Is It Time To Change Your Real Estate Strategy?
Dan Doran Webinar
I listened to a Dan Doran webinar recently and came away with some great marketing ideas for my real estate business. For those of you who know Dan, you’re probably laughing at me for being redundant. Dan Doran and great marketing ideas go hand in hand! Following is a call summary along with my thoughts.
We will be reviewing the basics:
- Deal structuring
The effect of the credit crisis on our real estate investment business is significant. 75% of our credit is gone. Changes we’ve seen in 2008:
- Liar loans eliminated
- FHA down payment assistance eliminated
- Increased lender requirements
- The bailout – don’t even get me started on this one!
If 75% of our available credit is gone, then we can ascertain that 75% of our available buyers are also gone. My favorite definition of insanity is that you continue to do the same thing and expect different results. The game has changed. Have you changed your business to reflect the change in the available buyer pool?
First start out by not eliminating your old strategies, merely putting them on the proverbial shelf for now. Everything cycles around, and what previously worked may work again. Commit to moving forward with a new business strategy in these changing times.
- Owner financing
- Free and clear properties
- High equity properties
Just how big is the free and clear property market? According to the U.S. Department of Commerce, the Housing Cost of Homeowners Report: 2000, it’s 30%! That’s huge!
Your target market for house buying is:
- Senior retiring landlords
This demographic is the largest free and clear owner occupant base. Fine tuning the selection to those needing to sell and haven’t been able to due to the credit crisis discussed above will yield you better results.
How do I find free and clear owner occupants? There are several list brokers that will provide this information for a fee. You can also search public records for homeowners that have owned their property for 30+ years.
What’s the best way to market to this demographic? I use the Yellow Letter. Simple and straight forward. Don’t know what the Yellow Letter is? Well, that’s a separate topic.
Now let’s make sure we understand the 3 Stages of Cash. I love deals that get me paid when I buy, paid monthly and then paid when I sell. I call it the gift that keeps on giving!
The 3 Stages of Cash
- Cash Now – spending money
- Cash Flow – passive income
- Cash Later – wealth
Couple this philosophy with offering sellers two options:
- Your price, my terms
- Your terms, my price
Consider the following:
- ARV: $180,000
- Purchase Price: $144,000 (81% of ARV)
- Terms: 0% & $300 per month for 36 months w/ $133,200 balloon
- Lease: $1,100 per month and cash flow; or
- Sell On A Wrap: $175,000 and make the spread
Remember the term of the loan is negotiable. Your seller may be willing to extend the number of payments in exchange for a down payment. If this is the case, be sure to include clause “substitution of collateral” in your loan document. This will allow you to sell the home and place the mortgage on another property, as long as the new collateral is as good or better to the original collateral. What a great concept!
So what’s the appeal to senior sellers? A big one is the ability to sell their home with either their price or their terms. How about the ability to receive some cash today, receive cash flow for months, and cash out in the near future? I like to negotiate 24-36 months for a cash out.
You first need to have a conversation with the seller and find out what their needs are. It may be to get out of a large house that has become too much for them to maintain. It may be to move close to family. It may be they need money to move into an assisted living center. It may be as simple as needing money to move. Ask them!
You must approach this transaction ethically. The definition of success is that no sale is complete unless all parties are satisfied and better off! It must be a win/win.
Now that you have a potential deal, how will you fund it? With the deal I outlined before, you don’t need funds. If you want to put money in your pocket at closing, your best bet is with private money. My private money lenders would love being in first position on a home with so much equity. You could pull $25,000 out to either make repairs on the home, or to help with costs until you execute your exit strategy. The great thing about the $25,000? It’s tax free!
Now any private money lender will want to be in first lien position. This means your lien with your seller would be in second position.
So what do you do with this property? You could rent the home, lease option or my favorite, sell the home with a wrap. Now my wraps generally have a balloon payment due, forcing my buyer to cash me out a full year before the due date of my underlining lien. I like having time to correct a situation if my buyer is unable to refinance.
Now let’s go get another one of these!
I’m a seminar/teleconference junkie, especially the free ones. If I can walk away with one new idea to help my business, it was time well spent. I’m definitely going to refine my marketing and include this program into my business.
Real Estate Education Material
- Real Estate Investor Training, Real Estate Coach - Real Estate Profit Coach - RealEstateProfitCoach.
Real Estate Investor Training and Real Estate Investor Coaching providing step-by-step, action steps to help you find more deals, get them funded and get paid faster.