How to Focus on What Market You Will Invest In

Patience and focalization are crucial elements of successful real estate investing and market selection. However, don’t feel as if you’ve missed the market because of the negative naysayers out there, who started talking about the housing bubble in late 2005. Forbes Magazine predicted a housing bubble every year from 2002 through 2005, and it still hadn’t happened as of late 2005. (Although by 2007, certainly things had changed in the real estate market.) Not that a housing bubble hasn’t eventually happened to some degree or another in selected markets; the point is that if you took the advice of naysayers, think of the lost upside you’d have missed.

Most importantly, remember that all real estate is local. Just because some markets are hurting, does not mean that other markets are not substantially out-performing the curve. This is a huge country we live in, with hundreds of builders, thousands of cities and millions of people. The socioeconomic and demographic landscape is so varied and complex, with job growth, population migration, and redevelopment initiatives abound, that it is insanely ignorant to suggest hyper-appreciation is nonexistent in a number of communities. People will always need a place to live, and builders will always be motivated to meet that need. With that in mind, what drives part of the success of the preconstruction investing model is not always the unabated and natural appreciation that occurs in a hot market, but the fact that some builders will artificially price their homes at a discount to spur sales activity.

Keep in mind that these builders, whether they be local, national or international, are answerable to their lenders. Their lenders want executed sales contracts and closed homes. Based upon how a lenders’ multimillion-dollar construction loan is structured, a developers’ progress on a subdivision is segregated into different loan amounts within one umbrella loan. As an example, a $10,000,000 umbrella loan is made from XYZ lender, with a construction loan drawdown schedule that results in 10 equal payments of $1,000,000 to the developer over the construction period of the development. The future loan drawdowns are contingent upon several factors; the pace of executed sales contract, buyer deposit reserves, the completion of zoning permits, etc. The latter components are a part of a very complex formula that essentially puts the onus on the developer to produce closed units, in exchange for access to the lenders’ capital.

Understanding a builders’ motivation and the market forces that affect a developments’ appreciation are critical to your success. Don’t be afraid of getting in the mid-to-late innings after you’ve conducted research on a market, and also keep in mind that along the way-and despite the meticulous research you’ve done-not every deal is going to be a home run. Expect a few duds here and there, and also know that there is no substitute for good research. The research should be your primary guidance in real estate investing. Just don’t go on a hunch. Make sure your hunch has backup-backup that can take you to the bank.

Property Investment – Help, My Property Won’t Sell

It is commonly said that you make money when you buy, not when you sell. However, often this lesson is not learned until you try to sell a property. I remember the first property I tried to sell. It was a two-bedroom unit in a small complex of eight. A lovely unit… only four years old in an upmarket growing suburb. I was moving to another state in Australia and wanted the property sold, to enable me to buy another home in Queensland.

The property took over 12 months to sell. Three contracts fell over due to finance issues for the purchaser. That was my first experience in selling a property. The emotional roller-coaster was challenging. Initial excitement when the offer was negotiated and accepted, followed by confidence when the contract was signed, followed by disappointment when finance was not approved for the purchaser. The final emotion was frustration when the contract fell over. This happened three times.

Prior to this experience I believed properties took on average three months to sell, depending on the current market conditions. A few years later, we decided to sell one of our properties. This time it took close to two years to sell.

The property was a 2000 square metre property in a beautiful coastal holiday town. The property had zoning that allowed for the development of eight two and three-bedroom townhouses. The property was ideally located on the main road, a couple of hundred metres from the shopping precinct and beach, had two street access and was very close to community amenities such as a child-care centre, school and bus stop.

One month after we purchased the property we were offered $70,000 more than what we had paid for it. We had no intentions of selling the property at the time. Later, on realisation that we did not have the experience, contacts or time to develop the property, we decided to sell it. The first two offers we received were from developers. The offered a 12-month settlement contract. They would pay an upfront amount, with the balance paid in 12 months. This contract suited them. They got to hold the property with little money down. Negotiations could not get the terms of the contract suitable to both parties, and both contracts stalled.

In hindsight we should have accepted the contracts. These were the first two offers we received. We expected more offers to come in that didn’t have a 12-month settlement term. The market turned, developers pulled out of the market, residential construction slowed down and our property took an additional 18 months to sell. Holding a property for an additional 12 months to two years is not good from a cash-flow perspective.

It is important to consider the type of investor you are, before you risk buying a property that is wrong for your investment strategy. Don’t assume you can just sell a property if you need to. When selling, the market is in control. The market determines when it wants to buy, what it wants to buy and for how much. This experience provided one of our biggest lessons in property investing… know what type of investor you are, and be that type of investor only.

You’ve Been Lied to About Real Estate Investing

Wholesaling real estate is by far the fastest path to real estate investing wealth. You’ve seen the investors on TV buying, fixing and selling property because it looks good. It looks fast, crazy, risky and exciting – all the reasons why it’s been on TV. What everyone fails to tell you is that it’s very risky, it’s time consuming and it’s not the most profitable residential real estate strategy you can do.

Don’t get me wrong, buying, fixing and flipping real estate is extremely profitable it’s just not for me and it’s most likely not for you. Here’s why you should not look into flipping a house.

Shocking? I know!

Everyone wants to flip a house because they see it on TV but what you don’t see on TV is what you need to be doing. You need to wholesale houses because you can get started today, right now with little to no risk, money and investing experience.

Wholesaling real estate doesn’t make for the best TV so this is why flipping houses has been all the buzz. We love the drama and we love watching to see if the house flippers will flip the house with a profit or will someone go wrong!

Everyone has enough drama in their life that we need to skip and focus on making the money. Focus on businesses that will yield the highest profit without being too risky.

And That Business Is Real Estate Wholesaling

As a wholesaler you’re in the business of connecting someone who is selling a house with someone who is buying a house and you get paid a ridiculous fee for doing so.

Now you’re not a Realtor and you’re not listing houses for sale. That’s not the cash producing strategy of wholesaling real estate.

You want to find distressed properties who are owned by someone who needs to sell the property immediately. The property is a burden and the worse it looks the better the deal you can negotiate.

Evaluate the property and agree to buy the house with the seller. Find a house flipper – someone who we love to watch on TV buy, fix and sell real estate.

Tell them you have a great deal for them. You have a distressed property with a motivated seller and they’re make tens of thousands on the deal when they can flip it, you just want you’re wholesale fee.

The house flipper will gladly pay you a wholesale fee if they’re going to make tens of thousands and the person selling the house gets their house sold. Everyone wins!

You introduce the house flipper as an associate of yours the seller when they actually buy and close on the property.

Everyone Wins

The house is sold – the seller wins!

The flipper gets a solid deal – the house flipper wins!

You brought the two together and made a nice profit – you win!

Wholesaling real estate is easy to do. It’s all about finding deal after deal. Wholesaling house day in and day out. There’s no risk and you can wholesale an extreme amount of houses whereas a house flipper can only flip so many houses and they’re taking on all of the risk.

Rethink your strategy and save the drama for someone else. You know better – become a real estate wholesaler today!