Marketing to Landlords
In this time of uncertainity in the real estate market, it's important for "flippers" to find that niche that still reaps profits. The smart money today is buying properties to bolster long term portfolios. Smart landlords realize the time to find deals is in a buyers market.
Why Market to Landlords?
The vast majority of landlords are regular guys/gals with full time jobs. They have neither the time nor the patience to find deals, renovate and find tenants. That's where the smart flippers see opportunity. Of course landlords need cash flow...so that poses a dilemma for flippers.
How to Market to Landlords and still make a profit
The primary question most flippers are going to have is how to buy a property, renovate it and sell it for a profit while providing a quality product at a wholesale price.
As with every flip, the profit is made at the initial purchase of the property. In this market, you MUST buy the property right. Two years ago we could be sloppy with our purchases, it was almost impossible to lose money on a flip. Today...losing money is a very real possibility. So lets get to the meat of it.
Your initial analysis has to take into account selling the property at a discount...so we as flippers must expect a much lower profit margin than before. If you were making $25k marketing to the retail customer 2 years ago...you have to adjust your numbers to possibly accept $15k today.
What are Landlords looking for?
To market to landlords you have to think like a landlord. The landlord customer is a very different customer than the retail customer. The landlord is more savvy than the typical retail customer. You must provide them with a solid product. This means ultra low maintenance renovations.
Windows should be replaced. Single hung windows are fine...and they are cheaper than double hung windows with elaborate sashes. Vinyl windows offer ultra low maintenance for the landlord.
Floor coverings should last. Carpet and vinyl needs to be replaced every few years. So instead of carpet, refinish the hardwood floors. Skip the vinyl for low cost ceramic tile(check out the specials at Home Depot or Lowes).
Cabinets should be simple with simple countertops. Home Depot and Lowes sell in-stock cabinets that both attractive and inexpensive.
Lighting should be inexpensive and bright. Bright homes rent for higher amounts.
Paint should be common colors with contrasting walls and trim. Trim should be bright white and walls should be eggshell. Use store colors from the paint store of your choice and leave a gallon of touchup paint in the closet.
HVAC should be whatever is appropriate for the area but central air/heat is always preferable. Homes with central air ALWAYS rent for a premium. As a landlord it's a bonus to find a home with a new heat pump.
Electrical and plumbing should always be updated. If the home has original plumbing, budget in ripping it out and replacing with CPVC piping and new fixtures. 200 AMP electrical is a must as is new outlets and switches. Have GFCI outlets installed near sinks. Also if possible, have smoke detectors hard wired in each room. Even if you can't hardwire the smoke detectors, make sure every room has new smoke detectors with working batteries installed.
Landscaping should be simple. Small shrubs that require little if any pruning is preferred. Curb appeal is incredibly important but don't go over board with the landscaping. Check your local landfill for free mulch to dress up your beds.
Develop a customer list
Before you buy a property, its always best to have a buyer ready. Join local investment clubs, call newspaper ads, check the local tax websites for absentee owners. Develop a list of landlords who are ready to buy. Survey your landlords to know where they own properties. Concentrate your buys in those areas. Ask what kinds of renovations they want. Your list is invaluable...treat it that way.
If you have a property already- look up the absentee owners in that neighborhood and call them. Do the work- be diligent. Owners than own multiple properties in a neighborhood are typically interested in owning others in the same neighborhood. Offer them a quality product at a discounted price...and you just sold your flip.
To Find a Tenant or Not
Making the decision to find a tenant for the potential buyer is a difficult one. Some landlords prefer to find their own tenants. In fact, many landlords refuse to buy tenant occupied properties for fear of inheriting someone else's problems. At the same time, many landlords prefer to purchase properties turn-key...with paying tenants already in place. The only way to make this decision is to know your buyers.
Marketing to landlords is a great way for flippers to weather the current storm. Develop your list, know your buyers, buy the property right, renovate to their requirements, provide a quality product and sell it quickly at a discount.
We may have to rely on a turnover model with lower profits for the time being. But there are indeed profits still to be made in the market. It just takes a smarter "flipper" to do it.