Shit happens in the deep end - good, bad, ugly and indifferent; it all happens there.
We all strive to swim there and your ability to ID the sharks that target the "schools" of thought will determine who you swim with AND where you swim.
Gonna keep this short:
Rates are low and property values are low.
That creates balance - more than there should be !
That creates a, certain, frenzy too !
As lenders begin to loosen up on their lending guidelines, more buyers are able to jump into the waters and troll the great big oceans of real estate.
More fish equals more shit too - and the waters get damn murky !!
Feeding frenzies lead to constrained inventories, so the demand increases the need which, subsequently, increases the cost as those, precious, inventories begin to decline.
Feel the water swirling ?!
And the haze thickens, because need increases as supply decreases - feeding that frenzy !!
And then the spring/summer of need ends, but the currents continue, as they always do, creating additional opportunity.
But the tide has shifted, so the "current" inventory builds, as the predators that contributed to that feeding frenzy have departed to, other, "shallow" opportunities.
Waters get deeper as the "currents" increase.
What I'm saying is learn to swim and recognize the risks associated to the depths you choose to swim upon - and within.
Happy 4th !!
I began flipping houses in 2006 and have made LOTS of mistakes.
Thankfully, no mistakes have cost me my desire and passion to pursue this business.
Thing is, it's not an easy business and with so many different options, in real estate, it can be overwhelming to a newbe.
Here's some recommendations -
Every day, I see countless ads, from craigslist to facebook - all advertising foreclosures and short sales "Buy our exclusive list", "unlimited access to our buyer's list", "one low, monthly, fee", "great leads", etc., etc, blah blah.
Let me clear this up for you - don't buy any of it !
Remember, mass-marketing ads are selling to mass-marketing buyers and the same list that you **might** be buying is also being sold to countless others, meaning everyone on those lists are being mass-marketed to and are, probably, tired of the solicitations.
Another fact is that most of the people, on those lists, are no longer reachable at the contact info in those lists.
Attend some real estate seminars
Most seminars, you'll find, do NOT provide you with all the information you'll need to succeed.
What they DO provide is a rough draft and, if you have some basic intelligence and common sense, you'll be able to figure out the rest.
Also, don't buy the coaching UNLESS it's from a local (Meaning the live and operate IN YOUR STATE).
*****SHAMELESS PLUG***** We live and operate in Western WA - check out http://www.WeBuyHousesCoach.com)
Familiarize yourself with local resources, like county websites, as well as zillow, trulia, estately and countless others.
Here, you'll find lots of great info, relating to properties you're interested in buying/flipping and want to gather more info on.
LIKE-MINDED PEOPLE (Some idiots, some not - you know what I'm sayin !!)
Join a REIA/REIC !!
REIA (Real Estate Investing Association)
REIC (Real Estate Investing Club)
These are one and the same - whatever acronym you use.
Just a bunch of real estate investors who can become a valuable resource to you and your growth.
While you're not, likely, going to find a buyer for your deals, here, you will find lots of great information - and maybe even a partner or 2.
Also, REIAs offer tremendous resources, like discounts on building materials/supplies - through partner retailers, national speakers, online content and forums, access to "investor friendly" attorneys, escrow and title companies and a whole wealth of support and services.
AT WHAT PRICE ?
At the end of ANY given day, flipping houses is a complicated business with LOTS of moving parts.
You'll find your schedule will be full, depending on the level of real estate investing you opt for AND how much of a player you evolve into.
Early on, you'll be giving up the freedoms you may be enjoying now, like weekends off, predictable schedules, vacations, restful sleep, money in the bank, sanity - to name a few.
Be ready for anything in this business.
Get to know an attorney, or 12 - just in case you find yourself operating in some "grey areas".
Also, be prepared to get your ass handed to you - early on.
If you're experienced and you're still getting your ass handed to you - find another gig.
Most recently, the video - as seen in this blog, was a real nightmare scenario.
We had the property sold, but during our ownership, the water flow to the house stopped flowing.....
I did EVERYTHING I had to do to make it right and we still sold this at a positive margin.
Flipping houses can be, incredibly, stressful - but if it was easy, everyone would be doing it.
Have fun !!
New To You RE, LLC
Think it's hard to wholesale real estate in this 2012 market ?
Well, it's not - IF you have the right deal - but isn't that always the case - regardless of the "current" market ?
Here's the deal, man.
Someone who knows their market, well, can easily benefit from buying a property from a knowledgeable real estate wholesaler - like you.
Question is, are you a competent real estate wholesaler ?
Here's a way to answer that question:
Do you know your chosen market(s) well ?
Do you have viable/assignable contracts ? -
What do I mean by viable ?
You have a market where a majority of 3 bedroom/2 bath homes, on a quarter acre lot, are selling for 295K - all day, every day.
These homes are on the market for, an average of, 45 days - and there's 2 to 5 SOLD comps - within the last 45 days, within a quarter mile of your subject property.
What makes your deal, especially, sweet is that you have your wholesale property, under contract, for 210K - and it's in better shape than 2 of the comps you're using in your presentation to your buyer (You ARE showing your - potential - buyers comps, RIGHT ??).
Your issue is that you have a limited amount of time to flip, or sell/assign, that contract, before your time runs out - contractually speaking.
You're fine, because you have a great contract/purchase price, RIGHT ?
You already know, by the flow of this blog, that your assignable contract price is not enough - and if you don't have any escape clauses, you're probably an idiot - unless you're of the fortunate few that can, and will, buy that wholesale masterpiece - should your contract require, if you're unable to assign that contract within the amount of time that's, mutually, agreed upon in the terms of your contract.
Ok, before you decide that you're an idiot, you do have enough time - per that assignable contract (You did make the contract assignable, RIGHT ?), to market, MARKET MARKET your exclusive AND assignable purchase price.
So, you advertise in ALL the LOCAL media that's focused on the area where your wholesale flip resides -and you have bandit signs and flyers - posted at any/all local businesses too.
As a sidenote, you also made sure that the seller, completely, understands that you'll be seeking a partner/investor who will "fund" the purchase price.
While you don't have to spend alot of time focused on this fact (in fact, you should NOT spend too much time explaining this fact - as you may put the seller off), it's best you make it a focal point, as you'll be needing to show your, perspective, buyers/assignees - first hand, the exclusive opportunity they have and IF that subject property is occupied by anyone, or is secured, you'll need the seller/seller's agent, to open that property every time you need to show it.
In my world, I believe in buying the wholesale properties I secure.
Why ? Because a great deal is a great deal AND if I can't assign the property, within my contracted time frame, then it's a minor error on my part - IF I know what I'm doing.
What the hell am I trying to say ??
Pay attention to your, chosen, markets.
If you contract to purchase a "wholesale" property - you need to be sure the purchase price matches the condition of the property with an, additional, GENEROUS discount.
Making your 5K+, per assigned deal, will be ensured IF you have a, undisputably, great price AND an effective marketing plan.
Also - the only, TRUE way to build your buyer's list is to, actually, get a property under assignable contract and market -
If that deal is everything you believe it to be, and you're marketing the living shizz out of it - you'll find your buyer(s).
Go get em !!
New To You RE, LLC
How to calculate rehab costs of a property? This is another question Real Estate investors ask quiet frequently. So I'll try my best to answer them here so others can benefit from the answers.
Your rehab costs will all depend on how much of a repair project it is and if there is any major repairs that might need to be done. Another factor will be if you plan to do the work yourself and create "sweat-equity" or hirer out to a sub-contractor or a more expensive general contractor. If you're half way handy and you have the basic hand tools that would be used around the house, you can probably do most of the work yourself and save thousands of dollars. In the past, I've even thrown in a small fudge factor of $2000 to $3000 just in case you find something more major after tearing into the project. You never know what else you might find when you tear out a wall or start ripping out the kitchen cabinets. The fudge factor can sometimes save you on your profits. And if it's not needed, you will have that much more a profit margin built into the deal.
Always check with your local zoning and other laws to make sure you can perform the work in question.
Now I'll admit, carpet and roof replacement are not something I'll ever attack again. For one, a roof is hard work, and as far as kicking carpet, that's another skill I've learned that I don't possess. One of my tenants back in the early 2000's told me that the carpet had a small wrinkle in the middle of the floor, she wasn't too worried about it because the coffee table covered it. She said whoever you hired to lay the carpet, she didn't suggest that I hire them again. I never had the heart to tell her I was one that did it.
Some states require certain things to be done before a mortgage can be funded in that state. Always check with your local real estate attorney, closer, title company, or real estate agent for what might be required. These inspections, tests, and results will have to be added to your overall rehab costs.
I'll give you an example; In South Carolina and most of the south eastern states, you are required to pass a termite inspection prior to closing. Depending on how you obtained the property, you might not have had a conventional closing, meaning the home inspection was never accomplished when you acquire the property. Since I obtained the property in a creative, non-conventional way, I was the only one to do any type of inspection, and I did that from the west coast. But, after you rehab the property and try to sell it to a future owner, the issue hits you in the face, not good if you're not ready for it! In the early 2000's I learned my lesson hard by gaining a $16,000 bill that had to be accomplished prior to closing on the property. To say the least, the entire deal was a loss.
I wrote a simple spreadsheet tool that I've been using since the late 1990's to help make estimating and listing items that the property needs easy. It can run on your computer and your smartphone and you can edit it on the fly. It lists almost all the normal items that you might need for a rehab project. You can fill in the square footage of the property room-by-room and the program will give you how many gallons of paint are required and the cost for the paint. And even calculate the amount of ceiling paint required in a separate column. Of course, you'll want to save money by buying the 5 gallon buckets instead of the gallon buckets, so it will over estimate your price on the paint by a little. So just be aware of that.
Walking through the property will usually tell you what's needed as far as repairs. If you locate a property that needs a lot more than just cleaning, cosmetics, painting, and patching, you might want to pass on the deal if you're new to the Real Estate investment arena.
In the next article I will address closing costs and holding fees of a Real Estate investment.
I attached an FNMA 13 page addendum that, essentially, has the buyer sign away many VERY significant rights AND enables FNMA to control how much profit you can make, for the following 90 days, after you purchase their house. READ THESE ADDENDUMS before you purchase that house ! You may get stuck and find yourself with the "deer in headlights" look on your face when you realize that asset is more of a liability.
Check out Clause #14 -
For flippers, like me, who are in and out of a property in 6 weeks, or less - this clause can really can cost you serious $$ and possibly more - depending on how much capital you have available for other projects.
This is one of many such psychotic addendums you'll need to sign off on, surrendering specific rights.
Seems with all that bailout $$ these lenders got, like Fannie and Freddie, they shouldn't be worrying about how much $$ you're making on your deals - they should be concentrating on liquidating the properties to buyers who have made acceptable offers and getting back on their own damn feet - leaving investors to help move the housing market into better times - like investors have always done in such times of strife.
However, if Fannie and Freddie - AND others, want to control how much you make - then let them fork over the renovation costs and contribute to our holding costs.
Of course, such contributions would be at the option of the buyer to choose yay or nay.
Remember - read those addendums to confirm that the deal IS the deal you think it is.
In my travels to other real estate websites and forums, I'm amazed at how many investors never read those psychotic addendums and it has cost some of those investors their business -
Make 2012 your best year yet -
New To You RE, LLC
In this 2012 real estate market, you have to know the game and how to win.
Yeah, it's a game.
Win ? Win is to assign the transaction AND ensure it closes - it's how you get paid.
Rules are simple:
1) Know your market
2) Know your buyers within your chosen market(s)
3) Identify a "true" prospect
4) Learn/know AND respect your seller's needs
5) Create a contract that reflects "reasonable" timelines - and outs - that respect your seller's needs
6) Have your capital, or proof of funds, included in your purchase offer
7) Have a marketing plan that's ready to roll at contract/offer acceptance
8) Talk/market to your buyers
9) Roll your marketing
10) Assign and drive on to the next
Wholesaling, or flipping, real estate is easy enough - even in this 2011/2012 real estate market.
Easy enough means implementing a system, or set of steps, that you apply to every property you get under contract.
Social media is, nearly, a complete marketing system - in and of itself.
Knowing where to market AND how to market - to social sites, is as important as identifying the sites.
Bandit signs are critical and will sell your property.
Additional local media will round out your efforts to flip that property !!
Timelines are critical, from those specified in your contract, to marketing, to bringing in and verifying your buyer to closing the transaction.
By understanding and following the rules of engagement, you have the best chance of making your $$, EVERY time.
Want help ?
Give us a shout
My name is D. Sidney Potter, and I flip houses. I started in 2002 on a whim with the expectation that I would buy a home and live in it for myself. Inadvertently this home turned out to be one of my first prospects. On this very first home I bought, I waited passively for about three to four months for the home to be completed. After a while, I noticed a funny little thing, and that was that the price started going up phase after phase, by small increments, in the $6,000 to $8,000 range. After the property was completely built, some seven to eight months later, I came to the conclusion that moving to this new home of mine out in Riverside, California, may not be such a profitable idea. In a split decision, I put the home on the market for $425,000 and sold it two months later for $415,000.
Amazingly, out of the gate I grossed $101,000 on my first home and I can tell you that it doesn't always work out this way. You don't always make $100,000 on a flip. And I can tell you, admittedly so, that I got lucky on this one. I hope to help those that have an interest in real estate investing- and more specifically new tract home flipping- in a reduced-risk environment that is both enjoyable, profitable, and reasonably achievable.
More particularly, the objective of this article is to provide a road map and edification for those who wish to invest in real estate, with an emphasis on new tract housing, for the sole purpose of earning a sizable profit upon its completion.
Often in the media, guys like me are referred to as flippers or speculators. Given the critique by the media, you'd think we were a real estate monster of some sort or perhaps the Gordon Gekko of real estate buying! The crux of flipping new tract housing is that the investor simply buys at a low price before the home is actually built. Notwithstanding the actual product type, the home is usually just an empty dirt lot in a subdivision. Normally, it might even be a concrete slab or just in the framing stages, but bottom line, it's a home that hasn't been completed- which makes it ripe for opportunity. The objective, when the home is completed-which is usually several months later-is to immediately resell the home for a substantial profit. This is flip methodology in its simplest articulation.
Although in 2011, and given the change in the market place, a flip today might be better characterized as an" intermediate flip", given the hold strategy required to reap the appreciation. What occurs from cradle to grave, A through Z, start to finish, nuts to bolts is what this article encompasses. It's how to buy a new tract home, hold on to it through its buildup stage and rapidly resell it after having bought it from the developer. During this time of incubation, what I call "flip candidates," given that they haven't fully matured and marinated, are not yet a transferable currency. As a result, they're still just flip candidates, until they're actually bought and closed from the developer. Because until that time, and no matter how much they may have gone up in value during the build-out time, nothing means nothing until you actually own the property yourself.
Having come from a real estate brokerage background where I previously sold shopping centers for five years with two major national brokerage firms in Los Angeles, and combined with my experience as a mortgage operations consultant, where I worked at different bank client sites across the country, which consisted of the evaluation and underwriting of mortgage notes in multimillion-dollar portfolios, I was uniquely qualified-for better or worse-to better understand the acquisition and disposition of investment product and the minutiae of underwriting guidelines that play a very large part in determining whether there's a profit to be made, or will be made in new tract home investing.
You the reader may find that buying real estate, even though you may have the allocated resources, is just not for you. And if that's the case, that's okay. But by reading this article and perusing other real estate books before and after it, you are at least making the well-considered and deliberative decision making that is required when allowing for such a momentous undertaking-which is the buying and selling of real estate in rapid succession.
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