Why do the most sophisticated real estate investors continue to buy pricey properties in the hottest property markets?

While some newer investors are wondering if the market and competition is getting too hot, funds, fund managers, and notable individual investors appear to be on an all-out buying spree. They may be selling and restructuring portfolios too, but they are buying big.

In the last few months, just in NYC multiple price records have been set for condos, apartments, and development sites. In March 2016 Property Shark reports multiple transactions flipping for tens and hundreds of millions more than they were bought for in the last four years. This includes firms like Howard Hughes, and individual fund managers, while celebrities, and sons of celebrity real estate moguls are buying prime Manhattan homes and Brooklyn properties for redevelopment.

We all know the market is constantly fluctuating. So why don’t these pros care? What do they know that newer investors don’t? What’s the key to doing more deals in hot markets, with confidence?

They know that prices always come back up. There may be dips, but look at any historical graph of property values and rents, and they have consistently marched higher. The dips are used to shake the newbies out of the market, and for pros to grab good deals before selling them back at a premium later.

The experts also know that before real estate dips, other investments will crumble first, and that only boosts the demand for real estate, and its cash flow, yields, and asset protection.

The keys to profitably and safely investing in times like this can include:

Having end buyers lined up

The ability and funding to redevelop or remarket the property

Cash flowing assets that will pay for themselves till resold

Finding the Funding

Leverage is vital in these conditions. More and more big buyers are partnering up to take down bigger deals and spread risk. Many are finding capital from banks like Santander and Ocean for developing projects. All that others need is access to a great hard money lender or transactional funding. And you don’t need great credit, or mountains of assets to access these sources of capital.

 

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.

How can you save our real estate transactions when your financing hits hurdles?

Real estate financing may have become marginally easier to obtain over the last year, but that doesn’t mean that everything will always flow smoothly. Often small quirks can easily be overcome. In other cases the deal just hits a roadblock. Experienced real estate investors learn to recognize the difference. So if your current mortgage loan app is at a dead end or stalemate, how can you save your deposit, funds invested in due diligence, and get the deal done?

1. Tap Retirement Funds to Put Down More Money

In many cases getting a loan is simply about an acceptable risk level for the lender. Many other factors can be overcome if buyers are putting down more money. This can help outweigh being light on assets, having high debt ratios, or weak credit. One of the places to tap extra cash to save the deal is retirement investment accounts. If you are purchasing your own home and are a first time buyer you may be able to tap your 401k or IRA without triggering any taxes. As an investor, rolling over to a self-directed account can make the whole deal even more profitable.

2. Partner Up

If your deal is on the rocks, a conventional loan isn’t an option, but you don’t want to lose the opportunity consider bringing in a partner. If the deal is that good there should be no shortage of potential partners willing to come in with the cash to complete. This can be friends, family, local private lenders, crowdfunded capital, or other peer investors you find online or at area groups.

3. Hard Money Loans

If your original financing is caught in the weeds due to technicalities and paperwork quirks try hard money loans. This offers far more common sense underwriting, and a hard money lender could swoop in and save your deal, and close in just a few days.

4. Transactional Funding

Transactional funding could really be the ace up the sleeve of many real estate investors when they need to close on a deal fast, but don’t have extra cash to put in. Transactional lenders can provide up to 100% financing, with no new appraisal, and can close in just days. It may be the perfect solution to save what you’ve put into this deal, get closed, and still make a profit.

Are you ready for some serious discounts on wholesale properties?

Forget the pennies to be saved on tax free days and at back to school sales. You’ll be able to buy the whole class some new threads and books with the profit on a couple of fast wholesale deals.

The sizzling summer mover season is done. There are fewer regular retail buyers in the market. That means less competition for house deals. While lagging data will take a few months to catch up, home prices normally soften during this period. Sellers get nervous because they aren’t used to dealing with seasonal fluctuations. All they get is that no one is showing up for showings. No one is making offers. And if they have one; their Realtors are getting hungry for commissions. This all makes for an excellent time to swoop in and score great discounts on house deals, and to negotiate the terms you want from a power position. It’s even a good time to go back to stubborn sellers and agents and get them to come down to your price. Which of course should be even lower now.

At the same wholesalers should find that buy and hold investors are back from vacation, and are getting serious about business again. This may be a short window to get them, before holiday madness starts, but this puts the icing on the ideal conditions for wholesaling.

So dust off your buyers list, load up on inventory, and flip it!

With a good transactional lender there is no reason wholesalers can’t enjoy a flurry of deals right now. And if you’ve still got time get involved with local backpack drives, and help others in the community that aren’t banking as well as you yet.

Want more tax free days? How about 365 days of tax free real estate investing? Check out next week’s post on how to slash your 2015 taxes by $10,000, and enjoy tax free returns all next year…

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

Crowdfunding for real estate is trending hot, while many consider transactional funding one of the best things to have emerged from the recent financial and foreclosure crises. So combined together could they be an even more powerful tool for real estate investing, and wholesaling properties?

While the implementation of Title II of Rule 506 didn’t really pan out the way many had hoped, the JOBS Act has still been very beneficial for both real estate investment and crowdfunding.

A whole buffet of real estate specific crowdfunding portals are now popping up on the web, and the media is doing a pretty good job of raising awareness around this democratization of property and investment. In fact, some may speculate that if left unchallenged by banks too long main street lenders may finally find themselves displaced, no longer needed, and finally feeling the pinch from decades of arrogance and horrendous customer service.

However, despite the endless and amazing benefits that crowd-funding brings to the game for investors, there is still a large gaping void many need to fill to leverage it…

It’s fantastic that smaller investors can now go to the crowd to raise millions for their real estate projects, and bring about development that would never otherwise be possible, while increasing the wealth and incomes of individuals and families everywhere. However, there is still often the issue of securing a property and taking control of it in between discovering the deal and being able to cash it out with crowdfunding.

Whether it is just a matter of a deposit to concrete the contract or short term acquisition funds, if investors don’t have the means to lock it up anything could happen by the time a crowdfunding campaign actually becomes liquid cash. Some don’t realize that even after a campaign end date it can take 20 days to receive funds.

This is where transactional funding can come to the rescue and save the day (along with millions in profits). Transactional lenders can become an essential source of flash funding to fill the gap and make bigger deals possible. Without it, many find their crowdfunding attempts end up a complete mess.

Everyone cheers when the banks get their wrists slapped for fraud but are increasing lawsuits tightening the home loan market even further, and if so what does this mean for real estate investors?

Politicians claim they understand that mortgage lending needs to be loosened up and that consumers need easier access to credit but are current moves, simply driven by panic and actually having the opposite effect?

In the last couple of weeks we’ve seen more mortgage giants being sued, with government promising more lawsuits on the way as well as an announcement of 530 indictments for mortgage fraud this year alone. Most recently this even includes Wells Fargo being sought for $190 million in damages for bad loans taken on by the government and Wells was arguably one of the most cautious of lenders during the recent boom and even more so now.

Yes, fraud, which has surprisingly only rocketed since 2008 needs to be stopped to prevent greater losses for the government and tax payers and to restore confidence in buying mortgage backed securities in order to keep money in the market. However, the dramatic increase in lawsuits and prosecutions could certainly make things even scarier to investors realizing how deep and widespread this fraud really goes.

On top of this, this all means more payouts being demanded from banks, which may not really hurt them now but certainly makes them less eager to make new loans.

This could just be the tip of the iceberg too as the government plans a new system for reviewing loans earlier, threatening to discover even more fraud in the next few months and kicking back more bad loans to originating banks.

There may have been some signs of credit easing recently and demand for more and riskier securities with better returns but more lawsuits and a tightening on behalf of originators who are too afraid to make loans could slow housing growth in 2013.

However, before Americans throw up their arms in despair, this may not be such a bad thing. Nationally home prices rose over 10% in the last year, with some areas seeing growth exceeding 15 and even 30%. If we don’t want to race to another bubble then reasonable growth is good. Plus there doesn’t really seem to be any lack of buying power in the market with the best properties still being snatched up in days.

Thankfully for investors focused on wholesaling and flipping houses the rise of transactional lending means they aren’t hurting either. This type of funding provides them all of the capital they need to finance their rapid, low risk flips without having to jump through the endless hoops of banks, making it much more attractive anyway.

So where are the hottest real estate markets for investors flipping houses today?

Some of the hardest hit markets like Phoenix, AZ and Las Vegas, NV are starting to attract a lot of attention, especially from Canadian buyers. With many home prices in Las Vegas down 60% and similar discounts available in Arizona it is hard for many to resist the urge to buy. With bargains this great there is definitely plenty of room to flip wholesale properties or turn them into turn key rental properties with tenants and management provided for those looking for hands free, cash flowing investments.

Recent statistics released by the California Association of Realtors show that available REOs appear to be drying up, suggesting that higher prices should be on their way soon. Though with such a large state you have to really take a close look at data on a local, zip code level before jumping in.

However, real estate investors who are looking for a faster turn around and bigger spreads may be more interested in areas which are already seeing the biggest rebounds. Parts of the country like southwest Florida, especially around Ft. Myers have continued to lead in terms of home price increases, yet offer amazingly affordable deals. With such low prices and great spreads on rental income the potential buyer pool is massive and flipping to other investors is easy too.

However, it is Miami that is really standing out for rapid growth with both transaction volume and property values rising. Inventory has dropped 65% from its high, condo sales are up 76% and it is believed that by the end of the year Miami will see a new record set in volume, which even exceeds that set during the height of the bubble.

Of course savvy real estate investors who can screen properties quickly and have access to a great transactional lender can find deals all over the country but these markets may well be worth checking out.

You have no doubt already found your transactional lender invaluable when it comes to flipping houses quickly with minimal risk and for maximum profits, but can they help you with your marketing expenses too?

If you are serious about real estate investing, regardless of whether you are flipping a few houses a month with funding from your transactional lender or you are focus mainly on buy and hold you probably have a good amount of marketing going on. This may include direct mail, telemarketing, display advertising, your website, a blog, PPC advertising and social media marketing. Whatever you are doing, it can certainly add up, but obviously you can’t expect to be flipping a significant number of homes each month without some type of advertising.

So how can you off set your marketing costs or tap into additional money so that you can expand on what you are doing?

One of the easiest ways to add to your income every month is through referral partner or affiliate programs. This is especially true if your real estate investing enterprise does a lot of online marketing. You can easily monetize your blog and website and even social media by allowing or running affiliate ads. This pays you a commission for every visitor who clicks on an add or buys something from a partner. This can be done through PPC with Google Adwords, affiliate directories and networks like Clickbank or Commission Junction or by hand selecting complimentary services.

If you haven’t asked your transactional lender yet they may have a referral program too. You probably run into other investors and buyers everyday who could use a transactional lender and who would be really grateful for the referral. So why not get paid for it? You could be making up to 10% of the fees your transactional lender makes on their transactions. It doesn’t take a genius to see that this could quickly build up to quite a nice marketing budget every month!

Come back next week to find out how to make even more from referral networks...

Once you have your transactional funding lender lined up and you have potential buyers lined up to flip houses to it’s time to focus on marketing to distressed and motivated homeowners.

What are some of the most effective marketing tactics for reaching these potential sellers that being used by the top real estate investors today?

Many of the most targeted lists you will get your hands on unfortunately may not come with phone numbers. One of the best ways to reach them is with a direct mail campaign. Forget postcards just because they are cheap and glossy. If you are working on a tight budget then you will find that handwritten and addressed style letters work incredibly well. If you can find someone else to do the writing though in order to maximize your time. Your teenager who wants shopping money, a neighbor who needs to make a little extra on a part time basis or a stay at home mom or dad. Give your letter a personal tone, though consider using toll free numbers to test different versions of copy, for capturing caller IDs and assigning leads to your sales staff if you have them.

One issue you may come across in your hunt for new seller leads is that while some attorneys, title companies, agents and insurance reps may want to share their client’s info with you, they may feel they are restricted in the personal information that they can share. The easy way to get around this is to run email campaigns as joint ventures. Have your partner send out your message to their database as a personal recommendation and you can even include a copy of your Proof of Funds letter from your transactional lender so they know you are serious. This is far more powerful than cold marketing, not to mention it can be free. Offer your joint venture partner a referral fee or send out an email message from them on their services to your database in return.

Another version of this marketing strategy is to put together a newsletter either as a mailer or in email form and have several of your strategic partners sponsor it so that it costs you nothing. Build subscriptions and readers for it online by enticing home owners with valuable content that is applicable for their current situation.

There have been a number of stories about ‘short sale fraud’ circulating in the last couple of weeks. Short sales are of course one of the great sources of discounted properties investors using transactional funding tap into to make big profits flipping houses. So should you be worried as a real estate investor and consider staying away from short sales?

Not at all! According to one Washington, DC attorney and short sale expert in an interview this week ‘short sale fraud’ is mostly a concept dreamed up by greedy lenders who are jealous of the profits real estate investors are making.

So how are some getting in trouble for their involvement in short sale flips? It is important to note that it isn’t the investors using transactional funding to acquire and flip homes for quick profits that are finding themselves in hot water. It has been licensed real estate agents who have been found to have mislead and blatantly lied to the banks in order to get short sales approved that have been the ones catching the heat. Such is the case with the Realtor in Connecticut who just got 8 months in the slammer. It seems she found a buyer and instead of submitting that offer to the bank, had a fellow real estate agent buy the property and then had them flip it to the end buyer for an extra $30,000. Nothing wrong with making a quick profit. The issue was the agent in question clearly abused her position and deceived the bank by telling them the property couldn’t sell for more when the deal was already set up.

Should the banks care at all if the property is resold, who to, when and how much for? No, if they are happy to recoup what they can and complete the short sale that should be the end of the story. Though licensed agents do have a fiduciary responsibility and those required to sign an affidavit confirming full disclosure in the A-B side of the transaction ought to be upfront. However, again full time real estate investors may want to think twice before renewing their real estate licenses again just to avoid the extra potential heat.

Otherwise get out there, lock down wholesale deals, put offers on short sales and use your transactional lender to help you flip homes quickly for some nice paychecks.

Despite the availability of 100% financing for purchasing and flipping investment properties with transactional funding some in search of true no money down deals still struggle to come up with earnest money deposits to lock down the most attractive bargains whether they are foreclosures, HUD homes, short sales or from other distressed sellers.

Transactional funding does offer 100% financing to cover both the acquisition price plus closing costs, but if you have to come up with a deposit to get a signed contract and you are running short on cash what are your options?

Obviously reaching out to friends and family isn’t ideal. You can try other investors and offer them a piece of the pie but that can really dig into your profits and mean giving up some control. Though don’t give up yet.

If you still have a regular job too then you can always try getting a payday advance loan. Normally they do not require any credit checks and can be funded in hours. You can also get a cash advance from one of your credit cards and pay it off within the grace period to avoid finance charges. If you don’t have a credit card or good credit and you do have savings but just don’t want to use them, then consider a secured credit card or secured line of credit from your bank. This will also help rebuild your credit rating.

If your credit isn’t bad then what about a signature personal loan from a local bank? Of course it is much better to keep your personal and investment credit separate and you will want to register a business to work under if you haven’t already. This opens the door to obtaining a business line-of-credit or even getting an AMEX card.

If none of the above are options, don’t panic yet. Transactional funding is often referred to as ‘flash funding’ for a reason - you can close in just days. There is a good chance that if you can close fast enough you won’t even need to make a deposit. If you absolutely must then ask your transactional lender about a Proof-Of-Funds (POF) or Verification of Deposit (VOD) letter which may be sufficient to help you get the deal accepted.