It’s no secret that investing in real estate can be a fantastic way to build your wealth portfolio, and we have some tips for finding real estate deals here. However, there’s been this giant dark, grey cloud hanging over the national housing market since the mid 2000s that understandably has made everyone extremely cautious. With banks ‘too big to fail’ and neighbors being foreclosed on left and right, not to mention vacant houses popping up from owners who were tired of being jerked around from misleading loan modification attempts and decided enough was enough, there hasn’t been much optimism to go around in recent years.
But it’s a different story today. Yes, the country still has a way to go to pull itself out from the housing slump and there’s no shortage of distressed properties in the banks’ pockets that will have to be dealt with, but most American housing markets today are seeing a steady uptick in prices of median single family homes (and other types) as inventory continues to tighten from coast to coast. That’s great news for all of us.
Homeowners with little or no equity who couldn’t sell their house before or wanted to avoid a short sale, might now be sellers at discount prices. In fact, homeowners who just flipped the switch from underwater mortgages to equity positions, although slightly, might be fantastic opportunities for buying a home “subject to” (the existing mortgage). Just be sure you know the pros and cons of structuring these types of deals (a topic for another post).
If the mortgage balance is a fair amount below your purchase price, you can offer to pay off a homeowner’s mortgage and have them carry a note (seller financing) as a short-term solution if your intent is to flip the house. This is a win-win scenario. You reduce your cost of capital (if your seller financing rate is less than what you’d likely pay a private or hard money lender) and the homeowner, in return of a slight payoff delay of a few month, gets to increase their total net return by actually making interest on the amount they lent you. Everyone wins!
So how do you actually find these great real estate deals?
Glad you asked! Since the rising market has infused many owners with equity they haven’t had in years, you could try looking at expired short sale listings. Some of those owners might still want to sell but now no longer need to go through the tedious short sale process. Talk to them!
You can also try owners who haven been in their house for years (as in over 20) and likely have little to no debt (“free and clear” or “low LTV”). We have a lot of long-term homeowners in Hawaii! While they may not have any extra motivation to sell and may want to keep the house in the family, all that juicy equity means they may be open to a quick cash out. With median single family houses in Hawaii hovering in the $600,000 price range and beyond, there are plenty of people who might want a little jolt to their bank account for their future. See if you can put a win-win deal together.
Lastly, consider homeowners whose reason for not selling to date hasn’t been their mortgage but the amount of necessary renovations. Hawaii has plenty of houses in need of serious repairs costing $100,000 or more. With home prices rising, Hawaii’s homeowners may now find real estate investors (like us!) who wish to buy their fixer upper. The next time you’re driving around and see a house that fits the description, knock on the door and see if the owners have considered selling. If it’s a rental house, even better! Contact the owners – they may be tired of being landlords and would love some cash instead.
Of course, there’s no shortage of ways for finding real estate deals. The times are changing and there are new opportunities everyday for sellers, buyers and investors alike. Even private capital investors who wish to earn a great interest rate on their money secured by discounted real estate will now find more places for their capital with more investors entering the resurgent market (of course, make sure you’re dealing with true pros!).
Good luck with all of your 2013 real estate goals!