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How Home Buyers Provide Investors With High Yields In A Distressed Real Estate Market

By Diane Hofflander

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Published: 03Dec2009
Word count: 829
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Experienced home buying groups have been in the home-buying business throughout Southern California for decades and purchase thousands of homes per year.

In a time and place where the ever-increasing threat of losing money in real-estate is prevalent, which home-buying group has remained fortunate in their ability to evaluate properties correctly, purchase at the right price? Here are some of the more important issues a bone-fide buying home buyer looks at when investing in the Southern California marketplace:

1. Cash availability to fund the deals found

2. Cash availability based off of LTV, not credit

3. Determining whether the deal is good or not

4. Exploring the multiple facets of how to attract deals

5. Understanding which investment strategies to pursue: flipping, rehabbing, options, lease-options, owner financing

Out of all of these, the most important aspect is being able to determine whether the deal is good.

Knowing If the Deal Is Good

While capital is a crucial key, being able to ascertain whether a deal is good or not is the key to keeping our capital investors happy, bringing more funds forward and solidifying the returns our capital investors are used to seeing, which typically ranges from 10-15%.

Being able to determine whether we can turn a profit on a particular deal AHEAD OF TIME is a critical part of the decision making process. Not only are we proud in our home buying capabilities, we are proud that we realize the profits that we do and secure our capital investors ROI as promised. Therefore, when an experienced home buying group creates a fail-proof system for evaluating and purchasing houses, the likelihood of success remains higher than most other home-buyers in the marketplace.

So, how do you know if it's a good deal?

Since I buy REOs (real-estate owned or bank owned properties), directly from builder's (called "builder closeouts") as well as from individual sellers, I have to utilize different investment strategies to profit from them.

Let's break them down into our two most common "Buy/Sell Profit Models":

1. Buy for cash - Sell for cash (AKA wholesale/retail, wholesale/wholesale)

2. Buy for cash - Sell on short-term Lease Option

After breaking it down to this level, the way I make a buying decision is pretty simple:

1. A property lead comes in

2. Run it through 2 different spreadsheets for each of the Buy/Sell models above

3. If you can't see a way through to making a profit with at least one of them - pass on it

Otherwise, it's a potential BUY, and I'll spend a bit more time to confirm the data that came with the lead to make sure my numbers are accurate.

Then and only then it's time to see the Seller, view the property, complete the negotiations and get the deal signed up.

We evaluate properties ahead of time through spreadsheets to protect our cash-backed investor's funds as well as to secure the highest return on investment for all parties involved.

In my experience an average investor is too anxious to make a deal, especially if the leads aren't coming in often enough to allow them to "cherry-pick" the deals they want. Experienced home-buyers receive so many properties from advertising, referral-systems, direct relations with banks and builders looking to liquidate that we have an over-abundance of leads.

Here is where most other investors fall short in realizing profits from every real estate purchase bought:

- They don't account for all anticipated expense items

- They only look at best case scenarios and don't review negatives, what-ifs, gotchas, etc.

- They plan for overly optimistic sales time or sales prices and don't plan for longer sales period and/or lower price points

- They don't plan for not being able to sell (for cash) and having to roll over to a different profit model (lease/option or owner financing)

- They don't plan for tenant/buyers not exercising their options (or owner financed buyers not refinancing their loans and paying us off), moving out and leaving us with the expenses of cleaning the place up, incurring higher than planned vacancies, extra advertising expenses

- They don't plan on being subjected to unfavorable market fluctuations for Buy/Sell models that stretch over a period of time.

So, when home buyers go through the motions and run numbers through spreadsheets, this ENFORCES the discipline of (a) full accounting of all applicable expenses, and (b) playing ALL possible scenarios, good and bad... but playing them in advance, before committing to purchasing a property.

Trust me, it's a lot better to play bad case scenarios and account for all expenses BEFORE you bought the property than AFTER.

With over a decade of buying houses, a few experienced home buying groups are geared towards even greater successes in a marketplace that has the best buying opportunities ever. Should you be looking for a safe, secure and higher than average return on your money, there is no better real-estate buying power as that which backs proven home buyers ability in the Southern California marketplace.

Certain home buyers get it - and many don't. When investing in real estate knowing what to do before you do it - is the difference between the winners and losers. Property Partners has a team of experts to rely on to ensure success. Learn more at http://www.Property-Partners.com .

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