Fear Buster #8: Not
Being Able To Find Affordable And Feasible Houses
by Jack Miller
Suppose I bet
you $25,000 that you can't buy me a house that made sense; either to fix up and
sell, or to hold as a rental for long term appreciation and cash flow.
How hard would you try to find one? Would you just give up and say it can't be done, or would you be tempted to try some things you hadn't done before?
That isn't some idle offer on my part; it represents the profit that just one house could bring if bought at the right price. If I paid you $25,000, in effect you'd be making about the same money as if you'd found it for yourself. From my standpoint, it would have cost me very little for you to do all the work and get all the profit, so it's a safe bet.
When you convince yourself that you can't find a house that makes sense, it's probably because you haven't really done all the grunt work that finding good deals requires. I finance a number of people who make a pretty good living buying and selling houses. On the average, they are buying and selling about one house per month and
$25,000 net profit per house after all expenses of buying, fixing, and selling
it. Here are some of the ways they are finding houses:
1. They cooperate with a Broker who will actually present the offers they make to sellers, regardless how far below the listed price.
2. They send out 40 letters each night to out of town owners whose addresses they have obtained from the tax collectors office. In some areas these can be bought on a CD and mail-merged into a standard format letter.
3. They pass out brochures and leave them on vacant and run down houses advertising the fact that they pay cash for houses.
4. They pay about $100 per week to run multiple ads in the local throwaway shopper's guides that can be found in grocery and convenience stores.
5. They cruise the neighborhoods looking for abused houses that might be candidates for a blind purchase offer.
6. They network with other entrepreneurs and trade opportunities with them. For example, they might give up an opportunity to buy a house that would make a good rental in order to get a house that would be an ideal fix-up/sell
7. They attend each and every foreclosure sale noting which houses lenders have taken back, and which sales have been put off. On delayed sales, they contact the owners and mortgage holders to see if they can't either buy the
house, or buy the mortgage at a discount.
8. They stay in touch with the IRS collections office to see if there are any IRS liens that they can buy with the intent to try to buy the house of the lien homeowner.
9. They monitor all Unlawful Detainer actions in the court house to be able to contact distressed landlords who might be ready to sell.
10. The stay in touch with builders to see if there is any chance to make a deal on a slow-moving model home, or on a house that is being taken in on trade.
If, when you say that you can't find a feasible house to buy, how many of the above things do you do on a continuous basis? Are you personally doing the work to find a house, or are you relying on a real estate Broker to find one for you?
When you add 6% to the price of a house, that could be the marginal cost that makes it unfeasible and unaffordable. When you use conventional financing, instead of seller financing and taking title subject to existing loans, that too could be part of the problem.
Some final thoughts: If you lease/Option a house, then sub-let it until you can sell it, how much money will it cost you? If you get the seller to co-venture the sale of his house by agreeing to share profit with you for a quick sale; how much money will that cost you? If you bring in an investor to put up enough money to make the house cash flow, or to feed the negative cash flow; how money will that cost you.
When you say that there just aren't any houses that you can make money on in your area, doesn't that mean that nobody is making money with houses? If someone else is, then the problem is probably less a factor of your market not being any good, and more a factor of your not trying hard enough, and not being able to structure a deal that will enable you to make a profit. Give this some serious thought and see if you can prove I'm wrong.
Reprinted by Permission. Visit www.CashFlowDepot.com or call (972) 496-4500. Jack Miller passed away in October 2009. A few of us were fortunate to be able to attend some of his outstanding seminars and also to get to know him as a wonderful person. Jack appeared at MREIA meetings and was an international speaker and active investor, specializing in single family houses. He wrote a monthly investment newsletter and conducted seminars on Exchanging, Management, Portfolio Strategies and Options.