Calculate Wholesale Offers on Income Properties that Landlords will Love.

Do you have some cash buyers who are looking for rental properties to add to their portfolio?  If so, that is great, but do you know how to run numbers that will not make you look like a fool?  If you run numbers like you would for a Rehabber, you  are going to miss the mark and possibly lose that cash buyer.  You must speak “cash flow” to the Landlord.  Meaning, you must show them the cash flow is in the deal you structured and the deal actually meets their investment criteria.

Now, how do you do that?  Keep in mind, you want a Landlord to keep coming back to you for repeat purchases.  The better your structure the deal and the easier it is for them to do a cash out refi, the sooner they will come back to you for their next deal.  Talk about credibility and repeat business….huh!!!!?

I have outlined the 4 steps to go through to calculate the offer.  You will want to show them the details of the deal.

Cash Flow Analysis Calculator

October 14, 2016 / 1 Comment / by / in , ,
Best Way to Capture Your Cash Buyers Attention When Selling Your Wholesale RENTAL Properties

I have seen many different ways that wholesalers offer their wholesale RENTAL property information to their cash buyers.  Some of these offerings have been less then effective in their ability to capture a cash buyers attention and truly convey the numbers that make the deal work.  The fact is that if you do not give your cash buyers enough information about the property, you will simply not get anyone biting on your wholesale RENTAL properties.  If you are struggling with getting your cash buyers to pull the trigger or even show any interest on your wholesale properties.  Cash buyers want to limit the amount of time they spend doing due diligence and how much credibility they see in your ability to evaluate and find great wholesale RENTAL properties.  You must include some key ingredients of the wholesale deal to your cash buyers.  Here is an example of the crucial ingredients to include in your emails, youtube posts, website posts, etc to cash buyers who are going to RENT the property:

  • Property Location ( General area = not un der contract) (Address = under contract)
  • Property Characteristics (Property type, beds, baths, sq ft, amenities, etc)
  • Gross Monthly Rents
  • Total Monthly Operating Expenses (Property Management, Maintenance, Taxes, Insurance, Vacancy Rate, HOA, Utilities, etc)
  • Repair Cost Estimate
  • Summary of Types of Repairs Needed to Rent for Top Dollar
  • Under Contract Price or Price to Buy Property Wholesale
  • Cap Rate
  • Listing of the RENTAL Comps Used to Arrive the Gross Monthly Rents
  • Your Fee
  • Your Contact Information
  • Youtube Video Link
  • Online Photo Album Link

If you provide this level and amount of information they will be more readily able to see the potential of the wholesale deal and be that much more confident in pursuing it with you and paying your fee for the deal.

July 11, 2016 / by / in , ,
Cash Buyers: Are You Buying Income Generating Properties? Learn Which Expenses Most Sellers Don’t Disclose

As I travel throughout the country, I realize how many cash buyers are buying income generating properties without ALL of the numbers being disclosed.  I think this is very unfortunate and saddens me that others in the industry think it is okay to sell a newer cash buyer on fictitious numbers.  So, I have decided to write this post to help clear up which numbers you really need to see before you go and buy an income generating property.   These are the bare minimum numbers that should be disclosed and the respective return that the property returns with ALL of those expenses accounted for in the P & L (Profit & Loss).

  • Gross Rents is the starting point.  You will subtract all of the holding costs associated with the property from this number.  The Gross Rents should include anything that you are collecting monthly for that property.  It should not include inconsistent late fees.  It should include rent each month, yet it might also include monthly storage fees, or monthly pet fees too.
  • (-) Property Management is an expense that should be subtracted from the Gross Rents.  It is the cost associated with the monthly management of the property.  Even if you are planning on managing the property yourself, you should still include this expense.  When you go to sell the property, your buyer will want to see that you have accounted for a property management fee each month.  I usually recommend that you pull at least 10% of Gross Rents to cover this expense.  Ten percent is a pretty common amount charged.
  • (-) Maintenance should always be pulled for any income generating property.  Even if the property is brand new or recently remodeled, you will still incur some maintenance costs.  When someone moves out, you will be grateful for this slush fund too.  Typically, I will account for 5% of Gross Rents, if the property is new or recently remodeled.  Whereas, I will pull 10% of Gross Rents for rentals that might need some updating.   If you have a savvy tax preparer, they might recommend capital improvements at certain times too.  Therefore, it would be in your best interest to have a slush fund available to fund these upgrades, instead of it coming out of your pocket.
  • (-) Taxes should be pulled out as an expense too.  You want to make sure the property still makes sense as an income generating property with this amount pulled out.  There are some areas where the taxes are so high that they really do not cash flow very well.
  • (-) Insurance is another critical expense to ensure is accounted for on your income generating property.   You will want to ensure that you have the appropriate and adequate insurance coverage for each of your income generating properties.  In some areas, you will need flood insurance, where others need earthquake insurance, in addition to a standard landlords policy.  You might even decide to include liability insurance too.  The increase of premiums will impact your cash flow.  FEMA has been changing the requirements and boundaries for certain types of coverage, which might impact how much you will to allot for your income generating property.
  • (-) Miscellaneous fees are those fees that may or may not apply to certain income generating properties.  I will include HOA fees (Home Owners Association) or PUD fees (Planned Unit Development), Utilities, and a Vacancy Factor Fee as I see that it applies to the respective income property I am buying.  HOA fees or PUD fees will apply in some areas where as not in others.  You should look into where the property is located in an area where these fees apply and  how much they are per year.  It is a cost that is required to be paid on that property.  In order to rent out some of our properties, we have to include utilities in the rent amount.  If this is the case, you need to account for those costs.  In some cases, your multi unit may not be sub metered, thus you have to pay for utilities initially and then back bill your tenants.  You need to account for this cost, incase you can not collect the money from your tenants.  You should always account for a vacancy factor.  Even if the property is supposedly always 100% occupied, you might have a vacancy at some point and that will cost you money to market it, to show it, and to repair it.  It is always nicer that the property is able to pay for that expense instead of it coming out of your pocket.

The result of all of the above listed expenses pulled from the Gross Rents will provide the NOI (Net Operating Income).  It is in your best interest to require that any seller show you all of these numbers, so you can make an educated decision on the income generating property.   If they just give you numbers with gross rents and the NOI doesn’t match yours, you know that they have not accounted for all of the expenses that you will incur with that property and they are trying to make it look like it performs at a higher return than it actually is performing at right now.  Do adequate due diligence before you by, so you ensure you are not taking on someone elses nightmare.

January 26, 2015 / 2 Comments / by / in , ,
3 Main Categories Of Cash Buyer You Will Find in Any Real Estate Market: Where is the Money in Today’s Market?

Not all cash buyers are created equal.  Yes, they all buy real estate in some form or another, but that is about as similar as each of these types get in any real estate market.  They evaluate properties in a variety of different ways and they look for different returns.  Some cash buyers are very creative, while others are implementing a more traditional approach to profiting from real estate.  Let’s get started by identifying the 3 main categories of cash buyer of residential real estate.

  • Rehabbers
  • Cash Flow Investors
  • Landlords

In many markets, you will find that Rehabbers are having a harder time finding properties that have a large enough spread for them to buy, rehab, and resell.  It is occurring due to the lack of inventory available in many real estate markets throughout the USA.   Most rehabbers are still trying to buy at 70% or 75% of ARV minus repairs.  If they are targeting properties on the MLS, they are hard pressed to find large quantities of those deals in a lot of real estate markets.  They will usually try to flip these properties within 3 to 6 months.

Cash Flow Investors are finding it a bit easier to find properties that meet their criteria than Rehabbers.  The reason why Cash Flow Investors are finding it easier to make a profit, because they are selling their properties in a future real estate market.  If they do a lease option, they are setting the option to purchase for one to three years out, which is in a different real estate market.  If real estate values continue to appreciate then they can sell that property for a nice profit in the near future.  If they do seller financing, they are selling the property in todays market, but the borrower will need to refinance the property in 5 years or so, due to a balloon coming due.  Thus, the borrower will need to refinance the property in a future real estate market and for an appreciated price.  As you can see, they could buy today for one price, but they will sell at a future value for a nice profit spread.  The Rehabber buys and sells in the same market, so they don’t have the same type of spread.

Landlords buy properties based on the net cash flow the property produces rather than just  current sold comparables.  If rental properties are cash flowing well in the area and expenses are generally low, you will find that Landlords will being paying market value or higher than market value for their rental properties.  Landlord buy based off of cash flow and certain returns per year.  Typically, the Landlord is not going to sell the rental property for 5 to 30 years from now.  Thus, they will be selling in a different market too.

Hopefully, you can see the opportunities in what I just wrote above.  The cash buyers who are selling in future real estate markets are the ones who should be the main targets and the main people making up your cash buyers list in todays market.  They are the ones that will be buying higher and leave enough room in the deal for a wholesaler to still make a profit.

January 19, 2015 / 3 Comments / by / in , , , ,
Which Repairs Do You Make On A Newly Purchased Rental Property?
Rental Property Repairs

Rental Property Repairs

There are many schools of thought on this subject.  In some cases, you are going to have some landlords that will completely gut and remodel the property and then rent it out to tenants.  You have another school of thought that states that you clean it up to liveable condition and then rent it out to a new tenant.  Some will fix up and replace the areas that tend to result in more maintenance calls and help to preserve the rental property and then rent it out.  None of these are wrong, but I do believe there are some general guideline that you should follow when deciding what to repair in your newly acquired rental property.

  • Stop leaks and make sure faucets and drains operable – I want to avoid toilet calls for as long as I can.  I prefer to replace toilets with new equipment to make sure they operate correctly and all leaks are stoppe in each rental.  I make sure all faucets and drains are operating correctly and not leaking.
  • New middle grade appliances – I dont want calls for broken appliances.  I will usually start a new rental off with new middle grade appliance with self cleaning or easy to clean features.  I want low maintenance appliances, so I stay away from smooth surface ovens and stainless steal appliances in my rentals.
  • No moving parts – I will remove anything that could be a hazard, a maintenance call, or easily broken.  I will remove ceiling fans, garbage disposals, and in door ice and water dispensors in refridgerators.  In most cases, you are going to limit the amount of maintenance calls and remove the items that could break more easily than other items.  If the norm is to include these items in your rental in order to get maximum rent amounts or rent the property faster, then I will include them.  However, I will make sure the rent amount will cover the additional maitenance calls I will receive.
  • Protect and Preserve – I will make sure that exterior maintenance is done initially and continues on a semi annual basis to make sure the whole structure is preserved and reduce major repairs.  If the roof needs to be replaced right now, you should do it right now.  If you can hold off a year or two without it resulting in water damage, then I recommend delaying the roof replacement until you need a capital improvement to off set your taxes.  I look at the exterior as the same way.

Besides these items, I will make sure that I clean up those items that are still functional .  I will do this even if the item may not be the most up to date, if it is still functional then we are going to keep it in place.  An example is a bath tub that is from the 60’s that still has some life left in it, eventhough it may not be the same size as modern day tubs.  If the kitchen cabinets are in descent shape, ut they might need to be painted with new hardware, I will do that over complete replacement.  A good rule of thumb is that I will usually spend half of my fix and flip budget estimate for a home I decide to rent.  Remember, the properties that we fix and sell to retail buyers will need more modern touches and updates, where as my rentals will be clean and functional.  If I am going to sell the property to a retail buyer, I will usually remodel the bathroom and kitchen, paint the interior, and install new flooring.  For these types of repairs in my area, we will normally be into our projects for about $15,000 to$25,000.  If I was going to rent this same property out, I would bank on a rehab budget of about $8,000 to $15,000, because I would keep and clean what I could and make sure the rest is functional .  You do need to see your rental properties and their respective repairs through a different set of eyes than you would with your buy fix and sell properties.  If you budget for a buy, fix, and sell type rehab, you will have plenty of room to go either direction with that property.  I always plan for the worst case scenario, so I can preserve my profit

April 26, 2013 / by / in , ,
Bird Dogging in Real Estate Should Be a Two Way Street: There is More Than One Way to Make Money
Bird Dogging in Real Estate
Bird Dogging in Real Estate

There are a lot of people talking about bird dogging in real estate.  Specifically, they are referring to bird dogging wholesale properties to cash buyers.  It is the process of finding cash buyers and determining what they want to buy.  Once you have qualified your cash buyers list, you will know which properties they want and how you need to structure your wholesale deals.  You will find properties that meet your cash buyers investment criteria, gather information about the property and seller, and run the numbers on the property.  When you run the numbers, you are taking into consideration what your cash buyers are looking for in their wholesale properties.  If the numbers make sense to your cash buyers, they will pay you for the address to that wholesale deal.  You can stand to make $500 – $3,000 per investment property you bring your cash buyer.

There is a new trend spreading through out the real estate investing industry.  Seasoned cash buyers, that have more properties than they can hold, are looking for bird dogs to bring them other cash buyers for their properties.  It is kind of a reverse form of bird dogging.  You have an ongoing source of properties to sell that meet most cash buyers investment criteria, however, you have a growing list of cash buyers to sell these properties too.  In most cases, your cash buyers buying properties are going to be landlords who are looking for long term turnkey rentals.  Many of the seasoned investors who are selling properties have an ongoing source of wholesale properties that they getting from other bird dogs or from other sources.  They will fix these properties up, rent them out, and put property management in place and sell them as turnkey rentals to people who want to hold onto real estate for long term cash flow.

The key factor to recognize is that you can be a bird dog who finds wholesale properties for seasoned cash buyers and then help them find other cash buyers to buy their turnkey rentals.  It is a great working relationship that can pay very well.  Infact, you should check out a group out of Kansas City, MO who offers such a program for bird dogs.  Their website has many great properties available and they offer details about their great bird dogging program. 

The most profitable way to look at real estate investing is to embrace the fact that there should never be any wasted effort.  You can maximize your time and effort by looking for as many opportunities to help and aid those around you.  Everyone knows someone who is in need of selling, renting or buying a property.  You just have to have enough guts to ask.

March 5, 2012 / 1 Comment / by / in , , , ,
Single Family Residences the Best Investment in Today’s Economy: Warren Buffet Recommends on CNBC
Warren Buffets Announcement

Warren Buffet's Announcement

On CNBC on Monday, February 27th, Warren Buffett said “ I’d buy up a couple hundred thousand  Single family homes if I could”.  Now we all know that when Buffet speaks that most investors will listen.  Well that is great news for seasoned real estate investors and newbie real estate investors, because we now have more money coming into our industry, thus more opportunities.

We would be dang fools if we did not take advantage of this time in real estate.  In fact, Buffet mentioned that single family residences that were held for long term rentals were the best to go after with 30 year fixed financing in place.  Wow!  I just posted on my blog about this investment group……the landlord.  In post “Why do landlords make good cash buyers for your wholesale properties” , I discuss why landlords are a great on going source of cash buyers for wholesale properties.  The people entering the real estate investment industry  now will most likely be inexperienced real estate investors and landlords , thus they will need people who are knowledgeable about the area and real estate investing.  There are a lot of investorsfollow will want to invest in real estate with the returns it provides without ever really being hands on.  They might even be people who want to make the greatreturns that rel estate offers, but they don’t want to own property….these people become your private investors.

Now is the time to aggressively build your cash buyer list and private investors.  You will need to gather their information and qualify them.  It is crucial that you know what exactly they want and what their rate of return needs to be, so you can bring them the types of wholesale properties they want. You will find that you can make a consistent income by putting this into effect even more so nowthat’s ever before.  You should sttakings king  to everyone you know about real estate investing and direct them back to Buffets interview if they seem skeptical or slightly interested.  You need to be their main contact for real estate investing from this day forth.  If you don’t do it, someone else will.

March 1, 2012 / by / in , , , ,
Why Do Landlords Make Good Cash Buyers for Your Wholesale Properties?
Cash Buyers List

Cash Buyers List

Why would you ever want to call a landlord or even consider them as a good source as a cash buyer? If this landlord has been investing in real estate for any period of time and is making a positive monthly cash flow, they are a savvy real estate investor who is looking to continue to grow their wealth. For this purpose, these guys are amazing cash buyers. Many of these landlords have been in the business long enough to know real estate market cycles, so they knew when they needed to sell their properties at the top of the market. They took the profit from these properties and pocketed it until the market rebounded. These people see the opportunity is now. They see that the market is coming back and one of the best markets to invest in.

Why? They see that there are great spreads right now. You can buy a property for wholesale prices and rent them for top dollar. There is an increase in the number of people renting, due to the number of people who have gone through foreclosures. Due to the supply and demand principle, we are seeing rents increasing on a steady basis.

For rent ads and for rent signs are a great way to find landlords. As you are driving through different areas, you will come across properties with for rent signs. You can call on these properties to find landlords who are looking to add more properties for their portfolios. When you give them a call you will find accidental landlords, seasoned landlords and property managers on the other side of the phone when you call on for rent signs or for rent ads. We are looking for seasoned landlords and proeprty managers. Seasoned landlords are the cash buyers/landlords that I mentioned earlier in this post. Property managers are a great source to find landlords too. They are working with a variety of different landlords at any given time. Property managers can increase their monthly income by finding wholesale properties to their portfolios that they can rent out. It is a win, win, win!!!

Landlord Associations and Real Estate Investment Clubs are another great source for finding landlords. You can find them by doing a search for the keywords “real estate investment clubs” or “landlord associations”. When you go to these events you will want to connect with people who are actively renting out properties and looking to add to their portfolios.

In some areas, you will find that the Public Housing Authority (PHA) will maintain a list of Section 8 rental property with the contact information for the landlords who are offering them. Here is a ready list of landlords who might be looking to add to their portfoilios and their rental income.

As you can see, there are many ways and reasons why you will want to find, qualify, and work with landlords. These cash buyers are seasoned investors, in most cases, that can teach you a lot about the local area. They also are not as focus on retail values, instead they are more readily focused on monthly income and a long term exit out of the properties. They know that in most markets their property will appreciate over the 5-30 year time frame that they hold the property, so they will find a profit on the sale of the proeprty at this time. You can make more money as a wholesaler selling properties to these cash buyers due to this fact. You can sell them the information acting as a property finder. You can sell them the contact on an Assignment of Contract or you could sell the property in a Double Escrow. Any of these techniques are great ways to wholesale properties quickly and for top dollar to landlords looking to increase their portfolios.

February 23, 2012 / 1 Comment / by / in , , , ,
So You Want to Be a Landlord! Here are 3 Pitfalls Most New Landlords Don’t Take into Consideration

Learn the 3 pitfalls of landlordingBeing a landlord is not always the most clear cut or easiest way to make money in real estate investing.  Many new landlords will not do sufficient research and they will buy a property based on limited knowledge about the area and the pitfalls of being a landlord.  You must do sufficient research to make sure that you understand the costs associated with owning a rental property in a particular area, let alone simply owning a rental property. 

  1. For instance, I am in Phoenix, AZ this weekend looking at properties.  If you did not do adequate research you would not know that you must register your rental property with the city and have a permit to offer any property as a rental.  It requires a fee be paid for a license to rent the property.  It depends on the area, but there are some cities nationwide that you could even receive a Class A misdemeanor for operating your rental without a license.  The fines typically will steepen as you have more offenses and your ability to operate a rental in that city let alone a business could be jeopardized too.  If the city is incorporated, you will in most cases be required to get a business license or a specialized business license to operate the rental unit. 
  2. Many new landlords will forget to calculate property management costs into their monthly expenses.  If you out source the property management to someone else, you will typically pay any where between 8%-10% of your gross rents for them to collect rents and manage the maintenance of the property.  In some cases, you will find that they will charge a flat rate and then offer a la carte services and fees for additional services above and beyond collecting rent.  Even if you are the one who is doing the property management, you should be paid for the work you do.  You may not pay yourself 8%-10%, but you still should pay yourself some fee for your time. 
  3. Is the area you are going to landlord in a “landlord friendly” or ” tenant friendly” area?  How do you find this out?  The local landlord association, eviction attorney, or fellow landlords will give you insight as to who is favored in that area.  It really comes into play when you are going to pursue eviction of a tenant.  The courts will be the ones who will tend to favor one or the other party.  In most cases, you will also find that many of the landlord tenant laws will also indicate a slant toward either the tenant or the landlord.  It is obviously in any landlords best interest to rent property in an area that leans toward the landlords rights.  It will be a lot easier to evict and the time frame will be a bit less too.  It will help you reduce your costs considerably.  If you are in an area where it is slanted toward the tenant, then you will want to get an attorney who is a specialist in eviction in your area. 

If you look into these few items before you buy a property as a rental, you will save yourself a lot of headaches and unforseen costs.  Landlording is difficult enough without adding these factors into it. 




September 12, 2011 / by / in ,
Finding Cash Buyers Via For Rent Signs & For Rent Ads

For Rent Signs & AdsFor Rent signs and Ads….what why would I ever want to call on those?  Well you will want to after I tell you who is behind those For Rent ads and For Rent signs.  The people that offer properties for rent are landlords or property managers.  These people are either cash buyers or people who know cash buyers. 

Let’s take a step back for a second and help you understand why landlords are one of the best Cash Buyers you can have on your list.  Landlords that have been in the business throughout the last rise and fall of the real estate market are the ones with money and the ones who want to build their portfolios now.  They bought property before or during the last rise of real estate and sold at the peak for a large profit, then they held onto the money until the market dropped.  Thus, the reason why they are looking to buy now and are one of the best sources of cash buyers.

Why do landlords make such great cash buyers?  They make great cash buyers because they focus on cashflow and not so much on purchase price.  If they can meet their cash flow needs, they will be willing to pay a bit more than your usual rehabber who is planning on fixing and selling a property quickly.  The reason for this is that rehabbers have to be competitive in this market, thus they need to buy cheap enough that they can fix and sell the property just below fair market value to a retail buyer. 

With that being said, who will offer you more profit as a wholesaler?….Landlords.  Who will buy your mediocre deals if the cash flow is there?………..landlords. 

So now you know why you will want to call on for rent signs and for rent ads.  When you call on for rent signs, you will approach them as if they might be interested in selling their property.  If they say yes, you get the property details and ask why they are selling.  If they are selling to get into another deal, you should find out what they are looking for and where.  If they are not interested in selling, but they simply want to rent their property, you can ask them if they are looking to add to their portfolio.  If they say yes, you will find out what they want to buy and where.  Essentially, you are going to go through the same line of questions you would with any other real estate investor to identify their investment criteria. 

If you find that the part on the other side of the for rent sign or for rent ad is a property management company, you can still work with them and possibly create a great referral contact.  You will ask them if they are interested in selling the property again.  In most cases, they will say I don’t know or I am the property manager.  If that is the case, you will ask if they have any landlords that might be looking for more properties.  In some cases, they are going to be real estate agents and may not be interested in your offer, because that is what they want to do.  In some cases, if they are real estate agents or not you might find that they see the potential and look to discuss this avenue further with you.  You want to gather their investors criteria and discuss how a deal will be handled if one is found.  Keep in mind, it is in the property managers best interest to help their landlords gain more properties, because that will equal more money for them through management of those properties. 

Hopefully, you can see that this approach can really be a win, win, win for all parties involved.  On top of it all, you build your cash buyers list and have a list of cash buyers that are willing to leave more in the deal, which equals more profit for you. 



August 30, 2011 / by / in , ,