Mindset in a “Seller’s” Market

As seasoned real estate investors will tell you, we’ve seen a lot of ebbs and flows in the housing market throughout our years of investing. As you gain experience, you too will come to see that even in the toughest and hottest of housing markets, investors can still create great deals. In today’s “seller’s” market it’s time to start thinking outside the box. Below are some suggestions as we all move forward in this, and any market.

 

As you go about looking for properties to make into deals, have you asked yourself this question: Have I told everyone that I know — friends, relatives, co-workers etc. — that I’m looking to buy a home from someone that is behind on their mortgage, behind on their taxes, or has inherited a home they aren’t interested in maintaining or keeping?  If you haven’t, do it. The result may be a pleasant surprise. Another option is to focus on homes that have a listing that has expired.  An overpriced house typically won’t sell causing sellers to get frustrated, and in some cases, let the listing expire or terminate their contract with their realtor, thus becoming an expired listing. Don’t contact the sellers right after their listing expires, as this is when realtors are contacting them and trying to get them to relist. Give the sellers some time. Look at listings that have expired 2-3 weeks prior. As a general rule, your success rate will be higher. In a “seller’s” market, making a purchase must be handled carefully, with planning, and a sense of calm and calculated urgency. We want to move quickly, but also in a smart manner.

 

Stick to your numbers! Let them be your beacon, and do not deviate from them. Run your numbers. At the end of the day, the numbers in your analysis don’t lie. Also, remember to not get emotionally involved with any offer you make or let the market condition determine your success. The offer will work or it won’t. Don’t go chasing a bad deal because you “have to get into the market” or run around like Chicken Little proclaiming the sky is falling because you have to get creative. Run your numbers, make the offer and move on to the next; whatever that is. Success only comes by moving forward.

 

A “seller’s” market doesn’t mean there aren’t deals out there to be made. The strategy of buy-and-hold is a great one to look at in this market. As you negotiate a deal, remember the property will still likely go up in value. In this “seller’s” market, instead of focusing on large, “home run” deals, focus on what you can control: you. When you focus on volume, you spread your risk across multiple deals. Don’t shoot for 2 or 3 “home run” deals a year; hit singles every 2 or 3 months and when one doesn’t work out, you still have the rest of the deals to bring you up. And remember, every deal is a learning experience. The more you do, the less anxious and overwhelming the market and conditions become. Do your research on the market and know it. Don’t go off what someone is telling you.

 

In this market, even though there appears to be fewer listings and prices are higher, investing wisely based on ratios, profit margins, and market trends will still allow you to make money. No matter the market, people are always going to buy and sell houses. It may not always be smooth sailing for us real estate investors, but learning to ride the rollercoaster known as real estate is half the fun.

How to Surround Yourself with Positive People

We are overwhelmed with life’s challenges every single day. When you are down, do not let negativity personify you. Think positively and surround yourself with people who can help you do that. There are already a lot of exhausting things life has to offer, so don’t allow negative people to weigh you down. But, how exactly do you do that?

First, be yourself and be positive. Optimism is a basic ingredient to your career and life’s success. To attract the right people into your life, you have to be yourself and let your personality shine. Make people see the real you; the real ones will be drawn to you. When you find them, find common ground between you two. Find the good in them that you want to absorb. It may be their attitude when things go wrong, their work ethic, their amazing time-management skills, their humor, or anything at all that makes them positive people. Make them influence you positively.

Then think. What really makes them positive people? Is it their outlook on life? Attitude? How they deal with people? Here are some of the traits that a positive person must possess to be considered good company.

  • People who give their best in everything they do because they treasure every opportunity as if it’s a one-shot chance
  • People who have big dreams and the drive to follow and achieve them
  • People who treat everyone they meet fairly, regardless of economic status, gender, age and the like
  • People who does not only listen but understand and give relevant advice; those who have empathy and compassion
  • People who can cope with frustration, anger, sadness and other emotions and life situations
  • People who can make time for work/school, spiritual life, family, and social life
  • People who value themselves like they value others, and vice versa

The list above is only a guide; it may differ, depending on your perspective. It is hard to draw people like this into your life because it requires you to attract positivity in your own life, and that does not happen overnight. It will require you to make an effort to change your mindset and find people who treat positivity as a vital ingredient of success. Whoever surrounds you, you must remember that positivity comes from within. Be positive, attract positive people in your life, and live a happier and more optimistic life.

The Importance of Zeroing in on Your Buyer’s Tolerance for Profit

The language of business is numbers. So it is with doing profitable real estate deals. There are three (3) very popular rules for calculating your offer. They are referred to as:

  1. “The 70% Rule:” (Offer equals the ARV (After Repair Value) times 70% less cost of repairs.)
  2. “The 75% Rule:” (Offer equals the ARV (After Repair Value) times 75% less cost of repairs.)
  3. “The 80% Rule:” (Offer equals the ARV (After Repair Value) times 80% less cost of repairs.)

The “80% Rule” offers the least profit. However, it offers much greater likelihood of getting the offer accepted than “the 70% Rule.” What’s exciting is that there are investors who use “the 80% rule” and still make more money on the deal than investors using “the 70% Rule.” You will want to find them.

Regardless of which rule is used, there are closing costs, holding costs, and selling costs. Generally, those costs total 15% and break down like this:

  1. Closing Costs: (3%) Paid to the title company to insure the deed is free of liens or encumbrances.
  2. Holding Costs: (6%) These costs are mostly the costs of borrowing the money to do the deal, but also include taxes, insurance and utilities etc.
  3. Sales Costs: (6%) Usually paid to the realtors who help close the deal.

As a wholesaler, it is critical to find the buyer who will pay the most for the property. Some buyers have their own money. This eliminates most of the holding costs. The same buyer may also have the property already sold or have an agent on board that eliminates their sales costs. The buyer who doesn’t have many holding or sales costs can use the 80% rule and make more profit than another buyer who has borrowing and sales costs but uses the 70% rule.

When we interview buyers, we want to find out their “tolerance for profit.” Do they have money? Are they an agent or do they partner with an agent? Going out to the job sites of successful bidders can help you find those buyers who do rehabs more efficiently and at a lower cost.

Asking this simple question can help you sort out the buyers who should be at the top of your list. “Suppose I have a property you know you can sell quickly for $300,000.00, but it is going to cost you $30,000.00 to rehab. Your ad says you buy houses, where would I have to be pricewise for you to buy this one?”

Simply put, the greater your buyer’s “tolerance for profit,” the more money you will make and the more deals you will do.

Staying Motivated

Staying motivated in your real estate business is critical to your success and can sometimes be hard, especially when you are first building your business. Here are some ways to help you get motivated and stay motivated.

Goals: Goals are the first step to motivation. Knowing why you are doing what you are doing allows you to create a road map that you can use to guide you. Make sure you have a long-term goal that really excites you. Work that goal backwards so you have some intermediate and short-term goals. You want to break it down to weekly goals and daily action steps. Be sure to have your goals written down and read them daily.

Vision: Create a vision of your long-term goal. Imagine (visualize) it as if it is already real. Imagine it in enough detail that you catch yourself smiling. The emotion you feel while imagining your vision is the power that will fuel your motivation. Spend a minute or so when you first wake up imagining your vision, and again as you are falling asleep at night. This is called, “Feeding Your Vision.”

Vision Board: A vision board is another tool you can use to bring your goal to life. You want to find images that represent your goal as completed. You can put these images on a poster board or a corkboard. Be creative and have fun. You want to put your vision board where you will see it often. The power in a vision board comes not from just looking at it, but from taking 20 to 30 seconds while looking at it to let it take your there, so you can feel motivated and catch yourself smiling.

One last tip: When you wake up in the morning, ask yourself, “What do I get to do today”?

 

How to Get More Out of a 24-Hour Day

There is one constant that we, as real estate investors, all have to deal with. That constant is time. There are only 24 hours in a day and that is something we are not able to change. If you manage your time wisely and work hard, you can get a lot done in a day, but you still only have 24 hours. In this article, we will talk about ways we can make that 24 hours grow. The key to this is leveraging members of your power team to work for you.

One of the best power team members you can get to add hours to your day is a real estate agent. Agents are experts at finding properties. If you take the time to train them on what you want them to do and the type of properties they send you, it can greatly increase your daily production. Training them may take a little time to do but the payoff will be big in the long run. To clarify this point, make sure your agent is sending you vacant, as-is properties. You do not want access to the MLS or them to send you every property that hits the market. This will detract from your time, as now you must sort through all the properties the agent should be sorting through. Also, have them create a template for your offer, as all your offers will be the same, just with a different property and a different price. Multiply that by 3-4 agents and you have added hours to your day by leveraging other people’s time.

Another thing you can do is get some bird doggers or property finders. You will have to give them specifics on the type of properties you want. Once they understand what you need, having them look for and send properties to you will help increase the amount of offers you are able to submit. You can always offer to compensate anyone sending properties to you, especially once you close on a property.

By leveraging out people’s time and resources, you can greatly increase your productivity and output. It may take a little time at first to train them on your needs, but the end results of adding time to your day is well worth it.

Foreclosure Process on Tax Liens in Florida

Tax liens can be a great way to supplement your income or your retirement nest egg.   In the United States, each of the states is either a tax lien state or a tax deed state. There are two hybrid states, Georgia and Florida. All of the other states are divided evenly along the line of being a deed or lien state. For our purposes with this article, we are going to consider tax liens in the state of Florida.

We are going to go through the steps that are needed to collect on a tax lien that was not paid in the redemption period. We are going to look at costs, court proceedings and auctions that lead up to us being paid as the tax certificate holder. By knowing what to do, you will be able to worry less about getting your money. Tax lien certificates in Florida are a great investment and you should never lose your money if you know what to do and when to do it. Let’s focus on the three following areas to understand the tax lien foreclosure process in Florida:

  1. Understand the redemption period.
  2. Working with the clerk of the court.
  3. Understand the auction process.

When you buy a tax lien certificate in Florida, you will be given a redemption period. This is the amount of time that the owner of the property will have to pay you your principle and interest. This period is usually two years. If you are not paid, you can continue to collect interest or you can begin the foreclosure. After your two-year redemption period, you can begin the foreclosure period any time you would like.

To begin the foreclosure process, you will need to contact the clerk of the court for the county where the property is located. The clerk will have the needed paperwork for you to file the foreclosure. There will be a fee charged, but you will receive that back when the foreclosure takes place.   Once the foreclosure is final, an auction date will be set.

At the auction, the starting bid will include everything that you are owed. All the money you paid for the tax certificate, the interest you are owed, fees you have paid and court costs will all be used to determine the starting bid. If someone bids at least the starting bid, you will get your money. If the starting bid is not met, then you will receive ownership of the property.

Foreclosing on a tax lien in Florida is simple. You do not need a lawyer nor do you need to worry about costs.   Follow the steps and get the help you need from the clerk of the court. You should never lose money in Florida liens. Take care of business and you will have reaped a very nice return of 18% from your Florida tax liens.

Best of luck in your investing! You can do it!

Understanding the Investor’s Mindset as a Realtor

Most of your traditional buyer clients are probably very similar in what they’re looking for in a property.  They want a property that is within their budget (or below their budget), that has as many bells and whistles as possible, and that is in a prime location.  Most of your buyers want as much as they can get for a price they can afford.

When you work with buyers like this, who are looking for a residential property, you will likely discuss various finishes, square footage, and building features.  Many of these buyers will purchase based on whether or not a property feels like home to them.  Little research or thought may be put into figuring out whether their dream home is a good investment, even though their home purchase is often one of the largest investments that they will make.

Many homebuyers are accidental investors.  They’re looking for a home that appeals to their “American Dream” ideal, and they end up making one of their biggest investment decisions in the process.  Although the real estate investor is looking at the same market as Sue and Joe first-time homebuyers, the investor is looking at the market through a very different lens.  By understanding the differing mindset of the investor, you will be able to serve your investor clients more effectively.  While Sue and Joe first-time homebuyers want to know about school districts, landscaping, and kitchen layouts, your investor client is less emotional about the transaction and more focused on these particular questions in his/her decision:

  • What is the potential value in a property?
  • How much will it cost financially and in terms of resources to receive the property’s potential value?
  • What are the risks associated with this acquisition?

Typical buyers (accidental investors) may end up making profitable decisions and coming out ahead simply because their goal of finding an appealing property means that they acquired a hot property that will most likely appreciate at a steady pace.  This is the mindset of many buyers.

The strategy of real estate investors, however, is very different from this “ideal property” mindset that most of your buyer clients possess.  Investors are looking for deals.  They are looking for properties that will return more than the initial investment.  If investors lose sight of their wealth-building goal and purchase a property on a whim or because of its “bells and whistles,” they may end up making a dangerous, costly investment error that will take them a long way from their wealth-building goal.

Part 2 – Getting Started with Residential Land Development

Part 1 of this series discussed the initial steps to getting started with residential land development. We covered financing options, finding partners, and finding properties. Part 2 will pick up where we left off and teach you 3 more steps you need to take. Because we covered 3 steps in the first article, we will number the following steps 4, 5, and 6.

4. Preliminary Due Diligence

After identifying a potential property, you will need to explore the codes, zoning regulations, and development processes for the local municipality or jurisdiction. Although you can go through the process to change the zoning or use for the property, it is typically a long and painful process that doesn’t guarantee your proposed changes will be approved. It’s ideal to keep your development conforming with existing codes and regulations.

5. Obtain Estimates For The Development

You will likely need to talk to several different contractors to get bids on the work that needs to be done. It’s wise to use contractors that have done similar projects within the area. They will have more experience working with the local city. Their experience will help them understand the requirements and costs for the project in the area. In addition to getting bids from the contractors, make sure you talk with multiple city officials multiple times. You need to make sure all of the stages of the application and approval process are covered. This process can include, but is not limited to:

  • Filling out and submitting paperwork
  • Meeting with city officials
  • Various 3rd party tests and permits
  • Purchasing water rights
  • Application fees
  • Construction inspection fees

6. Negotiation

Now you should have a good estimate on the timeline and cost to execute the development. You are ready to run numbers and make an offer to the seller. One of the keys to making an offer and negotiating is understanding if there’s any part of the development process that the seller is willing to complete. If it’s a big enough project, the seller may be willing to seller finance or subordinate the property. With the amount of information needed for a development project, it’s usually a good idea to have at least one meeting with the seller to discuss as many details as possible. Then you should present an offer that contains multiple options to make the deal happen.

Three Questions to Ask Yourself Before You Start Investing

As you start investing in real estate, ask yourself these three questions:

First:

What are your real estate goals? Outlining what you want your investments to accomplish will help guide you in the right direction. When you first start, it is like planning a vacation or cross-country trip. Discuss with your spouse or partner the core reason you are investing. Is it for retirement, for your children or grandkids and/or for supplementary income? Different strategies are needed for different reasons. Some yield returns more quickly (such as wholesaling), while others are for longer-term investments (such as buy-and-hold rental properties).

Second:

What is your time commitment? How much time are you dedicating to your efforts? Is this more of a hobby or do you want it to replace your day job? You need to be honest in your assessment of timing and what you are willing to give-up or reschedule. There are limitations to your weekly obligations.

If you are already busy with a full-time job, school or the kids, then you should asses your schedule carefully. Experts and seasoned real estate investors say beginners should realistically evaluate how much time they will be able to carve out of an already full schedule.

Third:

What is your focus? Where do you want to start investing? If you need money in the short-term, then you should focus on wholesaling. If you have the time and the expertise (or the network), then you might undertake buying a fix and flip. If you want residual income, then a buy-and-hold property would be a good strategy for you.

Assessing where you are financially will also help you decide where to start. Wholesaling takes little to no money down, while doing a fix-and-flip or buy-and hold will take a significant amount of cash. Some investors do not understand that many lending institutions will only lend a portion of the funds for a purchase and will not lend additional money for repairs.

Summary:

Assessing your goals, time-commitment and financial focus will help you be more strategic in your efforts to be a successful real estate investor. Additionally, being clear on your objectives will help you focus your efforts and avoid wasting time.