Real Estate Market Cycles

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What Makes A Real Estate Market a Sellers Market Versus Buyers Market?

I am going to go through and help you identify the difference between a Sellers Market versus a Buyers Market.  A real estate agent will help you with metrics to differentiate between each type of market.  Please keep in mind, not all real estate agents are created equal, but if they are actively doing real estate in that region, they should know the current state of the local real estate market.  They will get this information per quarter from the local board of Realtors.  A real estate agent pays to have access to the MLS, which gives them access to all of these metrics real time.  So, let’s go get into the details of what determines a Sellers Market versus Buyers Market.

  • Sellers Market – If the Days on Market (DOM) is less than 90 days, the active inventory on the MLS is less than 6 months, and more than 3% appreciation in that area, you have a Sellers Market.  I want to define the term inventory for you.  The inventory metric represents the amount of active properties listed on the MLS versus the number of buyers buying up this inventory at any given snap shot of time.  Just think of it this way, when there is an increase in demand, supply will drop and prices will increase.  It is all just another example of supply and demand.
  • Buyers Market –   If the Days on Market (DOM) is more than 90 days, the active inventory on the MLS is more than 6 months, and less than 3% appreciation in that area, you have a Buyers Market.  I want to define the term inventory for you.  The inventory metric represents the amount of active properties listed on the MLS versus the number of buyers buying up this inventory at any given snap shot of time.  Just think of it this way, when there is a decrease in demand, supply will increase and prices will decrease.  It is all just another example of supply and demand.

Now, I want to take this a step further and define the types of properties that a Rehabber would need to look for, in order for their aggressive offer to get accepted in each type of real estate market.  In a Sellers Market, a Rehabber will want to focus on Distressed Sellers & Distressed Properties.  If a Rehabber wants to get their ( Example: 70% ARV – repairs) offer accepted in a fast moving market, they need to focus on sellers who need to sell quickly and properties that have condition issues that will hinder this property from qualifying for FHA or VA financing.  Whereas in a Buyers Market, A Rehabber will want to focus on Distressed Sellers OR Distressed Properties.  Did you notice the difference between the two?  In a competitive real estate market (Sellers Market), you need to be that much more exact and focused on the right properties, in the right market, and offer the right offer.

December 31, 2016 / by / in , , ,
California is Giving Away Money: Learn About the Who & Why.

California has some pretty nice assistance programs they are offering homeowners who are in trouble. Check out the Keep Your Home California Program and the 4 options they are giving distressed home owners today.

1. Unemployment Mortgage Assistance — provides mortgage payment assistance to eligible homeowners who have experienced an involuntary job loss and are receiving California EDD unemployment benefits. Benefit assistance can be up to $3,000 a month and can last up to 12 months. The maximum assistance per household is $36,000.

2. Mortgage Reinstatement Assistance — provides assistance to eligible homeowners who, because of a financial hardship, have fallen behind on their payments and need help to reinstate their past due first mortgage loan. Benefits can include a one time payment of up to $54,000 to cover principal, interest, taxes and insurance, as well as any HOA dues.

3. Principal Reduction Program — provides assistance to eligible homeowners who owe more on their mortgage than their home is worth. Homeowners must have experienced an economic hardship or a severe decline in their home’s value in order to be considered. Homeowners are eligible for up to $100,000 in assistance.

4. Transition Assistance — provides one time funds to help eligible homeowners relocate into a new housing situation after executing a short sale. This program can provide up to $5,000 in transition assistance per household.

August 27, 2015 / by / in , , ,
Retirement Account Cash Buyers – The New Breed Of Cash Buyers
Retirement Account Cash Buyers

Retirement Account Cash Buyers

Over the next few months and into the next year or so, you will see more people jumping into the real estate market.  The new breed of cash buyers are retirement account buyers who have decided to direct their funds toward real estate investments.  The problem is that this new group of investors are not seasoned real estate investors who have bought and sold in that market for any period of time.  Most of these retirement account cash buyers will know that they want a particular rate of return or a certain cashflow per month, but they might not have any more investment criteria defined beyond that point.

If you are going to wholesale properties to these newer real estate investors, you will have difficult time identifying what they want to buy, therefore you wont be able to bring them properties that they  can successfully add to their portfolio.  After all, if they make a mistake and lose money, you now have one less real estate investor to buy your properties.  In many cases, real estate wholesalers will have to take time and help this new breed of cash buyer to define their investment criteria.  It will take some time and some patience, but in the future these new cash buyers will be a real estate wholesalers main source of cash buyers in most real estate markets.

I travel nationwide, therefore I see a lot of different real estate markets in any given month.  For instance, in the month of July, I have already been in the Denver, Minneapolis/ST. Paul, Salt Lake City, San Francisco, Inland Empire, Philadelphia, Newark, Central New Jersey real estate markets.  I have seen appreciation in a lot of markets and with that you will see a different breed of cash buyer rise to the top of the real estate food chain as the key buyer.  We are entering that portion of the real estate cycle in most metro real estate markets.  You will find more retirement account cash buyers popping up in the market.  So, if you call a cash buyer and they tell you ” If the numbers make sense, I will buy it”, you might be getting the ultimate blow off from a savvy cash buyer or you might be speaking with a retirement account cash buyer entering the market.  If so, get the retirement account cash buyers desired return and start finding them properties and see what sticks.  In most cases, you will be able to arrive at some solid investment criteria in due time.  Just don’t discredit this new breed of cash buyer, because you will be missing out on many more opportunities to make money wholesaling real estate as the real estate market shifts.  Plus, if they start making a good return in real estate investing, they know other people with retirement accounts that they might be able to refer to you.  In some cases, these people become great sources for private money loans that you can use to acquire homes for your own portfolio.  The possibilities are endless.

July 22, 2013 / by / in , , ,
Are You Struggling To Find Wholesale Properties To Buy Or Pass Onto Your Cash Buyers? I Have The Answer
Referrals For Property Leads

Referrals For Property Leads

As I travel throughout the country, I have found quite a few real estate markets that have heated up quite a bit and there is a lack of listed inventory available.  Please note that I said LISTED inventory, I did not say inventory.  Those real estate investors and cash buyers who have been investing in real estate throughout the gibs and flows of different real estate markets know how to find property no matter what is going on in the real estate market.  If you are new to real estate investing or you forgot how to find non listed properties for sale, I wanted to give you some insight as to what I use to locate properties in any real estate market.

  • Barbers & Hairstylist
  • Bartenders
  • Mail Delivery Drivers
  • Utility Workers – Electric, Gas, & Water
  • Mortgage Brokers
  • Credit Repair Companies
  • Hospice Nurses & Organizations
  • Funeral Directors & Estate Planners
  • Home Insurance & Medicare Insurance Agents
  • Disaster Restoration Companies
  • Surveyors
  • Food Delivery & Other Delivery
  • Mediation Companies
  • Landscapers & Lawn Care

I have placed just a small list of the people that you can network with to build a very steady and profitable flow of motivated distressed property sellers.  If you offer these folks a referral fee for every lead that they give you that you close on, you will have an army of bird dogs referring wholesale properties to you.  It is a great way to gain an advantage over your compeition and leverage other peoples time & contacts.  You will be able to make more money faster than most and pass properties onto cash buyers for a nice profit, because the cash buyers are not use to having to search for proeprties and in some cases they are unwilling to do the work necessary to find wholesale property leads on their own.

February 14, 2013 / 3 Comments / by / in , , , ,
Why Should You Invest In Mobile Homes in Mobile Home Parks?
Invest in Mobile Homes In Parks

Invest in Mobile Homes In Parks

Would you have ever thought that a mobile home could be a great investment vehicle? Let alone a mobile home in a mobile home park?  No matter the stigmas and stereotypes, mobile homes are great little cash cows.  There are so many ways to make money from mobile homes, it would be a shame to retain a negative perception of these little money machines. I hope to open up your mind to the possibilities that mobile homes offer and remove those stereotypes for you.  Why?  Well, simply because if you still hold those beliefs to be true, you will have a very hard time seeing and realizing all of potential these little moveable homes possess.

No matter how much money you have right now, you can make money investing in mobile homes.  You can invest a minimal amount of money and make a great return.  Depending on how aggressively you approach investing in mobile homes, you could have a nice monthly cash flow and no longer work for someone else.  If you have invested in real estate before, you know that a monthly positive cash flow of $300 or more dollars per single family home is a rare thing in some markets.  But, i do know there are some real estte markets, where you can make that kind of cash flow if not more, however, these real estte markets are not everywhere and not for everyone.  In many cases, they are in low income areas that have been hit very hard by the economy and might be many miles away from where you live.  What if I told you that you can make that and more each month on one mobile home over 5-30 years without the headaches of being a landlord!!!  If you buy and sell mobile homes the way I do, you will have this same type of cash flow each month from one mobile home.    Now consider if you had a bunch of these producing the same cash flow each month?  Let’s say, you had just 18 of these producing $200 a month, you would be bringing in $3600 positive cash flow a month.  Would you be able to quit your J-O-B then??? You definitely would not have to worry about making sure the tenants needs and repairs are taken care of each month and pay a property manager to manage those issues for you.  You would be receiving a monthly check from someone who owns the mobile home and wants to pay you so they can eventually own it outright.  I have only had about 10% of my seller financed mobile homes go into default.  The benefit for me is that I have already received my initial investment back in full and in most cases have already received a profit before they went delinquent on their loan with me.  I just clean the place up, collect another down payment, and monthly payments from the next buyer who want to own my mobile home.  I don’t have to worry about being able to qualify to refinance a loan either, because it is paid in full within 6 months to a year of selling the home with financing.  I have the same type of cash flow as a site built rental property without the outstanding debt or the headaches of being a landlord.

What if I told you that you could do this with only a few thousand invested?  Yes, you read that right and it does not even have to be your own money.   Most of the mobile homes I buy are bought for $6,000 and less.  Do you think you could raise at least that and buy your first mobile home? I am sure you can get at least that much if not more.  After all, how many of you have a credit card, a savings account, a car, boat, atv, travel trailer that you own free and clear, equity in real estate, retirement savings account, or a few friends or relatives.  If you do not have any of these to utilize, you could set up your business and gain a business line of credit with a local bank.  I set up a business banking account and asked for a line of credit.  The bank asked me to fill out a form and within 12 hours I had a line of credit for $5,000.  I did the same thing at another local bank and got the same thing.  You can see the trend and the amount of cash you could have at your disposal without much effort or time exerted.   You can network and find others who have money and want a great return.  You can network with people who want to make a better return on their money.  At one point in my business, I wanted to move into buying mobile homes on land, so I was looking for funds to acquire these in Arizona.  I started networking within my sphere of influence and a good friend of mine suggested getting in touch with a local hard money lender.  I called him to see if he was willing to invest in mobile homes on land in Arizona.  He said that he was not interested in investing in that market, but that he liked to invest in Utah and asked if I had anything I was looking to invest in Utah.  I told him that I did not have any mobile homes on land in Utah, but I was actively buying mobile homes in parks.  He was intrigued and asked me to explain a little bit more about what I did.  To say the least, he asked me to put together a prospectus and outline of the deals I had done and meet him for lunch.  We had another meeting after that, which is the meeting that he offered to fund all of the deals I wanted to get into as long as I taught him how to do the business.  We were going to split the proceeds for each deal after he received his initial investment back plus 10%.

Okay, well what if none of these work for you and you still can’t find money to buy mobile homes? There are peer to peer lending networks or P2P lending networks that you can post your money need and have a network of people bidding on your offering and help you gain the funds you need to start or continue buying mobile homes where you can make amazing returns. These are just a few of the sources I have tapped into to find money to buy my mobile homes in mobile home parks.

So, do you think you can make money investing in mobile homes now?  I hope you can at least see the potential now.  Really, the only obstacles you face are those that you place in your own way!!!

Learn how easy it is to invest in the Mobile Home Real Estate Industry! Please register for our FREE Mobile Home Investing Webinar called Tin Can Profits! (Yes, that’s what we call it.) on Jan 24, 2013 7:00 PM MST at:
https://attendee.gotowebinar.com/register/1427201625011787520

While the rest of the investing world jumps on the latest Real Estate investing craze, avoid the competition and market mayhem by investing in Mobile Homes.Investing expert Dawn Erling will show you how easy it is to make money in this lucrative market. She will give you her inside ideas and tricks that have helped make her the mobile home investing expert she is today. Be-aware that this niche isn’t for everyone… so if you are looking for lower investing price points, faster turn-a-round investments, and how to make quick cash then join our free webinar! WholesaleDealmatcher.com is proud to sponsor of this webinar. After registering, you will receive a confirmation email containing information about joining the webinar.

January 20, 2013 / by / in , , , ,
Is Your Real Estate Market Heating Up? Are You Struggling To Find Wholesale Properties? I Have A Solution!
Learn How to Invest In Mobile Homes

Learn How to Invest In Mobile Homes

I buy Single Family Residences in Utah.  I have noticed that the inventory has decreased quite considerably within the last 9 months.  Therefore, the typical wholesale property is becoming harder to Get an offer accepted, because there is more competition in the market place from retail buyers and landlords.  I travel all over the country, so I am in a lot of different real estate markets.  I am seeing the same type of thing poking up in many of the real estate markets throughout the United States & Canada.So, if you are new to real estate investing, you might find it difficult to get your whosale offers accepted.  In some cases, you might be entering wholesaling as a way to put capital in your pocket and get your real estate investing business up and running. The big question is….can you still make money wholesaling real estate? The answer is yes, but it is going to take longer to get wholesale offers accepted and evenlongest to make money with these challenges in place until you really dial in on your market and find your niche.

I have a solution to this problem.  The solution will get you earning money in almost any real estate market quickly.  The solution is a niche that I have actually been laughed at for doing.  In fact, any time I have stood up in a real estate investment club meeting and said what I do, I have received some interesting feedback and a sigh or two. You know what, I am glad they feel that way, because it keeps my competition low and my cash flow high.

So, guess what my niche is?  I buy, fix, and sell mobile homes and manufactured homes in mobile home parks. I even wholesale mobile homes with or without financing too.  Did you know you could even do that?  Okay, we’ll you may have thought it was possible, but did you know how much you could make per mobile home deal versus what you make with your typical wholesale deal?  Let’s just say it can add up to a lot of money, if it is done correctly. It could also become a long term cash flow producing investment too with no real carrying coSts either.  If done correctly, you could even get all of your money back within 12 months or less and still make 12-18% return on your initial investment.

Let’s do a quick comparison onconservative numbers.  On average, we net about $3000 on a wholesale real estate deal and if we have a money partner on our rehab & sell properties it might end up around $6000 in the current real estate market. Okay, so that is for your typical single family residence deal.  Now here is an example of what I made on a quick flip deal, I bought the mobile home for $5,500 using a business line of credit.  In a week, I sold it for $14,500, which is a profit of $8950 with my finance charge of $50 being pulled too.  Not too bad for a weeks worth of work.  It was noteven a manufacturedhomer, it was in the mobile home era and it was a single wide with 3 bedrooms and 1. 3/4 baths in a nice family park.  We just cleaned it up and sold it, so there were not any repair costs either.  We did not hold it long enough to pay lot rent and we kept the priorowners security deposit in place.  It is just one example of the money you can make in the mobile home investing world.

I have one additional point to make here too.  I was talking the other day with my single family residence investing business parrtner, who said we are slow now because we are having a hard time finding propertieS that meet our investment criteria.  I laughed and said well maybe we should do more mobile homes now.  She looked puzzled and said what do you mean.  I stated I put an ad out earlier this week that we buy mobile homes and I have received 10solid phone calls where people just need out of their mobile home.  Oh and by the way they are looking to buy single family residence like what we buy, fix, and sell, so we betterstart getting more inventory, can we cthe double dip on theseleads I have right now.  Now, I hope this has helped you to see the amazing opportunity intone current real estate market to have a low cost investment and make the same return if not more buying & selling mobile homes.

If you would like to learn more about investing in mobile homes please register for our Mobile Home Investing Series on Jan 24, 2013 7:00 PM MST at:
https://attendee.gotowebinar.com/register/1427201625011787520
Tin Can Profits! (Yes, that’s what we call it.)
In this webinar, you will learn how easy it is to invest in the Mobile Home Real Estate  Industry! While the rest of the investing world jumps on the latest Real Estate investing craze, avoid the competition and market mayhem by  investing in Mobile Homes.  Investing expert Dawn Erling will show you how easy it is to make  money in this lucrative market. She will give you her inside ideas and  tricks that have helped make her the mobile home investing expert she is today.
Be-aware that this niche isn’t for everyone… so if you are looking for lower investing price points, faster turn-a-round investments, and  how to make quick cash then join our free webinar!  WholesaleDealmatcher.com is proud to sponsor of this webinar   After registering, you will receive a confirmation email containing information about joining the webinar.

January 18, 2013 / by / in , , , , ,
Can You Really Wholesale Real Estate In Any Real Estate Market?

I decided to write this post due to what I have seen in the markets I have been in this month.  I have been in Calgary, AB, London,ON, Honolulu, HI, and Vancouver, BC.  These markets are still appreciating, fast moving markets (90 days or less), and high price point areas.  Most of my clients in these markets were skeptical if wholesaling could still work in their market.

Here is what we did.  We kept the same criteria that we use in any real estate market to find distressed proeprties.  Therefore we were looking for entry level homes, with at least 3 bedrooms, with a price reduction, sitting on the market for longer than average days on market, needing repairs, and seller must be motivated to sell.  We looked in areas where investors were buying and able to resell for a profit of $30k -$40k, due to higher price point of homes.

We found some investor friendly real estate agents who brought us some great pocket listings that met our investment criteria exactly.   These investment properties were in either distressed condition or had a seller with a distressed situation.  They were priced aggressively in the current market and had plenty of room in there for a fix and resell for After Repair Value.

Here are some examples from these markets of what these investor friendly real estate agents found for us.

  • Honolulu, HI:  Property was listed for $479,000 with $25,000 in repairs needed and ARV of $600,000.
  • Calgary, AB:  Property was listed for $469,000 with $30,000 in repairs needed and an ARV of $750,000
  • Vancouver, BC:  Property was listed at $489,000 with $40,000 in repairs needed and an ARV of $700,000 now and potential to be up to $900,000 when train station nearby is finished.

Do we really care what an investment property is listed for?  The correct answer is no, we really don’t care except to determine the sellers level of motivation to sell.  Each of these properties had a motivated seller who priced the properties aggressively in the market to sell it quickly.  The property in Calgary, AB was recently reduced with a seller wanting to close in 2 weeks.  It had sat vacant, but full of stuff for over 4 months.  The seller had moved to a diferent country and needed to sell fast.  The house needed updates and higher end finishes to sell it for the $750,000 ARV price.  The house in Honolulu, HI was an estate sale with a squatter that needed to be evicted.  It had sat on the market for a few months with a recent price reduction.  The property needed updates and freshning up.  It also had 2 units that could be rented out or one occupied and the other rented out.  The Vancouver, BC property was an estate sale as well.  The property needed to be cleaned out of personal effects (mostly shoes), updated, and cleaned up.  It was around he corner frrom a new commuter line for the train into downtown Vancouver, which made it a very desireable location.  Each of these investment properties  had plenty of room in the deal for costs to close & hold, to cover repairs, and provide ample profit for a cash buyer in that area.

It was fun when we ran the numbers and my fellow newbie investors saw that they could wholesale properties to cash buyers in their area.  It was a great eye opening expereince for them and proved that you can really wholesale properties in any real market as long as you have cash buyers and you find motivated sellers.

December 27, 2012 / by / in , , ,
New & Seasoned Real Estate Investors Be Aware of These Factors When Investing inTurnkey Rental Properties
TurnKey Rentals

TurnKey Rentals

I travel into quite a few real estate markets each month.  I have seen a lot of amazing things over the last two years.  One of the trends that has grown aggressively in popularity is the process of buying inexpensive and distressed properties, fixing them up, and renting them out with property management in place.  There are a lot of real estate markets where these properties are then offered as turnkey rentals to seasoned or inexperienced real estate investors.Do you know why turnkey rentals are more prevelant in less expensive real estate markets?  The reason is because these rental properties will not offer enough profit to a traditional rehabber,  if they were bought, fixed up, and  sold to retail buyers.  Retail buyers are not willing to pay that much for a home like that in that market all fixed up.  However, if these properties are bought, fixed up, and rented out, they can be sold to real estate investors for more than their current retail value.  An income generating property is valued by the amount of income it can produce, instead of sold comparables like a regular rehabbed properties  sold to retail buyers.  The demand for rental properties has caused a increase in the amount of rent that can be generated in any  hit hard by the economy.  Due to the economic shift, we have seen a lot of “use to be “retail buyers lose their homes to foreclosure, plus many are underemployed now or have had periods of unemployment in these areas to make matters worse.  Plus, the lending criteria is a lot more strict too.  It all creates a very strong and steadily increasing demand for rental properties.

There are a lot of credible and ethical companies that are providing turnkey rentals, but there are a lot that are not too.  I want to identify a few items to look into before you buy a turnkey rental, so you can make sure you are getting a good solid investment.  Here are some items to check into or request from the party selling the amazing turnkey rental to you.

  • You need to make sure that you see a track history of rents coming in on the property for at least three months preferrably six months
  • You want to make sure there is a verifiable lease agreement for the current and existing tenant
  • You want to make sure that there is documentation showing there was a legitimate background and credit check performed on the current tenant
  • You want to make sure that you have an extensive title search done to make sure that the turnkey rental has a free and clear title.
  • You want to verify that there are not any current building code or zoning violations on the turnkey rental and that it can be used in the manor that is being offered.
  • You want to verify that the repairs stated and condition presented is valid and true.
  • You want to make sure you do a background search on the property management company and ask for referrals to verify their service and work.  I would recommend doing an online search too.
  • You would be helping yourself to do some of your own real estate market research.  You should call a few local property management companies to request information about the local vacancy rate, security deposits, & rental amounts for a property similar in all ways to your possible turnkey rental.
  • You should ask for sold comparables for like properties in the area to compare what retail buyers are buying properties for in the area versus what the current asking price is on the turnkey rental.

All of these items will show whether you are truly buying a sound investment or not.  It is simply good practice to do this amount of due diligence on any income generating property.  Please do not let a high pressure sales person cause you to disregard these things and miss some of the items you must verify.   It will protect you from walking into a real estate nightmare.

September 13, 2012 / by / in , , , , ,
Rehabbers Get Frustrated With FHA’s New Two Appraisal Requirement In Some Hot Markets

As I travel the nation, I find interesting nuances within different real estate markets.  One of the most recent nuances I have come across is the fact that in some markets FHA is requiring two different appraisals before they will approve and fund the FHA loan.

FHA Appraisals
FHA Appraisals

Today, I am finding in some real estate markets that FHA underwriters are requiring two appraisals be done for every FHA loan request.  The property that is being financed by an FHA loan in these markets is being reviewed by two different appraisers that are pulled randomly from a pool of appraisers.

If you have been in the real estate industry for any period of time, you know that most rehabbers will buy a property, fix it up, and sell it for less than the going After Repair Value in a buyers market, so they can sell their rehabbed property faster than that areas average days on market.  They will not only do this to sell the property faster, but to make sure the property will appraise for that adjusted amount too, instead of for full retail.  When rehabbers are selling rehabbed properties in a sellers market, they will not need to do this as readily as long as the appraisers are staying in line with the increasing local real estate market values.

So, how do the two appraisals for FHA loans impact rehabbers and wholesale investors? In most cases, the FHA appraisers are looking at what the property sold for originally with the rehabber and then they are comparing it to the new asking price.  In most cases, they are asking the rehabber to justify the increase in asking price.  Thus, many rehabbers are finding themselves offering itemized lists of all of the repairs they have done to the property to help justify the agreed upon purchase price.

An additional factor that many rehabbers are facing is that some of the appraisers that are being chosen in the random pool are not truly comparing apples to apples.  Some of these appraisers are blending completely remodeled property values with distressed property values.  These properties are completely different animals even though they might be located near the target property.  After all how can you lump into the same group a property that is stripped of copper and anything else of value with one that has been completely rehabbed.  It does happen and that is how some of these FHA appraisals are costing rehabbers money and time.  In some cases, it is even costing them deals from closing due to FHA not financing them.  It has also delayed closings and even cost rehabbers more money, if they request a third appraisal to be done to help justify the under contract amount with the retail buyer.

Rehabbers need to have their numbers even more dialed in these real estate markets than anywhere else, due to the random nature of the FHA appraisals.  They need to have even more of a buffer built into each deal, so they can adjust their retail sales price as needed nd not lose profit.  I have seen the two appraisal system requirement in the Salt Lake City Metro market and in the Baltimore Metro market.  I am sure it is just a matter of time before it will hit more markets, if it has not already.

If nothing else, this will force wholesale investors and rehabbers to really dial in their numbers and make sure they have dotted their eyes and crossed their t’s.  It will also force the hap hazard rehabbers out of the business, because they will not be doing enough work on the properties to help justify to the increased sales price.

It might offer enough problems that some rehabbers might consider getting around these issues by fixing up their properties, filling them up with tenants, getting property management in place, and then selling the property to another investor as a turnkey rental.  Rehabbers will not have to deal with FHA underwriters random changes and requirements.

July 8, 2012 / by / in , , , ,
How Do You Pinpoint an Investment Strategy in Any Real Estate Market?
Investment Strategies

Investment Strategies

I am in Eugene, Oregon this week looking at investment properties.  I have looked at properties in the Eugene and Springfield areas when I was up here in March.  I would view the current Eugene real estate market as a place that has pockets of rehab and resale properties.  Likewise, I would not consider rehabbing and renting or renting in this area due to the CAP rates being 5%-7% on average, because I prefer to receive a CAP rate of at least 10% and higher .  When I was pinpointing the investment strategies in this area, my colleague, who is newer to the real estate investing business asked me, how do you decide what investent strategy to use in each real estate market?  That is actually a great question.  Let’s define what he meant by investment strategy:

  • Rehabbing properties for immediate resale and profit
  • Rehabbing properties for resale with terms and one to three year cash  out
  • Rehabbing and renting or just renting

These are the 3 main investment strategies that most people will use to build long term wealth.  In many cases, people will use a combination of these different investment strategies over the lifetime of their investment career.

I guess the right response for which investment strategy do you use ………would be ….it depends.  It depends on the following elements:

  • Where is the money to acquire the investment property coming from? Private, Hard Money, Bank, Corporate Credit, Self Directed IRA, etc
  • How long can you keep that money in the property? Weeks, Months, Years,…etc
  • What is the interest rate you are being charged to borrow money? Low interest rate = long term or High interest rate = short term
  • Is the real estate market a sellers or buyers market?  sellers market = rehab and sell    buyers market = buy & hold or buy low enough rehab and sell
  • What is the draw to a particular area?  Who lives in this area and why do they live here?
  • What is the employment rate for a particular area?
  • What is the rate of return you are looking to receive?
  • Do you want cash right away or money over time? cash now = rehab and sell   cash over time = rehab and sell with terms or rental
  • Do you need a tax break more than profit?  rental property and rehab and sell with terms will be your investment strategy chooses
  • What are the numbers that you need to view this as a successful investment strategy?  The amount you are willing to work for per investment property sold or a minimum amount of money coming in per month after expenses

All in all you can see that there are many factors that will impact your decision to use different invesmtent strategies in different areas.  In some cases, you are going to find that real estate markets might offer opportunities in certain pockets to use either investment strategy, but you might lean toward one investment strategy over another based on the above listed factors.  If I can really maximize my cashflow in that area, I am going to focus on rental properties instead of resale.  If I can make more than $30,000 on a rehab and resale property, I am going to be turning properties as quickly as I can in that area.  It really does not need to be anymore difficult and complicated than that when you are deciding on which investment strategy works in a particular area.

May 15, 2012 / by / in , , ,