“Hot shots” is the name given to jackpot properties that every person who dabbles in real estate part time or full time watches out for. They keep their eyes and ears open to potential deals and jump at the first opportunity as soon as they know that the jackpot property is in the market. Their gut instincts tell them that this property will generate handsome dividends if the deal is handled properly.
Separating the Good from the Bad
Being able to discern the difference between a good and bad piece of property usually comes with insider knowledge and long years of active duty in the real estate battlefield. One writer calls real estate an emotional business. One manifestation of this is that buyers are easily swayed by the appearance of the building or its fantastic location. But Tyler Hicks says that “buying the wrong real estate…can be a mistake. You really won’t be penalized for life. But you may have a few years of tight money. That’s why it’s important that every piece of real estate you buy be a good ‘fit’ for you.”
Finding Hot Properties
Be on the lookout for re-negotiated real estate deals, what Tyler calls the “real estate workouts”. These are deals where lenders, so as not to foreclose on a property, extend the term of the mortgage loan so that monthly payments and terms are easier for individuals. This is how the real estate pros lay their hands on properties about to be foreclosed because the property is being sold below market price.
Want to have fun and get educated at the same time?
Attend local property auctions. This is more for networking purposes and to get potential leads from others who make it a business to attend these auctions religiously. If one leading broker likes you, he/she may steer you to the right deals.
Keep a roving eye on government assistance programs, specifically those geared towards affordable housing programs for seniors and low income families. As governments become more sensitive to the needs of aging populations, they establish housing priorities for those in most need.
Remember that populations everywhere are aging! Seniors will be in a better position to demand more services, and housing is a top priority. Real estate professionals turn these opportunities into a gold mine because of easier financing terms.
Another technique for zeroing in on jackpot properties is to explore tax foreclosure certificates. This is a good way of making money from good properties without actually owning the real estate. These certificates can be bought from local tax authorities for properties on which owners have not paid property taxes.
Hicks points out, “Once you own one of these low-cost certificates, you have the right to wheel and deal to sell the property to others, take it over, or otherwise make money from it. It’s another way to move in on jackpot properties with small cash outlays that can make you rich – soon!”
Read your newspaper everyday and look for bargains. When sellers are on the point of giving up, they transfer their ad from the national paper to the community paper, as a last ditch effort. This is another area where you can tap another hot shot.
Leasing instead of Selling…
Lease with option to buy: a lease option has a longer term than a straight option, usually running for as long as one year or longer. Some will even stretch to three years, depending on the whim of the seller. While your lease is ongoing, you can rent out the property and be in a positive cash flow. The second advantage is, the property is appreciating in value. If you have a long lease option, you can then sell the property for the highest price you can obtain.
One last strategy for hot picks: be on the alert for long leases. Long leases will ensure that a property will be rented or leased for long periods of time, not just a year. Some commercial leases for example go for as long as 5 or
10 years. One example is the government. Take post offices as the best illustration. The government will usually rent space for post offices on a long term basis. If the property you are eyeing has government outlets like the post office, the automobile insurance board or the government-sponsored health centres, these buildings qualify as hot property!
LOCATION!
You’ve heard about the three principal parameters in real estate? One – location, two – location, and three – location. Take that with a capital “L”. One trick in looking for that pot of gold at the end of the rainbow is to buy the worst property in the best neighborhood, NOT the best property
in the worst neighborhood.
This is a cardinal rule that sophisticated inventors try never to break. Robert Allen gets the message across:
“If you buy the worst property in the best neighborhood, at least you have the chance to upgrade the property to match the standards of the neighbourhood, and your property value will increase. In a bad area, your property will only decline in value along with the rest of the neighbourhood.
Remember, you’re buying a neighbourhood, not just a property.”
A Model of Selling Success
Robert Allen’s concentric circle theory makes for intelligent hunting for hot properties. The circle has a small circle in the middle called the “center.”
The circles around it are identified as A, B, C, and D – A being closest to the center. The theory works this way:
compare real estate to student housing. The nearer the student apartment is to campus, the higher the rent is and the lower the turnover is. That student apartment therefore – being in circle A is a good investment. The same applies to houses. Which neighbourhoods are nearer to centers of
employment, education, shopping and conveniences? Try to hunt for properties in the A circle, and avoid those in the D area.
Introducing the Don’t Wanter
Don’t-wanters are people who will give anything to sell their property, to be rid of it completely, and who cross their fingers every minute hoping a seller will buy their property.
Because of this, they can be flexible as you want them to be. How many of them are don’t-wanters? “Even in extremely tight sellers’ markets, there are still plenty of don’t-wanters. Perhaps 5% of all sellers are willing to be flexible enough to be called don’t-wanters. Some new investors get discouraged early because they haven’t learned that 95% of the sellers are not flexible. They need to be dealing with the 5% who are don’t-wanters.”
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