Three Steps to Capital Gains

InvestorDirector.com

Successful property flipping revolves around strategic marketing

If you were to study successful real estate investors, you would see a system in place as they continually buy or control property and sell it for profit. All wise investors understand the two types of buyers that exist in the marketplace and what these buyers look for in a property. InvestorDirector.com published Identify the Type of Buyer Before Flipping, to give our readers insight as to what successful investors already know about buyer selection and deal structuring. Once you can identify which types of buyers are present in any market and what these buyers look for in a property, it becomes necessary to explore the three steps that savvy investors use to consistently acquire/control and sell real estate for profit. These steps are taking into account the market we find ourselves in now.

These three very important steps cannot be overlooked and should be a part of the business and marketing systems you develop for your own real estate investment business. These steps all have to take place from start to finish for you to sell real estate at a profit. By mastering these three steps, you’ll be able to sell more homes faster, thus growing your business exponentially. Real estate millionaires all use these steps efficiently and are constantly refining them based on demand and market conditions.

Before you embark on flipping any deals, you have to be able to control or acquire deals. This can be done by setting up an investor network and building a team of real estate professionals centered around deal financing and acquisitions. By having the means to buy or control deals already in place, you can focus your time on building a large database of buyers. It’s actually more important to have buyers in place, ready to buy a deal, than it is to be bogged down with a lot of homes and not enough buyers. Many investors won’t buy a house unless they have their buyer already in place. This is done through wise marketing, which is step one of three when it comes to investing for capital gains.

Step #1: Market to find buyers. How can an investor flip a deal if they do not know what a wide range of buyers want in any given market? They can’t, therefore it must be understood that successful flipping involves creatively marketing to buyers. This is an especially important step for beginning investors who, all too often, buy a home and realize they cannot sell it. Below are some simple and inexpensive strategies for building a pool of buyers, who will help you choose a target area to invest in and the type of house to buy or control before selling.

a)    Run newspaper ads that are attention grabbing. Let your audience know that you possess high equity turn key homes and ugly investor deals as well. It’s ok if you don’t have any deals at all; you’re just trying to gather as much buyer data as possible. When calls or emails come in, get the buyers name, address, phone number, credit and income levels, the area they want to live in, their price range, when they’re looking to buy  and the type of house they want. Let them know as soon as you have more “good deals” you’ll contact them. This is a very effective way to get to know buyers and area investors to flip houses to and can make selling a lot easier once you’ve acquired a good deal.

b)    Mortgage companies and title companies work with hundreds of investors weekly. Ask the reps at these places who the most active buyers and sellers are. Make sure to tell the rep you speak to that they will get your business if they can introduce you to the right people. You want active buyers and sellers who are always coming and going from mortgage companies and title companies.

c)     Go to Real Estate Investor Associations (REIA’s) and drop flyers with a good advertising hook and your contact information. A flyer that says “I HAVE DEALS!” or “HUGE EQUITY HOUSES!” work fine. The investors that attend these meetings are usually chomping at the bit and advertising to them says that you’re an authority figure in real estate who is capable of supplying them deals.

d)    www.craigslist.com is a great place to find not only buyers and other investors but good deals as well. Use attention grabbing marketing phrases suggesting you have some spectacular deals (even if you don’t have any at all) and you’re sure to get several contacts per day to add to your growing database.

e)    Email blasts using a program such as Microsoft Outlook is an excellent way to communicate with a growing database of buyers; especially when a great deal does pop up and is ready for sale.

f)      Social events are a great way to find buyers, sellers or other entrepreneurs.

g)    Realtors kick up buyers all the time but most can’t sell them anything. This is because most realtors don’t understand real estate finance and are very bad investors that truly don’t understand real estate at all – therefore they can’t seem to close deals with any investors. Talk to many realtors and have them feed you leads on hot buyers or discounted homes. Real Estate Owned (REO) Real Estate Agents are the best to work with because they understand foreclosures and investing.

h)    Signs on poles or freeway ramps. “I have cheap homes!” “Make money in real estate!”

“Massive home liquidation!” These are great ways that always lead callers to you. Once

again: Keep gathering the information of each buyer and investor that calls you. These

people are your lifeline to profits later on.

Step #2: Find the deal – either an existing home you own, or someone else’s. By tweaking the same techniques you used to find buyers, you can also find homes well under market value offered by motivated sellers or investor sellers. Ads in the paper (“I buy houses”), word of mouth, other investors, mortgage companies, REO agents etc. are all good ways to get what your owner occupant buyers and your investor buyers are seeking. If you plan on wholesaling or doing some rehabs, placing hundreds of offers on properties that are already discounted on the Multiple Listing Service is the way to go. Do this through reputable REO agents.

Step #3: Structure the deal. Every deal is going to require the buyer’s cash or ability to get some type of financing to purchase your deal. As a general guideline, it’s wise to have knowledge of the various financing products available to owner occupant and investor buyers in today’s marketplace. Request a financing preapproval letter and speak with the buyer’s loan officer before a buyer signs an Offer to Purchase contract. It’s also a wise idea to set up an affiliation with a hard money lending company and a mortgage brokerage. Doing so ensures, financing is always at your fingertips and allows you to oversee the process of buyer financing from start to finish.

Urban deals bought very cheap can be seller financed. This means you would be purchasing a home needing some minor to moderate repair work for anywhere between $500-$15,000 and setting buyer move in terms of $500 down, and $500 per month; buyer to make all repairs. In this market, this is an excellent strategy as urban renters are currently challenged to receive financing. Please read the article entitled $500 Down, $500 Per Month, also in the August issue of InvestorDirector.com Magazine for more excellent insight regarding this investment technique.