Wednesday, March 13, 2013

White Smoke Signals Fiscal Cliff!

My investor friends keep asking me.....where are the deals? 

They are doing all the same old marketing techniques:  probate, bankruptcy  divorce, foreclosure, out of area, free & clear, pretty house, ugly house, code violations, juniors, seniors, va's, fha's, hud's, nod's, fsbos, ups, and usp, and FBI.  

Nothing seems to be working that well.  Why?  Why is that?  Where are the deals?  The market has begun to rebound, but no one is selling.    Is it because of the hedge funds buying real estate?  Sooooo many investors are afraid of that buzz kill - so let me address it in this month's blog post. 

Hedge Funds (HF) have loads of capital; however, they are only interested in deals that can produce a 7-9% CAP rate.  Big deal - right?  7-9 % is lame in my book, but the problem or opportunity comes in the way the deal is presented to the hedge fund.  Do you think those HF managers know how to structure a deal for double digit returns?  Do you think they'll be able to short a 2nd or wipe out a 2nd through a Jr. Lien redemption?  Do you think they'll be able to negotiate 0% seller financing to produce the double digit return?  How about coupling the deal with a lending model to make close to 35-45% returns?  I'm sure those HF managers are not smart enough or nimble enough.   They can only look at the plain vanilla deals.  Those deals that put us to sleep. 

So what?  So quit your complaining and get out there and work the models.  It's hot market strategies right now.  That's right - that means post-it notes in targeted areas.  That means better lists and better marketing.  Your cost per aqusiion might go up closer to $1650-1800 per deal, but the deals should also be getting a little better.   Profits of 50k are becoming the norm (for the 150-200k market), so get out there and get to work. Most of my clients are seeing 20-30k on wholesale flip and that (last time I checked) should only take about 10-15 hours worth of work.   

That'll make the Lexus payment this month.