Common Methods to Deal With Wholesaling Real Estate
Wholesaling Real Estate is regarded as a no risk strategy that may get huge benefits for first-time investors and also old-timers who had long been in the field of property investing. It takes little or no financial risk and that’s the reason why it is popular with most investors. There are a few ways about how you can get started with wholesaling: look for handles lots of equity, locking up the deals and lastly finding the investors who’d be interested to buy the deal.
Here are a few of the common methods to deal with the challenges in finding deals with high equity.
Search for sellers in classified ads or Craigslist. If you’ve a tight budget and wants to try wholesaling real estate this is one of the best means for newbies investors. You can get leads there for free. There may not be a lot of good leads but you will soon discover some that are worthwhile like those who advertise that they’re in pre-foreclosure.
One other approach to market where you’ll not need to spend anything is to put a road sign like “We Buy Houses” and add your contact number in some high traffic intersections in your area. By doing this you will be able to target certain areas for some small investment. The only setback with wholesaling real estate method is that other municipalities restrict road signs so you need to ask around or do your research first before you place your road signs.
But here is one most targeted practice of marketing when flipping houses and that is through mail or flyer campaigns. Flyers are considered an ideal option since you can do these with a limited budget. Just print out some flyers announcing that you are a cash home buyer with your contact details. Then look for the prospective area that you’d like to distribute your flyers to.
But if you’ve enough budget, you may try mailings to targeted homes in area you wish to acquire. There are also companies out there that may help do this for you at an affordable price. At the same time assist you in finding motivated sellers like those in foreclosure.
After you have good leads coming into your wholesaling real estate pipeline, the next thing you need to do is get them under contract to buy. Try and see if you can get yourself a season investor or an attorney in your area to have a contract that would work well for you. It’s crucial that you ensure that you have the right to assign the contract before closing. In some other states, you’ll have the right unless the agreement states that you cannot assign the agreement and the term where buyer has the right to assign agreement can be added. So that you can then start marketing it to buyer’s list when you get the deal under contract.
Can People Avoid Foreclosure?
Many people emphasize on the fact that once you’re not able to afford your mortgage payments, your property will inevitably be foreclosed on. Because of the devastating penalties foreclosure can produce to an individual’s life, most people will do literally anything to avoid it. There are actually many reasons that make your lender issue a foreclosure notice for you, and most of them are a direct consequence to your uncalculated actions. However, in today’s conditions, the rules have changed a bit. With the economic instability we’re living by, it’s becoming harder than ever to have control over our financial lives. For people asking if it’s even possible to avoid foreclosure, I’ll reply that it definitely is, but only if you follow these tips:
1- Ignorance isn’t bliss:
I keep saying to people that ignorance is not the way to go when you’re facing financial issues. If you think that you’re going to outsmart your lender by ignoring them, then soon you’ll realize that you’re only hurting yourself. The number one reason people fall into trouble is because they ignore signs when they clearly see they’re coming. If you want to have all the options open to you, you need to act as soon as possible.
2- Don’t be afraid to ask:
Another key thing to avoiding foreclosure is to talk to your lender about possible alternatives. If you’ve acted as soon as you were not able to pay your mortgage, then there will definitely be many options left that you could choose from. Try to contact your lender and explain to them why exactly you are unable to afford any further payments. If they find out that you’re really honest and not just making things out, then they will be more than happy to offer you alternatives such as: forbearance, short sale, period extension, tax reduction…etc.
3- Solve what’s causing the problem:
If you are facing foreclosure, then there must be something wrong with your finances. While sometimes things could be way over your head (like job loss, death, loss of second income), most of the times it’s something that you have control over. You need to seek a debt relief expert who will make sure that you spend your money only on things that you and your family can’t survive without. If you learn how to spend rationally, then you’ll be able to avoid many financial problems and not just foreclosure.
I know that many people think that there will be no way for them to avoid foreclosure. However, with the right education and awareness, you will be able to avoid it and improve your financial as well as your overall life.
HUD Homes for Sale: What Are They?
HUD homes are properties where buyers obtained FHA financing which government is financing that offers a low down payment of 3.5% and this FHA loan is guaranteed by the government so that when the homeowner defaults Hud-FHA then pays that lender off so they do not lose any money. When these homes are foreclosed on and sold back to HUD at the foreclosure auction then they become HUD owned homes or government owned homes. After HUD receives title then HUD places the home on the market for sale with a Real Estate Broker. You cannot buy a HUD home directly from HUD. HUD properties are listed with Real Estate brokers and placed on the multiple listing services for sale. The best way to find out about HUD properties is to find a certified HUD broker who will submit a bid for you and give you advice.
Only licensed broker who are certified with HUD can sell HUD homes to the general public, however registered non-profit organizations and government entities may submit offers without the use of a broker. HUD gives priority to owner occupants however anybody can buy a HUD home. Owner occupant by HUD is some who has not purchased a HUD home in the last 24 months and someone that will occupy the property. Falsifying owner occupant status is considered a felony and subject to a $250,000 fine (18 U.S.C. 1010,3559;3571).
When HUD properties are listed for sale they go into one of the following categories:
IN (Insurable)-qualifies for FHA Financing.
IE (Insurable with escrow)-qualifies for FHA financing with repairs of $5,000 or less. These repairs will be responsibility of buyer but can be added to loan amount.
UI (Uninsurable)-these properties do not qualify for FHA financing. These properties typically have repairs exceeding $5,000.
UK (Uninsurable)-these properties do not qualify for FHA financing FHA 203b but will qualify for FHA 203K which is an FHA program that allows you to add repairs over $5,000 to the loan.
To submit a bid you must be pre-approved by a certified HUD lender and if you are paying cash you will need a bank statement proving you have funds in the bank to close. Bids are submitted through HUD’s website by a certified real estate broker. Bids must be submitted by 11:59 PM CST by the bid deadline date.
All uninsured (UI) and uninsured -203K eligible (UK) properties are assigned to a lottery program for 7 days. Also properties in designated Revitalization areas are also assigned to a lottery program. These properties are only available to good neighbor next door (GNND) participants and HUD approved nonprofit organizations and government entities. A government entity usually includes school teachers, and law enforcement. These properties are not listed in MLS and must be submitted through HUD website hudhomestore.com. These offers must be full price and HUD does not pay commission or closing costs of these properties.
The good neighbor next door (GNND) program offers properties in designated revitalization areas at a 50% discount to:
Officers
Teachers
Emergency Medical Techs
Firefighters
These buyers must meet some eligibility requirements but the main one is that they sign a silent note for the discounted mortgage amount that is removed after the buyer has lived in the property for 3 years. The main purpose here is to get get citizens to move into areas that need to be built up.
After the 7th day on the market HUD properties normally become available to owner occupants only and investors generally are not able to make offers until the listing status is changed by HUD to include investors. HUD will pay a certified broker up to 3% commission of the sale of the property. HUD will also pay 3% towards buyers closing costs but HUD accepts the offer that has the highest net to them. For example if the selling broker makes an offer on a property for $200,000 and takes a full 3% commission and the buyer asks HUD to pay 3% for closing costs than this total amount is deducted from the sales price and the net sales price that HUD looks at is $200,000 minus $$12,000 for commission and costs which leaves a net figure of $188,000. The $188,000 is the price HUD looks at.
Is Investing in Distressed Property Worth It?
There are many ways to invest in real estate, but in the end like all investments it is about the return on investment that you expect to make later that should decide if the investment is worth it or not. With the current state of the real estate market a lot of properties are worth less than they were previously valued a few years ago. Some of these properties can be run down due to being vacant such as in the case of a foreclosure and in some instances the previous occupant just may have not taken care of the property like they could have. This is what is referred to as a distressed property.
If you are looking to invest in distressed properties be forewarned that there may be underlying problems that could end up costing you more money than it is worth. You can go ahead and expect to possibly put in a considerable amount of time and money into fixing the property up for resale or rental. If you have money to spare and enjoy the satisfaction of accomplishment when finished fixing things up then a distressed property may be a fun and rewarding investment for you.
If you do not have the time or don’t have handy man or handy woman skills you could always hire someone else to do the dirty work for you. One business that is becoming more popular in this distressed property market is property preservation companies also called foreclosure cleanup companies. These companies will come in, fix up the property and get it ready to go back on the market.
Before you jump head first into a property make sure you do your due diligence. Consider the surrounding market conditions, are things selling, or are they holding steady? Are properties nearby increasing in value, or depreciating? Zillow can be an excellent resource and give you a quick idea on this. Also consider the demographics of the area. Is this location an area with a steady workforce and jobs? You want to make certain that there is no shortage of jobs in a given area. This is important for keeping property occupied with tenants in the case of passive income on rental property. It could be a blow if an area’s job market dried up and people no longer desired to live there. If you were depending on that cash flow from rentals you would not only have a hard time getting new tenants, but try selling a property in an area that no one wants to live and see what happens.
How is the crime rate in the area? I personally wouldn’t want to invest in an area that was attractive to criminals. You can contact the local police for this information which is public record. You might have to submit an official public records request and they may charge a small fee for the research but, it could save you a headache later if you can avoid a high crime area.
In the end what it all comes down to when investing in distressed property is will doing so meet your investment goals? If not then it would not be a wise investment. If you are smart about it and are able to obtain some good properties then distressed property could become a profitable and important selection in your real estate investment portfolio.
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