Categories
Wholesale Wholesaling

Can Real Estate Wholesaling Be Done Ethically?

Women thinking about real estate
Source: Photo by Pexels

Many people in the real estate industry frown upon wholesalers. In general, it seems that wholesalers have developed a bad reputation because many investors and sellers think they can find each other without an expensive middleman pocketing some of the profits.

But ‌the reality is far more complicated than just that…

The truth is real estate wholesalers make everyone’s lives easier, helping sellers to actually sell their unwanted homes and connecting buyers with properties they actually want. In a way, they fill a gap in the real estate investment game that nobody else can, providing genuine value to both seller and the investor.

Still, not everyone thinks that and so we wanted to address the question: Are wholesale real estate transactions ethical?

Let’s take a closer look at the issue.

When Is Real Estate Wholesaling Unethical?

Here’s how we see it: Real estate wholesaling is only unethical if someone conducts their business for the wrong reasons. After all, real estate wholesaling is legal in all 50 states—although with many local and state rules governing it.

Here are two situations where real estate wholesaling becomes unethical:

#1 – Deceiving the Seller

If a wholesaler deceives the seller into thinking that their property is worth less than it actually does, they’re effectively tricking them so they can earn more profits. But if the wholesaler tells them the actual value of their home and is clear about the extra cost they’ll pay for their expertise, then everything is done ethically.

As a wholesaler, the goal is to convince the seller that your list of buyers and connections will help them greatly, so they can sell their homes as soon and as easily as possible. After all, most sellers have the following problems:

  • They don’t have access to interested investors or buyers.
  • They don’t have real estate knowledge to handle the transaction.
  • They don’t want to take care of the property anymore and would rather liquidate it.
  • They don’t have the time and finances necessary to repair the property.
  • They don’t have time to waste as the property is near foreclosure already.

Another situation is if the property is already in foreclosure and the bank just wants to liquidate it. A real estate wholesaler can then step in, offer their expertise and knowledge, and get the job done quickly and efficiently.

#2 – Deceiving the Buyer

Another example of an unethical situation happens when the wholesaler underestimates the repairs needed and oversells the property to a buyer.

Sure, the wholesaler will certainly gain a hefty profit, but that effectively pushes the problem to the investor—where they have to repair and renovate the property at a much higher cost than expected. With a bloated after-repair value (ARVs) and inaccurately estimated repair costs (ERC), they’ll have lower their profits and struggle to bring the home up to standards or find another exit plan before they sink too deep.

Unethical situations like these are what fuel the negative reputation wholesalers have today.

Instead, you want to be known as an expert deal finder. Give accurate ARVs and ERCs, and put in the effort to build your experience, knowledge, and reputation in the community. The more you do this, the more buyers will see your added value to their investments—becoming an irreplaceable asset to them.

Ultimately, it boils down to the quality of deals you provide. If you offer pathetic deals for hefty profits and push problems to other parties, you’re only fueling the negative reputation that wholesalers already have to deal with in this industry.

Wholesalers = Real Estate Pawn Shops

Pawn shops also have a bad name, but they also fill a niche in local economies. Someone in need of quick cash chooses to sell their item at a pawn shop, usually for less than they could get by selling the item on Facebook Marketplace, Craigslist, etc.

Doing Real Estate Wholesaling Ethically

Many real estate agents look down on wholesalers as predatory, when they should actually look at them as another avenue for a quick sale in certain situations.

As long as you conduct your transactions the right way, you’re wholesaling real estate ethically and shouldn’t have any problems. After all, when you can build trust and credibility as a wholesaler, you’ll get far more recommendations from other buyers and sellers as well.

And when it comes to real estate wholesaling—networking is more important in the long run than acting out of your own self-interest for short-term profits.

What else do you want to know about wholesaling? Drop us a comment below!

Categories
Flipping

House Flipping Business Plans: How To Create One (with Examples!)

A rehabilitated home in North End, Detroit
Source: Detour Detroit

Flipping real estate makes for a great reality TV show, but it can also be a lucrative investment strategy if you know what you’re doing. What they rarely show on screen, however, is the importance of having a business plan for flipping homes—one that we’ll provide for you in this article.

Read on for our house-flipping business plan template!

The Ultimate Business Plan Template: Planning for Success

The goal is to build a solid foundation that serves as your living roadmap for your house-flipping empire. Only when you have the goals and action steps in place can you put yourself toward investment success, attracting real estate investors, financial partners, and home buyers to work with your company.

Here are the 8 steps you need for a thorough house flipping business plan:

Step 1: Mission & Vision Statement

Start by creating your mission and vision statement. Change the following placeholders:

[Company Name] [what you do] [what you offer] to [who your customers are] with [your benefits, e.g., faster, more reliable, lower cost].

Here’s an example of a great house flipping business plan:

Flipping Fortunes finds, fixes, and sells fixer-upper homes to investors and homebuyers in the City of Detroit. Unlike other companies, we are Detroit locals and partners of Logical Property Management company that has been operating in the area for more than two decades.

Step 2: Products & Services

Next, list down all your company’s services and support each title with a short description. Here’s what it may look like for Flipping Fortunes, the fake house flipping business we used earlier:

Flipping Fortunes will provide these services for investors and home buyers in Metro Detroit:

  • Complete property restoration or renovation: Our team will scout, inspect, budget, and manage property flipping projects from start to finish. Home buyers and property investors can then purchase affordable, quality homes at a fraction of the cost of a newly built home.
  • Professional assistance for house flipping projects: Our team will help real estate flippers and DIY home flippers with everything they need to complete their flipping projects, including connections to professional inspectors, licensed contractors, and experienced real estate agents.

The more details you can add, the better. After all, interested real estate investors and financial partners will want to know everything your company can provide for them before engaging and signing the dotted line with you.

Step 3: Management Team

In this section, you want to explain more about the “who” of your business. Is your team composed of knowledgeable and experienced real estate experts who’ll live up to your company’s promise?

Here’s a quick example:

  • John Doe, CEO: Licensed real estate broker and property manager for the past two decades. Doe began as a real estate wholesaler before spending most of his career working with several agencies and property management companies. In all of his ventures, he always specialized in house flipping projects, having now flipped more than 250 projects.

Be sure to include each individual’s expertise, experience, knowledge, and everything else that can prove their capability and solidify their role. The higher you can lift your team members, the more trust you’ll gain as a company.

Step 4: Success Factors

Next up, what needs or specific niche are you addressing in the particular real estate market? These things are crucial for getting financial partners to join your venture, convincing them ‌you have a great business idea on hand.

Here’s an example of what a success factor could be:

Flipping Fortunes addresses the growing niche within the Metro Detroit real estate market. Our team opens opportunities for valuable fix-and-flop projects, making it easy for investors and home buyers to get their slice of the confusing yet high-performing hotspots in the tri-county area.

Pro Tip: You can also conduct a SWOT analysis to get a clearer picture of your strengths and weaknesses as a company.

Step 5: Target Market

As with any business, your house flipping company’s success depends on the supply and demand, as well as the cost of labor and value appreciation of the renovations. You don’t want to offer your services to a place that doesn’t need them.

Instead, your goal is to identify where you can “sell” most of your flipping services to a large market for many years to come.

Step 6: Business Entity

To operate your business legally, ‌choose a business entity and register for your business in the state you’ll operate in. There are many business entity types to choose from, but we recommend that go with one that has limited liability protection, like an LLC or corporation.

Liability protection is crucial for a house flipping business, as there are many things that can go wrong. For example, someone can sue your company because of a property you’ve flipped—where you’ll want to ensure that your personal assets remain protected.

Pro Tip: Consult with a business attorney to learn your options and weigh them accordingly.

Step 7: EIN, Insurance, Permits, & Licenses

It’s also important to ensure that you have the required documents to run your business. Oftentimes, banks and private investors will want to see this anyway. After registering your business, go through the following processes before officially starting operations:

  • Register for an employer identification number (EIN), which you’ll use for tax purposes, applying for business loans, or apply for business bank accounts and credit cards.
  • Look into business insurance options, especially if you’re going to hire employees. You’ll need workers’ compensation, unemployment, and disability insurance. Moreover, research about general liability and commercial property insurance to protect your assets.
  • Obtain the property business licenses and permits for your state and scope of work. You might need to get several permits to work in the construction business. You can also check with your local chamber and business attorney to ensure that you have the complete paperwork.

Step 8: Financial Summary

Lastly, ensure that your flipping business will generate high returns—both for you and for your investors. Here are a few ways you can get financing:

  • Through friends and family loans: Also called Patient Capital, this is when you fund your projects with personal loans from family members, friends, or partners. It’s low stakes and an easier route than traditional bank loans.
  • Tapping into your 401(k): If you don’t plan on retiring ‌soon, you can take a loan out of your 401(k)—either from the classic 401(k) loan or a ROBS loan.
  • Combining financing options: You can also find success in using several financing options to purchase and renovate your properties.

Start Flipping & Start Generating Profits

As your company grows, the projects will naturally increase in complexity and number as well. That is why having a business plan is important, especially if you want to attract investors. Your investors should see that you do your due diligence before putting any money on the line.

Have any more questions? Drop them in the comment below!

Categories
Landlords

2022 Real Estate Forecast for Rental Property Investors in Detroit

Sign that says House For Rent in front of a building
SOURCE: Ian Samkov on Pexels

The US real estate market experienced a wild ride in the last few years, but things have started to settle down.

Many experts and agents forecast that normalcy is around the corner, especially since there was an increase in new listings with a small drop in closed sales in Southeast Michigan in 2021 compared to the previous year.

In the City of Detroit, the news is even better—total sales went up by 8.8% year-over-year.

Right now, Motor City is presently a renter’s market. The City of Detroit has seen an increase in renters vs homeowners, with renting households accounting for 44% of occupied housing units—growing by 35% over the past 3 years.

This is great news for landlords, as it means the tenant pools are increasing in size.

So, what’s in store for rental property investors in the City of Detroit? Let’s take a look.

Employment on the Up, Better Rental Prospects

The population of born-and-bred Detroiters has declined. However, we’re seeing plenty of working-age adults moving in, especially with opportunities opening up.

Just take a look at these statistics:

  • Employment growth is up 1.18% year-over-year in the city of Detroit.
  • The greater Detroit-Warren-Dearborn area saw an over-32% increase in GDP.
  • The City of Detroit is looking at a forecast of 29.31% rate for job growth and a 4.7% rate for job gain.

This shows positive trends for employment in the City of Detroit. And more people with jobs means more renters who are financially stable to afford beautiful rental properties. Moreover, it’ll help increase your occupancy rate so you can recoup your capital in a short time.

Affordable Homes with Increasing Sales Prices

As of July 2022, the median list price for homes is only $80,500, with median sales prices at $75,000. The median number of days spent on the market is a little high (85 days), but that’s already an improvement from the 143 days back in February 2022.

Currently, homes in the City of Detroit go for 11.5% below the asking price as of July 2022, but it’s worth noting that median listing and sales prices have already skyrocketed. Back in March 2022, the median selling price was $54,500. This shows a 137% increase in sales price in just a few months.

The stats show that Detroit’s property market is recovering steadily, heading towards pre-pandemic levels or better. For those looking to invest in homes, this is good news mainly due to two reasons:

  1. Healthy rent-to-price ratios, as you can easily purchase below-$100k homes and rent them out for at least $1,000 monthly. You’ll generate positive cash flow from the get-go and reap investment returns fast.
  2. Enjoy significant equity gains since you’ll purchase while the prices are still low. As home values in the City of Detroit continue to increase, you’ll steadily generate equity from rising property appreciation rates.

In short, now is the perfect time to invest in Motor City’s affordable housing market while prices are low. As the economy recovers and grows, your likelihood of renting and selling properties will only increase simultaneously.

simultaneously.

Emerging Opportunities to Invest in Condos

Meanwhile, in the urban areas of the City of Detroit, it’s also an excellent time to invest in condominiums. The greater downtown area suffered due to COVID-19, and inventory went down. But as businesses reopen and new developments continue, there’s a shift from a buyer’s to a seller’s market on the horizon.

Some key areas include Brush Park and North Corktown, with new developments breaking ground in 2022. We expect this will lead to a great economic boom for real estate investors looking to fill their commercial properties as well as more renter seeking condos in the heart of downtown.

Real Estate Forecast for 2022

It may be a renter’s market now, but as the city’s economy recovers, there could be a shift in trend soon. With the median listing price for homes still fairly low and the median sales prices increasing, there’s no better time to invest.

Overall, things are looking up for the real estate market in the City of Detroit, so catch the wave before you miss out!

If you’re looking to invest in real estate in the City of Detroit, hit us up at Logical Property Management! We’ll help you choose the best investment locations to maximize your returns.

Categories
Wholesale Wholesaling

Real Estate Wholesaling: How to Assure Sellers and Buyers That You’re Not a Scam

For sale properties on the west side of Detroit
Source: Crain’s Detroit Business

If you’re a real estate wholesaler, then you’re already aware that your success depends on the trust you build with potential sellers and buyers. Unfortunately, many scammers try to take advantage of people by misrepresenting their intentions or promising impossibly high profits.

As they’re on the way to the bank, the unfortunate wholesaler must deal with the fallout, which frequently involves unhappy clients and a ruined reputation. Nevertheless, there are things you can do to gain their trust, seal deals, and earn wholesale profits.

Here are 3 few things you can do to assure sellers and buyers that you’re a legitimate real estate wholesaler with their best interests at heart.

1. Know the common types of real estate scams.

Apart from posing as agents or homebuyers, some con artists go the extra mile by pretending to be home inspectors, lenders, or landlords. To protect your customers from fraud, familiarize yourself with common real estate wholesaling scams.

Besides protecting yourself and the people you’re working with, in-depth knowledge of common scams shows that you really know the ins-and-outs of the industry. Without a doubt, this will help build your reputation, where buyers and sellers will feel more confident partnering with an expert.

The Foreign Buyer Scam

In this real estate scam, the seller will usually receive an email from someone claiming to be a prospective buyer living abroad. Then they’ll say that they’re planning to move to the United States.

They’ll send a check for the down payment only to say that they accidentally paid too much and ask the seller to wire back the difference. Only later will the seller realize that the check is fake—they’ve received no money. By that time, the buyer will have vanished along with the cash that was “returned” to them.

The “Bait and Switch” Scam

This scam occurs when a prospective buyer makes an offer that’s above the property’s market value, its sale price, or both. The seller then excitedly accepts the deal, only to learn that the buyer isn’t signing the contract yet because of “delays”.

They eventually come back; although, this time with a much lower price and a list of demands. Unfortunately, the seller will have paid thousands in ongoing taxes, insurance, and utility bills by this time, and feel they have to honor the sale regardless.   

The Duplicated Listing Scam

Scouring through websites like Craigslist may lead you to great properties with incredibly low prices—but be warned! Some scammers copy legitimate rental listings and re-publish them with altered contact details and price tags. Unfortunately, some innocent buyers are so excited to grab the deal that they immediately wire a down payment to secure the purchase.

Needless to say, the scammer disappears upon receiving the payment, leaving the poor buyer with thousands of dollars lost and no property to show for it. They can try approaching the authorities for help but sadly, they often never get their money back.

2. Cultivate a robust online presence.

On the flip side, you want to show buyers that you’re not like the scammers we listed already. So, as a seller, you should establish a strong online presence is to convince buyers that you’re legitimate. After all, real estate scammers use fake names and likely won’t be as active on social media platforms.

Here are two ways to have an online presence:

  • Social Media: Create social media profiles on popular platforms like Facebook, Instagram, Twitter, and more to help prove your credibility and trustworthiness.
  • Website: Go the extra mile and build a website. Other than giving you a platform to display the properties you’re currently holding, you’ll also have a place to show past client testimonials, success stories, and positive reviews.

The more you cultivate your online presence, the more you can establish a strong brand and reputation. You also look more professional and differentiate yourself from scam websites that are often unorganized and hard to understand.

3. Avoid dominating the conversation.

As a real estate wholesaler, you’re probably aiming to grab all the opportunities you come across. There’s nothing wrong with this goal, but being too fixated on it could lead to being pushy or too eager when talking with buyers and sellers.

Instead, when speaking with buyers and sellers, stick to the basic facts—who you are, the name of your business, and how exactly you can help them. It’s completely alright to dig deeper and discuss their current situation and the property in more detail, but the key is to let them lead the conversation.

Constantly interrupting or talking over them will make you appear unprofessional and untrustworthy.

Build Trust, Land Sales, Earn Fortunes

Given how valuable an asset property is, buyers and sellers alike will only work with someone they trust. Therefore, if you want to land wholesale deals, you must focus on strengthening your brand and credibility. Only then will you find success in the real estate industry—one that’s largely built on trust.

Struggling to build trust with sellers and buyers? Our team of experts at Logical Property Management is ready to help!

We’ve been serving the Metro Detroit real estate market for more than two decades now and have everything you need to succeed in the area. We can help you with anything, from building an online presence to keeping track of your buyers and sellers.

Categories
Flipping

Flipper Insurance? Here’s What You Need to Know

A pair of carpenters need to work on house renovations
Photo by Annie Gray

By buying valuable properties at a low price point, you can set yourself up quite well. The better the deal, the better margin for your fix-and-flip projects—but there is always risk involved in the house flipping business. From carpenters dealing with heavy machinery to construction workers on ladders…

A flipping project can be a hotbed for injuries.

For example, over 30% of yearly ER visits in North America—or about 9 million visits—come from people falling off ladders. With danger constantly lurking on your worksite, you’re going to want some protection. And flippers need specific insurance that covers their type of work.

In this article, we will talk about the types of insurance you need when flipping houses.

What Kind of Insurance Covers House Flipping?

No one ever plans on things going wrong while flipping a house, but they do happen. That’s why it’s essential to have the right insurance in place. But regular insurance won’t cut it for house flipping, and homeowner insurance won’t cover it, either, because it’s considered a high-risk environment.

So how do you get good insurance coverage?

Well, you need to look into 3 types of insurance:

  • Dwelling Policy
  • Builder’s Risk Policy
  • General Liability Umbrella

Each insurance covers a specific area, which we will discuss in detail.

#1 – Dwelling Policy

A dwelling policy is an insurance that covers a vacant property under renovation from physical damage. Attached structures like garages and porches are also covered. Unlike homeowner’s insurance, a dwelling policy doesn’t include personal belongings, only the structure itself is insured.

With a dwelling policy, your property is protected against damage caused by:

  • Fire
  • Lightning strikes
  • Heavy winds
  • Hail
  • Explosions
  • Vandalism
  • Theft
  • Vehicular accidents

However, depending on your insurance plan, things like vandalism might not be covered. We will talk about the type of plans in a later section.

#2 – Builder’s Risk Policy

This type of insurance covers physical damage to the property during the construction process. Like the Dwelling policy, it will protect a home from the same sources of damage. Generally, the builder’s risk policy can be thought of as an add-on to the dwelling policy.

However, a builder’s risk policy includes additional coverage for the materials and tools needed to repair the property. With a builder’s risk policy, you can keep your building materials and tools safe from damage.

#3 – General Liability Umbrella

This insurance can cover you and your investors from liability for accidents and injuries caused during your home flipping project. For example, if a carpenter gets injured while working on your property and sues you for damages, the general liability umbrella can protect you against financial losses.

But keep in mind: The general liability umbrella only covers you, but not the workers and contractors you hired. This means that if they cause an injury while on-site, they won’t have insurance to protect them against liability.

The Different Types of Coverage

When you buy insurance, it comes in different levels of coverage to choose from. A basic package might have minimal coverage while higher levels of coverage can protect you more.

Generally, there are 2 types of coverages you need to consider:

  1. Basic coverage – This will cost less but will exclude protection from certain factors. For example, vandalism, theft, and water damage usually aren’t covered by a basic package.
  2. Special form coverage – This protects you from all sources of loss except for explicitly mentioned sources that are indicated in the contract.

Depending on your situation, you might need more than basic coverage. For example, if your property is in an area that experiences heavy snowfall—like Alta, UT, which experiences around 457” of snowfall annually—you should definitely get the special form coverage.

How Much Does Insurance Cost?

Unfortunately, there isn’t a clear-cut answer as insurance costs vary by region and other factors. Also, insurance prices have no direct link to property prices. Plus, the status of the location usually determines insurance. For instance, If an area is more prone to natural disasters, it will have higher insurance premiums.

Let’s take Detroit as an example. The area is susceptible to heavy rains and harsh winters, so insurance is more expensive in Detroit. The national average insurance price is $1,312 annually; meanwhile, Detroit’s averages are around $2,237 per year.

In short, depending on the location, insurance prices widely vary.

Protect Yourself From Liability While Flipping Houses

Flipping houses isn’t all sunshine and rainbows. Accidents can happen while rehabbing a property. If you’re not insured, you might be facing heavy losses due to lawsuits.

To avoid losing money—money better spent on your flipping project—to lawsuits and damages, get yourself insured. With a dwelling policy, builder’s risk policy, and general liability umbrella, you can protect yourself and your property from damage and losses.

Do you have any insurance tips for house flippers? Tell your story below!

Categories
Landlords

Top 3 Upcoming Trends of Short-Term and Vacation Rentals in 2022

An STR in the metro market
Photo by Andrea Davis

During the pandemic, STRs took a hit to their profits. Let’s take a look at some of the upcoming trends and the positive outlook facing STRs in 2022.

Before the COVID-19 pandemic, the short-term rental (STR) market was going strong. In fact, Airbnb reported a 33% increase in booking during February 2020—a month before the pandemic hit. In contrast, during the pandemic, STR bookings took a massive hit. By January 2021, Airbnb reported record low bookings, down 31% from their average.

It’s now 2 been years and we have to ask: Will the STR market recover?

While we have seen that people are becoming more willing to travel with COVID-19 restrictions slowly easing up, there are more than a handful of factors that affect the future of STRs. You’ll need to know these if you want to navigate the uncharted waters ahead.

Let’s take a look at some projections for the STR market in 2022 and beyond.

STR Trends for 2022 and Beyond

If you’re running an STR business, you’ll have to reevaluate your strategies to adjust to the changes. With how COVID-19 changed how we look at STRs, the market has adjusted to fit the new norm. Here are 3 of the biggest changes we can expect to see for STRs.

#1 – The Fall of Seasonality

Before COVID-19 made vacations impossible, it was fairly easy to predict when booking would increase.

For example, for a property located in the mountains, you’re likely to see an increase in tenants during the winter. For rentals located near theme parks or beaches, such as Orlando and California, you would see an increase in booking during spring and summer vacations.

However, thanks to the rise and familiarity of remote work (both for employers and employees), people are more willing to go on a vacation during off-peak seasons. In a May 2021 report, Airbnb recorded that 64% of respondents are willing to travel during off-peak seasons—making bookings highly unpredictable.

With people more willing to travel during off-peak seasons, bookings for vacation rentals might see sporadic bookings throughout the year. The number of total bookings might be roughly the same, but it won’t be concentrated on seasons.

To adjust to this, you should provide deals and discounts more frequently instead of focusing on seasons. Having regular weekend discounts can target the customers looking for bookings during off-seasons.

#2 – Recovery of the Urban Market

During the height of the pandemic, many people fled from cities to avoid the crowd. For instance, over 320,000 people fled New York City during the height of the pandemic, primarily to get away from crowded areas and retreat to more rural environments.

However, with the increased distribution of COVID-19 vaccines, people are returning to normalcy in terms of their comfort with meeting people. They aren’t as afraid of the crowds inherent to cities anymore as they were during the height of COVID-19.

In fact, New York City had an influx of  new residents starting in May last year. Plus, malls are reopening, more restaurants offer indoor dining, public transportation is returning to normal operations, and people are starting to repopulate the cities.

With people flooding back into the city, the need for accommodations will rise. Therefore, the urban market is looking to make a fast recovery—giving you the perfect opportunity to grow with it.

#3 – Longer Bookings Are Becoming the Norm

With the rise of remote work and online schooling (at least, for the meantime), people have changed the reasons for their vacations and, in turn, the duration of their rentals. The increase of flexibility with our responsibilities affected the length of everybody’s willingness to travel.

In a recent report, Airbnb showed that the number of people willing to book stays over 28 days has almost doubled. This is a great opportunity for your STR to adjust your pricing, provide duration-focused promotions, and meet the increased demand.

For example, offering a 10% discount for every additional week that they book can entice customers to choose your STR for a month-long trip. Even providing one free day for every successful referral can encourage people to give in to a longer vacation—and give you another guest to look forward to!

By providing customers with attractive deals for long-term bookings, you can:

  • Increase the number of visitors choosing your STR
  • Increase your occupancy rate
  • Increase and strengthen your rental income

Take Advantage of STR Opportunities in 2022

With travel restrictions lifting, the future for STR investments is looking brighter than ever. Our world is returning to pre-pandemic norms and the STR business is rebounding—if you use the opportunities wisely.

Take these trends into account and change your STR’s business strategy. Adhering to the market and behavior shifts will certainly strengthen and grow your profits as an STR owner, thriving in a market that people are looking for in 2022 and beyond.

Did you notice any other shifts in the STR market? Comment below and let’s get a discussion going.  

Categories
Landlords

Landlord Insurance: Key Things You Need to Know 

A man intently looking at his laptop
Photo by Bruce Mars

Are you new or considering property rentals? If that’s the case, chances are you haven’t even heard of landlord insurance. You might be thinking that it’s just another excuse for insurance companies to take your money or that you have another type of insurance that can cover rent-related issues. 

But it’s about protecting your investment and financial gains.

Skipping on landlord insurance is a rookie mistake you don’t want to make. With financial gains as your main objective, it may be tempting to cut costs. But if doing so compromises your investment’s security, you might end up spending more than you save.

To help you make wise investment decisions for your rental properties, we’re going to cover what landlord insurance is and why it’s a necessity. 

What is Landlord Insurance?

Landlord insurance protects your rental property from damages and financial loss. When your property gets damaged during the occupancy of a renter, landlord insurance can cover these expenses in the condition that the damages that occurred are covered under the terms. 

External and uncontrollable factors such as natural disasters, accidents, or other kinds of destructive events can damage your property. Landlord insurance can cover expenses resulting from these events, saving you from financial losses.

Landlord vs. Homeowner Insurance

Landlord and homeowner insurance cover similar kinds of damages brought upon by external and uncontrollable factors, but they can’t stand in place of each other.

Homeowners insurance can only be used if the owner of the property is the current occupant. In other words, you’ll have to be living on your property. That said, homeowners insurance can’t cover damages under rental occupancy. Insurance companies can only cover these damages if the property is under landlord insurance.

To put it simply, the kind of insurance required for the property is determined by who will stay in it.

Another notable difference between the two is their prices. There are higher risks of accidents in rental properties resulting in higher landlord insurance prices. Compared to homeowners insurance, landlord insurance can be 15% to 100% more expensive.

What your Landlord Insurance Should Cover

External factors that pose a threat to your property investment will depend on your location. For instance, the state of Michigan’s most common natural disasters are storms, floods, wildfires, and tornadoes. Considering what natural disasters occur in Michigan, you want to get an insurance plan that specifically covers these types of possible, unfortunate situations.

Here’s a list of guide questions to help you find a landlord insurance plans that suits your property:

  • What does the plan cover and what are the limitations? (Pro tip: Clarify any vague statements)
  • Will insurance claims be settled with cash value or replacement costs?
  • Can the insurance cover lose rent, water damages, and other highly possible incidents?
  • Can landlord insurance protect me from liabilities of house structure-related accidents?

To help you further assess if the landlord insurance plan you’re considering provides comprehensive coverage, take a look at this infographic:

Photo from Pinterest

The point is to avoid being hasty in choosing your landlord insurance plan. Your plan must provide protection against property damages, liabilities, and rental income loss, among many other things that may happen on your property.

Keep It Safe, Keep On Earning

Taking care of your property investment enables you to keep earning so you can use your money for future investments. By taking care of your investments, you also keep your financial well-being secure.

Getting your property investment insured is a surefire way to keep it safe and profitable, so take the time to study what accidents are most likely to occur on your property investment. Getting a comprehensive insurance plan that meets your needs will save not just money, but save you from unnecessary stress too. 

Aside from landlord insurance, consider requiring your tenants to get their own insurance as well. Read more about it in our article on renter’s insurance, and get in touch with us if you need more clarification.

Categories
Wholesale Wholesaling

Wholesaling Online Class: Your YouTube Syllabus to Wholesaling Real Estate

A 2-floor suburban house with a garage and a lawn
Photo by Curtis Adams

Find a motivated seller, acquire the contract, then find a buyer to close the deal. That’s the wholesale process in a nutshell. Seems simple enough, right? But there’s more to it than that, as knowing the process is just the beginning. 

If you want to close deals, you need to learn how these steps are done. That’s what will determine if you’ll succeed in the real estate investment strategy or not.

In this wholesaling syllabus, we’re going to break down the process into 7 steps. This will be a lot of information to absorb in one go, so be sure to bookmark this article for your future reference. Think of this as your handy reviewer whenever you need to brush up on your real estate wholesaling knowledge.

The Real Estate Wholesale Syllabus

We will provide videos as a learning aid as we go through each step. Just like when we were in school, all you need to do is read and listen attentively. This time, however, you’re not working for high grades, but high gains. Are you ready for wholesaling class to begin? Let’s get to it.

1. Conduct a Market Analysis

How To Analyze A Real Estate Market | Wholesaling Real Estate

Watch from 0:45 to 5:55

Some places provide more wholesale opportunities than others. When choosing where you want to conduct your wholesaling business, these 3 factors will help you determine if the market in a given area is profitable:

  • It’s a Metropolitan Statistical Area: Large areas like Metro Detroit have a crazy amount of people, which will likely translate to higher real estate activity. So aim for areas with at least a million people to ensure that you have enough buyers and sellers to look for.
  • There are Many Older Properties: These properties sell for a cheaper price, since expensive maintenance and repairs aren’t factored in. But it also opens great opportunities for you to seek out properties that only need minor repairs and touch-ups before wholesaling to buyers.
  • There’s High Supply and Demand: High supply means there’s a lot of seller activity while high demand means there’s a lot of buyer activity. High real estate activity suggests an abundance of leads, providing more opportunities to close deals.

Take your time to carefully analyze the different areas you plan on wholesaling, as choosing the right market is paramount to your success. With all 3 factors present, you can bet there are deals out there waiting for you to close them.

2. Build a Buyers List

How To Create The Best Cash Buyers List [Hack Strategy]

Watch from 1:23 to 7:20

Flipping Mastery TV’s Jerry Norton looks for two capabilities in wholesale buyers: They can pay in full and preferably in cash, and they are willing to close deals “site unseen.” These are ideal qualities any wholesaler would look for in a buyer, but where can you find them? 

Rather than going to different places to find these buyers, Jerry makes it easier by narrowing his search to the spots where you can easily find them. With Jerry’s auction and property foreclosure hack, you’ll be throwing your rods in an ocean full of fish.

Here’s how it works: For buyers to participate in an auction and property foreclosure, they need to have the qualities Jerry Norton stated—they’re willing to close deals site unseen and can pay in full. In these property auctions, buyers don’t have a chance to view the property. And as soon as a bid’s accepted, the buyer has to immediately pay for the property being auctioned. 

You can find these auctions online, at your county courthouse, or through third-party sales agents called trustees. Attend these auctions early for a chance to mingle with the buyers before the bidding starts. Some buyers stay after the auction, which can be another opportunity for you to get more contacts. Your goal here is to gather as much contact information as you can.

You can use this method for reverse wholesaling, too. Opposite of the traditional wholesaling process, you first find a buyer and then the seller. Attending these auctions also provides insight into what kind of properties ideal buyers look for. A surefire way to close more deals is by focusing on hot properties in the market and networking with capable buyers.

Although Jerry gives an effective hack to find and grow your buyers list, it’s always better to have multiple methods to choose from. Other strategies to grow your wholesale buyers list that you can try are cold-calling or partnering up with a real estate agent.

3. Find a Motivated Seller or Distressed Property

How to Find the Best Motivated Seller List using Propstream in Wholesaling Real Estate

Watch from 0:53 to 8:16

In wholesale real estate, time is of the essence. Therefore, it’s important to have methods in place that allow you to quickly connect with motivated sellers. How can you connect with more leads in a shorter time? Jerry Norton suggests a combination of inbound and outbound marketing so you can find and attract motivated sellers simultaneously:

Outbound Marketing

Actively seeking out motivated sellers with wholesale real estate lead generation strategies like cold-calling or driving for dollars are classified as outbound marketing methods. With outbound marketing, wholesalers generate leads by finding them. 

Inbound Marketing

On the other hand, inbound marketing methods aim to bring these motivated sellers to you by means of attracting them. Leveraging networking and online marketing tools such as Facebook or Google ads is a great way to be visible, providing motivated sellers opportunities to approach you. 

There are also motivated sellers who aren’t so active online, so you can catch them with traditional inbound marketing methods like bandit signs.

4. Put the Property Under Contract

How To Put A House Under Contract – You Ask, We Answer 🙂

Watch from 0:50 to 5:12

Getting the property under contract signifies half the job is done. Once you get the property under contract and have control over the property, you just need to find the buyer and finalize the deal. Here’s how David Dodge gets properties under contract:

  • Send the Sample to the Seller: Sellers can better assess whether they’re making a good deal if they have a copy of the contract they can review.
  • Get the Contract Under Escrow: Assuming you and the seller have finalized terms, clauses, and signing, you then have to get the contract approved by a title company and pay a fee.
  • Send the Receipt back to the Seller: Once your contract is processed and recognized, you send the receipt back to the seller to show that you are legally bound.

Remember to carefully set the terms of your contract. For the deal to go smoothly, all parties must be in full agreement of all clauses and conditions. 

5. Find a Buyer

How To Find Cash Buyers Made Simple! [Wholesale Real Estate]

Watch from: 0:08 to 7:20

Lili Thompson is a 25-year-old YouTuber that shares internet-based wholesaling techniques. For finding cash buyers online, she uses websites like ProStream and Zillow. However, access to these websites comes at a cost, but Lili suggests it’s worth it to close deals.

Her process starts by using ProStream, an online software that helps you find distressed properties. The software lets you highlight an area on a map and shows you properties for sale, auction, foreclosure, vacant, and other real estate classifications. More importantly, ProStream also provides a tab that shows all the cash buyers in the selected area.

Lili specifies her search by choosing the filter “flippers” on the Quick List Choices options of the filters. She says she looks for flippers since they need wholesale properties to flip. To find matches with the current properties she needs buyers for, she also puts a filter for the property type and price range. 

After her specified searches provide what she’s looking for, she saves the results using the listing tool of PropStream. She ends the PropStream portion of her process by using the Skip Tracing feature to extract all the contact information from her saved list. 

In reference to the video, she got 17 contacts priced at $.25 per contact!

With the property and contact information she extracted, she begins the next part of her process using Zillow, an online real estate market software. She inputs property information from her PropStream list and assesses these on Zillow. If she finds the types of deals she’s looking for, she makes contact using the contact information of the corresponding property.

Her process can be daunting for first-timers, but it’s a fast way to find the cash buyers you need in just a few clicks once you get the hang of it. Lili shares a great method, but remember that you should always have different lead generation marketing strategies to grow your buyers list and market your wholesale properties as well.

6. Assign the Contract

Real Estate Wholesaling Explained: How an Assignment of Contract Works

Watch from 2:02 to 4:24

There are two ways wholesale deals can happen: First, you buy the property from a motivated seller and then sell it for a higher price to a buyer. Second, you work as a middleman by acquiring the contract from the motivated seller and then assigning it to a buyer for a fee. 

Of the two options, the second one doesn’t require money out of your own pocket, making it preferable for wholesalers. Although margins are small, if done properly as a business model, this can provide a constant stream of income given you put in the time and effort.

In addition to the contract made with the seller, you’re going to add your part. The additional page states your transference of the contract to the buyer with a fee. For instance, the contract with the seller states the sale of the property for $100,000.00. Your part of the contract states a total of $115,000.00, making your fee $15,000.

Wholesalers in Oakland County often use contract assignments, but different states have different regulations for this method. REtipster warns that in other states, contract assignments are allowed only by licensed real estate agents. If you’re in one of these states and you’re caught assigning contracts, you can be imprisoned for practicing without a license.

REtipster gives a reminder to carefully check the terms, clauses, and liabilities stated in the contract (like this one from Quora). Creating a contract that protects your well-being is a security step you cannot miss in real estate wholesaling. You can use these contracts as leverage in case other parties aren’t fulfilling their obligations or withhold necessary information. 

When everything is clearly communicated and all parties are in agreement, it’s a win-win for everyone. 

7. Close the Wholesale

Watch Me Get The Title Company To Close My Wholesale Deal

Watch from 3:33 to 5:57

Once all the wholesale real estate contracts are finalized and signed, the last step to closing the wholesale is to get it approved by the title company. Take note that the state of Michigan uses title companies, but other states may use escrow agents or closing attorneys. Regardless of the different names, these entities all serve the same function. 

Assuming all goes well and your contracts are recognized and processed, the title company will either wire or send your fee to you. They will also be the ones to transfer the money from the buyer to the seller. After you receive your fee, consider your wholesale real estate deal closed.

Congrats! You’ve Graduated in Real Estate Wholesaling

You’ve reached the end of our free online real estate class on wholesaling. Whenever you feel like you need a refresher, you can always come back and review the 7 steps to successfully closing wholesale real estate deals.

Now that you have a deeper understanding of the wholesale process and some methods you can use, you’re ready to build a successful wholesaling career. 

Is there anything else about wholesaling you want us to take a deeper dive into? Leave a comment down below and we’ll catch you next time!

Categories
Wholesale Wholesaling

Your Ultimate Checklist for Wholesaling Real Estate

A wholesaler and a homeowner working out the details of the contract
Photo by Scott Graham

It’s no secret: wholesaling can be a lucrative real estate investment method to earn a profit with minimal capital. On average, you can make around 5-10% of a property’s market value if you wholesale an undervalued home—that means you’re looking at a profit of $10,000 to $20,000 with a $200,000 home if you can get it under market value!

However, getting a slice of this pie does not come easy. Contrary to popular belief, real estate wholesaling takes a whole lot of skill, patience, and elbow grease. 

For example, you need to find a property with a motivated seller, then find a buyer for it, coordinate all the paperwork required, complete the deal as soon as possible, and repeat everything again. You also have to simultaneously grow and maintain your buyer’s list so your business doesn’t come to a halt.

In other words, there’s a lot to keep track of when dealing in wholesaling. 

But there is a solution to it: Make a list! Just like most projects in life, it’s easier to streamline the wholesale process if you have a checklist to guide you. That’s why we’ve written this ultimate checklist for wholesaling real estate—perfectly designed to help wholesale investors like you.

The Wholesale Checklist

Having a guide to the step-by-step requirements of a wholesaler can make the entire procedure easy as pie. But we do understand that not all of the things we’ll mention below will apply to you, so we advise that you focus only on the things that are most relevant to you.

Let’s get to the checklist!

A. Select a Market

Have you selected a market? Have you checked the trends of the current market? 

Selecting a prime market can land you a hot deal. You want to find a market where there isn’t too much competition but is still highly coveted. In other words, try to find a balance—buyer markets that are on an upward trend without much competition to deal with. 

Take for example Burlington, N.C. There’s a total of around 57 thousand brokers in North Carolina—far smaller than states like Florida with 212 thousand. But, the real estate market in Burlington, N.C. is booming right now. In fact, it is the 2nd most lucrative market in the US with listings only lasting an average of 35 days on the market.  

You can only identify potential markets like these if you’re familiar with real estate market trends, so here is a quick jump-off point to get started:

  1. Reference the MLS listings to get an idea of current trends in real estate prices.
  2. Look for how long listings stay on the market. The less time on the market, the faster the turnaround for properties, and the better the situation for you.
  3. Additionally, it’s important to know the median price of properties sold, so you know what you’ll be working with. For instance, in Burlington, it’s $295,000.

Once you’ve chosen your ideal market, you can move on to the next step in the checklist.

B. Build a Buyers List

Have you built your buyer’s list? Have you found any willing buyers in the area? 

You’ll need a robust buyers list for a steady stream of good deals. Your goal is to continuously generate and follow up with the leads in that list so your wholesale investment becomes a growing business.

Here are a few options to build and grow your buyer’s list:

  • Create an online marketing campaign. Use social media and other platforms to get the word out on your name to build a potential buyers list.
  • Use customer relationship management platforms (CRM). Creating accounts on CRM platforms like Hubspot or Zillow can increase your reach to interested buyers.
  • Take note of buyer contact information and criteria. Make a note of the budget of your potential buyers and their contact info. When you find an appealing property, you can reference your list to see if the property coincides with the budget of one of your contacts. 

By having an established and growing buyers list, you can increase the reach of your wholesale business which can lead to more deals and profits.

C. Look for Motivated Sellers

Once you’ve accomplished the first 2 steps, you can now enter the meat of the wholesale process: Finding a motivated seller with a property that coincides with the criteria of your interested buyers. 

Now, in the industry, you’ll notice that distressed properties are popular for real estate wholesaling. There are 2 reasons for this: It’s easier to convince sellers to let go of their unkempt homes, and it’s easier to secure a larger discrepancy versus market price.

But how do you find distressed homes and motivated sellers? You can already do this by increasing your scope, using the same techniques for finding buyers:

  • Use CRM software to find properties. 
  • Use social media to create a marketing campaign for yourself. 
  • Create a dedicated email address and/or phone number to screen incoming leads.

Once you’ve found a motivated seller. You then must hash out your wholesale contract.

D. Create the Wholesale Contract

Having found a motivated seller, you now need to finalize the wholesale contract. When creating the contract, you need to make it clear to the seller that you’re not buying the property. 

You need to establish that you’re only finding an interested buyer for the seller. 

Given that, be sure to establish the terms of what will happen if you fail to find a buyer. For example, you can set up an earnest money clause that will act as a guarantee. This clause will protect you and the seller in the event of failing to find a buyer. You will hand over an earnest money deposit that will act as a contingency that will be returned to you once the wholesale is complete. 

Then, you need to find a buyer for the property.

D. Look for an Interested Buyer

Once the details of the wholesale contract have been decided, you then need to find a willing buyer. Be sure to thoroughly scope out the property to make it easier to find buyers. 

For example, take photos of the property that shows potential buyers exactly what it looks like without having them visit the home. Additionally, take note of important details such as the number of rooms, the size of the property, and the overall condition of the property. 

Once you’ve gathered all the necessary information, you should then do the following:

  • Send the property report to targeted buyers on your buyers’ list. Ensure that you send the property only to the buyers with the perfect criteria—or you lose their trust in the long run.
  • Like insurance, you can get in touch with local wholesalers to market to their own buyers. This expands your coverage, helps you grow your network, and makes it easier for you to sell.

Once you find a willing buyer, you can then move on to the contract turn-over. 

E. Assign the Contract 

With a willing buyer, you can then move on to assigning the contract. Here are the basic steps to remember when assigning a contract to a buyer:

  1. Receive the amount necessary to purchase the property from the buyer.
  2. Collect your earnest money deposit from the seller. 
  3. Turnover the buy and sell contract of the property to the buyer. 
  4. Enter into a new assignment contract with the buyer and collect your wholesale fee.
  5. Contact an escrow company to complete the deal after the arrangements have been made.

Once the buyer has the contract, you can move on to the final step of the wholesale process. 

F. Close the Deal 

The escrow company will now oversee the process of transferring the property to the end-buyer. During this phase, you should keep in touch with the escrow company to get updates on the progress of the sale. 

Once the sale is completed, the escrow company will turn over your assignment fee, and your wholesale will be completed. 

Follow this Checklist to Make Your Wholesale Easy 

Getting into wholesaling unprepared can be a recipe for disaster, and we don’t want that—not when real estate wholesalers already tend to have a bad reputation because of newbies making rookie mistakes!

But with the use of a checklist, you can avoid many of the pitfalls of wholesaling, increase your odds of landing a wholesale deal, feel less stressed with conducting your business and reap continuous profits from the many deals you’re scoring.

Take our list and make it your own! Good luck in your venture and feel free to comment on any other concerns you have in the comments section below.

Categories
Landlords

How Landlords Should Handle Emergency Repairs For Your Tenants

Woman’s eyes opened wide expressing shock while on a phone call
Photo by Yan Krukow on Pexels

You’re eating dinner with your family when your phone suddenly rings. Unfortunately, your tenant is calling to tell you of a serious problem—a burst pipe that has completely flooded the kitchen.

As emergency repairs go, landlords are required to immediately take action. Obviously, this is required for safety reasons and legal reasons. In this article, we’ll discuss how to approach emergency repairs so that you can use these in your landlord practices.

That way, you’ll be able to handle emergency repairs like a pro without ruining your weekend plans. Meet your obligations, keep your tenant happy, and protect your investment.

What is Considered a Landlord Emergency?

Before anything else, let’s review the landlord responsibilities in Michigan regarding emergency repairs: 

  • As the owner of the property, landlords are expected to immediately address any dangerous situation that can lead to occupant injury. 
  • Landlords usually do not have unpermitted access to the property during a tenant’s lease – except when a landlord can reasonably believe there’s an emergency issue. 
  • You’re obligated to take action within 24 hours of the tenant informing you of the emergency. Otherwise, tenants can withhold rent, repair & deduct, file a lawsuit, or report to a public official. 

Although the information stated above is from the state of Michigan, other states and cities will have similar rules and responsibilities. Now that we’ve brushed over the legal responsibilities, let’s proceed to what makes an “emergency repair.”

If left up to a tenant, anything that prohibits the tenant from living properly and comfortably on the property is an emergency. Legally, an emergency is anything that is likely to cause injury to a property occupant or visitor.

Here are a few examples:

  • A gas leak, as could cause an explosion or breathing problems, or poisoning.
  • Faulty or exposed wiring could electrocute someone or cause a fire that could result in occupant deaths.
  • A broken water supply line damages occupant possession and/or the property.
  • No heat during the winter months.

Non-emergency examples:

  • Sewer backup
  • No hot water
  • Minor water leaks
  • No electricity (unless it affects heat during winter)
  • List

The general rule to keep in mind is if it can wait until tomorrow, without the situation getting worse, then it is not an emergency

Best Practices as a Landlord for Emergency Repairs

Now that we’ve covered landlord obligations, let’s dive into some of the best practices in handling and preventing emergency repairs, especially during the holidays. No matter what the situation is, here are some tips you need to keep in mind:

  1. Always Be Prompt

The sooner you can fix a problem, the better. As much as possible, don’t let any repair needed last longer than 3 days. Be prompt when dealing with your tenants’ concerns, especially with emergencies. Being prompt will make your tenants happy and protect your property from serious damages.

  1. Keep Up Your Professionalism

Always be respectful and accommodating even during the holidays. Chances are your tenant also doesn’t want to deal with any problems during these times. Remember to always conduct yourself professionally.

  1. Determine if an Actual Emergency
  2. Before taking the next steps, you need to make sure it’s a real emergency. Tenants might not be aware that some issues fall on themselves to fix. For example, some issues like a clogged sink or a broken element on the stove aren’t emergencies that need to be addressed immediately. 

Set Expectations

Before anything, clarify what you are willing and not willing to do in the lease agreement. If your tenants know the extent of your abilities and obligations from the get-go, they won’t place any unreasonable expectations or call you up for repairs that they should handle themselves.

  1. Have a Prevention Plan

The best way to deal with an emergency repair is by avoiding it completely. So, before the holidays come around, do a maintenance check to make sure everything is in order. Identify and deal with any problems you spot during the inspection to protect your property while saving time and effort.

  1. Maintain Good Communication

Whether you can help or not, always keep an open line of communication with your tenants. Even if you can’t fix the problem right away (or the repair isn’t actually considered an emergency repair), picking up their calls and hearing their concerns shows your professionalism as a landlord, and encourages them to keep you updated with the conditions of your investment property.

  1. Have Contacts for Emergencies

For situations that qualify as an emergency, keep a list of contacts with a description of their services. As mentioned earlier in the article, emergency repairs are typically water-related concerns. 

With that being said, one of your emergency contacts should be a plumbing service with a description along the lines of “24/7 service including holidays.” However, if there aren’t any, resort to the next quickest option such as services that can be rendered on the next day.

Regardless if you can do anything or not, you still need to deal with your tenants and their concerns during the holidays. As long as you deal with your landlord’s responsibilities the best that you can, you can get the best possible outcome for emergency repair situations.

Be Prepared for Emergency Repairs

Emergency repairs can be a hassle, every day of the week. But by having good practices that help prepare you for such events, you’ll be well equipped to deal with them any time of the year. After all, you never know when a tenant will call for an emergency repair!

Got any more questions about emergency repairs? Let us know in the comments below!

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