Categories
DIY

Landscaping Your Rental On A Budget

Image Courtesy of Felix Mittermeier

The kitchen and bath may entice your potential tenants, but offering a beautiful, inviting outdoor space can be the tipping point for a place they’ll want to call home. The cost of beautifying a property varies greatly depending on the scope of the job and materials used. Since your rental property is a source of income, any expense must justify itself with a return on its investment — resist the urge to over-decorate. If you’re working with a limited budget, there are inexpensive landscaping design concepts to make the area more attractive.

Declutter the yard

Costing you not much more than your time, this is one of the easiest and cheapest way to spruce up your yard. Merely pulling some weeds and removing any dead or overgrown vegetation can freshen up the yard’s look. This may be all you need, but if you decide some landscaping is in order, you’ll have a clean palette to work with.

Outdoor Lighting

On a warm, sunny summer’s day, the outdoor area may look fine, but after sunset, it may lose some its charm. To experience what your tenants will encounter while enjoying a starlit nightcap, stop by the property in the evening and see for yourself. Is it inviting and attractive or boring and unfriendly? Landscaping lighting fixtures not only bring a dramatic look to the yard, but they can also double as an added security measure. There are several options that can brighten a drab looking space. For the garden, spiked lights can illuminate boundaries and walking areas, while providing a pleasant accent. Depending on your budget, spiked lighting can be hard-wired, battery-operated or solar powered. Another inexpensive alternative is tiki lights or string lighting with a timer or photosensitive switch. Easy to install, they can be strung through trees, from eaves or over patios or decks to highlight the space while providing a warm glow.

Paving Stones

If the outdoor area is small and/or receives limited sunlight, trying to maintain a lush lawn will become an effort in futility. Installing stone pavers will eliminate any dry or muddy dirt patches, instead turning it into an appealing useable patio area. After properly leveling the pieces and filling in the cracks, you’ve got yourself a multi-season functional outdoor space.

Flower Boxes

Flowers brighten even the most boring spaces by adding color and vibrancy, but unless you want to spend your time gardening, they aren’t always the best choice for a DIY landlord. If you insist on flowers for the yard, but don’t want the maintenance headache, incorporate flower boxes into your design. They are cheaper and require much less work than traditional flower beds — virtually eliminating the need for weeding. You can use old care tires or recycled wood for rustic DIY feel. For a bit more pizzazz, paint the rubber or wood frames to add color to your outdoor space.

Ornamental Grasses and Evergreen Foliage

Perennial ornamental grasses are versatile and incredibly inexpensive as compared to other flowers, trees or shrubs. Ornamental grass is super low maintenance, while adding lots of color and texture. Evergreen vegetation, such as small trees, bushes or shrubs add a dynamic that most tenants will enjoy. They require very little maintenance while producing a warm, plush setting with just an occasional trimming. Though most grasses and evergreen plants will thrive from direct sunlight, most will do just fine in partial shade. Plant or pot them near the patio, along walkways or fence lines for privacy.

Disregarding the outdoors can cost you with fewer walk-throughs and potentially excellent renters. Even if your property is a drab, concrete jungle, there are inexpensive, low-maintenance landscaping ideas to add color and character to the yard. Potential tenants might love the kitchen, but if the outdoor space looks like an abandoned graveyard, many will consider alternative properties. Renters shop on emotion, so if the space makes them “feel good,” that might be all you need to snag yourself a long-term tenant.

Categories
Wholesaling

The Wholesalers Buyers List: How To Effectively Market Your Properties

Image courtesy of Lukas

Being a successful property wholesaler is contingent upon not only locating a viable property, but more importantly, being able to find an end buyer – and quickly.

Whether you’re assigning contracts or double-closing, you want to move the property as quickly as you can. There’s no point in getting into a property if the potential for getting rid of it quickly is low. Your buyers list can be an invaluable part of your business. It provides the ability to contact serious, interested parties, as opposed to blindly cold marketing wanna-be investors. Since your buyer’s list is your lifeline to steady profits, you need to know the essential details regarding your properties, as well as the needs of your potential buyers.

What Is a Buyers List? 

Your goal as a wholesaler is to contract properties below market value and then, as quickly as possible, pair that property with a buyer. Starting your search for an end buyer after you’ve got a property under contract will only eat into any profits by accumulating holding costs. Often, you may be forced into buying the property yourself. A buyers list is your inventory of real investors who you can contact to offer your wholesale properties. Building a useful buyers list can take some time, so networking is key. To help grow a list, start associating with real estate professionals, entrepreneurs, and investors. Many communities have an REI club, but you can make connections through other channels such as online real estate forums, Craiglist, Facebook, property auctions, networking events, or from the bandit signs you’ve placed. 

Organize Your Buyers List

For your list to be useful, it should be kept organized and updated, prioritizing the most serious buyers or the ones most likely buy based on a set of parameters. Keep contact info current, take notes about the neighborhoods or property types buyers contacts on your list are looking for, so you don’t waste time and energy contracting houses you won’t be able to assign. Nor will you be trying to sell them a property that doesn’t interest them. Using a customer relationship management system (CRM) is an effective way to compile pertinent information across several channels, including social media. By analyzing the information in a CRM, you’re able to present properties to the investors most likely to buy, before resorting to emailing your entire list. 

Educate Your Buyer

Understanding the wants and needs of the investors on your list will save you and your buyers time. Property investors are busy and don’t want to be bothered with every contract you’re trying to assign. When looking for properties to wholesale, you should have a buyer profile already in mind before closing the deal. If you think a property will suit a buyer from your list, present them with a concise package, don’t just bombard them with tons of information or data that they’ll have to crunch themselves. Provide vital information first, such as location, terms of the deal, property photos, a list of expected repairs, and estimated ARV. If, after a quick review, there is something that piques their interest, you can delve into more specific details. 

To be a successful wholesaler, you should have a reliable buyers list at your disposal to effectively market any property under contract. Not all buyers on your list will be interested in hearing a sales pitch for all houses you’ve got under contract. Keeping your buyers list loaded with dependable contacts and updating it as needed will help you move those properties quickly to keep the

Categories
DIY

Rental Property Tax Deductions You Should Be Taking Advantage Of

Image courtesy of Pexels

We all know that paying taxes is an unavoidable expense of doing business, so protect the profit margins on your rental property by taking advantage of any and all tax deductions available to you. All of your expenses considered to be ordinary and necessary to run your business are deductible as per the tax code. As the tax laws are continuously changing, make sure you consult a tax professional before filing your return. 

Here is a list of some of the most impactful tax deductions:

Interest on Loans 

Your rental properties are likely some of the most expensive assets you own. So, unless you own them outright, you’re paying a significant amount of interest for your mortgage. In addition to your mortgage interest, you may also deduct other interest for loans to make improvements or other business-related activities. 

Depreciation 

You’re allowed to deduct ordinary business expenses for the tax year in which they occur on your annual return. However, the tax code does not permit large capital expenditures to be deducted all at once, those large purchases need to be depreciated over an extended period of time. The tax code allows for the purchase price of your rental property to be depreciated over 27.5 yrs.

Repairs and Maintenance 

Any repairs you make to your property are fully deductible for the tax year in which they occur. It’s worth pointing out that repairs are not the same as improvements. For clarification’s sake, a repair is an expense you incur to fix something you already own that is broken and/or is not operating correctly. For example, a burst pipe or a new thermostat for the HVAC system.

Capital Improvements

Any improvements, or other large purchases, you invest in for your property are not deductible for the year in which they occur. As mentioned above, repairs and improvements are distinctly different. The IRS mandates that capital improvements and restorations be depreciated per guidelines according to their natural, expected usable life. These types of expenditures would include a new roof, laundry equipment, and structural renovations. 

Meals & Entertainment 

If you meet someone for coffee or a meal to talk about your business, the cost may be tax-deductible. Just be sure your tax preparer knows about the new restrictions about expenses with clients versus staff.

Education 

Any business-related book or program you buy probably qualifies as a business tax deduction. 

Office Equipment, Services & Supplies 

Don’t forget about these! Any application you buy or subscribe to, paper, toner, etc. may qualify as a tax-deductible business expense. Part of your computer/printer and cell phone (both purchase price and monthly service) expenses may qualify. 

Travel Expenses

You can’t expense your drive into work every morning, but you can deduct work-related travel and maintenance. If you have a dedicated work vehicle, you can deduct the payments, gasoline, insurance, registration fees, and mileage. To make keeping a log easier, download an app, like Everlance, Stride, or TripLog to track your mileage and/or travel expenses, many offer a freemium option until you decide to spring for the full package. You have the option to deduct actual expenses incurred or use the IRS standard mileage rate. For 2019, the standard business mileage rate was $0.58 per mile. 

Pass-Through Deduction 

Congress enacted the pass-through deduction as part of the Tax Cut and Jobs Act in 2018. It is currently set to run through the end of 2025 unless re-enacted by Congress. This generous deduction allows you to deduct 20% of your income or 2.5% of your investment PLUS 25% of employee wages. Pass-through businesses are ones in which the business entity pays no tax, but instead the earnings “pass-through” to the owner(s) who pay the taxes on the personal tax returns. To meet the requirements of the pass-through deduction, you must operate your business through an approved legal entity such as a: sole proprietorship, S-corp, limited liability company (LLC), limited liability partnership (LLP), or partnership.

Home Office 

Small business owners and DIYers often devote space in their home for use as a home office. If you use the space primarily for conducting business, you can deduct associated expenses. The tax code permits you to write off prorated expenses for the mortgage interest, insurance, taxes, maintenance, and utilities.

Overall, be careful about proper documentation to keep your personal and business expenses separate. This can be as easy as using one of your personal credit cards ONLY for business expenses. Otherwise, you may be increasing your chances of an IRS audit.

Operating a DIY rental business is difficult enough without the IRS taking their chunk every year, you need all the breaks you can get. Luckily, by running your rental business, you are authorized to benefit from these and many other tax deductions, but it’s vital to keep accurate records for all business transactions. It’s worth reiterating, tax laws are updated frequently and often without much attention. Always review your deductions with a CPA or tax attorney to make sure you still qualify.

Categories
DIY

What You Need To Ask Your Contractor

How many jobs is you contractor juggling?

House flippers have a knack for seeing the hidden, potential beauty in a property that requires a lot of love. Hiring the right contractor to see that vision through to reality is a skill in and of itself. If you’re the kind of investor that has the ability to see the grand scheme of things but don’t have the time or qualifications to get the work done, you need to diligently screen your contractor.

How Much Experience Do You Have With Remodels?

Though there is some overlap, remodeling is a niche and is distinctly different from working on new construction. It’s hard to tell what setbacks you’re bound to run-up against, so if the crew has multiple skillsets, it will be cheaper for you. For instance, getting the same person to hang drywall, handle some minor electrical and later lay carpeting is less expensive than subcontracting specialists.

Are You Licensed AND Insured?

Any serious contractor will be licensed to work in the area and have proper insurance coverage. Don’t hesitate to ask to see copies of both. This will (hopefully) ensure that the work will be done to meet proper code requirements and that their insurance policy provides enough coverage should you need it. 

How Many People Are In Your Crew?

To be an efficient flipper, you want to get your property ready for sale as quickly as possible. Having the right-sized team, no matter the extent of your remodeling project brings confidence that the job can get done in a timely fashion.

How Many Other Jobs Are You Currently Juggling? 

You don’t want your remodel to take longer than needed — time is money. This will also give you a sense how large the company is and how your project will be managed. Many qualified contractors will be doing several jobs at once, that’s not necessarily a problem, as long as your rehab doesn’t experience unreasonable delays. If the other jobs are at different stages, then there shouldn’t be a crew shortage that would require hiring additional subcontractors that would throw you off your timeline.

Can You Ensure Completion By (insert date)?

If you’re satisfied with the answers to previous questions, get the contractor to commit to a guaranteed timeline for completion. People don’t like to pass on work and will tell “little white lies” to get the contract.Have your agreement drafted by a professional to make sure all of your requirements are correctly detailed. Rehabs rarely run as smoothly as the contractor would have you believe, there will always be unexpected snags which jeopardize your completion date. To help guarantee the agreed-upon timeline, consider including incentives for early completion and, likewise, penalties for any unreasonable delays.

Photo by Andrea Piacquadio

Categories
Wholesaling

The Down ‘n Dirty Of a Wholesaling via the Double-Close

To be a successful property wholesaler, you need to find a property, get control of it, and move it as quickly as possible. One of the biggest challenges a wholesaler faces is handling a buyer or seller that wants to cancel a deal when they find out what the wholesaler is making. That’s why it’s wise to be familiar with the double-close, where the seller and buyer close separate transactions and never meet.

What is a Double-Close?

Often a wholesaler puts a property under contract, as a buyer, but then assigns the contract to another buyer at a higher price. With a double close, the wholesaler actually purchases and takes legal possession of the property, then has a separate closing to sell the property to their buyer. Though the double-close does add an extra step and expense, it doesn’t necessarily delay the whole process; many closings are still completed almost simultaneously. Also, if you’re tired answering the question, “Is what you do even legal?” The double close removes any whisper of impropriety or illegality.

Benefits of Doing a Double Close

Financial Confidentiality: When assigning the purchase contract for a deal, your original seller and end buyer will eventually know your contract price, the final contract price, and can do the math to figure out what you’re making on the deal. Either one of them can feel jilted and try to force you to renegotiate, taking money out of your pocket. Theoretically, you could sue either or both for nonperformance of their contract, but that may take a while, and a judge may not look favorably on the transaction.

Using a double-close avoids all this. 

How To Perform a Double-Close

Since you, as the wholesaler, legally take ownership of the property, there are two closings, hence the name, to complete the deal. The first transaction is between you and the seller, where you are buying the property. In the second closing, you are the seller, so your buyer is purchasing the property from you. The two transactions can even occur in the same office on the same day.

Double-Close Challenges

Let’s be realistic, if it was easy, most wholesale transactions would use a double-close over a contract assignment. So, let’s look at why many wholesalers avoid using a double-close.

Purchase Funds: It’s much easier to get a property under a wholesale contract you plan to assign, then coming up with the funds to actually buy the property yourself. Lack of funds is why many investors are initially attracted to wholesaling to begin with. 

Solution: Use your network to look for sources willing to do Transaction Funding. Transaction Funding is what it says – it’s a very short-term loan to facilitate a transaction. Most of these types of loans are for less than a week. Because the lender can’t make much profit on interest for only a week, expect fees and high-interest rates. If you do the math though, you’ll find the actual cost is reasonable. 

Costs: Two closings result in two sets of closing costs – even if you’re closing on the same day. One for the transaction where you buy the property and one for when you sell it. 

Solution: There’s no way to get rid of costs like title insurance and recording fees, but if you establish a relationship with a closing company/agent, they may be willing to waive or reduce some of their specific fees.

Finding Closing Company: Years ago, the double-close got a bad reputation because wholesalers were doing closings where they used the end-buyer’s money, to fund their purchase from the seller. This is pretty much no longer allowed, hence the need for Transaction Funding. Still, many closing companies/agents won’t do a double-close (with Transaction Funding) or require a minimum amount of days between the two closings. 

Solution: Use your network to find a closing company/agent that understands the double-close and will work with you. 

Many wholesalers were trained to simply assign contracts and view the double-close as illegal, and too complicated, and so not worth the hassle. As we’ve outline though, the double-close may be something to consider. The extra steps and costs may help you close more deals, while also protecting the spread in those deals. 

Photo by Andrea Piacquadio

Categories
Wholesaling

Bandit Signs — Lead Magnet or Eyesore

Image by: Collis

You know those ugly signs you see when you’re sitting at stoplights that offer to BUY YOUR HOUSE FOR CA$H — those are called bandit signs. They are a disputed tactic in real estate circles, some people swear by them while others shun them. 

Why They Work

Do you ever think to yourself, “Who keeps putting up these stupid signs?” Or better yet, “Who actually calls these numbers?” You might be surprised by the answers to both questions.

  • Answer #1 – Property wholesalers are responsible. Wholesalers look for motivated sellers to buy their (usually) distressed homes. Then they mark the price up and try to sell them off was quickly as possible without making any repairs.
  • Answer #2 – It should come as no surprise, but motivated property owners. They’re lured by the idea of getting quick cash and getting rid of a property they don’t really want.

So why are they so effective? The signs are purposefully designed to be simple and non-threatening. They target motivated sellers who want or need to get rid of their homes fast. The message is simple and clear. That’s why they look like some guy with a magic marker scribbled his number on some poster board and nailed it to a utility pole or stuck it on someone’s front lawn. And that’s not far from the truth, except for most of them are made from corrugated plastic. By being ugly and straightforward, homeowners are less intimidated to phone an “average Joe” than some real estate agent. 

Legality

They are called bandit signs for a reason — they violate city ordinances in almost every community across the country. They are considered litter, so city crews just throw them away. That’s also why they usually pop up on Fridays after city offices close. Hefty fines can be levied per infraction and increase with the number of violations. Clearly, wholesalers remain unfazed by the threat of fines.

How To Profit From Them (Without Getting Caught)

1) Keeping your message simple and brief. 

2) Not using your company name. 

3) Taking the proper steps to avoid getting fined:

  • Only use prepaid cell phones (burners).
  • Never use your own name.
  • Place your signs on the weekends, most city employeesonly work Monday thru Friday.
  • If possible, use private property to place your signs. Ask the owner first. 

4) Placing them in high traffic areas for maximum exposure.

Wholesaling is YOUR business, only you can determine what strategies to implement to meet your income goals. Bandit signs have been proven to be excellent lead magnets, but they aren’t the only tool at your disposal. If you decide to use them, it’s best to incorporate them into your overall marketing strategy.

Categories
DIY

Keeping It Legal for DIY Landlords

A legal hammer.

ALWAYS have everything in writing. Specific terms should spell out exactly what is expected and legal from all parties involved

Working through the web of renting your properties can be mind boggling when you realize the details involved with signing a tenant. Knowing federal laws and local regulations will help keep you in business and profitable. Working from a template and a detailed checklist is a good way to keep everything legal from Day 1. If properly thought out, it can save you from the high cost of defending yourself in court.

Proper Documentation

ALWAYS have everything in writing. Specific terms should spell out exactly what is expected from all parties involved. Have a lawyer draft your lease agreement to help avoid the pitfalls of cookie cutter online forms. Rental agreements are legally binding contracts, know the rights tenants have and familiarize yourself with the Federal Fair Housing Act.

Advertising, Showings & Applicant Screening

You must study, and pretty much memorize, the Fair Housing Act to avoid discrimination violations. Your advertising, how you handle inquiries, showings and applicant screenings must all conform. Make one mistake and you could wind up in court.

Don’t forget about the Fair Credit Reporting Act and what your required to do if you deny an application or an applicant disappears.

Once you figure out how to legally operate — be consistent! Avoid potential discrimination lawsuits by treating everyone the same and avoid shortcuts — even when you know what the outcome will be.

Deposits and Fees

Check your state and local requirements regarding application fees, pet fees, security deposits, etc. Decide what you’ll charge and again, be consistent to avoid discrimination claims.

Keep In mind a security deposit is just that, a deposit, so it technically still belongs to the tenant, you are just holding it. Don’t go out and spend it. You may want to keep it in a separate account to make it easier to keep track of and explain when needed. Remember, the security deposit is used as a guarantee against possible damages or unpaid bills, but even during an eviction proceeding, it still legally belongs to the tenant.

Required Disclosures

Federal law requires disclosure to a tenant about potential lead-based paint issues. Make sure this disclosure is included in your lease and that you also have the government required lead-based paint pamphlet to hand out.

Your tenants may also have the right to disclosures regarding building ownership, landlord, or management company that acts on behalf of the landlord. Provide them with proper contact information for rent collection, complaints, maintenance issues, etc.

There’s also required disclosures like the Move-In Checklist, specific tenant notifications required in a lease like; Truth-In-Renting Act, Security Deposit Rights, Domestic Violence and Senior Living clauses. All are another reason to engage an attorney to at least review your lease annually.

Property Maintenance

Check your local ordinances for landlord obligations regarding property maintenance. Many cities consider it illegal to collect rent if a property hasn’t passed a city inspection. In addition to issuing tickets, they may also arrest an owner who fails to comply.

Know Your Landlord Rights

When dealing with landlord-tenant issues, there is usually more focus on protecting the tenant. As we all know, there are two sides to every problem, and as a landlord, you have rights, as well. Though not a complete list, here a few biggies:

  • Eviction – Depending on your lease agreement and state & local laws, you have any number of valid reasons for choosing to evict a tenant.  Keep it legal here, abide by all local laws and ordinances to prevent making the situation any worse.
  • Home Entry – You certainly don’t have unlimited access to a tenant’s home, but with proper notification to complete repairs or an emergency the law allows entry as needed.
  • Rent Increases – Many states and cities are passing laws limiting rent increases. Be sure to check and conform as needed. If there are no laws, you can legally raise the rent as much as you want, as often as your lease allows.

Housing is a highly regulated industry and need to be clear on fair housing laws and other local ordinances that affect your business. Pleading ignorance will not keep you out of trouble. Of course, you want your real estate investments to be profitable, but ignoring the laws set in place to protect the landlord-tenant relationship, will only do more harm than good in the end.  Before making any legal missteps, consult your attorney for clarification for any landlord-tenant issue.

Categories
DIY

Why Do I Keep Attracting Bad Tenants?

 Cops outside a house.

In the landlord sewing circle, conversations have a way of moving toward bad tenants.

No matter where your properties are located or how high your rental rates are, you’re bound to come across some bad renters — it’s just part of the business. Bad tenants affect more than just your bottom-line, they can wear on your sanity as well. If you feel like you’re attracting more than your fair share of “slumtenants,” maybe you are. Before things get any worse, take an introspective look at your policies and evaluate your business model.

Where Are You Purchasing Properties?

If you own properties in rougher neighborhoods, expect more problems and repairs. Lower demographic areas have lower income levels, higher levels of illegal activity, and many residents have a criminal past. Many will not have the decency to respect you or your property.

How and Where Do You Advertise?

If you’re nailing hand-written flyers to telephone poles, you give the impression that you’re desperate and probably will take anyone just to fill the vacancy. But if you take the time to take hi-def photographs and/or professionally made virtual tour videos to post on your site, you will attract a different type of renter. By including the rental rates in your marketing material and your website, you will instantly narrow the number of potential applicants. By charging higher rates, you’ll weed out much of the riff-raff.

The Application Process Is Your First Impression

Was the potential tenant on time for appointments? If they showed up late without calling or just blew you off with no consideration for your time, they’re probably not going to have much respect to your property either. Were they courteous and neatly dressed? If their appearance is sloppy, imagine what the inside of your rental will look like. 

For starters, charge an appropriate application fee. If prospective renters can’t scrape together the fee, how are they going to come up with the rent? Also, it’s smart to present a lengthy application, people who aren’t serious won’t bother to take the time to fill it out. Was the application written legibly, fully completed, and signed? Texting is ruining people’s penmanship, so that’s not the perfect marker, but if vital information or sections are left blank, you have to ask yourself, “What are they hiding?” These are some early red flags, though it’s not foolproof, it does you give an idea of how they will act as tenants.  

Don’t Skimp On Lease Details 

Sure, you can go online and just print out a lease, but be careful with cookie-cutter contracts. You want to be confident that every one of your required terms is in the lease. You’re better off getting an attorney to draft one for you, the initial cost will more than pay for itself when problems arise, or you find yourself in court. Make sure all tenants are listed and sign the lease. Once presented with the contract, many tenants will try asking for amendments, resist the urge to negotiate the terms of YOUR LEASE. By doing so, potential tenants will feel like they found themselves a “pushover,” you’re setting yourself up for problems in the future. 

Get The Scoop From Past Landlords

Your application has a section for references for a reason, make sure you contact previous landlords. A little extra time now doing basic research will save you the trouble of having to deal with the aftermath of damages or missed rent payments. Be glad to get the bad news early and weed out any subpar tenants. Past behavior is a good indicator of how they will treat you and your property. 

Max Out The Deposit

For the same reason it’s smart to charge appropriate application fees and rents, get as much of a security deposit as the law allows. It will weed out bad tenants that may have trouble coming up with cash on the 1st of every month. 

Don’t Be Lenient With Your Policies

Bad tenants are like sharks, they can sense prey in the water. You have a business to run and bills to pay. It is vital to be firm and consistent with all of your policies. Being passive about tenant screening, rent collection, and other house rules only cause more problems throughout their tenancy.  

You can’t always spot a problem tenant. Someone is bound to sneak through eventually. But with due diligence and proper screening, you should be able to limit your liability. You want to stay on top of your rentals and arrange for periodic inspections so you won’t get surprised when they move out. Finally, don’t rush the process just to fill a vacancy, if there’s any doubt, then there’s no doubt. 

Categories
Wholesaling

Where To Find Leads For Wholesaling Houses

 A woman in a suit.

Depending on your budget and goals, wholesaling deals can be found anywhere where you have motivated sellers, even in wealthier neighborhoods. Let’s be honest, though, most opportunities present themselves in more distraught communities where there are more distressed homes and foreclosures. 

Tips For Locating Wholesaling Opportunities

  • Homes facing foreclosure or that already are in foreclosure, bank-owned properties, and property auctions present excellent opportunities for wholesalers. Foreclosures, however, are not limited to low-income areas, the crash of 2008 is a good example where millions of people faced losing their homes. People lost jobs, had medical events, or got divorced, even in affluent neighborhoods. These life-changing events affected anyone who wasn’t prepared with an emergency fund.
  • Characteristic signs of potential opportunities often include boarded up windows and entryways and unkempt landscaping.

If you’re having trouble finding properties to wholesale, look in areas where other, more experienced, wholesalers are buying.

  • Low-income areas and neighborhoods where many of the homes are rented present a good opportunity. They are prime breeding grounds for flippers or landlords who own houses in the area. These people are often looking for new opportunities. Many investors don’t know how to find deals, are too busy or just aren’t interested in hunting them out. That’s good for you. This gives you a chance to put a property under contract and to offer it to a local investor looking to add to their portfolio.
  • Neighborhoods with one or two homes per block are areas you want to avoid, there’s little upside and low probability that you’ll be able to move them. As they say in real estate — location, location, location. As a wholesaler, you want to get your property sold as quickly as possible. A flipper will only buy the property if they’re confident they can sell it after renovations. And a landlord won’t see the point of purchasing a property if there is no potential for renting it out.
  • Hot Tip of the Day: Look for areas with newly built government housing. Not only do these areas typically have fewer vacant properties, they generally have plenty of homes in need of rehab. Finding neighborhoods where people are investing is promising. New home construction is a sign of stability or even growth. 
  • The internet age means it’s possible to find sellers without ever having to leave your couch. Digital “bandit signs” and pay-per-click ads on Google or Facebook are highly effective at honing in on a specific demographic. Using layered options and detailed targeting, you’re able to get your ads in front of an audience that will be more interested in hearing about your offer. 

Running any business has its challenges, it’s your job to be creative and stay abreast of market trends. Finding properties to wholesale isn’t that difficult, but it does take some work. As you gain experience, build your buyer’s list, and hone your negotiating skills, it will get easier. Combining strategies will increase your odds of locating profitable deals.

Categories
Wholesaling

When To Walk Away From A Wholesale Deal

 When To Walk Away From A Wholesale Deal.

When wholesaling properties, transactions don’t always run smoothly, sooner or later you’re bound to come across some deals that don’t go your way

The more experience you get as a wholesaler, the more will you be able to manage these imperfect situations. Other times, however, you’ll find that the deal just isn’t going to be worth your time, that’s when it’s time to walk away.

Sometimes you can’t agree on a price, other times circumstances change, that’s why you have to have an ironclad contract with contingencies that will allow you to get out if needed. Having something in writing will protect you when you’re faced with adversity or a worst-case scenario. To be a profitable wholesaler, you need to stick to your plan. Hold firm to your requirements and don’t allow yourself to be taken advantage of.

A good buy will ultimately depend on how well you negotiate the terms and conditions of the contract, it’s a give and take. Do not bend on your principles or agree to terms that don’t fit your strategy. On the flip side, this is a negotiation, so avoid being too hard-nosed, as well. If you can’t agree on critical criteria, it’s time to walk away.

When you locate a property, you’re eager to get the property under contract so you can find a buyer and collect your check. As with any other business transaction, when there are multiple people involved, timetables can get messy. Inspection dates and closings get bumped all the time, so you should allow for a reasonable amount of flexibility. One of the keys to successful wholesaling is seller motivation. When deadlines are not being kept or if you feel like the seller is stalling, it’s time to walk away. 

This sounds like a no-brainer, but if you won’t make enough money, then don’t waste your time.

There are a couple of reasons for little or no profit. First, the After Repair Value (ARV) is too low. There’s no point in buying a property if won’t be able to sell it for a profit. Second, there isn’t enough equity. Sellers want to walk away with at least a little cash in their pockets, but if they’re upside down, you’d have to configure a short sale. A short sale brings an extra hassle, but it is possible. However, very often, sellers don’t have the money to bring to closing. So if either of these is true for you, it’s best to walk away.

The world of real estate is forever changing. New laws, new code requirements, new zoning ordinances are changing the face and landscape of real estate. Stay abreast of current changes to avoid getting stuck with a property under contract and not being able to find a buyer for it. If any newly introduced factor will prevent you from being able to turn a profit, it’s time to walk away. 

As you grow your wholesaling business, you’ll learn to spot warnings signs that will trigger your instincts. You’ll have a sense when there isn’t enough upside to make the deal worthwhile. Not all of your transactions are going to be home runs, but do your due diligence and stick your plan. There will always be another property that will fit your parameters. When you see that things are headed south, it’s just best to walk away.