Discover 4 real estate niches for today’s market. For real estate investors, there’s never been in a better time in history to apply one or more of these strategies!
1. Creative Real Estate Investing
How does creative investing differ from traditional investing? It’s all centered on how you get to the deal.
Traditional Investing: With traditional investing your connection is through an agent, and everyone already knows about the property because it’s listed. That includes all auction property. Any property the public knows is for sale is considered traditional.
Creative Real Estate Investing: In creative real estate you work directly with the sellers. You’re connecting with the property owner and very few, if not just you, know the property is for sale. This lets you apply a series of different creative techniques. It also allows you to do creative financing structures. There are a couple key factors as to why creative real estate is so effective right now.
Low inventory: We have historically low inventory. A traditional home buyer will buy a home that is listed and right now they have less properties to choose from than ever before in history. That creates multiple offer situations any time you put a property on the market. We’re making huge profits because of this, sometimes doubling what we would normally make. With inventories plummeting, if you can get to the inventory before it hits the market, it’s like printing money. And that’s at the core of creative real estate.
Low Interest Rates: A factor that is fueling this low inventory is low interest rates. We are still at historic lows and people want to buy because the cost to borrow money is so cheap. This leads to increased demand which in turns drives up the prices.
2. Mobile Home Conversions
Since options for those looking at an affordable price point are extremely limited, mobile home sales have boomed! However, there’s a critical issue with mobile homes for real estate investors. Since mobile homes are not real estate but have a title like a boat or a car, you can’t get traditional financing. You have the option of a mobile home lender, but they have more stringent guidelines and are quite a bit higher than a tradition loan.
That leads me to a second option for real estate investors. You can convert a mobile home into real property and that opens it up to these new lending options: Fannie Mae and Freddie Mac, USDA Rural (has zero down payment), and VA FHA. As an investor, you can sell the property for a lot more simply because of the new loan options available to buyers. I’m not proposing you do a major renovation on a mobile home. I warn against that in my video, The Renovation Delusion. I’m suggesting taking the property from mobile home plus land status, to a manufactured home on a permanent foundation.
Challenges with Mobile Home Conversion
Hard Money Lenders Don’t Lend on These Deals: I’m a hard money lender for my apprentices and I fund these deals. That said, I don’t know of any other hard money lenders that do.
You Need Real Money: Most of the mobile home conversion deals involve a seller that doesn’t have a loan. This means these sellers are not motivated. Yes, you can try to negotiate creative financing and hopefully get on title with the seller being your lender, but that’s difficult. Most of these sellers will sell all cash or they won’t sell at all, so you will need real money.
There is a Time Delay: There is a time delay on this technique. The title retiring process could take some time. And then if you are selling to first time home buyers and they’re getting an FHA loan, you must be on the title for 90 days before you can resell it.
Converting a Mobile Home to a Manufactured Home
1. It Must Be on Owned Land
The mobile home can’t be in a mobile home park. It has to be on it’s own land and the land needs to be owned by the person that you’re negotiating with. A lot of mobile home owners own the land and the mobile home free and clear. And because they don’t have loans on it, they never saw a need to convert it. That’s where the opportunity comes in for you as an investor.
2. Retire the Title
Although retiring the title works differently in every area, you will typically need to file forms with the recorder’s office and the property appraiser’s office. This may require you to pay small filing fees. And now, you’ve retired the title and the mobile home is now part of the land.
3. There May be Additional Steps to Make it Lender Worthy
This is not a requirement in every state, but an example would be in Florida where they require you to do STRAPS. It requires you to have a permanent foundation as well as this addition of STRAPS, which require a permit. Once the STRAPS are put on with the permit and it’s approved, then it’s officially property and then those different lending options roll out. Since this third step requires pulling a permit, if you were going to do any fix up, do it before you pull the STRAP permit.
3. Flipping Land
The demand for land is enormous right now and this is due to two factors: home buyers wanting out of populated areas, buying one acre to ten-acre parcels, and developers who see that we are at historically low inventory levels and are trying to build.
Challenges with Flipping Land
I have a great video, 10 Tips for Buying Land. If you are thinking of buying land, make sure you watch that video because there are some complications that can arise. It might seem simple, but if you don’t follow the rules, you could really get hosed.
To keep it simple you could just get it under contract and put it on the market and see if someone’s willing to buy it. But the real money is made when you subdivide it. And that’s when complications can arise. It’s best to avoid developing at the level where you must get subdivision or planning approval from your municipality. That is complicated and time consuming. Instead, break up the land into the maximum amount of lots without having to get approvals. In Florida, for example, it’s five acres in most counties. So, if you buy a 50-acre parcel, so long as it has county-maintained road frontage, you can break it up into five-acre parcels and sell those without any county approval. And when you do that, you can make an absolute fortune.
4. Vacation Rentals
This is a long-term technique that will make a lot of money in the next few years. Even with the lockdowns, I made more money on my vacation rentals in 2020 than in any other year. When I went into vacation rentals, I thought I was late to the party. As it turned out, I wasn’t. However, I kept asking myself, “When’s the shoe going to drop? What am I’m missing?” And it just didn’t come.
Then COVID hit. And I thought, this is it. To my surprise, as soon as things started to open back up, bookings went through the roof. Suddenly, the times of year that are usually dead for some of my properties were full of bookings. It turns out I ended the year better than any other year.
Why is it so good?
- There’s a fundamental shift in where people want to stay. Nobody wants to stay in a hotel right now and the hotel industry may never come back the way it has been.
- People want to get out. They want to travel near oceans, mountains, and lakes. Your rental needs to be in areas where people have multiple things they can do.
- More people are traveling because their kids can do school from home. This gives families more flexibility.
The demand for vacation rentals has never been stronger, and it appears it’s going to continue that way.
Challenges to Vacation Rental Investing
Low Inventory: Finding a property before it goes on the market is already a challenge due to low inventory levels. Well, it turns out that the inventory levels in second home locations are even lower.
Rising Prices: The prices of real estate have skyrocketed in the very areas where the best vacation rental investing exists. Demand is just so strong for understandable reasons. Due to the increase in price and demand you need to buy strategically. Be very careful, or you’ll barely break even.
Restrictions on Vacation Rentals: Another challenge is finding the locations where counties or municipalities haven’t used their power to shut down vacation rentals. There are areas that are becoming more difficult to do vacation rental investing simply because the laws won’t allow it. But when you can find those little pockets, vacation rentals are a home run.