Stripped Homes Offer Great Profit Potential

It's the newest thing in housing these days... 4 BD/3BA... no kitchen.  No kitchen, no ceiling fans, no landscaping, even no light fixtures.  Yes, it appears that appliances and hardware are the latest casualties in the nation's foreclosure meltdowns.  A recent article in the New York Times calls attention to this growing phenomenon.  It cites a recent ad in Craig's List where the owner makes no effort to hide his intentions.  " 'Stripping House — Before Foreclosure,' the ad declared, offering potential buyers the cabinets and counter tops, the sinks and toilets, the doors, the appliances, the sprinklers. Even the palm and citrus trees in the yard were for sale, with a catch. 'You dig,' the author advised."  According to the article, areas like Las Vegas, which have seen the nation's highest foreclosure rates, have also been affected the most by home strippers. 

Some metro areas, like Phoenix, have laws in place that make stripping homes prior to foreclosure a felony under a state fraud statute.  In cities like this, the FBI has been able to apprehend home owners attempting to liquidate appliances.  Although the sentences for these crimes is usually quite light (18 months probation for a recent offender), police hope that criminal prosecution may deter home owners from trying to strip their houses before they leave.  But in other cities, like Las Vegas, there are no laws that make gutting your property prior to eviction illegal.  Mortgage contracts do specifiy that homes must be kept in good order, but the lack of state law on the subject makes the issue a civil, rather than a criminal, matter.  And legally pursuing home owners that sell off a home's assets prior to foreclosure is not usually a profitable venture for the bank, as costs of a lawsuit greatly outweigh potential recovery.
 
This has led to rampant home stripping in the Las Vegas area.  But we don't need an article in the New York Times to tell us that.  I see these stripped homes first hand every day.  In fact, they have provided me and my investor clients with some great money making opportunities.

One of my most recent purchases was a 2113 square foot home that was only three years old.  When we walked through the house, it was a mess.  It had no kitchen and needed new paint, carpets, and various hardware items that had been stripped.  We purchased the house for $104,000.  It had been sold new for $319,000.  After putting in a brand new kitchen for $4500 and spending $1500 on new carpets and $1500 on new paint and accessories, we had a beautiful home for a total of $112,000 ($53 per square foot.)  We were able to turn around and lease the property under a two year contract for $1295 per month.  This created terrific cash flow for my client and translated to acquiring the home for $0.33 on the dollar at an 11% cap rate (based on the $104K cash purchase.)

These types of deals are available for anyone who is willing to put in the time and effort to revamp one of these foreclosure homes that have been gutted by the previous owner.

Surviving and Thriving as a Real Estate Agent: Part 3

In my last two articles, I have discussed how real estate agents can not only survive, but thrive in this challenging real estate market.  I have covered the first three points in my four point plan:

1. Develop Your Niche
2. Become An Expert in Your Field
3. Be Mobile/Adapt
4. Develop a Marketing Campaign

Today I will cover the final point: Develop a Marketing Campaign.

Once I have developed my niche and determined specifically where I am going to invest and recommend that my clients invest, I create my marketing campaign to go find the investors.  I could easily write an entire book just on marketing for real estate agents, and I look forward to sharing more articles with you in the future on this topic, but for now I will share a few brief thoughts here to put you on the fast track. The marketing materials that I use are designed to aid the investor in making an informed decision on the investment they are currently considering. 

• The first item in this package is the “e flyer.”  This flyer is a colorful,
eye catching marketing piece that lists all the features and benefits of
the potential investment in a concise, easy to understand format.  I
send these flyers out to investors in the form of email blasts and
their purpose is to catch the investor’s eye and encourage them to read
more about the investment opportunity that I am offering.  To view an
example of one of my recent investment
flyers:www.viewpointequity.com/MGMFlyer.pdf  
• The second item that I include in my marketing package is a
proforma worksheet.  I have always used proformas to analyze
my own investments and I find it is an excellent tool to share
with my clients as they consider similar investments.  If the proforma
is done well and accurately, it will not only aid the potential client
in understanding the financials of the investment, but it will also
build your credibility in the eyes of your customers as not just a
Realtor, but a seasoned investor that actually understands the
investment process.  Having actual numbers plugged into a spreadsheet
gives the investor a sense of comfort with you and with the investment,
and helps to eliminate the feeling of the “unknown,” especially for
new investors.  All-in-all creating an informative and professional
marketing package for the properties that you are looking to sell
and including realistic projections and other data helps investors
to accurately evaluate a deal and establishes valuable credibility for
you that will result in repeat business, referrals, and client loyalty.
• Another tool that I use with outstanding results is my monthly
newsletter.  Different than a typical “Realtor” newsletter that might
feature recipes and other useful but non real estate related information,
my newsletter is filled with statistics, actual deals, potential
deals, education and opinions of the market in which I am currently
working.  Sending this out to my database on a monthly basis allows me to
stay in front of them and remind them that I am always looking for the
next best deal when and if they are ready to get involved.  To see my
latest newsletter: www.viewpointequity.com/newsletter.pdf
• My final, and perhaps most important marketing strategy, involves not what
I do, but what I don’t do.  I have found that my strengths as a
business person lie in my abilities to create leads, talk to clients,
sell properties and negotiate deals.  My strengths do not lie in the field
of internet marketing or graphic design.  Because of this, rather than
spend my time working on my own e flyers and newsletters, I employ an
internet marketing/graphic design firm to handle these details for me.  When
I am ready to create a marketing piece, I do the overall concept
management, writing, thinking, and analyzing and forward it on to
my specialist for the design of the marketing materials.  Once back to me
I make suggestions and changes to put the final touches on the material. 
I suggest that you too spend more time on the areas in which you
specialize and less time playing with graphic design programs on your
own computer.  This one idea (the virtual marketing assistant) has helped
me tremendously in getting more effective marketing material produced
faster than I could otherwise produce myself, leaving me free to
pursue sales.  If you are interested in contacting the firm that handles
my marketing, you can reach them through their
website:www.spiraldigitalmedia.com

If you follow these four simple steps, you will be well on your way to thriving as a real estate agent, even in a down economy.