subject: Home Buyer Exit Strategies That Attract Investors [print this page] Another great saga for real estate investors... As home-buyers continue to receive more and more requests from fellow investors hoping to develop an alliance, the realization is that there is a mass amount of capital sitting on the sidelines. Most of this capital is wondering what to do, where to go and how best to receive the safest returns.
While home-buyers are located across the country, their endeavors are beginning to mature across nationwide with properties being presented to us on a consistent basis. Most of these properties are presented with significant equity built in, usually below 70% of FMV (fair market value). This is more than likely why professional home-buyers word of mouth is spreading like wildfire. Great investments, safe and secure returns in the double digits and backing of assets with first trust deeds.
Although home-buyers generally prefer to liquidate their real estate inventory to end buyers at market value prices, many times their marketing results are bigger than their mouths and their portfolio begins to overflow. When this happens, they should shift their focus to wholesaling these under-valued properties to fellow investors. Although there is much equity that vanishes by selling wholesale, home-buyers prefer a "pea in the pod" rather than no pod at all.
Although this is the case, over the last year, capital-rich investors have been calling, presenting home-buyers with their request to be a capital investor. What is offered to these capital investors is the opportunity to "quick-fund" the deal so we can sell more of our portfolio to our end buyer base. For this "quick-funding", home-buyers capital investor receives 2% of what our purchase price is. A $500,000 property purchased by a home-buyer for $320,000 is then immediately re-sold to one of their end buyers, willing to pay $445,000. For the use of our capital investor's funding, he then receives (paid immediately through escrow) $6,400 (2% of our "A-B" closing of $320,000).
While this may seem like a small pittance, we have investors who are closing on 3-5 transactions a month. Any savvy investor realizes that a ROI of 6-10% a month is nothing to sneeze at.
Phase three of what a sophisticated home-buyer offers investors is called the assignable contract program. There are those properties that don't attract an end buyer, do not fit their criteria for long-term hold and are still extremely attractive opportunities under 75% of FMV. On these occasions, home-buyers are willing to "assign" their accepted offer (short sale or REO) to an end investor who is looking to fill their rental portfolio. While this method is less attractive to a property wholesaler as an exit strategy (because most of the profits are made by the "assigned investor", not them), it has created such a buzz in the community that the home-buying market has decided to open it up even further to their investor base.
If none of this is your modus operandi and by reading this you realize that you have more of a buyer base network perhaps this article can turn the table a bit... find a home-buyer that has cash-flowing properties which they would like to present to your buyer base - it's a wine win.
A very robust wholesale database list will be ideal which will provide you with access to many properties for which to exchange. Best of success...
by: Diane Hofflander
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