FAQ Marketing Buyers - Exit Strategies

Audio

Intro

This FAQ discusses various exit strategies for real estate investors.

It focuses on

-wholesaling,

-retailing (rehabs),

seller financing buyers, and

rentals (tenants).

Each strategy is explained in detail, covering crucial steps like

finding buyers,
marketing properties, and
handling negotiations and
closings.
Emphasizes the importance of
- building a strong buyers list and
- maintaining positive relationships with clients.

Also, advice on

tenant screening and
property management for rental properties.

FAQ

Wholesaling – Cash Buyers

1. How do I determine a profitable flip price for a wholesale deal?

Prior to making an offer, research your local market to understand what other investors are currently paying for similar properties. This involves analyzing recent comparable sales and understanding the current demand for specific property types. Ensure you leave enough profit margin for the investor you flip to – “pigs get fat, hogs get slaughtered.” A fair profit for both parties makes wholesaling easy and profitable.

2. What is a buyers list, and why is it important in wholesaling?

A buyers list is a database of investors interested in purchasing properties in your area. Building a robust buyers list is crucial because it allows you to quickly market your wholesale deals without relying solely on advertising. You can contact investors directly, increasing your chances of a quick sale and saving you time and money.

3. Should I take a wholesale property off the market once I have a buyer?

No. Until you have a signed closing statement and funds in hand, don’t stop marketing the property. Deals can fall through, and you don’t want to lose valuable marketing time. Accept backup offers to keep potential buyers in the pipeline, ensuring a smooth transaction even if the initial buyer backs out.

Retailing – Investors and Retail Buyers

4. How do I effectively market a property I’m retailing?

Begin by focusing on curb appeal and completing exterior repairs. Place “For Sale” signs and use newspaper ads strategically. Consider running “Rent-To-Own” ads to attract a wider pool of potential buyers, including those who may not qualify for traditional financing but could be viable candidates with your guidance.

5. What information should I gather when a potential buyer calls about my retail property?

Capture their name, phone number, and gauge their intent (buying or renting). Use a Property Marketing Log to track leads efficiently. Direct them to view the property independently before delving into pre-qualification. This allows them to form their own opinions while you gather essential information.

6. How can I ensure a smooth closing process for my retail buyer?

Stay actively involved in their loan application process. If they’re using their own financing, obtain an Authorization To Release Information to communicate with their lender. If using your preferred lender, guide them through the application process and proactively follow up on their progress, ensuring they promptly provide necessary documentation to the loan processor.

Seller Financing – Lease Option and Land Contract Buyers

7. Where can I find potential buyers interested in seller financing?

Your buyers list is the primary source, followed by “Rent-To-Own” newspaper ads. Additionally, consider partnering with real estate agents and mortgage brokers to tap into their pool of buyers who may not qualify for traditional financing but are strong candidates for seller-financed options.

8. What are key factors to consider when pre-qualifying a seller finance buyer?

Assess their down payment capacity and their understanding of potential due-on-sale clause implications. For lease options, evaluate their creditworthiness, monthly payment affordability, and their ability to qualify for a future bank loan. Thoroughly vet their financial situation and commitment to purchasing to minimize risks.

Rental Portfolio – Tenants

9. What are essential steps to successfully manage my rental properties?

Implement a strict rent collection policy using money orders or certified checks. Regularly inspect your properties (every 30-60 days) to proactively address maintenance needs and ensure tenants are upholding their responsibilities. Cultivate positive landlord-tenant relationships through small gestures like birthday cards and holiday gifts, fostering tenant satisfaction and longer tenancies.

Study Guide

Deal Sections

Real estate investing offers various avenues for profit.

This study guide focuses on four key “Deal Sections”:

Wholesaling: Acquiring properties below market value and quickly reselling (flipping) them to other investors.
Retailing: Purchasing properties, renovating them, and selling them to homebuyers through traditional financing.
Seller Financing & Lease Options: Offering financing to buyers who may not qualify for conventional loans, often utilizing lease options.
Rentals: Holding properties for long-term income generation through tenant occupancy.Action Sections

Successfully navigating these deal sections requires proactive steps in four “Action Sections”:

Market Analysis: Understanding your local market dynamics, including investor preferences and property values.
Financial Preparation: Securing funding options, including hard money loans, private lenders, and conventional financing.
Buyer Acquisition: Building a robust list of potential buyers for each deal section.
Marketing & Sales: Effectively advertising properties and managing the sales process.

III. Quiz: Short Answer Questions

Why is it crucial to “know your exit strategy” before making an offer on a property?
Explain the concept of “flipping houses” and how an investor can determine the appropriate flip price.
What are the advantages of lining up hard money financing for potential buyers in a wholesale deal?
Why is it recommended to avoid disclosing the number of bathrooms in a wholesale property advertisement if the property has only one bathroom?
What is the primary objective of running a newspaper advertisement for a wholesale property deal?
Explain the concept of “Rent-To-Own” advertisements in retail property sales and their advantages.
Why is it important to pull a potential buyer’s credit report before meeting them to show a retail property?
What are some strategies for handling buyer objections during a retail property showing?
Why should you avoid taking a retail property off the market even after securing a signed sales agreement and a deposit?
What are some key differences between attracting buyers for properties you plan to sell through seller financing versus those for traditional bank financing?

Quiz: Answer Key

Knowing your exit strategy before making an offer ensures you have a clear plan for profiting from the deal. It helps avoid impulsive purchases and allows you to structure the offer based on your intended outcome.
“Flipping houses” involves purchasing a property, often needing repairs, and quickly reselling it for a profit. The flip price is determined by considering the property’s after-repair value (ARV), renovation costs, desired profit margin, and prevailing market prices for similar properties.
Lining up hard money financing for potential buyers offers several benefits: faster closings, attracting more buyers who may not have immediate access to cash, and potentially increasing the flip price as buyers feel more confident in securing financing.
Avoiding mention of bathroom numbers when advertising a wholesale property with only one bathroom prevents deterring investors who typically seek properties with at least 1.5 bathrooms for resale to homeowners.
The primary objective of a wholesale property advertisement is to generate leads and build a buyers list. By attracting interested investors, you can expand your network and potentially find buyers for future deals even if the current property is sold.
“Rent-To-Own” advertisements target buyers who may not qualify for traditional financing but aspire to own a home. These ads attract a wider pool of potential buyers and can lead to sales to individuals who might otherwise be overlooked.
Pulling a potential buyer’s credit report before showing a property helps avoid wasted time. If the buyer’s credit is too poor to qualify for financing, there’s no point in proceeding with the showing.
Buyer objections during property showings can be handled by acknowledging their concerns, offering solutions, and emphasizing the benefits of the property. Flexibility in addressing minor issues, such as carpet color, can often close the deal.
Even with a signed agreement and deposit, keeping a retail property on the market until closing is prudent. It safeguards against potential buyer financing issues or changes of heart, ensuring continuous marketing and potentially attracting backup offers.
When attracting buyers for seller-financed properties, targeting those with credit or down payment challenges is key, often achieved through “Rent-To-Own” ads. Conversely, buyers for traditionally financed properties typically require pre-approval and focus on properties aligned with conventional lending criteria.

Essay Questions

Discuss the pros and cons of wholesaling versus retailing properties. Which strategy is more suitable for a beginner investor, and why?
Analyze the steps involved in building a successful buyers list for real estate investing. Explain how different strategies might be employed for acquiring buyers for different deal sections.
Compare and contrast hard money loans and private lending as funding options for real estate investors. Discuss the situations where each option might be most advantageous.
Elaborate on the importance of effective tenant screening in rental property management. What are the potential consequences of poor tenant selection, and how can these consequences be mitigated?
Discuss the ethical considerations involved in real estate investing. How can an investor ensure they are acting responsibly towards sellers, buyers, and tenants?

Glossary of Key Terms

Exit Strategy A predetermined plan for how an investor will profit from a real estate deal.

Wholesaling Buying a property below market value and quickly reselling it to another investor.

Retailing Buying a property, renovating it, and selling it to a homebuyer.

Seller Financing The seller provides financing to the buyer, typically through a mortgage or a lease option.

Lease Option A contract that allows a tenant to rent a property with the option to purchase it later.

Hard Money Loan A short-term loan secured by real estate, often used by investors for quick financing.

Private Lender An individual or company that lends money for real estate transactions, often with less stringent requirements than banks.

Buyers List A database of potential buyers for real estate properties.

Marketing Activities to promote and sell real estate properties.

Sales Agreement A legally binding contract between a buyer and seller for the purchase of a property.

Due-on-Sale Clause A clause in a mortgage that allows the lender to demand full payment of the loan if the property is sold.

Subject To Taking over a property subject to the existing mortgage, without assuming personal liability for the loan.

HUD The U.S. Department of Housing and Urban Development.

Section 8 A government program that provides rental assistance to low-income families.

Tenant Screening The process of evaluating potential tenants to determine their suitability for renting a property.

Application Fee A fee charged by a landlord to cover the cost of processing a rental application.

Credit Check A review of a person’s credit history to assess their creditworthiness.

Criminal Background Check An investigation of a person’s criminal history.

Denial Letter A written notification sent to a prospective tenant informing them that their rental application has been rejected.