Real estate is all about seeking new opportunities and making the best out of them. No matter how the market fluctuates or prices drop and raise, this fundamental principle remains the same.
When it might look like all your well-thought plans are going haywire due to an unexpected crisis, the best way to stay afloat is to keep looking for new opportunities. Stay keen, and you will figure out how to emerge as a winner.
When there is a boom in property prices, everyone wants to own and sell a property to make some quick cash. But what happens when these speculators get left out at the end of the buying cycle? They’re left with a property they don’t want to rent out and can’t sell. These speculators have the sole intention of selling their property, possibly at a profit. Sometimes, they might even be okay with just getting their original investment amount back.
This set of sellers are some of the easiest to deal with. They consider their empty house a burden and would be willing to accept a wide range of payment deals besides all cash. They will agree to good terms once they realize that the market has gone from sellers-to-buyers’ market.
So, start your routine by looking for empty houses in your area. You might be able to find speculators who are willing to sell. You can also look into other real estate agency listings to find such speculators.
Once you find a suitable property, make an offer. Your offer amount should be determined based on the rent that property can produce. The rent should be able to cover the monthly loan payments. This will help you make an offer that will ensure your profit.
If the speculator does not agree and counteroffers at a higher price, try negotiating to achieve a win. One way to do that is to use a promissory note for paying the difference in your offers later when the house retails. Let me explain:
You make an offer of $220K for a property listed at $320K, and the seller counteroffers $300K. You can show the seller your calculations on rent and monthly loan payments to show how much debt the property can support. And then give assurance that you will pay the $220K now and the rest $80K when you sell the house.
You can further negotiate on how long it should take to pay the remaining note and other terms.
Builders are the most vulnerable to market changes. It takes a lot of time and energy to shift their focus from a particular strategy. When a market shift happens suddenly, it’s like the titanic not being able to turn fast enough to avoid the iceberg. Builders have a lot in their hands and cannot stop their construction mid-way, nor can they back out of contracts. They might get stuck with unsold properties, which is a considerable burden.
Builders need to keep selling to be able to gather finances for their next project. So, they will be willing to drop prices to sell their existing inventory.
Builders usually get financing in the form of construction loans, which make around 80% of the actual market value. When market changes, shift the value ratio and, builders will be ready to sell in up to 20% discount on the original value of the house.
Lenders will be more willing to lend their money to a buyer than to a builder.
Homeowners will try their best to save their homes from foreclosures. But it can get challenging to juggle between the various monthly expenses and the monthly loan repayments.
But when owners struggle to make ends meet and still pay the loan, it is probably time for them to let go of their house. It is better to sell the house before foreclosure.
Waiting for foreclosure is disadvantageous in many ways. It severely affects their credit score, and this can reflect negatively in many financial aspects in the future, like their borrowing power, tenancy, insurance costs, and so on.
By making an offer to buy their house, you are helping them avoid possible losses. Be wise about the offer you make so that you will be able to make a profit.
There are many instances where people buy a property and then have to move out to a different location due to job or family circumstances. Out of town owners will always have a worry at the back of their head thinking about their property.
When you find properties with owners living far away, you can approach them with an offer. In most cases, they will be happy to make a deal with you. Approach them in a way as you are helping them relieve them of their management worries about the property.
The seller’s motive here is not about money but a worry-free healthy mental state. You can assure them that you will take good care of the property and make a reasonable profit when you sell it.
Fellow real estate agents can be a good source of information and possible clients as well. Agents have an extensive list of properties as they get paid to look for sale-able properties every day. They use door to door campaigns, advertisements, and are more familiar with the local populace. They bring sellers and buyers together, and most often, they don’t buy properties themselves.
Agents have a better knowledge of the neighborhood and can lead you to some excellent properties you might not have known. Approach them if you are an active buyer, and they will call you first if they think you can buy and close the deal quickly.
If you can assure them to close the deals quickly, the agent will also offer relatively better terms. It’s because agents get paid only when they sell and not for the listing they make. Since the incentive is to sell the property, they will be happy to deal with you.
If you find a property you like, check if any agent has listed it. If so, contact them and make an offer. As agents get commissions from both parties, they will work hard to make the deal close.
Try to gather as many contacts as possible among the agents and try not to rely on one particular agent exclusively. Follow up on your contacts to get updates on good deals and properties in your area.
The key to real estate success is to be conservative and be keen on the lookout for good opportunities. While market conditions may fluctuate, good investments can always bring in a good cash flow now or in the future.