I’m currently working on a rehab, and some people have asked how I found this property.

I got this one on the MLS (Multiple Listing Service–a list of houses for sale–when you buy a house through a real estate agent you’re usually looking at houses on the MLS). But wait–isn’t the MLS where all the houses are sold at retail? As an investor we’re looking for houses that we can buy for far less than the going rate, right?

An investor I know says that 5% of the houses on the MLS are overpriced, 90% are priced at market value, and 5% are under priced. Houses on the MLS are (usually) in good shape and ready to rent or sell, so if you can find one that is under priced then you’ve got a decent property to work with.

You may or may not find a property with enough equity in it to wholesale to another investor, but these properties can be very good for lease option deals or if there are things that need fixing (see the strategies page for “wholesale”, “lease option”, and other real estate strategy definitions).

This investor I was talking to wouldn’t divulge his method for finding the under priced properties on the MLS (you can’t blame him), but my guess is he calculates “the price per square foot” to help him know at a glance if it’s a property worth pursuing–a time-tested method to quickly evaluating a house based on it’s statistics.