Quick Skim
The slowdown in the real estate has sent some investors fleeing from the market. But those bailing out may be missing opportunities, say the authors of Making Hard Cash in a Soft Real Estate Market (Wiley, 2007). There are still big bucks to be made — even in a down cycle. In fact, authors Wendy Patton and Justin Ryan argue that “more money has always been made in a down market than in an up market.” They highlight how investors can snag the best buys, master market-timing and risk management, and prepare finances — all to better help you become a savvy investor in any type of market.

                Buy the Book

From the Book: 5 Investor Tips in a Slower Market

Slower markets can offer rich opportunities for investors: real estate sellers are more open to negotiate and lower home prices — and combined with low interest rates — can help you get properties at bargain levels. Yet, some buyers are reluctant.

“The market may not look perfect,” the authors write. “This is why prices haven’t taken off yet” — and why you want to get in before they do! The book offers the following tips:

1. Timing is everything. Enter the market cycle early. “When it’s quiet, when the media isn’t saying ‘record levels of appreciation,’ that’s when you want to jump in,” the authors write. As billionaire oilman J. Paul Getty once said: “Buy when everyone else is selling and hold until everyone else is buying.”

2. Get financially ready. Before you buy, consider holding costs, tax implications, and cash flow potential. Many things can go wrong when buying investment properties — such as a vacant rental or a property that won’t sell. Have cash reserves (get a partner if you don’t have any) and you’ll be prepared to ride out any market cycle. Identify your risk level and what you want: For example, an investor who wants to turn a quick profit with low holding costs would want to sell their new-home property before construction is complete. On the other hand, an investor looking for a bigger return with less capital gains tax would want to hold the property until after construction is complete and keep it as a rental property for at least one year.

3. Buy and hold. In a distressed market, this can be a smart move. A buy-and-hold strategy can help give the property an opportunity to appreciate over time. Buy at the right price, though. Compare the home’s price to what homes are selling for over a reasonable time period in that

community and what you expect is the lowest price the market will reach. Get in at that price. Consider lease option investments so you can rent the property to cover payments, having the property practically pay for itself each month. Also, continue to pay down the mortgage and eventually you may even have the home paid off — an ideal position for an investor!

4. Find best deal. In a slow market, you can get great deals — and some extras. Builders overbuilt during the housing boom, resulting in high inventories of unsold properties. Now, many builders report slashing prices, offering free upgrades, absorbing all financing points for their buyers, and paying closing costs or fees. Extras aside, other good investment properties include homes five years old or less and properties in the $200,000-range, which can particularly be desirable to a large pool of buyers. Also, look for a property in an emerging market. Some indicators: sales of existing homes and new construction permits are starting to trend upward, supply is steadily dropping, mortgage loan defaults are high but starting to fall, days-on-market move below 90, and low interest rates.

5. Have an exit strategy. Have a selling strategy in place before you buy so you’re not just randomly banking on the property appreciating and then doing a quick sale. Come in with a solid selling plan. For new construction investing, your selling options might be to assign your purchase contract during the construction period, sell when construction is complete, lease and then sell, or a lease option. Reduce the taxable impact of selling your real estate investments by talking to your tax adviser about a 1031 exchange or self-directed IRA. “Know how you will get out before you get in!” the authors advise.

Sneak Peek

“When markets go soft, things get interesting. Even though an abundance of opportunity exists in a soft market, many people still won’t take action. Why is this? Because by nature, people follow a ‘herd’ mentality. Most people believe that for something to be the ‘right’ thing to do, many people need to be doing it. Actually, this is not true at all. … An experienced insider’s secret — that many folks don’t want you to know — is this … When the markets go soft the playing field is being ‘reset.’ Short-term opportunities are removed and an abundance of opportunity gets created for the seasoned investors who know how things really work.”

About the Authors

Wendy Patton, also the author of Investing in Real Estate With Lease Options and Subject-To Deals (Wiley), is a broker with several real estate offices nationwide. She, along with her co-author Justin Ryan, also are real estate trainers, on such topics as lease options and pre-construction investing. Ryan is also a real estate practitioner in Michigan.

Posted on December 19 at 04:17 PM | Permanent Link | Add a Comment (3)

Here are the latest top selling books on sales and selling, according to Amazon.com:

1. Guerrilla Marketing, 4th edition: Easy and Inexpensive Strategies for Making Big Profits from Your SmallBusiness , By Jay Conrad Levinson

2. Little Red Book of Selling: 12.5 Principles of Sales Greatness, By Jeffrey Gitomer

3. The Long Tail: Why the Future of Business is Selling Less of More, By Chris Anderson

4. Little Green Book of Getting Your Way: How to Speak, Write, Present, Persuade, Influence, and Sell Your Point of View to Others, By Jeffrey Gitomer

5. The Ultimate Sales Machine: Turbocharge Your Business with Relentless Focus on 12 Key Strategies, By Chet Holmes

6. The Official Get Rich Guide to Information Marketing: Build a Million-Dollar Business in 12 Months, By Dan Kennedy, Bill Glazer, and Robert Skrob

7. Authenticity: What Consumers Really Want, By James H. Gilmore and B. Joseph Pine II

8. Covert Persuasion: Psychological Tactics and Tricks to Win the Game, By Kevin Hogan and James Speakman

9. Little Red Book of Sales Answers: 99.5 Real World Answers That Make Sense, Make Sales, and Make Money, By Jeffrey Gitomer

10. Word of Mouth Marketing: How Smart Companies Get People Talking, By Andy Sernovitz and Guy Kawasaki

Posted on December 13 at 05:42 PM | Permanent Link | Add a Comment (0)

Posted on December 3 at 02:55 PM | Permanent Link | Add a Comment (0)

John Maloof, author of The Real Estate Agent’s Guide to FSBOs (AMACOM, 2008), responds to your questions about how to grow your business by attracting FSBOs to your services.

Q: What's the most common misperception that FSBOs have about the process of selling their own homes?

A: The most common misperception is that selling by-owner is easy. Once the seller realizes how much time, effort, and money are involved, they usually find themselves overwhelmed and ready for help.

Q:In a slow market, sellers are looking to save money. How do you convince them that it's still worth paying for real estate services, even if they're not making as much money from selling their home?

A:Well, considering that, according to NAR, 51 percent of sellers go FSBO to save on the brokerage fee, this will be the most common hurdle you will face. The first thing you should do is educate the seller on the most recent NAR data. For example, in 2006, studies show that selling with a REALTOR® gives the seller 32 percent more at closing than going FSBO. This single fact seems to do a great job of convincing sellers that they stand to make more money with an agent. Click here to view more data on FSBOs.

Q: It seems like if you contact FSBOs too much, you'll be viewed as being pushy. What's the best approach you've used to convince FSBOs to hire you, without pestering them?

A:I usually contact each FSBO every few days. If it’s the first call, I call them back after roughly 4 days so the mail I send to them has time to arrive. After that, it’s about once every 4 to 7 days depending on their personality. If you feel that a FSBO seller is taking you as

"pushy", let them know that you are very aggressive and that you would like to put your aggressive skills to work toward selling their home. Often times, they'll see the value in your persistence and will list with you. Every seller wants an aggressive agent in this market.

Q: How do you approach FSBOs who've already had success selling a home on their own in the past? It seems like they'd be more difficult to convince.

A: Good question. In this market, this is very common. The first step you should do is educate the sellers on how the market has changed from a sellers market to a buyers market. In a sellers market, it’s easier for a FSBO to succeed due to the lack of supply of homes up for sale. But in a buyers market, the sellers need maximum exposure to increase their odds of selling. I would show them how, according to NAR, 90 percent of buyers talk to REALTORS® to search for homes.

REALTORS® use the MLS as their primary tool to find homes to show their buyers. So, without the MLS, the FSBO, in today’s market, will not have nearly enough exposure to maximize their buyer turnout and get the highest price. Educating them on these facts can guide them in a new direction.

Q: What’s the best way to make initial contact with FSBOs since you can get penalized with heavy fines if you violate the Do Not Call Registry?

A: If you are concerned with the DNC List, subscribe to a FSBO lead provider service. They check every number they provide you against the Do Not Call List. I recommend many of these services in my book. You can also subscribe to the DNC List yourself but this requires arduous steps that could be avoided by just having another company compile leads for you.

Also, you should keep in mind that real estate practitioners are buyers too. There's no restriction on calling to find out more about the property for sale if you're a buyer yourself. Not to mention, if you have buyers that you're working with, it doesn't hurt to ask the seller if they offer a cooperating brokerage fee if you brought in a buyer for their home. If they show an interest to talk to you, you can ask if they have considered marketing their home with a professional and go from there.

Q:What do you do when you have — what you refer to in the book — as "a Class D" FSBO personality type, someone who is rude and believes they can do a better job than you. You suggest to keep going after them, but what's the best approach when they’re making it obvious they want you to go away?

A: The "Class D" FSBO, or a FSBO whose personality is very hard to get along with, to put it nicely, is a great lead to follow up on. Each one will be different so use your best judgment as to how often to call them back.

For example, I had a seller swear at me and hang up on my first call. Then I thought to myself, every agent that calls this seller will probably abandon this lead. So, I kept calling this seller every week. Sure enough, when she became desperate to list, she had no agents calling her but me. She invited me over to hear my offer and I listed and sold the home shortly after.

So, I guess what I'm trying to say is, as long as they aren't threatening you, keep calling them based on your judgment of how often you feel would be comfortable. Don't give up on these leads!

Q: Do real estate practitioners need to change their approach to converting FSBOs when in a slower market?

A: Yes. List more of them! With fewer of your inventory selling, just increase your inventory.

Q: What’s the worst mistake you can make in trying to convert FSBOs?

A: You should make plenty of mistakes. This is all part of refining your selling techniques. As far as a "worst" mistake. I think that would be in the realm of unethical language. Here's a rule of thumb. Don't let your ego get in the way when trying to convince FSBOs to list. Some FSBOs may believe they are right by doing what they are doing so don't try to prove them wrong. This is where selling techniques come in hand. For reliable sales techniques, refer to my book. They are too lengthy to include in one answer.

Posted on December 3 at 09:07 AM | Permanent Link | Add a Comment (1)