The following is an excerpt from my latest E-Book, The Help-U-Buy Way: The Retail Sales Strategies You Need to Succeed In Any Market. For you FREE copy email me at Chris@RealEstate2.com or visit me on Facebook. www.facebook.com/TheMcAllisterTeam
Choosing and Working With a Lending Partner
One of the most important things to look for in a lending partner is someone who understands that most of your referrals will not qualify for a traditional mortgage right away. Many if not most lenders will see your referrals as waste of time. You need a partner who sees the value, and gets a degree of satisfaction, from putting someone in the house of their dreams - regardless of how long it takes.
They have to understand that these will be some of their most grateful clients and will they will refer them to family and friends in the future.
Your relationship with your Lending Partner must be reciprocal. The perfect partner is going to be in for the long hall, and you must be sure that your ‘easy' purchase referrals go to this person as well as the credit challenged customer. Take the time to share your vision and business plan with your prospective lending partners, and take the time learn about their business as well.
Your Lending Partner is a key member of your team, and critical to your profitability.
Does Your Lender Have a Credit Rehabilitation Plan?
Most reputable lenders have a credit rehabilitation program they contract with. These services work closely with your buyer for the period of time necessary to ‘coach' them to an improved credit score. Most cities have non-profit entities that provide home buyer education classes as well. Completion of these classes can help the buyer qualify for grant money if they and the home they are purchasing qualify. Sometime successful completion of the classes alone aid qualifying for a traditional mortgage.
The First Meeting
We always recommend the investor or the investor's Realtor meet with the buyer and the lender together at the lender's office. The initial portion of this meeting may include the exchange of confidential information the buyer may not want to share with you or your Realtor, so be sensitive to that. At a minimum however, you should conclude the meeting together so the buyer sees that you and your lending partner are both committed to getting the buyer into the home they want with financial terms that work for them.
FHA and Conventional Seasoning Rules
Lenders have specific criteria for determining whether to make a loan and one of them is under what circumstances the property is being sold. While you should never allow a buyer's lender to bully you into accepting less for a property than it is worth, it is helpful to be aware of the constraints they operate under.
Yes you must stand your ground but there is no reason to rail against something that is completely and utterly beyond your control either. FHA will not finance a home unless it has been held by the seller for a minimum of 90 days. In addition, expect to have to detail what you did to the house and provide your own comparable sales for review. Conventional mortgages backed by Fannie Mae and Freddie Mac have their own internal guidelines to limit risk, fraud, and predatory lending.
Appraisals
Appraisals by definition are an opinion of value. They are however the opinion of a professional licensed by the state and contracted by a lending institution that wants to ensure that every loan they make will perform. Appraisals sometimes come in for less than the price the property is contracted for. Sometimes the appraisal comes in just fine but the lender requires a second appraisal to justify the first. This is dictated by their internal underwriting requirements.
During 2008 and into 2009 we saw more and more second appraisals requested. One of the reasons is that we work in a market area being designated as ‘declining'. This means that home prices have been going down year over year. Banks are not in the business of making loans against depreciating assets.
Laws governing lending are changing on a monthly basis making it all the more important to develop a relationship with a reputable lender that understands your business.
For more information - visit us at www.TheMcAllisterTeam.com
Tips and Techniques for Wholesaling Properties Quickly
The 9 most effective and efficient ways to wholesale your property quickly - by Brad Zitzner
Method #1
Have your Realtor do a radius search in the MLS for properties that have sold within.5 miles in the past 6 months. Look at all the houses for sale and compare those houses to the one you have under contract to purchase. Don't call the listing agent. Call the agent who sold the property. Find out the condition of that house and how it compares with yours. Since you already know the sales price, and the financing method, you can compare the quality of that house to the quality of your house. If your house is better than their house, then you can make a judgment as to how much more to ask for it. If your house is worse than their house, then you must determine how much less to ask for your property than their property. This method seems simple, and it is, but it requires you to pick up the phone and call lots of real estate agents out of the blue. If you want to be successful at wholesaling properties, this is by far the most effective method, and the most efficient use of your time.
You will find out very quickly what others are buying, why they are buying and what that markets it truly like today. Not last year, but today.
Things to consider:
If you find that all the houses you are calling on sold for less than what you need out of your house, and they are similar in quality, condition, and location, you can quickly determine that your deal is not really a deal. If this happens, you need to move onto the next deal as quickly as possible.
When you talk to the real estate agent about the property they sold, make sure that you listen intently before describing what you have for sale. Let's say that they sold their house for $25,000 and you would be happy getting $25,000 for your house; however, in talking with them, you discover they had a foundation problem, mold, and a bad gas line. You may be throwing money away by offering your property at $25,000 before listening to them. In this case, you may find that your house is actually worth $30,000 or $35,000. You just need to listen first before offering your house for sale.
When you talk with the real estate agent, make sure that you let them know what is in it for them. When they sell other properties, they are always granted a commission by the seller. Make sure that you factor in paying them their standard rate or more.
The reason that going to these agents is the number one method to getting your house wholesaled is that these agents are typically the easiest to communicate your needs to. You already know that they work with investors. You already know that they represent buyers who are actually buying today. They will probably understand your point of view. And you will find that many of these agents are actually buyers themselves. They can assess your property quickly and they can let you know whether or not your pricing expectations are realistic in today's market.
Method #2
Go to a real estate auction or sheriff's sale and see who bids the most for the same type of property that you are looking to wholesale.
Using this method, we used to come across many more buyers than we can today. However, you will find that the buyers who are bidding the most are typically newer investors and might not know all the angles. As a consequence, when you share a deal with them, I have found auction buyers to be much more hesitant than REO buyers. I call this phenomenon the auction phenomenon. You can present the exact same deal to an auction buyer, however, if they are not buying it at an auction, they might not be interested.
Method #3
We Buy Houses Signs
Drive the neighborhood and write down every for rent sign and every sign that says we buy houses. In some areas, these may be hard to find and in other areas they will be prevalent.
Often when you call the we-buy-houses signs, you will talk with a third party operator. In an effort to get them to call you back, make sure that you tell them that you come across lots of deals. Every time I talk to the operator, I will say "I buy and sell properties all over the state, and I am looking for somebody local who can purchase a number of properties from me this year". Doing this will greatly increase your chances of getting to the decision maker.
You might assume that since they are taking the time to put up the signs, and pay an operating service that they would return every call. However, in my experience, this is definitely not the case. They want the service to screen out 90% of the calls so that they are only talking to motivated seller. (You and me).
When you are calling for rent signs, you may find that these investors are much less enthusiastic about buying more properties. However, if you take the time to listen to their story and get to know them, you will have a much better chance at introducing a property that might fit their portfolio. As a rule of thumb, I try to move much slower when talking with for rent signs and much faster when talking with we buy houses signs. Remember, you might be the first person in 6 months to call a for rent sign for the purpose of selling them another house. Whereas, you might be the 5th person that day to call the we buy houses sign. Their goal is to get information and get off the phone. The goals of the landlords are going to be much different.
Method #4
Classified Ads
Just like calling on the signs, there will likely be lots of numbers to call from the newspaper. Be sure to document the numbers you are calling from a centralized database. We use www.zzzrealestate.com as our database. You don't want to be calling the same people more than once with the same script.
When you are calling on classified ads, your goal is to get into a position of listening as quickly as possible. You are calling them, so you will need to spend a couple of minutes describing your reason for calling. After that, just listen. Try to discover their goals as an active real estate investor.
A little note about calling random people out of the blue.
I have found that I need to get geared up for this type of activity. I am not an overly gregarious or extroverted person, thus I find that I want to procrastinate on this type of task.
However, I have found this task to be the number one driver of cash into the business so I have learned to overcome this.
Don't call 4 people. Call 40! Once I get into the mode of calling 4 people out of the blue, and listening to their story, there is no reason to stop. I try to block out an entire afternoon for this type of activity. Doing this has built an amazing database of investors, and it allows us to operate much more on autopilot than before. For example: If I get a property in Cincinnati, I can call two people whom I have dealt with lots of times. They will quickly assess the property and get back with me. I have this network in Columbus, Akron, Cleveland, Dayton, etc. etc.
However, this database came from making hundreds of calls and listening to hundreds of people. If you are hesitant about calling people out of the blue and talking about real estate, my answer is to do it anyway. The truth is that nobody I know really wants to do this; however, after a while, you might find it to be fun!
P.S. Always get their email address and ask if it's OK to email them deals from time to time. Almost nobody says no to that.
P.P.S Always make these calls in front of a computer so that you can document the conversation. Once you make 5-10 calls, they will run together. If you can't remember who you spoke to about what, you are completely wasting your time. Spend 1 to 5 minutes after every conversation and write down everything you can!
Method #5
Sell to Your Contractor
Most contractors that I've worked with don't consider themselves to be buyers until you bring a deal to them. They are often so driven to find work for their subs that they are oblivious to the deals around them. I can't tell you how many times we have shown a property to a contractor for the purpose of a bid, and ended up selling the property to them instead. Contractors don't typically take the time to go out and find the deals for themselves, but they will often buy a property during times when their crews are low on work. They will do this for two reasons. The first reason is that they fear losing a good employee or subcontractor if they can't keep them busy. The second reason is that they can typically do work for much cheaper than other investors, thus they can pay the same amount as other investors and ultimately profit off their reduced labor.
Always try to remember to ask your contractors if they are looking for a good deal. You might be surprised.
Method #6
Use Local Resources
Go to your local reia meeting. It might be a complete waste of your time to try to sell your deal from the reia meeting; however, it will not be a waste of your time to go and listen to what others are trying to do. Your main objective should be to find the 3 to 5 people who are doing lots of deals and to get to know them. Work on building a relationship, not on selling a particular house. Doing this will ultimately result in a long term relationship where you can ultimately work together rather than immediately working against each other.
Method #7
The first five methods talk about ways to sell your property while you have it under contract and before actually closing on the property. The next couple of methods work great after you own the property.
List your property in the MLS. I don't know how many times I've talked to other investors who can't sell their house and they never even listed it for sale. They state, they can't afford to pay the commission. I cannot understand this logic. If they sit on it for a while, not only will they not be able to afford the commission, but they will also not be able to afford the additional holding cost. I still don't know of a better way to sell your property than to make it available to everybody who looks at the MLS. This has by far the most eyeballs of any method.
Method #8
Put the property on Craig's list. You might not find lots of qualified buyers on Craig's list, but you must be able to sort through lots of leads to find the one that matters. Using Post Lets www.postlets.com makes getting your property on the internet quick and easy.
Method #9
Position yourself as an expert. Write an e-book. Publish some articles. Write a column for the newspaper. Speak at a reia. People will then turn to you for advice.
For a FREE PDF of our new E-Book "The Help-U-Buy Way" our complete guide to our retail and wholesale sales strategies, email me at chris@realestate2.com.
Prepping Properties for ‘Wholesale'
Most of the time we are able to sell properties out right to another investor, as-is. Sometimes however, we have to put some additional cash and work into a property to help the buyer / investor purchase it. Here are a couple of ways we have done this.
The "Pre-Hab"
We have completed "pre-habs" on occasion where we have put limited finds into a project to help an investor or buyer obtain the appraisal they need for their preferred financing. Pre-Hab is just a term we use implying that we are making minimum rehabilitation efforts to a property.
These days, most investor financing requires that a property have working plumbing, a decent roof, and an operating furnace. This is a big change from just a few years ago.
Rehab to Rental Standard
"Rental Standard" to us is a property that is clean, safe, secure, and functional. It is far from fancy and may in fact show some wear and tear around the edges. It will be to Section 8 standards - but no more. It has to rent for a fair price. We do not expect a premium.
Rehabbing a property to this standard should allow us to sell the property for 75% to 80% of appraised value. This allows the investor / purchaser to obtain favorable financing, some equity, and positive cash flow.
Sweat Equity' Wholesale Deals
Another strategy is to allow the investor/purchaser access to the property prior to purchase so he or she can get the property to a point where it can be financed. This way they can customize the rehab so it conforms to their lender requirements and / or exit strategy. If they fail to perform, the improvements stay with the property.
Land Contract Wholesale Deals
Sometimes it makes sense to sell a property that needs work to another investor via land contract. Houses that will not finance without work are great candidates. Any work done stays with the house if the buyer fails to perform.
Land Contract Wholesale Case Study
I have actually done transactions like this with friend of mine who has properties in the city that he does not have the time to rehab. He wanted to get a few off his books so he was willing to sell these with very favorable terms. Below is an outline explaining how a typical deal is structured.
West Washington Street - Springfield, Ohio
This was a single family home needing just about everything. The seller purchased it at auction for the equivalent of back taxes.
The seller is happy, I am happy. These numbers are small, but the principle remains the same. If you have a property that you are struggling to find a suitable cash buyer for, consider offering it to a fellow investor as a land contract purchase.
For more information about wholesaling properties to other investors, as well as our complete plan for listing and selling investment property, both retail and wholesale, email me for a FREE copy of The Help-U-Buy WayTM, from our forthcoming real estate independent study series The Focused InvestorTM.
Why I Work With a Team
"Frank Sinatra never moved pianos."
That in a nutshell is why I prefer to work with a team. The number one goal at my real estate services company is each member of The McAllister Team doing what they do best at all times.
Frank Sinatra was a great singer, but I'm pretty sure he would have been the first to tell you, he wasn't much of a piano mover.
Chris's Unique Ability
My unique ability is creating business opportunities and strategies designed to support and add value to the lives of real estate professionals and clients. In other words, I enjoy assessing situations, identifying problems, creating solutions, and working with my clients (including agents) in implementing those solutions. This for me is ‘more fun than fun'. I enjoy designing workflow systems, writing job descriptions, creating marketing plans, researching, negotiating, writing and communicating.
I LOVE putting deals together, I LOVE seeing my clients get what they want.
All the rest? The day to day administrative things that have to happen to keep the business running and serve our clients such as entering MLS information, uploading contracts, creating listing packages, scanning, faxing, emailing, writing checks, putting up signs, scheduling appointments and a myriad of other things - I am simply not equipped to do. Ok, I can do it, but it literally sucks the life out of me.
The Traditional Model Does Not Work For Me
I was never happy with the single-agent, go-it-alone model. When I first earned my real estate license in 2001, I tried to do everything myself. I did it, and enjoyed ‘success' quickly, earning sales awards and Rookie of the Year accolades, but I was miserable. I am simply not wired to work that way and I thought my clients deserved better.
As time went on and I opened my own brokerages, I was slowly able to build a team around me that complemented what I am good at. I learned to hire people to ‘fill in my blanks', people who enjoyed doing the things I did not. This freed me up to focus 99% of my time on the things I enjoy, and am good at.
Every agent has a team whether they realize it or not. Their broker, the office support staff, their lending partners, title people, and fellow agents all work together to get transactions completed. I simply decided to be more intentional about it and take it to the next level.
The McAllister Team
All together we have 12 people on our team. 6 are licensed and 6 are hourly employees. The size of our team is dependent on the type of real estate work we do. Not only do we work with buyers and sellers, we do commercial sales, property management, and work with over 20 different banks and asset management clients marketing their foreclosed property in Dayton, Springfield and seven surrounding counties. Consequently, each of our team members has a specific specialty that they like, and are better at than anyone else.
If it was not for the individual team members we are so fortunate to have, we would never be able to do the volume or be able to serve our clients the way we do. Most days my job is to point the way, lay the tracks, and stay out of the way of the on-coming train. That makes me happy and keeps me motivated.
If you need the services of a real estate professional, or know someone who does, I hope you will think of The McAllister Team. Call 937-390-3715 or email me at Chris@RealEstate2.com.
We are NEVER too busy for your referrals!
We Lost $1,000,000 in Real Estate In Less Than 5 Years by Brad Zitzner and Chris McAllister is now available for Kindle download for $4.96.
Our personal story of navigating the real estate downturn. This is a how-to guide of everything that worked for us, and everything that did not. Lots of case studies and personal experience. If you are thinking of investing in real estate - you will want to read this book.
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