The Urly Bird

Why do you look for discount value - how much a property or note is discounted from regular market value - and not the cash flow generated from the real estate via cap rate?

I don’t know - but I have a guess!

You are REITs and hedge funds and want to have enough spread to make money and provide yield to your shareholders when you flip your real estate to charities. That may be true - it may not be. But when I spoke and emailed one Acquisitions Manager for a REIT/hedge fund - that’s the impression he gave me when he was deciding whether he wanted to deal with me to do a deal and take the deal to due diligence after meeting the seller.

I just don’t know. I was taught in business school to look at cap rates and last night at the monthly Edmonton Real Estate Investors Association we were taught about investing in apartment buildings - it’s all about yield and cap rate - comparative to bonds.

Why do you look for discount value - like this deal is 70 cents on the dollar. No wait! This one is better it’s only 35 cents on the dollar. (I omitted discount value in the marketplace because it’s no longer a key metric used for matching.) I know wholesalers look for discounted property because they want to make a profit margin on their contracts - make a spread when they buy low from the seller and sell high to the buyer - but leave enough room that the end buyer can still make enough money rehabbing the property.

I think discount value is used for flipping real estate and cap rate is used for buy and hold situations.

Do you think that deals should have cap rate or discount value when first evaluating them?

Real estate agents are a dime a dozen. No offence to my email list - who are primarily composed of real estate agents and real estate investors. I mean that the market has low barriers to entry so there are a lot of them. They are still valuable - especially to me - and the general public!

Realtors have to find deals just like anyone else to make a living and a career out of real estate.

How Do Real Estate Agents Find Deals?

They:

• Focus on a smaller market to become the expert in the area
• Hang fliers on doors
• Send mailers or direct mail
• Tap their network/database of contacts/CRM or excel spreadsheet.

This is according to REALTORMag.

So what’s stopping real estate investors and wholesalers to find deals the same way that realtors do. Don’t they want to become the expert in the area and get access to below market value deals before anyone else so that they can make money?

I think that it boils down to professionalism. Let me explain. I read one post on how bad wholesalers are professionally relative to real estate agents. How come wholesalers get such a bad wrap? I met with a really professional wholesaler for lunch who is a coach he does so well. I do not think that all wholesalers are like him. I think that many wholesalers try to be gangster.. It’s all about the cash.. That’s cool but there is still professionalism: treating people with respect, building trust/rapport for deals etc. You know? 

I think that if you focus on your brand and reputation you could legitimately get better deals because you will be trusted in your target market. It takes consistency of message - but you can do it.

You Can Find Good Deals With Virtual Real Estate Investing Too

It takes time but:

• Set up a website capturing leads
• Turn your website into a hub
• Close the deals

With these tips, you can compete with any realtor in finding deals - and partner!

What do you think of my tips; Are they realistic?

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Many of you are real estate wholesalers and have buyers and sellers that you do deals with. You have databases of buyers and do direct mail to get sellers. One of the biggest challenges of a real estate wholesaler is marketing costs. Access The Flock Real Estate Marketplace can help subsidize your marketing efforts by allow you to access buyers and sellers in the marketplace when you are flipping contracts. 

For less experienced real estate wholesalers I’ve prepared a slide presentation on the steps; I find it’s good to have a visual reference to go back to when you are training someone or are in the middle of a deal and want to know what you should do next to get to closing and collecting all of your money. This can also be used if you are more experienced - so don’t worry!

Step By Step Wholesaling Real Estate Deals Presentation

I don’t know.

At first, many investors might not consider using hard money loans for their own investments. But as time goes on, many investors want to start using hard-money loans so that they can get property. They get rent from the property that has been mentioned - when they are profitable - and this cash could be lent - turning investors into lenders.

I think that it’s possible to acquire homes for below market value when homeowners default because the courts price it for a foreclosure price in some jurisdictions and, as a lender, you have first option to buy - I believe. 

Is it ethical for investors to lend on mortgages?

There is conflict of interest for an investor that wants to acquire property at or below market value when they are lending their money on mortgages which could default -  if the investors are predatory, targeting to make loans that could default.

However, on the other hand, if your clients are the same people it’s good to have multiple solutions available to offer them if you are good hearted. You could help keep defaulted borrowers in their home.

What do you think?

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Here is a list of the 20 hottest housing markets for May 2016.

There are deals in:

Dallas, Texas

• $21,600 - A Grade Properties in Texas

Los Angeles, California

• $20,000 - REO

Typically, in hot markets the prices have been pushed up by buyers competing for the deals and housing. But, real estate agents and investors have left a few hot deals for you in these markets that are easy to get into. Just access the seller on Access The Flock.

What has been your experience in these markets? 

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You’d think that your buyers could be locked out of buying good deals with prices appreciating 10% in some markets like Denver and Seattle. But the fact is, chances are, they probably already own the properties that have appreciated - and are benefiting from the price appreciation. A lot of investors got in after prices dropped in 2008 early. And own these properties.

There is less inventory on the market today according to Trulia’s Ralph McLaughlin and Access The Flock is seeing more buyers relative to sellers lately - making it harder for buyers to get into the market. Buyers are competing bidding the prices up. Over 5 years, home prices could appreciate further as employment rates stay strong at 5%. So, if you get in now you could benefit from further appreciation.

There are some markets that could be due for a price correction like San Francisco. But, then again, it could remain a hotbed for a few years.

Do you have repeat buyers that are benefiting from price appreciation?

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I don’t think that it’s a very good thing..

Foreclosures have increased in some states year over year in 2016

What can we do about this besides help people get their homes back and make lots of money doing it? Nothing. 

Let’s close some deals..

Where are the foreclosures? What states are the foreclosures in? Where do I need to get my clients - buyers and sellers - to close in these areas? How can I make lots of money buying well below market value deals for myself and my clients?

I think that you can find a few buyers and sellers in New York on Access The Flock Real Estate Marketplace.

The state of New York has rising foreclosures year over year

Bank owned and auction foreclosures are up year over year in NY.

I have well below market value properties on my sellers list:

Check these out:

NY

BUSHWICK RENTAL APTS !!!

4 Buildings in Crown Heights Bklyn

60 units -manhatten

Reo in New York

U.S. Headquarters for a Worldwide Bank

NYC Hotel Asking $240M

Now, I don’t know if these are all real.

You can access these sellers on Access The Flock.

Good luck.

Please let me know how your deal closings have gone in the comments below.

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So many people in real estate are aggressive. When they negotiate, they are pushy!

I hate it!

So many wasted phone calls. Trying to bring the buyer and seller together to do a deal - and nothing comes of it because the other party just isn’t thinking win-win and how can we solve this problem - to do a deal. They are thinking: “How can I access this seller or buyer and cut this person out of the deal.” 

It’s nuts.

It’s crazy.

No wonder so many people are poor on the internet with few connections and trying to close their first few real estate deals. Low dollars to enter the industry. Low skill.

But enough rambling. You came to negotiate and answered your telephone. Now you have a prospect on the line and ready to do a deal.  You are for real.

How do you negotiate a real estate deal?

Type A’s can’t see closing a deal and are focused on getting what they can when they are talking to you - they don’t build relationships.

Know at the start of the phone call what you will never give up to them without getting paid when selling - money in escrow - or knowing who’s on title to the property - when negotiating to buy a property or note.

I’m sorry to say, but it’s tough out there!

This is knowing your BATNA - Best Alternative To A Negotiated Agreement. For me - the flock is the names of the buyers and sellers before I got mine. Never leave it on the table. I mean never leave the negotiation without it - get something for it! You know what I mean? Or you can walk.

You build a relationship with the buyer and seller and you want to leave with something.

An example: What’s the seller’s motivation?

Focus on meeting interests and not positions. For a seller that is facing foreclosure and you as a buyer coming in this can mean respecting that they are in foreclosure solving their true interest in staying in their home and coming up with a solution that isn’t based on price but solving the problem of how to acquire the property while keeping the seller in the property - possibly as a rent-to-own. Get creative when solving problems!

Don’t just battle over the price. It’s easy!

Use an Objective Criteria

If the buyer or seller don’t agree with your comps then you know that their crazy.

Unlike what most real estate articles on how to negotiate a deal this Inc. magazine article recommends not to play games even though they are rampant in the mean industry.

Some of the commissions on the big deals that are being circulated on the web are unrealistic and just not real. That said, if you were negotiating one of those deals and haven’t closed a deal before wouldn’t you offer a concession to close a deal in a collaborative way? Ya, right!

If you could change one thing with a realtor or real estate investor to make millions what would you say or do?

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Real estate investing is full of ups and downs but you want to focus on how to keep the worst stuff from happening to you. One of the key things to keep in mind to prevent bad things from happening are keeping your good tenants happy. Tenants can damage property and are notoriously known for setting up drug houses. So, let’s look at how to identify what a good tenant is and how to keep them.

What is a good tenant?

 A good tenant:

• communicates with you
• pays on time
• pays in full
• doesn’t damage the property

How do I keep good tenants?

Many sites recommend having a rewards system in place. I’m not sure how well this would work if you pick a bad tenant to begin with. Tenants can be unmotivated in their life and and not have things steady or firm roots and might not realistically know if they can commit to their tenant agreement. I’m not sure how an annual gift card is going to change things when they are having trouble paying their rent. It’s a good idea; I mean rewards for good behaviour is positive and all. Try gifts for the holidays! I’m a firm believer that the most motivation that can come to the tenant is through good communication and relationship building - if they are a good tenant to begin with. You might need to hire a good property management company to put this in place. The other thing that you can do is setup an email list in MailChimp and remind them periodically of their potential rewards along with your newsletter. If they are good tenants, try a renewal incentive - be it whatever the tenant wants in the amount you can afford!

The idea with keeping the good ones is to spend more time taking in revenue from rents and less time with turnover. I guess it does boil down to good customer service - after all, your tenant is the customer and you are running a business; You have got to keep them happy. By maintaining the property.

Some say setting a standard for punishment - a late fee - is ideal for establishing a strong relationship with your tenant. Keeping consistent communication when late is recommended. On par with setting a standard for punishment is to include in the tenancy agreement that you report to a form of credit bureau in your jurisdiction to avoid late fees.

The next thing is, balancing rents with term of lease. Sometimes it can pay to accept slightly below market rents to keep a long term tenant and avoid turnover.

So, this comes to - How to keep a good tenant? 

I think that the best way to keep a good tenant is to tenant screen for a good tenant in the first place. I heard studies show that you can keep good tenants for a long time that have been properly screened. Give that a try!

What has been shown to work when trying to keep the good tenants for you or that you’ve heard of?

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Social media sucks for real estate.

The best that you can do with social media is find a few customers and get them to land on your landing pages, fill out the opt-in forms and capture some e-mails and that’s with writing lots of great content on your blog and sharing it on social media like Twitter, Facebook, and Google+, or paying for ads on Facebook.

As far as closing real estate deals, the chances are slim over a 7 year period. Yes, that’s right, a 7 year period! I met with one real estate consultant that was still working on closing his first real estate deal after 7 years - and still hasn’t closed one! Another lady had spent a couple of years working on one real estate deal only to find out that the buyer’s proof-of-funds was fraudulent. That’s his bank statement - fraudulent, made up, manifested out of thin air. You typically want the dollars to be real from your funding sources. They don’t mention that online there is an even greater proportion of falsified documents let alone spreadsheets filled with property information that try to pass as real proof of ownership like title.

I still don’t think that you need to rely 100% on the MLS and a real estate broker. I think that you can do things like direct mail to find deals - heck that’s how many real estate agents find their clients. You can also include your social media accounts on your direct mail material, but start local. You can get a following from that and start blogging with engaging content. Include calls to action to ask them to telephone you if they have cash or a property for sale and become the go-to expert. Paid social media marketing might work better, in larger volume and quicker - like on Facebook targeting your location - than by doing it organically for free.

Oh my gosh! It’s what every industry expert recommends or do they just recommend that you do social media and that’s it to get real estate deals done. I don’t know. I just know that if you aren’t famous, it takes a lot of time to get real estate deals closed using social media marketing. It can be cheap, but takes time.

The problem with trying to do out-of-state real estate deals via social media is trust. It’s generally very difficult to trust the person on the other end of the phone that you meet via social media if they aren’t from a site with a rating and grading scale and if you don’t have referrals from lots of people that this person is trustworthy. They could take your money and run if they are a contractor and you’re trying to fix up a property from a distance.

I still believe that the best way to find real estate deals is to climb over the backs of other real estate professionals in your network because you want to be the one dealing directly with the buyer or seller, cutting out other middle men and dealmakers. I don’t think it’s ethical if done on purpose, but there has got to be ways of getting there like direct mail and the online strategies that I recommend above that can make it ethical.

What experiences have you had with social media marketing strategies trying to close a real estate deal?

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