Published at Sunday, February 17th, 2019 - 06:08:26 AM. House. By .
How to Turn Your House Into a Vacation Rental : Turning your house into a vacation rental can seem overwhelming at first... but it really doesnt have to be. This is a process that you can really enjoy and have fun with! I have set up houses as vacation rentals dozens and dozens of times, for my clients properties, as well as my own houses. I understand what is involved and required from every aspect, from assuring the property is in compliance with governmental agency rules and regulations, to making sure it has all the essentials that most guests require. In my commitment to assuring that my clients are continually successful with their vacation rental houses, I often find myself in the role of vacation rental counselor, mostly pertaining to governmental agency and code compliance, quality assurance, and ongoing property maintenance required to meet the current industry standard. So, with that in mind, its important to begin with the basics when you decide to offer your house as a vacation accommodation to travelers. In this article I will provide you with the 5 most important steps to follow to assure your vacation rental success. As you read through this, I advise you to consider the fact that your house is in a unique town or city, that this article is a general guide, and that it is critical for you to become aware of your local community sentiment, and rules and regulations about short-term rentals. Always remember, your house is a private property, it is are not a hotel, and preparing your house and managing it as a vacation rental accommodation for tourists must be carefully and thoughtfully done. 1 - LAWS, ORDINANCES, RULES, AND REGULATIONS The very first thing you need to do is to educate yourself about your local city, county, and state laws, ordinances, and rules and regulations pertaining to offering your house as a vacation rental in your unique community neighborhood. Please dont just assume that because its your property, you can do whatever you want with it. And, please dont put a lot of effort and expense in setting up your house as a rental for tourists until you rule out the possibility that there are laws preventing you from doing so. Many local and state government agencies have clear regulations stating that setting up your house to rent as a vacation rental turns it into a business, and it will probably be subject to some level of city, county, and / or state licensing. Many governing agencies also require that to legally rent your house as a short-term rental, you must collect local and state tax from tourists who rent your property. A quick search in the vacation rental news reveals, that as short-term rentals become more and more popular, many communities have licensing restrictions and very specific rules and regulations regarding renting houses short term to tourists. Call your local town or city governmental offices and get to the appropriate licensing department that can answer your specific questions. Find out what specific licenses and / tax numbers you need to legally rent your house, and get them. I highly recommend that you seek the assistance of an established licensed local rental agency that can properly assist you understanding and complying with licensing and tax requirements required in your community. 2 - YOUR NEIGHBORHOOD AND YOUR NEIGHBORS Now that youve determined that it is legal for you to rent your house as a vacation rental, and youve obtained the proper licenses and tax numbers, its time to think about the neighborhood where your rental house is located. This might seem silly, and many people gloss over this important step, but believe me you can save massive headaches and fights with neighbors by dealing with this issue pro-actively. Nearly every news article you read on communities that are resisting or trying to restrict vacation rentals point to the same neighbor issues: noisy tourists staging loud parties, tourists taking parking spaces from local residents, and tourists being careless with their garbage. In all the years Ive been in the vacation rental business Ive seen several neighbor-to- neighbor squabbles that have involved code enforcement, the police, and even expensive law suits. Most of these issues could have been avoided with plain common sense and consideration. Find out who your neighbors are, and do your best to communicate with them and determine if they will resist you renting your house to tourists. Once you begin renting your house to vacationers, you need to commit to being selective about who you rent your house to. It is important to talk with them and determine if they will be a good fit for your neighborhood. Ask them directly what they plan to do while they are renting your house for their vacation. For example, if you discover a potential guest is planning to rent your house to accommodate a wedding party or a birthday party, think about the impact on your neighbors and if they will be okay with this. Some properties I manage are in neighborhoods that will only tolerate very quiet couples, others are set up to accept larger groups and the neighbors are clear on this and understand the rules. Know your neighborhood, and set up your own House Rules that your tourist tenants must agree to comply with. The biggest complaint that most neighbors have who live next to vacation houses is noise. Some neighbors are more noise sensitive than others, and you need to know if your neighbor is going to call the police every time a group of vacationers sit around the swimming pool and listen to music. Give neighbors who live next to your rental your phone number, and ask them to call you directly if there is a noise problem. And when there is a problem, call the guests and ask them to quiet down. Since you are renting your house to tourists, it is your responsibility to make sure the guests you bring into your rental house are respectful of the local neighborhood. 3 - FURNISHING YOUR HOUSE AS A VACATION RENTAL Furnishing your house can be daunting if youve never done it before. Below is a very detailed list of basic home furnishing items you will need to provide. This includes suggestions for bed configurations, kitchen essentials, soft goods, and household items. Your guests will be looking for the basic comforts most of us look for in our daily living. Enjoy setting up your house for tourists - and strive to strike a balance between nice and economy. If you are striving to attract a higher end clientele add some nice touches and things that you would appreciate if you were a guest in your own house. You dont need to purchase all new items, but please doesnt use junk or your house will start to look like an unappealing garage sale. Add some interesting art work, wall mirrors, artificial plants, and some nice nick-nacks - just take care not to overdo it or it can start to look cluttered. Some personal pictures (a shot with your friends or family members) are nice to place on shelves... it reminds guests that they are in some ones house, and not a hotel. Suggested Bed Size Lay Out Your vacation rental property needs to be practical and user friendly as well as beautiful to look at. I have found the following general layout to meet the demands of most guests. As a general rule, avoid putting too many extra beds in a bedroom, you do not want to give the message of the more the merrier. If your property has an office or den, it is a nice feature to add a desk or set up an office. Try to make the nicest bedroom the master bedroom. The nicest bedroom is usually determined by the view and features - such as en-suite bathroom, private deck, French doors that lead to the swimming pool or porch, or it can just be the largest bedroom if the property offers no other unique features. If your property has more than one bedroom with an en-suite bathroom and/or view than you are lucky to have a property that can be marketed with more than one master bedroom or suite... and that is a fantastic feature. That way, couples traveling together dont have to flip for the best bedroom! About bed sizes: The layout below is suggested after nearly 2 decades of being in this business and listening to what guests require. Today, it seems like most people sleep in king size beds at home, and many couples who stay in vacation rentals insist on a king bed. For some couples, not having a king bed option can be a deal breaker since they are convinced they wont be able to sleep in a smaller bed with their partner. So that being said, here are the basic suggested guidelines... • Two Bedroom House Bedroom 1: Master bedroom - Prefer King bed. If room is too small use a Queen. Bedroom 2:- 2nd bedroom - Queen or 2 twins. (I find that 2 twins are a better option as they can be pushed together to make a King.) • Three Bedroom House Bedroom 1: Master bedroom - Prefer King bed. If the room is too small use a Queen. Bedroom 2: 2nd bedroom - Queen or King or 2 twins. Bedroom 3: 3rd bedroom - 2 Twins or Trundle bed • Four Bedroom House Bedroom 1: Master bedroom - Prefer King bed, but if the room is too small use a Queen. Bedroom 2: 2nd bedroom - Queen or King Bedroom 3: 3rd bedroom - Queen or King or 2 twins. Bedroom 4: 4th bedroom - 2 Twins or Trundle bed Guideline for Cookware and Kitchen Items Equip your vacation rental kitchen with basic cookware and kitchen items. Buy a good set of good cookware, as much quality as you can afford. It does not pay in the long run to get the cheapest as it will not last, but not necessary to buy the very best either. Sometimes you can find a nice stainless steel set in a box. Do not get the cheap aluminum stuff. • Stove Top Pans: Provide a basic set of 2, 4, 8, and 10 quarts. • Skillets: 7 and 10 inch • Oven Pans: Glass baking dishes: 9X13 and 8X8, roasting pan with lid (holiday dinners),cookie sheet, muffin tin, 1 pie pan, 2 cake pans, 1 pizza pan. • Mixing Bowls: 2 large: 8 - 10 quarts; 2 medium: 2 - 4 quarts; and 2 small: 1 - 2 quarts. These can be stainless or glass. These can also be used as serving bowls. • Knives: Paring, large vegetable, butcher, bread, and a sharpener. • Cook Prep Items: Colander, spatulas (1 medium size, l large size), mixing spoons (1 large, 1 medium), wire whisk, can opener (a good manual one is best), plastic cutting boards (1 large and 1 small), measuring spoons, rolling pin, ladle, funnel, and tongs. • Small Kitchen Appliances: Toaster, coffee pot (electric drip - Mr. Coffee Style), blender (good quality that will spin frozen drinks) • Other Kitchen Items: 2 to 4 pot holders and trivets, placements for complete table setting, 6 dish towels, teapot (for steeping tea; not essential but nice), bread basket, aluminum foil, and plastic wrap. • BBQ Grill: Inexpensive gas grills are best. Plan on replacing them about every couple of years. • Flatware and Serving Ware: Dinner plates, soup / cereal bowls, small plates (Service for 8 - 10 works best for property that sleeps up to 8), glasses (service for 8-10), flatware (service for 10 plus meat fork), 6 to 8 Serving spoons, 2 slotted spoons, coffee mugs or coffee cups and sauces (service for 10), 2 to 3 serving bowls and platters for hors doeuvres, or maybe a turkey or roast. Bright colorful serving bowls are nice and also help to add a pop of color to the kitchen. • Cleaning Supplies (keep in property for guests): Hand dish soap, dishwasher soap, degreaser, window cleaner, cleaning cloths, large 2 to 3 gallon plastic bucket, mop, 2 brooms (1 for inside and 1 or outside),1 dust pan Guideline for Soft Goods Equip your vacation rental house with nice quality bedding, towels, and window coverings. Do not buy the cheapest soft goods. They wont last and you will likely receive complaints. Guests expect good quality towels and linens and will write bad reviews for poor quality items. You can save money by purchasing from discount warehouse and home furnishing stores. • Towels: For a 2 bedroom rental - 12 bath towels, 12 hand towels, and 8 wash clothes; for a 3 bedroom rental - 14 bath towels, 14 hand towels, 14 wash clothes; for a 4 bedroom rental - 16 bath towels, 16 hand towels, 16 wash clothes • Sheets and Pillow cases: 2 sets for each bed. Get at least 400 count sheets • Bedding Protectors: Mattress covers for each mattress zip pillow protectors for each bed pillow (these go on the pillow before the pillow case). • Bed spreads or comforters: We take our cue from high end hotel rooms. At this writing (2011) travelers like duvet covers (over comforters) and / or mattalesse coverlets in the contemporary market. Bed covers MUST be washable. • Decorative and Comfort Items: Throw pillows, 2 or 3 blanket throws, throw rugs, door mats • Beach / Pool Towels - 2 per bedroom • Window coverings - Nice curtains and / or blinds Entertainment and Internet Service: Flat Screen TVs: People expect TVs in the bedrooms as well as the main living room / great room. I recommend a large TV (minimum 36 inch) in the living room, and smaller ones in the bedrooms (15 - 24 inch are fine). Small flat screen TVs need to be mounted on the wall or bureaus for security reasons. Cable TV or Satellite: Dont offer pay per view features. Its too hard to keep track of those charges. Internet (DSL): WiFi router is an expected feature. Almost all tourists travel with laptops... and they get upset if they dont have internet access. Most renters do request WiFi. Stereo and C/D player: Most guests travel with iPods in todays market, but most still expect some kind of music player. This should not be an expensive unit. It can be a large boom box type with detachable speakers and should be large enough that people do not try to take it outside. 4 - Maintenance and Housekeeping Your vacation rental must be well maintained and kept immaculately clean. Keep in mind, that while your house is not a hotel, you are offering it as a vacation accommodation to travelers, and guests will expect maintenance and cleanliness standards set by nice hotels. This is not a place to cut corners, and if you do, your house will soon appear on a travel log such as Trip Advisor, Flip Key, or rental review sites with negative comments. Bad reviews about poor cleaning and maintenance, even if they are exaggerated by unscrupulous guests, can quickly stigmatize your house and discourage future guests from renting it. You simply must commit to bearing the cost to keeping your house to quality standard. Most vacation rental agencies collect a departure cleaning fee in advance from the guests to clean it when they leave. Guests expect and deserve to arrive to a clean and tidy property. Set a cleaning rate that will cover your costs to clean the house thoroughly each and every time guests depart. Make sure you plan enough time to clean the house, and better yet hire a good professional housekeeper. Make sure carpets and furniture are cleaned as needed. During periods when your house is not rented, be sure you give it a deep clean. Replace towels and linens with new ones as necessary, and never make a bed or make up a bathroom with tired or stained linens or towels. If your house has porches or decks and outdoor furniture, they must be kept scrubbed and free from mildew and look fresh for every guest who checks in. Same with windows, yards, landscaping, swimming pools, and Jacuzzi tubs - they must be maintained to quality standard or you will get complaints. This goes for household maintenance issues as well. You will need to hone your handy-man skills and make sure all the light bulbs work, a/c filters are changed, the internet is working, TV remotes work, the toilets are flushing properly, and the pool and Jacuzzi heaters are working right. You will also need to be on call to go over to the property and provide minor repairs. Unless you live in the same town as your rental, and you are absolutely committed to maintaining it, hire professionals to do this for you. If you are not willing or able to do this, or cannot quickly respond to any maintenance needs, I strongly recommend that you hire a professional rental agency that is staffed up to provide these kind of services. It will save you a lot of head ache and could save the reputation of your rental house. 5 - Managing Your Property - Advertising, Reservations, Rental Contracts, Bookkeeping The final basic step to turning your house into a successful vacation home is to start advertising it and taking reservations. Today, there are several mega-vacation rental advertising websites to choose from that have huge data bases of available rental properties. Most of these are set up so you can you can post your own ad copy and download your own property photos. Expect to pay over $500. to get positioned on-line so that prospective renters can find your property. You can also use social media such as Facebook and Twitter to promote the availability of your property. If you decide to manage your property yourself, you must be completely committed to every aspect of the administrative process. This means answering email and phone inquiries in a timely manner, maintaining an availability calendar, talking with potential guests to determine if they are appropriate renters for your house, writing and sending rental contracts to guests, collecting rental fees, collecting and paying required bed and / or sales tax, collecting and refunding security deposits (or determining costs where there is damage), paying housekeepers and maintenance people, paying utilities, keeping licenses current, and generally staying on top of the bookkeeping. There are several home-based reservation management software packages available to help you stay organized, but they will only work if you are diligent about keeping the information updated.
How To Start Your House Flipping Business Step By Step : Want to start flipping houses but just dont know where to start? Do you need to set up a business? What type? What type of house flipping should you start with? What if you dont have much money? There are a million questions that can be asked. Theres so much information out there and its hard to know which is the right way to go and who to trust. Im going to cut through all of the confusion and show you how to get started in a step-by-step way. This is based on my experience and is my recommended path to getting the ball rolling. Step 1: Know Where You Want To Go We shouldnt just jump in our car and speed away without knowing where we are going. Thats crazy and a complete waste of time and money. Weve got to figure out our destination first. In my opinion, this is the single most important step in this process. You have to know your destination. It needs to be very clear and definite in your mind. An end goal of getting rich is too general and not definite enough to allow you to envision where you want to be. We need to figure out exactly what we want and how we want our lives to be so that we have a clear vision of what it is we are trying to achieve. Would you like to be able to take your family on vacations whenever you want and for as long as you want? Do you want to be able to earn profits instead of wages so that you can do this full-time and be in control of what you are doing and when? Do you want to be able to achieve all that you feel you are meant to achieve without waiting for someone to give you the opportunity? In order to do these things, we have to lay them out as specific goals. You can take getting rich and ask the right questions to figure out what you really want and why you want to flip houses. We could ask WHY we want to be rich. What would being rich do for us? What kind of things would you do if you were rich? What would your average day be like if you were rich? Answer these questions and write down your answers. Something about writing things down helps you to fully realize and remember your answers. Better yet, start a vision board. Figure out what your true dreams are and try to make them as specific and clear as possible. Try to have concrete goals that you can work towards. Narrow your focus. Step 2: Get Educated (dont overdo it) Now that we know our destination, we still shouldnt just jump in that car and peel out into the distance. That might be funny, but it would not be funny for very long. Especially when you find yourself lost and frustrated. We need to get educated so that we know the best way to get to our destination. We need to study the roads and figure out not only the shortest path, but the path with the least amount of traffic jams. The traffic jams in house flipping are the things that slow us down and make it more difficult for us to get to where we want to be. This can be things like having a ton of over-leveraged rental properties with non-paying tenants that are trashing the place and causing you to bleed money at a staggering pace. Youve probably already started your house flipping education. Well, I know you have because you are here reading this. At least you are in the right place! Thats a great start. That shows me you already know what you are doing so far. What do you need to learn and where can you learn it? In order to figure out what you need to learn, we need to figure out which house flipping strategy to focus on. Focus Your Energy On One Strategy There are a lot of strategies out there. Ive seen some really crazy and down right dangerous ones. Most typically just sound great and look good on paper but are super risky in reality. When you add the human factor to a lot of these strategies (tenants that dont pay and completely trash your house, unscrupulous investors and sellers, unforeseen costs and repairs, lawsuits, and list goes on and on), they are just not a good way to go. You have to get back to the basics. To the tried and true things that have been working for a long time for a lot of investors. My Recommended Starting Strategies (and I still use them myself) Starting with birddogging and wholesaling is the easiest way to get into flipping houses without much risk and with little to no money. These are the strategies that I feel you should focus on. I call these the strategies with the lowest entry costs in terms of time, money and experience. Give yourself a better chance of really making it by laser focusing on these two methods. Heck, just focus on one if you want. The great thing is that both of these can be learned quickly and interchanged for each deal as you see fit. Birddogging A birddog is someone that finds leads and gives these leads to an experienced investor to work. Heres how to do it: 1. You drive around and find vacant houses and send letters to the owners of the vacant houses. One of the owners calls you and tells you they are interested in selling the house. 2. You then tell another investor that has the ability to act quickly about the lead and he/she sets an appointment to see the house and makes an offer to the owner. 3. If they come to an agreement and the investor ends up buying the house, he/she will pay you a finders fee. This fee can be as much as $2,000 or more. I typically ask for $1,000 to $2,000 depending on how much potential I feel the deal has. I think most investors probably pay closer to $500 each if the leads are screened as well as I screen mine. What I mean by screening is just that I make sure the potential for a deal is really there. That the sellers have enough equity in the home and there are signs of motivation to sell. Some investors will pay small fees just for the lead (just giving the lead, whether they buy the house or not). Dont expect very much if this is the case (probably between $25-$50). Wholesaling Wholesaling is where you actually contract to buy a house and sell it as-is to another investor. There are several ways to wholesale, but in the spirit of having you narrow your focus, Im going to be discussing the assignment of contract alone. This is the strategy that involves the least risk and very little money. This is where you never take ownership of the house. Heres how to do it: So, if you find a deal where the house should sell for $100,000 and it needs $10,000 in repairs, you would want to buy it for $60,000 LESS THE AMOUNT YOU WANT TO CHARGE FOR THE ASSIGNMENT. If you want to be paid $5,000 for the assignment, simply buy it for $55,000 and offer it to an investor buyer for $60,000. Estimating repairs can be difficult in the beginning. At first, I sure was clueless when it came to what repairs cost. The best thing you can do is find a contractor (preferably one that has worked for house flippers) that can help you with the basic costs of normal repairs. Just sit down and make a list of normal repairs and what they typically cost. Some of the items can be priced based on square foot or linear feet. Market for leads (youll find out more about this further down in this article). Start taking calls and analyzing the leads. Most investor buyers are looking to purchase investment property at 70% of market value minus the cost to repair the property.The key with estimating repairs is that you will never get it the cost correct to the dollar. You are just trying to get a good estimate. Be conservative in your estimate. When you find what seems to be a deal that could work based on your analysis, you make the offer. If the seller accepts, you will sign a purchase and sale agreement (contract) with the seller that spells out the terms of the agreement. Most people use their own state approved contract for real estate transactions. I actually prefer a single page contract of my own that is straight and to the point. Most of the state contracts are full of CYA stuff for Realtors and tend to be 9 pages or longer. Talk about taking forever to get the contract signed! I dont enjoy explaining TIDE WATERS and other gobbledy-gook to sellers for several hours. Its important to make sure that your contract has and/or Assigns after the buyer name so that you can assign the contract. For the buyer name, you will use your name unless youve set up a DBA or company (read more about that below). In the beginning, its best to have an escape clause. This is where you have a statement in the contract that allows you to back out if you are unable to find a buyer for it. The clause should be simple and could be something like, This agreement is subject to further inspection of the property by the buyer. If the contract you are using has a section for a termination option, you can use that. This is typically used by buyers to pay a certain amount to be able to terminate the deal if they are not happy with the inspection or other aspect of the deal within an agreed upon amount of time. Once you have the house contracted, you take it to a title company and have it receipted. This is where you pay the earnest money you agreed to with the seller (I typically only pay $10 or $25 for earnest money. Its not a big deal unless you make it seem like a big deal (remember that). Contact your buyers and let them know about the deal. You will end up finding out who the serious buyers are by doing this. You really only want to work with buyers that take action quickly and let you know whether they want the deal or not. Dont waste your time with people that ask a million questions, like whether the bathroom toilet needs to be replaced. You are selling at a deep discount so those matters are irrelevant. Dont waste your time with these people.After a while you will develop a short list of go-to people that you can call and tell about the property. Its best to try and give them 12-24 hours each to see if they want the deal (one at a time of course). If they know there will be a lot of competition, they may not want to waste their time. If they know they have first dibs, they will be more than willing to check it out. Once youve found your ready, willing and able buyer (must be able to close by the date you specified in your contract with the seller), you will sign an assignment of contract form with them. This is just a single page contract (you can download a copy of mine here: Flipping Houses Resources Page. This assignment contract will then be taken to the same title company where you receipted the purchase contract. You could get a non-refundable deposit from the buyer to help ensure that they are serious. Good buyers will not hesitate to do this if it is a good deal. Non-refundable deposits can be as much as you want, but are typically $1,000-$2,000. When the deal closes, the title company will cut you a check for your assignment fee. Congratulations! Youve just made several thousand dollars without even owning the house. There is an alternative way to do this. This involves finding investor buyers and figuring out what types of deals they want and marketing and directing your efforts to find those types of deals. This way you can find exactly what they want so that you already have a ready and willing buyer. These investors might also help you analyze each deal so that you are buying at a price that makes sense for them (and of course you get the house for a little cheaper so as to cover your assignment fee! You do want to make some money for your efforts, dont you?) Theres no wrong or right way to go about it. Its really up to you as to which one fits better for you. You can try one method and then switch to the other or work at doing both at the same time. Your choice. This doesnt cover every possibility, but its a great introduction and good starting point for you to know what you need to learn about the process. Stay focused my friend. What if you stand to make a HUGE assignment fee? Good for you. If your end buyer doesnt like it, find another buyer. You are the one with the deal. If its a problem for them that you stand to make a lot of money for simply assigning the deal, tell them tough cookies. Thats the way its going to be. Simple as that. Why I Dont Recommend Rentals and Rehabbing - IN THE BEGINNING Rentals Some people want to start out by picking up rentals. The reason why I dont recommend that is because you should really have a certain level of cash reserves in case your places get trashed and go vacant, or tenants just stop paying and you have to spend a lot of time and money just getting them out. Rentals dont generate the kind of quick cash that wholesaling and birddogging can. Rehabbing Rehabbing is another one that I feel is better to start after gaining experience in wholesaling. This way you get a lot of experience in determining what the right prices are to buy the properties and in determining the repair costs, holding costs, selling costs and any other costs involved when rehabbing houses. Theres a lot more risk when rehabbing. If you start by wholesaling you might even end up developing a relationship with a local rehabber that can then help you to make the transition to rehabbing. Stay Focused Dont keep buying course after course trying to find that new secret way to do this easily. It doesnt exist and you are just putting off getting out of your comfort zone. Focus on one strategy, learn as much as you can about it and start taking action to gain experience and make a real go at it. Doing this will separate you from 95-99% of other people. Where To Learn Here, of course, is the best place. Im only slightly biased. But, you should also spend some time on the incredible forums over at Bigger Pockets and REIClub. These are great places to really fill in a lot of the gaps. I wanted to talk about figuring out where to start first, because when you spend time on the forums you will tend to get pulled in a lot of directions. You have to go in with a specific question to get answered. Search for answers to your specific questions and TRY NOT TO GET SIDE-TRACKED. People tend to get side-tracked easily because its easier (MORE COMFORTABLE) to just keep learning other things than to actually TAKE ACTION. Dont fall into that trap. Stay focused. Incidentally, the NUMBER ONE place to learn is on the streets. You will learn more hands down by taking action and finding out what you need to know. You dont have to know everything about a topic to get started. You should educate yourself on the basics and GET STARTED. Taking action will put you out of your comfort zone. It will be uncomfortable, but only in the beginning. Step 3: Start Marketing Youve got to find deals and you need to find buyers to buy those deals. Im a firm believer that it is much easier to find awesome deals by targeting motivated sellers. You arent looking for the right houses as much as you are really looking for the right sellers. A lot of new people think the only way to start is to find a real estate agent and have them find listed deals for them. Theres simply too much competition and the deals tend to be too slim. Its possible to work it this way, but why when it is much easier dealing directly with motivated homeowners. Marketing For Buyers It would benefit you to start immediately looking for cash investors. These are the people that you will try to sell your leads and/or deals to. Typically, rehabbers (people that fix up the houses and sell them) and landlords are going to be the people you want to find. These are the ones that are always looking for fixer upper houses, the kind you will be finding. Other wholesalers can also be great people to network with. If you are having trouble moving one of your deals, you can see if theyve got a buyer that would be interested. You would work out a split of the profits with the wholesaler if they do find a buyer for your deal. Here are some excellent places and ways to find buyers: • Local Real Estate Investor Association (REIA) meetings • Calling we buy houses advertisers (call numbers on bandit signs, yellow pages, online, etc) • Marketing your deals - you do want to market your wholesale deals (bandit signs, newspaper ads, craigslist ads, etc) • Have a Realtor look up investment properties that were sold recently and find who bought them • Calling For Rent signs • Driving neighborhoods where you want to invest and looking for houses being rehabbed Marketing For Sellers To find deals, I recommend marketing directly to motivated sellers. This is the We Buy Houses type of advertising. You are trying to find people that have a house they need to sell. This does not just mean people facing foreclosure, which is what most people immediately think of when talking about motivated sellers. There are a lot of other reasons that people will sell their house at deep discounts. These reasons could include (and are certainly not limited to): • House needs a lot of repairs the owner cannot afford to make • Person inherits a house and would rather have cash • Landlord is sick and tired of dealing with their rental property • Owner needs to relocate and sell their house fast • Divorce situation where the single owner cannot afford the house • Owner just doesnt want the hassle of selling their house the conventional way I could list the techniques on how to do this marketing, but a much better way would be to show you what I do and how I do it. And, in case you didnt already know, Ive blogged about 34 weeks of all the marketing I did and the leads that came in. Be sure to check out the first and second weeks on my blog where I show my marketing. Step 4: Start Building Your Team As you start to find and work deals, you will find it necessary to have good people on your team. These are not employees. Rather, they are people like a great closer (title company), real estate attorney, contractor (to help determine repair costs), accountant (hopefully you will need this as it means you are making money!), and a real estate agent (some are worth their weight in gold). Step 5: Set Up Your Company Heres a question that comes up a lot. People tend to get themselves stuck on these kinds of questions (including myself, in the beginning) and I think it is because it really is just another excuse to not get started. NOTE: I am not an attorney, nor am I an accountant, and I dont play one on the internet. Im not giving legal or financial advice so take these suggestions for what theyre worth. When you are starting out, there is no problem with just using your name. As long as you are conducting business in an ethical manner, there really is nothing to worry about. DBA or LLC? My suggestion is to wait until youve done a deal or two and then set up an LLC. If you want to check into which entity would be best for tax purposes, contact a competent accountant/tax person (try to get a referral from a successful investor if you can). For asset protection, contact a good real estate attorney. In the beginning, I did business with an assumed name (DBA - Doing Business As) because we were actually closing on the houses and I didnt want my name on record. When birddogging and assigning contracts, you dont take ownership at all, so this isnt an issue. Step 6: Get A Business Bank Account If you do set up a company or DBA, you should set up a business bank account. Remember, this is a business bank account and should never be used for anything other than your business. You dont want to end up with problems because you werent running your business like a business. The protections that a business provides can be eliminated if you do not run it like a business. So dont be spending money from your business account on something that is for personal use. You should consider whether you want to start one with a large national bank or a small local bank. Theyre definitely not the same. Ill discuss some of the benefits and negatives of each. Large National Bank Large national banks can be more convenient. They tend to have more options in the way of online banking and apps. The negatives that really, really grind my gears is that everything is done by their rules. What I mean is that when you try to call to find out one simple thing, you end up in a crazy labyrinth of a menu system... only to end up being hung up on just when you think you reached the right person. Another issue is that you cant typically go in and talk directly with a decision maker when it comes to a loan. Small Local Bank Small local banks are not as convenient when it comes to having branches all over the country (obviously) and online banking and apps that do as much as the large ones (though this seems to be changing quickly). The biggest benefit to the small banks is the ability to build relationships and the ease with which customer service is handled. Those are enough for me. We still bank with a large, national bank, but that will probably be changing soon. I cant even deal with them anymore. Anytime there is a problem, Melissa (my wife) has to handle it. And I thank her very much for that. Step 7: Grow Your Business When you start making money, be sure to reinvest it back into your business. OK, you should use a small part of it to celebrate your success. But the rest needs to go back into marketing and building your company. The first years are the most difficult and you have to do your best to build a strong company. Spending money on marketing can be hard at first. It sure becomes easier after youve made a couple grand with a simple birddog deal or several grand wholesaling a house. Dont be afraid to spend money on marketing. Make sure you are always planning your strategy and keeping an eye on your goals. Please be sure to figure out why you really want to do this. Step 1 above is the most important of all of these steps. Believe me. Rehabbing Rehabbing is where you close on a property, fix it up and sell it to an end buyer that is either going to live in it or rent it out. The logical progression for most people is to go from birddogging, to wholesaling, to rehabbing. With rehabbing you will need a source of money, insurance, contractors, patience, design sense, creativity, a desire to turn a dump into a beautiful home. Did I mention patience? Good.
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