Out Of Area Landlords Present Great Opportunities
Posted on June 1, 2007
When the real estate market cools and selling properties becomes difficult, it opens the door for opportunities that many investors overlook. Often, the same conditions that caused the market to cool result in a higher than a normal migration of people as they move to find new jobs or to accept transfers as their companies consolidate. When people relocate before being able to sell their homes, they are often put in a financial bind. Being faced with mortgage payments on their old home while trying to pay rent or make payments on a new home can be quite stressful.
Many times when this occurs, people are left with few alternatives except to rent the old home until it sells. Therein lies a host of problems that can cause headaches for these unwilling landlords and opens wide the door of opportunities for investors. While making payment on two homes may be stressful, it’s nothing compared to the stress of trying to manage a rental property you don’t want that may be hundreds of miles away.
For many of these reluctant investors, worries about cash flow invariably keep them from paying a professional property manager to oversee the properties. They try to handle everything themselves from long distance and when repairs, collection problems, tenant damage and other such common landlord issues occur, it drives them nuts. When sellers move away from a property, for whatever reason, and find themselves trying to cope with the expenses of a property they aren’t using, they can become very motivated. This motivation creates opportunities!
Some of the questions I’m often asked are, “How do you find properties where the owner has moved and is renting the property to help cover expenses?” or “When people are unable to sell a property before they move, isn’t it usually because it needs a lot of expensive repairs?” or “What’s the best way to deal with sellers who have moved?” It is my experience that people who say they want to start investing in rental properties, but focus on issues like these are usually more interested in convincing themselves they can’t do it than they are in finding good deals.
It doesn’t take a lot of effort to pick up the classified ads and look under properties for rent to find those with out of area phone numbers. This is a good indication that the owner has moved before being able to sell the property or possibly inherited it and need to rent it until it sells. Another good way to find these type properties is to get out and ride neighborhoods and ask people with whom you come in contact if they know of any such houses in their neighborhood.
Sometimes properties haven’t sold because they need expensive repairs, but that’s the exception rather than the rule. By far the biggest reason is that the sellers are asking more than the property is worth. Emotional attachments to a home where they have lived for several years can cause sellers to have an inflated opinion of it’s worth or place value on certain characteristics of the home that don’t mean much to potential buyers. Eventually they come to this realization and the more time that passes the more flexible they become.
Investors need to keep things simple! They need to realize that these can become real headaches for the owners. There are few forces stronger than having to make payments on vacant property that will motivate sellers to reduce the price, accept owner financing, offer favorable terms, or whatever else they need to do to move the property. Many times they will owner finance a purchase, which means no points and no fees, and in some more desperate cases, not even care whether you have a job, money or excellent credit. They reach a point where they become like the rat that said, “To heck with the cheese, just let me out of this trap.”
Here’s a tip! Don’t be reluctant to make offers that will work for you, although they may be far below what sellers are asking. Keep in mind that if you buy the property, it is you not the sellers who will have to make the payments. Many people are reluctant to do this because they don’t want to insult sellers, but an out of town owner who has been trying to rent a property and had to deal with the problems of being an absentee landlord may be more willing to consider an investor’s offer than you think.
One thing for sure, these owners will have an understanding of what’s involved with renting. They will have experienced the amount of rent their property can generate and this will make your job of showing them how you arrived at the offer much easier.
Don’t view making low offers as attempts to take advantage of seller’s unfortunate situations. People lose money every day on bad investments and other people make money because of them. If you make offers that work for you and sellers accept them, it could be a win-win situation for you both. You get deals on investment properties and the sellers get out of unfortunate situations. While the sellers may not be overly enthusiastic about the deals, you may have actually salvaged their credit or kept them from losing their new home. You aren’t taking advantage of people just because you profit from helping them solve problems they got themselves into.
Out of area landlords can present some great opportunities for investors.
» Filed Under Success Tips Articles
Comments
Leave a Reply