In this tricky market it is more important than ever to decide on your exit strategies before you even make an offer. You have to know how you can make money. It’s not about making deals, it’s about making money. The best thing about real estate is that there are so many ways to make money. They all work but some strategies work better than others in times when the market is down.
I am experimenting with several different ones to see which one or ones work best in this cash-poor market.
Strategy #1:
Buy and wholesale to another investor.
This had been difficult since my offers are 14 days close so the banks are motivated to accept mylow offers. Theproblem is that the banks are making it difficult to do assignments. They usually prohibit it in their contracts. I have tried using trust assignments with some success but still not perfect. What I did was sign the contract as Phyllis rockower, trustee. Then I created the trust with my “partner” and I both as trustees. Then I resigned as trustee and made her close. They made her resign all the papers. Well, it did work because the property is not in my name but it was a hassle.
Bill Bronchick, Esq recommends using an LLC and transferring management before the close.
Strategy #2
Buy, and close using the one- day dough people These are people who will put up the money for you to close. You have to have your buyer already in the wings who puts up the money before you close in a 2nd escrow. This is what is called double escrow. No- there is nothing illegal about it. That makes the above strategy of wholesaling easier. You actually close using the new investor’s money and you resign as trustee after the close of escrow.
Strategy #3
We are trying this one right now. I bought a fixer at a good price and am going to hold an onsite auction 30 days after closing. I hired a professional auction company to handle it. They do all the marketing. All we did was clean it up a little. It is a cosmetic fixer. The good part is that we will have a buyer within 60 days.
Strategy #4
Buy, rehab and sell to an end user- have to line up a hard money lender who won’t pick your pocket. That is the problem today. Hard money lenders have become really hard. It used to be that these folks were investors themselves who did not care about you. They only cared about the property. If you defaulted, they foreclosed in a heartbeat. Today, however, the lenders are usually brokers who are using money from folks who are looking for a good return. They don’t want the property. As a result they want ridiculous things like tax returns, credit and 20% down.
Strategy #5
Buy, rehab, and qualify for new loan. Then you can rent for some amazing cash flow, This is the first time I have actually seen the possitlity of obtaining positive cash flow in California. Who cares about price if you are getting a good return on your money. You could hold the properties for the long haul and wait for the next bubble. You would get the most money from section 8 housing from the gov’t. That way you get guaranteed rents. Or do a lease with option; fix their credit and then cash them out.
Another strategy is to do an installment land contract and “sell” the property to someone who can’t qualify. You don’t even have to raise the price. You merely charge a higher interest rate to them than the one you are paying to the bank. Your cash flow is that difference each month. That way you have no repairs and vacancy.
All of these can work. Trying all of them to get a cookie cutter formula that I can rinse and repeat. Follow my blog to see how I do. http://www.realestateclubla.com/blog.asp
Watch the video related to double escrow
Aaron Auxier discusses the 2009 Home Value Percentage Map recently released by First American Title Company in the Review Journal. Sadly, according to the map, zip code 89109 was the hardest hit area in town with a 60% depreciation in 2009 (approx. twice as bad as many of the city’s other areas). Aaron explains that the news is disheartening, especially as a new developer is currently trying to close escrow on the contracts of their Las Vegas Strip condo units (which were sold for upwards of $2000 a square foot during the pre-construction boom). Aaron points out that it’s frustrating that 89109 shows such a slouch and how the true replacement cost numbers, as well as intangibles of why developers are hesitant to sacrifice their prime Las Vegas Strip land for residential high-rise condominiums are rarely reported. In good news, while new projects attempt to close escrow at double and possibly triple the price, buyers are using this time to swoop up on resale units (many times short sales or REOs) at properties such as Panorama Towers, Sky Las Vegas, and Turnberry Place. Finally, Aaron informs buyers why they need to research what TRUE Buyer’s Agency means to their purchase, and the dangers of walking into one-sided, on-site developer’s agents (and hearing their spin).
Help answer the question about double escrow
About Author
Phyllis Rockower -
About the Author:
Phyllis Rockower, founder of Real Estate Investors Club of Los Angeles, has been a real estate investor and educator for over 20 years. Viewed as a true real estate expert, Phyllis has had numerous interviews with CNBC, ABC 7 News, Investors Daily, Time Magazine, KCET, Foreclosure News Report, The Daily Breeze, KNX Radio and NPR.
You can follow Phyllis’ personal real estate investing on her blog: http://www.realestateclubla.com/blog.asp .
