The Challenges of Wholesaling a Hurricane Property
Super-storm Sandy has blown in an estimated $50 billion in damages to the northeast, along with the promise of big profits from flipping hurricane damaged homes, but this doesn’t mean there won’t be challenges along the away.
There is no question that there will potentially be thousands of new, discounted homes going up for sale all along the east coast in the next few weeks and months, but in order to be successful real estate investors must anticipate the potential problems that could arise and know how to side step them.
The Challenges of Reaching Owners of Distressed Properties
Power and phone lines will soon be restored to most of those in the northeast, making it easier to connect directly with those with storm damaged homes. However, there will be many who can’t return home due to the severity of the damage and out of area owners of investment properties and second homes who may not have sustained damage, but who recognize the need to cash out while they are ahead.
Mailing addresses are relatively simple to obtain, even from public records for free. However, with so many displaced owners and addresses not being updated, utilizing a combination of email campaigns, social media and local display advertising with yard signs, for example, may be a smart way to go.
A great number of these homes are no doubt also already under the control of banks and lenders who have taken possession of them through foreclosure, or soon will. Big banks can be tough and frustrating to deal with, but local regional banks and credit unions can be great sources of REO deals if you can make the right contacts.
The Challenges of Flipping Hurricane Homes
Even once owners are tracked down, wholesaling a hurricane property can still have other challenges too…
Those who owe more than their homes are worth will require negotiating short sales or even dealing with insurance companies. This can slow things down a little and it is crucial not to do anything which can be interpreted as fraud. This doesn’t mean you shouldn’t go there, just build this into your plan and have a big enough pipeline of deals that this won’t slow your cash flow.
If homes are not secured or are water logged, it may be smart to mend entries, put up tarps to stop further leaking and watch out for mold so that they won’t deteriorate any further and can fetch top dollar.
There may be some math wizardry required here to instill buyer confidence too, and the better you do at showing how small the odds of a recurrence of Sandy is, the better.
However, when wholesaling a hurricane property, it is also essential to make sure your buyers can actually close, which can be challenging if they need conventional financing and recognize that you may still need to offer some sort of relocation assistance to owners to get them to move quickly.
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