Seek Legal Advice as Needed

When I was new in this business I knew a lot more than I do now. Yep, thought I knew it all. I admit I tend to “ready, fire, aim.” Many times that’s the only way to get something going. However, there are other situations in which one should exhibit more caution. Legal matters fall into that category, specifically contracts. On my first several lease option arrangements, I ignorantly pulled contracts off the Internet. I shudder to think about it now! Here’s the story:

I put a responsible but struggling family into one of my renovated homes. The husband was receiving disability and the wife was supporting the family with a house cleaning business. They had three kids and a grandchild on the way. My heart went out to them. We met several times to discuss how a lease option works. I have a clear and distinct memory of explaining that the option fee was not refundable, even if they could not exercise their option to purchase the home.

The term of the lease was two years. At the end of the two years, they still were not in a position to qualify for a loan. I extended the agreement an additional six months. At the end of the extension, they were no closer to qualifying. It did not make sound business sense to continue the arrangement. I let them know I would need to sell the house, and unfortunately this meant they had to move. Not surprisingly, they claimed to have no idea the option fee was not refundable and took legal action against me. My attorney did all he could, but my contracts were not worded correctly. What could have been avoided by a couple hundred dollars in legal fees in the beginning ended up costing me thousands.

Don’t be pennywise and dollar foolish like I was. Use contracts for all your transactions and be sure that they are reviewed or created by a real estate attorney in your state.

The Modern Real Estate Agent

Real estate investing is a fast-growing industry. Although it’s quite risky because it involves investing a large amount of money without a guarantee of your investment’s return, it still dominates a big percentage of the investment industry. One of the many reasons why this industry has been steadily growing is because it has become easier for agents and investors with the help of technology. Like many others, the use of modern tools has been widespread in the real estate industry. In this article, you’ll find a few of the many useful modern tools you can utilize to become a modern real estate agent.

In this industry, it is necessary to have a wide network of contacts. They may be experienced real estate agents who can be your mentors, investors who can be your clients in commercial real estate, or someone else. The list can go on and on that your phone’s memory might not be enough! This is why you should use a CRM (Customer Relationship Management) System like Zoho or Hubspot. These do more than just store your contact list — they manage it. Hubspot can be connected to your Gmail account. CRMs help track and manage your communication with your current and potential clients.

Another dilemma you might need to find a solution for is the wasted time going back and forth to set a meeting with someone. Use a calendar to store your appointment schedules so you don’t forget your meetings or calls. Google Calendar is a simple but very useful option, though there are a lot to choose from on the Web. You might also want to consider using a scheduler. A good example is YouCanBookMe. It’s an online manager linked to your calendar that allows anyone (with the link) to book an appointment with you. It then automatically shows which dates/times are open and directly syncs in with your calendar. Never miss an appointment again!

And, in case you are part of a small group of agents that wish to share tasks, Trello is a great solution for your task management needs. You can assign tasks, keep track of their progress, and even communicate with your teammates using this tool. There are a lot of tools you can use. You just have to find the best ones that fit your business needs.

POWER TEAM – PART II BRINGING A REALTOR ON BOARD

Once you get the investor-savvy agent on the phone, you need to verify that they work with investors. “Hi Mike. This is Gena. Angie said you are the rock star agent for working with investors! Is that true?”

You are building rapport and taking the edge off the conversation.   Who doesn’t like to be a rock star? If Mike says that’s him, you are off to the races. If not, ask for someone else, or call another office. Don’t waste your time or Mike’s time.

“So Mike, I’m looking for single-family homes in safe, entry-level neighborhoods. I like three bedroom houses that are 1,000 to 1,500 square feet. I want to renovate these houses, put them back on the market (you can list them for me) and make a nice profit. Can you send me a couple dozen houses that are vacant, need work, and have had a price reduction or have longer than average days on the market?”

Why are these points important? Vacant – someone is paying the bills and no one is living there. Needs work – a traditional homebuyer wants a home ready to live in, not a project. Price Reduction – the seller has started negotiating with himself. He’s getting anxious. Long days on the market – the longer the house sits, the higher the need to sell. In other words, these four characteristics define a Highly Motivated Seller!

This is not your all-inclusive conversation, but it will get you started. If Mike asks you questions you can’t answer, (which neighborhoods? what price range?) you can rely on his expertise and have him tell you what his other investors prefer. How Mike performs will let you know if he’s your guy. Sometimes you have to kiss a lot of frogs to find your prince, so pucker up!

Your real estate agent is your door to nearly everyone else you will need on your team. An agent who works with investors will know contractors, property managers, mortgage brokers, hard money lenders — everything you need! Referrals are always the best way to go.

Why Landlords Make Great Buyers and Sellers

We often deal with landlords when we are looking for investors that are buying rental properties. Calling landlords is always a great way to add to and diversify your buyers list. I want to look at landlords as being a source of motivated sellers as well.

There are usually two conditions that will cause a landlord to become a tired landlord or motivated seller. The first is when they are dealing with really bad renters. The renters have torn up the property or they have been constantly late on the monthly rent payment. Whatever the case, the landlords are tired of dealing with renters. The second type of tired landlord is one that is older and has been dealing with rentals for many years. Sometimes these landlords just need a little push to get them to sell their properties. Here are some questions you can ask when you start reaching out to landlords to give them that little push.

  • I see you have a property for rent; I was wondering if you have ever thought about selling that property?
  • Do you have other properties that you would be interested in selling?
    1. Especially with the older, tired landlords, they my have many properties they are looking to get rid of, so make sure you ask.
  • Do have any friends or business associates that may be interested in selling properties?
    1. Make sure you are always networking for more properties that may have a motivated seller.
  • Are you still picking up properties currently?
    1. This question if very important, especially if the answers to all the other questions are no.

When you call landlords make sure you go through all these questions with them. This is a great way to find motivated sellers and continue building your buyers list.

How to Hire a Contractor

Home renovations can be time-consuming, expensive and stressful! Finding the right contractor can ensure that your home renovation doesn’t take over your life and your wallet. But how do you know a contractor is the “right” one for you? Learn more about how to find, then hire the right contractor for your home renovation.

Finding Contractors

Ranging from Real Estate Clubs to Lowe’s and Home Depot to Angie’s List of ads in the local paper, there should be plenty of places to find contractors. So, how do you pick the right one for your project? Step one is to ask for personal recommendations. If someone is willing to vouch for their contractor, that is something you should take into account. If you aren’t able to get any personal recommendations, the Internet is your next best bet. Use YELP, Google+ and sites like Angie’s List to read reviews of contractors. While it is also a good idea to look at their websites because they showcase their best work there, you need to know about ALL their past work as well.

Once you’ve gathered a list of contractors, make sure to run a quick search with the Better Business Bureau. Even with personal recommendations, you want to ensure that there are no pending litigations or major complaints filed. Once you find your list of contractors, it’s time to start the hiring process.

Hiring the Right Contractor

Once you have a list of at least three contractors, it’s time to hire the right one! Before you interview each contractor make sure you can clearly communicate your expectations. Questions you should ask each contractor are:

  • What vetting process do you use for your employees or any subcontractors who will work on this project?
  • Will you be handling all the necessary permits?
  • Can you supply a detailed list of services and expected completion dates?
  • What deposit is required and what is the estimated cost?

Once you have these questions answered by all three of your contractors, compare them. It shouldn’t always be about price. If the lowest priced contractor has no vetting process for their employees, you probably won’t be happy with their quality of work. Find a contractor that offers a balance of value and quality. This will help ensure that the work is done to your specifications. Hiring a contractor is the first (and most important) step of any home renovation. A good contractor should be your partner throughout your entire renovation. They should ensure all work is done to code and finishes are in the best quality, all while sticking to your budget. Don’t forget to take into account what contractor you felt most comfortable with. Not only are they going to be in your home every day, you need to be comfortable discussing tense subjects and financial matters with them. A good contractor can make or break a renovation, so take the time to find and hire the right one for your project.

­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­[1] https://www.upwork.com/blog/2017/11/want-job-filled-faster-5-tips-hire-right-talent

[1] http://smallbusiness.chron.com/manage-subcontractor-67687.html

Finding and Talking to Realtors

Finding a good, investor-friendly realtor can be harder than you might hope. The way investors do real estate goes against most realtors’ training. Even realtors who have been in the industry for many years are conditioned to only do one deal with you and put in only 3, maybe 4 offers at the most. They are paid strictly on commission, so it is understandable that they would want a deal to close for as much as possible.

Most realtors are not use to putting in the hefty amount of work that often comes when working with an investor. What they often don’t realize is that an investor is looking to do multiple deals. Even though an investor makes offers that are more aggressive and for less money, there is much more money to be made for a realtor who works with investors.

The best way to increase your odds of finding an investor-friendly realtor is to find a property on a website like realtor.com that needs a lot of work and that only an investor would buy. You then contact the actual listing agent of that property. A realtor who lists a property that only an investor would buy is more likely to understand how to work with investors.

When you call the listing agent, you can explain that you are interested in the property they have listed and others like it. You can ask them to send more information on it and others like it. It is also helpful to tell them that you are looking to do multiple cash deals that you can rehab and resale.

You might get lucky and find some good investor-friendly realtors with just a few phone calls. Sometimes it takes many calls to find the right ones. It is important to not let yourself get frustrated if you don’t find good ones right off the bat. Keep at it and you will find good investor-friendly realtors.

Building Your Cash Buyers List – Part 1

Many first-time real estate investors start off wholesaling in order to gain the experience and get the exposure they need to become a fix and flipper or a buy and holder. If this is the case, then these first-time investors’ first step is to find cash buying investors or cash buyers to wholesale their properties to.

In this article, we will go over many ways to find cash buyers and discuss how to screen and qualify them.

Before we move forward, keep in mind that cash buyers can be either groups or companies, such as trusts, holding corps or LLCs, as well as individuals.

When wholesaling properties to cash buyers, you need to look at properties from two different perspectives:

  • Fix & Flips – These are properties that you are trying to get at the highest discount you can. For most investors this could be between 25-35% below market or even as low as 40-50%. It’s key to find out from your cash buyer what their rehab budget is, as well as the level of profit they are looking for. This is critical in coming up with your offer amount on the property. A fix and flipper is looking for a specific profit after they buy the property, do the rehab and resale it.
  • Buy & Hold (Rental Property Owners) – This is where you try to get the best discount you can. Usually if you can get an offer accepted at upwards to 20% below market then you have a good deal. You need to understand your cash buyer’s specific criteria on what types of rental properties they are looking for and in which market, the amount of cash flow they are looking for, and the capitalization rates they wish to get. Often, you can find the answers to these questions from the following sources:
    • Real Estate Brokerages
    • Property Management Companies
    • Other investors and those you network with by attending Real Estate Investor Clubs

This will help with your preparation prior to reaching out to cash buyers, and it will help you get specific and detailed knowledge of the following:

  • What type of properties are selling the most and the speed at which they are selling
  • The median price of property sales, as well as the average price per square foot that they are selling for

In Part 2 we will go over some simple steps to consider.

Let’s Start Our Power Team – Part 1

Ah, the mysterious POWER TEAM! Why on earth are we so attached to this idea? Believing you must have a power team is something that can hold you back. Since you don’t have a clue what a power team is, who should be on it, or how to draft your team members, you may be perplexed and stuck. Maybe you will stall and do nothing because, after all, your power team isn’t yet assembled. Well, just stop it now before you get started down this path.

Your power team, like your business plan, and even your goals, is something that is going to naturally evolve over time. It is not something you have to fully create before you begin.

You should start at the very beginning, a very good place to start. When we read, we begin with A, B, C. When we invest, we begin with a real estate agent. Finding the right agent might take some doing, but that individual is the key to your success.

Real estate agents do not receive training in investing. They essentially learn how to use the Multiple Listing Service (MLS) contract and how to not get sued. It is your job to find the rare gem of an agent who understands and likes working with investors. Oftentimes, a good place to start is with Keller Williams or REMAX. Those particular offices usually provide at least a little investment training to their agents. However, I have often found a great agent at an office with only one location. This search is part of your great scavenger hunt! Here’s what I want you to do.

Find a real estate office in the general area where you want to invest. Though any agent can show you any property, agents tend to know the neighborhoods surrounding their office the best. The phone will likely be answered by an administrator.

The conversation is going to go something like this: “Hello, It’s a wonderful day here at Keller Williams. This is Angie. How can I help you?” (Yes, they say something like that.)

“Hello Angie (use her name). This is Gena. I’m a real estate investor. I’d like to speak to one of your agents who works with investors.” This will stop Angie from sending you to the agent covering the floor that day or to the next one on her list. You are already in control. You know who you need to speak to, and you have said so. Sometimes Angie knows just what to do, other times she doesn’t have a clue. In the latter case, ask to speak to the managing broker.

With simple guided conversations, you can find a great realtor for your business.

Information on Exclusivity Agreements and Why (or why not) to Sign Them

An exclusivity agreement is an agreement that limits a buyer from dealing with other sellers. The seller involved on an exclusivity agreement should be the sole provider of the goods that the buyer demands. It is a partnership that gives the seller exclusive rights to supply certain goods or services to the buyer. The underlying significant question here is: Why should a buyer sign up for an exclusivity agreement?

In every decision we make, there will be always be pros and cons. The advantage of an exclusivity agreement is always more apparent for the agent. It could offer a higher selling price for the agent. After relatively securing the time and money involved, agents can control the negotiation time and can easily turn down any offer. It can offer advertising opportunities for the agent. It can save time for the agent because the agreement allows no last minute switching of the buyer to other agents. No paperwork will be wasted at all.

So how does the agreement benefit the buyer?

Signing the exclusivity agreement guarantees better information for the buyer. The agent is automatically committed to providing details and information that will guide the buyer. The negotiations are done faster, saving time for both parties.

It is the buyer’s call to make the agreement happen. As a buyer, who will potentially invest a great amount of money, it is prudent that you weigh your pros and cons before signing an agreement with a specific agent. You can base your decision on how the agent presents the whole agreement. You can actually have the option to put the agreement within a specified amount of time to give you the power to terminate it when you decide it is no longer giving you a good advantage. The agent should also be able to present your benefits when you sign the exclusivity agreement.

Do your research, ask the experts and, if you must, hire a legal consultant when you are having dilemmas on whether or not to sign an exclusivity agreement. You will be investing the money you’ve worked hard for; the lack of knowledge is the last thing you need.