with a money pit is one of the biggest risks of real estate investing. Investors have to be very careful to do their due diligence before buying.

One last thing to note is that property investors often turn to hard money loans for quick financing. As long as a particular property offers enough value in relation to the amount being borrowed, obtaining hard money is usually well within reach. Lenders appreciate good off-market properties just as much as investors do.

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