Buying Opportunity Ahead

stock market crash aheadThere is a saying on Wall Street, “Bulls make money, Bears make money, Pigs get slaughtered.” Right now, we are in ‘pigs get slaughtered’ territory. The only people buying now are Greater Fools blindly buying because prices have always gone up.

Housing markets, whether they be single family, multi-family, high end, low, end, Class A, Class C, have been distorted beyond all functional recognition, and are decoupling from the natural forces of supply and demand thanks to intervention of monetary stimulus by the Federal Reserve.

High end single family sales are growing, while mid to low end single family sales are cratering. Roughly 30% of US single family sales are cash sales, with increasingly foreign buyers now that the Chinese credit bubble is going ”pop”, and the Greek exit of the EU unfolds.

Multifamily, be they Class A, B, or C are at peak valuations thanks to land value adjusting to years of Fed driven monetary stimulus. In the case of Class C apartments, occupancy rates are at all time highs thanks to falling real incomes and increasingly fewer people able to afford a home.

After six years of Federal Reserve money printing, the result is a Frankensteinian economic monster, riddled with unintended consequences and serving no-one, except those at the very top.

To get an idea of how absurd things have become, have a look at the price chart for the Standard and Poors 500 Index, which serves as a rough barometer of US economic health. Read more…

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Posted by Ben - June 26, 2015 at 12:46 pm

Categories: Markets   Tags:

4 Ways To Wholesale An Apartment Building

wholesale transactionWholesaling an apartment building is usually only thought of in terms of an all cash transaction, where the seller agrees to a low price in order to get a cash sale and the end buyer comes in with cash plus bridge financing to fund the transaction.

This is indeed a tried and true model, but they are only available in any kind of abundance at a certain stage of the real estate market cycle. Once a market heats up, the deep discounts are harder to find.

If you broaden the transaction types you can do, you are able to wholesale more deals in a single market over a longer period of time.

Below are four transaction types that will expand your opportunities as an apartment wholesaler.

1. All Cash For Double Discount Price: This is the classic scenario for wholesaling an apartment building (or any other piece of commercial real estate). The property is usually distressed and attempts to market it have been unsuccessful. To price your offer as a wholesaler you first look at what would make sense for property as a value-add. You then discount price again to take into account what you need to make for an assignment fee. Persistent follow-up and negotiation by the wholesaler gets the deal under contract at a double discounted price, and the end buyer comes to closing with cash paying the single discounted price, cashing out the seller and paying the apartment wholesaler their assignment fee. As long as market conditions allow for extremely low prices, end buyers are able to easily mobilize capital for your asking price and deals go through easily. Read more…

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Posted by Ben - December 19, 2014 at 2:28 pm

Categories: Apartment Investing   Tags:

A Primer On Real Estate Wholesaling

real estate wholesalingReal estate wholesaling is the process of buying a piece of property at a very low price, marking the price up slightly, then turning around reselling it to a retail buyer, who will then rehabilitate and/or stabilize the property and realize the bulk of the upside value.

The beauty of wholesaling real estate, is that your profits are cash, and they come to you quickly; within a week or two. The sellers wholesalers deal with are highly motivated to sell, making buying at very low prices possible, and the investors they sell to come to the closing table with cash, be it their own cash, or from a line of credit or rehab loan.

In the world of real estate wholesaling, “price” is the central issue. If you can buy a property cheap enough, no matter what it’s flaws there will always be a buyer for it. Also, the lower the price, the more demand there is for a deal and the more the wholesaler can demand payment in cash with no contingencies.

Possible Risks And How To Deal With Them

If you are wholesaling properly you are buying at low enough prices that, even with your profit added on, the price you are reselling for still gets investors greed glands pumping and they are falling over each other to take the deal off your hands.

The only risk you face wholesaling is when you are unable to resell the property because you paid too much to the seller and no investors want to buy.

When you put a property under contract you always have an inspection contingency, so if you haven’t found a buyer by the end of the inspection period you can give notice you don’t approve the condition of the property and the contract is null and void. Any earnest money binding the contract is returned to you as long as you have given notice before the expiration of the contingency.

Finding Deals To Wholesale

The key to achieving low price is marketing; 1) targeting sellers who are motivated and most likely to sell cheap in order to get a quick cash sale, 2) making offers to those sellers, and 3) following up with offers until their properties are sold, either to you or  someone else. The secret to wholesaling lies in numbers, and creating high lead flow, and making a lot of offers. Read more…

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Posted by Ben - August 5, 2014 at 2:00 pm

Categories: Apartment Investing   Tags: , , , , , , ,

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