July 20, 2024

Decoration TipsA

The joy of Business

How to Use a Buyers List For Real Estate Investing

Using a buyers list in real estate investing can be tricky or very simple if you approach it properly. The tricky part comes when you don’t understand the focus and principal of the list. The simple part is how you collect the names for the list.

A buyers list is used to sell properties to buyers so the seller doesn’t have to wait for people to come to the property through extensive advertising. Expensive advertising includes realtor® commissions. Even at a 5% commission on a sale, this amounts to $25,000 annually on just five sales at $100,000 each. Multiply this by 20, 50 or 100 properties and the numbers are staggering.

In addition, realtors generally use the Multiple Listing Service (“MLS”) to advertise for other realtors® to sell the property. These other agents bring their own buyers to see the property and are paid ½ of the commission. All this takes time which can stretch into months or years depending on the area and the price of the property. Investors have to sell as quickly as possible to reduce their carrying costs and get their profit out.

Real estate investors have become proficient in developing ways to sell properties very quickly without paying a realtors commission. The most notable of these is using a buyers list of “hungry” buyers who have previously expressed an interest in buying wholesale houses, rental units or even rehabbed properties that are ready to move in for retail buyers.

The buyers list is very important to the continued success of every real estate investor. Unfortunately, most do not realize this until they have to sell their properties to a small group of buyers that are not in a competitive bidding situation. This results in the investor not getting as large a profit as he could if the sale was in a competitive marketing situation.

As the investor builds his buyers list, he should categorize his perspective buyers into “sub-groups” that are essentially niche buyers. These include, but are not limited to, landlords, wholesalers, rehabbers, end-buyers. Each of these groups of buyers will pay different prices for the same property if it fits their specific needs. For example, wholesalers will pay the least because of their wanting to re-sell the property yet again so they must have enough spread to make a profit.

Rehabbers will pay more than wholesalers because they are the target audience for wholesalers and they are looking at the after repaired value (“ARV”) for their larger spreads. Landlords are focused on their return on investment (“ROI”) from rental income and will generally pay more than wholesalers or rehabbers. Finally, the end-buyers are where the largest profit exists. End-buyers are homeowners who are buying the property to live in themselves.

Each of the various types of perspective buyers can be advertised for or found using normal investor strategies. There are over 25 of these techniques that will find hungry buyers that are just waiting to buy the investor’s property. The end-buyers are fickle in the sense that once they want a home to live in they continue to search until they find one. The landlords are somewhat picky because they don’t always have financing in place to buy more units. Wholesalers and rehabbers are generally always “ready to buy” if the property is a great deal.

The investor who builds his list must be equally aware of finding properties to offer his perspective buyers – even when he doesn’t have any of his own. He can work with other wholesalers, rehabbers and landlords to sell their properties and partner in the profits if a buyer comes from his list. By offering properties that are “good deals” as frequently as possible, he can make a living without having to find, rehab and re-sell to the retail market.