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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 , , ,
Are Your Offers Getting Rejected? Check These 3 Items Immediately

We have been training new and seasoned real estate investors for over 16 years.  We have seen a lot of the things that will hold people up in their real estate business.  We have compiled a list of 3 of the most common mistakes that most real estate investors will make when they are making their offers.

  • You are making the wrong offer on the wrong property in the wrong market.  You will want to refer back to this article  to better understand what we are talking about here.
  • You have made a mistake calculating the ARV (After Repair Value) and the repair cost estimate.
  • You are using the wrong Purchase Contract and contingencies for that market.

Normally, you will see that one of these mistakes, if not all of them have been made resulting in your offer being rejected.  Keep in mind, the more competitive the real estate market you are working in, the tighter and more accurate your offers HAVE to be to get your aggressive offers accepted.

 

December 31, 2016 / by / in , ,
Are You Considering Investing In Real Estate Remotely? You Need to Have These People On Your Power Team

Are you considering investing in real estate remotely?  If you are, you should have the following people on your power team:

  • Local Real Estate Agents
  • Local Real Estate Wholesalers
  • Local Bird Dogs
  • Local Contractors
  • Local Real Estate Attorney’s
  • List of Local Cash Buyers
  • Local Property Managers
  • Local Title Companies
  • Local Hard Money Lenders
  • Local Small Banks

You can obtain referrals from local Real Estate Investnent Clubs & Landlord Associations.  I usually reach out to the meeting or club organizer and the board members asking for referrals.  Then, I will usually start locating local investor friendly real estate agents using the techniques I have mentioned in this blog as well as in my book “Surefire Techniques to Find Investor Friendly Agents” .  They will normally have a few referrals for you too.  Next, I will build up my local Cash Buyers List using the techniques I have already taught in quite a few places on this blog.  I will ask them for referrals too.  Usually, I will have quite a few referrals that I can then screen and start working with right away. 

 

August 27, 2015 / 1 Comment / by / in , , , ,
2 Different Types of Real Estate Agents: Cash Buyers Should Choose the Right One

Over the last 13 years, I have found that a lot of real estate investors settle for a Real Estate Agent that is okay.  Many of these real estate investors do not understand the different types of Real Estate Agents available in residential real estate.  Here are a few categories of real estate agent that you will find in any residential real estate market:

  1. Retail –  The majority of the real estate agents in any real estate market are these.  They focus on helping owner occupants find homes that meet their needs as consumers and they plan on living in for a few years.  They will usually work with people who are buying based on emotion.  Consumers will pay retail or market value for a move in ready home.  Real estate agents who work with these clients are use to making full price offers on properties with little to no repairs needed and qualify for traditional financing.
  2. Investor – The smallest group of real estate agents are investor friendly real estate agents.  They focus on working with a select few real estate investors, who are buying properties on a regular basis with them.  They like the steady income and the consistency of having a few select investors that have the same investment criteria month after month.  They appreciate that their cash buyers are paying cash and can close quickly on each property.  In cases where they are working with Rehabbers, they are re selling the same house just rehabbed to retail buyers.  So they are essentially making two commissions within a very short period of time on the same property.  If they are working with Landlords, they are helping them buy a property and then they might help them manage the property for many years after the purchase and then help them resell the same rental property.  As you can see, it is a good way for these agents to have a more consistent income.

You need to ask any real estate agent you are considering working with if they work with real estate investors.  If they state they do, you will want to follow that up with whether they work with Rehabbers or Landlords.  Why is this a necessary question to ask?  Well, it is crucial to make sure that your investment approach and criteria is matched with the right real estate agent.

If they work with Rehabbers, they are use to making aggressive offers considerably below the current market value.  Additionally, they are use to going after properties that need considerable amounts of repairs and have definite condition issues.  Also, they are use to making many offers at a time to get one accepted.  They will know the fast moving areas and the areas where the best profit spreads are and where retail buyers are looking to live.

If they work with Landlords, they are use to making offers closer to market value and they are use to minimal repairs needed on these properties.  They know where the best rents are and the expenses associated with holding onto a property.  They can answer questions about Section 8 and other questions associated with holding onto a property for a few years.  They usually do property management themselves or they have a business associate who is offering that service.

As you can see, if you are looking for properties to flip, you need a real estate agent who works with Rehabbers, so you have someone who is on board with your approach to business and making offers.  Likewise, if you are buying and holding properties, you will need a real estate agent who specialize in rental properties.  They will be willing to make the offers that meet your criteria and who can provide the information you need to make effective offers on future rental properties to add to your portfolio.  You do not want a bunch of resistance to your investment approach, thus you need to match your approach up with the best investor friendly real estate agent.

January 20, 2015 / 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 , , , ,
Learn How to Find More Motivated Sellers In Any Real Estate Market

Are you struggling to find wholesale real estate deals that are not on the MLS? Are you getting all your wholesale real estate offers laughed at or just rejected? Does this mean wholesaling of real estate is dead? The correct answer is NO! It is still alive and well, but you need to tap into other sources for motivated sellers than the MLS. The MLS in most markets has a lack of inventory available and a healthy supply of retail buyers. Now is that really a bad thing? Heck no, you have a sellers market. It is the best time to sell a rehabbed property to a retail buyer, but you need to find other sources to find distressed properties with motivated sellers.

Now, how do you find these motivated sellers with distressed properties that are not on the MLS? Here are some of the ways to find motives sellers of homes in any market.

  • Referrals – one of the best sources for home leads come from referrals.  I enlist an army of people in any market to refer properties to me.  It is less work that I have to do and fewer people I have to know.  Many of these people would love to make a few hundred dollars from something they come across on a regular basis, but they didn’t know that it could be worth anything.  You want to target anyone doing deliveries, anyone dealing with a regular client base, any one doing health care, anyone working on anything in the property services industry, and so on. You need to guide this group as what you are looking for and where so you get good quality property leads with suffient information ion about those leads.
  • Probate leads – The heirs of the decessed tend to me motivated sellers with a property that often needs updating and/or repairs.  There are lists you can buy.  You can associate with probate or estate attorneys.  You can associate with fumeral homes and estate planners.  Some courthouses are easier to search than others for locating probate filings.  You can locate these leads in the legal notice or public notice section of your local newspapers.
  • Divorce leads – the attorneys and legal assistants that perform uncontested divorces will be a good reliable leads for motivated sellers.
  • Bankruptcy leads – the attorneys that advertise flat fee bankruptcy filings can be a great lead source for motivated sellers.
  • For sale by owners- you should call on all for sale by owner properties.  You will want to keep track of this lead, since they may not be motivated enough now, but in the future they might be more motivated to sell.
  • For rent signs – you should call on all for rent signs.  If the property remains vacant for too long, the seller becomes more motivated.  If they are absentee owners, they can be even more motivated to sell.
  • Free and clear properties – you can have a title company or attorney do a courthouse search for any of the paid off properties in any given county.  They might look for reconveyances or satisfied mortgages.  Especially, if they are absentee owners.
  • Bandit signs – these signs are usually yellow coroplast signs with a handwritten message on it. You will put these in areas where you want to find properties.  You should write a message such as “We Buy Houses and your phone number”.

These are just a few ways that you can find motivated sellers in any real estate market.  Now, it is Tim to get up and put some of these approaches into effect, so you can keep your real estate wholesaling or real estate rehabbing business competitive, if not beating out your competition.  There are plenty of off market houses out there, you just have to be a little smarter than the average real estate investor.

December 11, 2014 / 2 Comments / 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 , , ,
Cash Buyers Will Most Likely Give You The Following Responses When You Ask Them About The Profit They Need.
Cash Buyers Profit

Cash Buyers Profit

When you are qualifying your cash buyers, you will be gathering their investment criteria.  You will be asking your cash buyers what profit they are looking to make on each deal.  They will respond in one of the following ways:If they are a rehabber, they are a cash buyer who will be looking for a fixer upper property to rehab and resale to a retail buyer.  They might have one of three ways that they will say they need to profit from each property.

  • a percentage of After Repair Value
  • a percentage of After Repair Value minus repairs
  • a net profit dollar range amount

If they are a landlord, they are a cash buyer who will buy the property and hold onto it as a rental property with a tenant who is willing to rent it for a period of time.  They are typically looking for tax benefits and cash flow over time on this property.  They might say that they require the following types of profit.

  • net dollare amount of cashflow per month
  • % return on cash invested

If you can gather this information, you can run the numbers for the wholesale deals you are passing onto them in the correct manner and make sure you have their desired profit built in.  The fact is this, if your deal does not meet their criteria,  they will not buy it.  It is a business decision.  It is not emotional.  Bring the cash buyers what they want and they will buy from you again and again.

 

April 6, 2013 / by / in , ,
Are You Building A Cash Buyers List? Know What To Expect When You Call.

If you are a real estate investor or a real estate wholesaler, you will probably be building a cash buyers list at some point in time in your career.  Do you know what to expect from that conversation?  Do you know what information you need to acquire from that conversation?  I want to help you make sure your conversations are effective and that you are not thrown off by the responses you receive.

The core information you must gather is the following:

  • Where do they want to invest?
  • What do they want to invest in?
  • What price point do they want to buy at?
  • How many are they buying a month?
  • What is their exit strategy?
  • What types of repairs are they not willing to do?
  • How much profit do they want?

You will know what their perfect deals looks like and feels like.  You will know what they will buy.  Anyone who runs their real estate investing business like an actual business will be able to tell you very specific criteria for the properties they typically buy.  If the conversation becomes awkward or seems to not be going anywhere, then you probably are speaking with someone who does not have clearly defined investment criteria or is new to the real estate investment business.  In this case, you need to move on and not waste your time with this person, who will waste your time.

April 4, 2013 / 5 Comments / by / in , ,
Find Cash Buyers Using Your Linkedin Account

I have used Linkedin to build my real estate investing and real estate wholesaling business.  It has become an amazing opportunity to network with private money lender sources, hard money lender sources, hedge fund sources, investor friendly real estate agent sources, other cash buyers, real estate wholesalers,  asset managers, and contractors.  I wanted to share some of the techniques I have used to find cash buyers and building your network on LinkedIn.

You must make sure your profile stands out.  You should upload a professional picture and make sure your profile clearly states some of the following:   We buy houses, real estate wholesaler, real estate investor, your business name, cash for houses, etc.  The purpose of this approach is to let people know clearly what you do and why they should connect with you.

You should join a few real estate geared groups on LinkedIn.  The reason why you join these groups is to make yourself visible and connected to a like minded group of people.

In the group, look for members who are actively posting in the discussion section that they are looking or properties to buy or they are responding to others who have properties listed for sale.  Check out their profile and make sure they are someone who is an active investor in our target areas.  We are looking for cash buyers, so we want to build our network to be full of cash buyers who are looking for properties to rehab and sell or investment properties.  Many of the serious cash buyers in your area will be actively posting and responding to discussion threads and readily offering contact information for the poster to get information back to them quickly, even if they are not part of each others network.  It is another great way to gain access to an ever growing and active list of cash buyers on linkedin.

Next, you will reach out to people associated with the group.  The way that you reach out to them should go like this:  Hi, I am a fellow member of “group name here”.  I see that you are involved in real estate.  I would like to learn how we can help each other.  Please accept my network request.  I look forward to working together.

An additional way to build your cash buyers list on linkedin is to post in the group discussions that you have wholesale properties or investment properties for sale in a respective area.  You will have the local cash buyers responding to your post asking for more information.

I have found that linkedin is an amazing source of cash buyers nationwide, if you will build your cash buyers list and network correctly.  If you don’t follow some o the guidelines that I have outlined here, you stand the chance of your account on linkedin being locked down or shut down for abuse and spam.

 

March 1, 2013 / by / in , , ,