Lex Levinrad goes over where to look for deals and what type of buyers are most willing to sell at a discount.
Today, Lex Levinrad explains what type of homes to look for and some of the circumstances sellers will be desperate to get out of their home and sell to you.
Mike: Welcome back to the FlipNerd.com REI Classroom where experts from across the real estate investment industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Lex: Hi, everyone. This is Lex Levinrad, founder of the Distress Real Estate Institute and today’s lesson on REI Club is on wholesaling.
Mike: This REI Classroom real estate lesson is sponsored by VirtualStaffNow.com.
Lex: Okay. So the first step for most of you guys, especially if you are a beginner and never wholesaled a deal before, the first thing is to learn how to find deals. So let’s touch a little bit of bullet points on that. The first place and easiest place for you to find deals is simply online even if you’re not a real estate agent. You can go to Realtor.com and you can search. You can see every property that’s listed on the MLS without having a real estate license. Now, I do recommend that if you’re serious about getting into this business, you do think about getting your real estate license because it will give you a lot of added benefits for example, the ability to get lock box codes, the ability to see broker remarks, and most importantly, the ability to have access to these properties and actually, physically, go in them, okay.
So when we’re talking about looking for deals one easy place as I mentioned is Realtor.com. The challenge you have with that is everyone is looking in the same place, right. So every bank-owned property, every short sale that’s listed on the MLS is on there, which means every buyer’s agent, every cash buyer, are all looking at the same thing. So if you want to go a step further and look for deals that other people don’t have then what you want to do is try and look for desperate sellers, okay. I’m going to break down desperate sellers into three different components.
So the first one is sellers that have a property that has some kind of damage. All right, so it could be a hurricane damaged house, it could be fire damaged, water damaged, mold damaged, whatever, or for whatever reason that they cannot live in that house. Unfortunately, even though they cannot live in that house, they are still obligated to make their mortgage payments. So typically, they’ll be living somewhere else like in a rental and in a situation like that it’s usually a good idea for them to get out of that house as quickly as possible.
If you have some kind of tool like an “abandoned” sign or classified ad or a mailing piece like a postcard, or a yellow letter you’re mailing out to them, you can locate these people. And if they have a situation where they want to sell their house, they might contact you and that will give you an end to basically get a property that no one else has.
So that’s one type of desperate seller. And the other type of desperate seller would be somebody that’s in some kind of financial crisis. It could be either in foreclosure, about to enter into foreclosure, late on their payment. Or maybe their house is so far underwater that they are considering a short sale. And a great source to market to these people is simply to get the list of the people who are late on their mortgage, which is called “Les pendants” or notice of default, depending on what state you’re in, and you can simply mail a letter to these people, or a postcard, or a yellow letter and get hold of them.
Okay. So when looking for deals, whether you’re online or talking to desperate sellers, keep in mind a few things. First of all, you’re going to need to have basic knowledge of the price points in that market, okay, because if a seller calls you and you don’t know how much to offer them, that’s not going to do you or any of them any good, okay. So number one, make sure you have a price point understanding of comparable sales in your marketplace, what a house would sell for fixed up, which we call ARV in this business.
And then the second thing you need to have is make sure that you have an understanding of what it would cost to fix things. Okay, because if you are going to go and meet a desperate seller and you’re going to look at the house and there is some kind of damage, you’re going have to have a general assessment of what it would cost to fix that house up. What a contractor would charge to repair it to the point where it could be rentable or sellable, again. And that’s going to become very, very important because the ARV formula which is basically the After Repair Value of the property multiplied by 65% less that repair estimate is going to determine your offer price.
So make sure that you know how to determine your maximum offer price, make sure you understand that ARV formula. Once again, ARV times 65% less repairs equals your maximum marker and make sure you know what to say when they call, okay.
So looking for properties if you want just go ahead and get started. Some action steps, number one, go online on sites like Realtor.com, type in your city or town that you live in, and then search low to high and focus on the first 10 to 20 properties that are the lowest price points. Those are going to be your REOs and your short sales. Pick up the phone, call the realtor, tell them you’d like to make them an offer.
And then the other thing is get involved with some kind of campaign like bandit signs, or classified ads, or yellow letters, where you can market to sellers in distress. Okay, so that ends our how to get started wholesaling short REI educational topic. If you want to learn more about the Distress Real Estate Institute feel free to visit our website at www.lexlevinrad.com and I’ll spell that for you that’s L-E-X-L-E-V-I-N-R-A-D and you can learn a lot more about us on there. So until the next time, we’ll see you soon.
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