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Real Estate Investing: How Much Should I Be Offering Sellers Now?

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on Thursday, 24 February 2022
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With the fast changing real estate market many investors are wondering if they need to be changing up their offer strategies, and how much they are offering sellers. So, what should your offer formula be now?


The Changing Real Estate Market

The economy, finances and real estate market keep on changing at a face pace. There have been plenty of twists and turns, with more to come this year.


The housing market has continued to beat expectations. Multifamily is very strong too.


Tens of billions of dollars are chasing deals in this space right now. Which is also leading many investors to question their offer strategies. Especially as they find it more challenging to secure deals with often overly optimistic sellers.


The big question is how much to offer to still ink profitable deals, and keep up deal flow? You’ll starve without doing deals, but don’t want to be losing money by overpaying either.


Be Wary Of Rules Of Thumb

There are many books, articles, and speakers out there plugging their rules of thumb for making offers on properties to flip. Much of this is outdated and out of touch.


You cannot just stick to one rule of thumb and offer formula. Market dynamics are changing all the time. Some investors are used to making offers in the 60-70% range. Others have driven hard bargains at 40 cents on the dollar during crisis times. In other phases of the market a lot of money has been made offering 90% of the retail value for homes.


In the past some appraisers and lenders have gone up to 125% of the value knowing the market is growing so fast.


Be Wary About Overpaying

Overpaying will catch up to you eventually. Even these big funds blatantly paying 50% over value for properties will eventually find they pay for it.


At the same time, you may need to be more aggressive, and be willing to pay more for property than you thought it was worth over the past couple of years. Remember, it is about what the market is willing to pay for it.


Still, with prices expected to rise, at least one guru has been advising his followers to make offers based on pending sales, not closed comps. That is extremely dangerous.

Pending sales often don't close. They are not used for lenders and appraisals. It can mean big trouble flipping, and being restricted to only cash buyers willing to over pay.


Stay Flexible

Be aggressive enough to land the deals. Yet, conservative enough to not lose money and get stuck with dead weight you can’t sell.


Sellers won’t hold out forever. If you hold firm, the sooner they will fold. There is a lot of distress building. Especially with inflation in gas, insurance, and medical bills. As well as declining consumer debt performance.


Ideally you already have end buyers lined up in advance. You know their numbers, and can base your offers on that. Then with transactional funding your risk is incredibly low, deals are presold, and you are in and out, and paid.

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Keeping Deal Flow Alive When Your End Buyers Are Landlords

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on Thursday, 02 September 2021
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How do you keep your deal flow alive when you end buyers are landlords and buy and hold investors?


Pandemic lockdowns and ensuing restrictions, new policies and eviction bans have rocked everything rental property investors thought they knew about real estate. This might have put a dent in your deal flow if you’ve been wholesaling houses to them. So, how can you help them, and keep your business flowing?


The Big Eviction Ban Problem

Covid related restrictions and rules have impacted rental property operators in a variety of ways. One of the most notable is eviction bans. Regardless of them already being ruled unconstitutional, they are still out there.


In fact, new legislative bills like the Federal Disaster Housing Stability Act of 2021 are proposing both automatic and potentially never ending eviction bans.


That isn’t exactly making acquiring more rental properties very attractive to most buy and hold investors.


Here’s how you can help them, and keep your business firing on all cylinders too.


Serve Up Performing Rentals

No one wants to buy a non-performing rental with an occupant they may never be able to remove. Yet, the data suggests that the bulk of rental properties are performing well.


Find those with a track record and good tenants, and wholesale those deals instead.


Provide Deeper Discounts To Offset Risk

Investing decisions are all about the balance of risk and reward. If you can help lower your end buyer’s risk, and offer more promise of potential reward it could tip many more buyers in your favor, and lead to a lot more deals with each one.


One way to do this could be to offer deeper discounts to buyers; building in equity, and creating larger spreads for them.


Another option could be 12 to 24 month rental and income guarantees.


Turn Them Onto Smarter Leasing Structures

It is true that aside from Section 8 style government paid housing, the old traditional annual lease is probably dead. It is just far too much risk for any private and individual landlord to take on.


Yet, with a little creativity there may be many innovative leasing options that can avoid this attack on landlords, and help them pull in that cash flow.


This may include entire leases being paid in full in advance, switching to short term rentals, memberships, or even finding other ways to derive income from a property; such as renting it for storage or parking.

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Real Estate Wholesaling: The Number One Most Important Factor For Success

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on Thursday, 11 March 2021
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There is one factor that is by far more important to your success in real estate wholesaling than anything else. Do you know what it is? Do you have it?


It’s true that marketing is incredibly important. Being able to find deals is essential. Knowing your market data and values can make or break you. Yet, there is something far more important and pivotal for your success in real estate wholesaling.


This is truly knowing your customer.


Specifically, knowing your end buyer for your house deals.


Why It Matters

You can’t market well, pick deals to buy well, run the math accurately, systemize or have a predictable deal flow and income unless you know your end buyer customers in depth. You just can’t.


Failing here will cause you to bleed out your budget on all fronts. It will take you far longer than it should to sell properties. You’ll burn contracts and relationships on the buy side. Your reputation will get crushed.


Not to mention the fact that it only takes being stuck with a property or two to sap all of the profits you may be making on other deals. It is extremely risky.


Then, even if you do get lucky a couple of times, failing to really know your customer means that you cannot scale your business and income.


What Does Knowing Your Customer Mean?

So, what does it mean to really know your end buyer customers?


It means knowing as much about them as possible. Intimately and granularly.


You should know your demographic data. At the most basic you should know how many potential target customers you have each month and year. You need to know what their likes and dislikes are, where they hangout online, their preferred ways to communicate, and more.


You need to have absolute clarity on what their real pain points are. What their goals are. Plus, what their ability is to leap this gap with you.


For example, are they buying from you because they desperately need somewhere affordable to live? Or because they need deal flow for their rehabbing and flipping or rental property business? How much can they really afford monthly and as a down payment? What are the fears and limitations holding them back? Is it finding someone to trust, unknown repair issues and costs, or finances?


Ace this, and everything else will fall into place.

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Wholesaling Houses: Where Are The End Buyers Now?

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on Wednesday, 22 April 2020
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The market has changed. Where are the end buyers for your house flips and wholesale deals now?


The real estate investors who come out of 2020 on top are those who are the most flexible and quick to adjust to the changing times.


You may need to be more careful about the deals you buy, to ensure there is an end market demand for it, with able buyers. Know the buyers, and you’ll know your exit strategy before you get in, and the types of deals to be taking on now.


Wealthy Home Buyers & Buy And Hold Investors

Just a couple of weeks into the COVID-19 mess and Chase bank slashed availability of mortgages. Now requiring at least 20% down and a 700 plus credit score. That is going to eliminate a large portion of the population as potential buyers.


In contrast, many wealthy individuals and families are pulling their money out of the stock market, retirement plans and the banks to put their money into real estate. Some are buying half a dozen units or more to protect their wealth.


They have all cash, or can put down 50% and still get a mortgage relatively easily.


Movers Escaping The City

We are being told that even if quarantine restrictions are temporarily eased that we face another coronavirus outbreak in the winter, and it could be worse. Some are warning this could be a multi-year pandemic.


Who wants to be stuck in a condo in the city, with fast rising crime during times like these?


Expect more buyers cashing out their urban homes and moving to smaller towns and rural areas. Especially now that the office has gone the way of the dinosaur and remote work is here to stay.


Those in this group who act quickly can still walk away from their properties with cash to buy something else.


Real Estate Syndicators & Funds

Real estate syndicators and fund managers are also having to pivot and diversify in order to deploy capital and deliver on promises to their own capital investors.


You can serve them wholesale deals. Even better if you can pull together portfolios to provide the bulk buys they need to make efficient transactions.


Property Owners With High Amounts Of Equity

With the exception of transactional funding for real estate wholesalers, it is getting much harder to find loans to purchase real estate out there.


One exception to this may be homeowners and rental property investors who can refinance or offer high equity properties as collateral and gain bridge loans to make new acquisitions.


COVID-19 Heirs

Even before this virus we were in the middle of one of the biggest wealth transfer periods of our history. It’s a tragic situation. Yet, many of those who have passed on in this crisis may be glad to see their heirs now able to use their inheritance to go buy homes in safer areas, or use their legacy to go invest and create new streams of income and businesses in real estate which will keep providing for future generations of the family.

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7 Ways For Your End Buyers To Fund Deals In 2018

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on Sunday, 07 January 2018
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Successfully flipping real estate deals in 2018 relies a lot on finding end buyers with the financial means to purchase properties. The more that flippers and wholesalers can help prospective buyers find and connect with financing, the more deal volume to be done, and the faster they can be flipped.

Here are seven ways your flipper, rental property, and retail buyers can fund their purchases from you this year.

IRAs & 401ks

There is a lot more awareness of the ability to invest in real estate through self-directed retirement accounts today. Others still need to be turned on to the option. Though many more may begin to use these account options as the stock market continues to inflate and stocks become more expensive.

1031 Exchanges

Some US real estate markets appear to have matured, as have some individual investments. By using a 1031 exchange, investors can acquire your deals, while deferring tax liability on their gains.

Private Lending

Investor buyers without enough of their own cash and capital can find that individual private lenders are still the best option for financing. These lenders can be far more aggressive in terms and loan amounts, and are typically far faster and easier to work with.

Hard Money Loans

These loans are great for those who don’t want to deal with the hassles of conventional mortgage loans, or may be buying properties with repair needs that fall outside of conventional underwriting requirements.

Rehab Loans

Whether from investor specific lenders or the FHA 203k loan, there are great funding options for acquiring houses at a discount that need some repairs or updating.

Low Down Payment Loans

While investor loan LTVs have risen to 90% and even 100% in some cases, regular home buyers are also finding more and more low down payment options as well. This ranges from government loan programs like USDA and VA loans, to those offered by mortgage lenders like Flagstar which can be combined with local down payment assistance programs.

Seller Financing

Seller financing is still one of the best ways to ensure fast resales at maximum resale prices. That may be a low down payment large first mortgage, or carrying a second mortgage loan.

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How Much Money Should Real Estate Wholesalers Make?

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on Thursday, 12 January 2017
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How much profit should you be making on your real estate wholesale deals?

Property wholesaler profit margins are one of the most commonly debated topics among new investors, rehabbers, and buy and hold landlords. So, what’s the right amount? How much is too much? How should wholesalers set their markups?

Some wholesalers may not make as much as they could on deals because they are intimidated about losing them. Sometimes end buyers are complaining that wholesalers are asking for way too much, and are just wasting their time. So how do you pick the right number?

4 Ways to Price Your Wholesale House Deals

Fixed Fee or Percentage

One way to choose is to pre-determine what percentage or dollar amount you are going to charge across all of your deals. It could be 3% or 6%, $1,000 or $100,000. Or more. It’s up to you. This can make it easy when screening potential properties to see if they match your criteria. However, one flaw is that this doesn’t always maximize your deal flow and profit potential long term as the market changes.

Profit Left to the Next Buyer

Again, you can choose a fixed dollar amount or percentage spread which you think if fair for you end buyer to make after they buy, fix, and flip or rent the property. Of course, every buyer is different. Some use cash. Some use very expensive hard money loans. Some can get rehab work done cheap. Others pay a lot for contractors and materials. Some can flip a property in a week. Others take over 6 months to complete a flip.

ROI on Your Time

As a real estate wholesaler you are providing a valuable service. However, unless you have a team you are still often trading your time for money. Make sure you are getting a fair return. What’s your time worth? How much time do you spend flipping a deal? If you just quit working a McDonalds for minimum wage, then making $30 an hour may seem like an awesome deal. If you just quit being an attorney or doctor making $500 an hour, then you’ll probably want to make sure you are earning $1,000 an hour as a wholesaler. Remember to factor in all the time prospecting, screening, negotiating, and marketing, and managing the transaction.

Filling Orders

Another way to do this is to simply fill orders. Take pre-orders for deals aka ‘reverse wholesaling’. Then go find a fit, and profit what you can. You may have end buyers who are happy with 20% returns on two flips a year. Others may insist on getting properties 40% below market value, or being able to double their money. Take the order, find the deals, squeeze in however much you can. This is a little more fluid when it comes to predicting your income. However, it can lower risk and waste. One downside is that you are effectively letting someone else set market prices, versus controlling them yourself.

Looking Forward

There are wholesalers who can make $100k per deal, and do 10 deals a month. Others might do 1-4 deals per month and are very happy putting $20k in their pockets. Some might land some whales and make a million on a very juicy deal. A lot of it depends on how good you are at finding and negotiating deals, as well as how you market and present the inventory.

One thing which is really important, and which many wholesalers forget is to keep an eye on the changing market. Prices and profit margins will change. Protect your income and industry but refusing to sell out too cheap, but give good deals if you want more business.

 

What do you think? How much do you charge? How much do you think wholesalers should markup deals? Let us know on Facebook and Twitter

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4 Ways Property Wholesalers Can Help Their End Buyers Be Successful

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on Thursday, 29 September 2016
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The more property wholesalers help their end buyers be successful, the more they will be successful themselves.

Wholesalers who are serious about succeeding will proactively look for ways to help their end buyer customers. The more profitable and efficient they are, the more homes you can sell them, the more loyalty and trust you will build, and the more you’ll enjoy what you do.

So how do you help your rehabbers and landlords who are buying your properties?

Pile on the Referrals

As a true wholesaler you may not be interested in retail buyers, or getting involved in renting or rehabbing at all. Yet, chances are you’ll run into plenty of these leads every week. Pass them forward.

This can include renters, Realtors, contractors, retail home buyers, and buy and hold investors looking for rentals, as well as lenders offering long term financing and rehab cash.

Provide Better Intel, Earlier

What slows most rehabbers down the most? Evaluating properties and getting the work complete. So give them a better head start. When you can get them access to the property in advance. When you can’t provide more detailed information, repair estimates, repair needs, etc. If you let them know what deals you may have coming up, even before you are ready to close on the B to C transaction they can be sure to have their financing and crews lined up too.

Share Marketing Tips

What is the biggest sticking point for more end buyers? It’s getting that property resold or rented so they can bring cash in and buy more inventory from you. Help them with that. It is only to your benefit. According to RealtyTrac flip times are at a new record high of over 6 months! That’s crazy. Start a real estate blog and share marketing tips to help them move their deals faster. Share tips you find via social media and email too. They’ll appreciate it, and you might generate more end buyer leads in the process.

Be Consistent

Stay consistent with your inventory conveyor belt, the quality and accuracy of your deals, the match for your end buyers, and the frequency. If they can rely on you to have the good deals when they want them then they will keep coming back.

 

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

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