The Commercial Space Post-COVID – With Cove CEO Adam Segal

A recent Q & A we had with Adam Segal, CEO + Founder of Washington D.C. based Cove offers a picture window into the future of business. What was intended to be a real estate technology informative, turned out to be a glimpse of what the post-COVID world of real estate may look like. Initially focused on creating a network of co-working spaces to foster efficiency and productivity in the digital age, Segal’s company’s ship may have just arrived in the form of a world cataclysm. 

Cove logo

The coronavirus pandemic is forcing a paradigm shift for every business and institution on Earth. The world is turned upsidedown, and the only sure thing people can cling to, for the moment, is uncertainty. The daily grind, the 9-5, in contrast to the homogenization of the digital and the physical world, is creating catastrophes and vast opportunities for the future. And Cove sits smack in the middle of what most experts think will be the transition of transitions not just in real estate, but for business in general. I exchanged emails with the Cove CEO this past week, since catching up with him via phone proved impossible. Here’s the brief interview, followed by some takeaway points. 

RealtyBiz: How do you see commercial property marketing shaping up in the post-COVID era?

Adam Segal: At Cove, we believe commercial real estate will still have a place in a post-COVID era. In fact, it will transform from a place for your dedicated desk into an absolute key business resource to define culture and engagement. Traditionally, there has been a strong emphasis on your everyday desk or office. Moving forward, companies will consider where and how people are most productive, thereby enabling employees greater flexibility to choose when and where they work. The office will morph into a place to come together as opposed to being the required 9-5, everyday solution. For employees, this is an incredibly exciting future — as soon as you are no longer tied to a single desk or office, you have the freedom to design your life without your employer’s office location and long commutes as the deciding factor. At Cove, we provide the technology and service to support that future world for companies, while empowering office building owners a partner to create modern experiences integral to the future of work.

RealtyBiz: Some experts see the negative pricing trend for commercial property continuing to spiral downward. What is your view on this trend, and how can owners/developers prepare?

Adam Segal: When there is an increase in demand, differentiation becomes the absolute key. For those assets that are able to capture the future of work and unlock a differentiated experience, there will not be a downward spiral — in fact, just the opposite.

RealtyBiz: How do you see your business at Cove changing to address this new landscape? 

Adam Segal: Cove implements a modern consumer approach to the future of work for companies and owners of office buildings. Our focus is on building an experience around the office by building robust tools to bring everything online — from scheduling and coordinating your team to reduce capacity, unlocking onsite services and delivery, real-time updates — really a gateway to a modern work experience. The post-pandemic office will look nothing like the office of yesterday. In the future, the office will no longer be a home for your desk. Instead, the office will be a resource to bring people together for meaningful engagement. As a result, every company will need more intentional and coordinated office days for collaboration. The future of work for any company will include a mix of working remotely, in office, on travel — but now a real focus on productivity as opposed to a default 9-5, Monday through Friday culture. 

The Takeaway

According to Crunchbase, Cove is funded by Early Light Ventures. My takeaway on their investment, given the current state of transformation in business, is that those investors are smiling great big about now. $8.4 million in total funding could well turn into 100 times that figure. Here’s why.

Whatever benefits the remote office had before COVID-19, those benefits have been multiplied by 10,000 now. Furthermore, whichever businesses chose to optimize their buildings using Cove services before the pandemic, those clients are the leading edge of what physical office space will be in the future. Think about the whole situation like this. Once corporations and smaller entities make the adjustments for distancing, access assurance, safety measures, and added efficiency, how many do you think will switch back to business as usual? I should not have to spell out Cove’s potential here. From custom virtual events to building access management, Cove had a finger on the pulse of office buildings to start with. The next generation of office space will be all about remote work and managing a new kind of physical space. Who better to help transform the work at home corporate synergy? So, Cove has one of those rare opportunities brought about by the cosmos.

The post The Commercial Space Post-COVID – With Cove CEO Adam Segal appeared first on RealtyBizNews: Real Estate News.

Source: realtybiznews.com

New Home Sales Dip Slightly in September, but Remain Strong Going Into Fall

Home construction in Park City, UTGeorge Frey/Bloomberg via Getty Images

The numbers: Sales of new single-family homes fell in September, but the housing market remains poised to buck seasonal trends nonetheless.

New home sales occurred at a seasonally-adjusted, annual rate of 959,000, the U.S. Census Bureau reported Monday. That represents a 3.5% drop from an downwardly-revised pace of 994,000 homes in August. Compared with last year, new home sales are up 32%.

Last month, the government had reported that new-home sales had exceeded an annual rate of 1 million for the first time since 2006. The government uses a small sample size to produce the new-home sales report, which makes it prone to significant revisions like this.

Economists polled by MarketWatch had expected home sales to increase to a median pace of 1.033 million.

What happened: New home sales fell a staggering 28.9% in the Northeast, followed by much smaller declines in the Midwest and the South. Comparatively, the West was the only region to experience an increase in sales with a 3.8% jump.

The decline in September aside, year-to-date new home sales are running nearly 17% ahead of the pace set by this time last year.

The median sales price in July was $326,800, up from August’s median price. The inventory of new homes was 284,000, representing a 3.6-month supply at the current pace of sales. A 6-month supply is considered the benchmark for a balanced market.

The big picture: Although most economists anticipated sales to rise in September, that is an incredibly rare occurrence. An analysis of past sales data by Regions Financial Corp. chief economist Richard Moody found that since the government began tracking this data in 1963, new home sales have only increased between August and September on four occasions.

The number of homes sold but not yet started was up in September from the previous month, a sign that builders are struggling to keep pace with the demand for homes. The monthly decline aside, low mortgage rates continue to fuel demand among buyers. And with the inventory of existing homes for sale dropping to record lows, many buyers will be forced to turn to the market for newly-constructed properties.

By that same token, though, interest rates could come to represent a headwind for the market, Moody said. “Despite the recent strength of sales, affordability is a growing concern, even more so should mortgage interest rates follow yields on longer-term Treasuries higher,” Moody wrote in a research note.

The post New Home Sales Dip Slightly in September, but Remain Strong Going Into Fall appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

Orchard expands to Houston, East Coast

Orchard announced Tuesday its immediate availability to consumers in Houston, as well as future expansion into Charlotte, Raleigh-Durham, and the Washington, D.C. suburbs in the upcoming months.

Court Cunningham, chief executive officer and co-founder, said he’s excited for Orchard to help consumers in the new markets, where demand has outpaced inventory.

“We’ll make it easier for home buyers in these markets to secure their dream home as soon as they see it, while still selling their old home for top dollar,” he said.

Cunningham added that the Move First initiative, Orchard’s program allowing homeowners to buy their next home before selling their old one, proved popular during the COVID-19 pandemic because it let consumers avoid living in their old home while potential homebuyers toured it.

“Buying and selling homes the traditional way isn’t sufficient in today’s hyper-competitive market,” he said. “With demand at an all-time high, people need to make offers – ideally in cash – without contingencies.”

Houston, according to multiple listing service data, is selling homes above price at triple the rate of 2019, and Cunningham added that the number of homes going under contract within 30 days of listing has increased by 50%.

Orchard adds Houston to a service area that includes Austin, Dallas-Fort Worth, San Antonio, Denver, and Atlanta.

Originally called Perch, Orchard branched into the lending business in July. This followed the creation of a title and escrow unit, dubbed Orchard Title, in the fall of 2018. It also closed on a $69 million Series C round led by Revolution Growth in September.

In October, Orchard announced the launch of a digital platform that enables homeowners to manage the entire real estate transaction in one place.

The post Orchard expands to Houston, East Coast appeared first on HousingWire.

Source: housingwire.com

Meet The Real Estate Tech Entrepreneur: Annelies Powell from DreamSpace

We kick off our 2021 real estate tech entrepreneur interview series with Annelies Powell from Dreamspace, a New Zealand based startup.

Let’s get to it!

Who are you and what do you do?

I’m Annelies Powell, CEO and co-founder of DreamSpace, an accelerator of vertical housing through rapid, repeatable, permits.

Our startup is working on the crux of the supply and demand housing crisis. We focus on permits as these are the key to rapid scalability of what gets built and where, and ultimately the experience of the occupants.

What problem does your product/service solve?

The housing industry keeps giving us ‘solutions’, but the reality is we all need to recalibrate our expectations on a home. Downgrade, downsize or move out of the city you love. The future of housing won’t be better than the past.

Or, at least that is what we’ve all been told.

DreamSpace thinks differently.

Our B2B2C solution will not only fundamentally change the way we scale vertical housing in cities, but will also vastly improve the outcomes. Our repeatable design and permits give way to unparalleled efficiencies so that we can give all occupants an affordable, 2000ft², spacious, private, home in the sky. It’s the future you didn’t imagine possible.

What are you most excited about right now?

Right now I’m most excited about the sales leads coming in. New Zealand (our test market) has a property market which is booming right now. People want a more convenient life, which DreamSpace is all about. I talk directly to each lead which has been invaluable to hear what users want their dream homes to be all about, their pain points, and what has them looking in the first place.

What’s next for you?

Right now we’re focusing on an early-stage capital raise. This is for our first permit and partnership with a construction company to get things built. It’s a steep learning curve and of course insanely satisfying to work on something we’re so passionate about.

What’s a cause you’re passionate about and why?

Without a doubt the prosperity of humanity working in harmony with this planet. To me, there’s no priority. I try to read books that open up my world view of people who’ve implemented large scale change for both humanity and the environment. Education, technology and the climate are some obvious themes. Naturally, these themes slip into my work, which feels like a good way to have a practical channel in taking action on bigger causes for concern in the world too.

Meet The RE Tech EntrepreneurThanks to Annelies for sharing her story. If you’d like to connect, find her on LinkedIn here.

We’re constantly looking for great real estate tech entrepreneurs to feature. If that’s you, please read this post — then drop us a line (Community @ geekestatelabs dot com).

The post Meet The Real Estate Tech Entrepreneur: Annelies Powell from DreamSpace appeared first on GeekEstate Blog.

Source: geekestateblog.com

5 Tips Every Renter and Homeowner Should Know About Insurance

This week, I had to evacuate because of Hurricane Dorian. If you’ve ever experienced a natural disaster or had to evacuate your home, you know that insurance is a top concern. No matter where you live, there are common threats—such as California earthquakes, Oklahoma tornados, and Texas floods—that affect renters and homeowners.

Let's review five essential insurance tips that every renter and homeowner should know. You’ll learn the variety of protections you get from basic renters and home policies, mistakes to avoid when buying a policy, and ways to save money on premiums.

5 Tips Every Renter or Homeowner Should Know About Insurance

  1. Not every type of damage is covered
  2. Certain belongings have low coverage limits
  3. Know the difference between cash value and replacement cost
  4. There are special types of deductibles
  5. Don’t leave discounts on the table

Here’s more information about each insurance tip.

1. Not every kind of damage is covered

A basic homeowners policy pays for claims when a natural disaster—such as a fire, tornado, hail, or windstorm—damages your property. Personal belongings like your furniture, electronics, and clothing are generally covered up to specific limits for damage and theft.

Home insurance includes liability, which protects you from legal issues that could arise if someone is hurt on your property.

Homeowners coverage also pays "additional living expenses." That might include things like some amount of hotel and meal expenses if you can't stay in your home after a covered disaster.

If you’re a renter, you also need insurance, because your landlord is not required to cover you. Renters insurance gives the same protections as a homeowners policy. You get coverage for your personal belongings, liability, and additional living expenses. But it doesn’t cover damage to rental property because that’s your landlord’s responsibility.

Unfortunately, about half of renters don’t have renters insurance. Many mistakenly believe that their landlord would pay to repair or replace their damaged or stolen personal belongings. Or they mistakenly think a renters policy is too expensive. The good news is that a typical renters policy is quite affordable, costing just $185 per year on average across the U.S.

The good news is that a typical renters policy is quite affordable, costing just $185 per year on average across the US.

But what surprises many people is that a standard home or renters policy doesn't cover some natural disasters. These include earthquakes and flooding from groundwater.

If you live in an earthquake-prone area, you can typically add earthquake coverage to a home or renters policy. But flooding is a different category of insurance that must be purchased separately. Flooding is handled differently than other types of disasters because it’s the nation’s most common and expensive disaster. Floods can happen anywhere, and they don’t even have to be catastrophic to cause significant damage.

If your town or community participates in the National Flood Insurance Program, you can buy a policy for your rental or your home. And if you buy a home in a designated flood zone, mortgage lenders typically require you to have flood insurance.

Most flood policies have a 30-day waiting period, so you can’t wait until a storm is bearing down on you to sign up. You'd be too late.

Even though the federal government backs flood insurance, it’s brokered by regular insurance companies or agents. You can learn more at floodsmart.gov.

Most flood policies have a 30-day waiting period, so you can’t wait until a storm is bearing down on you to sign up.

Remember that water damage from rain, high winds, or a tree that fell on your roof are covered by a standard home or renters insurance policy. But damages to your home or personal belongings that occur due to rising groundwater are never covered, except when you have flood insurance.

Also note that if you have a home-based business with inventory, specialized equipment, or customers who enter your property, you typically need a commercial policy. Likewise, if you turn your home into a rental, Airbnb, or a vacation property, you generally need additional coverage or a landlord insurance policy.

2. Certain belongings have low coverage limits

Just like not every disaster is covered, not every type of personal belonging is fully covered under a home or renters policy. Some belongings, such as cash, aren’t coved at all. Many others have coverage caps.

For instance, jewelry, watches, furs, silverware, electronics, and firearms are typically limited to one or two thousand dollars of coverage. If you have jewelry that’s worth $10,000 and it’s lost or stolen, you’d come up very short with just $2,000 of coverage.

If you have items worth more than the coverage caps, you can add an insurance rider for more coverage. This addition is known as “scheduling” your personal property. It costs more, but it gives your most expensive items separate coverage so they could be replaced.

Another often-overlooked protection you get with renters and home insurance is that your belongings are covered outside of your home.

Another often-overlooked protection you get with renters and home insurance is that your belongings are covered outside of your home. If your vacation luggage gets stolen, you lose valuable jewelry, or your laptop gets stolen from your car, your homeowners or renters policy covers it.

So, pay close attention to the insurance limits for possessions inside and outside of your home and consider adding a rider or property schedule to beef up coverage when needed for valuable items.

3. Know the difference between actual cash value and replacement cost.

It can be a little confusing to know exactly how much money you’d receive from a renters or home insurance claim. So be sure you understand the different types of policies you can buy.

Actual cash value coverage pays to repair or replace your property or possessions up to the policy limits, minus a deduction for depreciation. The calculation can vary from insurer to insurer. But what you need to know is that a cash value policy only pays a percentage of what it would cost you to go out and buy a new item.

Cash value coverage is the least expensive option. However, it means that if you experience a severe disaster, you probably won't receive enough to rebuild your home or fully replace personal belongings.

Replacement cost coverage pays to repair or replace your property and possessions up to the policy limits, without a deduction for depreciation. That means you would receive enough money to rebuild a home with materials of similar quality. Or buy new items to replace your damaged belongings.

Yes, replacement coverage costs more than cash value. But it would allow you to replace what you lost.

There are also guaranteed or extended replacement cost policies which give you even more protection. They pay to replace your home as it was before a disaster, even if costs more than your policy limit.

Remember that a home insurance policy is based on the cost to rebuild your home and any outbuildings, not the amount you paid for the property or its appraised value.

Remember that a home insurance policy is based on the cost to rebuild your home and any outbuildings, not the amount you paid for the property or its appraised value. You never include the value of your land in your home insurance. Depending on the age, location, and style of your home, the insured value could be much higher or lower than its market value.

4. There are special types of deductibles.

A deductible is an amount you’re responsible for paying for an insured loss. The higher your deductible, the more you can save on premiums. So be sure to get quotes for different deductible amounts when shopping for renters and home insurance.

As I previously mentioned, disasters such as windstorms, hailstorms, and hurricanes, are typically covered by standard renters and home insurance. However, in some high-risk areas, you may have separate deductibles for damage caused by these disasters.

According to the Insurance Information Institute, nineteen states and the District of Columbia have hurricane deductibles: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and Washington D.C.

These special deductibles are additional and separate from the regular deductible for all other types of claims, such as fire or theft. A hurricane deductible applies only to damage from hurricanes, and windstorm or wind/hail deductibles would apply to any wind damage.

Hurricane and wind deductibles are typically given as a percentage that may vary from 1% to 5% of a home's insured value but can be even higher in some coastal areas. The amount you must pay depends on your insured value and the "trigger" event.

For instance, if you have a 3% hurricane deductible and your home is insured for $200,000, you’d be responsible for the first $6,000 ($200,000 x 3%) in repair costs. That’s much more expensive than paying a standard $500 or $1,000 home deductible.

In some states, the triggering event for hurricane deductibles to apply is when a Category 1 storm causes damage whether it made landfall or not. Other states allow Category 2 to be the threshold. In others, a hurricane deductible applies from the moment a hurricane watch or warning gets issued until 72 hours after it ends.

A hurricane deductible can only be applied once each hurricane season, from June to November.

5. Don’t leave discounts on the table.

When it comes to the price of renters and home insurance, there are some factors you can control and some you can’t. Here are some ways to save and typical discounts to ask for:

  • Bundling insurance is when you purchase different types of policies, such as renters or home and auto, from the same insurance company. Buying two or more policies can help reduce your total cost. Just make sure that the combined price from one insurer is less than buying policies separately from different insurers.
  • Shopping around may seem obvious, but many people don’t do it. Prices can vary considerably from insurer to insurer. Be sure to compare the same coverage and deductibles to get the best deal possible.
  • Installing safety features in your home or rental, such as smoke detectors, alarm systems, deadbolts, storm shutters, shatterproof windows, or roofing, may allow you to qualify for discounts. Even being a non-smoker or being retired reduces the risk for insurers, so be sure to let them know any factors that could work in your favor.
  • Raising your deductible is an easy way to cut the cost of premiums. Just make sure that you could afford to pay it in the event of a claim. Also, the savings vary depending on where you live and your insurer, so get quotes with multiple scenarios.
  • Maintaining good credit is vital for many aspects of your financial life, including the rates you pay for home, renters, and auto insurance. Depending on where you live, having poor credit can cause you to pay double the premium compared to having excellent credit! The only states that currently prohibit home insurers from using credit when setting rates are California, Maryland, and Massachusetts
  • Being a loyal customer can pay off with a discount. However, don’t let that keep you from periodically shopping around to make sure you’re still getting a good deal.

No one enjoys paying for home or renters policy, but when disaster strikes, you’re the victim of theft, or you get involved in a lawsuit, having insurance can be a financial lifesaver.

GET MORE MONEY GIRL

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Source: quickanddirtytips.com

639: Get Great Referrals by Building a Professional Network with Mark Maiocca and Mark Stiles

Clients are a great source of real estate referrals, but they’re not the only one. On today’s podcast, Mark Maiocca and Mark Stiles of Core7 explain how agents can drastically boost business by building a referral network with professionals from related lines of work. Listen and learn who you need in your network and what it’ll take to make them permanent parts of your referral machine. Plus, hear how to generate referrals with a simple script, what to do when group members aren’t doing their part, and more!

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Thankful Investor – John Martinez

 

Hey, welcome back for another segment! This is the 3rd and final segment that I wanted to share with you from my recent live event called the Thankful Real Estate Investor. We hosted this live right before Thanksgiving and it was an interactive event. Our 3rd speaker is Mr. John Martinez, the top real estate investor sales trainer! Let’s get started!

If you’re not a member of the FlipNerd Private Facebook group yet, you can join here: www.flipnerd.com/pro-event, and get access to lots of upcoming live and interactive content like this going forward.

Resources and Links from this show:

  • Investor Fuel Real Estate Mastermind
  • FlipNerd Professional Real Estate Investor Network: Join for Free!
  • Investor Machine Real Estate Lead Generation

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

[00:00:00] Mike: [00:00:00] Professional real estate investors are a different breed. We’re not afraid to go all in and take educated risks to build stronger businesses and help our families live better lives.

This is the FlipNerd professional real estate investor show. And I’m your host Mike Hambright each week. I host a new episode live and bring you America’s top real estate investors as guests.

Let’s start today’s show. Hey everybody. Welcome back for another segment. This is the. The third segment of three that I wanted to share with you from my recent live events called the thankful real estate investor. We hosted this live right before Thanksgiving. It was an interactive segment. So, uh, hopefully if you weren’t there, you’ll join us on an upcoming events.

Uh, our third speaker is mr. John Martinez, by the way, I’d love for you to join us at our future live events. We’re going to be doing these several times a month, going forward events like this that are live and interactive, answering your questions in our private. FlipNerd Facebook group. The way you [00:01:00] get access to that group is you go to flipnerd.com/pro event has a hyphen there pro dash event flipnerd.com/pro-event.

Make sure you go there and register. We’ll get you in the group and you can join us if you didn’t this time on our next live and interactive, uh, event. Let’s go ahead and jump in with mr. John Martinez.

I’m going to bring my buddy John Martinez and. John, how are you? You’re a little bit cut off. I think.

John: [00:01:27] Let me adjust the camera here.

Mike: [00:01:30] We want to see your good side.

John: [00:01:34] So you have to just deal with it.

Mike: [00:01:37] Yeah. So how are you? My friend.

John: [00:01:38] I’m good. I’m good. How are you  doing? How are you doing Mike?

Mike: [00:01:41] Good. Good. So as we’re kind of getting started here, I’ll ask a really a couple of things. First is if you guys have questions for John, if you don’t know John.

That’d be kind of unusual. So if you know, John is, and you want to ask some questions about what’s working now from a sales technique standpoint, or an approach of how you handle your leads, start to chat those in I’d love to get to your [00:02:00] questions. In the meantime, John, while we’re waiting on some questions, maybe you can share a little bit about what you’re most thankful about.

We’ve got so much to be thankful for. What would you share that, uh, I know you probably have, might have a long list if we had time to talk about it, but what are one of the things that come to mind that you’re most thankful for?

Uh, my health, uh, man, I turned 40 this year. So it’s funny how I that’s like more and more of a top of mine topic.

Like, uh, every year you get older. So, uh, turning 40 every day. I’m thankful for my health. Uh, thankful for parts of me that don’t hurt when I was picked up. And then, I mean the same with my family. Yeah, me too. My kids and my wife are all healthy. And I think, um, as long as you have that, you can basically basically get through anything else.

So that’s gotta be what I’m most grateful for.

Awesome. Awesome. Well, that’s great. So, so John, while we’re kind of waiting on some more questions, or maybe you could kind of share a little bit about what’s what’s working now, like we’ve been through, I wish we were through the COVID, so I don’t know if we’re through it earlier.

Trevor said we’re kind of. In the middle of this [00:03:00] code. And I’m like, hopefully we’re at the tail end. I don’t know where we’re at, but it’s, it’s changed. The dynamic has a lot of people that are doing stuff virtually now, or certainly vetting more out on the phone than they used to. What are, what are some of the things that are, that are kind of working now that people have had to adapt to over the last six or eight months?

Yeah. So it’s, you know, in sales, what’s worked for forever was having a plan or we call sales process. But I think it’s more important now than ever because we’re not doing as much kind of face to face or belly to belly selling. Um, so a lot of people who could kind of get away with just their wit and their good looks inside of a house and really building rapport that way and going buddy, buddy, and, um, having really good conversations because of, of that ability.

It’s it’s a lot harder to do that on the phone. So you have to start to rely on your plan or your sales process. I think even more now than ever before. Right? Your plan about what I want to accomplish during this call, how do I want it to begin? What do I want to, uh, [00:04:00] what’s the agenda for the middle? How do I want this thing to end?

What will, what will the acceptable outcomes be? Um, you know, if I run up against hidden decision makers, influencers, Pushback resistance. How am I going to deal with that? So I think it’s always, you know, the cornerstone of any good sales organization or sales person is, is process or having a plan. But I just think it’s more important right now than it’s ever been since we’re so disconnected.

Yep. Yep. So we’ve got a question from Matt here. That’s talking about kind of, how are you negotiate remotely? And I think, you know, a lot, like we just talked about a lot of people who have transitioned to doing this over the phone. And you lose some things on the phone, right? You don’t get to see the facial expressions or exactly how they’re living.

You don’t really get any indication of what the house is like by just walking in the front door. Um, maybe, can you maybe share some tips on how to make that transition for those that have had to make that transition that we’re buying at the kitchen table, if you will, to doing more over the phone?

John: [00:04:57] Yeah, I, I can’t so great point.

So usually in [00:05:00] a negotiation, you know, by the time you get there, A negotiation. You’ve got to walk a pretty tight line because you want to negotiate aggressively to get yourself the best deal. But at the same time, you don’t want to put yourself in a position where you, you upset someone or offend them in such a way that you kill your own deal.

Now, when you’re face to face, you can basically just read it. Right. Do you know the body language, the tonality? Um, no one can really hang up on you when they’re face-to-face either. Quit and say, get out of my house now they can, but it’s harder. Right? So in order to do that over the phone, one best practice I found what’s working right now is always assume the worst during the negotiation.

And then I’ll tell you what I mean by that. Um, you’re always safe if you assume the worst, um, uh, in a, in a sales negotiation and when it comes to keeping the conversation going and not offending someone or, or losing rapport. So here’s what I mean by that. Um, if you’re, if you’re making offers, you know, always assume that they’re not going to take it.

So here’s, here’s some examples, [00:06:00] uh, listen, I’d love to offer you a 75,000 for the property, but you know, based on this phone call, I’m guessing that if I offered that and I’m way out of the ballpark. Um, so, so you tell me, am I, am I, am I right? Am I in my way out of there? So just always assuming the worst there, you won’t put your prospect or the seller back on their heels and, and start that kind of confrontational negotiation.

So even as you go through the negotiation and you’re going back and forth, you know, Hey, I think I could offer you more money, but that would require you to, um, help it to clean out a little bit, or certainly shorten the timeframe or commit, uh, you know, within the next 48 hours. And, you know, we haven’t had a chance to think about that.

So I’m not sure if that, you know, the more, the extra money would even be worth, you know, you. Cleaning out a little bit more or painting the living room or getting their old car out of the garage. So I think, um, in order to be safe with negotiations, just err, on the side of caution and what it’ll actually do is it’ll build a, and it’s more amount of rapport.

It’ll [00:07:00] keep the conversation going. It’ll keep you out of that kind of enemy, confrontational battling type of negotiation and extend the conversation. So you can actually get through the negotiation and not end it prematurely.

Mike: [00:07:11] Yep. Good, good. That’s good stuff. So we’ve got another question here. I’m going to, I can’t tell with who the user is, but they’re saying what’s the best way to start a renegotiation or price with sellers.

So I don’t know the context of that, but let’s just say when people are buying virtually more frequently, now that they are, you’re making assumptions on repairs and stuff. And sometimes, you know, you find out that, you know, you told me the kitchen was remodeled, but it turns out is remodeled 20 years ago.

Right. And, uh, that it’s going to cost more. And so I think we all. You know, some people have an approach and I know John believes the same way that I do. You really want to use renegotiate as, as a. As a last defense, like you just really miss something and not this approach of like, well, I’m gonna try to lock it up and then go back and renegotiate.

I think we’re in agreement with how we, how we believe that. Um, but let’s just say we made [00:08:00] our best effort. We put an offer forward, an offer that we thought was good and later we found out we totally missed something or were misled on something. Cause we did it over the phone and we have to renegotiate.

So maybe talk about how to best start to renegotiate a deal with it. Somebody after they’ve agreed to something else.

John: [00:08:17] Yeah. So good question. So it pops up all the time. Um, it just happens. It’s the nature of the business is real estate and buying houses that are in disrepair or, or distressed sellers. Um, it’s going to happen.

So when you do it, you just need to really put yourself in the seller’s shoes when you go into that conversation. So here’s what I mean. We already know. And if you got one with a renegotiation and you’ve agreed to applies, and it might’ve been a tight negotiation to get to the price you originally agreed on.

When you go in and say the deal’s off, or I need even less, you have to understand how they’re going to feel. They’re going to be a little bit shocked. Um, they’re going to probably be a little upset and disappointed. And so as you go into the negotiation, first and foremost, you have to [00:09:00] realize what that will do.

If it’s with a seller it’s going to, they’re going to react the same way as is Mike, or I would react if we got upset or maybe even, you know, in that situation, you might even feel like you’re taking advantage of, or someone trying to pull one over on ya. Um, so you’ve got to realize that that’s going to be met with some type of resistance.

And now resistance in sales really shows itself in two ways. It’s either it’s kind of a fight or flight, right? If you get upset or you feel like you’re being taken advantage of, you’re either going to just shut it down and say fine, it’s off whatever. And I’m sure people have experienced that, right. They go in with the renegotiation and they just say, well, deal’s off.

No. Uh, or if there’s going to be a tremendous amount of pushback aggression, right. Um, get into a, uh, you know, a yelling confrontation or something like that. And that neither of those is going to lead to a smooth negotiation. I think we can agree on that. Right. If they’re shutting it down or, or getting pretty aggressive.

That’s not where you want to start off. So first and foremost, you got to know where your prospect’s mind is going to [00:10:00] be an address mindset first, before you get into the nego renegotiation. So knowing they’re upset, I’m just going to be open and honest and say, listen, I’ve got some bad news. I’m really reluctant to even bring it to you.

I feel like a schmuck because I know I’m going to rain on your parade today. Um, but I’ve, I’ve exhausted every option looking into this, and then we’ve got to have a really tough conversation and I want to let you know, I apologize up front because, um, it’s not going to be a fun one. Right. Uh, so if you see what I saw there, I just, I called the situation what it was.

Um, I took the temperature down using what we call tactical empathy in our sales training. Bye I’m going not okay. Just kind of, you know, going down and, and feeling bad cause you’re about to give bad news and that’s what a normal human being would do. Right. Um, and there’s some science behind it, but anyways, that’s it.

You want to go into it smoothly. And then, uh, I’m going to borrow from the last tip I gave, um, about negotiating over the phone. We want to, we want to come at it from a position where we’re [00:11:00] assuming the worst. So when I renegotiate, I started out just like I said, on the call, and then I’d say, listen, I, there’s no way I can pay 110 grand for the house.

It’s just based on what we found and everything going on. I, I can’t do it and I feel horrible about it, but I assume that if I had to pay even a dollar less, you don’t want to do it. And then just be quiet. Now, the reason why I didn’t say the number that I actually need is we feel tested this quite a bit.

And we found that we just say, you probably don’t want to sell at this point, or I’m not even sure I could buy at this point. Oftentimes sellers renegotiate down lower than, than what you need. Uh, I, I have countless emails and messages from people who said, I need a 10 K off. I went in with that exact read negotiating strategy.

And they said, well, would you take it if I took 20 K off? Right. And then, okay. Uh, so, so that’s it just know their mindsets slide into it, knowing you’re going to upset them and addressing and being real about it. And, and if it doesn’t [00:12:00] feel good to give bad news and don’t hide it, um, and then kind of go negative and assume that.

They’re not going to consider it or not like it, or you might not be able to get the deal done and then just go silent

Mike: [00:12:11] and see what happens. Yep. Yep. And I think some of it too is if you’re, if you shifted your model to bind more virtually, is there some things you can do to pre-frame that upfront? Like here’s our offer.

If part of your processes, we’re going to have an inspector come out and look what I want to try to give you a price. Now you can kind of pre-frame frame that is, uh, like we’re based on what you’ve told me. You know, here’s what we’ve come up with for repairs. And we’re going to have somebody come out and double check this.

And so you can kind of slip in there that in the event that any of that, that I missed anything here, we’ll find out and I’ll let you know, or right. You can kind of pre-frame them.

John: [00:12:44] Absolutely. Um, you know, that, that was kind of the assumption I was running with. No one likes surprises, prizes, especially bad news surprises.

So covering that upfront is definitely a best practice.

Mike: [00:12:56] Yeah. Good. We got a question here from our buddy John Harker, who [00:13:00] says hello?

John: [00:13:00] Hey John,

Mike: [00:13:01] uh, what do you do when a seller just won’t give you a price and just keeps. Saying look online. I don’t know what he means by that. Like,

John: [00:13:10] yeah. Maybe he’s, he’s referring to Zilla or do your research.

Mike: [00:13:13] They’re kind of celebrates online. They just won’t give you a price. And uh, so talk a little bit about what do you do when they just won’t show you their cards and they’re just waiting for you to give an offer.

John: [00:13:23] Yeah. So there’s a lot of strategies to get the number, but I want to come at this question two different ways.

Um, the first way is, okay, how do we get the number again? You’re probably seeing a pattern here. We’re going to pull back a little bit. Um, there there’s two ways to get it. One is I usually just suggest they don’t know the number cause people like to argue and push back. So one way to ask is. Listen, I’m guessing you don’t even know what you’d even what you’d want for the house we contacted.

You probably haven’t had time to do research, to think about it. That’s one way, another way to do it is to ask about a similar property. Oftentimes people don’t want to talk about themselves, but they’ll talk about their neighbors or a member of house in the [00:14:00] neighborhood. So another way you can ask is, Hey, listen, um, Houses in this neighborhood.

Do you know any that have sold recently? What are they going for? Right. And when you have a hundred K 200, 300 and you can kind of whittle it down from there real simply like really were you expecting to get more or less for yours? And now we’re starting to bracket them in and kind of drilling down on.

I was actually expecting a bit more. Well, why is that? Well, it’s a bigger house. It’s a nicer condition we rehab. So you can start to get to it in that round about way now, now that I gave the two ways that you’ll have more success doing it than just asking straight out, um, kind of some caution I want to throw out there.

Um, Oftentimes, unless you’re qualifying, let’s say this makes sense. If you’re qualifying, let’s say you have a bunch of leads and you want to find that, who am I going to work with? Who am I going to send my acquisitions out to? Who am I going to talk to? Where am I going to spend my time? Then you might be asking that price.

You, it’s a, it’s a level of your qualification. Now, if it’s not a level of your qualification, I’ll want to [00:15:00] caution you on asking what their expectations are, because it actually does more harm than it does. Good. Number one, it could get into your head. Um, I’ve worked with plenty of sales reps. Who’ve gone into sales calls gone.

We’re at two 50 for this house. They want 500 why even go, right? And they’re talking themselves out about, out of even showing up. But then when we show up and we run through the sales process and uncover some things, and sometimes those people actually sell for what they need to, right? No, one’s going to.

Call you up and you say, Hey, what would you like to sell for? And they’d say, Oh, 50% of what I think I could sell it for. That’s insane. Right? So sometimes that can kind of get in your head and stop you from even taking the appointment or really going full force at the appointment. The other negative.

About getting their offer is they’re setting expectations. And whenever you come in under it, cause you will come in under whatever they expect, 99 or 999 out of a thousand times. They’re going to be disappointed. [00:16:00] So, because I don’t want to disappoint them. I want to set expectations. I want to come in instead of saying, what would you like?

I’d like a hundred and me saying, I could give you 50 that’s bad. I’d rather go in and say, I’d love to give you 40, but with this, I think if we did it quickly, I could do 50. So then I’m setting, setting expectations. And then, uh, my comparison, it actually sounds a little sweeter. Um, so, so that’s my take on it.

So be careful asking, asking for asking price only do it. If you need it. Because of mindset and the expectations that sets, and then kind of the psychology that goes along with what’s called price anchoring. It could actually have a negative effect. So if you don’t need that information, you might not want to get it.

Mike: [00:16:36] Yep. Good stuff. Good stuff. So, John, we’ve got a really long question. I don’t want to put up on the screen cause I think it’ll block the whole screen, but effectively says, uh, you know, what kind of techniques are working well with speaking to homeowners or landlords? There’s a lot of trouble landlords out there these days because of all the rents, deferments and all this stuff, um, about.

COVID w on the value of their property versus kind of the future. So I think that there’s a couple of ways [00:17:00] I could translate that. I think, um, you know, there’s a, there’s probably a lot more landlords that are hurting now than there were before. COVID. And then on the other side yeah, for home owners and even, I guess for landlords is property values have gone up pretty substantially during, since COVID started because there’s just very little inventory, so prices have shot up.

So we’re, we’re kind of dealing with this whole COVID mess, but at the same time, knowing that prices just feel kind of artificially high right now because of what’s been going on. And so, uh, that’s like a huge loaded question ultimately, but kind of how do you integrate those things into. Talking about value when you’re talking to a seller.

John: [00:17:39] Yeah. So, uh, interesting questions. Um, we can break those

Mike: [00:17:44] down into a couple of smaller questions if

John: [00:17:45] you don’t know. It’s okay. It’s okay. I’m just thinking through it. So, uh, really I think having that conversation unless it needs to happen is kind of a trap. So I’m going into that question with the premise of, we’re [00:18:00] trying to convince someone that their house is worth a, when they’re trying to convince us that it’s worth B.

Yeah. And if you are in the real estate investment business, that’s, that’s not the conversation you want to be having. That’s a retail conversation, right? Um, that conversation is, is not going to do a lot for you as far as increasing your conversion rates. What you want to do is pivot that value conversation, not the price isn’t worth more because of COVID or is it worth less?

Two, what’s it worth to you right now? Uh, here is what I can offer. Let’s have a conversation about, is it worth even considering that offer? So shifting the conversation is where I’d want to take the answer to that question. If you’re having that conversation of, I think it’s worth 50. Well, I think it’s worth 60.

I think if we’re  that’s not a winning strategy and sales, you have to pivot the conversation. To listen, I’m going to give you an offer and I’m not sure it’s going to be more or less than, than what you were expecting, but let’s chat a little bit about what you want to accomplish. [00:19:00] And, um, so I know how to structure it and make sure I can maximize my offer.

And then you can just figure out at the end of this, Hey, with what I want to accomplish does accepting this offer makes sense or not make sense. And that’d be a pretty easy, easy answer for you. And then I’m shifting the conversation to, you know, what even got you started thinking about selling. Is there a, you know, is it, is it kind of a situation you want to get away from, or is there, do you want to use the money for something else?

Do you want to move across the country? What’s going on? And I want to redefine it and read it and just pivot that conversation to what’s your problem? What do you want to accomplish? And, and I’m going to ultimately give you an offer and then your only decision is in order to accomplish that. Is it going, is it worth it?

Is it worth taking the offer? And doing that you can, you can really stroke a tremendous amount of motivation. You can bring a lot of motivations to surface that your prospect may not have been thinking of. You can understand their situation a lot better. You’re going to build a lot more rapport, their urgency to take action.

The more they talk about their situation is going to increase. So I don’t know if I’m giving the right answer, but, but my answer [00:20:00] is that’s probably the wrong conversation to have, and we need to pivot.

Mike: [00:20:03] Yeah. Don’t look at the underlying issue of COVID it’s just the situation of what you think the value is versus what you can pay.

Right, right. Yeah. Yeah. I think there’s a lot of, there’s a lot of landlords that are hurting. Right. And I mean, there’s, let’s be honest. There’s a lot of landlords that didn’t buy, like. For me, all my rentals were bought at wholesale prices. And in fact, most of them were from many, many years ago. So like prices that are inconceivable now, uh, cause I’m actually older than John.

Uh, I was talking about age earlier, but, um, uh, but I think there’s a lot of landlords that, you know, they bought it off the MLS and they, in their mind, you know, or, or they bought a turnkey property at close to retail value and they never. Thought about like, well, what could go wrong? The house is newly renovated and like things go wrong, you know?

And of course, with, with COVID it’s even, uh, kind of unprecedented in terms of. You know, some States saying you don’t have to pay the rent and all that stuff. It’s just crazy. So I think what you really focus on there is that pain of like, you’re not even getting paid right now. When do you think you’re going to get paid again?

Right.

[00:21:00] John: [00:21:00] The reality of the situation is we all overpay for stuff happily because it’s worth it. Right. And we all take massive losses on things that we have when we sell them, because again, it’s worth it. So just think about any time in your life, where you said, you know what? I probably could have gotten more.

But I’m just thankful it’s over. I’m thankful I got rid of it. Yeah. I know. I overpaid for that, but here’s the opportunity it opens up. I’m glad I did. Right. And you’re excited about overpaying for something. So if you start thinking those terms, that’s how your seller’s thinking, right? It’s not always about getting, you know, fair market value to them.

Is what it actually accomplishes to them, not, not what Zillow says or what your, your, your maximum allowable offer is, or whatever you calculate the ARV to be. It’s, it’s going to be what’s it worth to them. So again, just another way to rephrase my answer is you’ve got to figure out what, moving that property is worth to them and get away from the ARV conversation.

Mike: [00:21:54] Yep. Yep. Well, guys, we’ve got time for a couple more questions, so please chat them in here. Uh, John saw this, [00:22:00] I got a question for you. How do you use, or how can you utilize the end of the year? Beginning of the year kind of phenomenon. Uh, and I’ve always kind of explained it as it’s like a health club.

Like people want to, you know, January 1st, there’s this line in the sand, that’s really just in their mind. And now I want to start the year and lose 40 pounds or whatever. There’s also people that have had. Problem rental property or a house they inherited, or a fixer upper of some sort that they’re like, I don’t want to deal with that next year.

I just want to get rid of it. How do you kind of utilize that in the year? Phenomenon of people wanting to start fresh?

John: [00:22:33] Yeah. I mean, you can use it just like you said. I, I typically don’t care. What time of year. It’s a great time to use scarcity. I can use really use scarcity no matter what time of year it is, but it works really well at this time.

Um, I’ll tell you when I was out, uh, training salespeople and kind of men buying houses coast to coast. Whenever we didn’t get one at the kitchen table, we would drive two blocks away and I would call and say, listen, We could give you a little bit more money if we can walk this up in the [00:23:00] next 60 minutes and we would often lock them up then because that’s scarcity.

So having, having a cutoff, and I think it speaks really to the broader, uh, sales strategy of having an offer expiration or having, uh, making a, no one, no right Treme salespeople out there, 20 acquisition agents and real estate investors, I think because there’s a fear of losing a potential deal. They never make their prospects actually make a decision.

Right? Think about it. Think about it. I’ll continue to follow up with you. And there’s never any cutoff where a decision has to be made. So the prospect never feels a fear of loss, a fear of actually losing the deal. So, um, cause the investors

Mike: [00:23:40] is afraid to say, I’m never going to call you again, right?

John: [00:23:43] Yeah, absolutely.

Uh, so sorry, my Alexa just went on and off. I don’t know what happened to you guys

Mike: [00:23:52] are winding it down. Guys, ask the questions. Cause the lights are going

out

John: [00:23:56] probably in the other room it’s like in it, but yeah, no. [00:24:00] And anyways, I want to just, just go back to that and say, Hey, every time you make an offer, you just word of advice.

You need an exploration, whether it’s by the time I, you know, if it’s not a yes. You know, by the time we wrap up our conversation. Totally cool. It’s no, uh, you know, don’t be a jerk about it. Uh, or Hey, you know, offers you a stand for a week. Obviously I can’t make an offer on a property and let it hang out there for a year.

If things change, my situation will change. Number of houses. I need changes the real estate market’s going to change. So I can, I can let this offer stand for three days, seven days, whatever it is. So you’ll do yourself a favor. If you just start giving a cutoff to when your

Mike: [00:24:34] offer expires. Yeah. Yeah. I remember when I first started this a long time ago now.

Um, and I used to sit there like, how good, how good is the offer for? And I was like, Oh, you know, 30 days. But even then I’d still be interested in buying it. And I was like, well, would I in hindsight, you know, so stupid, what would you do? You’d like, you’d go shop at everywhere in town. And like, I’m like plan B if they need it, which they would never need it.

So then we, then we got better. [00:25:00] Yeah. Awesome. Well, John, what do you think differentiates, let me ask you a question. What differentiates you? You, you’re a member of investor fuel as well. You know, you surround yourself with a lot of amazing people, just like I do for Schwartz, I’ve run in some of the same circles.

What do you think differentiates those that are doing really well at crushing it from those that are good, doing some deals, but kind of just getting by and kind of stuck in the grind. What do you think differentiates those two people from a sales perspective,

John: [00:25:26] from a sales perspective, It’s gonna sound funny, but it’s, uh, getting out of the sales role.

Um, I think the, the more successful people in invest a fuel, um, and, uh, you know, just, just investors in general. Um, even if they’re really good at it, uh, sometimes even if they like it pulling themselves out so they can grow, right. If they can have three acquisition agents that are half as good. Uh, the numbers typically work where you can turn up lead flow and, you know, still, uh, grow them at, uh, in the business.

So I think it’s [00:26:00] getting out of the seal rule so you can focus more on actually growing the business. And I, I train sales people, so I love to train an investor. So I don’t want to talk anyone out of, uh, investors buying houses, but at the same time, getting out of the sales role, hiring others to do it.

Even if they can only do it a fraction as well as you will allow you to focus on the actual and pull the levers that will grow your business and then turn everything off because now you’ve got the bandwidth to handle, increase everything else. So that’s when you can do sales. If you’re an investor business owner, entrepreneur is get out of the sales role and get yourself a couple of people who can do it

Mike: [00:26:36] for you.

Yeah, you can even say that about your whole business. Like we’re we’re in our way, right? I, I just, uh, before today’s event here, I did, uh, I recorded an investor fuel show with clay Rockwood. They’re doing a hundred wholesale deals a year and adding a hundred rental doors a year to their business. They’ve been in business for three years.

These guys are crushing it. And that’s what he said. That’s what he said is like, we just. I’m not the best at [00:27:00] anything that our company has to do. And I just had to get out of the way. And so I can focus on, you know, being the visionary or God forbid living your life. Right.

John: [00:27:09] You know, I’ve, I’ve, I, um, we’ve got one client in York, Pennsylvania.

This guy is probably one of the best natural salespeople I’ve met in my life. Like just, just he’s got it right. He was born with it. Um, that being said he doesn’t train the sales team. Um, he outsources that to, to me. Um, and the reason is, is not because he can’t do it. Um, but he knows his, his focus is spent elsewhere.

Now he’s doing 70 deals a month consistently and half for the last year or so last year. So we’re talking about how do you hit that volume? Um, and he’s not involved in the business that much anymore. So I just wanted to kind of throw that out there. He’s probably one of the best sales people I’ve met in my life.

He’s not selling his, he’s not even training his team, let alone selling the deals or buying the houses that are just positioning him because he knows he needs to [00:28:00] keep stepping up and taking kind of a higher level view of what’s going to grow the business instead of just taking that micro view.

Mike: [00:28:08] Yeah.

Awesome. Well, John, appreciate you spending time with us today. Great. To great to see you. My friend.

John: [00:28:12] Yeah. Good to see you, Mike,

Mike: [00:28:13] have a great Thanksgiving and a, well I’m sure we’ll be talking again soon. Okay. Thanks for joining me. On today’s episode, there are three ways I help successful real estate investors take their businesses and their lives to the next level.

First, if you’re in search of a community of successful real estate investors that help one another, take their businesses to the next level and a life changing community of lifelong friends. Please learn more about my investor fuel real estate mastermind. By visiting investor, fuel.com. If you’d like a cutting edge solution for the very best done for you lead generation on the planet where we’re handling the lead-generation for many of America.

Top real estate [00:29:00] investors. Please learn more@theinvestormachine.com. And lastly, if you’re interested in a free online community of professional real estate investors that isn’t full of spam solicitations and newbie questions, please join my free professional real estate investor Facebook group by visiting flipnerd.com/professional.

 

Source: flipnerd.com

How to Start Investing in Peer-to-Peer Loans

How to Start Investing in Peer-to-Peer Loans

Back in the day, if you needed a personal loan to start a business or finance a wedding you had to go through a bank. But in recent years, a new option has appeared and transformed the lending industry. Peer-to-peer lending makes it easy for consumers to secure financing and gives investors another type of asset to add to their portfolios. If you’re interested in investing in something other than stocks, bonds or real estate, check out our guide to becoming an investor in peer-to-peer loans.

Check out our personal loan calculator.

What Is Peer-to-Peer Lending?

Peer-to-peer lending is the borrowing and lending of money through a platform without the help of a bank or another financial institution. Typically, an online company brings together borrowers who need funding and investors who put up cash for loans in exchange for interest payments.

Thanks to peer-to-peer lending, individuals who need extra money can get access to personal loans in a matter of days (or within hours in some cases). Even if they have bad credit scores, they may qualify for interest rates that are lower than what traditional banks might offer them. In the meantime, investors can earn decent returns without having to actively manage their investments.

Who Can Invest in Peer-to-Peer Loans

How to Start Investing in Peer-to-Peer Loans

You don’t necessarily have to be a millionaire or an heiress to start investing in peer-to-peer loans. In some cases, you’ll need to have an annual gross salary of at least $70,000 or a net worth of at least $250,000. But the rules differ depending on where you live and the site you choose to invest through.

For example, if you’re investing through the website Prosper, you can’t invest at all if you reside in Arizona or New Jersey. In total, only people in 30 states can invest through Prosper and only folks in 45 states can invest through its competitor, Lending Club.

Certain sites, like Upstart and Funding Circle, are only open to accredited investors. To be an accredited investor, the SEC says you need to have a net worth above $1 million or an annual salary above $200,000 (unless you’re a company director, an executive officer or you’re part of a general partnership). Other websites that work with personal loan investors include SoFi, Peerform and CircleBack Lending.

Keep in mind that there may be limitations regarding the degree to which you can invest. According to Prosper’s site, if you live in California and you’re spending $2,500 (or less) on Prosper notes, that investment cannot be more than 10% of your net worth. Lending Club has the same restrictions, except that the 10% cap applies to all states.

Choose your risk profile.

Becoming an Investor

If you meet the requirements set by the website you want to invest through (along with any other state or local guidelines), setting up your online profile is a piece of cake. You can invest through a traditional account or an account for your retirement savings, if the site you’re visiting gives you that option.

After you create your account, you’ll be able to fill your investment portfolio with different kinds of notes. These notes are parts of loans that you’ll have to buy to begin investing. The loans themselves may be whole loans or fractional loans (portions of loans). As borrowers pay off their personal loans, investors get paid a certain amount of money each month.

If you don’t want to manually choose notes, you can set up your account so that it automatically picks them for you based on the risk level you’re most comfortable with. Note that there will likely be a minimum threshold that you’ll have to meet. With Lending Club and Prosper, you can invest with just $25. With a site like Upstart, you have to be willing to spend at least $100 on a note.

Should I Invest in Peer-to-Peer Loans?

How to Start Investing in Peer-to-Peer Loans

Investing in personal loans may seem like a foreign concept. If you’re eligible to become an investor, however, it might be worth trying.

For one, investing in personal loans isn’t that difficult. Online lenders screen potential borrowers and ensure that the loans on their sites abide by their rules. Investors can browse through notes and purchase them.

Thanks to the automatic investing feature that many sites offer, you can sit back and let an online platform manage your investment account for you. That can be a plus if you don’t have a lot of free time. Also, by investing through a retirement account, you can prepare for the future and enjoy the tax advantages that come with putting your money into a traditional or Roth IRA.

As investments, personal loans are less risky than stocks. The stock market dips from time to time and there’s no guarantee that you’ll see a return on your investments. By investing in a peer-to-peer loan, you won’t have to deal with so much volatility and you’re more likely to see a positive return. Lending Club investors, for example, have historically had returns between 5.26% and 8.69%.

Related Article: Is Using a Personal Loan to Invest a Smart Move?

But investing in peer-to-peer loans isn’t for everyone. The online company you’re investing through might go bankrupt. The folks who take out the loans you invest in might make late payments or stop paying altogether.

All of that means you could lose money. And since these loans are unsecured, you can’t repossess anything or do much to recoup your losses.

You can lower your investment risk by investing in different loans. That way, if someone defaults, you can still profit from the loan payments that the other borrowers make. But if you don’t have enough loans in your portfolio you’re putting yourself in a riskier predicament.

Final Word

If you’re looking for a way to add some diversity to your portfolio, investing in peer-to-peer loans might be something to think about. There are plenty of benefits that you can reap with this kind of investment. Before setting up an account, however, it’s important to be aware of the risks you’ll be taking on.

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