Archive for the ‘Wholesale Investing’ Category
June 23rd, 2009 | 
Author: Most people believe that investing in real estate during a recession is a risk that’s not worth taking. They claim that the market is too volatile, that no one is buying real estate since cash is very limited and that instead of buying houses, people opt to rent apartments since it’s a lot friendlier to their pockets and because most of them probably got foreclosed on and so on and so forth.
This is simply untrue.
You see, from the last argument alone (that people are moving to apartments and rental properties because they probably got foreclosed on), you’ll already be able to see two real estate investing opportunities – rental properties and foreclosures.
All you simply need to do is to try to look at the situation at a different perspective.
It may be true that this entails a risk that’s too high for comfort – if you’re using traditional or ‘old-school’ investing strategies.
What you need to understand is that recessionary times call for a more creative approach to real estate investing. You don’t necessarily have to abandon the business altogether. You just need to ‘shift your gears’ and approach your deals from another angle.
So what strategies DO work during a recession? Here’s a few:
Owner Financing / Subject To’s / Lease Options
A lot of homeowners who need to sell their houses find it difficult to find buyers so most of these houses are just sitting there vacant and sometimes even neglected but most of the time, these homeowners continue to make mortgage payments on them so these properties become more and more of a financial drag that they need to get immediate relief from.
Now you don’t really need to have these properties at a deep discount in order to make the deal work. As long as you can make the homeowners agree to owner finance the properties to you and so you can take the property under terms then that’s already a good deal.
For example, the property is worth $100K. You can buy it for $200K and still make money.
How do you do it?
If the owner is willing to owner-finance it to you (and most of them would be happy to do that), and you don’t have to make any mortgage payments for 30 years and after that time, you pay them $200K, do you think that will make the deal work? Of course it does! That’s because the home price will go up and you didn’t have to pay any interest and all that.
These strategies work really well right now because a lot of these homeowners really need to sell their houses fast.You just need to get these houses under flexible terms to make it work.
Wholesaling
In the present economy, this strategy is really hot. This is because you can get a house at deep discount so you can still sell it cheap and make a lot of cash.
The reason you can do this is the same as the first one, we discussed. Homeowners are really desperate to get rid of their unwanted properties right now because they have a hard time finding qualified buyers and a lot of them would settle for literally pennies on the dollar (40 to 50 cents to the dollar). All you need to do is grab these properties and flip them for a quick profit.
For example, a property with an actual value of $100K which the owner desperately needs to sell and would settle for $50K. You get the property under contract for $50K, flip it to another buyer or another investor for $60K and you pocket a quick and easy $10K.
Short Sales
Short sales work like a charm nowadays because there are so many foreclosures going on and a lot of homeowners actually owe more than the actual value of their houses (mostly because they probably got their house on 100% financing or did a cash-out refinance and now that their property value dropped, they end up owing more than what the property is worth).
With foreclosures at an all time high, banks are finding themselves with more foreclosures than they can actually handle and so they are need to move these properties real quick.
That’s where short sales come in.
In a nutshell, what you do in a short sale is to negotiate with the bank to accept payment on a property that is lower than what is owed on it or even lower than its actual value. Banks are very willing to do this since they’re not in the business of owning homes. Simply put, they’d rather take a short sales offer on a home and make some money than to be stuck with a bunch of properties they don’t need and want.
Indeed, as a real estate investor, there are a lot of alternative ways of approaching deals in the present economic situation that will still prove to be profitable for you.
You don’t have to listen to all those doomsday-mongers who keep screaming that the world is coming to an end.
Well is you go ahead and believe them and abandon your real estate investing business, that may exactly be what will happen to you.
It’s true that the times are difficult, but that does not mean all hope is lost. You just have to look at the situation from another angle and take it from there.
Remember, “Extraordinary times call for extraordinary actions.”
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At this time, you’re probably tired of all the brouhaha about the economy being in a tight spot and the real estate industry hitting rock bottom and all those doom and gloom horror stories that would give even, Hannibal Lecter nightmares.
At this time, you’re probably even “tired-er” of them so-called gurus saying, “Hope is not lost! I know the way, the truth and the right tools to earn you money! So whip out your credit card and let’s get to work!” In all fairness, some techniques work, some don’t. There are even times when the technique works, the advise is as good as it gets but the person who’s supposed to do the work is just too lazy or too busy whining.
Bottom line is that more than ever, we are trapped in a state of dog-eat-dog, survival-of-the-fittest kind of business atmosphere that is almost too primeval. And to survive, you don’t really need to go super-complicated or ultra-sophisticated in your strategy. Sometimes – better yet, most of the time, the simplest strategy is your best bet. Sometimes, you just have to go back to the basics. And to this effect, I have two words for you – Wholesaling and Foreclosures.
I know you know the concept of wholesaling. You take a property that’s worth a certain amount, get the owner to sell you the property at a bargain price, you re-sell the property to another person at a higher cost than what you had it for, and you pocket the difference. That’s it! It does not come any simpler than that. And the beauty of this is that it takes very little to get started with this. All you practically need is resourcefulness (learn to use search engines and real estate websites to spot possible prospects), more resourcefulness (scout the properties you find, take pictures, write down addresses, track down owners if possible and keep track of the goodies you come across), a lot of honey on your tongue (convince homeowners and get them to agree to the best possible price), a little bit acid in your veins (talk to angry homeowners and try to convert them) and the determination and drive to succeed (you got to do it over and over again especially if you hit several roadblocks early on).
The problem with some people who try to plunge into the real estate investment business is that they look and expect big results right away. As such, as soon as they get burned the first time, frustration already starts to creep in – and creep in strong. Soon enough, after just a few setbacks, they readily hang the towel and give up. Which brings us to another necessity in this business – or any other business for that matter – the right attitude.
It can not be denied that wholesale deals exist. They may be a lot tougher to find than before, but they’re there – probably around the next bend on the road, or over the next hill or on the next town or whatever. If you know where to look, and I have given you an option earlier, they’re there and you just have to find them.
On that same note, the current economic upheaval has left on its wake a trail of foreclosed properties. If you didn’t know better, you’d avoid these properties like a plague and pray you never come across one you can’t escape.
That’s probably one of the most common misconceptions about foreclosures. Truth is that, foreclosed properties have the tendency to become chests of gold and silver and all manner of treasures.
Now if you don’t know what a foreclosure is except for it being a situation in which a homeowner is unable to make principal and/or interest payments on his or her mortgage, so the lender, be it a bank or building society, can seize and sell the property as stipulated in the terms of the mortgage contract. Let me enlighten you a bit on how a foreclosed property can metamorphose into a vault filled with cash. 
You see, banks or lending companies exist for basically one thing, to lend money at an interest so they can make a profit. They’re not interested in accumulating property. Besides, owning a property that the bank does not want in the first place is like living with your parents and your in-laws in one house – they don’t like it and would want to convert the property into cash the soonest possible time in order to settle accountabilities. Moreover, the government requires banks to reserve eight times the value of the house for liability risks – meaning the banks would not be able to use this money readily nor can it be lent out and all.
This just goes to show that banks and lending companies who foreclose on properties usually find themselves owning an unwanted piece of real estate.
In which case, these properties become prime candidates for wholesaling since most of these banks and lending companies would want to cash-in now on the property while they still can and/or to avoid losses in the future. You’d be surprised how many of these banks would be willing to sell these properties at bargain prices just so they can get rid of it and the headaches that come with it.
Also, homeowners in the verge of foreclosures also become perfect seller prospects as most of them would opt to sell the house quickly in order to be able to gather as much cash as they can to buy/rent/mortgage a more affordable residence.
This just goes to show that there are techniques and strategies in real estate that work no matter what the shape of the economy is. You just have to find your angle of attack and press on.
Indeed, as the old saying goes, when the going gets tough, the tough gets going. You don’t have to cry rivers of tears because you think that your real estate business is already kaput. You just have to learn to adapt to the situation and find profit potential where most people think there is none. Again, remember, in the survival of the fittest, it’s usually the simplest organism that has the upper hand. Same is true to this business. In times of difficulty, the simplest approach to solving the problem is to go back to the basics.
Why don’t you check these automated wholesaling real estate tool?
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