I don't see very much discussion in the SS forum when it comes to selecting a few farm areas. I could use some tips or suggestions for this. I intend on retailing these homes, so won't be looking for too much rehab.
I need to find a low DOM however what is considered low in this market? Under 120 days? Under 90 days?
Since these will be retail most likely to families, I will look for lower crime and better schools. Is there such a thing as too nice of an area that could make it more difficult to short with the banks because the surrounding value?
Should I look at the median home price versus the average income? If so, what ratio should I look for?
Is there a "magic" number for arv? For example, homes that arv at 250k or 300k retail best?
Also, what % home value decline should I look for in the past year? There are areas where the average decline was 7% and areas where it was 15%. All areas saw solid growth (ie home sales) in the last 6 years and have near 10% unemployment, so there are plenty of underwater people who are very unfortunatey behind on payments.
How large should the farm area be?
Am I placing too much empasis on the above? For example, are your parameters more loose and you just do a pre-NOD search on several zip codes?
I am located in the Chicagoland area, so I can go 30-45 minutes in any direction and find almost any type of community. Perhaps that is where my hesitancy comes from. There are alot of options here.
Thank you for your suggestions!!
Good to meet you...
I dont buy through the MLS although I am Broker... I buy straight from the seller....
As for what to look for . Try 2/3rds of median... That is a great market..
Thanks for the reply Michael. I don't plan on using mls to locate properties. Mainly, I will be marketing directly to owners using 30-60-90 lists. I am also working on an agent or two to refer pre-mls properties.
I believe that being newer and working on putting together a solid system, I am over analyzing some things right now. :)
What would you suggest as a max days on market average for an area? Obviously the lower the better, however should I max out at 120 days, 90 days, etc?
I am not sure I understand your question... Days on market as it relates to a MLS listing or how many days from contract to cash...
If the second my average is 94
Remember once you have the right to buy you have the right to sell... So start selling as soon as youre contracted...
Sorry about that, I should have been more clear. I am trying to isolate a couple of areas to work short sales. Because I will be retailing the properties I I want to ensure they will move fast enough.
So I am trying to find out what the max DOM average on the mls should be for a market that I choose to work.
if your flipping buy everything just make certain you never own it,,
Shorts are easy to flip and make money on...
If and that is a big if, you are finding your deals off the MLS, you will want the properties that have been on the MLS the LEAST amount of time.
Why not either directly market to property owners in the foreclosure process, or even connect with a Realtor and let them find and bring the deals to you?
Make sure you eveluate each deal to make sure it is profitable and will be easily resold.
Hi Danielle - On average your short sales will take 60-90 days from the day you submit your package to the bank to closing. So, I would look for the areas where the houses are selling within that time frame. (you should be marketing the property for sale as soon as you get a contract on it) you could ask for extensions to get more time to close once you get an approval from the bank, but you don't want to get stuck without a buyer after you did all that work.
I am a very strong believer in having a realtor on your team, especially in the beginning. I had my realtor figure out what areas sold the most homes, what areas sold the quickest, and what price ranges sold the most often and the fastest.
In my areas, the best prices are $100-$125 and $200-$250. $150-$175 was ok too, but not the best. Not sure why but properties in the $175-$199 range just sit on the market waaay longer than the homes on either side of that range. If you can find all that info on your own and have the time then do it yourself, but otherwise hook up with a good realtor(read that: one who understands what you are doing on these deals and can get them sold in time)
I'm finding that the higher value properties aren't responding nearly as often as the lower end when I send them DM as an investor. I'm thinking I'm going to have my realtor mail to those properties and see if i get a better response. I have a feeling that demographic would just feel more comfortable dealing with a "licensed professional" especially in such a delicate situation. Just something to think about...
Thank you for all of your answers!
James - you've got it. I do not plan on pulling properties from the mls. Too much headache in relisting / working with listing agent. I am in the process of prequalifying agents who will send me pre-mls leads. It can be a challenge to get an agent to understand this process though!
Michael - when you say never own, are you referring to wholesaling the property or just not owning any length of time, such as a back to back? Also, 94 days contract to cash is that the contract with A or C?
Dave - you're spot on, my friend. As I mentioned above, I am working on adding a realtor to my team. Until I can add one that I am comfortable with and who understands short sales and how they relate to investors, I myself have a ton of time. On top of that, it's imperative that I know my market just as well as the realtor, so I will research this on my own as well.
I absolutely love your idea of having DM sent from the agent on your team to the higher end properties. I can see where that adds comfort to the homeowner who is unfamilar with creative real estate investing. Thanks for the tip!
Everyone have a great weekend!
Because I grab the deed as soon as legally possible I can control the resell... So the 94 days is from my purchase contract to my closing on the resell.
I do not believe in wholesaling... I double as often as possible..
Thanks for the clarification Michael!
Can you help me understand more about how you can move farm property efficiently? I'm curious about what you guys meant by 30-60-90. Why DOM needs to be lower than 120 and how you plan to retail to families.
Thanks in advance.
I think you may have misunderstood what I was asking. I was pretty much using a wholesaling term, "farm area", meaning the area that I will mainly locate properties out of. In a sense, you are farming the area for deals. I started out in Wholesaling, so was still thinking in those terms.
30-60-90 late lists refers to lists that you can purchase on people who are late on their mortgage payments. The list encompasses those who are 30 days late, 60 days late and 90 days late. After 90 days, you can generally just go to the courthouse and find these people because a NOD (notice of demand) has been sent to them and it is now a matter of public record.
For me, because I am not buying and holding, the faster the property resells the better. So I want to make offers on homes where the area's average DOM (days on market) is low. Even 120 days is a bit long. I'm really shooting for 100 days or less.
I will retail these properties using an RE Agent. The agent is an important aspect. They take a chunk of profits, so have to be worth every penny by being motivated, agressive and knowledgeable.
Hopefully this clears things up. If you have any other questions, feel free.
For a somewhat newer investor, great job in attempting to target your marketing efforts and building your system. :cool:
Thank you kindly Ted! We'll find out soon enough if my efforts pay off ;) Truth be told, all information that I have on Short Sales and really REI in general comes from this site and those (like you) who have been more than willing to answer any questions. So to anyone newer who reads this, get your education for free here at BP!!
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