Posted in Atlanta, Cash Flow Properties, Investing in Real Estate, Negotiation, Single Family Houses

The Art of the Deal

How long would it take you to recognize a good purchase opportunity?  How long would it take for you to make a decision to take action?

In the business of flipping houses, you must size up a transaction quickly and get the property under contract before someone else does.

This new series of articles I write are going to be real deals that I’m doing currently in the Atlanta Metropolitan area.

The real estate market is local in nature and in my position, we take what the market gives us.  Over the last six years we’ve operated only in the Atlanta area.  Initially, we acquired homes in REO packages, and then individually from banks and foreclosure auctions.  Those opportunities are 10% of what they were 6 years ago.

The supply of houses has drastically reduced, thus most of the hedge funds have packed their bags and left.  That leaves me and all the other hopeful investors scrambling for the crumbs of houses in a real estate market that has heated up.  These cycles of supply and demand have caused me to change my approach to the market.

My highest and greatest skill is negotiating profitable opportunities from home owners.  Thus, we’ve modified our marketing to attract home sellers and we are back to doing what we do best.

In this series of articles I’ve now prepared, I’ve targeted my marketing to attract sellers to buy their houses directly from them.  These are houses that are not listed on the Multiple Listing Service (MLS), and the only competition I have is usually other house buyers like myself.  Thus, I must recognize an opportunity quickly and I must decide my exit plan.

Never go into a negotiation to buy a house unless you know exactly what your strategy is.  I immediately determine my exit plan based on the location, age of the house, quality of the house and neighborhood from the following exit strategies:

1. Wholesale house to another investor in “as is” condition. When I use this strategy, I either assign my interest in my sales contract with the owner or I close on the transaction and then I market to other investors.

2. Buy – Rehab – Retail. In this strategy, we close on the home from the seller, remodel it and place it on the market.  There have been times when I leave the title in the name of the seller I buy from so that they sell directly to my buyer.  This could be important to avoid seasoning requirements with my sale to and “end user” (homeowner).  I can protect myself with a recorded option to purchase from the seller I buy from, or I can record a security deed to protect my option.

3. Buy – Rehab – Sell to Investor and We Manage. If the property is a quality house in a quality neighborhood, we might sell to one of our current investors at a profit and place into management.

4. Buy and Hold. Simply put, we keep some houses in our own portfolio of rentals.

They key to buying direct from owners is to only buy from motivated sellers.  If they’re not motivated, you’re wasting your time.  Depending on the circumstances, you can offer to get the owner to hold a note at no interest.  I’ve done this dozens of times and have done so again recently on a fantastic opportunity that we will sell retail.

Feel free to send me emails or call me to ask questions about specific transactions and my hope is that you could also put together profitable transactions like I do.

Keep an eye out for upcoming articles…there will be real deal structuring and negotiations shared with you!