What is an Absentee Owner?
The absentee owner definition is a person who owns real estate property but does not currently live in it or does not actively manage it.
Buy & Hold investors (i.e., landlords) can fit this description. However, the difference is that quality landlords take care of and maintain their investment property.
On the other hand, absentee owners generally allow their property to remain vacant without any upkeep. For example, some absentee owners will not cut the grass nor repair a damaged roof.
How Does Someone Become An Absentee Owner?
- Absentee owners may have inherited the property through a Will.
- An absentee owner may have moved to another city and haven’t been able to sell their property yet.
- They are in the military deployed overseas.
- An out-of-state Buy & Hold investor that has been unable to find tenants.
- Holding onto a property for the sake of capital appreciation
My agent showed me a property that was owned by another investor. The property had been vacant for ten years.
From the picture above, you can see how the property sat for those years. The deck, roof, garage door, HVAC were just some of the few things that need improvement.
That investor didn’t need the cash flow from that property. They were was just holding onto it for capital appreciation.
How do Absentee Owners Benefit Real Estate Investors?
Real estate investors always make their money going into a deal. Successful investors know their numbers and understand what kind of return they should expect from their real estate investment.
They don’t gamble with their money in the real estate market. That’s speculating, not real estate investing!
Truthfully, it’s hard to find the best real estate deals, especially in a housing market filled with owner-occupied homebuyers.
Owner-occupied homebuyers only have to pay a 5% down payment. This down payment is a vast difference to investors who spend at least a 20% down payment. Also, homebuyers can take advantage of low-interest rates allowing them to makes offers way above the asking price.
Therefore, absentee owners provide investment opportunities that avoid competition with homebuyers. They usually don’t have any emotional attachment to the property and are most likely willing to sell.
Furthermore, investors can acquire them at a price below market value because these properties are not taken care of overtime. They make the necessary improvements to the property to have a high After Repair Value (ARV).
The greater the margin between the purchase price and the ARV, then the more significant the profit! This investment property will make a great addition to their real estate portfolio.
How to Find Absentee Owners?
- Driving For Dollars
- Direct Mail Campaign
- Online Marketing
- Property Tax Records
- Multiple List Service (MLS)
Driving For Dollars
This strategy is a low-cost method for finding absentee owners. As the title suggests, an investor only needs to drive around in desired areas and look for properties that show vacancy indications.
These indicators can be uncut grass, mail sitting at the front door, boarded-up windows, and damaged gutters.
Investors can find the owner of the property by checking the public records for a particular address.
Direct Mail Campaign
This strategy is the practice of sending out mail to desired neighborhoods or particular people. The expectation is that only a small percentage of those people would respond to the mail.
For example, an investor could mail 1,000 letters and only receive three responses. Imagine, it’s like looking for a “need in a haystack.”
It’s essential to note that direct mail marketing can be expensive! Investors can easily spend $2,000 to mail 2,000 letters in hopes of finding a lead.
However, some investors find that this strategy is worthwhile. The cost of direct mail can be considered minor compared to acquiring a great deal.
Have you ever seen signs on the corner of the street advertising “I Buy Houses”? These signs are commonly known as Bandit Signs and are most likely illegal!
Nevertheless, I am not a fan of Bandit Signs because they can quickly litter a neighborhood and make it unappealing. An alternative solution would be renting a billboard or advertising on a car.
Craigslist is the world’s largest classified website. Real estate professionals can quickly post “I Buy Houses” on that site. Also, investors can check rental listings and look for ads that state “For Sale By Owner.”
By browsing rental listings on Craigslist, investors can build their absentee homeowner list.
Investors can be at the top of the search results by paying for ads or advertising on someone’s Facebook wall. This practice is known as pay-per-click advertising. This online marketing strategy is a convenient way to attract leads for a few dollars.
Property Tax Records
Investors can check tax records to identify property owners that live out-of-state. A request to the local tax assessor’s office can access these records.
Investors can identify out-of-state owners by comparing the property’s tax record with the physical address. Therefore, if there is a difference in property addresses, then it can be assumed the owner lives out-of-state.
Multiple Listing Service (MLS)
The MLS is a database of properties for sale provided by various real estate brokerages. However, it can be highly competitive (especially in a hot market) because of the easy access for real estate agents.
One of the most powerful and cost-effective ways to get leads is through networking!
By leveraging other people’s time and relationships, this is an excellent way for investors to get their message out there.
For example, talking with the neighborhood mail carrier can leverage their drive through multiple neighborhoods and identify vacant properties. Another example is talking to a property management company to help find absentee homeowners.
Furthermore, I recommend paying a finder’s fee to anyone who can help find a lead that converts to a sale. Adding a finder’s fee is an additional motivation to find quality leads.
In general, skip tracing services are used to gather information on any individual. Bail bonds, bounty hunters, and debt collectors are typically using skip tracing services.
In the case of real estate, investors just want to know if an owner is interested in selling their property.
How To Talk To An Absentee Owner
There isn’t a magic script that will convince all absentee owners to sell their property. Every owner’s situation is different. Therefore, I recommend investors and wholesalers to be sincere with your intentions and have a simple conversation with the owners.
Don’t focus on convincing the owners to sell. Instead, build a rapport with them and focus on being a problem solver!
Find out their motivation to sell and categorize their enthusiasm as hot, warm, or cold.
- Hot – These owners are very enthusiastic to answer questions and want to sell their house right away.
- Warm – These owners are interested in selling but maybe a little hesitant. These types of sellers should be followed-up by phone.
- Cold – These owners don’t have the motivation to sell. Investors should add their information to a mailing list.
Cash Is King: How To Purchase
Properties owned by absentee owners are usually not maintained and are in poor condition. Therefore, it’s almost impossible to get a bank to finance a purchase of a property that has a market value less than the asking price.
That is why investors looking to flip a property always pay in cash! Cash avoids the red tape and the retractions set by a bank.
How can people wanting to get into real estate pay for these properties? The answer: Leverage!
Below are 4 “No Money Ways” to invest in real estate:
- Hard Money
- Private Money
- Home Equity Line of Credit
- Business Line of Credit
Hard money is a type of loan provided by an individual or a company. They operate a little differently than a bank.
A bank checks your credit history to see if you qualify for a loan. A hard money lender does not check your credit history.
Instead, these lenders value the deal to make sure it’s a good investment for them.
Private money lenders are individuals that are not usually in the business of making loans. These types of lenders are generally family and friends.
Home Equity Line of Credit
A Home Equity Line of Credit is also known as a HELOC. This HELOC is not a loan but rather a line of credit similar to a credit card—the amount of the credit line bases its value on your home’s equity. A house’s equity is the market value of the house minus the balance of the mortgage.
Business Line of Credit
Another type of line of credit is a Business Line of Credit (LOC). This Business LOC is the vehicle I use to put a down payment on a house.
A Business LOC is similar to a HELOC where it uses a person’s home equity for valuation.
However, Business LOC can include OTHER assets aside from your home. These assets include stock and cash.
Absentee owners are great ways to find off-market deals. The challenge is how to find them. Sometimes it takes some creative strategies, such as doing a direct mail campaign or checking property tax records.
Seasoned investors know what numbers make a great deal. An investor that finds a great deal will easily have lenders willing to fund it!