Buying a short sale property is a way to get a great deal in Real Estate while also helping a seller get out of a tight situation. Unfortunately, due to bank delays and regulations, short sales have also become a source of frustration for REALTORS® and their clients. With average closing times of six months, the short sale process is certainly not for the impatient. What does it take to navigate the difficult short sale process?

Erin Attardi blogs about a very stressful short sale closing:

“The second lender was taking a while to complete its analysis, and fortunately, I was able to negotiate and obtain written extensions from the first lender. Finally, when I called to check in with the second lender on July 10th (a Friday), I was informed that the short sale was showing ‘APPROVED’ in their system, and that the written approval document was going to be emailed to me by the following Monday. I immediately called the buyer’s agent to let her know of the great news! The buyer had already completed his inspections and was ready to go. The first lender’s latest extension was valid through August 15th, which would allow the buyer plenty of time to close escrow. Monday rolled around, and the short sale approval document did not arrive. I called the second lender, and they said it was on the way. Tuesday…still no approval letter. What was the problem? I called Bank of America’s Short Sale Support Department to find out…the Final Negotiator (or Closer, as they are now referred to), was not returning my voicemails or emails. Turns out that for some reason, they emailed the short sale approval document to the wrong email address!! Ugh…annoying, but not the end of the world. I gave the lady I was speaking with the correct email address.”

Attardi’s constant call backs helped her catch the bank’s clerical mistakes, saving her and her client from further delays. Attention to details and persistence will help every Realtor when dealing with banks during the short sale process.

Getting a short sale approved is tricky business. You can be dealing with 2 lenders or one of the lenders might not agree to let the seller totally off the hook. The bank might not want to accept an offer because it’s not high enough or the seller might not qualify for the short sale. There are a dozen reasons, plus some, why a short sale may be denied.

However, after a short sale is approved, it doesn’t mean that another buyer can always automatically step right into place and pick up where the last buyer left off. So, an approved short sale notation in a listing might be misleading . . . read more about an Approved Short Sale.

Before we get into wholesaling and what that is, let’s talk about traditional, or “old school” real estate investing.   Traditional real estate investing involves buying a property and Holding it  for long term appreciation and wealth building.

The buy and hold stratagy does still have it’s place within real estate, depending on your business model and it doesn’t hold the attraction the more commercialized wholesale, or flipping has.

Wholesaling

Wholesaling is one of the best ways to break into the real estate field and the quickest way to make potentially quick cash.

Wholesaling provides an opportunity for someone to build a very good  income with little money or credit.   The requirements to become a successful wholesaler are ambition and  specialized knowledge.  The more ambition you have, the more money you will make. Of course, ambition alone won’t ensure success. Education, Preparation, and a Plan.

Flipping is the commercial term and subject you see on the tv shows.

A wholesale occurs when a wholesale investor goes into contract to purchase a distressed property below market value and then makes a profit by reselling it for a higher price to a property rehabber/retailer.  Key terms here are “below market value”.  To become an effective and well paid wholesaler you must locate those properties that can be purchased below market value so you can pass the savings on to your end customer, which is the investor/rehabber or landlord or whoever you will assign the contact to.

The things to remember here is that a wholesaler is not purchasing the property but “assigning” the contract to another investor or end buyer for a wholesaling or assignment fee. The particular assignment fee is determined by you, the wholesaler.

How can you find a property to wholesale?

Marketing is the key here and is a HUGE aspect to attracting motivated sellers.  As a wholesaler we want to come in contact with and only speak with property owners who are motivated.

Great deals rarely come knock on your door to find you. They find you when you have a marketing system implemented that is like a funnel  to prescreen them for motivation and directs them to then contact you immediately.

Motivated sellers are motivated because they are in financial distress.

We need to target our marketing to people who are motivated to sell their property and have a NEED to sell vs folks who WANT to sell their home.  We don’t want to deal with homeowners who expect to sell their home for full market value.

Some of the ways to market for motivated sellers

If you’re first starting out in real estate investing then it’s imperative that you have a short-term budget to work within so that you’re not forgetting about paying for all the other necessities in life: food, shelter clothing! And your bills

It’s very important to hit your target market, which as a wholesaler is motivated sellers.  Keep in mind that one good wholesale deal can net you anywhere from 1000 to 15,000 or more in an assignment fee.

1. Attend Your Local REIA meeting in order to network with and see what other active investors are doing.
2. Put Up Bandit Signs with your name and phone number on them.
3. Send Direct Mail to out of state home owners (a.k.a. landlords).
4. Contact For Rent by Owner ads and signs.
5. Call For Sale by Owner ads and signs.
6. Contact active Property Scouts or Bird-dogs.
7. Advertise what you are looking for on the web or in the newspaper.
8. Plaster Your “I Buy Houses” Business Cards EVERYWHERE
9. Tell at least 10 new people every single day that you’re looking to buy houses. Don’t forget postal workers, exterminators, gas/electric residential meter readers, grocery store clerks, gas station attendants, newspaper delivery people, everyone…
10. Team up with a Realtor and have him/her check the Multiple Listing Service for expired listings as well as certain keywords – days on market (long), vacant, estate, preforeclosure, must sell, fixer-upper, closing help, moving, relocated, divorce, etc…

Let me give you some background info on the process of wholesaling

Here’s an example to illustrate how you can make money through wholesaling: Assume a property is valued at $100,000. You get it under contract for $60,000. Then you find another bargain-hunting investor who wants to rehab it and sell or fix it up and rent. You sell it to this person for $70,000. Your profit or “spread” is $10,000 ($70,000 – $60,000 = $10,000!).

How can you find a buyer?

Creating a buyers list is probably THE most important aspect to becoming a successful wholesaler.  Locating the properties is one thing but you must have a good source of potential buyers who will purchase the properties you are attempting to wholesale.

Place ads on craigslist

• www.kijiji.com
• www.backpage.com
• www.classifiedads.com

using phrases that attract attention, such as “Great Rehabbing Deal”, “Investor Special”, or “Thousands Below Market Value”.

Joining social networking sites such as Facebook, myspace and twitter

Create a squeeze page. A squeeze page is a webpage that, when the visitor “lands” on it, he is asked to opt-in to some type of list in order to proceed further. On some squeeze pages, your only options are to opt-in or leave

Creating a blog with keyword specific terms and plenty of real estate content to draw traffic. Content is king and delivering high quality content to your blog visitors will get you potential buyers.

Local REIA meeting’s are a good way to find potential buyers

One of the greatest parts of wholesaling real estate is that it’s a way to get quick cash without worrying about your credit score or down payments. As long as you put in the work and have the right professionals on your team, wholesaling is a great way to earn cash in the world of real estate investing!

Flipping is the most popular form of real estate wholesaling. Flipping means buying a property and quickly selling it for a profit. When you sign a contract to purchase a bank property, you can sell it to an investor for a fee. All you are doing is selling your contract for that house to another investor.

Flipping is as easy to do as it sounds. It is a great way to earn some immediate cash and not have to come up with a lot of money. In fact, the only money needed is a small deposit on your contract with the lender.

When you flip a contract to another investor, the investor is paying you to sign over all of the rights and privileges you have under your contract. The investor who is paying you a fee then has the right to purchase the property at the price that has been agreed upon in the contract.

You should ensure that your purchase contract has a clause that allows you to assign it to someone. Some sellers may not agree to this clause. You can overcome this by telling the seller that you are not sure in what name you would like to take title to the property. Tell the seller that you may take title to the property in your corporate name or your business partner’s name. You can make the seller feel more comfortable if you write into the contract that you have ten business days to decide the name in which you will take title. This will give you two full weeks to flip the property.

The first report you need is the Profit and Loss statement.  This is a standard report of income from the previous month and expenses so you can see your NOI.  You should be sure that is in your hands no later than the 10th of each month.

The second thing you need to review is the check register.  You want to see what checks were written from the previous month.  If you can see where the checks are going, you can get a better idea of the cash flow and see who is getting paid what.

You also get an idea of whom the vendors are and you can question things that you do not recognize.  The check register can also alert to you any other problems with the property.  For instance, if you see an increase in the number of checks written to the plumber, you need to determine what the reason for that is.

An occupancy and traffic report can help you analyze where your tenants are coming from and what marketing campaigns are most effective.  This report can alert you to which units are empty, rent ready and which ones are not.  The worst thing to have happen is to have vacancies that are not rent ready and someone shows up who is ready to move in that weekend.

You can create the occupancy and traffic report in an Excel spreadsheet.  Your onsite manager then fills it out on a daily basis.  Each row is a day of the month and each column includes number of calls, number of showings, number of applications sent out, leases signed, follow ups, referrals, leads from ad sheets, leads from signage, leads from walk-ins, and leads from merchant coupons.

By looking at this report, you can see the relative amount of activity.  If you are getting activity but not converting, then you need to find out why.  That tells you that you need to re-evaluate your process.

The fourth report is the maintenance, or work order, report.  When a tenant calls in with a maintenance problem there should be a work order to complete and a progression of steps.  A work order summary log should include all of this information.  The maintenance work order log lets you know that your tenants are being taken care of.

Whoever is managing your property needs to have a work order log.  You want to see how long it takes for a work request to be filled.  You do not want the turn around time to be a week.  Customer service must be a priority with your tenants.

These four reports help you to monitor the overall health of your multifamily property.  Good property management is the backbone of retaining tenants and keeping your property managers accountable is crucial to your multifamily property being a money-maker for you.

There is a property that has low occupancy and is need of $50,000 of moderate rehabilitation.  The rent needs to be increased but it cannot be increased until some cosmetic work is done.  The owner is out-of-state and is not really in touch with what is going on.

So you have an opportunity.  Yes, it needs $50,000 of capital and you could come in and buy this property.  Because they property has been allowed to deteriorate, it is worth less than what the owner owes on it.

What you want to do is gain control of this property.  You are not going to buy it; you are not going to own it; you are going to get control of it.  This is done by putting in place a five-year triple-net master lease which stipulates that you are the master tenant.

As the master tenant, you get to operate the property.  You can make all of the repairs and you run the property.  You sublet it to the tenants that you choose and it is for five years so you can turn the property around.

At the same time as when you put in the lease, you are going to put an option in place to buy the property.  Let us say that your option to buy was for $1 million.  What you do to rehab the property is going to make the property worth more than $1 million and if it is worth $1.3 million that means your option is now worth $300,000.

You are going to reposition the property which means you are going to rehab it, raise the rents and raise the occupancy.  You are going to raise the income and increase the value to $1.3 million.  You then have the choice of buying the $1.3 million property for $1 million and have $300,000 in equity.

Only at that point in time would you own the property.  The rest of the time you just control it.  You own nothing other than your option but you control everything.  You are the master tenant and you have the option.

The multifamily property arena has many opportunities for many different types of players.  Working with multifamily property deals is not limited to owning the property.  The “Own Nothing, Control Everything” strategy can allow you to take advantage of the great investment opportunities available to you in multifamily properties.