Housing prices have been under pressure for the last few years due to the subprime market meltdown. During this period we have recommended that creative real estate investors apply new money making strategies in their investing business, to not only survive — but thrive.
For over a year now we have been preaching important changes investors should make. It is important to flex some of your strategies to adjust to the change in credit markets and increased need for cash flow. However, there are a number of investing principles we have always used and taught that are as valid today as ever before.
The real estate investing game has changed since the recent stock market crash and rippled into the recession in October 2008. As much as it may feel like it, you don’t need new government laws, rules, restrictions and taxpayer money for help and protection.
The housing bubble collapse and dire economic forecasts are very serious. It feels like everything has spun out of control in less than a year. Yet, the good news is that you still you have control over your attitude, which will drive your investing results, your profitability and your ability to create financial freedom and security.
If you’re scared, nervous or uncertain about your ability to succeed in buying, holding and selling real estate over the coming months and years, then what you really you need is to build your very own “economic stimulus” plan. With the right attitude and toolset, it is possible!
Let’s explore what has not changed… what has changed… and what you can do about it.
The days of scooping up the profits from the frenzy and easy lender financing are gone. But the tried and true methods to get rich in real estate (or any other business enterprise for that matter) has not changed.
As a creative real estate entrepreneur you get paid for solving problems for buyers, sellers and private investors. The bigger the problems — the more you get paid. The more problems you solve — the more money you make.
I predict that an elite, proactive, optimistic group of creative investors (who adopt the right strategies needed today) will continue to collect big cash profits, monthly cash flow and long term wealth over the next few years.
Let’s take a closer look…
What Has Not Changed
Richard Roop has been buying and selling single family houses as a main source of income since 1996 when he first began studying creative real estate. Later, when he began attending boot camps, attendees at these events began recognizing him as the “marketing guru” for real estate investors.
He first published his own real estate training system in 2001 and that launched his sideline career as speaker, author, consultant and coach to real estate entrepreneurs.
Here are the real estate principles and strategies he has been sharing and advocating since 2001. There are as valid and as important today as they were “way back when.”
[Notice that much of the way he buys and sells houses does not rely on banks, mortgage brokers, real estate agents or qualified buyers. But that does not mean he does not take advantage of their contributions whenever he can.]
Marketing Strategies
• Don’t rely soley on real estate agents to find you deals
• Use direct response marketing to get motivated seller’s calling you
• Focus buying “bread and butter” homes in demand by the largest pool of buyers
• Establish tight “farm areas” that you can dominate and focus all your efforts in
• Spend a regular amount of marketing money each month to bring in leads
• Double your income by following up on sellers who first rejected your offer
Buying Strategies
• Generate uncommon profits by providing massive value to the marketplace
• Buy with terms so you can offer a seller a higher purchase price than all cash
• Don’t ever speculate or rely on appreciation
• Always establish a sizable spread between your buy price and projected resell price
• Present multiple offers that work for you and let the seller choose one
• Avoid high-end or luxury homes unless you have a proven exit plan with little risk
• Buy right so you can sell or occupy quickly by offering attractive price or terms
Funding Strategies
• Don’t rely on using your own money or credit to acquire properties
• Raise any cash you need for your deals from your buyer or private lender
• Let everyone know about your private lending opportunity
• Don’t rely on banks to fund your acquisitions or to close out your buyers
• Take over existing liens “subject to” and have the seller wait for their profit, if any
• Pay off seller carry back notes at a deep discount if they ask for their money early
Selling Strategies
• Don’t rely solely on real estate agents to bring you buyers
• Sell with flexible terms to fill your houses quickly for top dollar
• Don’t rely on mortgage brokers to get your buyers financed
• Establish a specific date your buyer will close with a new loan or move in as a tenant buyer
• Buy and finance free and clear houses with seller financing
• Occupy your houses with tenant buyers or sell on wraparound financing
• Don’t rely on qualified buyers who can borrow now and buy any house on the market
• Always get enough ‘cash in hand’ to protect yourself before a buyer moves in
• Be prepared to take the house back if your buyer does not keep their promises
• Build a buyer’s list and work that list every time you get a new property
Have you setup your real estate investing operation using many of Richard’s principles? If not, now is the time to implement them… all of them… immediately.
What Has Changed
Richard published an article for his newsletter subscribers in August 2007 entitled “Surviving and Thriving during Historic Real Estate Market Changes.” In it he asked is students:
“What will happen to your local real estate market as an escalating number of homeowners have trouble selling… or qualifying to buy a home… or paying back the money they’ve already borrowed? What will happen throughout nation as these types of problems intensify and ripple across the country?”
Since then we have seen the greatest economic crisis in U.S. history since the Great Depression. The article went on to warn:
“I predict that all kinds of industries will get hit hard… especially real estate brokerage, construction and lending. The problems will bleed into other industries and anyone relying on a job for personal income and security will be, quite frankly, out of control. Some communities will be devastated. I see a negative, downward spiral which may last many months but could last several years.”
So where’s the opportunity?
“Historically wealth has been created out of chaos. By repositioning yourself NOW, making a few slight changes in your approach to your real estate investment strategies, not only can you avoid being part of the problem, but you can be the creator of solutions that help reverse the trends… and get paid well for your efforts.
If you have a strong desire to succeed in real estate then the current climate is your opportunity to make a huge contribution. This is your opportunity to help thousands of buyers and sellers over the next few years and literally set yourself up financially… for life.”
Richard also went on to say…
“What’s most important to you? Your family? Your health? Your freedom? As you may know, overwhelming personal financial problems can lead to stress in relationships, depression plus other serious mental and physical health issues. You’d probably agree that your health, family, friends and personal freedom are more important than money. But a lack of money can lead to many problems in today’s society. It is a harsh reality.
…Whether you call yourself a newbie, a real estate investor or a real estate entrepreneur, what’s happening now and coming just around the corner is serious and worthy of your immediate attention…”
He also had some very realistic perspectives last year on the recent government bailout moves…
“I believe the real estate lending industry is experiencing a multi-year collapse. Banks are tightening up. More people are having trouble qualifying to buy or refinance real estate. We will soon witness a huge shakeup in how people find housing that works within their budget and lifestyle, whether they want buy now or just rent. Either way, everyone needs a home.
Plus, sellers need help getting free from their properties now. That includes owner occupants, landlords, investors, banks, builders and retirees. Perhaps that includes you as well. The competition for qualified buyers will continue to intensify. Unless these sellers are successful, more unsold homes will go back to lenders. Many sellers will simple walk away feeling they have no other choice. As they do, real estate owned by institutional lenders (REO’s) will skyrocket. The government will step in I believe… but how useful would you expect that to be?”
You do not have to be a victim in this mess. You can take the right actions now to protect yourself. Here’s part of the answer:
“Your friends, family and neighbors could soon be in a pinch if they have a home loan that begins to adjust… or if they need to sell soon. Far too many people have used their equity as an ATM. The number of homeowners with no equity is growing. Home prices are under pressure in many markets because of growing unsold inventory. This is wiping out much (if not all) of the gains from recent market appreciation.
Who will home sellers be able to sell to when there’s a glut on home on the markets? Who will buyers be able to buy from? Who will finance these buyers? Who will tenants rent from until they can own?
What if the answer to all those questions was YOU?
Imagine if sellers who needed to sell could turn to you as their buyer… and buyers sought you out because you’re the one person who could sell them a home. What if you could provide affordable and attractive housing to all the other people who want (or need) to rent?”
Here are The Changes to Make Now
They include:
Marketing Strategies
• Focus on using direct mail marketing to target homeowners with more equity
• Get a bigger bang for your marketing dollar by targeting the smaller “motivated lists” such divorce, probate, expired listings, landlords filing eviction, vacant properties, etc.
• Target free and clear houses and ‘out of the area owners’ mailing every 90 days
• Avoid targeting homeowners with little or no equity unless you have a systematic short sale investing operation
• Use systematic direct mail to follow-up on sellers we first rejected your offer
• Place more value on the leads that come from your marketing
• Start getting more referrals from real estate agents and mortgage brokers
Buying Strategies
• Avoid over prescreening or making offers on the phone
• If you would consider buying a house for what the seller owes or more, set the appointment regardless of how motivated they appear
• Do a value building presentation, spending more time to communicate why your offer is fair and why they should act quickly
• Assume declining home prices will continue and make your offers accordingly, buying better by projecting a lower resell price or value in the future
• Avoid paying interest on seller carry back notes
• Avoiding rehabbing “junkers” if you’re relying on a retail buyer to cash you out
• Flip wholesale deals knowing what your wholesale buyers will pay all cash
• Focus on houses where a buyer can cash out without borrowing more than the FHA lending limits for you area
Funding Strategies
• Only offer monthly payments to a seller up to the projected net income on the house
• Only buy houses “subject to” that have enough equity to support a small private investor second note that can fund all the money need to buy, fix and hold
• Pull out part of your profit in cash with a private investor first mortgage on a free and clear house and have the seller take back a second mortgage at 0% interest
• Be aware of the new challenges with closing agents on doing simultaneous closes
Selling Strategies
• Plan to get you buyers cashed mostly through FHA lending criteria
• If needed, close on your contract or have your payments begin only after finding a buyer
• Get creative on your buyer’s down payment or purchase deposit by considering trades, sweat equity or a ‘down payment assistance program’ where they build up their down monthly
• Competitively sell offering a great price, attractive terms or both as needed
• “Wholetail” by listing homes on the MLS below market when needing to get cashed out
All these strategies are still the ones you want to be adhering to.
July 16th, 2009 at 4:54 pm
this is really works!