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Category Archives: Wholesale

Don’t Get Distracted by the Deal-tails!

Real Estate Deals

Make Real Estate Deals

I received an email today that reminded me how easy it is to get into an analysis paralysis mode when an owner calls with a property they want to sell. The potential of getting a deal often sends investors into a frenzied whirlwind of over-analysis. When buying wholesale, we are looking for situations where we can buy the property at a significant discount. This usually means we are dealing with owners who are in some sort of crisis. It could be anything from a nasty divorce to a lost loved one. In any case, it can seem difficult to unpack the baggage to get the information we really need from the owner.

This is an all too familiar story for many new real estate investors. Your heart races with excitement when the owner calls and seems motivated to sell. You start with good intentions to follow the script, only the owner seems to be evading your questions with a canned, “I don’t know!” Or, they go off on some irrelevant tangent.

You find yourself afraid to ask the questions you need answers to for fear of upsetting them and losing the deal. Or, maybe you all together forget your questions because you are caught up in their circumstances. Once you hang up the phone you realize you are overwhelmed and don’t feel you have enough information. So you set off on a quest to find the golden nugget of information that will make the heavens part, the choirs sing, and provide the confidence to make a perfectly concocted offer. Only after awhile you are frustrated, overwhelmed, and empty-handed because someone else got the deal.

Understand that owners are often dealing with a lot of stresses and the information (or lack thereof) probably has more to do with the emotional circumstances surrounding the real estate. The owner may not even be aware that they are giving you the run around, because they may not realize the effect the situation has on them.

When this happens, don’t get sucked into the confusion. Just remember what you really need to begin evaluating a property:

  1. What is its potential? Will it increase in value if it is repaired? Will it increase in value because of the market appreciation? Is there some unseen value by changing the use of the property?
  2. What kind of profit do you need to make on the property to make it a good investment for you?
  3. What expenses will you incur in the process of recognizing the property’s potential? This could include repair, holding, and closing costs just to name a few.

So now step back and ask yourself, What do I really need from the owners? The biggest thing initially is just access to the property to be able to estimate the repairs. In Wholesale Buying, I often talk about making offers site unseen to streamline the process, but if you have an owner that isn’t giving you enough information or seems uncomfortable, it may warrant you meeting with them before you make your offer. So, if at the end of your conversation you don’t feel you have enough to make an offer, a good course of action is to make an appointment to see the property. This will keep you moving forward and make you accountable.

I often see investors obsessing over things that don’t necessarily change our evaluation process such as the owner’s mortgages, tax liens, and asking prices. They haven’t even made an offer or seen the property, and they are burying themselves in research. While these things may affect the strategies we use, they don’t generally change our bottom line. We still need to be profitable or we wont stay in business. If an owner won’t sell at a price where you can buy, all those other pieces are irrelevant.

If an owner can’t sell because of mortgages and liens after you make an offer, then we can use our arsenal of strategies to help the owner and create a deal. My point is don’t get caught up in the “deal-tails,” before you even know if it’s a deal. It’s like Mark Ray, Mentor, always says, “If you aren’t making offers, you aren’t making money.”

Now the next question is if you find yourself caught up in analysis paralysis…what are you avoiding? I realize that many new investors want to make sure they have all the information to do the deal perfectly. In reality, you will never do the deal if you don’t take those first steps to make an offer. All the “deal-tails” can be figured out along the way.

Alecia St. Germain
Rich Dad Education Elite Trainer

Wholesaling Real Estate – Creating Wealth out of Thin Air

One of the most appealing things about investing in real estate is that it can be done with very little capital. In other words, you do not have to have a $150,000 in your bank account to purchase a $150,000 house. This concept is called using leverage. Leverage simply means that you can control a lot (the whole house) with very little investment.

This article will focus on how you can leverage yourself into some great deals and make some money along the way. We will focus on an investing technique called wholesaling (also referred to as contract assignments).

How It Works

Wholesaling involves finding a great deal and then selling it to another party interested in the deal. You sign a contract with the seller agreeing to the terms of the purchase. Then, you find someone else that would like to have those terms with the seller and you sell them the contract. You are not selling the property; you are selling them your position in the contract.

The seller still gets every penny that was agreed upon in writing, the new buyer gets a great deal, and you make a fee for assigning your position in the deal to the new buyer. It is a true win-win-win situation.

What is the benefit to you as the person in the middle of this transaction? Think about it like this:

If you are the one in the middle, how much money did you have to invest to make this deal work? The answer: very little. The only money that you invested into this deal was the earnest money deposit that you paid with the purchase contract once the offer was accepted. Since this amount is negotiable, it could be as little as a couple hundred dollars or less if you are good at negotiating.

How much financing did you need to get? The answer: none! Since you are selling your position in the deal, you never needed financing to make this work. The new buyer pays cash or lines up their own financing to complete the purchase.

If the property needed repairs, did you have to do the repairs? No! The new buyer is taking on the contract as is and the property as is. Any repairs that are needed will be completed by the new buyer.

As you can see, there is a tremendous benefit to be able to do deals where you invest very little money, financing is not necessary, and you do not have to do repairs. If you are doing transactions that require very little money, your credit is not needed and you do not have to be a handyman to do it, you can see that you have really removed the major barriers that keep people from investing in real estate. You have harnessed the power of leverage all because of the simple technique that you are using.

Finding Investors

Although you could sell your contract to a buyer that wants to purchase their own home, you typically will sell it to another investor. The major reason for this is that they are always in the market for a great deal. If you negotiated a great deal, they will likely have an interest.

When most people are introduced to wholesaling, they typically comment that finding the investor to sell the contract to must be difficult. Actually, it is quite the opposite. If the contract that you negotiated with the seller is a great deal, then that represents an opportunity for the other investor to make money. That is what is going to keep them interested. You will find that the better deal you negotiate, the easier it will be to find another investor. If the deal is not that great, you will have a hard time finding investors.

If you are using this technique and you find that you are having a hard time finding investors that are interested in your contract, that tells you that you probably have not negotiated a good enough deal.

One of the easiest ways to find investors for your contracts is to use the “We Buy Houses” signs and ads that you see all over the place. If you are wholesaling, the investors that are advertising are not your competition. They are your buyers.

As you find these signs and ads, you should be taking down their names and phone numbers. Start building a list of potential buyers. You will have a lot more confidence going into a deal knowing that you already have potential buyers lined up.

When you find these investors, give them a call. Your whole objective during this call is to introduce yourself and find out what they are looking for in a deal. Every investor is different. Some of them have certain areas that they like to invest in. Some of them have specific types of properties that they look for. Some of them have to have a certain amount of profit or else they will not be interested in the deal. When you take the time to find out what they are looking for before you have a contract in place, wholesaling becomes so much easier. Build your list of buyers first and you will have a lot more confidence finding the right deals because you know what they are looking for.

When you call them, say something like, “Hi, my name is ______________ and I am an investor in the area as well. Sometimes, I run into more deals than I can personally finance and I wanted to know: If I had a deal that made sense, would it be okay if I brought it to you?” This tells them why you wouldn’t buy it yourself and it opens up the door to discuss things further. Chances are very high that they will say that they would be interested. Start to gather their information and what they look for in a deal. Now you are building a list of buyers for your wholesale deals.

This simple investing technique can help you leverage the power that real estate has to offer. This is a perfect example of why you do not need to have a lot of money or credit to invest. You simply have to know the right techniques and know how to use them. With this knowledge, you will be able to capitalize on the great deals that you see and make a profit.

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