Best Techniques

[beaver124]

Well in a hot market, doing would be super hard unless ur super lucky, but wholesaling or sub2 might be pretty good. Lease optioning might also be the way to go.

Beaver124

[niravmd]

hard to find motivated sellers in a hot market.
LO is a good way to go.
rehabbing is good.
buying old unpopular 3/1 houses and adding extra room and/or bath
is good.
however, make sure you're not buying at the peak when everyone else is selling.

[Buzz]

Hi, everyone !

I posted this in the Beginners forum, too, but, I'm looking for opinions (and the "why" behind them) on the best and most successful investing techniques to use in a HOT "Sellers Market".  Appreciation 25-30% a year and houses are selling within a week of being listed.

What techniques have you been using, or would you try to use in a situation like this?

Thanks a lot in advance for your input !  

[karlakr]

Well, with that kind of appreciation it almost seems like you'd be missing a golden opportunity to NOT hang onto stuff for a while.

I think I'd focus on buying cheap, fixing up, and renting for a year or two.  Then you can decide if it's worth selling on a lease option or seller finance or just outright.  Or if the market is still hot I'd just continue to hang onto it.  At the first sign of downturn I'd get it under some kind of contract with someone.  

I guess I take a slightly different approach than a lot of investers.  Whenever I find what I consider to be an undervalued property I decide what my best strategy is for that particular property.  I don't only look for things to flip or only look for rentals.  What works and makes $$ on one property may not be the best strategy on another.

That kind of appreciation is unreal.  If you can buy something that's at all undervalued and then let the appreciation take it's course you'll be in the $$$$$$$$$!

Keep us posted!
Karla in Amarillo

[Buzz]

Thanks, Karla.

I am looking at this from a new investor point of view.

If you were starting right out of the box with a couple of flips under your belt, but not much else, what strategy would you look to work on?  

I am leaning toward sub2's with really motivated sellers and/or lease options, working the FRBO market.

Not sure if wholesaling and flipping or assigning would be possible right now, but.....I guess if you find the right seller, anything is possible.  

So, if you were just getting started and wanted to conserve cash, where would you begin in my market and what would you focus on.

Thanks again.  I hope more people will chime in, as well.

[aak5454]

even a hot market you have to make sure that the price is legit; not just based upon, "Joe sold his house down the street for $X" mentality that I have seen a lot of sellers have.  You have to known your markets and frequently pull comp (I keep files on lot of stuff/areas).

I really don't care whether the property is $100k or $1M, "the Math" behind the deal has to work (i.e. comps well and produces the return I am looking for).

[beaver124]

If you have patience, Id go with options...not lease options, but normal RE options, an example of this would be:

Let’s say you found a luxury home worth $500,000.  
You purchase an option to buy the home at $425,000 anytime within the next 90 days.  

On Day 47, you find a buyer who will pay the full $500,000.  

You cash in your option, pay the seller $425,000 … and keep the remaining $75,000.

hope this helps,

beaver124

[trecey]

beaver124-
How do you "purchase" an option? Can you explain how that works please?

[beaver124]

Basically what everyone means by purchasing an option is really just paying the person whos house you want to sell like 100 dollars so you have permisson to sell it. You have the seller sign a contract at a specified price, and your task is to sell the house for higher than that amount, your profit is the difference between what you sell it for and the amount specified. Speaking in legal terms, an option gives you the right to buy that house at any given time within that period, so that you can sell it, youd do a simultaneous closing.

hope this helps,

beaver124

[karlakr]

Ok, so can you explain how that's different that 'bird dogging'?  Is it basically just that you'd make more with doing the option method?

I'm not sure I get why/when a seller would agree to the option.  Can they still sell it during that time to someone else, or does the option tie it up?

THX,
Karla in Amarillo

[beaver124]

When you sign an option with the seller, you are in control of the property, only YOU have the exclusive right to buy it. No its not the same as birddogging, because you are in control of the property. Sorry, my last post was halfassed because i was in a rush. Youd have to find a motivated seller for this technique, maybe one who is going through a divorce or making double payments, most of the same reasons that you would buy sub2. Except here, you dont actually own the property so you dont have to pay taxes, maintanence and all that other stuff. A good book I would reccomend is "How to make money with real estate options" by Thomas J. Lucier.

Beaver124

[Buzz]

Ok, so can you explain how that's different that 'bird dogging'?  Is it basically just that you'd make more with doing the option method?

A bird dog finds the property for the investor who then makes the deal.  

When you buy the option - YOU are making the deal (because you know how) and therefore SHOULD BE PAID MORE.

Can they still sell it during that time to someone else, or does the option tie it up?

Depends on how you write the option.  I'd skip the $100.00 and give them the right to sell it themselves, too, if they thought they could.  If they do, no harm, no foul.  Unless, of course, I knew I had a ready buyer and I got a good deal on the option with plenty of room for everybody to make some money.  That's why luxury homes and motivated sellers are such a sweet find !

Example:  $600K house
Option to buy at $400K
1.  Find a buyer for $500K and you make $100K

2.  Find an investor to buy your option for $10K - $20K = another THANK YOU VERY MUCH !

Regards,

[beaver124]

Yes you could assign it like buzz just exampled or you could get an auctioneer and have a reserved price set... also it would be good to see if you could also get the furishing to auction, that would lead to another tidy profit at no additional cost.

beaver124