Tuesday, April 10, 2007

In a buyers market you look for buyers first, then find the houses...

We hear it every day that the foreclosure rates are skyrocketing, the housing market is bottoming out, and there are a glut of deals out there now. Finding deals is no longer a problem, however once you acquire a property its MUCH harder to execute your exit strategy if your plan is to flip, or retail it in this market.

So what does this tell us?  Its actually pretty simple... the market has changed from a hot sellers market (where deals were hard to come by), to a stagnant buyers market (where buyers are hard to come by).  But, because the Fed has recently decided to keep interest at the current low rates there are plenty of buyers looking to capitalize on this lucrative buyers market.

It's just that all the potential buyers are waiting for the absolute bottom before they make their decision to buy.  They don't want to get caught in a situation where they buy a property and the market slips another 5-15% and now they too are upside down in their new home.  But if you can offer them a good deal (price or terms), then there are plenty of buyers out there to take properties from you... you just have to find them first.

In the last sellers market cycle you could buy a property and put a sing out front and it would be gone before the paint in the living room dried.  But now its not so easy.  With MLS inventory building to record highs, and FSBO signs stuck in every other yard, buyers have plenty to choose from so there is no urgency on their part.

But, if you change your strategy and spend more time looking for buyers first, and then find them houses... now you have a business model that is setup to generate huge dividends in this market.  So, rather than spend time looking for houses to buy, and then look for buyers to sell them to... instead you may want to consider looking for buyers first.  If you can find a buyer that is looking for a particular house, in a specific neighborhood, and has a set amount to spend... then you can go out and locate that exact deal for them and almost guarantee a quick transaction. 

And because you are an investor (not a Realtor), you can create more attractive terms, or negotiate with the seller to produce the exact results your buyer is looking for... and get paid handsomely in the process.

So, where can you find these buyers? Here we can just go back to the basics and start by sending direct mail campaigns to large apartment complexes, or get a list from www.infousa.com that gives you all the prospects in a specific demographic area that have a low credit score and do not own a home.  Its amazing what you can do with the lists provided by these major list sources.

Essentially if you are marketing to the right targeted market, and you can provide them with the American Dream of owning a home for the same monthly amount as they are paying to rent... and provide some struggling sellers with a solution... you can find yourself in a situation where your problem solving can earn you a nice income, and give you an opportunity to acquire some real estate with a positive cash flow...

And who doesn't like positive cash flow?


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