Best strategy for low pop. low income markets.

[Jon L.]

Hi Guys, I live in WV and it is not a hot market. Median income is ~$30k and population is 50k in my area. Houses aren't selling here, yet there are lots of them for sale. Rental market is high, HUD rental assistance is high, poverty rate 30%. There is a university that is seemingly thriving, but no jobs for the graduates.

I've been wholesaling since last year, and can find the legit deals (40-50 % ARV, 25% cash-on-cash, lowest on market, no war zones) but the "cash buyers" just don't seem to have the cash. It's a challenge to move a $35k for $10k, so forget about moving a $70k for $20k.

Let's just say that my wholesale deals are garbage, I need to work harder to find better deals and fatter buyers, and wholesaling does indeed work in every market. Either way, what would be the best strategy for this scenario? Thus far, I have only focused on wholesaling and am attracted to the no cash no credit techniques, but I most definitely feel the need to expand my horizons.

Thanks in advance.

[Michele Fischer]

Jon L,

Have you considered buy and hold? Population in my target area is 40K, poverty rate is at least 25%, and we are doing well with rentals. If the prices are that discounted and the rental market is high, focus on buying the best for your portfolio, as a thought.

[Jaclyn B.]

If there are a lot of homes for sale and they stay on the market for quite a while, that means you potential have quite a few motivated sellers. You also mentioned there's a substantial rental market. Why not buy from a motivated seller and rent out the house? 

Buy and hold is my preferred strategy so I may be biased, but in this scenario it seems like a good strategy.

[Jon L.]

Thanks Michelle and Jaclyn. How do you normally acquire these properties?

Is there a technique in which one could purchase a house via owner financing and then move in tenants immediately?

[Jaclyn B.]

@Jon L. 

If there are a lot of properties just sitting on the MLS, start with properties that have been on the MLS for the longest time (that meet your other criteria in terms of location, bed/bath #, etc) and make an offer. Once you've purchased a property put out for rent ads in the newspaper, online on Craigslist, sign in the yard, etc. Depending on your market your MLS may also hold rental listings. Or you could hire a property management firm to do all the tenant related tasks.

A lot of folks on Bigger Pockets can provide information on direct mail (yellow letter) campaigns. Direct mail is not my area of expertise so I can't speak to that. 

[Michele Fischer]

Owner financing has gotten pretty complicated/restrictive with Dodd Frank. Do you have friends and family or savings to cash buy one, fix it up, then mortgage it to fund the next one? I also always used the MLS. I would be more comfortable using a letter campaign or connections to identify the properties today, but I'd need to do more research to figure out how best to follow through after I found one.

[Curt Smith]

I feel you have a gold mine up in your area!! You have 2009-2010 still happening, a buyers market. Here's the general tactic:

- Use a public records search service, sitx.com, agentpro247.com and search for 2 property types:

- zero or a little equity, mail to these folks, buy the property for zero $$, take over paying the mortgage payments. This is called buying subject to the existing financing. You just pay closing costs out of pocket, some times some fix up too. Market for rent to own who will eventually buy the place at a mark up with bank money.

- 100% equity, wholly owned. Usually older folks who need to get out of their house but as you say few buyers. You write a purchase contract based on THE SELLER owner financing to you. You are an investor so Dodd Frank is not even in play. You pay 1/2 the rental rate on the note. Negotiate the least down, the longest term, monthly at most 1/2 rent.

For very little cash you can become a millionaire (on paper) very quickly, in a few years.

The key is don't do the above in junk neighborhoods. Only do this in nice neighborhoods and good schools. This is the experts wisdom!!! Picking up junk houses will only get you walk aways and you being on the hook for mortgage payments etc. Nice neighborhoods rent to own / renters will want to stay.

Good luck.

[Brian Gibbons]

Geez @Curt Smith 

We must be blood brothers.

Formula- 

• Buy-Control-Flip  low equity deals
• Sub2 and rent out
• Lease Option and assign for 3-5%
• Wrap and re Wrap on Owner financing for spread

1. Free and clear no loans

• Buy on Installment Sale, no Dodd Frank if you are not living in it, turn the residence into "paper" "an annuity" for the retiree.

Buy 10 of each, no banks, no credit.

[Account Closed]

Originally posted by @Michele Fischer:

Owner financing has gotten pretty complicated/restrictive with Dodd Frank. Do you have friends and family or savings to cash buy one, fix it up, then mortgage it to fund the next one? I also always used the MLS. I would be more comfortable using a letter campaign or connections to identify the properties today, but I'd need to do more research to figure out how best to follow through after I found one.

Dodd Frank covers consumer loans only.  A seller offering seller financing to an investor purchasing for a business purpose is not affected.  Not complicated, not restrictive. :)

[Curt Smith]

@Brian Gibbons LOL like the the movie Twins, you're the better looking and smarter brother my friend. :) You gave good tips too.

[Phil Pustejovsky]

Have you considered renting the homes you acquire through Section 8?

Section 8 is a form of government subsidy whereby the govt pays your tenant's rent. Since you can purchase properties at such a low price compared to the monthly rent, they will cash flow very well.

Your biggest challenge will be managing the properties since the tenants are more likely to complain. But locate a 24/7 handyman service and they can handle fixing toilets at 3AM. Since the cash flow is so strong, it may be worth the hassles.

[Jon L.]

@Phil Pustejovsky I have to admit, you got me into wholesaling. I found your lecture at UCF, but didn't quite wrap my head around it until finishing your book and your Udemy course. So, BIG THANKS, and I'm honored you've responded to my post, while giving out even more free info.

To answer your question, yes, I have considered it. When I conquer the fear of owning housing that repeatedly will be destroyed by Sec 8 tenants who couldn't care less about their living conditions, then I'll consider it more.

@Curt Smith Thanks for the advice. Having an owner financing deal at 1/2 the rental rate, and the rest of the terms you described, is exactly the strategy I'm looking for. For one to be able to contract those deals, and then find tenant buyers would be perfect. I would need to see contracts for both sides of the deal in order to fully digest the process.

I don't quite see an owner being OK with someone purchasing their house via owner financing or Sub 2 and then immediately moving in standard tenants while charging them rent, though. Can this be done without transfer of title prior to closing?

@Brian Gibbons Thanks for chiming in, as well. I've read a lot of your posts on Sub 2 and lease options. I will definitely be seeking out more of your advice and mentoring in the near future.

[Curt Smith]

You'd have an attorney's office closing for either sub-to or seller financing. You'd disclose your business model that you'd put a renter or preferably a rent to own tenant who will cash the seller out in a few years.

Then after closing you'd move in the tenant. But the seller knows what the process is because you explained it to them.

Yes most are nervous about this tactic!! It takes a motivated seller with few options to see the light that this is a great plan. Most just don't have creativity or ability to see the risk really isn't much at all. Most imagine sky is falling scenarios and run back to the couch for another night of mind numbing TV. You're job is to focus on that this solves their problem (that you dug out of them).

[Brian Gibbons]

1. A letter of intent up front with the seller sets the tone with the seller.

2. Have your attorney prepare the sub2, wrap, or lease option assignment docs, and have the seller go down to the attorney's office and sign.

These 2 steps allow you to have a solid deal that does not unravel, stops "buyer's remorse".

Here is my letter of intent for lease option assignment.

https://drive.google.com/file/d/0B410Qg6zTH1EUFdQe...

from there you can market for the tenant buyer.

[Account Closed]

How to Invest in the Ghetto.

Great video. :)

https://www.youtube.com/watch?v=yQ2ciWHlTi4