Category Archives: Foreclosure

7 Keys to the Perfect Real Estate Agent

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Well, you bought a house and fixed it.  Time to flip.

So….are you going to list with an agent or sell it yourself?

There are lots of advantages to using a local Realtor:

  • Access to MLS
  • Someone to screen buyer calls
  • Someone to show the house
  • Someone to handle offers, contracts and closing
  • Someone with knowledge of fair housing laws
  • Someone to give you unbiased advice and support

The biggest disadvantage is you have to pay a commission– and that is a REAL disadvantage.  Remember you pay the commission based on the selling price… not your profit.  If you bought a house for $70k, put $15k into rehab and plan on selling for $100k, after closing costs you and your realtors might make about the same amount… even though you were the one taking all that risk.

So how can we make sure we are picking the best Realtor?

1. Look for top “selling” agents, not listing agents

Listing agents list.  Selling agents sell.  When you hire an agent with a bunch of listings, you are hiring someone who does a good job working with sellers.  But a good selling agent has a list of qualified buyers… and helps those buyers put houses under contract.  If all your agent does is list the house on MLS, you have not received the most bang for your buck.

2. Buyers agents know a good deal when they see it

A selling agent (also called a Buyers Agent) is the one dragging buyers around to all the properties in the area.  When they see your top-of-the-line flip, with a well done rehab, they know it.  They know to show your house to their qualified buyers first… and they help convince those buyers to put in a top-dollar offer.

3. Buyers agents have good prequalified buyers

An experienced selling agent knows not to waste time with unqualified buyers.  So the good ones will have their buyers get loan approval (and all the required loan documentation) before they start showing houses.  By working with an experienced buyer’s agent, you eliminate most of the offers from people who will never be able to get through the loan process.

4. Give the top selling agents a 3-day preview

Even if you’ve listed with a specific realtor, compile a list of the Top 10 selling agents in the neighborhood where your flip house is located.  Give them a call as you are finishing your rehab, and let them know the house is about to go on the market.  Let them see the house before it hits the market, and make sure they know you are giving them a preview because they are a top producer.  This gets the agents most likely to sell your house a head start on identifying the perfect buyer… which gives you a head start on a contract.

5. Offer top selling agents a 4-5% commission

If your listing agent says something like “we take a 6% commission and split it evenly with the selling agent”, offer a better incentive.  Offer an extra 1-2% to the selling side if they bring a contract that closes within 30 days of the initial listing.  This gives agents an incentive to move quickly on your house, and the extra commission is well worth the quick contract.

6. Avoid part time or inexperienced agents

Everybody has to start somewhere.  But not on your house.  And while there are some great part time agents, you have to wonder about anybody not committed 100% to their day job, right?  The top selling agents are not new to the game and they are not part time.  I would not consider listing with someone who hasn’t brought at least 25 buyers to the table in the past year, nor would I look to someone with less than 5 years in the real estate game.

7. So how do I find the top selling agents?

First, run an MLS search for the neighborhood where you are trying to sell a home.  Look at the selling agent on all the close by homes in the past year.  Likely, you will see the 80/20 rule applies… 80% of the sales in a particular area will come from 20% of the agents.  Those are your agents for that area.

If you don’t have MLS access (a bit of a chicken and egg problem), ask loan officers, title companies, listing agents or investors at your local REIA who sells the most houses in your particular area.  They will know.

So what Keys do you follow in picking the perfect real estate agent to sell your flip homes?  Please let us know in the COMMENTS below!  Thanks!

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7 Survival Tips for the Accidental Landlord

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Nothing says “future distressed seller” like an Accidental Landlord.

Becoming a landlord by choice can be an excellent, intelligent financial decision.

But turning into a landlord because the property you thought would flip quickly just couldn’t sell…. Well that usually just sucks.

Too many investors screw up the calculation on their acquisition price or rehab costs, and then find themselves with no choice but to rent out the property and mitigate the damage.  Or they found a title problem.  Or a foundation issue that doesn’t impact safety, but prevents a sale.  In these cases, the flip usually needs to become a rental.

A cash investor usually has no problem doing this. Even accounting for professional property management, property taxes, insurance and maintenance bills, most cash investors are going to have positive cash flow at the end of the month with a rental property.

The problem is when you used leverage to buy that flip.

Most people don’t believe this, but even with a hard money loan, you can make a nice profit off of a rental property.  IF you were conservative with the loan amount, IF you had enough skin in the game, and IF you don’t have a short-term balloon.

So what’s an Accidental Landlord to do?  Here are some Emergency Tips:

Rent Quickly– the longer the house sits empty …  or the longer you wait to list it or market it as a rental … the less likely you are to make a profit.  So market as a rental as soon as you realize that’s the only viable option. 

Price it Right.  Then price it right.  This goes hand-in-hand with Rent Quickly.  Do some quick market research, see what the rental comps are… then price 10% below the market to get someone in right away.  Waiting a few months to rent the house out will hurt a lot more than dropping the rent right away.

Rent to the Right Tenant.  Losing a tenant (or cleaning up after one who trashed the place) is a sure way to kill profits.  Screening takes time and money… and requires experience.  But it is a smart investment to do a background check and credit check.  You may not care if they were 30 days late on a Visa bill…. but you want to make sure your prospective tenant hasn’t left a trail of jilted landlords.

Consider Professional Management.  We are a DIY nation.  But are you cut out to be a landlord?  Do you like early calls on a Saturday?  How will you handle the inevitable emergencies?  Do you feel comfortable with the screening, billing and collecting process?  Managing tenants is a BUSINESS.  Are you set up for that?  If not, find a good property manager.  Delegate.

Talk to an Accountant.  You need to know what you can and can’t expense on a rental property.  If you are used to flipping, you may not have a clue how depreciation works.  But it’s an important part of the profit equation for all buy-and-hold strategies.  And you have to recapture depreciation when you sell, so you might as well learn how to benefit from it.  You also need different record keeping for your rentals than for your flips.  So don’t forget to call the CPA.

Talk to a Lawyer.  Sure, you can use an off-the-shelf lease agreement.  Just fill in the blanks and hope for the best.  But do you understand your state’s landlord-tenant law?  Do you know the rules for escrowing a security deposit?  Or what notice you must send for non-payment?  Or what the Fair Housing Act requires? Again, most flippers try to get by without a lawyer on the team (except for at closing).  Landlords always need competent legal counsel.

Call your Insurance Agent.  Make sure the policy you bought to cover your rehab and flip will work.  It usually won’t.  You need to insure the property against damage and yourself against liability.  If a guest of your tenant gets hurt… you will get sued.  And you want to make sure your tenant understands they have to insure their stuff—that’s not usually covered under your policy.

What other tips do YOU have for an Accidental Landlord?  What does a flipper need to know if they suddenly find themselves with a rental property?

Please leave a Comment below!

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