I’ve read a lot about REI, and seriously want to get into it. However none of the strategy seems to apply in my local market.
my area: average house priced around mid-400,000$, market is pretty good, houses generally sell within 30 to 60 days, Condos goes even faster. I don’t save much per month. I have about only 12k $ to spend on investing. :rolleyes
I guess I can forget about wholesale and rehabbing, takes too much capital. Also foreclosure is not an option as it’s impossible to get information from the banks here. (very strict privacy regulation in Canada) Everyone here is talking about getting rental buildings, but at 400k price, it’s going to take a lot of down payment to make positive cash flow.
I thought about Lease purchase / Sub2 , but the market sales houses so fast, maybe too much competition from realtors? I thought about do birddogging for other investors, but I can’t even find them. (Except the old-school buy and rent investors)
What strategy should I focus on? Do I need more capital to invest in such a market? If so how much money would I need minimum?
Any advice would be great.
To determine what strategy works where you are find somebody that is making money doing real estate where you are and do what they are doing. Don’t look at realtors they are just salesmen. Find an investor and do what he does. One technique you can use is to find an investor is to look at the local real estate that are placed by investors. Call the number and ask them if they are an investor and if they say yes ask them if they will show you what they do. Most will say yes.
thanks for the input.
though, that sound a lot like doing Realtor’s job. I could just get a license and pretty much do the same thing and better. nevertheless at this point I think lease options are my best bet.
i will try this!
i have attended a local REI network event before, but it was flooded by agents and mortgage brokers, people trying to sell courses or items. I didn’t meet a professional investor.
i have attended a local REI network event before, but it was flooded by agents and mortgage brokers, people trying to sell courses or items. I didn't meet a professional investor.
Haha. How true! Most REI clubs are nothing more than flea markets, where that month's "expert" is selling their get-rich-quick crapola.
Those mortgage brokers and agents that you met at the meeting deal are the ones doing the kind of financing and finding the type of deals that investors like. They also are talking to the people you want to meet up with every day. Ask them who they know that is knocking the cover off of the ball and get them to give you an invitation.
You were in the right place but doing the wrong thing. Don’t sit there and listen to the presentation, talk to the guys standing at the back of the room. These are the movers and shakers.
I don’t think lease options are anything at all similar to a real estate agent’s approach. They take listings and try and sell it. Not at all like working a lease option deal.
OK, really? No strategies seem to apply to your market?
You’ve outlined about every scenario and condition that creates failure for you. So my questions are,
Why you want to pursue an industry that represents one failing prospective effort after another?
What are you trying to accomplish for yourself with real estate, if nothing seems to be workable?"
Fearing sounding like a jerk, but it seems you want something for nothing. Real estate, regardless of the niche you pursue takes WORK. This includes overcoming a negative attitude and clearing a clouded perspective. Otherwise, whatever you believe to be true, will be true for you.
Meantime, your description of your market sounds like a dream market to me …fast sales …lots of activity. Really? This is a condition ripe for successes. No wonder there’s so much competition. People are making money. However, your attitude is, “It’s not easy enough to make money here, because there’s too many people making money; I can’t save anything; and deals just don’t drop off trees like I want.” That’s how I hear it. Hmmm.
Get off your butt and pick a niche and stick with it, until it starts paying. It makes zero difference what niche you pick in a market like you describe. The distinction I make is that unless, and until, you pick one approach, and become familiar enough with it to recognize the opportunities available with that approach, you’ll just assume that there’s really no ‘good’ approach. Or worse, you’ll constantly search for that elusive, ‘easier, less stressful, risk averse’ “strategy.” Well, good luck with that.
Meantime, here’s some free advice (which does not represent the value of this advice, just saying). You’ve got $12,000. Put that in the bank and pretend it doesn’t exist. Put yourself in a position of joining an elite group of investors that started from scratch and learned how to leverage the money, experience and brains of others. That’s what I did twenty-five years ago. I borrowed money and relied on the experiences of others to move toward my investing goal(s).
The first thing I did was become an expert deal analyzer (in a crappy, depressed market). Then I became an expert at finding deals (in a crappy depressed market). Then I became (by necessity) an expert at finding money for my deals (in a crappy, depressed market). You can do the exact same thing (or better in a strong, growing market).
Meanwhile, I especially like what Bluemoon suggested. Find someone who’s successful, and copy them, if not pick their brains.
AJ says lease options are nothing like a Realtors listing because the agent lists and then tries to sell it. Duh!! What are you doing with the option, it is really a listing at a set price and you add your commission by assigning the option at a higher price, and there is nothing that says a buyer just can’t just exercise the option and buy. How many listings have a decent set price? So it is a form of listing if you want to use it that way, not much different really, it is all how you look at it and how open your mind is.
I probably sound more negative than I actually am. Money doesn’t just fall from trees, i know. However, without getting side tracked, here is what I am doing now,
getting a marketing plan in place, i’ve already decided to do lease/option to start. This will be done in 1 week, and then, hot or cold, i will just have to jump in.
looking for a local investors group, this is probably going to take longer, i will start this weekend and will probably take 2 to 3 weeks because of my job. Doug Pretorius used to be close to my city, but he doesn’t log on anymore for some reason, also his website no longer responds, i wonder what happened.
getting a website done. 1 month
I will update my progress, success or fail, ho ho ho…
Legally they are not the same. There is no commission with a lease option. Anyone who thinks the two are the same and feels there is a commission will likely end up with the regulators taking you to court.
The more the two look the same, the more you will find that you are brokering deals and must be licensed as an agent. The more you understand the distinction, the more you can legally avoid being a licensed agent.
BTW - The comment is specific to the USA. I do not know the licensing laws in Canada.
I think what Brian is saying is that the two transactions are effectively the same, even if legally different.
For example, real estate agents in one state can secure options on property, as principals, in other states, and market those options without notice.
As a principal, an unlicensed individual can both option and market for sale a property regardless of the spread, and regardless of the state.
In either case the Optionee (‘seller’) is acting as a principal in the transaction and therefore has all the rights of an owner, which includes selling the option for whatever spread/price he can negotiate.
Of course an agent with a standard listing, has a different standing with the seller and a different equity position with the property. He has the right to collect a commission, but not a spread. However, if the agent were to option the property, instead of list it, he now has an equity position, and as a practical matter can sell the house for whatever he can get, and collect the spread, instead of a commission.
Now, what’s possible and what’s a lawsuit in the making are two different things.
I’ve known agents that took advantage of the seller’s ignorance of market value by using a ‘net listing’ agreement. This of course simply gives the agent the right to keep any money over a certain ‘net proceed’ after a sale.
If there’s really a huge spread on a net listing, you can bet the seller will sue the agent for fraud as soon as he discovers how much equity he left on the table.
And if it goes to court, you can imagine how sympathetic the judge will be to the sophisticated and experienced agent when compared to Grandma Moses sitting in court nicely equity stripped. This scenario applies to the professional investor, too.
If the deal is too far one-sided in favor of the investor/agent, somebody’s gonna be in court (and lose).
I think we are both aware that the subtle differences matter greatly.
The prior reply said you add a commission when you sell the option. There is no commission. You can market the option for what ever price you like and if you want to make a profit, great. it is not a commission.
The person with the option is not really selling the property. They are selling their right to buy. If they claim they are selling the property they are committing fraud or misrepresenting the facts.
Why do I want to split hairs?
An investor was fined over $30,000 for repeatedly using options to market properties on behalf of the owner. In other words, he was promoting his services as an assistance to the seller and used options to get paid. Rather than just agree to buy the property and then sell his interest, he used words that left the seller thinking someone else was helping to market the property.
When challenged by the state regulator for real estate or when it court, what you say and what you have done matters. Best that people understand the subtle differences if they are trying to avoid a specific law. If they are too sloppy, they will get reported. Many times they are reported by a disgruntled real estate agent.
If it walks like a duck and sounds like a duck, it does not matter if you call it a plane. The judge will look at the substance and not just the title on the paperwork. They will also look at the marketing, the verbal communication and other details.
That may happen, but this is so unusual and rare that it hardly qualifies as more than an anecdote. Obviously there’s more to this story, than a simple misunderstanding of an option.
You say it is rare. I say it is not. Agree to disagree?
The key is for the person using an option to use the correct terminology and to keep their paperwork organized. The more someone starts acting like a marketing agent on commission the more likely they will get turned in.
If someone wants to lock in a deal and then sell on their right to buy, then all should be fine as they are not attempting to earn a commission. They are taking genuine risk and they are a principal.
website address registered and in development, getting a dedicated smart phone this afternoon. (on time line, will be finishing up in 2 weeks)
Marketing plan is being executed, still need to order bandit signs and business cards. Posting ads online, cold calling some sellers this week. looking into direct mailing programs here, although Canada is right behind China in terms of information censorship. yikes (on time line)
need to get the paper works done, “lease/options contracts”, looking at my old document archives tomorrow, and may purchase some online. Though I hope it applies in Canada. (delayed)
i hope i’d be able to find some local investors this week, no luck so far. (on time line)
My job has been very busy lately and it’s hindering my progress. stay tuned!
Congrats on getting going… I remember how excited I was 19 years ago when I first started … Of course back then it wasn’t Smart Phones and Websites. :biggrin I can honestly say I have done very little work in Canada directly so I wish you the best of luck.
Had a minor car accident this week, stressed out for a day or two but recovered. other than that
Yay, my initial website is done, woosh, took me a while, had to do it myself. spent good 10 hours on it. (on time line)
Got 1000 business card ordered (on time line)
Got 7 “maybe” inquiries from 130 emails. Not very good rate but I’ll try harder and change my approach
finally tracked down a local investor who is successfully doing lease/purchase, but he is not answering phones for some reason.
still need to do:
put together a bandit sign campaign, looking for signs now (will finish in 1 week)
looking for door hangers, flyers (will finish in 1 week)
cold call news ads, this was delayed
speak to a few mortgage brokers about the local rules
TELL EVERYONE MY NEW BUSINESS
anything I am missing? I like posting my plan and time here, i feel more obligated to do them if i post it public.
stay tuned.
Also, I would love to hear some seasoned investors tell us how hard they worked initially. There are tons of success stories, I don’t care much for that. I would like to hear how many calls you’ve made, how much time you spend on thinking about marketing, doing marketing, etc. because this ain’t the freeloading business, right? I have a feeling i got a lot of hard work cut out of me ahead.
I could just get a license and pretty much do the same thing and better. nevertheless at this point I think lease options are my best bet.