According to Boston Consulting Group and Bloomberg, big fund managers are struggling. As this $100T space faces a revolution, where will the capital go, and how can real estate investors position themselves to benefit?

The Big Issue

The massive asset management industry appears to be facing a major inflection point.

Coverage of the issue reveals concerns that many large financial firms may face extinction in the near future. Their investor customers have been increasingly demanding cheaper, and more passive investment strategies.

At the same time, money managers face the challenge of trying to make more money in a bear market, which has already seen some lose money for 20 quarters in a row.

Reportedly 90% of the additional revenues these firms have enjoyed over the past 18 years is from the rising bull market, instead of attracting new capital from clients.

In the past six years investors have yanked $600B from these fund managers. With Blackrock seeing $13B in withdrawals in the past three months alone.

For Real Estate Wholesalers

As a real estate wholesaler, how can you benefit from this shift in available capital, and avoid repeating the mistakes these dying firms have made.

Don’t Count On Appreciation Alone

Even as a real estate wholesaler and flipper it can be tempting to sometimes make offers based upon a fast rising market. Whereas savvy investors are always looking to build in an equity cushion with their offers, just in case the market shifts mid transaction.

Sell To Those Providing Passive Income Investments

It seems that passive income investments are increasingly trending in demand. Consider how you can wholesale in volume and create a pipeline to those serving the end retail investors in this space.

Maintain Sustainable Margins

Profit margins that are too thin are frequently the cause of businesses failing. It can also be harder to raise pricing later. Be sure you are operating on strong margins in the beginning, with room to offer deals, and still make a profit.

Serve Those Fearing A Bear Market

Whether you believe it is a bear market or there is a new recession looming isn’t nearly as important as what end buyers and their clients think.

If that fear is driving their decisions and where they put their capital, be sure you are catering to them.

This may include altering the price ranges and property types you are targeting, as well as geographic areas.

Be sure to check out our 1% interest rate deals on loans over $600k, and scale your business this season.

Is it the right time to sell your real estate investing business? If so, is your company even sellable?

This could be the ideal time for many real estate business owners to cash in and sell their companies. It is a window of opportunity many will kick themselves for missing out on.

However, not every company is positioned and optimized to be sold or bought. Let’s look at the timing, why you should be prepared regardless of your plans, and what you can do to make your company an attractive acquisition.

Why Now Is The Right Time To Sell

This is the phase in the real estate cycle when many real estate businesses may be peaking in value and appeal. It is also the same peak time in the general economy and mergers and acquisitions cycle for business owners to sell.

Many failed to see this opportunity ahead of 2008. Then either struggled for years while everything fell apart, or just closed the doors and quit, leaving millions of dollars in unclaimed value on the table.

This is a time in the economy when a lot of consolidation is in the works. Capital markets still have cash to fund acquisitions, and bigger companies want to expand by acquiring more market share.

That could all change fast in a downturn. The ability to buy may evaporate. Acquirers will be looking for steals, and to offer a small percentage of what they may offer now.

Why Having A Sellable Real Estate Business Is Important

Right now you may think you will never want to sell your business. That’s what most think, until the moment they need to. Yet, we never know where the market, company values, will go, and when for sure. We never know if we will be healthy enough to work tomorrow. Or if our families will need us to be present for them, instead of running a business.

Selling a business can provide a lump sum payday, ongoing passive income, or a combination of both, without having to be involved on a daily basis.

Even if you never sell, being sure your company is set up for it will only help increase the value of your assets, and improve your operations. You can’t lose. Yet, you can build millions or billions of dollars in extra value into your company, while going about your regular daily work. It’s virtually a no-brainer.

How To Optimize Your Company

Optimize your company for value and appeal by:

• Creating systems throughout your business
• Maintaining clean records, accounting, and contracts
• Use smart leverage for deals and keep your cash balance sheet healthier
• Make sure your business can run without your daily involvement

In spite of being in a super hot market, some real estate investors are still finding they are stuck with inventory sitting on the shelf for months, or even years.

With so many bidding wars, and competition between buyers, it seems bizarre for properties to fail to sell immediately.

This is incredibly important. Even more so than many investors appreciate. Properties that are languishing in your inventory are costing you money. They present risk every day. They raise questions about the strength of the market in your buyers’ minds, and can detract from your other inventory. At a minimum, they are watering down your overall returns, even if you paid cash for them.

It doesn’t take much dead weight to sink you. Or to eat up all the profits from your other properties. It puts you at risk of breaking the golden rule to not lose money.

Why Your Properties Aren’t Selling

Pricing:

In this market, when most properties seem to sell in a day, the most obvious reason something isn’t selling is that it is wildly overpriced. It’s not even in the ballpark.

It may make a lot more sense to cut the price, get your capital back, and get on to a deal that you can make more money on.

Trust:

Even if you are offering a stunning deal, if buyers don’t trust you, they are not going to buy. Period.

It’s Too Hard To Communicate With You:

This isn’t about what works for you, but being available in the medium they prefer. Many simply do not want to talk on the phone today, won’t take calls, and never check voicemail.

If you don’t respond to emails and text messages, then you are probably going to miss out on the bulk of buyers out there. The opposite is true as well.

They Aren’t Sure What It’s Worth:

You may not be conveying the value of what you are offering well. Perhaps there is too much uncertainty over comps, property condition, and repair costs.

How To Move Them Faster

Owner Finance:

In addition to the above tips, you may consider offering financing. Think low down payment, palatable monthly payments, and perhaps even three months with no payments to get them started.

Work On Your Website:

It doesn’t have to be big, complex, or fancy, but it should be up to date, and boost your credibility, and likability.

 

Find The Buyers First:

In future, don’t speculate by buying and hoping you can resell. Instead, find the buyers, fill their orders, and use transactional funding to turn them around immediately.

 

Generation X now holds most of the wealth in the US. How has this shift of wealth changed? What does it mean for real estate investors?

For years many have been proclaiming how important it is for real estate professionals to be marketing to millennials and even Gen Z. Others have focused hard on Boomers and their parents. It is true that Gen X was among, if not the hardest hit in the 2008 financial crisis. Now everything seems to have changed.

Rapid Wealth Growth

The big headline last year was how the world’s billionaires grew their wealth by around 50%, or $4T within just months of COVID restrictions beginning.

Now the latest data shows that Gen X has also been a huge beneficiary over the past two years. They’ve seen their net worth rise by 50%, and now control more wealth than any other generation.

Gen X households now control more wealth than boomers. While just 5% of the nation’s wealth is in the hands and accounts of millennials.

While many in the US reportedly lost all of their savings during COVID lockdowns, Gen X has not only recovered from the previous financial crisis, but appear to have learned to thrive through crises.

Both inheritances and the appreciation of their wealth through real estate has certainly helped. The current outlook should mean an even greater wealth transfer to this generation.

What It Means For Investors

There are three big takeaways for real estate investors from this new data.

The first is who now has the capital to invest. If you are raising capital in addition to financing properties, then Gen X is likely to have the largest pool of investable capital.

Second is who is buying properties. Gen X may also be selling inherited properties and old homes as they move up or migrate. Though they also now appear to be the strongest group of buyers of investment properties.

Thirdly, it follows that real estate investors and businesses should be positioning and marketing to Generation X. This may require some revamping of strategies in terms of the homes you are making offers on, the rehabs done, and the platforms that you advertise on, as well as the language you use in your marketing. Yet, making these key adjustments now could make all the difference in your own level of success and wealth.

 

If you are frustrated with or fearful of other types of real estate investment, here are five important reasons that you should try wholesaling before you quit.

Real estate is still the best tool for getting and staying ahead financially. Yet, between recent events and the common nuisances of other forms of real estate, it’s understandable that many are tired or worried about their strategies. Wholesaling could be the cure you’ve been looking for.

Here’s why…

No Tenants Or Guests

Renters and Airbnb guests can really test your patience with the human race. They drive many good landlords with great intentions of helping and making a difference out of the business. With wholesaling you are in and out, and don’t have to deal with them. You can choose properties with no tenants and let someone else deal with leasing if they choose to.

No Repairs Or Contractors

Rehabbing and renovating properties can be an inspiring dream. Completing projects can bring a lot of satisfaction. Yet, every experienced flipper knows that these projects notoriously cost more than expected and take longer than planned. As well as how incredibly challenging it is to find those mythical good contractors. Wholesalers don’t have to deal with any of that. No repairs. No improvements. No juggling construction and maintenance crews.

No Credit Or Acquisition Capital

If you fear putting your personal credit on the line or don’t have good credit and cash to buy properties, then wholesaling offers access to 100% financing, without using your personal credit. Keep your credit free and healthy for other emergencies and optimize your personal finances. Keep your cash in reserve for plugging income gaps and when you face unexpected expenses, like medical bills.

No Captive Equity

Real estate’s ability to appreciate rapidly can be one of its great appeals and benefits. Of course, it can also depreciate just as fast in other phases of the market. It may ultimately bounce back and rise higher again. Though who wants to see their down payment or sweat equity evaporated? With wholesaling you are in and out before the market can change on you. All of your capital can then be used on marketing and scaling, rather than sitting stagnant.

No Financing Hurdles

Wholesalers use transactional funding which doesn’t rely on the usual underwriting hurdles, income verification, personal credit or even appraisal reviews. It’s super fast.