I am just starting on this business. Haven’t bought anything yet, but I have been studying the market and talked to RE agents. One question I have for all of you experienced investors is:
What do you do if the market has been a seller’s market, and most houses are sold above the asking price?
I wanted to do at least one or two flips first to get some cash to work with and then maybe get into rentals. But with the market, it seems hard to buy a property below market value. The agent told me that the price will keep rising, so if I hold it and rent for at least a year, I can gain about 13% equity. But the agent does not think flip is going to work. I understand that he may not be as creative as the investors here. Any suggestions?
Is your realtor an investor??? If not then forget about their advice to buy, hold and be at the mercy of the market. The only way you will find great deals is the same in any market: find motivated sellers!!! Just a tip, but you won’t find them by looking in the same places as everyone else!!! Most of the best deals never see a real estate agent. You can look for pre-foreclosure deals, if you feel like you can control your greed; you don’t want to kick someone when they are down!!! Look for vacant houses that are a wreck, just be sure to calculate your repairs realistically. Most importantly, you make your money when you buy!!! Don’t let your eagerness to do a deal cause you to pay too much for a house!!! Happy hunting!!!
The agent did say that he used to be an investor, but he stopped doing that because the market here really heat up. However, he may just be a traditional investors and do things the old way.
Mike, what you said make sense, that’s what I think I have to do too. But I need the agent’s help to get the comparable information. What do I say to him to keep him interested in helping me? Do you tell him that you want to find opportunies to buy below market value? Agents always ask what criterias you have, and I don’t really knowwhat to tell him except that everything that has a profit potential.
Mike has some good info for you. Also, the agents will tell you flips don’t work because you don’t need the agent to do it.
You want to find sellers who are motivated and as Mike said, you’ll find them in every market. Depending on your budget, there are different ways you can get information on owners in whatever area you want to buy. There are services you can subscribe to and many cities now have them online. They also have the comparable information online as well.
Another source of comparables is the old fashioned newspaper. The weekend editions are full of ads for homes for sale . . . by agents and by owners. Start keeping track of the prices and the locations and pretty soon you’ll know the values without having to have comps. Except when the market changes in any drastic way.
When I need comps, I go to realtor where I buy reports in bulk; say 10 reports for $100 - $150.00. If you buy them individually, in my area, I might pay $20 per. I ask for houses in the exact neighborhood (found in the properties legal description) only. I get the actual sales price, & days on market for all the houses in that neighborhood with comparable square footage, bedrooms, bathrooms, lot size, etc. Don't get too tight on these or you won't get any results!!! I use this to determine the actual value of the home. I then make an offer based on my formula, 60% of the home's after repair value minus the cost of repairs = my maximum allowable offer. Also, another idea I am thinking of implementing is this: Realtors pay a subscription fee to access the MLS. Since I am not a realtor, and don't typically need them for single family purchases, I offer to pay there subscription fee in return for the ability to run my own CMA reports... Sounds good, if I can find the right realtor!!! Happy hunting!!!
When I need comps I go to my appraiser who pulls them for free I also go to my realtor’s who pull them for free as well. The thing to keep in mind is I never just get comps from one place I get them from at least three places… Hope this helps…
Why do you get comps from at least three different places ???
I was under the impression that all comparisons come from the MLS and you just need to find someone with access to pull them for you ??
Then do a drive buy to make sure the comps really are comparable.
They may have a great property in a sterling location, but how much time do they have? If the sherrif is going to haul them out in a week, the answer is…not much.
Maybe they need to move for a job transfer, might have just been divorced, or maybe mom lives three states away and her health is failing. There are a lot of reasons people need to sell quickly, and investors help them do it.
Anything already listed with an agent usually will not get you the best deal unless you have an established relationship with an agent or agents. You want to get directly to the owner before it gets listed. FSBO is a pretty good source but still not the best.
Contacting owners directly in the area you want to invest will yield the owners you’re looking for. The best ‘motivated seller’ is sitting at home wondering what they heck they’re going to do with the property to get out of the situation, whatever it is, that they’re in. You have to prove to the owner the reasons it’s better to sell to you than do anything else with the property. Creativity, sincerity and integrity are what they respond to. I have been doing this for years.
Regarding comps, the folks have given some good resources. But if you’re looking to work independently, which is the best way for some, you’ll want to set up a way to get comps where you’re not relying on anyone else. As in my earlier post, the online county tax records are usually very good.
Just remember that people usually want a lower appraisal for tax purposes. The only real way to determine a property’s worth is to sell it. Whatever someone will pay for the property (excluding investors!) is what it is worth. That’s why I ask for comps on the actual sales price. I use tax records for a rough estimate and usually add about 12% to the tax value.
I think you’ll notice one congruent thread throughout this post: realtors do not have the good single family deals!!! If you decide to work pre-foreclosures, the postings are available to the public by law. In Texas, the notices have to be posted in two public places a minimum of 21 days prior to auction, depending on your state, there will be another similar version of this requirement. Also, since your exit startegy calls for a short period of ownership, only look at properties with an older mortgage; they are the only ones with enough equity to qualify for a flip, without getting into short -sales, etc. Basically, they are the easiest deals to make happen. I can’t stress enough, treat these people like you would want to be treated in their situation. Most of these people are good people who would pay their mortgage if they could, but life has thrown them a curve; if you’ve ever been in their shoes, you’ll know what I’m talking about!!! If you can help these people solve their financial problems, you’ll be well paid.
There are other places to find motivated sellers that are less emotionally charged than pre-foreclosures.
Just another add on to the comp issue. I work for a title company in Arizona and we can get any comps in the state in a matter of seconds. I would say, get in with a local title insurance company. Some of these places will charge, however, we never have, and I am sure you can find one that can get you the information you need. Good Luck!
I think a clarification is needed on tax records. I use the assessor’s records on closed sales within the last six months, not the assessed values. Mike’s right on the assessed values. . . they are usually lower than what a regular (non-investor) sale would generate for a property.
Also, regarding the use of MLS information through a realtor, here in Seattle, it’s against MLS policies to allow anyone else to use my logon. It’s big fines and disciplinary action if they were to find out. So you’ll want to be respectful when looking for an agent to help you in this way and not ask them to do something against their organization’s policies or any state law. I don’t know about other states or areas, so you’ll need to check with them.
If it is true sellers market then you will be gaining money while you are in Escrow, and that would be a great Flip market. The faster the better. What state are you located in I am sure I can find you a very good Investor Realtor for your area.
If you are rather new at the RE game then you need the experience of a “Professional Realtor” on your side…