Techniques to Assigning Deals for More Profits
When I first started flipping properties, I assigned my deals to the first investor I could find not considering that it could be possible to make more profit. Now, that I have become more experienced, I selectively accept contract assignments.
Today I want to discuss how you should assign a deal to an investor the proper way for fastest results and many times larger profits.
1. Make sure the math is correct.. During depressed or downturns in the economy use a value of 60% of the current market value less repairs. When the market is appreciating you can use 70% less repairs. This will ensure your investor/buyer can still make a profit and be secure even if the market slips.
2. You heard it before, but let me say it again… Location, Location, Location! Investors don’t want to buy in war zones or areas where the future value won’t increase when the market starts to improve. Each and every investor has specific areas where they buy property, as well as areas they avoid. You need to ASK each investor where they will accept contract assignments, and keep an EXCELLENT DATABASE so you don’t have to struggle finding a buyer when you need one (or more). This is why I have you build your buyers list first.
3. Comparables Sales including solds (within the last 30-60 days), pending sales and active listings. Use a quarter mile radius to start with and then stretch it out from there. Make sure you stay within 10% of the living square footage, 25% of the lot size and 10 years of when the house was built. Be prepared to share the comparables with your investor and talk about them with confidence.
4. Competition – how many active listings are there in a quarter mile radius? How many are REO listings? If an investor is going to buy a contract assignment they don’t want a lot of competition when they go to resell that property after repairs. Plus if the value of the nearby REO’s is far less than your comparables that will drive down your resale value, which will drive down your offer price. Make sure you determine your market value properly!
5. Accurate Repair Estimates. You have to do the correct amount of repairs. It will not help to cut corners. Neither should you go overboard. Revisit your comparables before you complete your repair analysis so you know how to make your assignment equal or better than the competition. When your investor asks you about the repairs, you can explain how you came up with the repair list and costs and let them know their profit margin is secure.
6. Practice Makes Perfect. If you haven’t presented an assignment to an investor, take the time to practice first. Use Flippers software to create a presentation for you . Then Present it to your family, to your friends. By the time you approach the investor your language will be polished and appreciated.
7. Always after completing an assignment with your investor, ask them if they need any additional data or information for the next time. Believe me; they will truly appreciate you taking the time to find out what THEY want.