Best Area to Get Started In?

[Chris Coughlan]

With the current mortgage crisis and hearing all of the foreclosure opportunites on the radio I decided to look in to it a few months ago. After doing a bunch of research it appears that there is great potential in the short sale/preforeclusure market. I've kind of been turned off from foreclosure/auction/sherrif sales due to the long process and the inability to inspect the property etc.

Besides getting the "balls" to actually approach people in preforeclosure situations, the main thing holding me back is financing, I simply do not have the money for a downpayment.

My plan was to buy properties, hold on to and rent them until the market turns, and then eventually sell, but that may not be the best option at this point.

Reading this forum the last few days I've been hearing some new terms:

bird dogging - http://www.biggerpockets.com/articles/bird-dogging101rb.html
wholesaling - http://www.biggerpockets.com/articles/wholesaling-properties-lg.html

To be honest, I'm not 100% sure what the main difference is. It seems like bird dogging is just finding properties below value for a buyer to rehab and sell/flip, and wholesaling is just finding properties below value for the buyer to sell/flip. The key to both is that you are using the buyers money?

subject-to / lease-to > I've read this term a few times on this forum and it has been related to "little money required". I guess I'm looking for what this really means.

I need some direction on what people think is the best avenue for me to start with. Are there options for me to get started where I don't need a lot of money? How can I get in touch with investors/buyers if I did want to bird dog or wholesale?

I'm sure I'll have many more questions, but that's it for now.

Thanks

[Account Closed]

Chris, Welcome to BiggerPockets! If you don't have money for traditional financing, you will have to pursue a strategy of creative financing, without banks. You need to work to build up your cash reserves, as you said.

Birdogging is when you are acting as the person who is out beating the bushes for deals. The best way is to network with real investors at your real estate investors club (see the link on this site for a listing of clubs in your area), and/or call for rent ads and signs and talk to the landlords, who may be buyers for more properties, and establish a buyers list. Ask your buyers what their parameters are. Now you will have an "order list" and can go out and seek properties that fit their parameters (area, price, type of house, whatever). If you are a bird dog you will have an agreement with the buyer that if you bring a deal sheet to them, which fits their criteria for buying, they will pay you a finders fee or bird dog fee if they buy it. Then you would be out of the picture and on to the next search.

If you were a wholesaler, you would do all of the above, but you would go ahead and write a purchase agreement up, make an offer and get your offer accepted in writing by the seller. Then you would contact the investors on your buyers list and pitch your deal and see if they are interested in buying it (you will add your assignment fee to the price you are asking from the investor- end buyer. This fee can vary alot, from $2K on up. If he accepts, he closes the deal with his financing and you get your fee (or some wholesalers get their fee up front).

If you do either of these strategies you would not need much if any money to do the deal, hence the appeal to new investors. However, you do have to have a marketing plan to obtain the motivated (key word) sellers. That wil cost money. But at least it is not a huge lump sum, just a few hundred per month can buy a fairly nice marketing plan. The smarter your plan and the more you market the more potential motivated sellers you will find. Read the posts under the "Marketing" forum for alot of good ideas. Some people use bandit signs, direct mail to absentee owners or free and clear owners, etc.(you buy a list from a source like www.melissadata.com) newspaper ads, preforeclosure lists, probate, door flyers, post-it notes, yellow letters, post cards, Craigslist, and others. Keep marketing and develop a "spiel" where you can qualify the sellers so you reduce wasted time looking at houses that you can't buy because they are not motivated enough. It's a numbers game at that point, if your marketing is working. Eventually you can make offers. If you get a good deal accepted, you can always find a buyer for it.

Subject to and lease option purchasing are two strategies where you may need some money down to make the deal but not always, again, depending how motivated the seller is. Look in the "Creative financing" forum and/or use the search function to read all about these strategies and the forms to use. With these methods, you are actually buying the properties, although you could wholesale them too if the deal is good enough. I like lease options because there are more people who seem to understand it and just need you to educate them through the process. They save sales commissions, they just have to wait for their money. You find a tenant buyer, get an option payment up front, make monthly cashflow (hopefully) and make the most of your money on the back end if they buy.

Keep your education process moving and learn alot from this site and a few select books that can be bought cheaply from ebay or amazon.com (used books option).

Good luck! Keep us informed of your progress! Mike