The Urly Bird

Regulation

You are impacted by different rules. It’s important that your buyers and sellers also follow any guidelines by regulators. With competition very high it makes it more demanding to follow rules. This stress affects decision making.

You can work with consultants or with people within their own company to find a fit with regulation.

One of the keys for regulators is the liquidity of real estate assets, the price, and ownership.

Liquid prices makes the market more efficient and ownership reduces fraud.

Pricing

As Asset Managers, it is important not to compete on price because your institutions are institutions.

Real estate buyers want discounts and there is competition.

Knowledge of the marketplace is important to know prices.

You have a digital business strategy:

It is very important to have a digital business strategy. The two sources of focus for a digital business strategy in this article are the:

• Prevalence of real estate platforms, and
• Communicating on social media

You have your own real estate platforms and listing sites.

It is important for you to leverage social media to take advantage of a non zero-sum game.

Competition

It is hard to stay competitive when listing sites connect buyers and sellers.

Maintaining quality and differentiation

You might not be responsible for managing quality and differentiation. 

Value might be at the forefront of an your mind when the competitive industry is buying low and selling high.

If you have 7 buyers from one listing you will be more competitive.

Partnering with customers

If you buy and sell real estate are you partnering with buyers and sellers?

Fitting in with industry practices

It’s hard to discern if a buyer or seller is fraudulent.

Banks have real vetting procedures.

Balancing risk/return

Some properties in some markets can be $1. 

Bad matches are curated off the site.

I have my first survey back of someone rating a cash buyer or motivated seller a 10 which means that deals close. I also have someone saying that they are making money when the deal closes.

There are many ways to get real estate leads on the internet.

All that you have to do is search cash buyers list and motivated sellers list and you will run into websites that sell real estate leads.

My site sells matches. These matches are algorithmically selected and curated by real people to be the best.

When you save a cash buyer or motivated seller in Access The Flock, you bring them to the market.

If you are the cash buyer or motivated seller, even better.

These are good signs.

China’s foreign direct investment into the United States dropped nearly 46% to$48.19 billion, after hitting a record high in 2016 because of transaction restrictions. Cash transfer restrictions have a $50,000 limit although they could be removed because they could be temporary.

Chinese buyers like coastal cities

There are a lot of examples of why Chinese buyers like New York City. The first is widely known that New York City has had a record low crime rate and that is the reason that Chinese buyers are looking to invest in New York City, especially Brooklyn. The first is that Chinese buyers are moving to Brooklyn where there is “Sunset Park, Brooklyn’s first Chinatown.” Next, middle class Chinese pool their money with family and move to Brooklyn. Also, Manhattan has been popular for apartment sales and apartment building purchases where since 2008 Chinese buyers have been driving up rents.

“New York is a lot like Hong Kong in terms of prices, but the housing quality is a lot better,” saysVanessa Chan. “I also knew Manhattan property would appreciate much faster than some real estate investments in Asia.”

Chinese buyers see real estate as a long term investment

Banks see Chinese buyers as good investments because Chinese buyers tend to believe that real estate is a stable long term asset culturally. Instead of being cash buyers Chinese are getting mortgages with well known mortgage requirements being around 35% downpayment. I think banks are lending to Chinese as their focus because the Chinese market is so large and the demand for investing and moving to New York City is so massive over the years.

With the $50,000 restriction on transfers Chinese cash buyers would be moving to New York City. There are advertisements in Chinese cities to invest in New York City for a Green card, according toDr. Peter Kwong, professor of Urban Affairs and Planning at Hunter College. Some articles suggest that Chinese cash buyers are a myth in New York City; That there is no way to access their money for apartment buildings. However, Chinese buyers are willing to get mortgages to park their money in New York real estate — especially apartment buildings.

Chinese investors like the strength of the US dollar compared to the Yuan and real estate since 2008 could be attractive cyclically. Sometimes Chinese buyers leave real estate vacant. Sometimes they improve the property and their investment helps the community. Chinese buyers are making it difficult for first time homebuyers to enter the market because they are making real estate more competitive by bidding up prices.

Chinese buyers want to diversify and want to invest in foreign property like New York City for the long term.

Rentals are a good way to make money from real estate.

Use the cap rate:

The capitalization rate, often just called the cap rate, is the ratio of Net Operating Income (NOI) to property asset value. So, for example, if a property was listed for $1,000,000 and generated an NOI of $100,000, then the cap rate would be $100,000/$1,000,000, or 10%.

Contracts

All you need is a purchase and sale contract and a lease agreement.

Making money with no money

Do a joint-venture (JV) with a cash buyer and make 50% of the cash flow.

Free and clear property

Real estate without mortgages are more likely to cashflow.

Investment real estate can be break-even on a month-to-month basis if it has a mortgage and you might get the mortgage pay down and appreciation as part of your return.

Long term investing

Buy and hold a portfolio of free and clear cash flowing investment real estate.

Buying low and selling high

Don’t compete versus wall street, charities, the marketplace buying and selling unless you are wall street or charities.

People that buy at prices that are too high are “stupid.”

You could sell to charities at higher prices.

It’s hard to time buying low and selling high and you might get pulled into being a trader into different asset classes as you watch the correlations on TV and prices on the internet change.

Maintaining real estate

Buy and make improvements to real estate over time.

Hold rentals over time for appreciation.

Collecting rent

Sometimes you will have to make phone calls to collect rent. Share an office with a lawyer.

Find a niche with a lot of leads

That way you do not have to worry about your cash flow running out. 

Do you love assets?

I love taking all the cash.

Finding real estate deals is emotional because you do not know what is real.

Finding deals sends you through a rabbit hole with no end in site.

You will be surrounded by lies and fake cash buyers and motivated sellers if you do not know how reputable they are and if they pay for things.

If you are not careful finding real estate deals can leave you alone in your bedroom wondering if the person you are dealing with wants all of your cash and to leave you with nothing.

That’s a real estate deal. Or is taking all of the cash.

I love taking all the cash.

I hate being left with nothing at the end of a negotiation.

If you are dealing with fraudsters then how do you negotiate a win-win so that you can actually get all of the cash!

You need a system to tell you who actually pays cash for cash buyers and motivated sellers. 

Then you will know what is real!

And just maybe fall in love.

Are you highly motivated to be with this person?

Transitioning from a casual relationship to falling in love may have a chemical underpinning: Evidence shows that dopamine-rich areas of the brain are involved in the beginning stages of love (Fisher, Aron, & Brown, 2005); these areas are considered part of the brain’s “reward system” and serve as highly motivational.

Don’t compromise when doing a real estate deal.

Collaborate and create win-win deals.

You can create win-win deals by knowing your BATNA:

In negotiation theory, the best alternative to a negotiated agreement or BATNA is the most advantageous alternative course of action a party can take if negotiations fail and an agreement cannot be reached. BATNA is the key focus and the driving force behind a successful negotiator.

You can use the cash buyer landing pages.

The cash buyer landing pages match cash buyers with motivated sellers.

China is by far the biggest foreign buyer of residential and commercial property, proposing $24.3 billion of spend in 2014–15 — more than triple the United States and six times the outlay from Singapore, the Foreign Investment Review Board annual reports shows.

Chinese investors prefer owning real estate to shares.

White people consulting with Chinese cash buyers.

Read this for more on culture.

Chinese investors like American investors are buying the Bronx.

I think that there are apartment buildings in the Bronx that go between $1.4 to $1.8 million.

I don’t know anything that would want something like that!

 Chinese cash buyers are investing in the Bronx because the murder rate has dropped 91% since 1990.

They must be investing in more than prisons!

I wonder if it’s the same broker that’s connecting Chinese investors to the Bronx as it is to Australia!

I think that Chinese cash buyers are investing in apartment buildings that cash flow.

Jon Ellis says Chinese buyers are helping first home buyers because they’re increasing supply, and also stimulating construction activity which is keeping the economy afloat.

Chinese people prefer the internet for direct contact instead of using local agents and middleman.

Long-term Investments

Canadian cities look like a safe place to invest to these long-term investors. They are not usually seeking short-term or speculative profits. Most of these buyers are building a legacy to benefit their families for generations.

Key Take Aways To Structure A Deal

• Don’t bring in a buyer unless you know the seller.
• It seems like the broker communities are tight-knit that control the access to the Chinese markets.
• I imagine that it’s ultra-competitive between the middlemen.
• This article says that there are a few people that control all the access to China.
• I imagine that if you showed your cash you would be first in line to access U.S. real estate.
• Make contacts that can help you.
• Selling U.S. property to Chinese cash buyers is different because of the cultures and language.
• Chinese cash buyers like to invest in brands.
• It can take decades travelling to China to build up a list of cash buyers.

Data compiled by the National Association of Realtors shows that Chinese purchasers in recent years have bought an even mix of detached single-family and multifamily houses, with a median price of $425,000. About 69 percent of purchases have been all-cash, while 31 percent have been mortgage-financed.

This article says that Chinese cash buyers are buying Canada and not just Vancouver.

It says that there are positive benefits and negatives to the influx of cash in Canadian communities. 

The prices of properties increase and that prices out Canadian families. Especially millennials that are looking to save and purchase their first properties. I imagine.

Victor Li estimates that just 3% of potential Chinese investors in overseas property have so far been found — meaning a virtually untapped goldmine lies over the border in mainland China.

Rich Hong Kong investors have been ploughing money into British bricks and mortar for decades, snapping up off-plan apartments at weekly property fairs that can then be rented, flipped, held as investments or used as second homes.

“Our thesis — and this is supported by quite a lot of evidence — is that in many ways the international Chinese investment journey is probably just starting,” says Charles Pittar, chief executive of Juwai.com, a website that aims to pair mainland buyers with property developers in places such as Australia, the US and the UK.

Contrary to Opinion

“They certainly don’t bring any suitcases of cash because they’d be stopped at the Australia customs,” Mr Ellis says.

There has also been a Chinese government crackdown on illegal offshore money transfers.

However

It stands to reason that when one runs out of prospective domestic buyers, the next logical step is to approach those who have been engaging in unprecedented money laundering on a global scale in the form of “real estate purchases” which are nothing more than parking funds offshore (and far away from China’s banks) while leaving the newly purchased house unoccupied.

There is a $50,000 limit on what Chinese are allowed to convert each year due to capital controls.

“We are reluctant to take on new clients unless they have 100 percent of the cash for a property,” Scott Kirchner said. “But then there’s the issue of how do they get the money out of China.”

In a bid to staunch the flow of yuan out of the country, the Chinese government has tightened regulations around buying foreign currencies and increased penalties for infringements.

Good luck accessing a list of Chinese cash buyers!

The per capita income in Cleveland in 2010 was $17,537.

Cleveland has a population of 388,072.

Most home prices in Cleveland are between $50K and $100K. 60% of the population are renters.

The buildings are mostly detached SFRs from before 1939 with 2–3 bedrooms.

The average market rent in Cleveland is $824 per month.

Cap Rate

The estimated cap rate in Cleveland, Ohio is:

~20% = ($824*12)/$50K

Why Escrow?

Real estate deals are risky transactions. You can submit contracts when you get matched.

What do you think of the idea of getting your buyer to hold your money and documents in escrow before connecting them with the seller?

Better yet just sharing an office with a lawyer.

What is an Escrow Deposit?

Also known as an Earnest Money Deposit, the escrow deposit is money that a homebuyer puts down as a sign of good faith when purchasing a home. It is refundable until the end of the inspection period unless otherwise negotiated, but after that, if the transaction is cancelled, it is usually forfeited to the seller for their trouble.

Closing

The final, and most legally complex steps, are the escrow period and its culmination, the closing.

According to this Time article:

An escrow account is essentially a holding tank. During a real estate transaction, the escrow officer — usually a lawyer or title company representative — holds all the important documents and deposits while the buyer and seller work out the details.

What is escrow?

“A written agreement or something of value put in the care of a third party and not delivered until certain conditions are fulfilled.”

I think that it’s a good practice to do that but totally unrealistic because it seems to force industry standards.

No one in real estate really tests. They just close.

Closing a real estate sale is closely related and connected to closing the escrow: it’s when the deal is completed and both parties get what they bargained for — money for the seller and a home for the buyer.

If I have a buyer and seller’s name. Do I just send a contract and hope the best?

How many years does it take to close a deal after submitting a purchase and sale contract with master fee agreement?

A truly motivated seller is less inclined to engage in lengthy negotiations — they just want to get the deal done.

I think that you can fire the seller if they take too long to close and you can fire the buyer if they don’t put your earnest money deposit in escrow according to one real estate coach that I had lunch with.

That phone conversation will tell you whether they are wasting your time.

That should be a clause in your contract.

I think it takes 3 years if the buyer has a proof of funds for $250M because of all of the people in their company and due diligence.

You can take lengthy walks on the beach if you live in California or Florida while you wait.

I think you have all of the power if you have the buyer and seller’s name at the start of the negotiation.

That’s what I have.

That’s the position you are placed when you use AccessTheFlock.io.

It’s totally boring.

I just need a fax machine.

“Search for a lawyer to close on Google And $350,000 is mine!”

Do you have a library of contracts?

I think that it’s a bit of gamesmanship deciding on what contracts to use.

You are probably negotiating with people that are in different states or countries. Probably just states for the most part.

It might matter where the property is located to determine what laws to follow in your contract.

I’m not sure if you can specify that the contract be governed in certain jurisdictions even though the property is spread out all over the United States.

Your closing will take place in the office of the escrowee.

You might need to travel.

How much do you want to pay for a lawyer?

Attorneys can charge $750 for transferring title in Canada and between $1,000 and $2,000 in the States.

If you have a closing lawyer that handles your escrow can’t they be the same person that advises you on the contracts to use?

I think you need to partner with a real estate lawyer or title company.

They might tell you not to keep your legal costs so high.. or to set up too many corporations.

When you escrow you can close.