How do you pick the right neighborhoods to wholesale properties in?

Picking the right market and ‘farm’ area to target deals in is a critical part of success for real estate wholesalers.

There are many niches to investigate as a real estate investor. Each investor may find they have a special knack for different parts of the market. Yet, as a real estate wholesaler, there are certainly some go to segments to rely on for getting started swiftly, and for picking up the pace of deal volume and income when last year’s strategy doesn’t seem to be producing like it used to.

Where’s The Ideal Target Zone For Real Estate Wholesalers?

Start by remembering what wholesaling real estate is all about. Especially compared to other real estate investment strategies.

Yes, it is about buying low, and selling low, in comparison to retail prices. It is also a volume strategy. It generally relies on quickly doing a high number of deals each month and year.

To achieve this, there needs to be sufficient inventory available, as well as demand.

This means you probably can’t stick to the highest luxury price ranges. These pockets may offer huge pay days, but only few of them, and far in between. Unless you have substantial capital reserves, endless patience, and a lot of financial runway, this probably isn;t the niche you are looking for. Consider that Hollywood actors like Tom Selleck are still concerned that they won’t be able to afford their luxury homes if they don’t keep actively working.

We also know that there is limited demand in the cheapest neighborhoods. Most end buyers don't have the stomach for it. The cash requirements for working in these neighborhoods can also be far higher than imagined, due to a lack of financing, and big rehab bills.

Sticking in the middle ground, where there is the largest potential pool of end buyers promises the most volume. Though it can also be the most competitive.

Multiple Exit Strategies

The middle market is also key to maintaining multiple exit strategies. It not only offers the most potential buyers by population, but the widest variety of buyers too.

This can include retailing homes, prehabbing, and wholesaling to both landlords and rehabbers.

Having multiple exit strategies, and leveraging using transaction funding are key for never getting stuck, and losing money in real estate.

Are property management companies the next hot spot for leads for real estate investors searching for deals on wholesale properties?

While many retail property owners are still misinformed and are trying to list at top of the market prices, many others are waking up to the reality of where the market really is right now. For a variety of owners in different locales, that means distressed properties and motivated sellers and agents.

Why Are Property Management Companies Ripe For Lead Generation?

Everything comes together at this intersection. Renters who are being financially crippled by inflation stop paying their rent, and end up vacating units, or in evictions. Owners who are feeling the pinch in their personal finances are coming up short when it comes to renovating vacant units at today’s sky high material and labor costs.

In turn, these properties become dead weight, a source of financial bleed, and a huge liability for property management companies which are supposed to be servicing them, but aren’t making any money on them.

These companies have large databases of owners. Many of whom want and need to sell.

At the same time, these can be great properties, which can become fantastic income streams with a little sprucing up, and new tenants.

How To Pitch Them For Leads

Cold emailing, and spamming main inboxes is unlikely to be very fruitful. Yet, there are many individuals in these organizations with this information, and who are motivated to help.

Team members in maintenance departments know which properties are sitting idle with deferred maintenance. Leasing agents know which are vacant. Account managers know their clients’ financial situations, and who is actively looking or needing to sell.

You can knock on office doors, call individual extensions, email various departments, and even use ringless voicemail.

While your value proposition should be obvious to this lead source, you can also sweeten the appeal by referring your end buyers back to them for property management service once they are ready for a new tenant.

A well crafted email series, phone script, and text message template can help you tap into these sources of deals at volume.

Remember, if they don’t have owners selling, then they probably have owners who are acquiring, and can be great end buyers for your other wholesale deals.

Some are pointing to a new $10B Blackstone apartment deal as a sign that the real estate market has already bottomed out. History suggests that could actually indicate we are just now about to plummet from the current peak in prices.

Blackstone: Big Deals, Bad Timing

Bloomberg News suggests that Blackstone’s new acquisition of an apartment operating REIT for $10B is an indicator that real estate prices have hit a new low, and should begin rising again.

The assumption is often that the biggest financial institutions are the ‘smart money’, and always get it right.

Recent history tells quite a different story. In fact, it was at the peak in 2007 that Blackstone bought a portfolio from Sam Zell for $39B. At the time it was a record breaker for the largest leveraged buyout in history. Of course, values immediately began plummeting after that.

It’s worth noting that the history of this transaction and story has been edited in recent years, including on Wikipedia to make Blackstone look more savvy than the big hit they took back then.

With this information, Blackstone’s deal may actually suggest we are at the peak of the market, and a substantial dip is coming.

Buy Low, Sell High

It’s far better to be like real estate billionaire Sam Zell who became famous for buying at deep discounts, and selling high.

Looking across all the economic data from interest rates to ongoing high inflation, to epic levels of defaults on auto loans and credit card debt, and a new rise in foreclosures, it is clear that consumers are running out of money. Without some major game changing shift in finances, we can only logically expect that these property owners that are running out of financial lifelines will soon end up in distress sale situations.

At the same time, one Realtor economist suggests that high property prices and interest rates are the new norm, creating a sweet spot to wholesale properties. Though some pockets of the market are certainly hotter than others. Many Realtors are reporting that their most active listings are those in the lower to mid price range, and fixer uppers.

Big money funds have to keep investing. They may even buy your large portfolios, if you can piece together package deals. Or you can go for fast and high volumes of individual house deals.

 

New changes to what is being reported on credit reports could hit many potential home buyers hard, and keep them out of the market.

Along with rising interest rates, new hits to credit scores could take more home buyers out of the market. This may be welcome news to some investors who have been craving less competition.

While credit scores may not be needed to obtain transactional funding to wholesale properties, investors should also be watching out for the impacts on end buyers, and who may end up not qualifying or being able to close.

Buy Now, Pay Later

One of the latest moves by the big credit bureaus has been to include buy now, pay later loans on credit reports. This includes TransUnion and Equifax.

According to TransUnion, this is being done in the name of “inclusion.” It is estimated around 100 million Americans use this type of financing each year. It’s already a $91B market, growing at over 45% per year. It is expected to become a $4T market by 2030 according to Allied Market Research.

You’ve seen these ads online. Now when you go to check out you may see payment plans being offered by Buy Now, Pay Later companies like Affirm, Zezzle, Klarna and After Pay.

It seems convenient, but this could also create major problems.

For a start, borrowers using these loans for items as cheap as $50 can’t really afford them. It is also multiplying inflation. Now fashion companies can quadruple their prices, because consumers can pay over time. So, instead of a pair of yoga pants being $25, they may sell for $100. Then there are many hidden costs or interest involved in some of these types of credit.

This is during a time when there are already tens of billions of dollars in spiking business and credit card defaults and late payments.

The lenders want this credit on reports to motivate people to pay on time. Or perhaps because they are not paying on time. Including them on credit reports may only exclude millions of borrowers from homeownership.

This also comes in the wake of some lenders counting recent COVID forbearance programs the same as foreclosure. A move that takes even more out of the buyer pool. Even if their mortgage company put them into forbearance without their permission.

Summary

Be wary of convenient looking buy now, pay later deals. They are not designed for the benefit of consumers. Now they might exclude millions from being able to buy homes.

On one hand this may free up more inventory and lower competition for investors. It also means that while it won’t affect you obtaining 100% transactional funding for wholesale deals, it may mean many end buyers won’t qualify to buy your deals with financing.

 

Looking for and finding low priced wholesale properties is one thing. Ensuring you have a viable deal, that comes with plenty of appeal for end buyers, and which they can actually buy may require a little more attention.

Make sure you are watching these factors…

Deed Types

There are several types of deed used to transfer real estate. Wholesalers need to know what type of deed they can get and provide. Savvy end buyers will, and should be wary of only being offered quit claim deeds. These really offer no protection or security. End buyers want to be confident in their investment, ability to get title insurance and resell in the future.

Unpermitted Property Changes

Many low priced distressed properties (and even some very expensive ones) are so much cheaper because they have illegal changes. That can be additions, garage conversions, subdividing units, and so on. Those can lumber new buyers with big fines, prevent them from re-selling or refinancing, and from obtaining a mortgage loan to buy your property. They can still be deals, just know the challenges. Make sure your buyers do to.

Realistic & Appealing Spreads

Offering a property with a $68,000 ARV for $48,000 doesn’t really leave much of a spread for the next investor. Not when you factor in 2 sides of closing costs and repairs. It may be a nice discount for a retail buyer, if they have the cash and want to spend it in that neighborhood, but make sure you know your buyers and what they want.

Changing Mortgage Rules

It is important to anticipate changing mortgage lending rules and programs. If they tighten, they could cut plans and deals short. Fortunately, we are are expected to be in a period of loosening mortgage criteria. Most analysts don’t expect Dodd-Frank to disappear yet, but it could be stripped down.

Who Pays the Costs

One of the quirks in the market since 2008 is more distressed property sellers trying to get buyers to pay the burden of past due property taxes, liens, and fines. Sometimes even there closing costs. Those costs can often exceed the purchase price too. Know who pays what.

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.

New data highlights massive pool of wholesale properties available for investing…

While the US housing market has rebounded quickly, many real estate investors continue to seriously underestimate the amount of house deals available to them for flipping for quick, and sizable profits.

New real estate statistics firmly buck the media spin suggesting it is hard to find value and foreclosure properties in the US in the second half of 2014.

While thousands of American homeowners have been lifted above water thanks to rapidly rising home values and equity, millions more remain in distressed situations. 9,100,000 remain underwater according to the latest numbers.

Per figures from RealtyTrac over a third of Nevada homeowners still owe at least 25% more on their homes than they are valued at (even values are going up daily). This is only topped by one central Florida city.

Unsurprisingly Nevada remains one of the top 5 states for foreclosures in the US. The other top 4 states for foreclosure activity include; FL, MD, NJ, and IL.

RealtyTrac’s VP says the time it is taking lenders to foreclosure in Nevada has actually risen as of June 2014. It now takes 494 days to foreclose on average, versus just 420 days in 2013. That means many more foreclosure homes coming down the pipe.

In fact, the Las Vegas Review Journal reports NV foreclosure starts rose 56% year over year, and 66% month over month to June 2014. This puts 1 in every 138 homes in NV in the default process. Twice as many Florida homeowners in currently in foreclosure.

Still, home builders don’t appear to be fazed and are still rolling out new projects. The market is heading up, and great times for real estate investors are ahead. However, there are still millions of great opportunities now, for taking advantage of spreads, and rapidly rising home prices. It is just a matter of honing in on the best locations.

Armed with fast cash from Best Transaction Funding real estate wholesalers should find no limits on deal volume, expect what they can personally handle.

How can real estate wholesalers tap in to more buyers and well capitalized bulk buyers for more volume now?

New data has shown endless tracks of discounted homes and foreclosure properties still available. Armed with the Best Transaction Funding the only thing in between reeling in bigger profits and where wholesalers are now, is tapping into more highly qualified buyers.

So how can you find them?

1. Source Cash Buyers from Recent Purchases

One of the most common ways of finding cash buyers to wholesale properties to, is by sourcing those which have recently purchased area homes for cash. This is often followed up with a direct mail campaign.

2. Buy to Rent Lenders

Numerous ‘Buy to Rent’ lenders have popped up in 2014. They are well capitalized and eager to put their money to work, funding buy and hold investors in making new acquisitions of single family rental homes. Many of these lenders may be only happy to make introductions in order to create new lending opportunities for themselves.

3. Title Companies

As with lenders, title companies will often share their records and lists of buyers with real estate investors in order to drum up more business. Work on developing relationships with these reps.

4. Local Meet Ups

More and more private money lenders are reportedly attending local real estate investor meet ups. As a wholesaler these in person networking events can be gold mines for finding buyers and putting together deals on the spot.

5. International Property Shows

International property shows are frequented by deep pocketed real estate investors with billions of dollars up for grabs. Top international shows can provide a great combination of vacation getaway, competitive research and direct networking with serious cash buyers.

6. iBeacons

Apple iBeacon technology is specifically being rolled out for the real estate industry, enabling brands to push alerts to passing mobile devices, alerting users of deals.

7. Mobile Push Notifications

A vast number of retailers now use mobile push notifications to alert consumers to new deals and sales. Why not use the same strategy for marketing hot wholesale property deals?

8. Blog, Blog, Blog

 

Too few real estate investment firms are taking their blogging seriously. This is an essential pillar of inbound marketing, and is a must, especially for those not embracing the most edgy technology.

The most successful real estate wholesalers see vendors, service providers and business partners distinctly differently than others. In fact, it is one factor which can often create dramatic in results.

This is a characteristic which is also seen among the wealthiest and most sophisticated buyers and investors, as well as leading CEOs. Put simply, it is the value put on quality services and business relationships.

This is not just about recognizing the importance of larger, long term gains and success trumping unsustainable short term gains. When considering the potential liability of being too cheap and churning through low quality vendors and reliability become almost priceless.

One of the most common ways in which this is seen in the industry today is when it comes to sourcing help and wholesale properties. One of the most ironic ways this rears its head is when some refuse to cough up for valuable third party services. This applies to the MLS, outsourcing platforms, online platforms for sourcing help, and other brokers. The argument by some is why should they pay for a third party middle men. Perhaps they are forgetting that they themselves as wholesalers are technically third party middle men. All too often they are happy to use the services, they just don’t want to pay for them. The fact they are used at any level shows the value they have.

Cost is the second part of this. It is wise to look for good deals and cost effectiveness. Unfortunately, the short sighted often believe that means cheapest.

One of the greatest examples of this in the real estate investment arena is house prices. Some of the cheapest homes of the moment can be found at Detroit’s foreclosure auctions. Some of the homes might sell for $1,000. After the fact they can cost many tens of thousands to repair or even tear down, and some will likely never see the rents or values other properties will. A most expensive property might actually end up delivering far higher returns and require less cash money out of pocket.

The same applies to wholesaling businesses hiring copywriters or designers. Cheap can often mean sabotaging future goals, losing advantages in speed to market, and more expense needed for constant do-overs.

When it comes to choosing real estate attorneys the savviest wholesalers, investors and business owners get that a low cost attorney or ‘pre-paid’ legal service can often ultimately cost more due to increased billing hours and substandard results. What they achieve in a week might be accomplished in 30 minutes by a real estate attorney with a higher hourly rate.

Could you imagine Warren Buffett and Berkshire Hathaway achieving such results and reputation over such a long period of time if they only hired the cheapest staff and acquired the most depressed businesses?

We are entering a new boom in the U.S. housing market. Using BestTransactionFunding wholesalers can look forward to turning substantial volumes of properties for years, for high profit margins. However, all the money in the world might not keep those which don’t prioritize wise counsel, solid business relationships and quality team members in the game.

Market conditions and profits improve by double digits for real estate investors in 2014…

New data shows all the stars aligning for property wholesalers. According to data from foreclosure monitor RealtyTrac:

• Average gross profit per home flipped topped $60k in Q4 2013
• For Q1 2014 unadjusted ROI on flipped houses averaged 30%
• The average time to rehab and flip houses dropped almost 20% to 84 days

So profit margins, and annual returns are improving nicely for U.S. real estate investors. However, so are conditions for flipping and wholesaling even more homes in the second half of 2014.

Quarter over quarter a new 2014 U.S. Home Flipping Report shows the percentage of American homes sales which were flips dropped to just 3.7%. Some might find this surprising. However, savvy wholesalers likely recognize this as great news. It certainly somewhat reflects the recent dips in available housing inventory and decline in publicly available foreclosures and short sales.

However, it also suggests more competition, and specifically heavy weight institutions with bigger pockets are moving out of the way for smaller investors. Plus, as an experienced, veteran wholesaler knows, a hot and healthy market can be even better for flipping and profits thanks to rapid home price increases and end buyer demand. This is backed up even further on news that all cash home purchases hit a new high in Q1 2014 at 42.7% of all residential property transactions.

There are still a multitude of potential wholesale properties out there, with more coming online daily. In Detroit alone hundreds of new foreclosure homes are going to the auction block for as little as $1k a pop.

For those seeking more liquidity to ramp up volume and flip houses faster check out what BestTransactionFunding.com can do for you today...

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.

There are all types of complicated Internet marketing strategies and sales funnels that you can set up today but perhaps the most cost effective of all for finding more wholesale inventory has nothing to do with the world wide web at all.

There are distressed homes to be grabbed up all around us. In addition to bank owned REOs and the properties being peddled by other wholesalers there are thousands of homeowners becoming delinquent on their mortgages as well as many homes needing to be sold quickly due to divorce and probate.

Of course exactly how many homes are in foreclosure or are in a distressed state in your area can vary, but taking a look at some of the numbers from data compiler Realty Trac it is likely an enormous figure. In August alone 1 in every 266 homes in Lee County, Florida received a foreclosure notice. In many parts of Los Angeles this rate is around 1 in every 100 properties. In Las Vegas, NV some zip codes are saw 1 in 19 or even more foreclosure filings in August this this. This of course doesn’t count all of those who have already fallen into default in the last year or two and who still need to sell their homes.

This means that you must certainly personally know quite a few people who need to sell. More importantly perhaps, it means that everyone you know also knows a number of people in need of help. Just through personal contacts alone you should easily be able to find more than enough inventory to keep you busy flipping homes for quite a while. The question is are you reaching out to them and do they know that you can help? If you simply traded contact details with everyone you ever come into contact with and told them what you do, you should have more than enough homes to make millions.