Bandit Signs: Do They Still Work in 2017?

Let’s face it. Bandit signs, those small plastic “WE BUY HOUSES” signs posted on telephone polls and at intersections, are the Kanye West of the real estate industry. The people that love them think they’re absolutely brilliant, and the people that hate them… well, they just wish they’d go away. As divisive as they are, we took a deep dive on the state of bandit signs in 2017 to see if they’re still a good way to generate leads.
For more (legal) ways to generate leads, check out our top 43 real estate lead generation ideas.
Okay, throw on some music that gets you amped about making more money (our pick) and let’s get started.

Where To Buy Bandit Signs (And How Much They Cost)

Source: Phillip’s Natural World

You can purchase bandit signs at any online or brick and mortar sign shop. Coroplast (corrugated plastic), is both weather resistant, and fade resistant, so it should be your first choice. You can buy them for as low as $1.99 each. Then you’re going to want to stock up on staples, a heavy duty staple gun, zip ties, or maybe even a dedicated sign stapler.

The Psychology Behind Bandit Signs: Why They Work

Source: New York Transit Museum via BBC.com

For more than thirty years Dr Jonathan Zizmor has been running the same decidedly un-slick ad in the New York City subway system. It’s dominated by a garish rainbow, a confusing and cluttered hodge podge of different fonts, and a layout that’s well…there’s no other way to say it, ugly.
As silly as it looks, the design flaws were probably no accident. Here’s Dr Zizmor himself explaining his ads to Business Insider:

“I was getting all my fancy-schmancy people, but I wanted to see the rest of the world,” he said. “Most people don’t even know a dermatologist.”

How many people know a professional real estate investor?

9 out of 10 People Agree…

If you were to ask ten New Yorkers what they think of Dr Zizmor’s ad, nine of them would probably just roll their eyes and laugh. After all, the ads are pretty silly looking.
Of course Jonathan Zizmor doesn’t care about nine out of ten New Yorkers. He cares about the 10th New Yorker. The one who works a lower wage job and has severe acne, or maybe an embarrassing scar. For them Zizmor’s ad is a serious one—they don’t see a silly ad. they see a doctor who is approachable. Someone who won’t look down their nose at them or make them feel inferior for having an embarrassing skin condition. A doctor who looks like a regular person, terrible taste in graphic design and all.
That tenth person might have been putting off treatment for years, or even decades. They’re probably worried that they can’t afford treatment at all. They’re also probably more than a little embarrassed to be looking for acne treatment or scar removal in the first place. Despite all this, they’re finally ready to throw in the towel and call a dermatologist. On the subway the next morning, they’re confronted with this ad:

Source: Laser Dermatology NYC

Again, they’re a little bit embarrassed, they’re worried about not being able to afford treatment, but they’re still committed to calling a dermatologist TODAY. Who do you think they’re more likely to call?
Since you’re reading an article about bandit signs you probably already guessed the answer. They’re going to call Dr Zizmor. Wouldn’t you?

Why Desperate Homeowners Respond to Bandit Signs

If you’ve been working as an investor, rehabber, or wholesaler for a few years, that tenth New Yorker who called Dr Zizmor probably reminded you of someone: A homeowner who needs to sell their house quickly. Think about it. They’re probably embarrassed to be so close to foreclosure, they definitely don’t have a lot of money in the bank, they need to sell yesterday, and probably think they’re going to get taken for a ride by the broker in the gleaming S Class and Saks Fifth Avenue pantsuit.
Here’s what most desperate homeowners who need to sell are looking for in buyer:

• Someone they can relate to
• Someone who won’t make them feel ashamed
• Someone who might be closer to their economic level
• Someone who will tell it to them straight
• Someone who they might be able to out negotiate
• Someone who speaks plainly

For many homeowners who find themselves in stressful financial situations, calling a number on a bandit sign might make a lot more sense (at least emotionally) than heading over to the local boutique real estate office.
Now that you have a better idea of why bandit signs work so well, let’s dive in and look at the 7 problems you’ll encounter when using them. Even better, we’ll show you how to avoid those problems and start generating leads with bandit signs.

The 6 HUGE Problems with Bandit Signs in 2017 (and how to avoid them)

Before you start getting excited about how many new fix and flip projects you’re going to get from a weekend of posting bandit signs, you need to understand the risks. Here’s a quick rundown of the risks and potential downsides of bandits signs.

1. They’re Called Bandit Signs For a Reason…

Bandit sign is not just a catchy name. Bandit signs are called bandit signs for a very good reason; in many municipalities bandit signs are actually illegal.
Yes, really. Despite (or maybe because of) the recent explosion of interest in fix and flip and rental investing, many local communities have been cracking down on bandit signs. In Philadelphia for example, a weekend spent putting up bandit signs can cost you as much as $75 per sign. Putting up 20 signs, which is not an unusually high number for many investors, might end up costing you $1500 in the city of Philadelphia. In Orange County Florida, the fine is $150 per sign. That’s $3000 for twenty signs…

How to Avoid Getting Getting Fined in 2017

Let’s not beat around the bush here. The only way to truly avoid getting fined for putting up bandit signs is to not post them at all. After all, cold calling FSBOs, signing up for Zillow Premier Agent Direct, or mastering Facebook ads can get you great listings too. That said, since you’ve gotten this far into the article, you might want to know how creative investors avoid paying fines. Here are a few of their ideas.

Get permission from property owners

Although local ordinances might affect them as well, owners of private property are probably going to be a lot more forgiving than the local government. If you’re nice, they may let you put up your signs for free. If it’s a really prime location (busy intersection, downtown area near public transportation etc) then it might even make sense to work out a deal. Would you pay $50 for 5 good leads? I know I would.

Talk to your lawyer

Let’s face it. Legal statutes, even at the local level, can be byzantine and opaque unless you’re a lawyer. Instead of crossing your fingers and guessing, buy your lawyer an expensive lunch and ask them.

Put your signs up on Friday night and take them down Sunday night.

Some agents recommend putting your signs up on Friday and taking them down Sunday night. Since they work for the government, the odds of a code compliance officer working on the weekend are pretty slim. You also might avoid the ire of the local community. If they see you’re at least making an effort to not visually pollute their neighborhood, they may be less likely to call and complain.
That said, some investors have been reporting that code compliance officers are catching on and are now working weekends as well. Tania Matthews, a Keller Williams Mega Agent in Central Florida, reported that in her area at least, code compliance officers have been known to work weekends. This is why getting permission from property owners or researching local regulations is still your safest bet.

2. Some Local Residents HATE Them… and Will Hate YOU for Putting Them Up.

Source: The Adventures of Johnny Northside

No matter how you justify it, at the end of the day you’re trying to buy houses for below market value. Worse, you’re probably trying to buy them from vulnerable people in often desperate financial straits. They’re also ugly. Yes, they’re strategically ugly, but would you want dozens of bandit signs on your block?

How to avoid the Ire of the Community in 2017

Don’t use bandit signs to generate leads! If you’re dead set on using them, try putting them out temporarily, or putting them up on private property only.

3. You’ll Probably Violate DOS or NAR Disclosure Regulations

Source: https://www.rrar.com

Even if you get a pass from your lawyer and find a nice old lady who lets you cover her house in bandit signs, you’ll probably still run afoul of DOS or NAR disclosure regulations.
In most states, real estate advertising is highly regulated. The most common advertising regulation by far is that Realtors or even sometimes non-Realtors must fully disclose their licensure in all advertising. That means your cleverly amatuer looking hand written WE BUY HOUSES sign might have to include “Sally Smith, Licensed Real Estate Salesperson”. For many homeowners, that makes you someone they’re trying desperately to avoid: a skilled professional.
How to avoid violating DOS or NAR disclosure regulations in 2017
There’s only one real answer here and probably not the one you’re looking for. Follow all DOS and NAR regulations regarding real estate advertising to the letter. In 2017 advertising regulations in most states have gotten more strict, not less strict. The odds of getting fined for this are pretty slim, but if you’re a Realtor working under a designated broker, they will more than likely demand you follow all applicable regulations. For good reason too. They’re the ones that will get fined.

4. Your Bandit Signs are Going to Get Taken Down

Since posting bandit signs in your farm area might run afoul of local ordinances, make the neighbors angry, or get in the way of your competition, the odds of all your signs staying up can be remote.
Town employees, angry local residents, or your competition might decide to grab a utility knife or pry bar and tear your signs down. If you’re not careful about putting them up, the weather might do that job too.

How to avoid getting your signs torn down

Here are a few ways to make sure your signs stay up:

Create a map of where you posted signs and check on them occasionally

Throwing up a few signs and hoping for the best won’t cut it these days. You may post 20 bandit signs on a Friday and by Saturday morning only have three left. If you don’t remember where you put all your signs, that means you might not be getting calls from your best locations.
Instead, write down exactly where your signs are and take a few minutes to check on them once a week or so. If you find a location with competitor’s signs still up and yours torn down, that might mean it’s a great spot and your competition is trying to keep it for themselves. Pay special attention to these areas.

Use strong zip ties or heavy duty staples to post your bandit signs

If you’re posting signs to telephone poles or utility poles, always use heavy duty zip ties and contractor grade staple gun to put them up. There’s even a company that makes a two foot long heavy duty stapler specifically designed to post bandit signs.
You also might want to consider getting a little creative with placement. Generally speaking, the higher up they are, the more visible they are. They’re alo much harder for people to take down. If you have permission to post signs on a local building, use heavy duty concrete anchors to make sure your signs stay up.

When they go low, you go high

Let’s face it. Even the most dedicated vandal or real estate investor is probably not going to lug around a 12 foot ladder to tear down your bandit sign. That means the higher you can get them, the safer they’ll be. Here’s a quick video of just how easy it is to hang signs 10 feet up with the Sign Stapler tool.

5. There’s Too Much Competition

Source: Pexels

Let’s face it. With the rise of a hundred and one new TV shows about flipping houses, real estate investing is trendier than Pokemon these days. In fact, according to a study by Zillow sister site Trulia, more than six percent of all homes sold in 2016 were flips. That’s the highest percentage we’ve seen in more than a decade. That means your new investment strategy is probably going to be shared by more than a few people in your town. If you happen to work in one of the cities that Trulia found to be flipping hotspots like Las Vegas or Tampa, then there might be enough would-be investors in town to fill a minor league baseball stadium. Here’s how you can live with the competition.

If you can’t beat them…

Your grandmother’s best advice (besides to always wear comfortable shoes) applies to real estate investing too: If you can’t beat them, join them. Instead of viewing your local investors as competition, why not reach out and try to work with them? Real estate investors are not all cut throat Gordon Gekko clones. In fact, some of them can be downright friendly and actually want to work with other local investors. No one has all the money, all the time, or all the connections in the world. Meeetup.com and Bigger Pockets host hundreds of real estate investing meetups every day. If you keep seeing the same “I BUY HOUSES FAST CA$H” sign with the same phone number, give them a call. What do you have to lose?

6. You Might Not Get Any Leads

Source: imgflip.com

Of course like any lead generation strategy, there is a possibility that spending an entire day putting up bandit signs won’t get you any leads at all. Here are a few ways to tweak your bandit sign strategy to make sure your phone rings.

Your signs need to stand out

In order for people to see your sign and decide to pick up the phone, your signs need to stand out. A good rule of thumb is that if your sign is not legible enough to be read and understood from 20 feet away you need to go back to the drawing board.
In order to make sure your signs stand out, come up with a dead simple message “I BUY HOUSES ALL CA$H” along with your phone number in big, bold text (black), and choose a bright, highly visible background color (yellow or orange are pretty popular).

Pick your locations strategically

Like everything else you do in real estate, there is one mantra that should be in the back of your head when you’re putting up bandit signs. Location, location, location. What good is putting up a hundred perfectly designed signs if no one ever sees them?
Some locations to consider when posting bandit signs might be busy intersections, downtown areas close to mass transit. Shopping centers, malls, banks, Home Depot, check cashing companies, and payday loan offices.
Since many people will be driving by your sign at 30+ miles per hour, higher is generally better than lower. That means telephone poles, utility poles, or if you’re lucky, on commercial or residential buildings in busy areas.

Quantity over Quality?

There are two schools of thought here. One is that the more signs you have up, the more calls you get. While this may be true to some extent, if you were to actually track where the majority of your calls are coming from, you might find that you get 90% of your calls from 10% of your signs. Why not save yourself the headaches and mileage and only maintain your signs where you’re getting calls from?

Use a google voice number to track your results

Since bandit signs probably aren’t going to be your main lead generator, you need to be able to quickly and easily track who is calling you from your signs. One easy way to do this is to set up a google voice number and use that on your sign.
You can even set up several numbers if you have signs up in more than one neighborhood, then use call tracking software to easily identify the most effective locations.

The Bottom Line

Although bandit signs can be a tricky way to get leads, if you have check your local laws, find the right locations, and take time to maintain your signs, they can be a great way to build your business.

4 Simple Tips for Finding Incredible Real Estate Deals

When I was a child, every Saturday morning was the same: Wake up early, pile into the car with my mom  and start looking for . . . yard sales! Yes. I was raised by a "yard sale mom."
Because we didn't have a lot of money, we bought nearly all of our clothes, furniture, toys and pretty much everything else from someone who no longer wanted those items. And, let me tell you -- my mom was the master at those sales. She knew how to find the coolest gadgets, toys, games and appliances for pennies on the dollar. She could negotiate a 50-cent t-shirt down to 10 cents, and regularly did. She would even buy far more than we needed, just so she could resell those items at her own garage sales and make a profit to fund our family vacations.
Today, I do far less yard-sale shopping  but the lessons I learned from her haven't changed. I still want to find a great deal. Today, however, instead of 50-cent t-shirts, I spend much of my time hunting down great real estate deals, because I'm a real estate investor.
Whether I plan to flip that house, hold the property as a rental or go for something entirely different: Everything begins with a great deal. Here are four simple tips you too can use to find better deals on your own real estate, whether you're looking for an investment, a property for your business or simply a home for your family.

1. Consider buying a bank-foreclosed property.

When someone fails to pay a mortgage payment for an extended period of time, the lender will ultimately repossess the home and remove the occupants. Once the home is empty, the lender generally lists the house for sale on the market, using a local real estate to list it.
While the foreclosure, in itself, is of course sad (no one rejoices when someone loses a home), once the deed has been done, these properties can be some of the best deals you’ll find in real estate. Banks want to be in the business of lending money, not managing property, so they are often quick to offer large discounts just to get the deal off their books. Translation: You can get a great deal on foreclosed properties, if you know how to buy foreclosures right.
Because the foreclosure process can take several years, these properties are often in need of some serious repair or updating. So, further discounts may be given to compensate -- for buyers willing to brave a rehab.
Talk to a local real estate agent about the foreclosures in your area, and start checking some out. You might be surprised at the deals you can get.

2. Be the first . . . or the last.

In real estate, often the old adage holds true: The early bird gets the worm.
Oftentimes, it’s not the highest offer for a property that gets accepted, it’s simply the first. Therefore, if you are looking for a great deal, be quick about it! Get a pre-approval from a bank so you can jump at any property right away, and have your real estate agent set you up with automatic email alerts notifying you of any new property that hits the market.
Then, don’t delay -- check it out quickly, and make an offer the same day if possible.
Conversely, another way to find great deals is to look for properties that have been on the market for a long time. Those owners are often far more willing to sell for a discount, because they are tired of holding on to that property. Many times, they will have been making two mortgage payments for months (or years) and will entertain almost any offer.

3. Approach absentee owners privately.

In a hot real estate market, like the one most of the United States is experiencing today, great deals can be hard to find because of the large number of people looking for a home. In some areas, a single house for sale might get a dozen or more offers in the first several days.
Therefore, one of the best tactics real estate investors use today is to look outside your multiple listing service and instead contact owners directly, asking them to consider selling. At any given time, a good percentage of the population will entertain that option, so why not reach out before they list the home with a real estate agent?
One of the best kinds of people to target is absentee owners, which simply means someone who owns a property but doesn’t live there. They might be landlords (who hate their tenants) or owners who inherited their houses and are simply unsure what to do with them. You can find these deals in a number of ways, such as:

• driving around, looking for houses that look vacant, and using online public records to track down the owner
• buying a public record list using an aggregate-list site like ListSource.com
• calling mom-and-pop landlords who are listing properties “for rent” on Craigslist. Let them know you aren’t interested in renting, but you would like to talk to them about buying.

4. Look at a lot of deals.

Finally, understand that finding good deals is largely a “numbers game.” You often have to kiss a lot of frogs to find the prince!
For me, I look at deals in terms of a funnel. At its top, numerous leads come in, but at the bottom, only a few come out. Therefore, if I want more deals at the bottom, I need to improve each aspect of my funnel, including the quality and number of leads at the top. For example, my funnel might look like the following:

• Raw leads from my real estate agent -- 200
• The location is somewhere I would buy -- 100
• A quick analysis shows promise -- 20
• A deeper analysis still shows promise - 10
• Deals I've made an offer on -- 8
• Offers I've made that have been accepted - 1

Notice that, in the above funnel, my agent sent me 200 possible properties, but at the end, I ended up making offers on only eight and only one offer was accepted. If I wanted to buy two properties, I know I'd need to look back on my funnel and find a way to increase my numbers. Because, again, it’s just a numbers game.
Whether you are looking to buy an investment property, purchase a home for yourself or buy real estate for another reason, remember: You make your money when you buy. If you want to have immediate equity in your property, which can help you build wealth in the future, or save you in case of an economic turndown, you must find great real estate deals.
So, don’t settle for paying market-price for a house. Instead, follow the four tips here to get a deal so good even a "yard-sale mom" would be proud!

Real Estate Investing 101. What is BRRRR?

What is BRRRR?

BRRRR is an acronymn for a popular investment strategy that, until now, hasn’t been given a name. So, I decided to name it! BRRRR stands for:

• Buy
• Rehab
• Rent
• Refinance
• Repeat

In other words, it’s the strategy that involves buying fixer-upper rental properties, repairing them, leasing them out to great tenants, refinancing to get your money back and then repeating the process over again and again. This can be a powerful strategy because of the ability to acquire numerous properties without you running out of capital to invest — and at the same time, combining the benefits of house flipping with the wealth building characteristics of rentals.
Let’s break down the strategy for you and look at each step.

1. Buy

The first step in the process is to buy a great deal. Not just any deal… a GREAT one. Great location, great neighborhood, but a fixer-upper house.
BRRRR investing is very similar to house flipping; in fact, it IS house flipping, but rather than selling the house, you are going to rent it out after fixing it up. But the same principles that go into house flipping are needed here.
For example, a popular rule of thumb used by many house flippers is the 70% rule. This rule states that the most a flipper should pay for a property is 70% of the After Repair Value (what it’s worth when fixed up), less rehab costs. So a house that has an ARV of $150,000 and needs $30,000 worth of rehab could be bought for $75,000 because:

$150,000 x .7 = $105,000.

$105,000 – $30,000 = $75,000.

Think that’s impossible to achieve? Just ask most successful house flippers, and they’ll tell you that their entire business model is built on margins similar to this. So stop saying, “I can’t do this,” and start asking “How can I do this?”
It may require direct mail. It may require Craigslist. It may require driving for dollars. It’s going to take some hustle. But if house flippers can do it, so can you.

2. Rehab

The next phase in the BRRRR strategy is to fix the property up. However, unlike in house flipping, this property will be rented out for a period of time, so the materials you use should reflect that reality.

For example, I’m working on a BRRRR property right now. (I just purchased it last week and am in the middle of the rehab part now.) When my crew tore up the carpet, we discovered beautiful hardwood floors underneath. While this seems great… I’m actually not going to refinish them, yet. To refinish them would cost me around $3 per square foot, or $3,000 total. Then, someday when I go to sell the property, I’ll probably have to refinish them again because of the heavy tenant usage. And that’s IF I can refinish them again (you can only refinish floors so many times before they are sanded too deep.) Therefore, I’m going to use laminate wood floor throughout the entire home. This will protect the floors, for around $2 per square foot, and will look amazing. Then, before I sell it someday, I’ll just remove the laminate and finish the floors then, to sell for top dollar.

The key to rehabbing a BRRRR property is to make the property as “tenant proof” as possible, using materials that will last a long time and won’t need to be redone later. Also, it’s important to rehab with the goal of getting the highest ARV and rent possible. For example, if you can turn a two-bedroom home into a three-bedroom home, do it! This can add hundreds of dollars per month in cash flow and thousands in equity.
Of course, you could do all the work yourself if you wanted, or you could hire it out. That’s up to you and dependent upon your skills, availability and desire. DIY can save you a lot of money, increasing the odds you’ll find a deal that has numbers that work. But it will also take a lot of weekends and evenings.

3. Rent

Next, it’s time to rent the property out to GREAT tenants. Luckily, you just bought a property located in a great location and rehabbed it to look brand-new. It shouldn’t be hard to find incredible tenants to rent the house.
Furthermore, because the property was rehabbed at the start, your repairs and capital expenditures (roof, siding, paint, etc.) should be fairly low for the next few years. Everything has already been fixed! Of course, you’ll still need to budget for repairs and maintenance, but it should be much less than you thought.
Then, it’s time to rent the property out. You might choose to hire a property manager, but because you already rehabbed the property and because you are renting to high-class, great tenants, managing a BRRRR deal shouldn’t be too hard. I would save the money and do it yourself!
Now, to say something a little controversial: The goal of the BRRRR strategy is NOT to make a ton of cash flow. I know, I know — that goes against almost everything I’ve ever preached before. And I’m not saying to buy something that won’t cash flow. I won’t accept long term negative cash flow. Ever. BUT if I’m only making a little bit of cash flow, that might be okay with the BRRRR strategy because the power of the BRRR strategy is in the long “flip” — the equity built. I’ll explain this more in a bit. But first, let’s talk about the next “R” in the process.

4. Refinance

Earlier I talked a little about how you were going to finance the property and mentioned that it’s tough to get a conventional mortgage on a fixer upper. However, conventional mortgages are REALLY nice. Low interest, long term, easy. So the fourth step in the BRRRR strategy is to refinance into a nice conventional mortgage after the property has been fixed up. And even better, by refinancing, there is the possibility of getting all your money BACK.
Of course, you don’t NEED to refinance the property to get your money back. Perhaps you make great income from a job and can afford to let your down payment/rehab money stay in the property. This will likely help you get better cash flow, and maybe you’ll get a better ROI than you’d get elsewhere. However, if you are like me, you probably want your money back so you can do it again and again. So let’s talk about how to do that.
In other words, let’s go back to those numbers we used earlier. We found a property that had an ARV of $150,000. We purchased it for $75,000 and put $30,000 into the rehab. At this point, we have $105,000 into the purchase.
Most lenders will allow you to refinance a property for 70% of the ARV (in other words, they will do a 70% Loan to Value [LTV] loan on the property). Well, it just so happens that 70% of $150,000 is $105,000… so we could theoretically get back 100% of our invested capital.
That’s right — we’re going to refinance this property with a low-interest, 30-year fixed mortgage for $105,000. This will pay back whatever source of funds we used on the original purchase and rehab. In this example, the only money out of pocket will be the closing costs.
After the refi, you should have a completely stabilized rental property that shoots off a little bit of cash flow and has roughly 30% equity just sitting there. Plus, you’ll have all your money back, so it’s time to…

5. Repeat

The final “R” in the BRRRR strategy is to repeat the process. I mean, it worked once, and we got all our money back, so why not do it again? And again? And again?
Sure, at some point the bank will stop refinancing the properties for you. And maybe you’ll need to find another solution, like a portfolio lender or a partnership. But it CAN be done.

How to Make $100,000 Per Year with BRRRR

Now that we’ve covered the five steps of the BRRRR strategy, let’s look at an example of how someone could make $100,000 per year using this process.
Historically, prices of real estate have climbed around 3% per year when averaged out. Yes, some years are better and some worse, but over time, this has been true. But let’s be a bit more conservative and say 2% per year.
Therefore, say we bought a property today with an ARV of $150,000, but paid just $75,000 for it. Then we rehabbed it with $30,000 and refinanced it for $105,000. Then we rent the property out. At a 2% increase per year, this property could be worth $165,000 five years from now. At the same time, the loan during those five year would have been paid down so the balance would be just $96,000.
In other words, after five years, we would have $69,000 in equity. Of course, if we went to sell the property, it would likely need another coat of paint and maybe some other minor fixes. Plus, we’d have to pay the real estate agents about $10,000 as commission. And then we’d pay a few thousand in closing costs. So that $69,000 in equity would look a lot more like $50,000 in profit at the end of the day.
Therefore, to make $100,000 per year using the BRRR strategy, you simply need to buy two deals each year, and starting in year five, begin selling two each year.
As long as these numbers work, you’ll never have more than ten properties, and after five short years, you’ll be making six figures by just doing two purchases and two sales per year. Now, that could truly be a “four hour workweek.”
Of course, if you want to take that $100,000 per year and quit your job, you could. You could buy an airplane. You could go to Tahiti. Or…. you could recycle that money and turn that $100,000 into millions.

The Biggest Drawback of the BRRRR Strategy

At this point you are probably thinking, “This sounds great… so what’s the catch?” As with all investments, there are a few drawbacks to be aware of. There is a looming one that you may have already wondered about: what if you can’t refinance?
If you are unable to refinance the property to get your money back out, you are kind of stopped in your tracks.
Therefore, I recommend visiting a few local banks and making sure you are a good enough borrower before you ever purchase the first deal. Of course, if after the rehab you are unable to refinance the property, you could always wait until the first-year lease is over with the tenants, kick them out, and sell the property.
Having multiple exit strategies is always a great thing and one of the perks of the BRRRR strategy.
Other drawbacks include: What if the tenant destroys the house? What if you can’t find a good enough deal? What if you can’t finance the original purchase?
These are legit questions, but the cool thing is — there are answers! These are the kind of questions asked every day in the BiggerPockets Forums, so if you are not engaging there, you are missing out on one of the most powerful tools you have at your disposal.

Conclusion

The BRRR strategy has a lot of moving parts, but if you work it right, it can be a powerful ally in helping you build some serious wealth.
Following this strategy can help you combine the equity growth of flipping with the tax benefits, cash flow, and appreciation of rental properties, maximizing your profit at the end of the day.

A 60-Day Action Guide to Wholesaling Your First Property

So you want to become a real estate wholesaler? Great here’s a 60-day action guide to wholesaling your first property.

Introduction

Before we get started, I do not want to give you any false impressions. This is not 60 days to $5,000 without working; it’s 60 days to get you in the game.
I like to use analogies, and I will start with this one to put things in perspective. If you had the opportunity to play one season without pay to make an NFL team the following season, would you take the opportunity? I’d bet you would.
Let’s say you are doing everything your teammates are doing. You are getting up at 5:00 a.m. to run, and you’re in the weight room, out practicing, and learning the plays with the team. You’re doing everything, but you’re not getting paid. What do you think will happen? Eventually, you’ll be able to do what they do and make the team. You’ll become a paid player. It’s just the same for real estate wholesaling—you have to be willing to put in the sweat equity to reap the rewards. So let me show what this process looks like. Keep in mind—this is just one way, but there are many ways to close your first deal.

A 60-Day Action Guide to Wholesaling Your First Property

Step 1: Define your purpose.

The first step of the process is to ask yourself the following: Why do I want to wholesale property? What is it that I want and need? If you cannot clearly define these things, then stop. Also, your answer cannot be, “I want to make money.” Of course you do, but you want to use the money for what purpose? You have to have a reason. The universe will not work towards bringing what you need if you do not know how you intend on using it. This is like going to a bank and asking for a loan, and when the loan offer asks, “How much do you need?” you say, “As much as you can give me.” The banker then says, “Well, what do you need it for?” and your response is, “I just need it.”
Sounds foolish, doesn’t it? That’s how some of us sound when it comes to our approach to success. We want it but have no idea what it takes or what success looks like. Defining your purpose should not take long, but it will take energy. I tell people to think back to when they were children. What really amazed them? Work towards that and dig deep. Your answer is somewhere in there.

Related: The 6 Most Common Newbie Wholesaling Questions, Answered!

Step 2: Join a team.

Using that same analogy of football, let’s say you now have to find a team. In searching for a team, you’re simply looking for a group of people who want to accomplish the same goals you do. As a real estate investor, this is normally easy to do. As long as you find those that truly love real estate, you can find a common purpose with these individuals, and you can help each other achieve common goals.
When you’re wholesaling, you need other investors to network with. You have to be able to pick up the phone and discuss real estate with likeminded individuals. You can find these people at real estate meet ups, cash flow games, and online forums groups like BiggerPockets. You have to make yourself accessible. I often tell people to friend investors on BP in their area and start a group or join a group already established. Go to Meetup.com and search “real estate investor groups.” This is where you will begin to learn what they learn, do what they do, and know who they know. Real estate is a contact sport; you have to get out and create contacts.

Step 3: Absorb everything.

Once you find a team, learn as much as you can. Do not be afraid to ask what you may think are dumb questions. Ask and become knowledgeable. There are specific things you need to learn about, including your market, potential buyers, what these buyers are purchasing, and where they’re buying properties.
Let’s start with finding buyers; you can seek out this information by researching all the recent cash transactions that occurred in an area. Without going too far into the details, let’s just say you can contact a local title company and inform them that you’re doing market research and looking for all the recent transactions without financing that occurred in the past year. Once you receive the addresses, you can search those addresses with the county assessor’s office to look for the tax mailing address. Once you have the tax mailing address, you can then send out letters asking them to contact you if interested.
Related: How to Set Goals as a Newbie Wholesaler (& Actually Achieve Them!)
Once they call you—because they will call—ask them what are they looking for. Ask them if they will be ready to move quickly if you find it. Now you have buyers.
This is normally where the fear begins to kick in. Push that fear aside. You will go through the emotional roller coaster of fear, anxiety, low self-esteem, and many other emotions in between.

Step 4: Pay to play.

Education is not free. However, it does not have to be completely unobtainable, either. Building your circle of influence will cost you something. This will, of course, cost you time, effort, and sometimes money. You’ll need to put your money where your mouth is. If you really want to be an investor, you will have to invest in yourself
You will not be able to reap the benefits without giving up something. While gurus often say that with little effort you can close your first deal and make $5,000, that’s simply not so. The beginning is the hardest. You need to “pay to play” by taking others to lunch to ask questions, investing in direct mail, or driving for dollars. Also, to increase your circle of influence, you will have to pay to be in the environment of those who are doing what you want to do.

Conclusion

This article tackles the psychology of starting out. You have to have a purpose, educate yourself, absorb a lot of material, have the right mindset, and finally, put what you learn to action. Education is the key. If you want to learn to do something new, you have to reprogram your thinking to see it materialize. To quote my college professors, “Put your theories into practice.”

Pros & Cons of Using a New LLC for Every Property Purchase

The Pros & Cons of Using a New LLC for Every Property Purchase

by Matt Faircloth | BiggerPockets.com

There is so much conversation on LLCs—from the basic stuff such as what are they and why should we use them to more complex topics like which state we should register in and the difference between a manager-managed LLC and a member-managed LLC.

Today, I am going to take a stab at one of the questions that goes around a lot. Should you get a new LLC every time you buy a property? There are pros and cons for doing this, and in today’s video, I go over them in detail.

Pros of Using a New LLC Every Deal

1. Ownership structure: Perhaps you are working with several different owners on a new deal. It makes sense to have a new LLC as it will define the ownership percentages and the roles of each owner.
2. Working in a new state: This could be argued either way, but to me, it makes sense to incorporate in the state where your investment property is.
3. Doing a flip: Many investors do a new LLC every flip. This makes sense, as it separates that flip from other properties with respect to taxes and liability. More on this in the video.
4. Asset protection: Holding each purchase in its own LLC will compartmentalize each property from the other. If there is a liability claim with one property, it won’t affect any others held by you. Some would say that this is the main reason to hold each deal individually. Watch the video for a deeper conversation on how valid this is.

Cons of Using a New LLC Every Deal

1. Higher costs: You will pay a fee to set up each LLC and in most states another fee to file a return every year and a fee to your CPA.
2. Growing portfolio: Depending on the size of your portfolio, it might be easier to get a loan if you lump several properties into one LLC. Holding each property individually could make it harder to get financing, especially if the values are less than $100k.
3. Insurance: You can obtain a reasonably sized general liability policy on your properties and arguably have the same level of asset protection as you would if you held each address individually.

I go into way more detail on this in the video, so be sure to check it out.
I know there are schools of thought on both sides of this conversation, and I would like to her from both.

12 Rental Property Improvements You Can Make for Under $500

1. Paint

You may not be able to paint a whole house for $500, but you can enhance key rooms and create accent walls. Trending colors this year may include grays, beiges, greens, and pinks.

2. Change Out Flooring

The same applies to flooring. In cheap rentals, you may be able to use vinyl or focus on small, key areas of flooring. Putting new flooring in small entry areas and bathrooms or replacing the carpet in that one ugly bedroom could make a big difference in renting quickly and for more money.

3. Patch the Roof

Roof leaks can cause major havoc with rentals. They can quickly deteriorate your asset, cause ballooning repair bills, add to the maintenance interaction burden with tenants, and can lead to damage of renter belongings, which you may be on the hook for. In many cases you don’t need a new roof, just patches.

4. Add Smart Home Tech

Add some trendy new tech to make renters feel great about their choice. That could be smart locks or smart thermostats, better wifi, or new Google Home devices.

5. Bring in a Bar

You may be able to expand countertops or bring in a standalone bar, which really adds to the excitement and emotional appeal of a place.

6. Resurface Cabinets

Replacing kitchen and bathroom cabinets can be expensive and a lot of work. Instead, look at options for resurfacing existing ones.

7. Add a Backsplash

Kitchen backsplashes can make a massive difference in the appeal and perceived value of a home.

8. Consider Flex Office Space

Working from home is fast becoming the new norm. Many remote workers soon find that working from the sofa isn’t as effective as they expected. You may not want to reduce bedroom counts by turning one into a home office. However, you may be able to create some flex space with a cabinet, pantry, or Murphy bed that enables quick changes between daily living space and the office.

9. Finish the Garage

Finished garage spaces add a big “wow” factor and more value. Even on a tight budget, you may be able to finish walls, add flooring, install storage, or put in office furniture.

10. Replace Hardware

Replacing front door and cabinet hardware can have one of the best returns of any home improvement.

11. Stage the Home

Staging can be powerful for marketing rentals. You can do this virtually for less than $500—or bring in some extra furniture or rented furniture temporarily.

12. Replace Appliances

Appliances are a big deal to renters. Replace microwaves or dishwashers that are broken, consider adding a washer-dryer, or lease new appliances as a staging move. You can choose whether or not to include the appliances for the duration of the lease.

Best and Worst Real Estate Investments by Zip Code. # 11 Best is in my own backyard!

Best Real Estate Investment – By Zip Codes

Realtor.com conducted some research recently to find the best zip codes in the country. They chose a stat you might think is insufficient as a guide to invest — solely on demand.  Their list is based on a) the time it took properties to sell, and b) how frequently homes are viewed in each ZIP code.  There are other factors that go beyond current demand such as overall housing forecasts, specific features, crime rates, commuting time, types of properties, and more which will impact whoever rents your property or buys it.
Here’s a cool graphic from homesnacks.net that you’ve probably never seen before. It maps out all the zip codes according to these factors:

• Population Density
• College Degree Holders
• Unemployment Rates
• Household Incomes
• Short Commute Times
• Home Values

Looks like the give the thumbs up to Seattle, So Cal, Wisconsin, New England, and the core of Texas.

That’s a different ranking of zip codes, and it may help decide on, or avoid investing in properties in specific regions.

Here’s Realtor.com’s top 50 real estate zip codes:

Rank	ZIP Code	Community, State
1	76148	Watauga, TX
2	94523	Pleasant Hill, CA
3	80233	Northglenn, CO
4	80916	Colorado Springs, CO
5	78247	San Antonio, TX
6	94954	Petaluma, CA
7	2176	Melrose, MA
8	63126	Crestwood, MO
9	97222	Milwaukie, OR
10	92104	North Park, CA
11	40242	Louisville, KY
12	66204	Overland Park, KS
13	48072	Berkley, MI
14	95123	San Jose, CA
15	37214	Nashville, TN
16	78749	Austin, TX
17	94585	Suisun City, CA
18	14625	Rochester, NY
19	49508	Kentwood, MI
20	58103	Fargo, ND
21	46804	Fort Wayne, IN
22	95678	Roseville, CA
23	43214	Columbus, OH
24	95376	Tracy, CA
25	98105	Seattle WA
26	83705	Boise, ID
27	68144	Omaha, NE
28	27511	Cary, NC
29	90230	Culver City, CA
30	93906	Salinas, CA
31	59102	Billings, MT
32	93004	Ventura, CA
33	67209	Wichita, KS
34	80603	Brighton, CO
35	95062	Santa Cruz, CA
36	32707	Casselberry, FL
37	95368	Salida, CA
38	93720	Fresno, CA
39	50010	Ames, IA
40	14150	Tonawanda, NY
41	28273	Charlotte, NC
42	30269	Peachtree City, GA
43	55423	Minneapolis, MN
44	53005	Brookfield, WI
45	23226	Richmond, VA
46	66617	Topeka, KS
47	75495	Van Alstyne, TX
48	33624	Tampa, FL
49	7066	Clark, NJ
50	80501	Longmont, CO

Zip Codes with the Lowest DOM

According to Realtor.com, it takes 53 days less to sell a home in the top 20 markets. That means these zip codes are in much greater demand.  Will this demand continue through the next 10 years? The answer to that tough question might be found in state and region migration trends, demographics, types of industries, and other economic data, such as I discussed in the San Diego and Los Angeles and San Francisco real estate forecasts.
Investors might be very focused on where millennial aged buyers/renters might be living and where they’re likely to move to. Places like Longmont, Colorado might be head scratchers, however these might be very attractive locations for younger buyers.
For example, the migration away from Silicon Valley in California is one such trend that could last 10 years. The San Francisco, San Jose, Santa Clara region has all the earmarks of overheating such as in-migration, positive economic outlook, and a lack of residential land. Any towns such as Pleasant Hill (#2) and Petaluma (#6) and others in between Sacramento and San Francisco could have huge potential for price growth.