Advanced Option Strategies » Real Estate http://advancedoptionstrategies.net Moving beyond the simple things... Fri, 13 Aug 2010 20:14:58 +0000 http://wordpress.org/?v=2.8.4 en hourly 1 The 5 Most Effective Marketing Strategies for Real Estate Investors http://advancedoptionstrategies.net/the-5-most-effective-marketing-strategies-for-real-estate-investors http://advancedoptionstrategies.net/the-5-most-effective-marketing-strategies-for-real-estate-investors#comments Wed, 13 Jan 2010 19:20:25 +0000 admin http://advancedoptionstrategies.net/the-5-most-effective-marketing-strategies-for-real-estate-investors Having been involved in real estate investing for little while now, I’ve become very familiar with various marketing strategies. And along the way, I also found out which methods generated leads, and which ones didn’t.
One thing to note is that everyone will experience different results with their respective marketing campaign. Two different people in the same market could be doing the same exact thing and get very different results.
And two different individuals, in two different markets can get similar results. That’s just the nature of the beast.
But there is a secret to this; there is no secret! You have to test each strategy in your particular market to find out which one works for you. And when I say test, I mean test.
For example, don’t send out 5,000 letters to a mailing list that you’ve never tried. That defies all common sense. In that example, I would send out 200 letters and see what the results are before diving in headfirst.
I recommend that you apply this methodology across all the strategies below until you find the one that works the best for you.
So, in my opinion, the following are the top 5 real estate marketing strategies (in order of effectiveness and quality of leads):
1. Apparel/Human Advertising
2. Direct Mail
3. Cold Calling
4. Bandit Signs
5. Newspaper/Yellow Page Ads
Apparel/Human Advertising
This is my favorite way to generate leads. Why? Simple. Because leads come to me, instead of me chasing them. Let me first explain what “apparel/human advertising” is. I define it as “wearing your business,” meaning that you display and promote your services on your apparel and clothing.
I simply put on a shirt that markets my services whenever I go out — to the mall, grocery store, post office, doctor’s office, etc. — and people come up to me to talk about real estate and their specific situation. It will surprise you how many people will approach you.
And the quality of leads is also high. You know why? Because people instantly and clearly know that you are a real estate investor and will only approach you if they are serious.
For example, I wore my “Private Lender” t-shirt the last time I visited my doctor. Once he read my shirt, he couldn’t stop talking about real estate and how he has been looking for places to invest his money. Bingo, now he has the answer, and I secured another private lender to my stable.
And guess what? He has other friends who are doctors, dentists, and lawyers who have money to invest. Now you can see why I like this strategy so much.
-Most inexpensive method
-Instant, direct way of telling people what you do; face to face contact
-Only works if you wear the apparel
-Only works where you are
Direct Mail
There are several ways to employ a direct mail campaign. I’ve attended several seminars run by real estate “gurus,” and each guru will swear by their own program. So, being the pragmatist that I am, I tried a majority of them.
I’ve ran marketing campaigns using postcards, handwritten letters, professional letters, and even USPS priority mail. Out of all the campaigns, handwritten letters generated the most leads.
On a good campaign, I received 25% response, which is astronomical. Don’t expect this high of a response rate every time. My average response rate hovers around 10%.
-Direct mail isn’t cheap. It is the most expensive strategy.
-You must choose your mailing list wisely and get it from a credible source
-Depending on the list, you will receive letters that could not be delivered
-Most homeowners will respond only after multiple mailings (experts say 7 contacts is the magic number).
Cold Calling
How many people can truly say that cold calling strangers is something that excites them? Probably not many, because most people inherently avoid unfamiliar territory. It’s time to get past that fear and get out of that mindset, because cold calling is by far one of the most effective strategies out there, especially if you are going after the preforeclosure market.
First, you need to get a list of individuals to call. If you are marketing to preforeclosures, there are several services that will provide phone numbers of homeowners facing foreclosure. Second, you need to practice your call script. Know what you want to say and how to respond to objections. And practice this over and over until it is second nature–and then practice once more. You get the point.
Being able to respond intelligently to the homeowner’s concerns will build credibility and rapport. Those are the two most important things to construct during a cold call. Remember, you are a stranger who they know nothing about.
Thirdly, be able to prescreen each caller efficiently and effectively. Gain a true understanding of their situation, and obtain enough information to analyze the property to see if it fits your criteria. And finally, if the property meets your criteria, be able to close, whether it means getting an appointment to view the property or actually agree to sales terms.
-Very effective — when you get in contact with homeowner
-Targeted to only those you want to market to
-Easy way to build rapport with homeowner due to personal contact
-Calling strangers asking to buy their house is not on the top of most people’s list
-Can be time consuming and can only market to people you actually talk to
Bandit Signs
If you’re not familiar, bandit signs are those PVC signs you might see plastered around town, reading “I Buy Houses, Any Condition, Any Price.” They are usually attached to wooden posts near busy intersections.
Before you go putting these signs up, check with your city’s rules and regulations because bandit signs are illegal in many cities. You can be fined heavily if caught.
The effectiveness of bandit signs is up for debate. A few years ago, I would have said that bandit signs worked great. But now they are everywhere and commonplace, people might be numb to them. Nevertheless, if you are the only sign posted, people will notice.
And if you pepper your farm area heavily, you will generate leads from bandit signs. Bandit signs are relatively inexpensive, roughly $2/sign, and you can hire people to post them. But you might have to have to put the signs up every 2-4 weeks, depending on how fast the “sign police” in your market do their clean sweep of the area.
-Inexpensive strategy
-Can reach a broad audience if you want
-Not targeted; “shotgun” approach
-May be illegal in your city
-Frowned-upon by some individuals as “eyesores”
Newspaper/Phone Book Ads
Like all service providers, placing an advertisement in the newspaper or phone book is always an option. But let me stop you here. This type of marketing has been by far the least effective method for me. It is expensive, sometimes prohibitively costly depending on your market, and is not targeted.
Sure, it can reach a broad audience, but is not worth the cost of the ad for me. And like all other ads, you will be clumped together with all other companies that provide similar services. So it’s hard for you to stand out, relative to the other marketing strategies already covered.
Like I said, I’ve had very bad results from placing these type of ads. So bad, that for one of my phone book ads, I only received 2 calls over the course of a year. And one of them asked me if I buy mobile homes! That might be an opportunity for some investors, but that doesn’t float my boat.
-Can reach a broad audience
-Very costly
-Not targeted
-Doesn’t generate quality leads (for real estate investor purposes)
Now that I’ve covered the top 5 marketing strategies, I hope that you have a better understanding of what you want to employ in your business. But remember to test more than one strategy in your market to see what gets you the best results. This is the only way that you will find what works in your market. Go out there and make it happen!

]]> http://advancedoptionstrategies.net/the-5-most-effective-marketing-strategies-for-real-estate-investors/feed 0 10 Strategies: an Overview http://advancedoptionstrategies.net/10-strategies-an-overview http://advancedoptionstrategies.net/10-strategies-an-overview#comments Wed, 13 Jan 2010 07:15:23 +0000 admin http://advancedoptionstrategies.net/10-strategies-an-overview Fast Profits in Hard Times will teach you everything you need to know and give you specific resources (websites, toll-free numbers, etc) to implement the following 10 strategies:

1. Invest in Tax Liens

Buy liens placed on properties by municipalities because owners have fallen behind in paying their property taxes. Then, when the property owners pay what they owe to the municipalities, receive not only a return of your principal but also a penalty interest rate set by the municipality, typically in the range of 8% to 25%. If the property owner defaults altogether, take possession of the property for a fraction of its real value: the sum of the back taxes you’ve already advanced. You can then sell the property, even a bit below its market value, for a huge profit.

2. Buy Real Estate Below Market Value

Identify real estate sellers who are willing to accept less than their property’s full market value for a variety of reasons. Then resell the property immediately at a profit, rehab it, rent it out, or even live in it yourself, all with the built-in financial cushion of having purchased the property for far less than it is truly worth.

3. Invest in Income Trusts and Master Limited Partnerships

Earn high yields of 8% to 13% by investing in trusts that extract or transport natural resources such as oil, gas, coal, or timber. Such trusts pass a large amount of their earnings directly to investors through monthly dividends. Depending on the trust or MLP, some of the distributions may be considered a tax-free return of capital, boosting your after-tax return even more.

4. Invest in High-Yield Stocks

Invest in stocks with stable businesses that pay dividend yields of 5% to 15% or more. Some industries offering such high yields include electric utilities, oil tankers, and real estate investment trusts, and several broad-based closed-end mutual funds. This is a way to make your capital compound with very little risk when you reinvest the dividends or to boost the income you live on if you take the dividends in cash.

5. Enroll in Dividend Reinvestment Plans

Invest in companies that offer Dividend Reinvestment Plans, known as DRIPS, which allow you to use dividends to purchase shares directly and thus bypass brokerage fees. Automatically reinvest dividends back into further stock purchases, thereby compounding your portfolio’s assets over time. Several companies offer discount DRIPS, meaning that you get an additional 2% to 5% bonus every time you reinvest dividends, compounding your return even more at no additional cost to you. So if you get $100 in dividends, you receive $105 worth of stock when you enroll in a 5% discount DRIP.

6. Buy High-Yielding Bonds

Buy bonds of companies, municipalities, or foreign governments, either individually or through open and closed-end funds, which pay yields of 5% to 12%. In addition to the high rate of interest, you will receive the return of your principal when the bond matures. There are many types of hybrid bonds available in today’s market with catchy names like STRIDES, ELKS, MITTS and HITS which offer guaranteed return of principal, high yields and potential bonuses based on how the underlying instruments perform.

7. Use Put and Call Options

Rather than buying and selling actual stocks or stock indexes, you can, for a fraction of the cost, trade rights to buy and sell those stocks or stock indexes at specific prices within a specified period of time up to two years into the future. This form of leveraged trading allows for far greater gains but also runs the risk of far greater losses than normal stock investing. It is therefore imperative to follow careful strategies that limit risk while optimizing profits.

8. Profit from Foreign Exchange Trading

Trade one currency against another currency, on the expectation that the currency you’ve bought will gain in value relative to the one you sold. This provides a convenient way to profit from the decline of the US dollar against most major foreign currencies.

9. Invest in and Broker Cash Flow Opportunities

Identify people and/or businesses willing to sell future receivables at a significant discount in exchange for ready cash. Then either buy the payments yourself or serve as a broker for a third party, typically a large financial company, which provides the funds. For example, you can broker or buy cash flows from lottery winners, lawsuit winners, mortgage notes or reimbursements due to a doctor’s office from insurance companies or Medicare.

10. Set Up Passive Income Strategies

Set up some kind of system that needs minimal ongoing management but continues to produce significant cash flow far into the future. A few examples include:

placing vending machines in high-traffic locations to collect passive income whenever customers make purchases

placing ATMs or point-of-sale (credit/debit/card swipe) machines in high sales volume locations to earn small fees paid by merchants whenever customers use the machines

Buy high-quality timeshares in desirable locations and seasons and rent them out over the internet to earn substantial rental income

Copyright © 2008 Jordan E. Goodman

The above is an excerpt from the book Fast Profits in Hard Times

by Jordan E. Goodman

Published by Business Plus; January 2008;$23.99US/$27.99CAN; 978-0-446-58156-1

Copyright © 2008 Jordan E. Goodman

Author

Jordan E. Goodman is a former Money magazine journalist and the author of several bestselling books, including Everyone’s Money Book, The Dictionary of Finance and Investment Terms, and Master Your Money Type. He provides financial advice to millions of people each month through regular appearances on radio call-in and TV shows and through his seminars to corporate, association, and university audiences. He has been a regular contributor to NBC News at Sunrise, The Marketplace Morning Report on Public Radio, and many other shows.

]]> http://advancedoptionstrategies.net/10-strategies-an-overview/feed 0 Strategies For Successful Real Estate Investing http://advancedoptionstrategies.net/strategies-for-successful-real-estate-investing http://advancedoptionstrategies.net/strategies-for-successful-real-estate-investing#comments Fri, 08 Jan 2010 19:24:23 +0000 admin http://advancedoptionstrategies.net/strategies-for-successful-real-estate-investing The continuing rise in population all over the world makes real estate investment a very profitable option.
There is a continuing demand for quality living space as family and businesses continue to expand.
Logically, this scenario assures that a piece of real estate would inevitably bring in higher returns in the form asset appreciation and/or rental.
However, before you jump in and buy an investment property, follow these three simple ways to ensure your success in the market.
Set a budgetary limitation for the purchase of the property.
In any type of investment, you should make a realistic estimate of your financial capabilities.
You do not have to set aside cash for the entire value of the property since you can purchase on mortgage but surely lending banks would ask and evaluate your financial position.
Make a thorough investigation on the investment property.
Before making an offer on any property, make sure that the title is clean and does not have any encumbrances or liens.
Additionally, you should perform a detailed study of the trends and developments in the real estate market. In making a decision on where to buy: concentrate your search closer to your area or within your state; look for growth potential in developing areas; make it a habit to inspect the property personally and the general area before making the decision and limit your short-list to areas with good infrastructure and utility services as these bring in higher returns.
Set a realistic time frame within which to sell the acquired property.
Determine the probable number of months (or years) within which you can hold the property before selling it at a profit.
Make real estate acquisition and investment a continuing business.
Real estate investment is not a one-time affair if you are to seriously consider real estate properties as an important element of your investment portfolio. You have to be an active investor and continually on the lookout for lucrative and profitable opportunities ones.
If you do suffer a setback in one deal (a breakeven sale), do not let it dampen your spirit but learn from your mistakes. Use your mistake as a learning experience to make wiser and better choices.
Real estate investment is very much like a military operation, it requires careful planning, attention to details and systematic execution and it is the best way to make multiply your hard-earned money faster. As long as you do your homework and prepare systematically, everything should go very smoothly regardless of market conditions.

]]> http://advancedoptionstrategies.net/strategies-for-successful-real-estate-investing/feed 0 Investment Strategies for Real Estate http://advancedoptionstrategies.net/investment-strategies-for-real-estate http://advancedoptionstrategies.net/investment-strategies-for-real-estate#comments Tue, 05 Jan 2010 08:03:37 +0000 admin http://advancedoptionstrategies.net/investment-strategies-for-real-estate Any type of investment carries some degree of risk. When you invest in real estate you have a level of risk involved because the market constantly fluctuates. For this reason it isn’t wise for those who aren’t up to date with market conditions to invest their money on any properties.

You can start with an investment in a reputable real estate agent that can help you out tremendously by obtaining more profitable properties. Find an experienced agent that can provide useful information and strategies on how to profit even though there are fluctuations. The key to succeeding in real estate is making sound investment choices.

You should begin by becoming familiar with the local market because this is a direct indicator of the nation’s real estate market. Your real estate agent should be able to lead you to the place where you can get more information regarding your specific investment market. Learning about this information is vital to your success in real estate.

The local economy is a huge determining factor when it comes to the market value of a property. If the local economy is up the price of the home goes up and it goes the same when the economy has gone down.

If there is a shortage of homes on the market then the prices will rise due to the lack of available homes for sale. In many areas price fluctuations depend on the season of year.

Real estate fluctuations make is necessary to enlist the help of an experienced real estate agent or investor that is up to date on the local real estate market, as well as the rest of the country.

When you have are informed on the market and think you have found a sound investment option make sure you analyze the property thoroughly before paying for an inspector to do a complete inspection. When you are investing in an expensive home it should only be done after you have intensely analyzed the market and property itself. Always get some professional advice to back up your decision. A professional might see something that you don’t even know to look for.

Anyone who invests their money into the real estate market should be prepared and be able to handle any changes that might and likely will occur in the real estate market. Many of the changes that happen in the market are caused by an increase in interest rates, tax rates, supply and demand, and rise or fall in property value. Another important determining role in the market value is the local unemployment rate.

If you are going to invest your money into real estate then you should be able to have a readily available solution for any problems that may occur. You need to be thinking about selling the property before you have even purchased it. There is no guesswork involved in real estate but rather calculations of costs to invest and what you will come out on top with. You should have a decent idea of what you are going to make on a property before you put in an offer on it.

]]> http://advancedoptionstrategies.net/investment-strategies-for-real-estate/feed 2 Getting Rich in Today’s Market With Bank-Owned Foreclosures and “Rent-Smart” Lease Options http://advancedoptionstrategies.net/getting-rich-in-todaya%c2%80%c2%99s-market-with-bank-owned-foreclosures-and-a%c2%80%c2%9crent-smarta%c2%80%c2%9d-lease-options http://advancedoptionstrategies.net/getting-rich-in-todaya%c2%80%c2%99s-market-with-bank-owned-foreclosures-and-a%c2%80%c2%9crent-smarta%c2%80%c2%9d-lease-options#comments Mon, 04 Jan 2010 20:11:14 +0000 admin http://advancedoptionstrategies.net/getting-rich-in-todaya%c2%80%c2%99s-market-with-bank-owned-foreclosures-and-a%c2%80%c2%9crent-smarta%c2%80%c2%9d-lease-options Getting Rich in Today’s Market

With Bank-Owned Foreclosures and “Rent-Smart” Lease Options

by Andy Heller

 

There are literally hundreds of wealthbuilding strategies available for real estate investors. Some are more lucrative than others, and many are simply way too much work for the money that an investor hopes to make. Fortune Magazine recommended Andy Heller’s “Buy Low, Rent Smart, Sell High” strategy among the top five recommended strategies for real estate investors.  Like so many of us, Andy started investing part time, pulling aside a few hours each week for his hobby. Scott Frank and Andy Heller have approximately 40 years of combined real estate investing experience.  During this time, they have bought, rented and sold approximately 100 properties. They have done this while holding full-time jobs and putting their families first.

Getting Started

 

The lack of success of Andy and his partner Scott’s “buy and flip” plans led them literally by accident to a goldmine called buy low, rent smart, sell high.  When Andy and Scott found buying properties from distressed sellers to be

tedious, hard work, and depressing, they discovered by accident a hidden gem in the foreclosure process…BANK OWNED REAL ESTATE. With bank-owned real estate an investor is able to purchase MULTIPLE PROPERTIES from single sources, without emotions, and with clean and clear title.  Once purchased, when Andy and Scott were

unable to flip their first home after 9 months on the market, they modified the typical lease/purchase deal to come up with their unique rent smart and sell high formula. Their SHORTEST lease is 3 years, and each of their tenants accepts responsibility for repairs and maintenance. High turnover, nightmare tenants, and lengthy vacancies are non-issues when you “rent smart.”  The Buy Low, Rent Smart, Sell High program offers at its core a win/win formula for

everyone the investor comes in contact with: sellers, tenants, and others. The seminar will cover the three pillars of real estate investing:

 

Buy Low

 

1.Learn how to consistently purchase real estate below market.

2.Learn how to identify the right type of property for your preferred investment model.

3.Learn about the best ways to buy discount properties today. Take a deep dive into the Buy Low, Rent Smart, Sell High preferred method of buying low: bank-owned foreclosures (aka post-foreclosures and REO Properties).

4.Learn what most investors do when calling banks without success…and learn the Regular Riches way to successfully approach banks.

5.Learn about financing your purchases.

6.Learn our formula for establishing the Maximum Purchase Price for all types of properties, regardless of type, condition, or your investment strategy.

7.Learn how to negotiate to a successful purchase.

 

Rent Smart

 

1.Learn about Lease/Purchasing.

2.Learn how to establish the right lease/purchase terms.

3.Learn how to minimize Repairs and maintenance headaches…let other landlords deal with them…not you!

4.Learn how to reach out and advertise to find the best tenants.

5.Learn the ten point checklist for selecting the best tenants.

6.How buy and flip investors and buy and hold investors can benefit from lease/purchasing in today’s real estate market.

 

Sell High

 

1.Learn how to sell properties without paying real estate commissions.

2.Learn how to sell properties for fair market value without discounting.

3.Learn how to quickly get your property under contract

 

Andy’s seminar will be interactive and the attendees will be engaged to work examples after Andy first presents how to do it.  Andy’s seminar will be on September 12.  Seminar attendees should bring calculators to the seminar.

 

SPECIAL DISCOUNT CODE!!

Use this code when checking out and receive a special discount:  CFRI7772

Seminar will be held from 9:00 am to 5:00 pm on September 12th at the CFRI Education Center at 55 Skyline Drive, Suite 2850, Lake Mary.

Registration deadline is September 11.  Please register online at www.cfri.net

 

 

The Central Florida Realty Investors Association (CFRI) is a not-for-profit organization dedicated to promoting ethical real estate investing.  We provide over 20 networking and educational opportunities each month to investors in Central Florida to help members gain practical knowledge of real estate investing. 

CCFRI is the oldest and largest Real Estate Investing Association (REIA) in Florida and the proud recipient of the 2004 community service award, and the prestigious 2007 & 2009 Honoring Excellence Award – the highest honor bestowed on any REIA in the nation by the National Real Estate Investors Association. In 2008, CFRI was awarded the National REIA Award for Membership and Communications. 

 

Learn from the best at http://www.cfri.net

]]> http://advancedoptionstrategies.net/getting-rich-in-todaya%c2%80%c2%99s-market-with-bank-owned-foreclosures-and-a%c2%80%c2%9crent-smarta%c2%80%c2%9d-lease-options/feed 0 Book Review: How to Sell Your Home in Any Market http://advancedoptionstrategies.net/book-review-how-to-sell-your-home-in-any-market http://advancedoptionstrategies.net/book-review-how-to-sell-your-home-in-any-market#comments Sun, 03 Jan 2010 20:31:29 +0000 admin http://advancedoptionstrategies.net/book-review-how-to-sell-your-home-in-any-market In the current economic climate, selling your home has gotten radically more difficult.  Don’t worry!  A new book, “How to Sell Your Home in Any Market” helps you improve the odds of getting your home sold despite market conditions.  Best selling real estate author and top real estate broker, Loren Keim, has put together his staff’s experiences in beating the odds in this easy to read page turner.

Keim claims that there are six primary reasons homes don’t sell.  The big three are poor marketing strategy, incorrect pricing and reluctance to properly stage the home for showings.  According to the author, ANY home can be sold in any market if it’s positioned correctly in the marketplace. Positioning means making the home show better than the competition, strategically pricing the property using price points, using advanced marketing techniques, and understanding showing and negotiating strategies.

He outlines a variety of methods of “getting the word out” on your home, including using the world wide web, and unique give-a-way strategies among many others. If all else fails, the author has a section on desperation measures which includes a full outline of how to work on a short sale with your bank, a lease purchase, auction, rent with option and many other ideas.

The book is clearly written and Keim draws on more than two decades of experience in the real estate business for advice and anecdotes. There are sections on pricing, marketing, hiring a Realtor (or selling by owner), having showings, negotiating offers and going to settlement. The initial chapters of the 287 page book cover a practice called staging, which is a home makeover that is designed to help buyers imagine living in a home that’s for sale.

Keim includes checklists for each room and includes strategies for setting the home apart from the competition. The book is clearly written and Keim draws on more than two decades of experience in the real estate business for advice and anecdotes. It has chapters on pricing, marketing, hiring a Realtor (or selling by owner), having showings, negotiating offers and going to settlement.

The initial chapters of the 287 page book cover a practice caled staging, which is a home makeover that is designed to help buyers imagine living in a home that’s for sale.

Keim includes checklists for each room and includes strategies for setting the home apart from the competition.  I highly recommend this book.

Full of real world stories, examples and checklists, this is simply a great read.  “How to Sell Your Home in ANY Market

]]> http://advancedoptionstrategies.net/book-review-how-to-sell-your-home-in-any-market/feed 0 7 Strategies To Get Your Property “SOLD” In A Slow Market http://advancedoptionstrategies.net/7-strategies-to-get-your-property-sold-in-a-slow-market http://advancedoptionstrategies.net/7-strategies-to-get-your-property-sold-in-a-slow-market#comments Thu, 24 Dec 2009 19:34:09 +0000 admin http://advancedoptionstrategies.net/7-strategies-to-get-your-property-sold-in-a-slow-market With the economy slowdown and newspapers negatively guiding the Real Estate market, it is crucial for sellers to get help from the best agent while learning simple tactics to increase the chances of selling their home. In a slower market, enthusiastic buyers are few and far between. It is in the seller’s best interest to be prepared and informed of potential buyers needs and expectations.
Below are simple strategies and techniques that can benefit sellers and get their properties “sold” in this slow Real Estate market.
Pricing to Sell:
With market conditions being a catalyst in the establishment of property value, realistically pricing your property is vital to selling your home. As the market becomes slow and idle, buyers gain the advantage and are inclined to hesitate at looking at overpriced properties. When a property is first listed on the market, it attracts the most attention, enthusiasm and curiosity, but overpricing it at the initial listing might deter numerous potential buyers resulting in reluctant views and the property just “sitting” on the market.
Incentives:
With a highly competitive market, enticements of all sorts are being used to persuade buyers, like you see home builders do. Follow their example and present an attractive offer with an appealing incentive to the buyer. A few noteworthy examples could be, “$5000 Design Credit at Closing,” or “We’ll make your first two mortgage payments.”
Seller Financing:
As the seller and home owner, considerable amounts of equity can be built up over several years allowing the possibility of owner financing. With loans being more difficult to acquire these days, offering an enticing seller financing might attract more buyers who wanted to buy but couldn’t obtain a loan. With more home-financing options for buyers, your possibility of selling increases dramatically.
Appealing inside and out:
Most homes only have one chance to make a great impression, and it is imperative that the seller does their best in creating an attractive external appearance. You shouldn’t judge a book by its cover but in the intense real estate world, most people tend to skip unattractive homes even if it is appealing inside. With a myriad of properties on the market, buyers become overwhelmed and impatient after going through dozens of unmemorable homes; which makes it very crucial that your home looks great from the inside and out.
Spotless and Well-kept:
Common sense says that buyers do not want to purchase a dirty or cluttered home. As simple as it gets, one of the most important and easiest things to do to improve the possibility of selling your home is to keep it immaculate and organized. A home is usually someone’s largest investment and a complete turn off would be an un-kept or a disorderly home, even if the property details were perfect on paper.
Staging:
There is no harm in getting additional help, which could mean getting your home staged. Clean homes are great, but when empty, buyers have a hard time envisioning themselves in that home and therefore make’s it unmemorable. Professionally staged homes inevitably sell faster than un-staged homes, just because it is more appealing to the eye.
Hire a Full-Time Realtor with a Strong internet Presence:
As 80% of today’s home buyers search the internet for property, it is vital that sellers find an agent, who is aggressive in all fields, especially the internet during a slow market. Find an agent who has a great track record and specializes in your area to ensure your odds of selling quicker. Expect a detailed marketing plan along with a strong internet display from your Realtor. To search for agents in your area with the most internet exposure, simply explore GOOGLE, YAHOO! or MSN for your area or neighborhood.

]]> http://advancedoptionstrategies.net/7-strategies-to-get-your-property-sold-in-a-slow-market/feed 0 Financing Strategies For Investors http://advancedoptionstrategies.net/financing-strategies-for-investors http://advancedoptionstrategies.net/financing-strategies-for-investors#comments Wed, 23 Dec 2009 19:29:11 +0000 admin http://advancedoptionstrategies.net/financing-strategies-for-investors Real estate investors can be broken down into three categories with the distinctions between them based on the length of time the property is held. On the short end, you’ve got flippers. These guys look for properties on the cheap, maybe put some money into fixing them up and then selling for a profit. For the most part, they have no intention of renting the property out and work as quickly as possible to complete the deal. This category represents a lot of the people chasing foreclosures and probate sales. From the lending perspective, their biggest motivators are low down payments and NO prepayment penalties. They’ll even pay exorbitant Subprime interest rates to put these deals together without penalties.
Next up, you’ve got speculators. These guys look for quickly appreciating markets. The idea is to get in, buy a bunch of properties, keep them for 3 to 5 years and then move on to the next booming market. For that length of time, they have to rent out their properties but are not particularly interested in paying down the principle balance on the mortgage. In fact, if they’re confident in the appreciation potential, they may be willing to accept negative amortization loans in order to keep the cash flow on their properties positive.
The last category is investors. These guys try to accumulate a portfolio of properties and have the rental income pay down the principle balance over time. The idea, obviously, is to own a number of properties outright or with minimal mortgages and enjoy positive cash flow on each. From the lending perspective, these investors are looking for longer term loan products like intermediate ARMs or 30-year fixed mortgages. Clearly, a property with a 30-year fixed mortgage and a sustainable cash flow will eventually be paid off, leaving just the property taxes and insurance behind.
So, let’s talk about each of these a bit more. A lot of flippers do this stuff full time. In terms of underwriting, it makes it a lot easier if they’ve got a real job. But if they don’t, they don’t have a verifiable source of income either. Of course, if they’ve done it for more than two years, we can say they’re self-employed and get the loan done that way. But if they’re new at the game – and many of them are – we almost always have to use a No Doc program. That’s the lowest level of documentation and the pricing reflects the increased risk.
Meanwhile, if we say they’re self-employed, they obviously have an investment property as well as a primary residence – and maybe more than one – all without any rental income. So they’re supporting two houses. That means we’d have to show a VERY high income to fit within debt ratio limitations. The moral to the story is the vast majority of these deals end up in Subprime programs because it’s easier to get approvals, particularly for low or no down payment programs.
Now, the question is: does it matter? Well, not really because you’re only planning to keep the property for a few months anyway, so the monthly payment isn’t that important. Yes, the payment may be big but you only have to make three or four of them (hopefully) before you can get out. It’s just another cost of doing business. By the way, I’m not saying A-paper and Alt-A programs are impossible for these types of deals. They’re just harder to qualify for.
What about the speculators? People buying for 3 to 5 years. Well, the negative amortization Option ARMs are extremely popular. I’m not a big fan of Option ARMs because they’re risky and largely misunderstood by those who get into them. The big attraction the low initial monthly payment but that’s balanced by the resulting negative amortization and an interest rate that’s variable from the very first month.
Anyway, they do have advantages for speculative real estate investors because they make it more possible to have positive cash flow on investment properties. So we should really take a moment or two to fully understand how they work. First and foremost, the initial payment is an artificially low payment. In many cases, it’s based on a 1% interest rate but that definition is based more on marketing than reality. Fact is; the minimum payment is less than the accrued interest so the mortgage balance goes up every single month.
This minimum payment doesn’t stay the same forever. It’s fixed for the first 12 months and after that, it increases by 7.5%. Then it’s fixed for another 12 months and increases by another 7.5%. The minimum payment increases by 7.5% each year for the first seven years OR until the loan balance has reached its ceiling. Depending on the program, these loans can grow to either 110% or 125% of the original loan balance. Actually, the ones that can go as high as 125% are becoming increasingly rare. Most will only allow you to go as high as 110%. Anyway, once you’ve reach that ceiling, the loan starts amortizing right away – and that means a BIG payment shock at that point.
For obvious reasons, these loan programs are only justified if the real estate market is appreciating FASTER than the loan is growing. Although it depends on where interest rates go, most of these loan programs grow by 2% or 3% each year if you only make the minimum payment. So if the real estate market is appreciating faster than that, you’re still building equity. If not, you’re losing money every month. That’s the scary part. If it ever comes to that, you actually SAVE money by selling today – unless you’re okay making the larger interest only payment. And don’t forget the interest rates on these programs are variable so the interest only payment can be different each and every month.
But we also have to keep in mind that these loan programs will only go as high as 95% financing. In fact, on investment properties, some lenders won’t even go that high. Depends on the lender. Also, the 95% financing is generally split into two separate loans. The 1% start rate loan usually only applies to the first 75%. The 20% second mortgage makes up the difference and is usually a fully amortizing loan with a much higher interest rate. Sometimes, you can do an 80/15 but most are 75/20s. So that means you have to come up with at least 5% down payment to qualify for one of these loans. That makes it more difficult to buy more and more, unless you continuously refinance and take cash out of other properties.
The speculative investors who use these programs are trying to keep their properties cash positive, or as close to cash positive as possible. But as we discussed a moment ago, the payments rise by 7.5% each year. After three or four years, the payment will be 24% or 33% higher (respectively) than it was at the beginning. If the market is still appreciating strong at that point, the investor may want to keep the property for another three or four years and refinance into another identical loan product, bringing the payment back down to the initial 1% point again. Doing so would increase the negative amortization but it may also keep the cash flow positive on that property.
You have to understand how underwriters evaluate investment properties. It really doesn’t matter how much equity you have. They only look at the cash flow impact of owning it. And you can show that impact in one of two ways. You can show lease agreements on the properties but the underwriters will always take the monthly rental figure and mark it down by 25% to account for periodic vacancies. It’s called the occupancy factor and most loan programs give you credit for 75% of the rental income listed on lease agreements. Incidentally, many Subprime programs will give you 90% or even 100% of such rental income – another example of easier Subprime guidelines.
The other way to show the cash flow impact is with the Schedule E of your federal tax return. That schedule details the income you make from rental properties but you clearly have an incentive to reduce that income as much as possible to limit your tax liability. Meanwhile, for underwriting, you want to show as much income as possible. So there’s a conflict there. Point is, there are disadvantages with both methods and you should usually look at both options to see which one will calculate the highest.
Each time you have a property that’s got negative cash flow, you have to show more income to squeeze into the same debt-to-income limitations for the next loan. It makes sense. If you’re subsidizing a property with your own income, it represents a monthly expense just like a car payment. So each time you add another property you have to subsidize, you have to show more income to qualify for the next loan. Depending on how much you’re subsidizing, you will quickly be claiming more income than you actually earn and will eventually be considered unreasonable by underwriters.
If a speculator wants to continue accumulating properties in hot markets, one of his or her top priorities is staying cash positive, or as close to it as possible. That priority exists for long-term investors as well but so does the repayment of the mortgage balance. As a result, these investors tend to consider more factors than just annual real estate appreciation. Appreciation is attractive but so is a healthy rental market, and the rental market depends on the types of jobs available in the local area and the health of the local economy.
There are plenty of companies that study this type of information and provide various reports and ratios to help identify healthy markets. I’m sure you could go to Google and find a lot of such offerings. I recently read an article that chose Charleston SC, Jacksonville FL and Austin TX as particularly attractive markets for long-term real estate investments. All three cities have diversified economies, good wages and affordable housing. Anyway, the motivation is clearly different then speculators or flippers. Long-term investors want a stable market where they can cover an amortizing loan payment – that’s principle AND interest – with the rental income from the property.
Now, a well planned real estate investment strategy may involve more than one type of investment. For example, a long-term investor may buy a property in a hot market using a negative amortization loan and keep the property for only three or four years. After realizing some appreciation, the investor may sell the property and use the profits to pay down a mortgage on a different property in a more stable market. Perhaps the reduced mortgage balance will bring that property from a cash negative situation to a cash positive one. For the right investor, this strategy can work well even for flipped properties.
There are plenty of promoters encouraging people to take these profits and leverage them even further into more and more properties. Many of these promoters encourage negative amortization on all their properties. That’s where I have to disagree. That would’ve been fine four years ago but I just don’t believe the real estate market will continue to appreciate the way it has in recent years. Given the current market conditions, I don’t believe it makes sense to expose yourself to that much risk. If real estate goes sideways, these loans erode your equity and add volatility to the market.
There’s always a balance. That balance will definitely be different for a sophisticated investor than it will be for an average homeowner but that doesn’t mean you have to stretch it to the absolute limit. At the end of the day, the ideal situation remains; owning properties free and clear and collecting monthly rent payments on each.

]]> http://advancedoptionstrategies.net/financing-strategies-for-investors/feed 0 Selling Property in a Challenging Market http://advancedoptionstrategies.net/selling-property-in-a-challenging-market http://advancedoptionstrategies.net/selling-property-in-a-challenging-market#comments Wed, 23 Dec 2009 07:39:24 +0000 admin http://advancedoptionstrategies.net/selling-property-in-a-challenging-market As the news stories about the woes of the property markets continue to pile up in the media, more people are tempted to put their homes on the market in the present climate to see if they are able to sell ‘at the top of the curve’ and take advantage of the capital gains they have made in the past years of the property bubble.

While experts disagree over the size of the market ‘correction’, or the length of any downturn in the market that is likely to take place over the next few months or even years, there is little doubt that more people will be in a position where they feel under pressure to sell their property as quickly as they can. The danger is that in putting your property up for sale you will be tempted into taking a much lower offer than you should, as well as the stress of dealing with demanding buyers.

On the other hand, being unrealistic about the value of your property, the motivation of your potential buyers, and the market conditions could lead to being stuck in a situation with a property that has been extensively marketed and still does not sell, despite discounts to the price.

Some of the situations you may encounter over this period of toughening market conditions are explored here, along with some possible strategies to help you sell your property at the right time and for the right value.

Be Objective – This is particularly important when you are selling your own home, rather than any kind of investment property, but it is vitally important that you are realistic and able to take the fact that agents or buyers may suggest you sell your property for less than you think it is worth.

This does not mean that you should just give in without a fight to the first offer that comes along, when you are convinced that the property is worth far more, but make sure your position is backed up with solid facts. In market conditions as they are at present, research in the local area is even more important, and can be the key to making your sale successful. Check estate agents’ windows regularly to see what at price similar properties are on the market, as well as how quickly they move.

Also, try to compare your property to other similar ones for sale in the same area, and be as objective as you can. Essentially, these similar properties are your competition for buyers, and you need to know where your property stands in relation to them. Think about things like proximity to schools, shops and leisure facilities on the positive side, and main roads, traffic black spots and industry on the negative.

Knowing all of this, and listing where your property is stronger than most of the other similar properties on the market at the time, will allow you to price your property effectively and realistically, as well as helping in its marketing. The knowledge that your property has the best gardens of the type, or has an extension as a utility room should allow you to bring out the advantages in the details as supplied by the agent, as well as helping you to sell the property when you are conducting viewings.

Aggressive buyers and tactics – One of the biggest problems with selling with the current turbulent market conditions is that buyers will feel they are in a true ‘buyer’s market’. This means they will feel emboldened by the prospect of being more sought-after than the property they are considering buying, a situation that has not occurred in the UK for example, in at least five years. Given this fact, buyers are taking up some practices that have not been seen by vendors for a few years – some of which are just a shift in the landscape and relationship between buyer and seller, other which are a degree more unsavoury or even immoral.

One of the biggest differences that sellers will notice in the current climate is the time factor. Buyers are now far less likely to be rushed into making an offer, or improving an existing offer as they will have the impression that you need them more than they need you. While this can be true, it pays to be prepared to wait for offers and responses to come in.

Of course, this is a legitimate buying tactic in the same way that in a rising market sellers are able to make buyers wait for their responses to try to make sure they would be prepared to move their offer upwards. Buyers will feel that by holding out on making their first or follow-up offer, they are sowing the seeds to make sure that you are ’softened-up’ for a lower offer than would otherwise be normal.

Be aware in this situation of the research you have done on the right price for your property, and be prepared to stick to your guns – but not too much. While it is quite fair to ask for a fair price in negotiation, if you are completely inflexible in the money stakes, you will scare off legitimate and fair buyers.

Once you have accepted an offer for the property, there are other things that buyers may now feel emboldened to do given the market conditions. For one thing, the agreements for fittings and fixtures may go on longer and be more intense that you might expect. Again, buyers will feel that they are in a stronger position to demand that some of the items you would have taken with you remain in place or are prepared to pay less than you want for them.

In this situation you would be well-advised to try to keep the two issues separate, while the buyer may be keen to suggest that unless you move on the fixtures and fittings the whole deal could fall apart. If they continue to be stubborn on this point, and you feel that they are close to pulling out of the sale, there may come a time to make a difficult choice. If you give in to their demands, can you be sure that this is the only issue on which they will be aggressive, or will it be a signal to them that they can push you into a corner in any of the negotiations? Would you prefer to keep this sale, no matter how much you have to smile through gritted teeth, or are you confident in finding a buyer? There is no blanket answer to this, and each situation can only be judged upon your feelings at the time.

One of the more worrying trends in recent weeks has been the idea of buyers gazundering sellers. Gazundering is a process by which buyers agree a sale price and put the wheels of the sale in motion, only to demand a hefty discount on the property price at a very late stage, often just days before completion. The discount demands can be anything up to 20 per cent off the agreed price, and sellers are left with the option of either giving in to the demands of their buyers or risking losing their sale, the house they want to buy and causing the rest of the chain to collapse.

Some websites are deliberately promoting gazundering as a legitimate bargaining tool in the house buying process, and even go so far as to say buyers should have offers accepted on three different properties to maximize the chances of one of their gazundering attempts being successful. Most people will see this as a morally-questionable way of entering into a sale, but be aware that there may be some people out there who are willing to try it.

Make the most of what you have – Many of the properties that are coming on to the market at the moment are quite similar – in some areas there are so many two-bedroom apartments for sale at the moment that sellers are dropping their prices by up to £100,000 (approx $200,000) in order to attract attention from a smaller pool of potential buyers than has been seen for some years.

In this situation, the best thing you can do is to make sure that you have maximized the features of your property that are going to attract buyers and make it stand out from all of the other properties of the same type they will have viewed already. If you have a huge kitchen, make sure it is clean and tidy but that people can see you enjoy spending time in there, if the garden is 30 yards longer then the neighbouring properties, make sure it is tidy, the lawn mowed and some colour and life are evident. You may even want to demonstrate the its lifestyle possibilities by putting out garden furniture to show how it can be used.

A recent survey also suggested that spending a small amount of money on refurbishing and remodeling parts of your property can not only get you back almost the same amount of money as the investment you put in, but will also help to make the property stand out to buyers. Purely on a monetary basis, it is said that a minor remodeling of the main bathroom in a property is the best way to spend on the interior of a property, with up to 100 per cent of the investment being made back on the property sale.

Making your property ready for viewings is also important. Some say that brewing fresh coffee or baking bread in the kitchen is the best way of making an impression on people viewing the property, but nothing will stick in their minds more than a well-presented, well cared-for home. The much-vaunted ‘kerb appeal’ factor is very important in creating the right first impression and setting the tone of the viewing. Pets and clutter should both be banished for the duration of the viewing, and if possible and necessary, you may want to send the children and partner to the park for an hour while people are viewing the property.

What you really want to create in a competitive market like we have at the present time is a lasting impression on potential buyers. If you can let each of your viewings leave with a sense that they want to be in your property, and can see themselves happy there, you have won half of the battle and will have a better chance of sticking in their minds.

Think differently – Don’t be afraid to do something a little different in marketing your property to the buyers that are out there. Remember that there are always people who are looking to buy property, even if there aren’t as many as there were, or as many as you might want to see. In fact, many buy-to-let investors are looking to expand their property portfolios now as they see it as a perfect time to buy the properties they want, as well as a time when there will be more people who have to rent instead of buying themselves and getting on the property ladder.

Some sellers will see this as the right time to look into selling their property on their own, and not using an estate agent. Certainly the fees that will be saved on any purchase are a welcome bonus, and perhaps that will allow you to be a little more flexible on your pricing than someone who also has to pay their agent a commission at the end. Selling without an agent is not something that should be tackled without careful thought and preparation however, as doing things wrong will waste time and money, and will ultimately make it difficult to sell the property later through an agent if the independent route fails. Many agents will be reluctant to take on a property that has been on the market independently in the recent past, as they will feel that it has been overexposed to the market, and their chances of success are therefore diminished.

Even if you are using a real estate agent to sell, you can still get creative with your own marketing strategy. There are some wild and interesting ideas of how you can bring attention to your property sale, from having bumper stickers made up and taking out advertisements in local papers on your own. One of the more targeted approaches works very well if your property is in the catchment area of a well-regarded school. Some sellers have been known to hand out flyers at the time when parents are arriving to collect their children, as they often know someone who wants to move to the area.

If your property is particularly attractive and stands out from the crowd, you may want to consider holding an open house for potential buyers to come along. This is a particularly good idea for desirable properties – it brings in interested parties to have a more leisurely look around the property and even to take a little more time to discuss finer points with you personally, and if you are lucky it will also mean that they will see other interested potential buyers arriving to look around and spur them into making a good offer.

Don’t panic! – Despite some of the media stories to the contrary, there are still properties that are being bought and sold across the country, so there are buyers out there. They may not have the huge and easily-accessible finance options that were available a year ago, and they may not be as willing to enter into a bidding war to get your property, but they are still out there. A well-presented, loved, realistically-priced property will sell, as there will be a buyer out there who wants it.

Try to be patient in waiting for viewings, offers and negotiations – not only will you find it stressful; you will also transmit a kind of desperation to the buyer that they can use to drive your price down.

It is also a good idea to have a set of limits and a back-up plan if the market turns out not to want to buy your property in the timeframe you have in mind. Set a lower limit for offers that you will accept, a time limit that you want to lave the property on the market. Should a sale not happen, or the price you are offered is too low, consider updating and improving the property you already have – either for you to continue to enjoy, or for a fresh assault on the market.

If you need to sell quickly – Should you get to the point where you need to sell your property quickly, there are a couple of options that should at least allow you to escape from a sticky financial situation. Sometimes these options are looked down on by many in the industry, and while they do offer opportunities to those involved to make money from buying your property cheaply, they can offer sellers a way out and still give them some equity to play with.

Auctioning property in the UK has not really taken off significantly, despite numerous efforts to promote it as a good way to buy property. Some properties are auctioned, and it is often repossessed or probate properties that make up the lots. This can be a good way to make sure that you achieve a reasonable sale, so long as you don’t put an unrealistic reserve price and are prepared to accept a slightly below market value price. If you are lucky enough to have two or more bidders who are keen to get hold of your property you may get a higher price than you imagine.

Another option is to go to one of the quick sale companies in the UK market, who offer a range on service to allow you to sell your home quickly and get your money out in a short space of time. Backed by the fact that they have cash reserves, these companies are able to offer cash within days to most sellers. They make their money from buying properties below the true market value, but that is the price you pay for being able to get your hands on a significant amount of capital in a short space of time. For people who are in more dire financial straits, these companies also offer ’sale and rent back’ schemes to allow them to get their capital out of the property and still have their home to live in.

]]> http://advancedoptionstrategies.net/selling-property-in-a-challenging-market/feed 0 Buying Real Estate Using Rent-To-Own And Lease-Purchase Options http://advancedoptionstrategies.net/buying-real-estate-using-rent-to-own-and-lease-purchase-options http://advancedoptionstrategies.net/buying-real-estate-using-rent-to-own-and-lease-purchase-options#comments Fri, 18 Dec 2009 19:36:53 +0000 admin http://advancedoptionstrategies.net/buying-real-estate-using-rent-to-own-and-lease-purchase-options Owing a home is a big part of the American dream. But not everyone is fortunate enough to become a homeowner due to delimiting factors such as insufficient income, bankruptcy, bad or no credit, loss of employment, etc. For people with such troubles, owning a home is a distant dream and some of these people resign themselves to a lifetime of renting. But such people are not without options. Rent-to-own, which is also known as a lease-purchase option, can be an excellent alternative available to some people who are currently unable to buy a home.
A rent-to-own or lease-purchase option is an agreement between a prospective home buyer and a home seller. The agreement is basically a rental contract with a right to purchase the property after a period of time (usually 1 year). When a home seller offers a lease-purchase option, what they are really offering is the option to rent the house at some monthly rate, and to lock in the sales price of the home now, even though the prospective buyer would not actually purchase the house until a later time (if at all).
Here is a hypothetical example. Let’s say the monthly rent for a home is $1700. Under a lease-purchase option, a prospective buyer would rent the home for the $1700 a month, but would also pay an additional premium (e.g., $200-$300) every month for the option to buy the home after a period of time (usually 1 year). So in this example, the total monthly rent is actually $2000, but $200-$300 of the money will be applied toward buying the house at a later time. In other words, the home seller would apply the $200-$300 extra paid every month toward the prospective buyer’s down payment at the end of the year.
The good news for prospective home buyers is that it allows them to lock in the purchase price of the home now, even though they are not purchasing the home until a later time. The bad news is that if a buyer decides not to purchase the home at the end of lease term, the seller often keeps the premium amount paid over the year, although this is usually a point of negotiation.
Prospective home buyers should know that many of the terms described above are negotiable such as how much the monthly rent will be, how much extra has to be paid every month for the option fee (if any), the length of the lease term, etc. The other issue to consider is if it makes sense to lock in a home purchase price now in markets where real estate prices are still declining.
When compared to renting, a lease-purchase can be an attractive alternative because it gives prospective buyers an opportunity to own a home before they normally would be able to. There are some advantages to a lease-purchase option such as:
1) Low or No Initial Down Payment. Many lease-purchase options do not require an initial down payment.
2) Equity Advantage. At the end of the lease term, the value of a home may have appreciated over time, which benefits the purchaser.
3) Living Experience. Prospective home buyers have the opportunity to try out a home and neighborhood before purchasing the property.
4) Leverage Advantage. With just a small investment, a prospective buyer can control a property; yet still have the option of not buying the home if market conditions don’t warrant it.
Rent-to-own or lease-purchase option can be an effective strategy to home ownership. However, there are both positive and negative aspects to this type of approach (as described above). A good real estate agent can help you navigate the complex world of rent-to-own and lease-purchase option properties.

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