How to Find Below-Market Deals in Competitive Real Estate Markets

Real estate is one of the most popular types of investing in the United States. While real estate can be lucrative, it’s not without its challenges. Thriving markets and competitive areas can make it difficult to find below-market deals, but not impossible. Seasoned real estate investors have long used below-market value (BMV) properties as the backbone of their investment strategy.

If you’re a new investor, a below-market value property can make real estate more accessible and serve as a starting point for your portfolio. These properties are unique as they offer almost instant equity due to their cheaper price point. Most below-market properties are priced this way due to the seller’s circumstances, rather than any structural or mechanical issues with the property. Similar to distressed properties, below-market sellers are often seeking a quick sale and are may be willing to work with investors to accept a lower offer.

Privy can help users run detailed investment analyses and target properties. We help investors automatically filter listings and match properties to their investment strategies to help them find below-market deals quickly.

This article is an in-depth guide on how to find below-market deals in competitive real estate markets to grow and diversify your portfolio.

What is a Below-Market Property?

A below-market value (BMV) property is typically a residential property sold at a lower price than its actual market value, creating a lucrative opportunity for successful real estate investors. Sellers of BMV properties are highly motivated to sell their property quickly, often due to financial difficulties, foreclosure, relocation, and personal circumstances. These expeditated sales are ideal for fix-and-flip deals and investors using the BRRRR strategy for rental properties.

Investors seek out below-market properties as they have an increased profit potential by offering instant equity. Strategies like the BRRRR method focus on these properties as the immediate equity enables them to leverage the property for future investments. Below-market properties provide a lucrative opportunity for investors to maximize potential appreciation for rental properties. This immediate equity also minimizes risks by acting as a financial cushion, making it easier to boost the potential return on investment (ROI) for a property.

The Benefits of Below-Market Value Deals in Real Estate

Why should you focus on securing a property as part of a below-market value sale? It’s all about the numbers and maximizing your financial gains. Buying your property effectively at a discount puts your investment in a favorable condition from day one. Investors can achieve a return on their investment faster than with a property sold at a higher price.

The gap between the property’s purchase price and market value is the main benefit of a below-market sale. This financial buffer enhances the likelihood of a property’s value appreciation and accelerates its associated benefits. Many investors choose below-market value properties to diversify their portfolios at a lower price. Investing in several below-market-value properties can enhance the potential for consistent rental income and minimize risk. 

This financial buffer minimizes risks for investors in the event of a potential downtown or market fluctuations by having a lower exposure. When market conditions are less favorable, a below-market value property has a higher chance of delivering a positive return and providing stability for an investment portfolio.

Not every buyer realizes the potential of a below-market value property, often making them lucrative deals that are hiding in plain sight. Savvy investors can purchase these undervalued properties from motivated sellers for fix-and-flip investments or long-term rentals. 

Successful investors need a below-market value strategy to navigate competitive real estate markets. It’s vital to understand the local market by conducting independent research and working with real estate agents in the local area. Before purchasing a below-market property, investors should conduct a feasibility study to ensure it’s a viable investment.

Strategies for Finding Below-Market Deals

Whether you’re a first-time investor or a seasoned investor diversifying with below-market deals, it’s important to understand the different types of strategies available. Data is your best friend in spotting undervalued properties and targeting motivated sellers can enhance your chances of securing such a deal. While it’s possible to find on-market deals that are undervalued, don’t overlook the potential of off-market properties in competitive real estate markets as well.

We’re sharing four strategies investors can use to find below-market-value properties in competitive markets:

1. Leverage Privy’s Data

It’s a common misconception that motivated sellers can only be found through off-market deals, like vacant property owners and those undergoing foreclosure. While these can be a fast sale, motivated sellers can also be found on-market as they have already decided to sell their property.

With Privy’s investor-focused data, you’ll be the first to spot a below-market-value property in your target area. Our LiveCMA is designed with every type of investor in mind, making it easy to run complicated real estate investment analysis to determine the best use of a property as a fix and flip, long-term rental, or rebuild. 

2. Targeting Motivated Sellers and Distressed Properties

You can find motivated sellers both on and off-market, but they’re the key to securing a property at a below-market value. A seasoned investor knows how to spot a motivated seller who wants a fast sale, whether it’s due to financial pressures or personal circumstances. These property deals are mutually beneficial as the seller can release the cash they need, while the buyer can purchase a property with instant equity. Motivated sellers may be willing to accept an offer below their current asking price, so it’s always worthwhile to try and negotiate. 

The seller’s motivation (financial issues, relocation, etc.) often drives the below-market price, regardless of the property condition. Privy’s data makes it easy to find these motivated sellers, not just distressed properties.

Motivated sellers are often seen as being a ‘distressed property’ type, however, this terminology doesn’t immediately mean that the property is in a state of disrepair. The term ‘distressed property’ acknowledges that there is a difficult circumstance surrounding the potential sale, such as a foreclosure or long-term vacancy. 

However, investors who want to target motivated sellers and distressed properties will need to have the cash readily available to secure their deal. These buyers will accept a below-market value for their property in exchange for an immediate sale that is promptly closed. 

3. Explore Off-Market Deals in Areas with High Investor Activity

Off-market properties are often known as ‘pocket listings’ with the investor or real estate agent reaching out to the buyer directly. Growing demand for properties, especially in areas with high investor activity, has made off-market deals common.

The key to exploring off-market deals is to get an understanding of the local area, including its future potential and current market activity. Off-market deals are often completed at a below-market price as the seller is put in an advantageous position as they don’t have to worry about the additional expenses of auction fees or the time-consuming process of listing their property.

Investors can initiate contact by working with a local real estate agent or using a skip tracing service to get a seller’s contact information. 

Most investors focusing on off-market deals will narrow their search to a particular area, developing a localized strategy with a focus on proactive outreach to meet motivated sellers. Looking off-market is one of the most popular strategies for finding below-market deals in competitive and up-and-coming real estate markets.

Privy’s data-driven insights help investors understand investor activity in high investor activity areas. Privy’s ability to highlight high-investor-activity neighborhoods, makes finding profitable below-market deals easier, even in competitive regions.

4. Network with Local Real Estate Agents

Real estate agents can help investors bridge the gap when searching for below-market-value properties. Networking and establishing relationships with estate agents can give you valuable insights into the local market. Agents are often working on their own pocket listings and may be able to connect an investor with a potential buyer for an off-market deal. Similarly, a real estate agent can help you identify a property that has been on the market for an extended period with a seller that may accept a below-market value offer. 

Privy makes it easy to partner with investor-focused real estate agents and build your network with Privy Pro Agents. Our automation tools make it easy to review an agent’s experience and quickly connect with them. 

How Privy Helps Real Estate Investors Find Below-Market Deals

At Privy, we empower real estate investors to identify below-market properties by analyzing local market trends and comps to make even the most competitive markets more accessible. What makes Privy unique is our breadth of  data that makes even on-market deals more profitable by giving you a view of the wider market context.

Privy’s real-time data with its frequent updates (every 15 minutes), ensuring users have access to the most current listings in competitive markets. This feature makes it easier to spot below-market deals before other investors do.

You can leverage our data to find your target property type to align with your investment strategy, including fix-and-flip properties, long-term rentals, and rebuilds. Privy makes it easy to automatically filter for listings that match your investor profile and compare investment strategies.

Our data has efficiently been used by Privy investors in markets with high investor activity to consistently find properties at up to 60% of ARV. Our ‘crack the code’ tutorial shows how you can use Privy and on-market deals to find below-market value properties in even urban areas and those with high investor activity. 

How to Make Competitive Offers While Staying Profitable

Below-market value deals are not always advertised as such. Often investors can secure a property at a price below its market value by making an offer or approaching a seller directly for an off-market deal. Investors should ensure they are making competitive offers if the property is in a competitive market where multiple investors may be interested in purchasing it.

It’s important to do your due diligence as an investor before making a competitive offer to ensure your investment stays profitable. A below-market-value property may not actually be profitable if the savings on the purchase price don’t offset the repair and renovation costs necessary to make the property market-ready to sell or rent.

Within a seller’s market, it’s up to the buyer to make a competitive price, even in the case of a distressed property. There is only so low that you can go with an offer, especially if another investor might come in with a higher offer. We’re currently in a seller’s market where prices are higher due to increased demand, giving sellers the negotiating power. 

While there will be room for negotiating in a below-market value property, it’s crucial to understand the local market and what comparable distressed properties have sold for recently. Base your competitive offer on the price that comparable homes have sold for in similar situations using Privy’s direct-to-MLS data.

If the property is already below-market value with its asking price, avoid “lowballing”. The sellers are already motivated and submitting an asking price offer in this scenario for an on-market deal can still secure a 50% to 60% ARV. Below-market value deals are being listed weekly with fix-and-flippers in high investor activity areas often being the most profitable. 

Find Below-Market Deals with Privy’s Data

Investing in a below-market property is a great way for investors to build and diversify their portfolios. You can find below-market value properties everywhere, including in competitive real estate markets. Doing your due diligence and understanding the local market can minimize the risks involved with a below-market-value deal. These below-market deals are ideal for fix-and-flip properties and investors using the BRRRR method for long-term rental properties.

Privy offers all the data and investor insights you need to find below-market value deals in competitive real estate markets. Ready to get started? Attend an on-demand demo to upgrade how you invest in real estate.