Both seasoned investors and individuals new to flipping or wholesaling houses will ask, what is the one thing that makes the difference for a successful real estate investor? The answer is elegantly simple; the people who put houses under contract are the ones who are successful.
I know it seems too simple, and there is more to the process, but I can tell a successful investor from someone who might do okay in the market based on how quickly they put a house under contract. The reason is straightforward; once you have a property under contract, you have the ability to make money off of that house. No house under contract, no potential for a profit or return on investment.
All right you say, but once I have a house under contract, aren’t I now taking on a huge risk? A contract is actually the best way to reduce your risk. Prior to having a contract, you can’t do due diligence, you can’t start inspections, and you can’t evaluate if it is going to be better to rehab the property or wholesale it. A well written contract with good contingencies not only allows you to reduce risk by opening up your ability to evaluate, but acting quickly to get under contract also reduces your risk of losing out on the best investment opportunities. Often the biggest risk to making money is the risk you take when you delay making an offer on a property.
Don’t worry about what contractors you need, or if you have a buyer lined up yet, or even if you have secured financing. Those are issues you can solve during the due diligence period in your contract, but you will never need contractors, buyers, or financing if you never make the offer and set up a deal.
But maybe if I wait longer, I can get a better deal or negotiate them down?
Actually getting a property under contract is the best way for you to get a better deal. During the inspection and due diligence period you build into your contract you can leverage your contingencies and your discovery about the property to negotiate an even better deal. Once someone has said yes to a deal, they tend to be more motivated to keep moving forward and are more open to negotiating, so don’t be afraid that a contract will make it harder to get a better deal, because a contract is exactly what you need to be more effective in your negotiations. Your contract is the tool that allows you to get the best profit out of a property.
Okay, so I am convinced and am ready to go out there and make offers on everything. Wait; here is the one time I will tell you to slow down a little. The best way to be able to confidently make offers on properties that will make you money is to first set your criteria. Establish your goals and your strategy. Have a basic idea of what types of properties fit your strategy and a rough idea of what kind of numbers you need to have a good deal. Know how much below market value you need to be at for a viable deal. This will allow you to quickly evaluate potential properties and pull the trigger to make the offer, not on just gut instinct, but because you know the numbers will work.
Decide what contingencies you want in a contract ensuring you have all the tools you need to evaluate, negotiate, and have the opportunity to back out of a deal that won’t be profitable or that doesn’t work with your strategy. Even with contingencies that are meant to protect you and your earnest money, keep your contracts as simple as possible. Though this is not always possible, especially if you are in a situation that requires a MLS contract, clear and simple is better and allows the seller to accept an offer more quickly.
Creating a standard contract that is your template and includes the contingencies you want on all deals is a good idea. This can even be a fill in the details that you can keep with you at all times so that you can make an offer on the spot when you have a property that fits all of your criteria. Imagine finding a great property with a motivated seller who is anxious to get a deal moving forward. You pull out your standard contract, fill in the property information, and add in any additional contingencies you want, sign it and give that offer to the seller. Your decisive action now makes you the person the seller wants to work with and your confidence can give you the edge that makes the difference between getting what you want and having to settle for investments that only almost fit your strategy.
So decide on your criteria, know what contingencies you need, and get those properties under contract. That’s what makes a successful real estate investor.
Click HERE to find out more about how we can help you get more properties in the Washington DC metro area under contract.
Have you signed up to attend the DMV’s premier wholesalers meetup yet? Meet other wholesalers and aspiring wholesalers and join the discussion of how to find and close more deals. See details at https://www.meetup.com/Express-Homebuyers-Wholesaling-Real-Estate-Meetup/