Is is smart for more house flippers to be seller financing their deals to retail buyers?

The latest figures from ATTOM Data Solutions’ house flipping report shows that flippers are down to a record low number of deals, only around 65% are using cash for their deals, and it is now taking over six months to turn the average flip. With this in mind, many house flippers could find offering seller financing on their resale properties helps a lot.

Rather than getting easier, there could be more difficult in obtaining home loans for end buyers ahead. Offering to hold the mortgage, do wrap around deals, or short term lease options could all help.

For a start, it can dramatically speed up the resale. Instead of sitting on the market for six month collecting dust, and going down in value in the perception of buyers, advertising seller financing could lead to a very fast resale deal.

Higher resale prices are another reason to consider this strategy. The types of buyers who are most likely to take these offers are not as price sensitive. They know there is a trade off in price versus terms. They are more worried about the ease of getting in, and the monthly payments.

In taking a seller held mortgage, investors are creating a new flexible paper asset. It can be held for ongoing passive income, sold quickly for cash, or a combination of both.

As a wholesaler you may be able to afford to do this if you are buying super cheap assets, say $4,000 to $40,0000. Or connect your flippers you are selling to with rehab lenders and private lenders who will give them a year to pay them off. The more you help your flipper clients, the more they can buy from you.

The owner financing concept can work well, IF sellers are providing attractive and competitive terms, and a trustworthy presentation. Many are not. They are asking for way too much in down payment, are not leaving enough spread in payments for a buyer to rent out the property, and are not squashing concerns about the seller being able to live up to their end of the deal. Keep these factors in mind.

Where are the wholesale real estate deals to be found in 2016?

As the US economy and housing market continues to improve many real estate investors are wondering where they are going to find good deals to buy over the next 12 months. The National Association of Realtors says we are finally returning to a ‘normal’ market after over a decade. According to NAR that includes very few foreclosures and short sales in the marketplace. So where should value seeking real estate investors be searching for new properties to buy?

1. Real Estate Wholesalers

This might seem quirky, especially if you are a wholesaler yourself, but don’t discount this source just yet. As hard money and rehab lenders ease up and offer high LTV loans it’s easier than ever to flip house deals from wholesalers. Many also have invested heavily in dominating local auctions, marketing to motivated sellers, bank distress sales, and have negotiated incredibly low priced deals. Others attract many leads which aren’t in their immediate area and are happy to refer them. This can create a lot of efficiency for investors.

2. Aging, Long Time Owners

Between recent equity appreciation and the new rising interest rate environment this is the ideal time for many aging real estate owners to sell. Those that are already in retirement, and have owned their properties for a long time may not want the hassle of managing any more, and probably have a sizable amount of equity. Those without any heirs of their own may be happy to let properties go at a discount to good people that share their values.

3. Your Landlord

There are a large number of real estate investors who are also still renters. If this includes you then don’t overlook asking your landlord if they are ready to sell. If you don’t and they list it with a Realtor you’ll be kicking yourself.

4. The MLS

Many real estate investors snub their noses at the idea of flipping houses on the MLS. However, a look at what others are accomplishing by doing my change your mind. If you can make $50k in a few days by picking up ripe deals this way, why not?

5. Expired Listings

Even though many properties have been selling incredibly fast, others have been rotting online for so long that Realtors are losing their listings. Sometimes this is because they were too aggressively priced. In other cases it is they were poorly marketed, or the agents just failed miserably at responding to leads. These can be highly motivated sellers eager to meet a real buyer.

6. Inherited Property

It is important to be sensitive in this niche, but many heirs to real estate are eagerly looking for a cash buyer that can move fast and help them liquidate estates. If you haven’t already consider adding this niche to your portfolio in 2016.

 

Authored by Best Transaction Funding BestTransactionFunding.com is the leading source of transactional funding and hard money loans for real estate wholesalers in the US, where 100% financing, and saying “Yes” is what we love doing all day long.