What is driving for dollars and how does it work? More importantly, how can you — the real estate investor — use it to find off-market deals that your competitors aren’t even aware of?
That’s what we’re going to talk about in this 2021 guide to driving for dollars.
What is “driving for dollars” in real estate?
Driving for dollars is the term that real estate investors use to describe the act of driving around specific neighborhoods with the goal of finding off-market properties that competitors haven’t noticed.
It’s not the most efficient way to find off-market deals — since you literally have to drive around and write down the details for each individual distressed property that you find — but it can certainly be an important part of your overall deal-finding process.
For many real estate investors, driving for dollars is a supplemental marketing strategy (since it’s quite hard to scale). They “drive for dollars” when they’re heading to the office, driving to the gym, or going for their daily walk. Other investors pay a team of people to drive for dollars every day or a few times per week.
How Driving for Dollars Works (with Example)
The idea behind driving for dollars is that you — the real estate investor — will be able to find motivated sellers that other investors aren’t aware of… that you’ll be able to create a unique list of possible deals.
(Rather than marketing to all the same people as your competitors)
Okay — but how do you know which properties might be owned by motivated sellers? What do you do with the properties you find?
We’ll walk through the detailed steps below but, for now, let’s look at an example.
Imagine that you’re an experienced investor and that you schedule an hour to drive for dollars in a neighborhood where you think there might be some deals. You’re looking primarily for distressed properties — homes that look abandoned, uncared for, old, and/or unmanaged.
Distressed properties often indicate a homeowner who is frustrated with the required upkeep of their home.
You write down the addresses of these properties, snap some photos from your truck, and head back to base. Once you’re in front of your computer, you research the properties to try and find information on the owner, skip trace the addresses to find the owner’s phone number, and add them to your marketing cycle.
In that way, you have access to deals that other investors in your area might not be paying attention to.
The Benefit of Driving for Dollars
As we’ve already mentioned, the primary benefit of driving for dollars is that you’re getting access to deals that other investors aren’t aware of. And while it might not be the most efficient strategy, it can certainly give you a leg-up on the competition.
How to Make Driving for Dollars More Efficient
The biggest problem with driving for dollars is that it’s inefficient — and that’s why many investors don’t do it at all.
It’s much easier to pull a list, send thousands of mailers, and wait for the phone to ring than it is to drive around your neighborhood to find maybe 10-20 properties that might have the potential to become a deal.
So… how do you make driving for dollars more efficient?
One option is to hire a team of 3-5 people who work for 5-6 hours per week scouring specific areas for distressed properties. That’s not a bad idea and you could probably pay as little as $15 per hour, although you might consider offering a small commission instead so that these people are more motivated to find good properties.
Another option is to build relationships with local mailmen, dog walkers, and habitual outdoor runners. All of these people are consistently outside driving or walking through various neighborhoods.
If you can find them, give them your business card, tell them what you do, and offer them a commission for any deals you close on properties that they send you, they’ll be motivated to help you out — who wouldn’t want to make a little extra money on the side?
And finally, check out the “Best Software Setup” section of this article to see our tool recommendations — that’ll make driving for dollars way more efficient and effective.
6-Step System to Driving for Dollars Efficiently & Effectively
Now we’re going to walk you through 6 steps to driving for dollars efficiently and effectively — from choosing a market that’s ripe with motivated sellers to researching those properties and plugging them into your marketing cycle.
1. Choose Your Target Market
The first step is to choose a neighborhood that you want to drive for dollars in. Of course, don’t just randomly pick any neighborhood — you want to choose an area with a lot of potential for deals.
Consider some of the following questions to choose a “high value” neighborhood…
- What is the crime rate?
- What is the average home value?
- How old are the homes?
You’ll have to decide for yourself and your market what answers to those questions are going to result in the densest number of deals for a particular area.
Typically (but not always!), a higher crime rate, older homes, and lower average home value will result in more distressed properties with motivated sellers.
Also, make sure that you’re tracking the areas where you’re driving for dollars. Otherwise you could waste time and money driving the same areas multiple times — or miss out on lucrative areas because you thought you already covered them.
Once you’ve picked a neighborhood, it’s time to prepare you or your team to drive for dollars.
You’ll want to bring a camera (a smartphone will do just fine) and a notepad to write down addresses. You’ll also want to consider timing — when are you going to drive for dollars?
(The last thing you want is people peeking out their currents wondering why the hell you’re taking pictures of their house)
The best time to drive for dollars is usually between 10am and 2pm on weekdays — most people will be at work during that time and so you can avoid awkward interactions.
And ideally, try not to spend too much time looking at any one house so that you don’t get the cops called on you for being creepy.
If you’re hiring a team to help you drive for dollars, make sure that expectations are clear for where they’ll be driving, how long, what type of properties to look for, and what information they need to collect.
3. Look for Signs of Distress
We’ve talked about how distressed properties are more likely to be owned by people who want to sell their house quickly for cash.
But you might be wondering… what are the signs that a home is distressed?
Here are some things to look for…
- Yard is overgrown with weeds.
- Broken windows
- Faded paint
- Uncollected newspaper or junk mail
- Notices posted on the doors or windows
Trust your gut.
If a property looks neglected, then it probably is owned by someone who’s frustrated with the management and upkeep of the home — they might, in other words, be willing to sell to you for a fair cash offer.
When in doubt, write down the information and do some research on the property. The worst case scenario is that you get rejected by the owner… but that’s just a part of the biz.
4. Take Notes
When you find a property that appears to be distressed, you’ll need to take notes on the property. Here’s a baseline…
- Take a picture of the property.
- Write down the address.
- Write down anything noteworthy, specifically things that can’t be seen in the photograph (“only distressed property on the street” “lots of mail on the porch” “notice on the door” etc)
This will be critical information when you do additional research on the property and try to get ahold of the homeowner. The more context you can have, the better.
5. Research the Properties
Okay. You have a list of distressed properties from your driving for dollars expedition.
The next step is to do a bit more research on each of these properties (you can outsource this to a VA if you want).
You’ll want to find…
- Owner information (address, phone number, name)
- Previous sales date and price
- Bank owned?
You can research properties on your county assessor’s website, search public records, search on Google, door knock, speak with neighbors, and/or use a skip tracing service to find the above information.
You’ll want to throw out properties that don’t fit your criteria — if they’re low equity or bank-owned, for instance.
Otherwise, the next step is to add them to your marketing cycle.
6. Market to Your Prospects
This is where the rubber hits the road.
If you did a good job driving for dollars and researching properties, then you should be able to market to these new prospects and even pull a few deals out of them.
You can send them mail, call them (if you’re able to find their number through skip tracing), or even door knock. If you don’t get an answer or if the person is hesitant, plug them into your follow-up sequence.
But as you might expect, things can get cluttered… really fast.
After you’ve driven for dollars 100 times, how will you know which areas you’ve covered and which ones you haven’t?
In regards to all of the data you collect from multiple sources, how will you know who you’ve marketed to before? When the last time you called a prospect was? Where each record falls in your follow-up sequence?
The effectiveness of your marketing plan relies on good data management.
Check out the software setup below to ensure you’re making the most of every dollar you spend and every lead you generate.
The Best Software Setup for Driving for Dollars
As we’ve mentioned, driving for dollars is usually a pretty inefficient process. You drive around neighborhoods, take some pictures and make some notes, do some research, and then manually add those properties to your marketing campaigns.
But thanks to technology, there’s an easier way.
Check out the video below for a detailed walkthrough.
Driving for dollars is a great supplemental way to find deals and grow your business — it’s particularly effective because many investors don’t do it.
At the very least, look for properties when you’re driving to the grocery store or during your daily walk. Or for better results, hire a team of people to help you drive for dollars and build relationships with dog walkers, mailmen, and habitual runners.
That’ll give you access to deals that other investors in your marketing aren’t paying attention to.