Home Rentals- the New American Dream?

USA TODAY is featuring a great article today entitled “Home Rentals — the New American Dream?

Here are some great snippets on the future of the rental market…

The foreclosure crisis will drive 3 million former homeowners to rent single-family homes between 2010 and 2015…

Single-family home rental was the fastest-growing part of the rental market, Fannie Mae says, citing U.S. Census data….

“In the next five to 10 years, you’ll see tens of billions, if not hundreds of billions, of dollars of private equity” pouring into the single-family rental business…

In the past six months, Colony Capital has bought more than 1,000 homes to turn into rentals. Most are in Arizona, California and Nevada, though Colony expects to expand into Texas, Georgia and Florida. In the next year, it will invest at least $1.5 billion in single-family rentals….

He says the growth of big-time investors in the single-family rental market is a “transitory thing” because it’s more expensive to manage them than multi-family housing. “The end game for investors is to sell these homes profitably in three to five years to owners….”

70 percent of those who lose homes to mortgage distress will own again. A recent Harris Interactive survey, commissioned by Coldwell Banker, found that 83 percent of renters want to own a home….

For Rent

What do YOU think about the upcoming rental boom?  Are you ready to capitalize on this trend?

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7 Keys to the Perfect Real Estate Agent

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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Plays 2 Run- Politics and Foreclosure Tactics

I love political commentary. Especially from those who identify and label bullshit.

One of my favorite guys to listen to is Alan Kelly (@playmakeralan), the CEO of Playmaker Systems and author of The Elements of Influence.  He does a great job of weekly breaking down political bullshit on The Morning Briefing- POTUS.

Alan frames his discussion in terms of “running plays”.  The plays he discusses are not limited to politics– they work in business as well.  They are the methods of advancing ideas, controlling markets, positioning products, and beating the competition.

In his system, Alan identifies 28 “Plays” (a stratagem, one of a finite set of discrete strategic maneuvers).  They are each labeled, defined and thoroughly discussed.   If you love strategy, game theory, and competition, get the book and visit the site.

Here are 9 of Alan’s Plays and how we regularly see them run at a foreclosure auction.

PASS-Exit the Marketplace.  The strategic withdrawal from the marketplace. From time to time, an investor’s war chest gets empty… or close enough.  Rather than show up at the sale and risk making a wrong move, the investor can take a vacation, focus on other investment strategies, or just go to the sale and hang back.  This strategic retreat allows the investor to live to fight another day.  Retreat… regroup… redeploy.

PING-Hint and Hide. The oblique reference or suggestion, enabled either by a player’s mere presence or its implied interests in topics, events and developments. The investor who wants to control a segment of the auction may strategically bid on properties that don’t fit his investment profile… just to throw others off.  Showing interest in everything can mask the investor’s true intention.  Bidding on farm properties when you are a single family home investor.  Buying the raw land out from under the developer.  These are not direct attacks, but simple hints that a competitor needs to look out for you.

RED HERRINGSend Off Course. Action drawing a competitor away from its preferred position or intended course of action. How many times have you heard investors at an auction asking each other about a sinkhole, or whether the property was occupied, or whether the roof was shot.  This might be genuine curiosity… or it could be a Red Herring.  The beauty of this Play is that you never know…

JAM-Gum Up the Works. Disable or disorganize another player’s activities or communications.  Investors love to distract their competition during the sale.  Asking them questions, calling their phone, or otherwise running a pick play to prevent them from bidding on the property up for grabs.

CHALLENGE- Exhort Others to Action. The public appeal, suggestion or demand by a player.  Investors love to push their competition off a property.  Sometimes directly, sometimes indirectly.  The open challenge “Come on, you know you want this one” can get in another bidder’s head just long enough that they don’t bid on time…. or even better yet… push them into buying a mistake.

BAIT-Taunt, Provoke a Reaction. The overt provocation of another player through action or information. People who are taunted get angry.  Angry bidders make mistakes.  Provoking the competition usually results in them making a poor choice.  The Information Bait is a little more subtle, but just as effective.

DRAFT- Follow, Feed-Off, Then Try to PassThe attempt to feed off another’s energy, innovation or best practice with the intent of overtaking.  At foreclosure auctions, we call this Piggybacking… the investor who doesn’t do their homework, but simply outbids someone who knows what they are doing.  It takes less energy to draft… but its also easier for the lead car to put you in the wall when you try to pass to the outside.

PLANT- A Secret Ally. A trusted and confidential ally- usually disguised or undisclosed to the opponent, who is placed to seed information.  This doesn’t work well at small auctions, and a plant can only be used once per player.  But we often see new plants at our sale conducting whisper campaigns.  Especially when new bidders with lots of cash show up.  Be cautious of the friendly person chatting you up at the sale…

CRAZY IVAN-Turn and Attack Unexpectedly. The deliberate invitation or initiation of an attack.  Crazy Ivan is one of my specialties… the suicide maneuver for tactical advantage.  Remember Hunt for Red October, where they spin the sub? I love leaving everybody in the room wondering what the hell I am thinking. We buy so many houses that it starts to get predictable, which invites Drafting.  Crazy Ivan just keeps it real…

 So what other games and plays do you see at foreclosure auctions?  What works… what doesn’t?

Please respond in the Comments Below!