If you are considering getting into off-market real estate investments, you’ve likely heard off-market real estate investments mentioned. These can potentially be highly lucrative investments, but they can also be a challenge for new investors since they can be so incredibly different from normal real estate listings. We’re going to cover what exactly off-market means, and how it can change the entire investment process and strategy behind your purchase.
What Are Off Market Real Estate Investments?
Off-market real estate investments are real estate transactions that occur with properties that have not been formally listed on the MLS, or multiple listing services. This means that it is exposed to a much smaller pool of potential buyers since it hasn’t been formally marketed to the public, and as such, you won’t see it on conventional real estate listing platforms.
In some cases, the seller’s real estate agent may be able to privately market the property to potential buyers in a more limited network or through other marketing methods that are limited to select audiences. This will generally depend on the goals and strategy of the seller, and may simply be done to gauge interest in the property.
How Off Market & On Market Transactions Can Coincide
There are situations where a property may be off-market for a period, then become formally listed. The seller may choose to do an initial off-market presentation to get potential offers and gauge investment interest in their property, then take the property to the market armed with a better price. Sometimes, even when presented with enticing off-market offers, a seller may still push into the market. Still, other sellers may stay exclusively off-market, particularly when they have received robust off-market offers in the past and prefer the off-market process.
Potential Benefits & Drawbacks Of Off Market Real Estate
Many of the pros of participating in off-market real estate investments are from the seller’s point of view, though there are some significant advantages for some buyers in some circumstances. A seller marketing their property to off-market investors may be able to avoid the often expensive home sale preparations. Off-market real estate investors are more likely to be able to buy a home or other property “as-is” and do repairs or improvements with their own capital. Sellers concerned with their listing potentially growing stale and forcing price reductions may also choose to sell their property off-market.
Some of the drawbacks for a seller include limiting the potential pool of buyers, and the possibility of competitive bidding as a result. This can be a boon for the right buyer, who can leverage the situation for increased value and less buying pressure driving the price up. Also, a seller that stays exclusively off-market may never fully realize the market value that could be achieved by selling on the market, which is another great opportunity for the right investment buyer.
Be Sure You Plan For Contingencies When Dealing Off Market
If you’re buying off-market real estate investments, you’re likely doing it with the goal of creating wealth by improving the property and eventually making a profit from its future sale. In some cases, market swings and other forces may preclude your initial strategy from being viable, and you’ll need to have a plan ready. Working with a solid wealth planning or investment planning firm can help you iron out these potential contingency plans so that you can minimize or prevent losses for higher-risk properties.
Before You Begin Any Off Market Real Estate Investments Talk To A Professional
There are some considerable differences when buying off-market real estate investments, as well as some risks that may not be present in conventional listings. Before you make any big off-market real estate investments, reach out to our team to discuss your strategy and have your backup plan ready.