Steven Strauss Column: Real Estate Business
October 26, 2011
Steve – It seems to me that with real estate prices so low, now is a good time to get into that business. Buy low to sell high! My problem is that I don’t have great credit (who does these days?) So 1) is real estate actually a good idea, and 2) how does someone in my situation get started?
My personal bias is that I am almost always bullish on real estate as a business. I have known too many people who have made great sums of money with their savvy investments. And they still are. When prices are going up, it’s of course good for business, and when they are down, it is a buyer’s market. So know up front that that is my prejudice: I like the real estate business.
To buy property the conventional way, you must have good credit and money in the bank. Without both, getting into a place is difficult; neither the owner nor the lender will take you seriously. But what do you do if you have bad credit or you haven’t saved enough for a down payment?
You my friend are what we call “the unconventional buyer”; you will have to be more creative.
Being an unconventional buyer means that you simply cannot call up a real estate agent, drive around, find a property you like, and make an offer. You’ll probably have to find someone who will be willing to work with you and your situation.
How? Here’s the secret: You need to find an owner who is as motivated to sell as you are to buy. What you are looking for is someone who needs to quickly get out of a mortgage or whose property has been on the market for an extended period of time. There is no shortage of those these days, unfortunately.
There are many reasons a house or other real property may not have sold easily. It could be that it is in need of major repairs. Maybe it’s in a poor location. Perhaps, it just has an odd floor plan, a small backyard, or some other similar reason. Maybe it’s because of the bad market. Whatever the case, your job is to go find that hungry motivated seller, because hungry motivated sellers are creative sellers, and that’s what you need.
Where do you find these sellers? Here are a few ideas:
The empty house: If you are an unconventional buyer, when you go out looking around for a home as an investment, the best thing you can find is an empty house for sale. An empty house is a house that is costing someone a lot of money. It signifies that the owner has probably tried to sell it, couldn’t, has moved, is now stuck paying two mortgages, and needs to sell the house. An empty house is an unconventional buyer’s best friend.
Ads and signs: The magic words you are looking for with any sort of real estate (a house, duplex, commercial property, etc.) are “owner will carry the papers.” or “owner financing available.” This means that the owner is willing to finance all or part of the sale.
The victim of divorce: This is harder to find, but equally lucrative for the unconventional buyer. A divorce, especially a bitter one, often means that the parties need to sell the house quick. If you can locate one of these, a creative offer can sometimes work.
Estate Sales: When an elderly person dies and leaves a home or other property to his or her heirs, the heirs will often put it up for sale. Here again then is the possibility for an unconventional purchase as the place may need extensive remodeling and/or the heirs may not agree on how to proceed.
If you are willing to take the place “as is,” you may be able to get them to sell it to you in order to save them from additional headaches.
Pre-Foreclosures — A building that is on the verge of foreclosure is a building where the owner might be very amenable to a creative financing deal. Rather than have a foreclosure on their credit, many owners in this situation are willing to sell the property, even to a needy buyer. Foreclosure notices can be found in the real estate section of the classifieds, in legal newspapers, or online.
It’s actually a great time for the unconventional buyer. Good luck.
Today’s Tip: MBO Partners, one of the leaders in helping independent consultants succeed, recently released the inaugural Independent Workforce Index — a landmark study that examines the state of independent work in America. Some of the key findings of the study include:
• Nearly 60% of independent workers said they are highly satisfied with their work
• 28 million American workers said they are likely to be independent within the next two years
• Independent Stats: 47% male, 53% female; 12% Millennials; 49% Gen X; 30% Baby Boomers; 10% 65+
• Average income of the independent worker — $52,600
• 75% of independents stated that doing something they love is more important than making money