The market has changed. Where are the end buyers for your house flips and wholesale deals now?

The real estate investors who come out of 2020 on top are those who are the most flexible and quick to adjust to the changing times.

You may need to be more careful about the deals you buy, to ensure there is an end market demand for it, with able buyers. Know the buyers, and you’ll know your exit strategy before you get in, and the types of deals to be taking on now.

Wealthy Home Buyers & Buy And Hold Investors

Just a couple of weeks into the COVID-19 mess and Chase bank slashed availability of mortgages. Now requiring at least 20% down and a 700 plus credit score. That is going to eliminate a large portion of the population as potential buyers.

In contrast, many wealthy individuals and families are pulling their money out of the stock market, retirement plans and the banks to put their money into real estate. Some are buying half a dozen units or more to protect their wealth.

They have all cash, or can put down 50% and still get a mortgage relatively easily.

Movers Escaping The City

We are being told that even if quarantine restrictions are temporarily eased that we face another coronavirus outbreak in the winter, and it could be worse. Some are warning this could be a multi-year pandemic.

Who wants to be stuck in a condo in the city, with fast rising crime during times like these?

Expect more buyers cashing out their urban homes and moving to smaller towns and rural areas. Especially now that the office has gone the way of the dinosaur and remote work is here to stay.

Those in this group who act quickly can still walk away from their properties with cash to buy something else.

Real Estate Syndicators & Funds

Real estate syndicators and fund managers are also having to pivot and diversify in order to deploy capital and deliver on promises to their own capital investors.

You can serve them wholesale deals. Even better if you can pull together portfolios to provide the bulk buys they need to make efficient transactions.

Property Owners With High Amounts Of Equity

With the exception of transactional funding for real estate wholesalers, it is getting much harder to find loans to purchase real estate out there.

One exception to this may be homeowners and rental property investors who can refinance or offer high equity properties as collateral and gain bridge loans to make new acquisitions.

COVID-19 Heirs

Even before this virus we were in the middle of one of the biggest wealth transfer periods of our history. It’s a tragic situation. Yet, many of those who have passed on in this crisis may be glad to see their heirs now able to use their inheritance to go buy homes in safer areas, or use their legacy to go invest and create new streams of income and businesses in real estate which will keep providing for future generations of the family.

 

The data shows that real estate investors still can’t rely on traditional mortgage lenders and banks for their financing. The good news is that there are alternatives.

The latest mortgage lending statistics from Ellie Mae and National Mortgage News show it hasn’t gotten much better for real estate investors over the past year. These are just some of the challenges that demand investors use alternative financing sources for their house flip and wholesale deals.

Time

The time it took to close a purchase loan grew by almost 10 days last year, to nearly 50 days on average. When more sellers and agents don’t want to sign a contract for more than 30 or 45 days, this type of financing just doesn’t cut it.

Credit Scores

If you do use your own credit as a real estate investor, you know that the system is notoriously rigged to penalize you the more you do. Instead of getting extra credit for experience they punish you for having taken out more mortgages. 58% of completed loans still have credit scores of 700 to 799. 71% have credit scores above 700. Taking out one loan on your personal credit can knock you off of that tier and derail your plans to scale.

Loan Costs

Conventional loan costs are still high. Even despite all the technology which is making it easier to obtain and process loans. A lot of it is made up of miscellaneous third party fees and mandatory purchases to get the loan.

No Common Sense

There doesn’t seem to be any more common sense in underwriting mortgage loans. It’s one of the downsides of artificial intelligence and going too big too fast. Just between Google and Facebook lenders should have all the data they need to approve more loans. They can even tell if you made it to work today or called in sick with a hangover.

Completion Rates

Far fewer mortgage loan applications may make it to closing than you think. Last year barely 65% of VA home loans, and 70% of all mortgage loan applications actually made it to closing. Those are not good odds to build a business on, have your income rely on, or to gamble deposits on. If you put down a $2,500 deposit on average, you’re already losing $7,500 to over $10,000 for every 10 properties you put under contract. That has to be deducted from any profits you do make on other deals.

A Better Way To Fund Your Mortgage Deals

Hard money is an alternative. Though still often an expensive one which is far more like dealing with a traditional bank than it used to be. Private lenders can be an option, but can be a huge distraction from just making money on real estate deals.

Transactional funding is different. No credit score requirements, no losing the deal over an appraisal and funding available in hours. Try it out on your next deal.

 

Recent California wildfires have displaced thousands of residents. What help is available? How can real estate investors lend a hand?

The latest round of CA wildfires have dealt what may be one of the most catastrophic seasons on the state, with new record costs, and thousands forced from their homes. According to the state government website, 2017 has seen almost twice the average amount of acreage burned, with damage that could cost at least $1B, if not close to $5B. This includes around 8,500 residential homes which have been damaged or burned down.

The IRS has responded by extending some tax deadlines for those affected until January 31st, 2018. Victims may also be eligible for FEMA of up to $34,000 to help with funeral costs, emergency hospital bills, and housing expenses. There are also going to be a variety of agents and real estate investors looking to help house those displaced, and to offer quick sales for those who don’t want to, or can’t hang on and rebuild their homes.

A new report from UpNest shows data that suggests recent years of fires have not have much impact on the state’s property prices or demand. Yet, there are clearly many property owners who have lost everything, are still struggling to get back on track years down the line, and whose land is still badly scorched. The most immediate impact for real estate appears to be even worse lack of available housing, and rocketing rental and housing costs.

There is a huge need for fast acting real estate investors who can go in and help owners liquidate fire damaged homes, as well as for rebuilding and renovating them. Real estate wholesalers can play an urgent and much needed role in this, by finding, contracting to buy, and providing inventory to other investors who have more time and capital to reposition, remodel, and build. While fire damage and burnouts can typically be a roadblock for traditional mortgage financing, wholesalers can use Best Transaction Funding to acquire and flip these houses to cash buyers and those with flexible credit lines, that don’t rely on property inspections.

Summary

Data suggests that California housing prices are not likely to be slowed by recent fires. There is a big need for housing, and funding is available for fast flips. Wholesalers can help out by getting product in front of those with the time, money, patience to rebuild or rehab, while giving sellers the quick cash they need.