Real Estate management is the best way to build fast cash in this present economic activities. It has been noted that 90% of the world’s millionaires became wealthy through flipping houses. But how can an ordinary person flip houses and make a great deal of cash flow in today’s real estate market?
What are the main things you need to understand before going to flip a house? And why is it important to educate yourself before real estate investing?
In this article I explain and elucidate diverse ways that will help you in your real estate investing venture.
The following Tips are torchlights that will guide you in that path to success in real estate management.
STEP 1 : FIND BUYERS FIRST!
In order to profit in real estate investing, it makes sense to find buyers first. You can do this by building a buyer’s list, attending auctions, working with real estate agents and using the Multiple Listing Service as well as other simple strategies and tactics. The best strategy to use if you ask me would be to target buyers that have a history of purchasing properties for cash.
STEP 2: GATHERING INFORMATION
After you find the buyers the next thing you need to do is find out what your buyers want. You can do this by asking them what areas of town they are investing in. How much they are willing to spend on their ideal property? What type of property they are currently buying? And how fast they can settle? Getting these questions answered will give you an idea of what to approach your buyers with.
STEP 3: FIND MOTIVATED SELLERS
In order to make money in flipping houses you have to understand how to work with motivated sellers. A motivated seller can be anyone who is in distress financially, or physically. An example of a motivated seller is someone who is getting a divorce, going into foreclosure, paying to mortgages, need to rehab their property but don’t have the cash, going bankrupt, and so on. Therefore, in order to get a great deal when real estate investing you have to find someone that falls within this category. You can find these sellers using various forms of marketing.
Step 4: SCREENING THE SELLER
When your advertising is working and the motivated sellers are calling, in order to really get a good investment property deal you want to get as much information from the seller as possible. You can do this by asking the seller for information on their house. You want to find out what type of condition the house is in as well as the asking price of the property, but the most important question you need to know is why the seller is determined to get rid of their property.
STEP 5: GET COMPARABLE PRICES
Once you receive the information from the prospect, the next thing you need to do is run comparable sales to see if the deal will be a good house flip. You can do this by going to sites like Realquest.com, Zillow.com, Bank of America has a home value estimator and you can find it by asking search engines like Google.com then search for Bank of America Home Value Estimator. You can also use sites like Eppraisal.com, or consult with a Realtor. There are many ways to run comps when you’re looking to find out what a house is truly worth.
STEP 6: WORKING THE NUMBERS
After running your comparable sales for the house the next thing you need to do in order to invest in real estate is work the numbers. You can do this buy understanding the MAO formula. The Maximum Allowable Offer formula is as follows: You take the ARV (After repair value) and you multiply it by 65% and that leaves you with the amount that you are willing to pay for the house. Then you subtract the rehab cost, closing cost and overhead and that leaves you with the MAO or (Maximum Allowable Offer) that you can make on the house.
STEP 7: MAKING THE OFFER
Once you have the Maximum Allowable Offer the next thing you do is make the offer. Your offer should be less than what your MAO is. The best thing to do in this case is to subtract and additional 10% off of the MAO and start your bidding with the motivated seller from there. Negotiations can make or break your deal when it comes to investing in real estate so make sure that you are sincere and very clear with the seller from the very beginning.
STEP 8: MAKING CASHOLA!
Once you get all of this done, you need to approach your investors list that fit the criteria of the particular property. Doing this will allow you to sell the property rapidly, being that you have pre-screen the buyers and you know that they can close fast! Once you have solid buyer then all you need to do is send the contracts over to the title company and wait for your check to come in the mail. The best strategy to use in real estate investing would be to sell the property for less than the market value without rehabbing it. This is called wholesaling the property.
How To Immediately Triple Your Wholesale Real Estate Investing Business
I would like to show with you a little technique that I discovered that immediately tripled the number of deals I close in my wholesale real estate business. Its closely related to the old saying ”The Fortune is in the Follow Up”, but it is not about just following up as much as its about following up properly. This little technique is going to change everything for you if you just apply it to your business.
Let’s say I mail out 500 postcards/letters to find highly motivated sellers. I can usually expect that out of those 500 people, I will get 10 calls but just about 3 or 4 of the houses will actually be motivated sellers.
Out of those people, only one or two (usually just one) of these motivated sellers actually fits my criteria that I use to decide if the deal is worth my time. Most investors would put aside the deals that didn’t fit their criteria and focus on the one deal that did.
But the secret to tripling your business lies in those motivated sellers that you would usually pass over. You need to create a file of these motivated sellers who call you and make a unique marketing campaign that continually contacts them for up to 1 year. The fact is you never know what can happen in that period of time and that seller that might not have fit your criteria can suddenly become the perfect situation to profit from.
If you are constantly putting your name in front of these people, there is a great chance that they will be ready to work with you when their situation changes and they have a deal that more closely fits your criteria. Using this technique, I have TRIPLED the amount of deals I close. It’s all about following up with the right leads and not dismissing them just because they don’t pay off immediately.
How to Identify Motivated Sellers
To find motivated sellers you have to look for them in the right places. It’s sort of like fishing you want to go where the fish are biting and once you have discovered where they are biting you want to have the right bait on your line so that you can hook them and reel them in.
But first you must understand the mindset and characteristics of a motivated seller and what are the reasons that make them motivated to sell in the first place? Here are a few of those characteristics.
1) They desperately need to sell due to circumstances.
2) They are looking for a quick solution to their problems.
3) They are not afforded the time or don’t have the money to sell their house the traditional way.
4) You are possibly their last hope to alleviate their burden.
Let’s face it a big chunk of your success as a real estate investor will be based on your ability to distinguish between the motivated seller and the non-motivated seller. The non-motivated seller you want to stay far away from because they will only waste your valuable time, frustrate you and leave you wondering if the real estate business is really for you.
You will never convince a non-motivated seller to turn into a motivated seller unless you are willing to pay retail prices for their house. So it is imperative that you quickly and efficiently screen your sellers to determine if they are motivated or not.
Some of the questions that you should ask in the screening process are the following:
Would you sell your house for what you owe on it?
If the seller answers yes to this question they are truly motivated and you should be able to get a free house by taking over the debt or almost free house with debt plus some cash given to the seller.
Would you let me buy your house by taking over the payments?
If the seller answers yes to this question they are truly motivated and you should be able to offer as a solution a lease option or some type of owner financing “subject to” deal.
I’m a real estate investor and I am in the business of making a profit so I can’t pay retail prices for houses. Do you have a problem with that?
If the seller answers no to this question that they don’t have a problem, they are truly motivated and after some negotiation you will be able to get their property at a substantial discount.
Are you willing to accept some creative financing terms that will allow me to purchase your house?
If the seller answers yes to this question they are truly motivated and you should be able to craft an offer and close a deal that involves some type of owner financing.
In conclusion, as a real estate investor you will save yourself a lot of frustration by identifying and ascertaining whether or not your seller is truly motivated. Always remember that a motivated seller is someone that needs to sell.
Omar Johnson is a successful real estate investor and author of the home study course “Renegade Stealth Marketing For The Savvy Real Estate Entrepreneur” For more info visit http://www.renegadestealthmarketing.com
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