Before you read another sentence, make sure you're sitting down. In the next few minutes, I’m going to show you some unbelievable things about real estate that will make you question the nature of reality. 1. Cinderella's Castle at the Magic Kingdom was constructed using a set-trick known as forced perspective, which makes the castle appear much larger than it really is. 2. The domed top of the Seattle Space Needle was built to be perfectly balanced, so the restaurant could be rotated with the help of a tiny 1.5 horsepower motor. 3. When the Leaning Tower of Pisa was built, it started shifting on its foundation before construction was completed because of the unusually soft soil it was built on. This same soil is the reason the tower has survived at least four earthquakes since 1280 A.D. 4. If you've ever felt lost in an IKEA store, there's a reason for that. IKEA stores are built like mazes so they function like a walk-through catalog (and generate a lot more impulse purchases along the way). 5. If you travel in any cardinal direction from the town of Los Algodones, Mexico (north, south, east or west), you will end up in the United States. 6. Even though Sweden is the second largest paper exporter in the world, the country's forest biomass is growing, because for every one tree they cut down, they plant three in its place. 7. A man named Karl Bernd Esser, who was the chief designer of Saddam Hussein's bunker, was also a grandson of the woman who helped design Hitler's bunker. 8. When the Ancient Pyramids of Giza were originally built, they were white. Unlike how they look today, they were plated with a highly-polished white limestone that reflected the sun’s rays and gold caps on top. 9. There is a township in Minnesota that has a population of less than 1,000, but more than 20 zip codes. 10. If you're in downtown Detroit and you head directly south, you'll actually travel into Canada. 11. Termites eat wood twice as fast when they listen to rock music. Apparently, termites are attracted to the harder vibrations from the sound of rock music. 12. The highest and lowest points of the continental United States are in the same county. Mount Whitney in California stands at 14,494 feet, while the Badwater Basin, a little under 85 miles away, is 282 feet below sea level. Both are in Inyo County. 13. In Hong Kong, most toilets are flushed with seawater to conserve the city's scarce freshwater resources. 14. Scotland and Alaska both fall on the same circle of latitude, 57 degrees north of the Earth's equator. 15. China uses a lot of cement. In fact, China used more cement between 2011 – 2013 than the United States did in all of the 20th century. 16. Are you sick and tired of your next door neighbors? You might consider moving to the Siberian Sakha Republic. This territory covers about 20% of Russia's land mass and has a population of less than one million (less than one person per square mile). Most of the area still largely unexplored by humans. 17. Did you know that the Chicago River flows backward? In 1900, engineers successfully reversed the flow of the Chicago River so that it emptied into the Mississippi River instead of Lake Michigan. The system was named a ‘Civil Engineering Monument of the Millennium' by the American Society of Civil Engineers (ASCE). 18. Egypt is building a new capital city to replace Cairo. It will feature a “smart traffic system,” a huge green space bigger than New York’s Central Park, a mega-mall and housing for 6.5 million people. An official name for the city hasn't been picked yet. 19. Prior to 1933, the infamous Alcatraz island was owned by the U.S. military and used as a minimum-security prison. Some of the inmates were even employed as babysitters for the children of officers who lived on the island. 20. There's a town in Texas called Earth. It's the only place on Earth named “Earth”. 21. 30 years ago, you had about 17 minutes to escape a house fire. Today it's down to 3-4 minutes. Why? Because newer homes and furniture burn faster, giving you less time to escape. 22. There's a Castle in the Czech Republic that has had a ‘Bear Moat' filled with actual bears for the past 300 years. 23. Iranian officials were outraged to learn that the Star of David had been built and displayed on the roof of Iran's largest airport for over 30 years before a Google Earth satellite image revealed it. 24. Edinburgh Castle is so old that by the time of the first known mention of it in ancient literature, its founding was already shrouded in myth and legend. 25. A million people in China live in underground nuclear bunkers constructed in the Cold War era. 26. Since being discovered by the timber industry in the 1850s, 96% of the 2,000,000 acres of old-growth Coast Redwood trees in California have been logged. 27. The first inflatable “bouncy house” was invented in 1959 by John Scurlock, the same man who invented the safety air cushions used to catch people jumping from tall buildings. Do you know of any other crazy real estate facts? Let us know about them in the comments below!The post 27 Real Estate Facts to Entertain Your Brain appeared first on REtipster. from https://retipster.com/morerealestatefacts/
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If you want to succeed as a real estate investor, you need to know how to find motivated sellers. That's not just my opinion, that's a fact. When I first started pursuing my real estate investing career, I wasted a TON of time trying to find these people the wrong way (at one point, I was almost convinced it was impossible). There finally came a point when I was just about ready to throw in the towel – and that's when I discovered the power of direct mail marketing. But it wasn't just ANY direct mail marketing that did the trick. There were some very specific steps that simply had to be followed – and if I didn't put the time and effort into doing it right, I'd end up throwing a lot of money right out the window. Bonus: Get a FREE copy of the INVESTOR HACKS e-book when you subscribe! Success requires decision and actionThe market moves fast. Stay ahead with the latest tips in low-risk, high-return real estate investing for your business. Moving through the process wasn't always fast, convenient or cheap – but when I took my time and carefully went through the right motions, the floodgates opened WIDE and I was inundated with more opportunities than I could handle. Data: The Crucial ComponentDirect mail was a pivotal discovery in my journey. Knowing how to obtain the right information and use it correctly had EVERYTHING to do with my ability to find unbelievable deals (truth be told – I can't think of any notable success I had prior to this discovery… it was that big of a deal)! The funny thing is, for most of the world's marketers – direct mail is actually an incredibly ineffective marketing medium (it's the only industry where a 1% response rate is considered “acceptable”). As real estate professionals, we need to have a higher standard (because let's be honest, most of us can't afford to dump millions into a strategy that isn't consistently working). Luckily – the answer is simple… the real power behind a successful direct mail campaign is in the data. When you're working with the right information (i.e. – data that is current, accurate and reliable) and when you understand how to filter it correctly (so the right people are ON your list, and the wrong people are OFF of it), you should expect to have a response rate somewhere in the range of 5% – 20% (and if you're lucky, maybe even higher). To some, this may seem impossible pull off, but with a basic understanding of where to go for the information and how to filter it properly for the specific types of properties you're looking for – it's not nearly as complicated as it seems. Data SourcesWhen I think about the world of real estate data – one word comes to mind:
If you've ever sifted through a list of property owner information directly from the county – you probably know what I'm talking about. In some cases, this information is presented in a crazy, unpredictable and potentially dangerous format, and one misstep can be costly. The good news is, there are several data companies out there who have managed to bring some semblance of order to this jungle. They've combed through most of the 3,143 counties in the United States (and the wildly different organizational systems they all use), and made it substantially easier to find the information we're looking for. Bringing order to this quantity of information is a huge undertaking. We're talking about THOUSANDS of extremely complicated assessor files that are changing every single day. Getting this kind of information under control is not a simple task, and if you're a direct mail marketer and/or real estate professional who uses this information for the purpose of direct mail, this kind of organization could definitely be worth paying for. In this blog post, we'll take an inside look at a few of the major players in real estate data, and we'll examine what each one brings to the table, what their services cost, some of the pros and cons with each one, and what you can expect to see if you decide to work with them. We're also going to talk about some important aspects of real estate data that can have a big effect on the success of your direct mail marketing efforts. DataTreeOf all the data services I've explored to date, DataTree has the most well-designed and easy-to-use interface. Depending on which features you use and how much data you need to pull, it may also be the least expensive option on the market. If you use DataTree for your direct mail campaigns, this video shows how that process works… You can also see more of what this program can do in terms of property research in this blog post and this blog post. Note: We do have an affiliate relationship with DataTree. If you sign up for the service through our affiliate link, you'll get a discount off the regular price of the service, and REtipster.com will get a very small commission if/when you choose to sign up. Pros:
Cons:
PricingThe standard pricing for DataTree will vary depending on what you're planning to use it for, and which plan you select. At the time of this writing, these are the current pricing options (available at a substantial discount, only through the REtipster affiliate link): If your business works like mine, the line items you'll want to pay attention to are the following:
DataTree uses a “credit system” of sorts, where you agree (on a 12-month contract) to pay a set amount each month for the ability to you use the service. When you pull a Property Detail Report or a Property Characteristics Report (or anything else listed above), each instance will deduct the quoted amount from the monthly credits have you available. Once you exceed the number of credits you have at your disposal each month, it will continue to charge you above and beyond your monthly commitment, for each time you use it, at the same quoted amount. So, if you know you'll be pulling a TON of data, it obviously makes sense to sign up for the Gold subscription, because the cost of each additional pull will be exponentially less than if you signed up for the Bronze subscription. AgentPro247What I like about AgentPro247 is that it's fairly easy to use, easy to sign up AND it offers one of the better property research tools I know about. It's not JUST about the lists you can pull (though that's certainly an important aspect of it), it's also about how easy they make the due diligence process, especially for “niche” property types like vacant land. Here's an overview of how to generate a list with this service: You can also see more of what this program can do in terms of property research in this blog post and this blog post. Something I appreciate about AgentPro247 is that their system will show you exactly how current their database is in every county around the country (RealQuest and DataTree were the only other services I found that offers this kind of transparency). With their Geographic Coverage tool, you can verify when the data was last updated in any given county. Here's how it works… What I found in my research was that ALL data resellers have this issue on some level (it's one of the unfortunate tradeoffs/risks when you're not getting your data directly from the county). The difference with AgentPro247 is that they'll actually tell you about it – which I certainly appreciate. Pros:
Cons:
PricingThe standard pricing for AgentPro247 will vary depending on what you're planning to use it for. AgentPro247 actually increased their prices pretty significantly in mid-2017, which is a bummer… but even with the higher prices, it's still a pretty decent service and the cost is still less than most of the other options mentioned in this blog post. DISCOUNT: I am an affiliate of AgentPro247 and if you want to use the exact plan I do, follow these instructions and enter Partner ID: CFGRSH at checkout (I recommend either the Profile Package for $27/mo or the Gold Package for $72/mo). If you intend to use it for pulling direct mail lists, a Gold Package subscription will give you access to all the essential data that most real estate professionals are looking for (Property Types, Demographic Data, Mortgage, Foreclosure). Depending on how many records you need to pull on a monthly basis, the price could range anywhere from $45 – $108 per month. Here's a specific breakdown of what the pricing looks like at the time of this writing:
If you need access to this data solely for the purpose of researching properties, the Profile Package is a great option. Starting at $27 per month (and “pay as you go” dollars if you need more), you can find out all kinds of information about a property – including:
ReboGatewayReboGateway takes a slightly different approach to how they offer data. Rather than giving you one giant pot of information (i.e. – the entire United States) with a limited number of leads to pull each month, they'll give you access to unlimited data from one county (with additional counties available at a slightly higher cost). If you're a real estate professional consistently working in one or two counties, this could be exactly the kind of solution you're looking for. Here's how their system works: ReboGateway also has a product called Investor's Title Toolbox, which does all the same things ReboGateway does, but gives subscribers nationwide access, as well as the ability to search all types of properties including commercial and be able to filter by loan to value. ReboGateway and Investor's Title Toolbox are a bit different in that they specialize in finding unique situations that create highly motivated sellers. Most data companies will simply provide a filter, where you have to decide what types of leads you want on your list. ReboGateway does this too, but they also offer some pre-selected criteria that aren't available in most data filters from other companies. With these pre-defined criteria, you'll be able to find certain types of property profiles, such as:
These situations all have one thing in common – there is a higher likelihood that the property owners are in a position where they want out of their property NOW. To get an even more potent list of motivated sellers, you can also double-up on these items. For example – you can pull a list of properties where the owners have filed for divorce, the property is non-owner occupied AND it's back due on property taxes. With this kind of combination – you're virtually guaranteed to get a list of property owners who desperately need your help. Pros
Cons
I think ReboGateway is a great option for some, but not all investors. For the investor or real estate agent who has a business focused in one market or county, it will probably be a very helpful tool in a lot of ways. On the other hand, if you're an investor who is constantly pulling lists and researching properties all over the country, there may be better alternatives out there. PricingContact: Todd Holmes ReboGateway also offers the following subscription plans (without the free additional county, waived set up fee, VIP List Development, or grandfathered pricing).
Keep in mind, if you want the promo code discount mentioned above, you'll have to sign up for the annual subscription. Investor's Title Toolbox is only offered on an annual basis with 3 different options:
RealQuest ProRealQuest Professional is a service that can be used for researching properties and generating lists (a similar concept to AgentPro247, but at a much higher price, with information pulled from a completely different database). Similar to ListSource, RealQuest is a platform by CoreLogic (which means the data for both services is pulled from the same pool of information). The user interface offers a lot of flexibility and options to meet the needs of most real estate professionals. Here's an overview of how to generate lists with RealQuest. And here's an overview of their property research tool. Something I appreciate about RealQuest is its wide degree of functionality within their system. I also appreciated that (similar to AgentPro247), their service allows users to see the “Latest Recording Date” – so there will never be any question as to the currency and accuracy of the data you're working with (and when it comes to direct mail – this is a big deal). The only thing that turned me off from RealQuest was the price (which was very high in comparison to the other services on the market). I also wasn't a fan of how their subscriptions are only available with a 12-month commitment. These high barriers to entry made the service a tough sell for someone like myself. Pros
Cons
PricingAt the time of this writing, there are a few different pricing options available: Option 1 – Starter Package $150/mo (12 month subscription)
Note: The Starter Package is for one state only. Option 2 – Growth Package $225/mo (12-month subscription)
Note: The Growth Package covers the entire United States. Option 3 – Portfolio Package $275/mo (12-month subscription)
Note: The Portfolio Package covers the entire United States. From what I saw, this service has some very good information and their system works very well (I couldn't detect any glitches or problems in its functionality) and I was very impressed at how the filtering criteria allows users to narrow down the types of properties on each list to some very specific segments. The only downside I saw was that the service costs 10x more than every other option on the market. RealQuest is not cheap. But here's the thing… I'm not a heavy data user. I've never been one to send out 10,000 mailers per month, and my business doesn't rely solely on direct mail to find motivated sellers – so even though I could easily fit this into my budget, it would be overkill for my situation (like trying to kill a fly with a canon). On the flip side, if you are a high volume data user and if you need to get extremely specific about the types of recipients who belong on your lists, this could be precisely the service you need to bring your business to the next level. ListSourceListSource is another service by CoreLogic, and it's one of the more well-known platforms for generating direct mail lists. This service is extremely popular because of its convenience. It is very easy to generate a one-off list (similar to Melissa Data) with no subscription required. That being said, ListSource does not have any function available for property research (like RealQuest, AgentPro247, Melissa Data and ReboGateway do), so you'll only find it useful if you're in need of a direct mail list. That being said, if a quick list is what you're after (e.g. – if it's your first time pulling a list and you're not ready to commit to a subscription) – it's a nice option to have at your disposal. This video below (taken from a blog post I published last year) will give you an idea for how their system works. The only downside of ListSource is almost entirely in the price. A common theme I found with CoreLogic brands is that they aren't cheap. However, the service seems to make up for it in convenience and ease of use. The fact that you can use it without any long-term commitment makes it an ideal option for the beginner (and for the long-term user, there are discounts available if you're willing to utilize their bulk pre-pay and/or subscription options). Pros
Cons
PricingThere are three different ways to purchase lists from ListSource: Option 1* – ListSource Prepaid Bulk Account (12-month subscription)
*Rates based on standard property lead filters and output selections. Option 2* – ListSource Monthly Billed Subscription (12-month subscription)
*Rates based on standard property lead filters and output selections. Option 3 – Build List (no subscription required) Without a subscription or prepaid draw account, the average cost for a one-time list will be in the range of .30 – .45 cents per record. In my experience, the lists I've generated were around .18 cents per record – so the price doesn't necessarily have to be quite this high. The cost will vary depending on which filtering criteria you're using. Note: ListSource requires a $50 minimum purchase through their website and PayPal is the method of payment (however, this not apply to pre-paid purchases). How Current is the Data?There are three big players that compile real estate data in the United States today:
When you purchase your farm lists or property reports from a data service like DataTree, AgentPro247 or RealQuest Pro, these services pulling the information from the database they're associated with and then delivering it to you in a usable format. As you can imagine, there are MANY different uses for this kind of information and as real estate professionals, the most common uses are conducting property research and doing direct mail campaigns. Just speaking for myself – I've used this information to make some major investment decisions, and I've done some sizable direct mail campaigns with the lists I've generated from them. It goes without saying, with the amount of money we're putting on the line, it is very important that we're able to rely on the currency and accuracy of this data. If the data isn't reliable, the results can be disastrous. Data companies understand this and make every effort (and generally do a good job) of keeping their databases as accurate and up-to-date as possible. The problem is… some counties (typically, the rural ones with a smaller tax base) aren't great at making this information readily available, and some counties just don't make it available, PERIOD. As such, you'll find that most of the data from these services are reasonably current (i.e. – within the past 30 days) but occasionally, you'll encounter some counties that aren't. The Currency TestSince the currency and accuracy of the data is simply a prerequisite to any successful direct mail campaign or research effort, I decided to do a side-by-side comparison of all three databases, to see if any one of them came out better (or worse) than the others. I took a random sampling of 50 counties around the country – 25 densely populated “Urban” counties and 25 sparsely populated “Rural” counties. I conducted the test on February 18, 2019 – and got the following results (note: to draw your attention to which counties were older than 30 days, I've shaded those dates in red, and the counties that were older than one year or not available at all were shaded in bold red). Urban CountiesAs you'll see from this sampling – most of the densely populated areas were kept very current in all three databases (even the “older” ones weren't much more than 30 days behind). As I mentioned earlier, my assumption is that these counties are kept current because the governing bodies have a MUCH greater source of tax revenue, thereby allowing them the budget to keep their records current and published for these data compilers. Rural CountiesAs you'll see from this sampling – most of the sparsely populated counties were much less predictable. Roughly half of them were over 30 days old in all three databases, but many of them were still dated within the past year (with the exception of a few – which either had no data available or hadn't been updated in a long time). Since these counties have a MUCH smaller population than the previous list, I can only imagine that these governing bodies are working off a smaller budget and thereby have fewer resources with which to keep their records up to date. Who Has The Best Information?Remember, there are well over 3,000 counties in the United States, and 50 random counties is a VERY small sampling with which we can draw any sweeping conclusions. However, I think it does give us a reasonable idea of how all three databases are doing. Based on the information I saw, it didn't appear that any single database was notably better or worse than the others. CoreLogic seems to be stronger in some counties, just like Black Knight seems to be stronger in others, and First American offers the best in its own set of counties. All in all, they all seem to be in the same general place in terms of how current and reliable they are as a whole. None of them are perfect, and as much as I wish I could point you to one obvious choice, I can't say that one of them was the far-and-away the best over the others. Using the Right List CriteriaIf you want the best possible response rate from your direct mail marketing efforts, it's critical that you're sending your message to the right people – and the only way to do this is to use the right filtering criteria to generate your list. In order to do this with any success, you need to know EXACTLY who your target audience is – and take special care to specify what types of properties and owners you need to include (and exclude) from your list. Every service works a little bit differently, so it's impossible for me to tell you exactly which filtering criteria you need to use – but you'll find that most of them have many of the same general filtering options available. Depending on who your target audience is, here are a few examples of how your list could be filtered… Cash Buyers ListIf my goal is to generate a list of real estate investors who are actively purchasing properties without financing in my target market (i.e. – “cash buyers” who have shown that they're actively looking for opportunities in the area, and they've got the cash available to buy now). My filtering options would look something like this:
Vacant Land ListIf my goal is to generate a list of property owners who currently own vacant land and are motivated to sell, there are SEVERAL potential ways I could filter my data, but these bullet points give a general framework by which to start the process (this is with the assumption that these filtering options were all available in my market and with my data service of choice):
Remember – your filtering criteria may vary depending on the type, size, location (and more) of the vacant lots you're trying to target. Single Family Homes ListIf my goal is to get a list of absentee owners who own single family homes and are highly motivated to sell, this is the criteria I would use to generate my list (assuming these filtering options were all available in my market and with my data service of choice):
Depending on which service you're using and which county you're pulling your list from, there will be times when not all of these filtering criteria are available. For example – the “Tax Default” option isn't available from all of the services listed above – and of the ones that do make it available, even they can't provide this information everywhere, because this data changes daily and many counties aren't sophisticated enough to publish this information on a daily basis. That's okay – but it also means your list may be a bit more “watered down” in terms of finding the specific types of property owners you want to talk to. If you're still determined to get the tax delinquent data from these counties (as I usually am), your only alternative option is to get a delinquent tax list directly from the county. A Final Note About Delinquent Tax DataProbably the most effective filtering technique I've ever found is to narrow down the property owners who are currently delinquent on their property taxes. When someone owes back due property taxes, it's usually a BIG red flag. For one reason or another, the owner and their property are a TOTAL mismatch, which inherently makes them highly motivated to sell. Some (but not all) of the services above will offer “Tax Default” or “Tax Delinquent” as one of their many a filtering options in some (but not all) counties. The challenge with this kind of data is that it's very time sensitive. It changes daily, which makes it even more challenging to track. If you find a county that is current and has good information, it can work extremely well, but once the data is more than a few weeks old, there can be some substantial changes to that list – which will cause it to start losing its potency very quickly. As you can see from the county comparison above, some of these counties are kept very current, but some of them aren't. If the delinquent tax filter is important to you (as it is to me), you'll want to make sure you're only working in a county that is kept current. The unfortunate truth is – in many counties, there's only one way to do this right. When delinquent tax data is important to me, I skip all of these services and get my lists directly from the county. Getting this data from the county can be a HUGE pain in the neck for a lot of reasons. Even though the data works very well, most counties won't make it easy. IF you can get their list, it will usually be in a format that is far less organized than the services above provide – but if you can find a few counties that will provide their list in an acceptable format at a reasonable price (0.01 – 0.25 cents per parcel is what I'm accustomed to paying), you'll also find that it works incredibly well, and can only be rivaled by a few data services in a few select counties around the country. If you're interested in taking the plunge and getting your list from the county, this blog post explains exactly how to do it. Also note – delinquent taxes are definitely NOT the only cause of seller motivation. I've bought a lot of properties from owners who were not tax delinquent… so keep in mind, while it's certainly an effective filtering criteria when it's available, you can still find PLENTY of opportunities from owners who have their property taxes paid current. Which Service is Right for You?When I was compiling this information and recording these videos from each data service, what I took away from this exercise was that none of them are perfect, and none of them have everything I would want to see. Some of them are GREAT at certain things (like pulling lists) and TERRIBLE at others (like doing property research). Others are extremely effective at filtering lists to narrow down certain property types and property owners, while being completely incapable of filtering out others. Some data companies offer a lot of filtering flexibility and powerful data solutions but charge a very high price for access to their database. Others provide a very affordable and easily accessible platform but aren't necessarily the best fit for every real estate professional (and of course, you'll never hear any data company talk about the things they aren't best suited for). In the end – nobody seems to have it figured out from all angles, but if you know exactly what kinds of properties you're looking for, and if you know that the specific data you need is available in your area AND it's accurate and up-to-date, you should be able to nail down which of these services can best meet your needs. I can't tell you which one is best for you – but if you have a thorough understanding of what you need and how much you're willing to pay for it, you should be able to find the best option. The most important thing is for YOU to understand what you need, what types of properties you're pursuing, and what kind of information you're going to need to do the job effectively. Every data company brings some kind of value to the table, but in order to get the right kind of value that fits your needs, there needs to be very little ambiguity about what you're looking for. The post Are You Using The Best Real Estate Data? appeared first on REtipster. from https://retipster.com/real-estate-data/ One of the most common questions I hear from people in the real estate business is,
It doesn't matter what type of real estate investor you are, at some point, you're going to run out of cash. If you want to keep buying properties and grow your business, you'll need some other source of funding in order to stay liquid. Now, there are a lot of ways to deal with the issue. Some investors turn to hard money loans, some will partner with other investors who have the cash, others will buy properties with seller financing or work with conventional lenders (until their bank decides they've borrowed enough money). The problem is – all of these “solutions” have some big costs associated with them, and that's why this interview is such an important one. In this episode, we talk with Mike Banks of Fund & Grow. This company has made it extraordinarily easy to get short term financing that charges 0% interest for the first 12 months (at which point, most people will either refinance or pay off their loan through the sale of the asset they purchased with the money). This financing strategy isn't the right fit for every situation, but for a lot of reasons (which we'll get into in this interview), this can make a TON of sense. It offers a combination of speed, flexibility and savings that few other financing methods can bring to the table. Click Here to Get Prequalified! This is definitely one you'll want to listen through to the end! REtipster provides real estate guidance — not tax or investment advice.This article should not be interpreted as financial advice. Always seek the help of a licensed financial professional before taking action. Links and Resources
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Thanks again for joining me this week. Until next time! Right-click here and “Save As” to download this episode to your computer. The post 035: Need Money? You Need to Know About This… appeared first on REtipster. from https://retipster.com/035-fund-and-grow/ One of the biggest obstacles every land investor has to wrestle with is how to find the “market value” of vacant land. It may seem like an odd dilemma to a conventional real estate investor but trust me – if you've ever tried to find comps or relevant valuation data for a parcel of raw land, you know how challenging it can be to nail down a concrete value for this type of real estate. Especially for those in the land flipping business, it presents a MAJOR challenge, because the conclusions we draw about this number will affect everything else in the process, and most of the data we need simply isn't there. Understanding How Appraisals WorkBefore we get into the complexities of valuing land, let's establish a fundamental understanding of how real estate appraisals work. In the vast majority of real estate transactions (especially when financing is involved), buyers and lenders will hire a professional appraiser to verify the value of the real estate being purchased and/or financed. The appraiser will put together a comprehensive report that considers three key valuation approaches:
These are widely considered to be the most reliable methods of determining a property's market value. In most cases, an appraiser will use at least two (if not all three) of these methods to come up with their final conclusion. Here's a quick overview of how each of them works: Income ApproachThe idea behind this approach is to determine the amount of ongoing income (i.e. – rent or lease revenue) the subject property can be expected to produce. In order to determine this number, an appraiser will look at the “market rent” in the area. In other words, what are similar properties currently being rented or leased for in the same market? The appraiser will look at several similar properties (while also considering their size, location, condition, amenities, etc.) in order to get an idea for the amount of revenue the subject property could feasibly produce. Cost ApproachWith this approach, the appraiser will try to determine what it would cost to rebuild the exact same structure from the ground up. The appraiser will figure out an estimated cost of construction, based on today's prices (minus depreciation, plus land) and use this to come up with a measurement of the property's value. There are a lot of big assumptions that live inside this approach (namely, the cost of building materials, and the assumption that nobody will ever pay more for a property than the cost of the improvements). The cost approach is an important consideration – but it's almost never sufficient to use this approach all by itself to determine a property's fair market value. Sales Comparison ApproachWith this valuation method, the appraiser will look at the recent sales figures of similar properties in the area (i.e. – the prices that similar properties have sold for in recent history). With this approach, the appraiser is making the general assumption that a normal buyer will not pay more for the subject property than others have recently paid for similar properties in the same area. Appraisers will only consider the data from properties that have actually been sold because these are concrete numbers and (in theory) they represent real purchase prices that have been paid. Appraisers usually find this data from various public records, real estate agents, other appraisers, etc. The Problem With LandThese valuation approaches usually work fairly well for houses, apartments, commercial buildings and the like, but vacant land is a completely different story. In the vast majority of cases, the data needed to draw these conclusions for a vacant lot simply isn't available.
It's a frustrating dilemma for land investors because it's extremely important for us to understand a property's market value. This number drives everything else in the process (the offer price, the cost of property taxes, holding costs, closing costs, the profit margin when selling, etc.). If we can't be certain about a property's market value, we'll have to live with some level of ambiguity – and ambiguity is never ideal, especially when you're investing a lot of money into a property you can't afford to be wrong about. RELATED: The Truth About Land Investing: 15 Warning Signs to Look for When Buying Vacant Land What Drives Land Value?Unfortunately, there is no “magic bullet” when it comes to valuing land. As any real estate appraiser can tell you, it's virtually impossible to reach the point of 100% certainty about any property's market value of a property, and that's especially true for unimproved land. The good news is, there is almost always a way to get reasonably comfortable with a “ballpark value” on a property, even with raw land. While it's not a black and white valuation approach by any stretch, there are a number of reliable measurements you can use to get confident with the value of a prospective property before you sink any of your own money into it. When I'm seriously evaluating a potential land investment, I start by looking at several different factors and asking myself, “How important will these factors be to my end buyer?” How is the property zoned?What can the land be used for? Can someone use it to build a house? Office Building? Factory? Is it best suited for farming? Hunting? Mining? Make sure you understand what your (or the future buyer) will be allowed to do with the property in accordance with the local zoning and planning requirements. RELATED: What's the Highest and Best Use For Your Land? In many cases, a property may be useful (and even the zoning may allow) for more than one purpose, and that's worth considering too. How much inventory is available on the market?Is this a one-of-a-kind property or are there hundreds of others exactly like it on the market right now? If you own land with an incredible location (or view, or access, or resources, etc.) unlike any other in the area, that's probably worth something. However, if your property is one of a hundred others exactly like it, and all of which are currently listed for sale – that will make it much harder to sell your property at a premium price. What are similar properties listed for in the near vicinity?Pretend for a moment that you are the owner of this property you're evaluating. If you listed this property for sale today, what kind of “selling competition” would you have to deal with in the immediate vicinity? If you're able to acquire the subject property for the price you want, will you be able to re-list it, and list it at a price that is significantly higher than what you paid for it, AND exceedingly lower than all the other properties in the area? This is how you make money as a land flipper, and it's another key consideration in determining what you should be willing to pay for a parcel of vacant land. RELATED: How Much Should You Offer For That Property? How desirable is the property?Think of this as the “common sense” approach. The first time you saw this parcel of land, what was your first impression? Did anything about it look interesting, desirable, appealing or attractive? Be honest with yourself – was there anything sexy about it? Is it likely to catch anyone else's interest? Are you looking at a gorgeous, wooded, mountainside lot – or is it a dry, barren, hostile wasteland? If you go through the effort of creating a great property listing, how beautiful will you be able to make this property look? Can you give buyers an offer they can't refuse? What are the holding costs associated with the property?Suppose you buy a parcel of land and you aren't able to re-sell it immediately. What if you have to hang onto it for 6 months? 12 months? 2 years? If you're forced to hold onto this property for longer than you want to, how much will it cost you (e.g. – property taxes, association fees, assessments, etc.)? Can you afford it? Is it worth the risk? Does the property have road access?When you're dealing with vacant land, this one is a biggie, and it has huge implications for what a property is worth. It's always important to verify that a vacant lot has road access (or some kind of legal easement) so the owner (be it you, or your future buyer) can actually get to it. If it doesn't have any access points (and believe me, there are a surprising number of vacant lots that don't), your property might as well be on the moon. Make sure the property has legal access – and if you do decide to roll the dice on this kind of property, make sure you're paying almost nothing for it. What is the size, shape & dimensions of the property?Think about what this property might be used for some day. Is the parcel big enough? Does it have an odd shape? Is it located next to anything that would significantly decrease its desirability? Take a mental note of any red flags that you run into… these can be serious issues that will influence the property's value. RELATED: One Weird Trick to Find the Size, Shape, Dimensions, and Location of Your Property How close is this property to the local conveniences and amenities?Consider what kinds of amenities or local attractions will be available to the owner of this property. Will they have a grocery store across the street or will they have to drive 3 hours to get there? Will you be able to market the property's location as a good thing? This one is closely related to the property's desirability and it's highest and best use. If the property's most obvious use is to build a single-family house, park a mobile home or hold any kind of residence, then this metric becomes even more important to consider. What do the adjoining properties look like?The properties next door can have some major implications for the value and “sale-ability” of a parcel of land (e.g. – Think about it, would you rather live/work next to Glacier National Park or a Meth Lab?). Most people care a great deal about who their neighbors are, so try to get a good idea for how the surrounding properties could impact the desirability of your property. If the adjoining properties have any obvious issues that are beyond your control, you'll want to think carefully about what this means for the property's value. Is the property situated in a flood zone?When properties are located within a flood zone, the cost of flood insurance can be very expensive, and this added cost of property ownership can have a BIG negative impact on the feasibility of building improvements on the property. To get an idea for whether a property is situated within a flood zone, check out the FEMA website or FloodTools.com and do a property search to see if your property is situated within or nearby a flood zone. RELATED: How to Identify (and Avoid) Wetlands RELATED: How Does a “Perc Test” Work (and How Much Does It Really Matter)? Valuation Hacks For The Savvy InvestorEven though the data for vacant land appraisals is sparse in most areas, there are still some alternative approaches that can help you zero in on a realistic value of the property you're evaluating. Here are a couple of tricks I use on a regular basis… Scour the MLSNote: Since this video was published, Trulia was acquired by Zillow (and Zillow has made some BIG improvements to their database of land sales comps). If you head on over to Zillow, you can use this exact same process to find current land listings AND recent land sales comps in your area. You can also use Redfin to determine approximate market values in the same way (but with better options for data analysis), as I explain in this blog post. This approach is far from perfect (for obvious reasons), but it does do one thing quite well… it will inform you of what kind of competition you're dealing with (and what those sellers are hoping to get out of their property). In other words – if you were to list your subject property for sale in this market today, what other listings would you have to compete against? Take a minute and do the math. Once you understand what price your property will have to be listed for in order to look like the best deal on the market, this will give you a better perspective for the property's potential value in contrast to what's currently available on the market (because if you're offering the best deal and advertising it well, it will theoretically be the first one to sell). Price Boss Valuation CalculatorIf you want to take this a few steps further, another clever way to go through this exercise with a property valuator called Price Boss (as I explain in much greater detail in this blog post). Price Boss allows you to copy and paste the raw data in any market from websites like Zillow, LandWatch, and Craigslist and ultimately, come up with a much more data-driven decision. This video explains how it works… Note: As mentioned above, you can help support this site AND get a $100 discount on Price Boss Pro if you use coupon code RETIPSTER during the checkout process. Enjoy! Price Boss isn't a “magic bullet”, but it's A LOT better than simply going with your gut after seeing a few vaguely similar listings in the area. Just like any calculator or spreadsheet, the reliability of Price Boss depends greatly on the quality of the information you start with, but if you're smart about how you work with the information, it can be helpful in giving you a lot more confidence about what land values are in any given area. Contact Local Real Estate AgentsAgain, this is far from a foolproof method, but it does help to “tell the story” of what your subject property may be likely to sell for. It's certainly helpful to look at market data on your computer, but there's a whole other level of value that comes from picking up the phone and calling a few local real estate agents. When I find a local agent that actually has some experience selling vacant lots in the area, I ask them something like this…
This kind of statement tells the agent a couple of things:
As you're having these conversations, pay close attention to the prices they suggest. If they throw out some numbers that clearly aren't going to work for you, now is the time to figure that out (instead of after you've already bought the thing). Another thing to keep in mind is that you might actually want to hire one of these people to list this property in the future. It doesn't hurt to start reaching out and making connections with agents on the front end like this. Their services might actually come in handy. My primary warning would be this: Don't put too much faith in any ONE agent's opinion. There are a lot of clueless real estate agents out there, especially when it comes to vacant land. If you decide to go through this exercise, make sure you're getting input from at least 2 or 3 agents (the more the merrier). Recognizing Hidden ValueIn some cases, the value of a property is a little harder to recognize. On paper, there may not be much value in the property's location, or what it can be used for, but there is still a great deal of value in what is growing on it. Keep an eye out for any value that can be yielded by harvesting timber. If you notice that a property is situated in a densely wooded area, this may be worth investigating further. A professional forestry consultant can help you get an idea of what timber on a piece of land is worth. Also keep in mind, depending on a number of factors, removing trees has the potential to enhance or detract from a property's value and usefulness. In some cases, clearing the land (or choosing the right areas to clear) can make a property more readily usable for development. In other cases, dense tree coverage can foster wildlife and make a property more useful for recreational purposes. RELATED: TIMBER! A Guide to the Harvesting of Trees Another potential point of value is the property's mineral rights (which aren't always automatically transferred to a new owner with the surface rights). Surface rights are exactly like they sound – they are your rights to own and use the surface of the land. Depending on what type of property you own, the surface rights allow you to develop the land in accordance with the local zoning and planning ordinance. Mineral rights apply to anything that exists beneath the surface. This includes coal, natural gas, oil or any other commodity that can be mined. If your land is situated in an area with these energy resources, and if you own the mineral rights to your land, you can either sell them or lease them to an interested party. Both options have their pros and cons, and you can make money by either collecting royalty interest or working interest. It will be up to you to decide which one you prefer. RELATED: What Every Land Investor Should Know About Mineral Rights When a property has value to offer in the form of timber or untapped minerals, this added value oftentimes isn't accounted for simply by looking at the basics like size, shape, location, zoning and similar listed properties in the area. There can real value at stake when a parcel has rich natural resources, and these can present some great opportunities that many other land investors will overlook. An Appraiser's PerspectiveNow that you've heard a land investor's take on this issue, I wanted to dig a bit deeper and get an appraiser's perspective on how they evaluate vacant land. I reached out to Ryan Lundquist (founder of the Sacramento Appraisal Blog and a certified appraiser in the State of California) to get his input on how he would approach the task of valuing land. When it comes to real estate valuations, this guy's word carries a lot of weight, because he is working in this world every day. As a professional appraiser, he understands how to approach this process using the conventional standards that are well-established in the real estate industry. Here is a summary of a Q&A interview we put together on this topic… What are the most important factors you look at to determine the value of a vacant land property?
Let's talk about location, zoning, and topography. Why are these things important? What about these three factors would cause a property's value to go up or down?
In your opinion, is vacant land a difficult type of real estate to value? If so, why?
(Note: When the data is available, this is the kind of visual context that Ryan likes to provide for his clients) When an appraiser nails down the value of a vacant parcel of land, how much deviation (or “lack of reliability”) do you think there is on this number and why?
How much weight and importance would you give to the following factors?The property's assessed value:
The listed prices of similar lots in the area:
The amount of inventory (of similar properties) on the market:
For the typical land investor who is trying to nail down a “ballpark value” of a vacant lot (WITHOUT ordering an appraisal), are there any common valuation mistakes or dangerous misconceptions they should watch out for?
It's An Art, Not A Science.Believe me, I would LOVE to give you a crystal clear approach to valuing land that will always work, every time – but I'm there is no such thing (and if anyone tries to tell you otherwise, I'd be highly suspicious of whatever they're trying to sell you). The fact is – even an appraiser's opinion should be taken with a grain of salt. When we're talking about real estate (or any other product or service, for that matter), the final rule is this:
The data (when available) can give us a halfway decent idea on this, but that isn't something you should be your life on. At the end of the day, the value is mostly contingent on finding the right buyer, for the right property, at the right time. Extracting the most value from any piece of real estate is an art, not a science. When it comes to determining the value of land – the best you can do is perform a reasonable amount of research. Take the time you need to carefully consider the items listed above. Dig up whatever data you can find with tools like AgentPro247, look at other locally listed properties on Zillow and use the best, most unbiased judgment you can manage. At the end of the day, if you're making offers that are low enough, you should be able to protect yourself from most of the inescapable risks of land investing. Due to the difficulty of getting perfect valuations, you should be giving yourself a healthy buffer to help to offset any errors in judgment that you might be making along the way. This is the way I've been doing it for years, and even though I haven't always done it perfectly, I've never gotten in over my head – and that's something most real estate investors can't say for themselves. The post How To Find The “Market Value” of Vacant Land appeared first on REtipster. from https://retipster.com/valueofland/ New real estate investors tend to overcomplicate and overthink their first few investments. However, there are actually only a few core ways that investors lose money. This means that, if you get these few, critical pieces of the puzzle right, the rest usually fall into place as mere logistics. Some of these risks face both flippers and long-term rental investors, while others are unique to one or the other. Though I don’t focus on land or commercial or mobile-home investing in this piece, the same principles apply to them as well. Here are eight big risks to focus on as a real estate investor, along with exactly how you can mitigate each of them. Avoid these risks, and you’re virtually guaranteed to make money on your next real estate deal. For All Residential InvestorsBoth flippers and long-term, buy-and-hold investors face these two risks, so no matter your strategy, don’t fall prey to these two missteps. 1. Underestimating Needed RepairsUnless you buy turnkey rental properties, you will likely find some repairs or updates are needed when you buy an investment property. After all, forcing equity is a real estate investor’s bread and butter. Repairs could range from minor cosmetic retouching (a paint job, fixing a backsplash, etc.) to a complete gut and renovation. When you evaluate a potential property for purchase, one of the most crucial jobs you assume as an investor is accurately estimating repair costs. Once, on my second day into a renovation, I got a call from my general contractor saying the framing in my unit had rotted behind the walls and much of the house would need to be reframed. The total cost of this fix? A whopping $10,000. While that house was intended as a flip, I ended up keeping it as a rental because I would have lost money had I sold it. But, because I hadn’t prepared for renting as a contingency plan, the cash-flow numbers were ugly. I still ended up losing money on the deal in the end. I'm certainly not an outlier in this situation. Most seasoned real estate investors have a story like that from early in their career. MitigationFirst, include a contingency clause in your contract allowing you to withdraw from the deal – with a full deposit refund – if the home inspection reveals unknown issues with the property. (Read more about how to exit any bad deal here.) Next, find the most thorough, nitpicking, anal-retentive home inspector in your local market, and send them in post-haste. Be sure to also walk through the property with at least a few trusted contractors for their opinions on needed repairs. Ask them probing questions about what issues may not be visibly obvious, but nonetheless need addressing. Wiring, framing, plumbing, ductwork, the furnace, the roof, the hot water heater, the air conditioning condenser — do the best inspection you can of each, and get opinions from your Realtor, home inspector, and contractors. Also, be sure to ask the seller about the age of each of the above, as they may be able to provide details. Just make sure you corroborate their word with expert opinions and invoices (if available). One useful mobile app for real estate investors is Property Fixer (available only on iPhones, iPads, and Macs). Another way to estimate repair costs is through HouseFlippingSpreadsheet.com’s free downloadable estimator tool: The same company offers a web-based tool if you prefer to use it on the go. 2. Overpaying Contractors for RepairsBeyond the risk of underestimating needed repairs, there’s also the risk of being ripped off by contractors even when you accurately diagnose which repairs are needed. Contractors are notoriously difficult to work with, and finding trustworthy, affordable, reliable contractors is an enormous challenge for many real estate investors. As difficult as it is to screen, hire, and manage contractors in person, it’s exponentially harder when you’re investing long-distance. Unscrupulous contractors love to find ways to upcharge you over the course of the renovation:
It’s classic bait-and-switch, where they attract your business with a low contract bid, then find ways of charging you more once you’re committed to them for the project. MitigationAlways, always, always get at least three quotes for any significant repairs at your investment properties. Beyond quantity of quotes, improve the quality of your quotes by building relationships with contractors whom you trust over time. Try new contractors on small jobs first, and, if they do good work on time and on budget, then you can try them on a slightly larger project, and so on. Trust takes time to build — especially when you’re working with assets worth hundreds of thousands of dollars. When asking for a quote, make it clear that you expect all contracts to be completed on budget and on time. Also, ask contractors if they are aware of any risks of surprises in the investment property/properties in which they conduct work. If they respond that there is a risk, ask for specific details and the potential extra expense in a worst-case scenario. Ask for second and third opinions from other contractors, to see if they agree with the main contractor you've employed. Then, do whatever you can to minimize the risk of extra expenses, and make sure that even in the worst-case scenario you will not lose money. Before signing a contract, get your Realtor’s opinion on the contractor’s pricing and timeline. If they approve, ask at least one other local real estate investor their opinion. Always verify contractors’ references, view their previous work, and check other clients’ reviews on websites like AngiesList.com. Here's how you can use Angie's List to do more research on your contractor: Once you’ve signed a contract, stay in daily contact with your contractor. Visit the work site at least three times each week and inspect the quality of the work. Voice any concerns immediately with the contractor in a professional but firm way. It’s your project, and you are ultimately responsible for making sure that all repairs are completed well, within your budget constraints, and by the agreed-upon time frame. For FlippersThe above tips apply to nearly all residential real estate investors. But, what are some unique ways that flippers lose money (and ways they can avoid doing so)? 3. Overestimating ARVIf you overestimate the after-repair value (ARV) of a property you flip, you’ve set the stage for losing considerable amounts of money. You must not, under any circumstances, overestimate the ARV. Without an accurate sales price, your profit goes from being a mathematical forecast to being anyone’s guess. If you buy a property for $50,000, put $25,000 of repairs into it, and expect to sell it for $105,000, only to miss the mark and end up selling it for $80,000, you will lose money. That’s because you’ll still rack up soft costs – more on those shortly. MitigationIt’s easier than ever before to research comparable property sales (comps) and estimate current and post-repair property values. Start with Zillow as a free, easy tool: Remember: The less similar and the older that the comp is compared to your property, the less reliable it is. A condo with the exact same floor plan, in the same condition, that sold last month in the same condo community is a very accurate comp that you can use confidently. Find a house that’s vaguely similar, a few miles away, and in worse condition than your property? You’ll need to factor in more wiggle room. To handle the risk inherent in calculating the ARV, set three numbers:
These numbers can serve as a guideline for you and a reminder that you are working with probability, not certainty. Your ultra-conservative, worst-case-scenario ARV? Make sure that doesn't leave your profit in the red. With luck, the property will sell higher than your target … but professional investors don’t bank on luck. 4. Underestimating Soft CostsIn the property-flipping game, soft costs are every expense other than direct renovation, material, and labor costs. Soft costs include closing expenses (for both the purchase settlement and your second closing to sell), lender fees, interest, utilities, taxes, insurance, and any other costs you incur along the way. Note that some of these expenses are carrying costs you incur every month you own the property. The longer you own a property, the higher your soft costs and the lower your eventual profit. That’s why it’s so important that contractors finish the job not only on budget, but also on-time. MitigationThink of soft costs in three categories:
Your one-time purchase costs include expenses like the appraisal, the home inspection, lender points/fees, title costs, and property insurance. Get a good-faith estimate of closing costs from your lender, and add some padding to the estimate to be on the safe side. When calculating your monthly carrying costs, be sure to include loan payments, utilities (e.g., gas and electric), water, and property taxes. Unlike many homeowners’ insurance policies, investors’ insurance for flips is typically not refundable on a pro-rated basis, so it is not a monthly carrying cost, but rather a one-time purchase cost. Your largest cost at the eventual sales settlement is, of course, your Realtor’s commission, but check to see if your Realtor charges any additional fees as well. Also, ask your Realtor about any other settlement costs that are likely to fall to you at this second settlement. One mobile app that can help you estimate both renovation costs and soft costs is REI Estimator Pro for Investors (note that, after a free trial period, it costs money). For a free online alternative, try out RealMarkits’ flipping calculator. Just as underestimating repair costs can ruin your returns, so can underestimating soft costs. Flippers’ profits depend on accurately forecasting two things: expenses and ARV. Get these numbers right, and you will earn predictable, strong returns. Get them wrong, and you could be in for months of stress followed by thousands of dollars in losses. When in doubt, estimate on the high side for expenses and the low side for ARV. For Long-Term Rental InvestorsLike flippers, long-term, buy-and-hold investors face their own unique challenges. Here are the most common ways these individuals tend to lose money. 5. Overestimating RentsJust as flippers run the risk of overestimating ARV, rental investors risk overestimating rents. Missing the mark by $100 can mean the difference between a moderate return and monthly losses. You must get rents right when forecasting a property’s cash flow. MitigationThe same tools that help you estimate property value can help you estimate rental rates. Check local comps using tools like Zillow. Here's a quick example of what Rentometer's free service provides: You should also use lower-tech tactics to review comps, as not every rental property lists on Zillow. Start with oldie-but-goodie Craigslist to review other local rental listings. Also, check local circulars and newspaper classifieds, and then go walk the neighborhood looking for for-rent signs. Put yourself in the mindset of a prospective renter. For instance, attend a few open houses of comparable properties listed for rent. How do they compare to yours? Your goal is to get a gut-level understanding of local rents. Lastly, don’t count on rent appreciation. Rents nearly always rise over time, but “nearly always” is not the same as “always,” and you never know when a recession will knock rents down a few pegs. 6. Underestimating Rental ExpensesNearly every new landlord underestimates the costs of owning and managing a rental property. Doing so often leaves them with negative cash flow and a sour taste in their mouth for landlording. Here are some of the expenses you can expect to encounter as a landlord, along with common ratios:
These vary widely, of course. In lower-end neighborhoods, expect these expenses to be higher. As a general rule of thumb, the “50% Rule” is surprisingly accurate, stipulating that around half of the rent will go to non-mortgage expenses. You will, of course, have to factor in your mortgage payment as well if you buy with financing. MitigationBy doing your homework, you can pull together accurate estimates for every expense listed above. Start by speaking with other landlords and property managers who work in the same neighborhood, and ask about vacancy rates. You can also look up vacancy rates on Moving.com, but only down to the level of ZIP code, not the exact neighborhood: You can (and should) have a specific property manager in mind, even if you plan to self-manage. Know their pricing, and, again, even if you intend to self-manage, budget for management. It’s a labor expense, regardless of whether you’re doing the labor or someone else handles it for you. To ignore it is to discount all the work that goes into managing rental properties. Older properties will need more major repairs, so budget accordingly. Keep in mind that preventative maintenance can significantly reduce your long-term repair costs. When checking the property taxes, don’t just look at last year’s tax bill. Make sure that the assessed value will not dramatically change based on the transfer. If it will reset, calculate the new tax bill based on your purchase price. Get a custom quote for property insurance too. We include a free rental property calculator on SparkRental, to help you calculate cash flow, ROI, and include mortgage and interest expenses. Here’s a quick video showcasing how to use it: Like every other property-related expense discussed in previous sections, be conservative and estimate on the high side. 7. Unpaid Rents & EvictionsFew things ruin a landlord’s returns faster than rent defaults and evictions. I’ve had nightmare tenants cost me tens of thousands of dollars. It’s a reality of rental investing, and a significant risk, as you’re entrusting an asset worth tens or hundreds of thousands of dollars into the hands of a stranger. Don’t expect sympathy from judges. Most state and local landlord-tenant laws are designed to protect tenants more than landlords, and that goes double for larger cities. It literally took me 11 months once to remove a tenant from my property. The entire time they lived rent-free, using every loophole in the law to postpone eviction. Read up on some of the other options to get rid of bad tenants, and you’ll notice that none of them are particularly fast or cheap. MitigationThere’s a simple way to avoid bad tenants: thorough, aggressive tenant screening. The problem is that it’s work – a lot of work, if you do it right — and most landlords just don’t feel like putting in that work. Collecting rental applications and running tenant screening reports is the easy part. We offer it free of charge to landlords, as do some of our competitors. Here’s how you can run tenant screening reports in 90 seconds or less: But the real work starts after those reports come back to you. First, set aside a few minutes per applicant to read their rental application, credit report, criminal report, and eviction report in detail. Those latter two should be quick, as they hopefully don’t include any hits. If the applicant still looks promising, pick up the phone and start calling past and present landlords, employers, and personal references. Follow these steps to steer clear of horrible tenants. Note that you don’t need to be local to do any of this. You can screen applicants and manage your rentals from anywhere on earth. 8. Tenant DamageIt’s worth reiterating: When you sign a lease, you hand over possession of an asset worth hundreds of thousands of dollars. Anything can happen from that point forward. Tenants can throw raging parties, leave the heat off when they go on a two-week ski trip in January, or punch through every single cabinet in the kitchen (that last one actually happened to me once, unfortunately). MitigationAgain, landlords can prevent tenant damage through aggressive tenant screening. When you contact present and former landlords, ask specifically about how well the tenant treated their property. Specifically, ask about their cleanliness and conscientiousness — but don’t stop there. As a final step in the tenant-screening process, go and physically inspect the tenant’s current home, and give them as little notice as possible. You want to get a snapshot into their daily life, because you can be sure the way they treat their current home is exactly how they’ll treat yours. If you can't do that for some reason, walk them to their car and peek inside. Most people treat their car the same way they treat their home. Include in your lease agreement a clause specifying semi-annual inspections – and actually perform them. That serves two purposes:
As noted, it can be a time-consuming task to perform these inspections, but the risk of not running them outweighs the hassle of actually doing so. Final WordNone of the above is particularly difficult. Yet, new real estate investors get it wrong all the time and lose thousands or even tens of thousands of dollars. Why? Because all of the mitigations outlined above take work. This isn’t your 9-to-5 job where you have a boss standing over you and specifically telling you to do this due diligence. As a real estate investor, you’re the boss, and if you choose to rush your tenant screening or ARV analysis so you can spend your Saturday with your friends and family, no one will reprimand you (or even remind you, for that matter). You’ll just lose money on your real estate deals. And then, you’ll yell and scream and curse the “market” or “those evil tenants” or real estate in general as being a risky investment, when in fact it was you who failed to put in the hard work. Direct real estate investing is not passive. If you want passive exposure to real estate, buy into an REIT. If you want to earn excellent returns from real estate, focus on avoiding the pitfalls above, and you’ll find that it’s virtually impossible to lose money as a diligent real estate investor. What are your greatest fears about investing in real estate? Have you had any bad experiences with the risks above?The post 8 Reasons Your Real Estate Business is Hemorrhaging Money (and How to Stop It) appeared first on REtipster. from https://retipster.com/8-money-losing-mistakes-real-estate-investors-make/ Statistics show that 7 out of 10 Americans are signed up on a social network. And today’s real estate professionals realize that this online interactive platform is a powerful tool at their disposal – one that’s literally often already in the palm of their hand. Here are three important ways you can use social networks to boost and improve your business:
Looking to boost your business with an improved social media presence? Contact the internet marketing experts at Agent Image. From setting up your profile on platforms like Facebook, Twitter, and LinkedIn to managing your posts on a weekly basis, we have the right social media solutions best suited for your needs. We look forward to having a productive conversation about your goals and strategies! Call us today at 800.979.5799. The post 3 Ways to Boost Your Online Reach Using Social Media appeared first on Best Real Estate Websites for Agents and Brokers. from https://www.agentimage.com/blog/3-ways-to-boost-your-online-reach-using-social-media/ Most real estate investors rely on direct mail in a big way. While it's certainly not the only way to find great real estate deals, it's one of the most widely-used marketing mediums that delivers any kind of consistent, predictable results. In this episode, we talk with Brian Kurtz – an offline marketing expert (among many other things) who happens to know a lot about direct mail. While most of his past clients have not been real estate investors per se, there are many parallels and “best practices” that apply to everyone in the direct mail trade. Brian shares with us some of his thoughts, opinions, and experience on how to get results with direct mail. Even though we didn't see eye-to-eye in every aspect of this conversation, I think you'll walk away with some new insights that are worth thinking about nonetheless. You can see the video of our conversation here: Links and Resources
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Thanks again for joining me this week. Until next time! Right-click here and “Save As” to download this episode to your computer. The post 034: What REALLY Affects Your Direct Mail Results – Interview w/ Brian Kurtz appeared first on REtipster. from https://retipster.com/034-what-really-affects-your-direct-mail-results-interview-brian-kurtz/ Are you ready to make it big this 2019? Now that the holiday season is long over, it’s time to get to work on the things that really matter for your business. To help you start the year on the right foot, we looked at the latest trends in the marketing and design industry. The result? Five tips on how you can improve your real estate website, and your overall business this 2019. Let’s get started.
The post Real Estate Website Must-Haves for 2019 appeared first on Best Real Estate Websites for Agents and Brokers. from https://www.agentimage.com/blog/real-estate-website-must-haves-for-2019/ Have you ever wondered what a parcel of vacant land is worth? And no, I'm not talking about what the seller or their listing agent has it listed for – but what it's ACTUALLY worth. If you're in the land investing profession, you probably know this is a dilemma we've always had to deal with. And it's a BIG problem. Why? Because the conclusions you draw about property's value will affect everything else in the process…
The way you determine a property's “market value” is an extremely important and influential part of how your business ends up working. If you get this part wrong, everything else falls apart… so how can you come up with a solid, educated, reasonably accurate valuation for vacant land? How can you NOT lose sleep at night, wondering if you made a huge mistake offering too much or overpaying for a property? A Complex IssueFinding the value of a vacant lot may seem straightforward, but the issue is anything but simple. Unlike most types of real estate (houses, multi-family properties, commercial retail, farmland, industrial, you name it), vacant land is a VERY challenging type of real estate to value, because:
In almost all cases, we have very little information at our fingertips, which makes the process extraordinarily difficult. Heck, most professional appraisers don't even know how to do this with any real accuracy – so how are YOU supposed to figure it out?? New Developments in the IndustryNow, I've noticed over the past few years as I've been perusing for “comps” (if you can call them that) on sites like Zillow, these online platforms have started to show a lot more “sold” comps in the various markets they serve. I remember back when I got started in the land business, these sites used to show practically ZERO sold comps in each market, so the fact that we're able to find more information is a big step forward. Of course, this doesn't fix the problem, but it does give us a lot more data to work with. There have always been plenty of “For Sale” properties in most markets. These numbers aren't nearly as reliable valuing land (because it's just the seller's opinion, which is almost never based in reality) – but they do give us a vague idea for what people think their properties are worth, and we can compare these numbers to what properties are actually selling for on a per-acre basis, and figure out how much variation there is between the two. With all the new data we have available now, it's becoming more and more feasible to look at the information in each market and draw some vague (at best) conclusions about what properties are actually selling for and how those numbers fluctuate based on property sizes, and which towns and subdivisions they're in. But even though the information is there, it still takes a lot of time to look at the numbers and draw any real, accurate conclusions from what the data is saying (and if you're not a very analytical, left-brained person, then just forget about it). Introducing: Price BossNot long ago, my friend and fellow land investor Howard Zonder told me about a new pricing and valuation tool he's been working on for the land business. He showed me how it worked, and he said I could play around with it for free (mainly, so I could tell YOU about it), and after using it for a few days, I think it's kind of a big deal, and it could be a MAJOR help to other folks in the land business. This video gives a high-level overview of how it works… Note: You can get a $100 discount if you use coupon code RETIPSTER during the checkout process (as noted in the video above). While I can't claim to be a Price Boss Expert yet, I have had a chance to run through several valuations and get a good feel for what it can do. All things considered, this calculator is an amazing piece of work. At the time of this writing (early 2019), I haven't seen any other tool that even comes close to what Price Boss can do. Granted, the quality of information this calculator puts out is only as good as the data you put into it (the same way any calculator works). The more data you can feed into the front end, and the more “random” that data is from your market, the more accurate and reliable your results will be. I don't think you'll ever get to the point of having 100% guaranteed accuracy… but you can do a much better job of closing the “gap of uncertainty” when you have something like this at your disposal. Also note – this video review is very high-level in nature (I skipped over all the details on how to work with Craigslist, LandWatch and other websites. If you want to see even more details on what this thing can do, Howard has several tutorials that explain more about how the calculator works (he'll get into a lot more of the tidbits that I don't have time to mention here):
Pros
Cons
As I was using Price Boss, there were several little tweaks and improvements I suggested to Howard (many of which he made almost immediately)… but if there's one thing missing that I think would be a HUGE help, it would be for the tool to have a way to track the difference between what properties are selling for on a per acre basis and what properties are listed for on a per acre basis. Of course – you can do this yourself by looking at the number manually (that's what I've done for years), but if Price Boss had this functionality built into it, this would make it MUCH easier to figure out what discount rate should be applied to all of the For Sale properties (so those numbers aren't skewing the rest of the data one way or the other), and it would save users a ton of time too. PricingPrice Boss is currently available as a Lite version and a Pro version. The Lite version is a $47 one-time payment and it comes with none of the LandSpeed integration and none of the web-scraping capability (which, honestly, is where most of the value is). The Pro version is a $497 one-time payment (or $397 if you use coupon code RETIPSTER at checkout) and it comes with all features unlocked (I'm using the Pro version in the video above). There's a free trial with each version, so you can give it a whirl before you pay for it, to make sure you actually know how to use it. Both plans also come with a $20/mo subscription that will give you access to support and product updates. You'll have to sign up for this by default, but you do have the option of opting out (if you're someone who hates spending money). Final OpinionUltimately, I think Price Boss gives users the ability to come up with much more accurate, reliable, data-driven pricing and valuations based on the size and subdivision/city split. This is WAY more dynamic than just offering $____ (insert your favorite shoot-from-the-hip number) per acre for everything in a given county, regardless of size or location. There are always huge variations in what identical-sized vacant lots will sell for, even within the same county, and if you just sent out a flat number-per-acre on a county-wide basis, you're going to throw away a lot of deals. Of course – you can still do it this way, and you'll probably still get deals (this is how most people have sent blind offers for years, and it works)… but there's a good chance you'll get a lot MORE deals if you improved this part of your process. While it does require a bit of learning, this really is the most well-made calculator I've ever seen in any niche of real estate investing, let alone the land business. It offers a great deal of help in dealing with a very real problem that all land investors have to deal with. Every other land valuation method I've seen to date (talking to realtors, looking at dozens of comps on Zillow MANUALLY, even getting an appraiser's opinion) only gets you part of the way there at best. I honestly think this does a better job than even most appraisers would do – because (as most appraisers will tell you), they have very little data and don't have any real solid basis on how to come up with values for most parcels of land. I wouldn't say Price Boss gives you 100% certainty either, but it gets you a heck of a lot closer, with the ability to utilize a lot more quality information in an organized fashion than all the other methods will. Have you had any experience with Price Boss? What did you think about it? Let us know in the comments below!The post How Much Time Could This Save You On Valuing Land? appeared first on REtipster. from https://retipster.com/pricebossreview/ In this next stage of our real estate wholesaling series, I’m going to teach you every trick in the book about how to sell your inventory fast as a real estate wholesaler. Dispositions — or the action of distributing or transferring property to someone — is the activity in which wholesalers sell off their inventory. In Part 3, we covered all things Acquisitions, which is the aspect of buying (or acquiring) inventory. Specifically, we detailed how to find motivated sellers and analyze deals (so you’ll want to check that out before continuing here). Dispositions are actually my personal area of expertise, as I was the head of this department for nearly three years at Simple Wholesaling, a company that bought and sold an average of 28+ properties per month (at least while I was there). Today, I’m going to show you how to find buyers, market your properties for sale, and break down your entire work process into a simple checklist. Dispositions for the Different Methods of Real Estate WholesalingIn part two of this blog series, I broke down how there are three primary ways to conduct business as a real estate wholesaler.
Each method has a different set of restrictions as to what degree you can market your properties. So, for the sake of this article, I’m going to solely focus on Dispositions from the perspective of a Traditional Close. Bonus: Get a FREE copy of the INVESTOR HACKS e-book when you subscribe! Success requires decision and actionThe market moves fast. Stay ahead with the latest tips in low-risk, high-return real estate investing for your business. The traditional close offers the most freedom when it comes to marketing inventory, so using this method as our primary example will provide the most depth on the subject. At the end of the post, I’ll also highlight the biggest restrictions of the other two methods, so if you choose to use one of them instead of the traditional close, you’ll be well prepared to do it successfully. Finding the Right Buyers as a Real Estate WholesalerThe most important aspect of selling inventory as a wholesaler is having a solid buyers list. One of the major benefits of wholesaling as a business strategy is that in many cases, your buyers will be repeat customers. Roughly 80% of the inventory we had at Simple Wholesaling was sold to the same three people every month! Your buyers list doesn’t have to be massive to be effective — you just need buyers who know, like and trust you, and whose business is large enough to buy several properties on an ongoing basis. Your buyers list doesn’t have to be massive to be effective — you just need buyers who know, like and trust you, and whose business is large enough to buy several properties on an ongoing basis.Click To TweetThere are three ideal “buyer types” to look for:
Buy-and-hold investors are typically the least frequent purchasers among the three, but they make the cut because they’re always expanding their portfolio. You may find a few who will buy every month, but it’s more common to see buy-and-hold investors buy every two, three or even six months. Rehabbers (also known as “Fix-and-Flippers”), are GREAT customers to find because they’re always trying to do more and more flips, and if they can outsource the headache of having to find great deals to you, you’ll become a great asset to their business. Rehabbers typically buy monthly, if not weekly, depending on the size of their operation. Turnkey companies are the BEST customers to find. You could literally base your entire business on “reverse” wholesaling to a handful of turn-key companies, and you’d be set. In case you don't already know, a turn-key company is a one-stop solution for outsourcing all things related to buy-and-hold investing. They find the deal, rehab it (sometimes just partially, to get the property in good working order), get it rented and manage it. All their buyers have to do is give them money for the purchase (post-rehab), and then the turnkey company will handle the rest. The returns aren’t as good as if you managed the process yourself, but, as an example, in Indianapolis, I knew of several turnkey companies that would routinely provide 12-14% ROI for their customers, which is pretty good — and it’s hassle-free for the end buyer. If you can find a solid turnkey company, master their criteria and start finding them investment properties, you’ll have all the business you could ever want! These guys buy A LOT. Our top buyer at Simple Wholesaling (which was a turn-key company) would sometimes buy 15 – 20 properties at a time. Another great thing about these buyers is that they typically spend more and are less picky when it comes to inventory. Why? Because they can get great deals on rehab costs with the huge volume of properties they work with. 6 Ways to Find Buyers as a Real Estate WholesalerNow that we've covered what kind of buyers you want to target, let's explore how you actually find them and begin sending them opportunities. There are six major ways to find buyers, so let’s dive into each one individually. 1.Networking at Local MeetupsThere are a TON of real estate investor networking events in almost every market (if there isn’t one, then be the guy or gal who starts it — you’ll instantly be seen as an authority figure). Whether it’s people from BiggerPockets, REIAs, Eventbrite, Meetup, or Facebook Interest Groups, a quick Google search will show you a list of events you can attend. Once you go, ask around for what event (or events) is known as the one where all the “real players” go, and then simply start attending that one on a regular basis. You can also ask who the major buy-and-hold investors, the main rehabbers, and the biggest turn-key companies are in the market — there should be plenty of people who will know.
When you finally bump into an ideal buyer, do not promote yourself. Rather, simply ask about their business, their buying criteria, and their biggest pain points. Then, once they have shared, finish the conversation with:
If they say yes, they’ll likely have a business card of some kind, and you can manually add their contact details to your buyers list (even if it’s just an excel spreadsheet). 2. Buyer-Facing Direct MailIn the same way that you market using direct mail to find motivated sellers, you can use direct mail to find motivated buyers! There are a couple of different data providers out there that can grant you access to recently sold properties. This is massively beneficial because once this data is obtained, you can pull a list of recent cash-buyers who bought around the particular property you're looking to sell. Being a licensed real estate agent and having access to your local MLS is probably the most direct way to accomplish this, but there are third-party data providers that can provide this to you for a fee (like DataTree, for example). Here's a tutorial on exactly how you'd use it:
We’re into real estate investing. We’re also into keeping it real.That’s why we wanted you to know that some of the links in this post are connected to our sponsors — but the real-world guidance is all REtipster. Related: The Real Estate Investor's Guide to Building a Buyers List 3. Branding YourselfYour reputation is the lifeline of your business. If you don’t have a good reputation, then arguably, you don’t have a viable business. There are a number of different things you can do to establish your brand: Things like starting a blog, a podcast or a YouTube channel can do wonders in terms of helping you stand out from the crowd. At Simple Wholesaling, we did all of the above (and more). We joined speaking panels, contributed to the blog at BiggerPockets, established our own monthly meetup, and networked with any and everyone we could… and it worked! To this day, in the real estate investing world of Indianapolis, you won’t go very far without running into the name Simple Wholesaling. The key is to get out there and provide value to as many people as possible. In return, people will talk, and sooner or later, you’ll get a reputation for being trustworthy and reliable. When people hear word-of-mouth from others that you’re the real deal, you’ll get buyers from all over the place! I can remember at least three recurring customers from California that found Simple Wholesaling through BiggerPockets or through the Simple Wholesaling podcast. Branding is a long-term play. You won’t see results immediately, and it can be hard to quantify and track, but in the end, establishing a name for yourself is the most powerful thing you can do to for the long-term success of your business. 4. Working with Real Estate AgentsAnother fantastic source of buyers is real estate agents — or at least, those with investor clients. Even though they are few and far between, there are typically a handful of investor-friendly agents in every market. If you find one, establishing a working relationship can be fantastic for your business. Yes, you might have to pay out commissions, but if you continuously have properties for their clients who are actively buying, a lot of the time, you can work out a deal to lower their commission, due to the fact that they can count on ongoing transactions with you. When it comes to working with real estate agents, don’t side-step them and work directly with their buyers. This is a fast way to ruin your reputation! Think of the real estate agent in the same way you would your buyer, and add these agents to your buyers list. They will, in turn, send these properties out to their buyers. 5. Putting Up Signs In Front of (and Around) Your PropertyAnother great way to get buyer leads is by simply placing bandit signs in the front yard of your property and at the entrances of the neighborhood. These signs can be handwritten and simply say something to the effect of:
You’d be shocked at how effective a little yellow sign can be. Local investors will call you all day long asking about properties, and each time they do, you can ask them to join your buyers list. 6. Advertising Your Properties Over TimeThe final way to find buyers as a real estate wholesaler is to be exceptional at advertising your properties. In the next section, I’m going to cover exactly how you can do that. For now, though, the point I’m trying to make is that with all of your advertising efforts, you need to have a clear call to action for them to join your buyers list. Then, you need to have a system in place where it’s easy to keep track of everyone who decides to do so. There are a number of different software providers out there who are designed to help you do this. Two solid options are MailChimp and Constant Contact. The most basic thing you can have is a single-page website called a “landing page” or a “squeeze page” that has an opt-in for an email, and then your email service provider will take care of the rest. RELATED: How to Build a Squeeze Page for Your Real Estate Business How to Be Exceptional at Marketing Inventory As A Real Estate WholesalerRemember when I said I would break down the entire dispositions work process into nothing but a simple checklist? Here you go (and yes, you can download it as a free PDF below):
Subscribe for FREE download!100% Privacy. NO SPAM. Unsubscribe at any time. You have Successfully Subscribed!Marketing Phase One:
A) The first thing we want to do is prepare the property for sale. Sometimes, you’ll need to clean it out if there is a lot of junk left over from the former owner, but take note this is not a deep clean. These are distressed properties, so the only reason you’d clean it out is if there was so much trash and junk that your buyers couldn’t clearly see what kind of work needed to be done when they did their walkthrough. Next, you’ll want to place a lockbox on the property (assuming that it’s vacant). At Simple Wholesaling, we set up the same lockbox code for all of our properties so that buyers could easily help themselves in and out of the properties. This saved us a considerable amount of time because we no longer had to meet the buyers in-person to show the property (unless it was tenant-occupied). On the rare occasion that this gave us some problems, all we had to do was change the lockbox combo and inform the new buyer leads that the code was different for this property. After that, you’ll want to put up your yellow bandit signs in front of the property and at the neighborhood entrances (I recommend at least three signs per property, as a general rule of thumb). B) & C) Once this is set, you’ll want to take professional pictures and, if you’re able to, conduct a video walkthrough of the property, even if it’s just with your cell phone. Having great pictures and a video of the property will immensely help your buyers and make you stand out from the crowd. At Simple Wholesaling, there were many properties we sold based solely on the pictures and video, sometimes without the buyer ever stepping inside the property! RELATED: Virtual Tours – a Simple Way to Sell Your Property FAST There are some restrictions on this with tenant-occupied properties. Sometimes, they’ll let you take pictures and do a video walkthrough, but other times they will not. Do the best you can, but tenant-occupied properties are always a lot more hands-on, so just be prepared for that. D) Next, you’ll want to create a property sales presentation. This is a PDF that highlights all of the relevant information of the property. It shows the pictures, the bed/bath ratio, comps, parcel maps, and more. Let’s jump on the computer, and I’ll walk you through how to create one through a website called Canva: Marketing Phase Two:
A) After we’ve prepared the property for market, we now want to give preference to our best buyers. Let them have the first option to buy. These are the folks who buy from you every single month — those who know, like and trust you and are a pleasure to work with. Master their criteria, learn their birthdays and special events. Send them Christmas presents and free tickets to ball games -- spoil the heck out of them! Because of the 80/20 Principle, these guys are truly the lifeline of your business, so you want to keep them happy for years to come. Send the video walkthrough and property sales presentation to these buyers first, before you even upload it to your website. B) If your top buyers aren’t interested (or they’re dragging their feet to get back to you), upload the sales presentation and the video walkthrough to your selling website. Having a site that clearly displays all of your inventory in one place is one of the best things you can do as a real estate wholesaler. It makes it so convenient for your buyers to work with you, and most wholesalers don’t do it. I remember buyers telling me that they thought our prices were a little higher than most wholesalers, but when they could make the numbers work, they’d still prefer to work with us because of how easy it was. They could run all their initial due diligence just by going to the website, even before they called us! The easier you can make the buying process for your clients, the more you’ll sell. C) After you’ve uploaded the new property details to your site, you’ll want to conduct an email blast to your entire buyers list. Sometimes, you won’t hear from people who are on there for years, and then, all of a sudden, they’ll pop up out of nowhere and want to buy a property. I suggest sending out an email blast once or twice a week — with the main objective of highlighting all of your inventory, with the newest ones at the top. Marketing Phase 3:A) Post an Ad for the Property on the Following Platforms:
A) This is pretty self-explanatory. After you’ve sent the property details out to your buyer’s list and uploaded it to your website, it's time to start posting ads for it everywhere you can online. With each ad, you’ll want to give people a call to action to join your buyers list. It can be as simple as saying, “Check out more inventory by visiting our website,” and having your site host a very clearly displayed opt-in box saying, “Join Our Buyers List!” RELATED: 50 Websites to Post Your Real Estate Listings for FREE Certain ad platforms won’t allow you to post links to other websites (like Craigslist, for example). If that’s the case, when people call in, you’ll want to frequently ask if they’d like to join your buyer’s list and add them manually. Being licensed really helped us thrive at Simple Wholesaling. There were times when sales from the MLS were what saved us from losing money for the month. Retail agents can sometimes be annoying to work with, simply because they’re ignorant of the way investors think and sometimes the MLS itself might try and police what you can and cannot promote on your website. Overall, though, the pros far outweighed the cons. I’d highly recommend getting your real estate license as a wholesaler. RELATED: Should Real Estate Investors Get Their Realtor's License? The Restrictions Of Wholesaling Through AssignmentsWhen you wholesale through assignments, you enter into a purchase agreement with a motivated seller and then turn around and sell the buying rights of the contract (i.e. – selling the paper itself). Some wholesalers will intentionally try to keep their sellers in the dark about the mechanics of how the deal works, so they don’t get freaked out and back out of the deal. I strongly suggest you not handle your deals this way, because when you’re open with the seller about the fact that you’ll find an end buyer, they’ll typically be much easier to work with and will allow you to do many (if not all) of the things mentioned above. When you wholesale a property through an assignment, you'll be much more limited in what you can do to market the property. Here is a list of five restrictions you’ll face when wholesaling through assignments, especially if you're keeping the seller in the dark:
The only thing I could see you doing is making a basic sales presentation using only the data you can gather online and sending it out to your buyers list. You might get away with a Craigslist ad here or there, but again, there is a big risk if the seller sees it. This still could work as a business model, especially if you had only one or two major buyers who understood assignments, but you’ll be facing a significant amount of limitations all the same. One suggestion I’d make, if you go with this method of wholesaling, is to consider having a website that requires user logins. If you have a password-protected login for buyers to view your inventory, then you’d still be able to have a centralized place to display your properties, but people who are not on your list won't be able to see the inventory (including your seller). Again, I don’t recommend this, I think if you’re going to wholesale through assignments, you might as well become a real estate agent who specializes in working with motivated sellers, establish a listing agreement with them, and then market to investor-buyers. This way, you can still get the perks of not having to put your money in the deal, while still being able to do all of the above-mentioned marketing activities. You could then simply negotiate a higher commission and ask for the buyer to pay for it. Most investors wouldn’t mind this because it’s essentially the same thing as an assignment fee, just structured differently. RELATED: Wholesaling Made Simple! A Comprehensive Guide to Assigning Contracts The Restrictions Of Wholesaling Through A Double CloseWhen it comes to wholesaling through a double close, the restrictions are very similar to wholesaling through assignments. Again, to recap, a double close is where you enter into a purchase agreement with a motivated seller and then arrange for the end buyer to fund BOTH the transaction between you and the seller, and between you and them – and this all happens simultaneously at the closing table.
The nice thing about a double close is that the end-buyer doesn't have to know how much money you're making from the deal, whereas with assignments they do. The big key in all this is transparency and permission. If you can properly frame the mindset of your seller by being honest and upfront about what's happening, you can get a lot of permission to do what you need to do to market the property. But please: Don’t EVER do something without the permission of the seller! Many wholesalers do, and it makes all of us look bad as an industry. If I were wholesaling through assignments or a double close, I would clearly explain the situation to the seller by saying something like:
If you frame it this way, and they agree, asking them to do any of the above-mentioned marketing activities would be a no-brainer because they know you’re trying to find them a buyer. Again, it’s probably cleaner to do this as a real estate agent, but if you don’t want to disclose your profit margin to your end-buyer, doing a double close might be the route you want to go. In the next article, we will cover the final business department: Transactions. I’ll give examples of what contracts you need for all three methods of wholesaling, what you need to be aware of when it comes to closings, what to looks for in a good title company and more. See you next time! The post The Ultimate Beginner’s Guide To Wholesaling Real Estate (Part 4) appeared first on REtipster. from https://retipster.com/wholesaling4/ |