Cash Flow in an Up and Down Economy

Cash flow: for some it is the thing they can never figure out; for others it flows like well water.

How do you set up cash flow? How do you keep cash flow coming in? What properties can bring in cash flow?  Cash flow can be set up through single-family homes, multiple unit properties and commercial properties. The focus for this article is on commercial property storage units.

Storage unit facilities come in varying sizes and layouts, from a small, single row of units to a multi-acre facility that has indoor and outdoor storage capabilities.

Storage units are able to survive in high and low economic times because of people’s need to acquire “stuff.”  In good times, people need a place to store the extra stuff they have. In lean times, downsizing happens so people store the stuff they cannot part with.  As a storage facility owner this is all great news, along with the fact that I will not need to unclog any toilets or worry about the eviction process.  If someone does not pay for their storage unit, the unit will be locked and the unit owner will typically be given a 30 to 45 day notice. After that the unit will be put up for auction.  At the auction, the unit will be opened and people can look, but not go in the unit itself. The unit goes to the highest bidder. Typically the unit needs to be emptied by the end of the business day.

Now, when evaluating cash flow from existing storage units, there are multiple considerations to make:

-What is the current occupancy rate? How do the prices compare to close by competition?

-What is the mix of size of units in the area? How many units are available in competing facilities?

-What type of storage is being offered: outside, RV, inside, climate controlled, small vehicle?

-Are there mixed-use facilities in the area: car wash attached, mobile home or RV park adjacent, vehicle rental facility or moving supply store?

-How long has the facility been in operation?

-How close are the nearest competitors?

This is a short list of things to check on a cash flowing commercial property, specifically a storage facility. As with any type of commercial property in a city, we want to make sure the city is still happy to have the facility operating within city limits. Talk to the planning and zoning commission to find out what the city’s 5-year plan is and how they see your facility playing into it.

I have seen facilities that went back and forth with the city for five years on what was needed and how the facility should look before the building was approved —it took four phases. But because planning was completed before the second phase of development, the facility was fully rented during phase one.  Understanding what your objective with your property is for the next five years will help you plan ahead and help your cash flow, even in a down market.

10 Most Import Items to Upgrade on Your Home

If you have a home that you are considering fixing up so you can sell it for the best price but you don’t have a fortune to spend on upgrades, focus on the following 10 items to make the biggest impression on potential buyers:

  • New Front Door: It is always important to make a good first impression and the front door is the first thing people see when they come up to a house. Replace an old, plain slab door with a new raised panel with a window in it.  Paint it a color that complements the house but also adds a little character and stands out.
  • Tile Foyer Entry: The next item buyers see when they enter your home is the entry, so make it look like an entry by laying some tile or hardwood in the space allotted.  If you walk into a house that is carpeted right up to the front door, the entry disappears into the living room and doesn’t look as classy.
  • New or Improved Doors: Another inexpensive replacement that can make a big difference is replacing the interior doors.  If your doors are plain, flat slab doors, upgrade them to raised panel doors.  Purchase a whole new pre-hung door, jamb and casing to replace the old ones.  They will come pre-primed so they can be easily painted.  Be sure to pick a color that offsets the walls for a two-toned look.
  • New Door Handles: Along with your new doors, jamb and casing you should replace the hinges and door handles with a nickel satin finish to match today’s modern look.  You can buy inexpensive handles for about $12 each and make a big impression.
  • New Electrical Switch Plates: Other items that are overlooked include electric wall switch plates.  A lot of people will freshly paint their place but leave the old, worn-looking electric cover plates on or even paint over them, which is worse.  Spend 35 cents each and replace the cover plates throughout the house.
  • Paint/Replace Trim: Painting the house will make one of the biggest best impressions of all, but if your walls look pretty good already and you are on a budget, consider just painting the doors and trim.  You can pick a color that offsets the wall color, like white when the walls are grey or beige.  This will create a two-tone look which is much more appealing than everything painted the same color.
  • Paint Kitchen Cabinets: Replacing the kitchen cabinets is nice but also one of the most expensive rehabbing items you could do, so if you are limited on funds, consider simply painting the cabinets.  Since today’s popular look is white cabinets, you can paint over any cabinet finish with semi-gloss white and make your cabinets look new.
  • New Shower Curtains: Another easy, inexpensive upgrade is to replace your shower curtains with new, decorative curtains that match the colors of the home.
  • Add Window Shutters: You can also add window shutters to cover up old windows and avoid spending the money to replace them.
  • Add a Nice Mailbox:  Lastly, you can help your house stand out from the crowd by replacing the mailbox with a new one that has a little more character than every other mailbox on the street. You can also paint the old one to stand out and tie the color in with your new front door for some added street appeal.

3 Ways Entrepreneurs Can Use Crowdfunding

Whether you’re just starting a business plan or you’re already coming up with new ideas to grow your business, financial instability may always be a struggle. It’s not every day that you get support from people around you, especially if money is involved. Great ideas can go unheard or unfulfilled for many reasons, which is why you many need to look for other sources for your funds. Some businesses look for investors to sit on their board of directors and invest in their company, some look into banks or lenders to acquire a loan for their funding, and others look into crowdfunding.

Crowdfunding is the process of sharing your business/project ideas to the public with the goal of getting some support. You discuss your idea with people who could possibly be interested and willing to give small dollar contributions. The more people you get to believe in your project, the more support you get and the larger amount of money you raise.

This can be done in various ways. One of which is through rewards. You market your business idea online and offer rewards to your backers in return. The rewards can come in various shapes and sizes. They can include a personalized gift, a certificate, or any material memorabilia. Or, they can also come in the form of discount coupons, bragging rights, and such.

Crowdfunding can also be done based on equity. It’s quite similar to investments but it has a unique set of rules and terms. Backers can be offered equity stake in your business in exchange for the amount that they will give to your business as support. And, like many other investors, they would expect this investment to grow over time with the business. Or, it can be lending-based where backers lend the funds to put your business ideas into fulfillment but they expect the exact amount of the investment in return after a certain period of time.

These are only some of many ways crowdfunding can be practiced to help you collect funding for your business ideas. As long as your ideas are worthy and feasible, you’ll never lose support.

Understanding the Pre-foreclosure Market

The pre-foreclosure market has a phenomenal potential for profit. This can be particularly true for people with very limited funds. Yes, you will have to learn a lot and apply what you have learned. Not a lot of people understand the market, so most areas have a very limited number of skilled competitors. Just purchasing a pre-foreclosure property is not understanding the market. Understanding the market is knowing what to buy and how to buy it right.

The first and perhaps most important key is to find people who don’t want the home. Perhaps they are going through a divorce or a financial crisis. The second critical key is to learn how to focus on pre-foreclosures that have substantial equity. To make the big money you will want to purchase the property “subject to the existing mortgage.” Basically, either the property has equity, or it does not. mortgages that are more than the value of the property can be purchased via a “Short Sale.”

The strategy to close pre-foreclosure deals is quite different where there is positive equity than where there is negative equity:

If the home has negative equity…

You will need to get the banks permission to accept your offer. You will also need cooperation from the current owner of the property. In other words, both the current owner and the bank must agree “in writing” to sell this home to you at a price below what is owed on the mortgage. The current owner will need to sign paperwork agreeing that they still owe the difference to the bank. Obviously, this can be scary to the current owner. Historically, banks have just written these debts off. However, they could go after the current owner at some point throughout their lifetime.

Banks don’t enjoy losing money. Banks only agree to do so when other options appear to be worse. In recent years the banks have speeded up the process of what is called a “Sort Sale.” The name means selling a mortgage “Short” of what is owed on it. Someone in the bank needs to sign off on the deal. Generally, Bankers are reluctant to sign off on a money losing deal because they are looked on as the one who lost money for the bank. Even today closing a short sale doesn’t lend itself to an easily duplicatable process. Hence, every deal stands on its own.

Nonetheless, if you are dealing with a smaller Regional Bank where you have access to the decision maker and or you are dealing with a cooperative “current owner,” you will want to move forward with passion! One last positive point about many Short Sales. Because, the process often takes over three months banks are not that concerned with deposits. They often ask only for a small deposit or don’t really monitor deposits closely. Hence, you may only need to get the funds or a buyer with the funds when the deal closes. There is one way to increase your Short Sale Opportunities and we will cover that next.

If the home has positive equity…

Once you understand the pre-foreclosure market you will want to look for, market to, and or try to find these “cash cow” opportunities. Nonetheless, you are likely to run into deals where there is negative equity. A wonderful thing about purchasing pre-foreclosure direct from the current owner is that you don’t need the banks permission. You don’t want to offend them, but you can close these deals without getting banks to sign anything.

However, you will want the current owner to sign the appropriate paperwork and those things will want to be witnessed and notarized. But, that’s just paperwork. Finding a home with positive equity can allow you to fund your actions with the equity itself. Understanding the pre-foreclosure market means knowing where and how to find the money you will need to close these deals. We will cover these in copious detail in our next installment entitled “Conquering the Pre-foreclosure Market.”

If you market effectively for pre-foreclosure, you will also get some opportunities for Short Sales.

The most critical thing to understand about the pre-foreclosure market is how to know a good deal when you see one. Most of that is just a math problem once you get past the people part. Further, much of the people part is a math problem also. So, let’s start there. Even a modest marketing effort will have you working with people who have received a “NOD (Notice of Default) letter.” Of those 60% will resolve their issue without losing their home. Some of those could have resolved their issue with money they received from you or your sources. You can make a healthy profit right here while you build a compelling future kingdom.

You are looking for two kinds of people. Anyone who has equity, more equity is better, and wants to save their home but is getting turned down with every effort from the traditional lenders, is an ideal candidate to borrow money from you and your sources. Also, anyone who has equity but “doesn’t want” the home is a candidate for you to make money.

If you really understand the pre-foreclosure market, you will know that it is worth learning and understanding due to the large profits you can make. Further, you will be of service to those in need.

Workshop Update | Week 20 – May 16–May 19

This week, Response delivered 14 Real Estate and Stock workshops. Our overall customer experience score, for all surveys received, was a 5 out of 5. We saw over 806 students. Here is what some students shared about their experience:

“I would highly recommend it to anyone.” —Nathan H.

“Overall great!” —Jose B.

“Training was valuable.”—Kasuma G.

Should You Sell Your Home Yourself?

The real estate industry can be very risky. Every move you make should be well-thought of. Whether you’re a buyer or a seller, you’ll always have a list of things to consider. Just like when you plan to sell your property, one thing to consider is when you should or shouldn’t hire a real estate agent to assist you. And, it’s going to be a tough call.

Selling your home without an agent sounds both good and bad. It may be good in some ways because you will be able to save thousands of dollars by not paying the agent’s fee, you’ll be able to do the selling exactly your way, and you’ll have complete control over everything from planning to closing. On the other hand, not having an agent that is knowledgeable in business and in real estate can hinder your real estate career and cause you to waste money in the long run.

Going solo in the selling process can make you ask these questions:

  1. Has the real value of your home been determined? It’s hard to do it yourself, especially if it’s your first time and you’re unaware of how to price a house. This may lead you to either overprice or underprice your property, and you may eventually end up with little to no income in return.
  2. Are you willing to add to your workload just to take care of this? You might already have a lot of things going on and putting this task on your shoulders might add another burden.
  3. Also, during showings or visits, are you willing to entertain potential buyers and screen them yourself? This may sound like an easy thing to do but it’s not. You’ll have to be very careful and observant so you can identify which buyers are good and have high potential.

Before coming up with a decision, you should weigh the pros and cons. Do not rush to conclusions. Do research and seek understanding before taking an action.

Rehab or Rental: What insurance coverages do I really need?

Congratulations on deciding to invest in real estate! Whether you are going to rehab and sell a property or keep it to add to your portfolio as a rental, you will want to make sure you are covered in the event of future liabilities.

As a real estate investor you want to protect your profit and your assets from the moment you acquire your property until the day you close and pass it along to someone else.

Let’s take a look at the timeline of a rehab property:
– Identify the target property
– Due diligence
– Call your insurer about the property
– Offer is accepted
– Close on the property
– Get all permits required
– Begin rehab, work with contractors
– Complete work
– Sell or find tennet

I hope that seeing “call your insurance agent” before “offer is accepted” was not a shock or surprise. You might have heard other investors talk about builder’s risk, a vacant home policy, a homeowners policy and a dwelling policy, but which one do you need?

A standard homeowners policy should cover the following; Coverage for the dwelling (your main house) and attached structures (such as a garage), contents of the home, loss of use for a hotel if you are unable to return to your home, personal liability and medical expense.

A dwelling policy is custom-built on what liabilities you need to cover, adding coverage for building materials and covering no occupancy while no work is going on.

Depending on the type of rehab needed, your agent will need to consider multiple policies.
If it is a cosmetic rehab, including kitchen and bathroom, you can get a policy that will cover home vacancy until the rehab is done and sold. If you are moving walls and dealing with structural issues, you may need a commercial carrier as that is closer to a builder’s risk policy.

Let your agent know how many homes a year you are planning on doing. Some have policies that will cover multiple homes. Most policies are on a per home basis, so ask your agent about what discounts or coverages you need to add. Water damage is always good to add to a policy in case there is flooding or damage from the city line if it backs up in your home.

Communicate with your agent to make sure you understand your coverage and how to make the process simpler and smoother for the next property you work on.

Now, if you are thinking of holding the property and becoming a landlord, you have different liabilities to consider:
– Standard homeowner policies will not cover a rental. In fact, they could deny some coverages if you are renting the property.
– Fire policies will need to be updated to cover any appliances or furnishing you have provided for the rental property.
– When protecting your rental income from loss and minimizing unnecessary expenses, make sure you are not paying to much for insurance.
– Replacement Cost or Cash Value Insurance: make sure you understand the out-of-pocket expenses for both as you move forward.
– Look into liability insurance in case harm or damage happens on your property to a guest or by the tennet.

Your agent will talk with you about dwelling policies. Typically you have DP-1, Dp-2, and DP-3.
– DP-1 is a basic policy covering fire and vandalism.
– DP-2 is broader adding wind, fire, hail and even collison if a car hits the property.
– DP-3 is a special form or open policy. Unless a peril is specifically excluded, it is covered.

Talk with your agent and figure out the best way to move forward with coverage on your property. Requiring your renter to have their own rental policy should be a hard rule that is always in place.

This article was intended to help you be aware of what to expect, not scare you from investing. When done right, having investment properties is a great way to build up income and assets for your future.

Creative Ways of Financing Your Business Project

Creative Ways of Financing Your Business Project

Getting a business off the ground costs approximately $2,000 up to $5,000 for home franchises and $3,000 for micro-businesses, according to Business News Daily. True to the words of Sol Luckman, “It takes money to make money.” The sad reality is that despite having brilliant billion-dollar business ideas and all the data in your favor, sourcing finance to start or finish projects can be quite taxing, especially for emerging entrepreneurs with little-to-no credibility. For this reason, budding entrepreneurs should take a minute to understand the changes in business funding over the last decade and come up with creative ways of securing the money bags for their business projects.

Social Media Marketing

In a world where people look to social media platforms like Facebook, Instagram, Snapchat, and Twitter for advice on how to eat, drink, live, dress and act, social media marketing can be instrumental in securing funding for business projects. How so? Well, for starters, marketing on social media platforms enable you to reach investors from the large pool of 2.77 billion Internet users in the world. Advancing your business via social media can also be done through influencer marketing. This is where you pay or partner with an influencer who has a huge following to post about your products or services and why people should invest in or buy them.

Going live and posting videos on your social media feeds is another way to help secure funding. Doing so creates awareness about your project, grows a fan base and promotes brand loyalty thanks to the fact that visual content is shared 40 times more than written or audio content. This fan base could help support you financially. Additionally, once investors see a huge number of people like and re-share your content, they will be more than eager to finance your project.

Participating In Saving Challenges

Saving is one of the best ways to create a fund pool for starting, expanding or finishing any business project. This is because it comes with zero baggage, seizure threats or debt.  Participating in any of the many saving challenges on the Internet is a fast, guaranteed way to source finances for your business idea over a defined period of time, say 52 weeks. These challenges state the time duration and the amount of money you will raise over the stated time. It is then up to you to find ways to source the money to deposit weekly, biweekly or monthly depending on the challenge. This could be through formal employment, side hustles or hiring out one’s talents and skills.

Approaching Angel Investors

Getting access to a good investor in this Internet age has become simpler. Getting them to invest in your project, therein lies the rub, as they are bombarded with constant requests. Social proof, a well-planned out business strategy, and specific objectives on how you’ll get your project finished are things that will give you an edge over all other applicants. Additionally, you want to look for an angel investor in your field. Having an angel investor who has succeeded in the same field as yours means they are in a position to connect you with all the power players in the field from suppliers to manufacturers and authority contacts. They also have invaluable insights on what might or might not work and you will, therefore, have your work cut out for you.

Sometimes, traditional methods of sourcing funds like bank loans, peer-to-peer lending, venture capital, grants and crowdfunding fail. During such times, think of out-of-the-box ideas to generate the money needed to complete your project. Social media, angel investors and saving challenges are a great place to start.

 

Money Saving Home Repairs You Can Learn To DIY

Money Saving Home Repairs You Can Learn To DIY

Home repairs can get costly, especially with the national average cost of hiring a plumber coming in at $299 and the cost of hiring an electrician at $322. While these might not seem like outrageously high numbers, they can add up over the year when you factor in how many home repairs you typically need. However, there are solutions to these financial woes, and they lie in learning how to simply fix things yourself. Sometimes, the path to financial freedom includes learning how to take cost-effective detours in the form of DIYing what you can.

Easy Plumbing Repairs

When your toilet is clogged, it can be easy to want to call a plumber and pay the fee in order to avoid having to deal with it yourself. However, there are many easy fixes to plumbing problems. To repair a leaking toilet, for example, simply loosen the bolts located at the base, remove the toilet from the base and clean up any debris around the drain hole. To DIY a clogged toilet, you’ll need to put a cup of baking soda into the bowl and let it sink to the bottom. If it needs a little extra help, you can boil water and throw that into the mix. Add two cups of vinegar slowly and watch it unclog whatever is causing the buildup.

Replacing Kitchen Appliances 

It’s actually not that hard to replace various kitchen fixtures such as a faucet or parts of a refrigerator. You’ll want to begin by identifying the route of the problem. In most cases visible rust, leaking water, or reduced water pressure are signs of a problem and will lead you to the root cause. Once you’ve figured that out, you’ll want to remove the faucet or similar appliance and simply follow the instructions included in your new one. Nerd Wallet released reports stating that 31% of homeowners don’t have money set aside for these types of repairs, so by DIYing them yourself you can not only help save on unnecessary spending but also put that money back into your savings.

Remodel Areas of Your Home

44% of Americans who are homeowners said their first unexpected home repair or remodel occurred within the first year of ownership. This is why it’s a great idea to really learn how to DIY these tasks in order to save money while increasing your investment in the house as an asset. While some tasks are better left to professionals, remodels such as installing hardwood floors, resurfacing cabinets and updating the interior paint can all easily be done without any experience.

Taking on Electric Repairs

While it might seem like a daunting task, repairing something electrical can be as simple as knowing where to connect the wires. To replace a light switch, for example, requires you to simply choose the fixture you want. Then, once you’ve got it, you’ll want to turn off the power to your home, remove the existing light switch and pull it out away from the wires, disconnect the panel and then replace it with the new one. Now, take the money you’ve saved and add it to your savings account or some sort of financial fund. Use this money to invest in high-quality repairs and renovations down the road that can increase your home’s value.

The Joy of Saving and Learning 

If you’re constantly calling someone else to fix everything, you’ll not only drain your resources fast, but you’ll miss out on the opportunity to learn how to gain practical skills and feel a sense of accomplishment. Learning how to DIY home repairs is a great way to gain skills without tapping into your savings, and that’s a smart financial move you can apply to any area of your life.

Workshop Update | Week 15 – Apr 11–Apr 14

Workshop Update | Week 15 – Apr 11–Apr 14

This week, Response delivered 15 Real Estate and Stock workshops. Our overall customer experience score, for all surveys received, was a 5 out of 5. We saw over 563 students. Here is what some students shared about their experience:

“I just love, love, love the knowledge that I gained from this workshop.” —Juliette S.

Great class. Thank you!” —Mary R.

“Awesome!”—Alex P.

The Baby Boomer’s Guide to Spending Time and Saving Money

The Baby Boomer’s Guide to Spending Time and Saving Money

We’ve always been told to save for retirement. “Start early,” they say. “Don’t waste money on frivolous things,” they say. Our existence seems to consist of working every day to live, only so we can retire one day with the money that we saved over the years. But at what expense is all of this to our quality of life? Why work simply to live without enjoying the life we’ve worked to achieve? Baby boomers, we’re talking to you. You’ve worked hard and earned your retirement; it’s not too late to start living it up. It really is possible to be frugal without giving up all the fun.

How You Save Your Money

Medicare

Prioritizing is a part of life; so, before enjoying the fruits of your labor, assess your responsibilities first. Housing, food, and healthcare are at the top of the list when it comes to seniors. Since maintaining one’s health is especially important during your golden years, look into Medicare coverage if you haven’t already. Online resources can help with enrollment and choosing Medicare Advantage Plans, which offer supplemental Medicare coverage for vision, dental, and prescriptions.

Long-Term Care

Another cost to consider is Long-Term Care (LTC). Long-term care insurance helps pay for personal or medical assistance when you’re unable to care for yourself. Assisted living and nursing homes fall under the realm of LTC. Not all baby boomers have the financial means to pay for these services out-of-pocket, so this is where LTC insurance comes into play. While you’re still healthy, you can prepare for your needs later by purchasing a long-term care policy. To compare prices and coverage, search online for LTCI companies on review sites like Consumers Advocate.

Life Insurance

The purpose of life insurance is to make sure your loved ones are financially taken care of after your passing. It’s there to replace the income you once provided, especially if you were the breadwinner. It’s also there to help cover funeral arrangements so your family doesn’t have to pay for it.

Some families benefit greatly from life insurance, but not everyone requires it. If your family has the means to financially support themselves without your life insurance benefits or if you don’t have to pay estate taxes, then there’s no reason to take out the extra cost. Adult children who are independent probably won’t need your life insurance benefits, nor will a spouse who has enough income or assets to be self-sufficient in the event of your passing.

How You Spend Your Life

Once you’ve covered the necessities, you can find discretionary ways to fit a quality lifestyle into your budget. Life doesn’t have to be put on hold just because you’re trying to be frugal, but there needs to be a balance between saving your money and spending it. You can have a life without sacrificing your savings by trying some of these tips:

  • Minimize your entertainment expenses by cutting your cable and replacing it with alternative streaming services like Netflix or Hulu. You’ll still be able to watch your favorite television programs without having to pay for the channels you don’t need.
  • Take a road trip instead of a pricey vacation or a cruise. Driving cuts down on costs and allows you to see more of the scenery you normally miss out on when you fly.
  • Take advantage of senior discounts at restaurants, retail stores, and travel services.
  • Host potluck dinners at home. Be social with friends without having to spend money on going out to eat and drink. Or, if you do go out, split a meal with your spouse and bring your own wine.
  • When it comes to entertainment, look for ways to buy discounted event tickets or opt for community theater or musical performances.

Ask yourself this: What’s the point of saving all of your money just so you can use it to survive? Without a healthy balance between saving and spending, you’ll slowly see the days pass by…and one day you might regret not doing the things that you wanted to do. If you’re not living life to the fullest, then what are you living for?

6 Easy-to-Follow Steps that Can Stop Disappointment from Turning into Deathly Discouragement for the Beginning Real Estate Investor

6 Easy-to-Follow Steps that Can Stop Disappointment from Turning into Deathly Discouragement for the Beginning Real Estate Investor

When you first start any new activity, it is entirely possible that you will experience pitfalls, set backs and even disappointments.  This is almost inevitable for most new real estate investors as they attempt to duplicate the success of others.  However, long-term discouragement that can cripple your investment efforts need not be the final result of real estate expectations that don’t come to pass as planned.

The words “disappointment” and “discouragement” may sound alike, but that is certainly not the case.  Disappointment comes from unfulfilled or broken expectations and is generally a short-term effect.  Discouragement, on the other hand, happens when you can no longer see the light at the end of the tunnel or when you abandon hope.  As a new real estate investor, you are setting out on a path toward success, and success is a continual process.  As you progress towards your goals and objectives, you will encounter both small and large things that may disappoint you and possibly lead towards discouragement.  Our goal is to learn from these disappointments and avoid discouragement.

Let’s suppose that you have decided to go into the business of finding good properties that can be used as rentals.  You have read and studied about the requirements for such properties and decide to find your first rental property.  After reviewing advertisements and using your spare time to drive and survey the area in which you want to invest, you notice a For Sale sign on a property with the number of the listing agent.  You note down the number and make a call to see the property.  After meeting with the listing agent, you are convinced that this is “the right property.”  You have studied how to fill out an offer to purchase, but you elect to have the agent you met at the property help you fill out the offer.  As you are making the offer, the listing agent says there is another offer on the property and maybe you can outbid them.  Before long, you have gone through a couple of different counter offers and you were outbid.  You lost the property and are extremely disappointed, but should you be?

Ask yourself, “What went wrong?  What could you have done differently?”  Now is the time to become proactive and change those things you can control.  The real question is, “How do you change your attitude and what specific strategy can you take to ensure that a simple disappointment, like a rejected offer or a lost property, doesn’t lead to long-term discouragement that can bring death to your new real estate investing business?”  Let’s examine a simple strategy of six steps that can make all the difference in the world.

Step #1 – Identify What Went Wrong

This identification process contains three individual elements: review, describe, and record.  Unless you can identify exactly why something happened that lead to disappointment, you will never be able to make the changes necessary to stop disappointment from happening again and again.

  1. Review exactly what happened. Before you can understand how to solve any problem, you must know exactly what the problem is and how it happened.  As a new real estate investor, you must know what strategy you are following.  There is a difference in finding a property that works as a fix up property and one that might be ideal for a rental.  You must also be acutely aware of why the problem occurred.  Why were there multiple offers on the property?  Did you wait too long or did you fail to follow a proven strategy in locating the property?
  2. Describe in detail the problem that occurred. In our example of being outbid because of multiple offers, there were multiple reasons why you may have lost the property.  Let’s start by examining what happened when you first saw the property.  You immediately called the listing agent and made an appointment to see the property.  What’s wrong here?

The listing agent is not your friend and he or she certainly doesn’t represent you.  By law, the listing agent is representing the seller and will do all in his power to get the very highest price possible for the seller.  Because the agent is representing the other party in the transaction, you have no control in the negotiation process.  In effect you were bidding against yourself.  Finally, the price you might have paid for the property was probably too high.  If you are forced into paying more than the current market price for the property, you are already in a losing position.

As you are doing an analysis of why a problem occurred, make sure that you are realistic in that review.  Don’t hide behind sayings like, “It was not my fault.”  The truth of the matter is that it might have been your fault from the time you decided to look at the property.

Record your findings.  It’s true that we can learn from our mistakes, but unfortunately, we often hide or forget those mistakes.  When you actually write down what happened and why it took place, you have something you can refer to.  I like to call these mistakes “min failures.”  They are not major failures because you can correct them.  Dale Carnegie is recognized as a foremost authority on self-improvement.  He once said, “Develop success from failures.  Discouragement and failure are two of the stepping stones to success.”  There is real value in recording these mini failures.  You can use this record to create an ongoing learning experience because identification of a problem truly is the first step in this all-important strategy.

Step #2 – Describe Corrective Behavior

Understanding what went wrong is important, but if you can’t correct the mistake, it will surely happen again.  When it does, you are on the road to long-term discouragement.  Identifying the problem should allow you to come up with possible solutions to the specific problem.  These are the corrective steps you can take to get past the disappointment and avoid long-term discouragement.

Let’s go back to our earlier example of losing a property to a higher bid.  What corrective steps could you take if you were to start over again?  In essence that is what you are going to want to do – start over again and find another, and perhaps better property.  In your journal or record, open up your mind and explore all the different ideas.  First of all, you are going to want to ensure that you have an agent who is going to work for you and not for the seller of the property.  Second, did you spend enough time finding the right property?  What could you have done differently?  Take the time and try and come up with multiple ideas and explain why each one might have been a better solution.  Be specific and give the reasons behind the choices.

What you are doing is moving from a reactive situation to a proactive one.  Just by doing this, you will become more positive, but even more importantly, you will become more realistic.  Writing it down will help you remember what to do when the time comes.

Step #3 – Change Your Mindset

Simply by following the first two steps of this strategy, you are becoming a more positive person.  You are in effect starting to change your mindset.  When you adapt your thinking in a more positive manner, you are moving to a positive mindset.  When you have a positive mindset, you are able to control what happens around you.

The first thing you want to control is the environment in which you live.  Don’t become a negative person who wallows in self-defeating thoughts and actions.  If there is anything around you that influences you in a negative manner, you need to get rid of it.  That may mean that you need new friends and associates.  Negative thoughts feed on other negative thoughts.  Anything you can do to rid yourself of these negative influences will benefit you.  Willie Nelson, the country singer, once said, “Once you replace negative thoughts with positive ones, you’ll start having positive results.”  He may not have been the greatest philosopher, but he certainly had wisdom when he left that thought.

Once you start thinking in a positive manner, you will be able to see clearly in the fog of depression that often accompanies disappointment.  In a short period of time you will be able to have a positive mindset.  When this happens, you will begin to express the traits of a new positive mindset:

  • Optimism. You will have the willingness to make an effort in your real estate strategies and to take a chance instead of assuming your efforts will fail.
  • Acceptance. Soon you will acknowledge that everything doesn’t turn out exactly as you thought it might.  This allows you to step back and then move ahead in life and in your real estate strategies.
  • Resilience. You will have the ability to get back up when things in your real estate adventure seem to knock you down.  When you meet stumbling blocks, you will smile and realize that next time things will go better.
  • Gratitude. You will appreciate the opportunities you are given and be thankful for learning from them.

The important thing to remember when adopting this positive mindset is that you should never “go it alone.”  Loneliness is the enemy of a positive mindset.  The last thing you want to do when meeting a disappointment is to separate from the world and believe you are alone.  Find friends and associates who are willing to build you up and support you in those times of mini failures.  Consider working with other real estate entrepreneurs and possibly coaches and mentors.  If you have the opportunity to attend live training events with other real estate entrepreneurs like yourself, do so.  It is a great way to create friendships with positive minded people.  It is also an opportunity to learn real estate investment strategies from experts who have gone through similar disappointments.

Step #4 – Explore Your Options

Now that you have recorded your alternative options and begun to think in a more positive manner, you are ready to change outcomes.  It’s time to control what is going to happen in the future.  The old saying “If you get thrown from a horse, get up and get back on” is true in the field of real estate investing.  You may need help getting back on the horse, but the ride will be worth it.

Once again, you must be realistic in why your disappointment occurred.  As you come to grips with why you were disappointed, you may have the tendency to move toward discouragement with real estate.  This is a negative thought and should not be part of your new positive mindset.  However, if you find yourself in this situation, consider asking for help.  Start by using all available educational options that discuss and explain your specific real estate strategy.  If you were going to invest in rental properties, make sure you understand all you can about how to find, fund, and purchase the right properties.  Continue your studies to find out everything you can about landlord experiences.

If at all possible talk, to other investors like yourself.  Spend the effort to meet with professionals who can guide and mentor you.  Once you decide to engage a professional mentor or coach, make sure that they have both the experience and the knowledge to help you on your journey to success.

Now, go ahead and make concrete goals and objectives for moving ahead in your real estate adventure.  Be specific with timetables and exact objectives.  If you are going to engage a buyer’s agent, write down exactly how you are going to find the right agent in your area.  Whatever the task, write down how you will go about completing it.  Every option or goal should have a specific action step involved.  The very act of describing future behavior ensures that positive results can occur.

Step #5 – Focus Your Behavior Through Personal Action

Your initiative will create positive results.  It really is up to you to move the ball forward and to ensure that your real estate goals are achieved.  Up to this point, you have identified the problem and found corrective options, but now it’s time to actually make some changes.  It’s time to complete your goals through personal action.

There are specific reasons why direct personal action is crucial to your success when starting to invest in real estate.

  1. Action activates information. You can gain all the knowledge imaginable from multiple sources, but the knowledge will remain silent and without meaning until it is activated by action.  Only when you personally take action will the knowledge be changed into results.  Only through direct action can real estate knowledge come to life.  This is especially true when solving real estate investment disappointments.
  2. Action helps eliminate techniques that don’t work. Your time is valuable and you must be able to focus on things that work.  Trial and error is only valuable in real estate if you take action and do something.  Yes, there are times that things don’t work, but unless you take action and try, you will never know.
  3. Action create positive habits. The strategy of eliminating discouragement in real estate is a process and that process is based upon developing positive habits, and these habits can only be developed when action is involved.
  4. Action builds self-worth. As you accomplish anything in life, your confidence grows.  When investing in real estate, this new confidence helps you move forward, while at the same time it creates a value in your accomplishments.  Success is built upon action and personal real estate success is built upon personal action.

Step #6 – Understand the Past, But Always Move Forward

Disappointments should be the key to learning, not the foundation of failure.  You must be aware of exactly what went wrong, but once you determine the cause, don’t dwell on past outcomes.  Your goal is to live both in the present and to move toward the future, not to continue to worry about events in the past.  Now it’s time to focus on learning how to improve your real estate success by eliminating the causes of those setbacks.

Be specific about making changes.  It’s not enough to say “I’ll do it differently next time.”  Rather, you need to be able to say exactly HOW it will be different.  Recommit to taking positive action.  Make your goals realistic and then publish them and let others know what you are doing to change your life.  When you tell others about your future goals, this will give you the incentive to take positive action.  Perhaps even more importantly, you won’t want to disappoint your family and friends.

As you start to have success, reward yourself with each small achievement.  You’ve done the work, now it’s time to start collecting the rewards.  If you find a property below market value that fits your investment criteria, that is a success, even if you personally don’t purchase it.  Go ahead and treat yourself to something as it is a step in the right direction.  Even better, reward yourself by making an offer on the property (through your personal buyer’s agent).

Above all else, eliminate emotion from your investment decisions.  Never believe that you “must have” any property.  Such a belief will lead to more discouragement than anything else.  When emotion in real estate is eliminated from the equation, answers will always make more sense – and yes “CENTS.”

Don’t let disappointment turn into discouragement that can destroy your real estate future.  Try this strategy of six simple steps and eliminate discouragement from your investment outlook.  Real estate investing can become a vehicle for financial success but achieving that success will be a process.  When you learn from your disappointments and leave discouragement behind, that process can truly be the key to your future.

VR Technology in Real Estate

VR Technology in Real Estate

Life has so much to offer. The splendor of it is just waiting to be discovered. One of the greatest splendors of today’s generation is the birth of technology.

Despite the unstoppable advancement we are achieving today, the demand for shelter is not changing. Real estate is one of the many industries that benefits from modernism. The methods people use to search for properties have already evolved. The discovery of Virtual Reality has really changed the game of today’s world. Having a grasp of the real world without needing to actually visit it is an experience that is becoming gradually widespread in the industry of real estate. It is an exceptional and groundbreaking process. The era of brochures is bound to end.

We cannot deny that buying properties can become really strenuous. But through applications that allow customers to have a 360-degree preview of spaces, the stress on the buyers end can be lessened. Everything can now be accessed easily: style and color selection, furniture placement, lighting options, and so on. The advantages of virtual reality are too many. It provides a limitless feature that could turn actual visitation into a thing of the past.

The digital evolvement of today’s society, specifically in the real estate industry, has really upgraded the whole process of buying properties. This is indeed a stirring phase for the current real estate game. It is amazing how, in just a few clicks, one can automatically obtain an immersive experience and check out a future space without actually driving across towns or cities to see it.

Home Improvement Repairs to Ensure Better Sales

Home Improvement Repairs to Ensure Better Sales

Now that you have decided to sell your house, you might be tempted to make some basic home improvement repairs to make your house as attractive as possible and to appeal to only the best buyers. Of course, making repairs and beautifying isn’t wrong; however, homeowners tend to overdo it and waste dollars on unnecessary repairs.

So, before you put your home improvement ideas on the table and purchase supplies, take a step back and think about what would really make your property attractive to buyers. The following are three improvements that will go a long way.

  1. Keep walkways and the yard in shape

Even if you have moved out of the property, it is still a good idea to keep the landscape tidy by cleaning the flowerbeds, raking leaves, and removing dead trees. It is also a good idea to set a timer on the lights so your property doesn’t appear eerie and dark. Similarly, don’t let your mail or newspapers pile up. Arrange to have your walkways and driveways plowed every week.

  1. Check your roof and clean the gutters

Cleaning your gutters and checking your roof can easily slip your mind. However, neglecting roof and gutter issues can lead to a severe domino effect that can turn away potential buyers.

Overflowing gutters not only damage the foundation, they cause drainage problems as well. Plus, it is highly unappealing for a potential buyer to see puddling water when visiting your house.

Similarly, the roof will be examined during the home inspection, but it is still better to have someone take a look at it beforehand. Small cracks in the roof often go undetected, ultimately causing water to infiltrate your house slowly and damage the walls and ceilings.

  1. Paint

One simple way to make your house more attractive is to paint the walls with a neutral and soft color. The ideal color is off-white and, while your walls might have a unique, appealing color, others might not have the same taste in paint color. The same applies to carpet.

How to Convert Stumbling Blocks into Stepping Stones

How to Convert Stumbling Blocks into Stepping Stones

Mount Timpanogos is a majestic 11,752 foot guardian of the beautiful valley where I live. I rose early one morning several years ago and hiked twelve miles to reach the summit. Together with a close companion we moved from wooded slopes to barren rocky slides where the snow white glacier protected Emerald Lake. Prior to reaching the top of the mountain, we saw two athletic young men running barefoot through the sharp rocks. I was amazed. As they passed our small group, I asked them why they were running barefoot through the sharp and jagged rocks. Stopping for a second, one man replied, “These rocks are only stepping stones to the top and running barefoot helps find the best footing.”

Since that time on the west slope of Mount Timpanogos, I have reflected many times on their comments about stepping stones. There is no doubt in my mind that every one of us will confront sharp and jagged rocks on our journey through life. We can call these rocks stumbling blocks, and how we treat them will determine whether they cause us to fall or will lead us to a bright future. I believe that stumbling blocks can become stepping stones that provide excellent footing for reaching our individual summits.

There are many obstacles to success in today’s ever-changing world. As the Director of Real Estate Education at Response, I have witnessed many of the obstacles that many entrepreneurs face on a regular basis. Here are just a few of the stumbling blocks that can stop us from achieving success in our chosen fields.
• Poor Work Habits. The lack of proper dedication to completing a task is the first stumbling block most entrepreneurs encounter.
• Undefined Goals. If you don’t know what you really want, there is no way you’re going to achieve success.
• Using Shortcuts. The idea of a shortcut is to achieve success without putting in the work. Too often, shortcuts lead to the wrong destination.
• Failing to Get Expert Advice. None of us is born with the ability to do everything perfectly.
• Lack of Consistency.
• Unwillingness to Change.
• Falling into Negativity.

Stumbling blocks can be converted into stepping stones to success when you follow a plan based on outcomes and results. I can’t think of anyone who doesn’t want to succeed. Unfortunately, many people find success elusive because they encounter stumbling blocks and haven’t learned how to confront these obstacles and turn them into stepping stones for success. Let me offer six suggestions for using your obstacles as stepping stones. .

1 – Change your perspective. How we think determines how we act. Start thinking long-term and living short term. When you begin completing short-term goals as part of long-term objectives, life looks better. Don’t get discouraged when things don’t happen as fast as you would like.

2 – Forgive yourself. Don’t wallow and dwell on mistakes. Failures, large and small, will happen. If you make a mistake, recognize the mistake and be willing to forgive yourself for making it. Then move on towards your long-term goal and forget the pain of the mistake.

3 – Develop new strengths. As you progress towards your long-term goals, start finding new ways to do things. Look for new ways to accomplish your goals. If you have made a commitment to achieve success in real estate, search out education and experts who will help you make your dreams a reality.

4 – Enjoy the journey. When you hit those stumbling blocks, remember that they are only short-term bumps on your long-term journey to success. Don’t let the stumbling blocks rob you of the fun and enjoyment of life. Be willing to laugh at your stupid mistakes and enjoy the success of your micro goals.

5 – Be open to options. From time to time the stumbling blocks may require you to change your path. Perhaps you will need to alter your program as there are many different ways to reach your goals. If something isn’t working, don’t give up on the journey, consider taking a different path to reach your goals.

6 – Never give up. Babe Ruth once said, “You can’t beat the person who won’t give up.” That is as true today as it was then. Your ability to keep working will help you to achieve success when others fail.

A wise religious leader, Dieter F. Uchtdorf, once said, “Our destiny is not determined by the number of times we stumble but by the number of times we rise up, dust ourselves off, and move forward.” The question is whether you want to stumble or step, and when you make the right decision, the answer is even more clear. Stumbling blocks can be converted into stepping stones for success.

You Shouldn’t Buy a House If…

Almost everyone dreams of purchasing a house of their own. However, there are always downsides and upsides to it. And, home buying isn’t for everyone. When you are in your 20s, are young and confused, and haven’t quite got your life together, then maybe you should really think hard about whether buying a house at this point in your life is the best decision. If you’re uncertain where your life is headed because you have a lot of plans and not all of them are aligned to one path, then maybe you should think twice about home buying.

If you still have to or plan to go back to school, don’t buy a house just yet. Unless you’re certain that you can afford a monthly mortgage payment and you have enough resources to maintain the property, or you’re sure that you’ll be staying in that house for years, you might not want to buy one. You can always opt to rent first while you’re in this uncertain phase.

Buying a house isn’t as easy as 1, 2, 3. For young adults, it’s always okay to wait until you’re financially able to purchase a house of your own. Don’t feel rushed by society’s timeline. You are not obliged to buy a property of this type or that price or in this location. You have the freedom to choose the house you want in the neighborhood you feel comfortable in. Don’t get fooled by society’s present standards. So, wait until you’re ready to buy a house.

Even though you’re in your 20s, you will soon grow older and may have a family of your own. It’s hard to know what size of home will fit your needs. This may grow and change over time – soon you may have a significant other, have kids and even have some pets. The size of home you need may change, so it might be too early to decide what to buy right now.

Don’t buy just yet if you are the type of person who likes moving from one place to another. Take time enjoying this phase of your life. When you’re done wandering is when you can settle in a place where you’ll always feel convenient, comfortable and content.

Moreover, some young adults don’t consider buying a house because they don’t want to get caught up in the responsibility of owning one. They have other priorities, like traveling, seeing the rest of the world, saving for a car, enjoying a new hobby, and such. Home owning does not end when you’ve finally signed papers, moved in and the house is officially yours. You have to take care of a lot of things in order to maintain a property. That includes the maintenance and monthly utility payments. Sometimes these fees will drain you financially and get you really stressed out. Thus, if you think you’re not ready yet, buying a house should not be your main goal.

Workshop Update | Week 10 – Mar 9 – 10

Workshop Update | Week 10 – Mar 9 – 10

This week, Response delivered 12 Real Estate and Stock workshops. Our overall customer experience score, for all surveys received, was a 5 out of 5. We saw over 801 students. Here is what some students shared about their experience:

“This was a terrific workshop all weekend.” —Berwyn S.

“I can’t wait to get started. Thank you for the opportunity.” —Christy C.

Excellent learning experience.”—Edilberto D.

10 Most Important Items to Upgrade on Your Home

10 Most Important Items to Upgrade on Your Home

If you have a home that you are considering fixing up so you can sell it for the best price but you don’t have a fortune to spend on upgrades, focus on the following 10 items to make the biggest impression on potential buyers:

  1. New Front Door: It is always important to make a good first impression and the front door is the first thing people see when they come up to a house. Replace an old, plain slab door with a new raised panel with a window in it.  Paint it a color that complements the house but also adds a little character and stands out.
  2. Tile Foyer Entry: The next item buyers see when they enter your home is the entry, so make it look like an entry by laying some tile or hardwood in the space allotted.  If you walk into a house that is carpeted right up to the front door, the entry disappears into the living room and doesn’t look as classy.
  3. New or Improved Doors: Another inexpensive replacement that can make a big difference is replacing the interior doors.  If your doors are plain, flat slab doors, upgrade them to raised panel doors.  Purchase a whole new pre-hung door, jamb and casing to replace the old ones.  They will come pre-primed so they can be easily painted.  Be sure to pick a color that offsets the walls for a two-toned look.
  4. New Door Handles: Along with your new doors, jamb and casing you should replace the hinges and door handles with a nickel satin finish to match today’s modern look.  You can buy inexpensive handles for about $12 each and make a big impression.
  5. New Electrical Switch Plates: Other items that are overlooked include electric wall switch plates.  A lot of people will freshly paint their place but leave the old, worn-looking electric cover plates on or even paint over them, which is worse.  Spend 35 cents each and replace the cover plates throughout the house.
  6. Paint/Replace Trim: Painting the house will make one of the biggest best impressions of all, but if your walls look pretty good already and you are on a budget, consider just painting the doors and trim.  You can pick a color that offsets the wall color, like white when the walls are grey or beige.  This will create a two-tone look which is much more appealing than everything painted the same color.
  7. Paint Kitchen Cabinets: Replacing the kitchen cabinets is nice but also one of the most expensive rehabbing items you could do, so if you are limited on funds, consider simply painting the cabinets.  Since today’s popular look is white cabinets, you can paint over any cabinet finish with semi-gloss white and make your cabinets look new.
  8. New Shower Curtains: Another easy, inexpensive upgrade is to replace your shower curtains with new, decorative curtains that match the colors of the home.
  9. Add Window Shutters: You can also add window shutters to cover up old windows and avoid spending the money to replace them.
  10. Add a Nice Mailbox:  Lastly, you can help your house stand out from the crowd by replacing the mailbox with a new one that has a little more character than every other mailbox on the street. You can also paint the old one to stand out and tie the color in with your new front door for some added street appeal.

 

There is NEVER a Bad Time to be a Real Estate Investor

There is NEVER a Bad Time to be a Real Estate Investor

I had the privilege of beginning my investing career working with the Father of Creative Real Estate, Dr. A.D. Kessler.  Dr. Kessler had the wisdom of over five decades as a real estate investor and had seen several cycles of real estate ups and downs.  One of my favorite lessons from Dr. Kessler is: “Fortunes have been made in real estate investing in good times, bad times, and in-between times.  There is NEVER a bad time to be a real estate investor.”

After adding my 21 years of real estate investing to Dr. Kessler’s vast experience, I have realized that he was correct in this statement.  And now as I work with many other investors, it is my opportunity to remind you that investing works best when you add a long-term perspective to the short-term one.

What goes up must come down, and what goes down must come up.  These are the cycles in the real estate market, and no matter what the brilliant financiers and masterminds behind the Fed’s manipulation of interest rates may do, these cycles are still going to play out.  The “crash” in 2008 was going to happen with or without the issues of subprime or dishonest hedge funds. It may have happened with a little different timing, or a little more gradually, but it was the result of prices rising beyond the ability of many buyers to purchase properties.  And when it bottomed out, a reversal needed to occur because too much money was sitting dormant—it was “burning a hole” in people’s pockets.

I have the opportunity of speaking with numerous investors every day.  Many are new to the process and concerned because the current market is moving rapidly. Prices are going up, and there are housing shortages in many areas around the country.  This is what is called a “seller’s market.”  These investors are concerned because it is more difficult to make deals on properties at low investor prices.  For them, they are having a bad time in real estate investing.  It is harder to get good deals.   The funny thing is that if it was a buyer’s market it would be easy to get the deals, but it would be harder to sell the properties at a good profit.  Gosh, it starts to sound like you can never have the ideal market.

My perspective learned primarily from Dr. Kessler is that it’s always a good time to be a real estate investor, and we just need to learn how to work with things as they are.  The secret to success in a seller’s market is to become a Master of Marketing to find properties. Every business understands that they need to do marketing to find customers—the life blood of business.  In real estate, our marketing is to find properties, and to find people who want properties.  And the savvy real estate entrepreneur recognizes that they need to put together a diversified and effective marketing plan to find these properties and buyers.  In a seller’s market, it is easier to find buyers than properties, so we need to create a successful marketing plan to find properties.

Unfortunately, many new investors think they can simply line up a real estate agent, let them do all the work and go home and watch “Dancing with the Stars” and wait for the properties to roll in.  Well that will get you what most investors are getting—very little.  That isn’t a marketing plan, and every business in the country would fail if they only had one way to generate customers.

I’ve had the opportunity to work with some of the most successful investors in the country—the ones who write the books and have the television programs.  I’ve helped edit their books, and even been on their tv programs.  So I also had an opportunity to ask how they find properties.  Do you know what their answer has consistently been?  “Every which way we can!”  They know that in real estate, like every other field, there is no magic pill—no magic way of finding properties.  They cite online classified ads, multiple real estate agents, wholesalers, other investors, property managers, driving for dollars in neighborhoods, door knocking, attorneys and insurance agents, resubmitting on rejected offers, foreclosures and pre-foreclosure lists, calling on rental properties, probate properties, and many other methods as the ways to find properties.  Most importantly, they all have a marketing plan with at least a dozen or more methods that they use regularly, and they track their results.

Every investor must treat their investing as a business or it will wither and die.  Marketing can never become an afterthought. It must be front and center in your investing time. The allocation of time blocks must be created and used effectively.  If you need additional lists of ways to find properties, contact our office. We have lengthy lists that you can select from to create your marketing plan.  Let me ask a few questions to see if you have begun to think creatively about how to “turn over more stones” to find off-market properties.

  • Have you contacted any property managers to see if any of their clients are buying or selling?
  • How many neighborhoods have you driven through in the last two weeks to look for properties that are for sale?
  • Do you work from lists of foreclosures or pre-foreclosures to follow up on properties through direct mail, phone, or knocking on the property’s door?
  • Have you spoken to any probate attorneys to see if there is a way you can assist people with estate properties that they are handling?
  • Have you spoken to any administrators or marketing directors for assisted living or nursing homes? They often have potential residents who cannot move in until “mom or dad’s” house is sold.
  • Do you have online sources that list properties for sale and also properties for rent that you check daily?
  • How many wholesalers have you linked up with to see if you can do co-wholesaling together, where one of you brings the property and the other brings the buyer?
  • Are you checking on tax delinquencies in your area?
  • Do you have any bird-dogs finding properties for referral to you? I, at one time, had dozens of pizza delivery guys forwarding properties to me.
  • Do you know which areas of town have the most boarded up houses? And when was the last time you spent a couple of hours driving those neighborhoods?

Real Estate investing is not difficult, but it does takes diligence and an organized plan.  And at the root of that plan is your marketing plan.  I challenge you, on behalf of the entire program, to develop a marketing plan within the next two weeks that will have at least one dozen different methods of finding properties.  It may take longer to implement them all and establish tracking to make sure that they work, but a diversified and effective marketing plan will allow you to elevate and ramp up your success.  And if you already have a dozen, move to having two dozen methods and make sure that they are all producing successful results.

You will discover that this process alone will not only provide you with more and better property opportunities, it will also keep you so busy with success that you will forget about whether it is a seller’s market or a buyer’s market or an in-between market, and you will be many steps closer to building your own fortune!  Best wishes, and we’ll see you on the road to success!

Workshop Update | Week 9 – Mar 2 – 4

Workshop Update | Week 9 – Mar 2 – 4

This week, Response delivered 13 Real Estate and Stock workshops. Our overall customer experience score, for all surveys received, was a 5 out of 5. We saw over 856 students. Here is what some students shared about their experience:

“It was the best thing I ever did.” —Carol M.

Awesome – so excited for the future!” —Darnetta S.

“The workshop was very educational.”—Dwight D.

Joint Ventures on Spec Building

Joint Ventures on Spec Building

One way to invest in real estate is to joint venture with property owners by building a new home on their property for resale.  Buying a building lot and constructing a home on it for resale is called investing in a spec house because you are building it on speculation that it will sell for a profit.

To do this, you want to look up all the vacant properties in the neighborhood of interest and find those that are paid for free and clear.  Then contact the owner and propose the idea of joint venturing with them on a project on their property.  Ask them to sell their property to a joint venture partnership for a reasonable price. You will then build a house on their property and sell it, and after paying them the agreed price, split the remaining profit.  As the managing member of the partnership, you will obtain a construction loan to pay for the house building and the owner will subordinate his or her home to the construction loan.  Through this process an investor can start a project with zero monetary invested and make half of the profit.  An example is as follows:

Owner’s property:                                                                     $100,000

Construction cost to build house:                                               $150,000

Price of the finished home:                                                        $350,000

Other expenses:

Taxes, insurance, closing costs, commission:                    $35,000

Total Profit from Sale:                                                                 $65,000

Split 50/50:                               Each partners share:       $32,500

Not a bad profit for not investing any of your own money.  Your job is to line up an architect to design the home, get a general contractor to build it and procure the construction loan.  The owner’s job is to put up his property as collateral for the loan and, in doing so, make the agreed upon purchase price and the additional profit.  Of course the more expensive the project, the more money that can be made.  Imagine the profit in a multi-million dollar home still with no money out of pocket.

Banks are completely willing to do these loans when the property is free and clear because their loan will be less than 50% of the appraised value of the home when it is completed.  Of course, if you are a general contractor, you can build the home yourself and make an additional general contracting fee.  If you are a real estate broker, you can make an additional commission for listing and selling the property.

Workshop Update | Week 8 – Feb 23 – 24

Workshop Update | Week 8 – Feb 23 – 24

This week, Response delivered 13 Real Estate and Stock workshops. Our overall customer experience score, for all surveys received, was a 5 out of 5. We saw over 703 students. Here is what some students shared about their experience:

“Excellent workshop. The best!” —Angel M.

Very inspirational!” —Raquel E.

“This was an awesome class- so mind opening!”—Atiba T.

Cheap Bandit Signs

Cheap Bandit Signs

As you drive around your city, you have probably noticed signs in strategic locations advertising a house for sale, cash for houses or someone looking for an apprentice to make monthly income investing in real estate.

Did you ever imagine that you would be putting out signs to find properties and cash buyers? And not only signs but bandit signs! What is a bandit sign?  Bandit signs are typically used to promote limited time offers to a large group of people.  However, they may get quite costly when you find that you need to replace and buy them repeatedly.

You can order them from various web sites: www.amazon.com, www.gobigyellowletter.com, www.signsonthecheap.com or sometimes you can find them at a home improvement store.  You can even go to the dollar store and pick up white signs, paint them yellow and put them throughout town.

Do you want to pick up signs for free?  Let’s think outside the box for just a moment.  Is it an election year?  Whether it is a midterm election, primary election or a full-blown presidential election, candidates have flooded the city with their election signs.  They create them by the hundreds and put them out by the hundreds. There are signs for candidates ranging from city council to sheriff to mayor or governor or president of the United States.  These signs remind us not only to vote but to vote for a particular person.  After the elections are over, where do these signs end up?  Who goes around and gathers them up?  Wouldn’t it be great to help the candidate’s election committee and pick up these signs? What a Good Samaritan you are.

Simply contact the candidates, both winners and losers, and offer your assistance to pick up their signs.  They will be tremendously grateful for your help and you will have an abundance of signs that are ready to paint over with bright Rust-Oleum Painter’s Touch 2X 12 oz. Gloss Sun Yellow General Purpose Spray Paint from your local home improvement store.

Feel free to set out your new and improved yellow bandit signs around the city stating that you “Have a House for Sale,” “Must Sale” or “We Pay Cash for Houses.”

 

Home Down Payment

Home Down Payment

It’s every American’s dream to have a house they can call their own. And before that dream materializes, they’ll have to accomplish a number of things and have enough money for their home. Usually, the first thing that comes to mind when we think of buying a home is the down payment. A home down payment is the amount of money paid upfront to purchase a home. It is combined with the monthly charges added when applying for a home loan.

When preparing for a down payment, you’ll have to consider multiple things like the type of home you wish to have, the type of loan you want to apply for, the term of the loan, and so on. You’ll need to consider all of this before you truly start factoring your down payment cost. There are tools available to help you determine your expected down payment cost and how to save for it.

When you are able to save a large amount for the down payment, you’ll be more comfortable in your payment cycle for many months. For instance, if you can pay 20% of the home’s selling price as the down payment, you won’t have to pay for the private mortgage insurance (PMI). Also, a bigger amount of down payment results in smaller monthly mortgage payments. It also helps you qualify for a loan with a much lower interest rate. Having a larger down payment can make you an ideal buyer, making your offer more attractive compared to other potential buyers. Although a 20% down payment is enough for you to avail these benefits, you still have the option of paying an even bigger amount for your initial payment. It depends on how financially prepared you are and how bad you want to get the house yourself. The more beautiful and ideal the house is, the more buyers there are that you have to compete with, and a higher down payment offer can definitely do the trick.

Negotiating Earnest Money Deposits

Negotiating Earnest Money Deposits

An earnest money deposit is always a bit of a challenge for real estate investors.  Real estate agents and some sellers tend to ask for really large earnest money deposits, but paying large earnest money deposits can be a huge challenge for real estate investors, especially since they make multiple offers in order to make deals happen.  If you were to make 10 offers this week on properties and each one required $2,000 in earnest money, what would that do to your ability to be an active investor?  Let’s examine the truth about earnest money in terms of the law and provide a practical approach on how to make your offers include earnest money that is reasonable and practical.

As far as we are aware, the laws across the United States require that there be “consideration” in making an offer to purchase real estate.  Consideration refers to the offering of something of value from the buyer to the seller for them to consider the purchase offer.  In years past that may have been a chicken or a new harness. Today it is most commonly money.  The law does not usually specify how much money qualifies as consideration, nor when that consideration needs to be paid.

There are ample cases in most states indicating that $1 represents “good and valuable consideration” for the purchase of real estate. So to offer a relatively low consideration is a right that exists in all states, and the money does not have to be paid upon acceptance of offer to open escrow on the property.  Escrow is a collection of money and/or documents held by a third party in connection with a real estate closing.  Escrow can be opened with only a purchase agreement going into the escrow at the beginning.

I have found that in making offers, the person who makes the offer has an advantage, so we ought to use that advantage to make an earnest money proposal that works for us.  Here is an example of what we would suggest for an earnest money proposal: “The earnest money deposit shall be $300 due and payable at closing.”  It has been amazing to me how frequently this proposal has been accepted just because it is in writing and included with a bona fide offer to purchase.

Not all sellers will accept an earnest money proposal like the one above.  For example, on foreclosed properties, the lender who owns the property, or the government agency who owns the property, often has set regulations that they will not bend.  Institutional sellers have a right to set these regulations if they choose.  Since most private sellers are a little more flexible, the above proposal is more likely to be acceptable to them.  After all, earnest money deposits go into a safe or a bank account and cannot be accessed or spent until after closing.  There are no shopping sprees at Costco available to the seller.

If the seller resists your earnest money proposal, they will probably counter with a request for more money due sooner than closing.  Let’s say they ask for $2,000 and want it to be due within two days after they sign the agreement.  You can respond with the following:

  • Well, I’m reasonable and negotiable, and it sounds like you are opening some negotiation.
  • You have requested two modifications to my proposal—A) The amount of the earnest money deposit; and B) When the earnest money deposit will be made.
  • In the spirit of negotiation, I’m willing to allow you to select either one of the two modifications, and I will take the other one. So if you want $2,000, I get to select when it will be paid, and I choose payable at closing. Or if you want the money within two days, I get to select the amount, and I choose $300.
  • If you are unwilling to negotiate, then I will need to terminate my offer. Keep in mind that there are a lot of opportunities for me. I can make 20 offers today if I want to, but you need to sell just this one specific property, and I am a bona fide buyer making a bona fide offer.

Obviously, I’m not able to have this discussion in every situation, but I have made certain that my real estate agents understand and support my approach, and we use this “two choices” approach frequently, and we’ve shared it with many other investors who have also implemented it successfully.

You may have to make a few extra offers along the way, and you always have the right to agree to pay a larger amount if that works for you.  We want to assist in every way we can to create greater success for you as a real estate investor.  And remember that real estate deals are made, not found.

 

How to Overcome Personal Fear in Today’s Financial Climate

How to Overcome Personal Fear in Today’s Financial Climate

It’s difficult to not worry in today’s up and down financial times.  Newspapers, television, and social media outlets continually reveal the negative results of decisions made by entrepreneurs.  Unfortunately, the rush of bad news is only compounded when your friends, neighbors, and long-term associates join in and talk about their personal failures.  If you’re like most people, you might soon question your personal investment decisions, and before you realize it, you develop what I call “personal fearopia.”

In this “fearopia,” you start to question decisions you made without any basis for concern.  In today’s world of real estate investing, this is especially true.     When “personal fearopia” rears its ugly head, the decision-making process can quickly be impaired.  The first thing that happens is that you begin to question past decisions.  You worry that you made a mistake and start to financially retreat.  But beware: when you’re moving backward, there is no chance for you to progress.  Here at Response, we hear many financial success stories, and without exception, the individuals who have been financially rewarded have done so when they followed a simple well thought-out plan for overcoming fear of failure.

Entrepreneurs experience failure, but they should remember that they’re not alone.  Bill Gates and Steve Jobs both experienced setbacks and failures on their road to success.  What makes them different is that they treated these failures as temporary roadblocks on their path to ultimate success.  As the Director of Real Estate Education at Response, I believe it is critical for each new real estate entrepreneur to realize two important points.  First, failure is temporary and not fatal, and second, there is a proven method for overcoming fear in the tumultuous financial climate of today.

With the right attitude, failure is temporary.  In an earlier article, I explained why I believe that Michael Jordan is much more than a tremendous athlete and member of the Basketball Hall of Fame.  He has impacted countless individuals in their quest for success, both on and off the basketball court.  When asked about failure, Michael Jordan used his own quest for success on the court to emphasize that failure is temporary and nothing to be feared.  He said, “I’ve missed more than 9,000 shots in my career.  I’ve lost almost 300 games.  Twenty-six times, I’ve been trusted to take the game winning shot and missed.  I’ve failed over and over and over again in my life.  And that is why I succeed.”

I would like to suggest a simple five-step method for overcoming your fears as you begin your career in real estate investing.

Step #1 – Confront your fears head on.  Don’t ignore fear.  Instead act as if you have already succeeded.  Ignore the media and social media outlets who barrage you with negative examples of why you can’t succeed.

Step #2 – Develop a personal real estate plan.  Start by getting as much education as possible about your preferred real estate strategies.  Remember that Resource provides  training, tools, and resources.  Now use your education to develop a plan that includes goals and objectives along with timetables.  You will never succeed unless you are willing to challenge yourself to meet timetables that match your objectives.  This plan should be written out and then reviewed on a regular basis.

Step #3 – Eliminate negativity.  This new plan is a personal roadmap that can help you reach your financial objectives, but if you don’t eliminate negativity in your thoughts, actions, and associations, the plan can fall apart. Instead of thinking about negative “What if” questions, turn your thoughts to the positive and start dwelling on the “When this (positive event) happens.”  You will be surprised at how this new positive attitude will increase your ability to turn your plan into reality.

Step #4 – Take action.  You must put your plan into action.  Own your plan. These are your goals and objectives.  It can help to cut large goals into small, easier goals.  Prioritize your time and turn those small goals into completed tasks.  Take action and you will be actively conquering fear.

Step #5 – Build confidence by refining your plan.  As you take action and experience small successes in your real estate career, your confidence level increases.  When this happens, consider refining your plan to include larger yet still achievable objectives.  Every time you do this, your ability to overcome fear will increase.

It’s good to accept that fear could play a large role in your financial life. But you are in control. Your thoughts control your actions and vice versa. So eliminate that fear by taking steady, manageable action and you will soon find success in your real estate investing.

Improve Your Productivity: Know Your Numbers

Improve Your Productivity: Know Your Numbers

For many years I was in the Restaurant Business where, I owned and operated multiple restaurants along with a  restaurant consulting company. I also provided support to other independent restaurant operators. I taught them systems and skills on how operate more efficiently which in true made them more profitable. One of the lessons I learned early, was the importance of keeping track of activity. Without knowing their numbers and the activity level, it was almost imposable for them to understand what they were doing right or what wasn’t working. There was no way for them to know, where to focus their time and energy to make improvements.

Today in my role as a Real Estate Coach and Advisor I speak with very few students that are tracking their numbers let alone reviewing them with the idea of being able to improve their business. If you are not keeping track your activity, you are missing out on a tremendous opportunity for improvement.

Some of the data you should be tracking daily and reviewing at least monthly. How many people do you talk to daily and what is the mix? How many are real estate agents? How many are cash investors? What about sellers are they FSBO’s, pre-foreclosure, calls from you bandit signs, etc.? Which groups are the most productive for you and why? How many cold calls did you make? How many doors did you knock on?  How many people did you talk to while you were knocking on doors? How many ads are you running and which ones are working for you? Are you asking yourself questions and are they the right questions?

The real estate business is the same way. You have to know your numbers on your activities.  As you move forward, you will set goals for your activity and check yourself daily. You will find power along with insights you didn’t know you had. There are three major areas we need to track our activity in daily they are;

  • Finding Quality Cash Investors
  • Finding Deals
  • Writing Offers

In each of these areas, there are at least nine techniques.

We have developed a new tool that is designed to help you with your weekly planning. If you would like to receive a copy of this tool which list the techniques please contact the Real Estate Advisory Line at 877-394-4752 ask for the Weekly Activity Worksheet and the Advisor will email you a copy. It will help you to identify areas that you might want to study and improve your skills.

 

The Effect Rising Interest Rates have on the Real Estate Market

The Effect Rising Interest Rates have on the Real Estate Market

Interest rates are on an upward trend over the two years. As they continue to rise, let’s look at the affect they will have on the housing market.

The biggest effect is going to be, as interest rates go up consumers buying power goes down. Here is an example of how this would look. Let’s say a consumer can qualify for a home payment of $1000 per month.  They do a down payment of 10%, and they get a 4% interest rate. That would qualify them for a property valued at $232,500. This was the case a little over 1 year ago. In today’s market with everything being equal, but their interest rate closer today’s market rate at 5% would allow them to buy a property valued up to $207,000. With the rising interest rate, they have lost $25,500 in buying power. This along with the higher home prices in today’s market, make in hard for the end retail buyer to buy homes. This can also start putting some down pressure on the market which will cause property price to slow or even start going down.

Another thing that will be affected by rising interest rates is ARMs (adjustable rate mortgage), because it is directly correlated to the current interest rates. As interest rates go down ARM interest rates will go down, but as interest rates go up ARM interest rates will go up as well. ARMS will have an introductory period where interest rates will not change. When the introductory period ends the interest will start following current market rates. If they are not refinanced into a fixed rate, their interest rates will continue to rise with the market. As the interest rates goes up their mortgage payments will go up. This may cause some homes to be become unaffordable to the home owner, which will result in more foreclosures taking place.

Interest rate are still at a historically low rate, but they have been rising over the last couple of years. As they continue to rise, there will be more downward pressure on housing prices. Interest rates are an important element to pay attention to in the real estate market.

 

Smart Goals

Smart Goals

Several years ago, I attended a conference of business professionals where I was asked a simple question that ultimately had a major impact on my life and that of my family.  The presenter asked everyone in the audience to write down one major accomplishment they would like to achieve within five years.  After everyone had committed the overall goal to paper, he asked us the following question, “What will stop you from achieving this goal?”  What was interesting was that he didn’t ask how we could achieve the goal, rather he wanted us to clarify the reason or reasons why it would not happen.

I reflected on his question for some time and then listened as he pointed out the difference between dreams and goals The first thing I came to understand was that dreams and goals are not the same thing.  Goals can lead to results whereas dreams most often lead to frustration.  What’s the reason?  Dreams are all about the destination whereas goals are about the journey.  Also, for goals to be effective, they must be realistic and well defined.

How can we learn to set goals that will make the difference between success and failure?  I believe  the answer is a step-by-step process.

  1. Believe in yourself. Ultimately, success will be on your shoulders, so you must believe in your own abilities.
  2. Visualize the process. Achieving long-term success is a journey or process and your goals must be achievable.  You should be able to visualize yourself completing not only the long-term goal, but the smaller micro goals that are the foundation for success.
  3. Put it on paper. If you don’t write it down, you won’t remember it, and if you don’t remember it, you won’t accomplish it.  Be specific as to what you are going to do, how you’re going to do it, and when you intend to accomplish it.
  4. Commit yourself to action. This step is fundamental to success in business.  Unless you are committed to the process and taking regular, consistent action you are ultimately committing yourself to failure.
  5. Remain focused on micro goals. Micro goals are best described as the individual activities required for success.  Yes, you have a long-term goal, but you must remain focused on the individual assignments necessary to achieve that long-term goal.
  6. Follow a plan of action. Your plan of action must be specific and should be written down on paper.  Once you have recorded what you are going to do, you must remain focused on doing it.
  7. Adopt a review it now attitude. If you want to see success happen on a daily basis, review your action plan daily.  Make yourself accountable to your action plan by reviewing what you have accomplished, what you still need to do, and an up-to-date timetable for accomplishing the tasks.

 

Most entrepreneurs have heard of setting SMART goals. I have been fortunate to see countless individuals change their lives by setting realistic goals and then achieving success when the SMART acronym is applied.

 

SMART GOALS

  • Specific – Write down the specific tasks to be completed along with a detailed account of how you intend to accomplish the goal.  It should clearly detail what you are going to do.
  • Measurable – If the goal is well written, you should be able to measure how it was done, when it was accomplished and the final result.
  • Attainable – You must be able to achieve the goal. Once again, micro goals with concrete objectives must be part of your SMART goal program.  If you lack specific talents or education, then add micro goals that allow you to develop those talents.  In my role at Response, I have witnessed individual after individual develop real estate talents that allowed them to achieve or attain their micro goals.
  • Results – Your goals must be results-oriented. As you review your individual goals, you must evaluate the results themselves, not just the activity participated in.
  • Time Bound – Your goals should be tied to realistic time frames that stretch your abilities.

 

When I was in Europe I visited Picasso’s museum in Barcelona.  I was amazed at the achievements of Pablo Picasso as an artist.  His quote on goals explains how he was able to accomplish so much during his life, and I believe it can be a roadmap for how to achieve success today instead of experiencing failure.  Picasso said, “Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act.  There is no other route to success.”

Your ability to set realistic SMART goals and then to follow through with a well-designed action plan will determine the difference between success and failure.

Negative Comments Should Never Define Your Financial Destiny!

Negative Comments Should Never Define Your Financial Destiny!

Life is difficult especially if you allow negativity to control your actions.  Far too often, we allow people’s opinions to define our expectations.  This is also true in the real estate investing world. As Response’s Director of Real Estate Education, I am constantly made aware of negative comments that can derail a blossoming real estate career.

In our world of high-speed Internet and with the growth of social media, it is easy to lose focus and get distracted from your personal financial goals.  This sometimes occurs when family, friends, or associates question your financial decisions.    If you allow these uninformed opinions to control your actions, you might soon doubt your decision to change your financial future using Response’s powerful training, tools, and resources.

Recently I had the opportunity of attending an NBA playoff game with several of my close friends.  While there, we talked about which Hall of Fame Players had influenced basketball the most.  Before the discussion ended, we had moved the conversation to the basketball players who had most impacted our lives.  After listening to my friends give their opinions, I said that Michael Jordan was the most influential player in my life.  When asked why, I responded with a quote from Michael Jordan himself.  He said, “If you accept the expectations of others, especially negative ones, then you never will change the outcome.”

This is especially true in the real estate field and establishing personal financial goals.  When your friends and associates offer ill-informed negative comments, they strike right at your emotional center.  Regardless of the fact that the negative comments are generally based on rumors and falsehoods, they can have an impact on your real estate decisions.  Perhaps you are ready to make that first offer, but your brother-in-law offers the comment that he read several negative comments online about investing in real estate education.  What do you do?

Let me give you a three-step process to keep you centered on real estate success.  First, and most important, you need to ignore mean-spirited feedback and responses based on false information.  Consider the comment of your “brother-in-law” about negative feedback he saw online.  Remember that comments found online are only opinions  and are often based on faulty or missing information.

The second step is to re-commit to working toward your personal goals.  You made the decision to pursue real estate education as a vehicle to achieve your financial objectives.  This education can change your life, but a specific action plan must be included with those goals.  So, step back and take concrete action to convert your education into a roadmap for financial success.

Step three Share your dreams with like-minded people.  It is critical that you associate with people who have a positive attitude.  These are the people who will rejoice in your success as you move forward.

Real estate investing is a key to wealth.  Andrew Carnegie said it best when he stated, “Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.”  Unfortunately, there are many people who have not come to this same conclusion.  When they offer negative comments and try to influence you to abandon your real estate goals, they are not your friends.  They are not your supporters.  Take their advice for what it is worth – nothing.  Your financial future is in your hands.  Negative comments should never define your financial destiny.

 

Persistence is the Ultimate Key for Success

Persistence is the Ultimate Key for Success

What is the determining factor for success in business today?  Is there some secret certain entrepreneurs have learned that makes success a reality rather than a fantasy?  These questions have a  a one-word answer – persistence.

Zion National Park is less than three hours from my home, and I enjoy making the trip several times a year.  Together with several close friends, we hike the steep canyons where vertical cliffs of 1,500 to 2,000 feet in height tower above us.  On a recent excursion to this hiking paradise, I waded up through the Virgin River towards our ultimate goal called The Narrows.  I remarked to a close friend, “It’s amazing how such a small river can carve a canyon, thousands of feet deep through rock hard stone.”  I listened as my friend described the geological process unique to the Park.  When he finished, I added that it wasn’t power, but persistence that was responsible for the geological marvel.

As the Director of Real Estate Education at Response, I am acutely aware of the role that persistence plays in real estate investing.  Of course there are other elements in play such as education, training, experience, and hard work, but the ultimate key for success is persistence. Response has developed a vast library of training, tools, and resources that can provide the background necessary for success, but unless the individual understands the role of persistence, success will usually remain a fantasy.  Persistence is key.  Calvin Coolidge once stated, “Nothing in this world can take the place of persistence.  Talent will not:  nothing is more common than unsuccessful men with talent.  Genius will not: unrewarded genius is almost a proverb.  Education will not: the world is full of educated derelicts.  Persistence and determination alone are omnipotent.”

None of us is perfect.  We all make mistakes.  Failures, large and small, are a fact of life.  How we react to those hard times will determine how our lives and our investments end up.  Persistence and determination will determine whether you succeed or fail.  One opportunity for persistence comes when real estate investors come face to face with the obstacle of criticism.  Friends, who usually have little or no experience, offer unwanted and wrong advice.  They say they want to help you avoid failure by pointing out how you made one mistake after another.  Perhaps they criticize your current investment plans. The truth is that there will often  be people who tell you that something won’t work, that you don’t have the abilities or talents, or that you just can’t do it.  Don’t listen to the naysayers.  Instead seek the advice of people who have the experience and knowledge to help you succeed.  And then, make the determination to hold steadfast to your goals and objectives despite setbacks.  When you develop the trait of persistence you can and will overcome these negative attacks.

How do you develop the ability to become more persistent?

  • 1 – Identify your objectives. What do you want to achieve? What are your short and long-term objectives?  Be realistic and concise.
  • 2 – Determine your motivation. Why have you established your goals?  Goals are great, but unless you have a burning desire to accomplish them, they can slip by and soon be forgotten.
  • 3 – Believe in yourself. Everything starts with a self-evaluation.  What are your strengths and talents?    Acknowledge your weaknesses and commit to finding help in overcoming them.  You must believe that you can overcome weaknesses, use your strengths, and actually achieve your goals.
  • 4 – Learn through education and experience. Once you determine where you need help, find experts who can guide you and point you towards the resources that will give you confidence to actually do something.  But education is not enough.  You must gain experience by following through.  Yes, you will make some mistakes, but use those mistakes as part of the learning process.
  • 5 – Outline and live by an action-plan. Your plan should be a roadmap full of micro-goals with which you can measure your progress.  Your personal action plan should be written out in simple terms which allow you to complete short and intermediate goals.
  • 6 – Commit to remain positive. A positive mindset is critical when you meet obstacles.  If you are surrounded by negative people, change your friends and associates.  You will never be better than your own attitude.  Remove every source of negativity in your life.
  • 7 – Develop personal discipline. Minimize stress from other parts of your life and commit to following your action-plan on a daily basis.  You can measure your success by the amount of time you are following your plan.  When you set a timetable, be realistic in what is required to accomplish the task.  Once you’re committed, follow through on your decisions.

Persistence will determine how and when you will complete your goals.  No truly successful person has ever found success in life without experiencing setbacks, obstacles, or even outright failures.  Success is the byproduct of learning from these mistakes and continuing on.

 

Real Estate Investor Secrets

Real Estate Investor Secrets

It’s true that the vast majority of individuals who initially make the decision to invest in real estate soon fail.  In fact, real estate professionals have found that 95% of the people who start the process to invest in real estate never even make an offer to purchase a property.  Why does this occur?  It all boils down to one simple word – Discouragement.  On the other hand, there are a substantial number of people who decide to invest in real estate, using one or more investment strategies, and they prosper and succeed.  What’s different between these two groups of people?  The second group has learned to control and even eliminate discouragement from their mindset, while the first group hasn’t.

Let’s look at several things that successful real estate entrepreneurs have done that changed the way that they invest in real estate.  We like to call them the 7 secrets that can eliminate that dreaded discouragement for beginning real estate investors.  As you learn to incorporate these secrets into your investment strategy, you will soon recognize the benefit of eliminating discouragement from your mindset.

Secret #1 – Understand your Personal Investment Strategy

Each of us are different and we all have separate talents and strengths.  Some of us are great with numbers, while others are fantastic in developing personal relationships.  Regardless of the differences we have and the talents we share, it’s possible for all of us to succeed in real estate investing, but we need to be aware of our personal strengths and weaknesses.  The goal is to match a separate real estate investment strategy to your personal strengths.  For example, if you have a talent and skill of doing construction work, you might want to consider looking into finding fixer upper properties and flipping them for a profit.  If you are great with numbers and love working with people, you might best look into finding a rental property as your first purchase.

There are basically three major real estate investment strategies that include: rental properties, fixer upper and flip properties, and buy and hold properties.  Within these three major categories, there are multiple individual strategies.  As you begin your real estate investment adventure, you need to select your individual strategy and then begin to do the research on how that strategy works.  It is critical that you understand what to do and how to do it before you do anything.  If you decide to go into rental properties as your main strategy, take the time to learn all you can about the advantages and disadvantages of owning rental property.

Once you have a basic and sound understanding of how a selected real estate strategy works, you need to develop your own approach to the strategy.  We like to call this approach – your niche.  It’s what is going to make you special and help you make a profit from your real estate adventure.

Secret #2 – Create a Roadmap that Will Guide You to Success

Every new real estate investor should start by developing or framing a basic business plan based on the real estate strategy they have studied and chosen to follow.  This business plan is really a roadmap you can follow that will help you overcome obstacles and move towards success.

  • Set Specific Goals.  In essence, this roadmap will contain a list of short-term, mid-term, and long-term goals, all of which will guide you along the path of success. If your chosen strategy was rental properties, specific goals might include items such as; looking as specific properties in your target area, researching rental rates within the target area, identifying funding opportunities that match your credit rating; making the offer, etc.  This list of goals should be written out and be extremely specific in nature.
  • Each goal should have a timeline or timetable attached to it.  You must have a way to measure if you have succeeded reaching the goal. These timelines are not meant to be a constraint on your ability, but rather a way to motivate you to take action.
  • Create Rewards for Completing Your Goals.  Each goal is a step toward your ultimate success as a real estate investor.  Goals are nothing more than dreams if no action is taken, and if you reward yourself for completing the goal, action will usually take place.  For example, one of your goals might be to identify three specific rental properties in the target area.  Once this goal is reached, you might reward yourself with a special night out with your spouse or significant other.  The object is to create rewards that you will remember and enjoy as you reach and complete these initial goals.  If the reward you choose has meaning for you, you will work harder to complete the goal.
  • Establish Danger Points that should be avoided. Your roadmap should list things that can derail your success in real estate.  As you study and develop your personal investment strategy, you should understand all the risks involved and then work to eliminate them.  Some of these dangers signs might be:
    • Don’t over leverage your property.  It’s true that when you use borrowed money or capital to purchase a property, you can magnify your return, but, it’s also true that increased leverage or borrowing can also magnify your risk.  When you decide to purchase a property, you need to be aware of how you are going to repay the borrowed capital.  Every investor needs to control the leverage and not let the leverage control you.
    • Don’t fall in love with the property.  When you become emotionally involved with the property, you begin to make emotional decisions instead of fact based and financially sound decisions.  If you start to believe that you must have a specific property, regardless of the price or terms, you are setting yourself up for both failure and discouragement.  Wise investors always look at the numbers and base their decisions on those numbers.
    • Don’t over rehab when buying properties.  This is especially true for fixer upper properties.  You want to make to make the property as rentable or saleable as you can.  When you over rehab a property, you are spending your profis before you ever get them.

Secret #3 – Continue Your Education

Educating yourself should be a life-long pursuit, and it is extremely important for the aspiring real estate entrepreneur who wants to achieve success.  There is, however, another side benefit of continuing your education about real estate.  Discouragement often appears when things don’t go as planned.  By continuing your studies about real estate investing you will plan better and avoid those pains of anxiety and discouragement.  And when you are already discouraged because things haven’t gone as anticipated, continued education in the following ways will get you back on the path to success.

  • Educate Yourself Through Personal Study. This study can take place in a myriad of ways.  You might start by reading and listening to books written by other successful real estate experts.  Pay special attention to their stories of how they reacted when obstacles appeared unexpectantly.  In addition to discovering that you are not alone in these pangs of discouragement, you will learn specific steps to overcome the obstacles or setbacks that might be causing your discouragement.
    Your personal study should not be relegated to simply reading books.  You should also search out other successful investors and spend time talking to them about their experiences.  These discussions should always be centered first on identifying the problems they may have met, and second, on evaluating specific ways they solved the problems.  Don’t pass on the opportunity of learning about their successes in real estate.A third way to continue your personal education is to meet and greet the experts in the field of real estate.  Leverage their expertise by learning what they do and how they do it.  You may want to meet with well-known appraisers, bankers, and even surveyors.  All of these experts can give you information that will help you identify problems along with the best solutions.  The time you use meeting and interacting with real estate professionals will also teach you multiple languages.  Soon you will know how a plumber, appraiser, banker, title company officer etc. speaks.
  • Find a Mentor. Mentors may be paid professionals or they may just be other real estate professionals who have experienced great success.  When you are just beginning your career in real estate investing, take the time to meet other like-minded individuals in real estate.  When meeting these people, learn to ask questions that are based on specific examples.  You will find that when you ask knowledgeable questions, you will get real world examples of success.  You might find a mentor by becoming an unpaid intern for them.  Offer to do some of their research for them, naturally following their instruction.  As your relationship with a mentor grows, your education will also increase.
    If you have the financial capability to pay for professional mentoring, it can be worth the money you spend.  If you elect to pay for professional help and mentoring, make sure you establish the credibility of the selected mentor.  If you are paying for this valuable service, the mentor should be able to provide references and examples of how they have helped other people like yourself.
  • Attend Training Events.  If you belong to a local real estate investment organization, they will normally have access to local training.  Make sure you attend and take good notes.  These are also places where you might establish relationships with potential mentors.  There are also well qualified national organizations who can provide extremely competent instruction in the specific steps involved in different real estate investment strategies.  Many successful real estate entrepreneurs have found that the money they spent on their education was returned many times over in their personal success.
    There are also credible webinars offered online that can increase your knowledge about real estate.  When selecting a webinar, take the time to assess the qualifications and credibility of the person providing the webinar.  The more you learn, the better you will feel, and the better you feel, the quicker your discouragement will disappear.

Secret #4 – Buy Right

Every smart investor should always make money on the purchase.  This means that they are buying at market or below market.  Naturally, if you can purchase a property below market value, you have built in equity right from the start.  The question becomes, “How do you buy right?”  It starts by using the following simple steps:

  • Know Your Target Market.  If you are buying locally, spend time looking at what other properties have sold for.  It doesn’t matter what people are asking, what really matters is what people are getting for the property.  The saying “Location, location, location” is all important.  Make sure you are comparing apples to apples and not apples to oranges.  Pay attention to where the different properties are located in the area and then compare sales among true like properties.  Once you have established realistic values in a geographic area, then you are ready to start identifying prospective properties.
  • Look for Motivated Sellers. When you are ready to purchase a property, it will pay big dividends to know why the seller is selling the home.  Once you identify a well-motivated seller, you can make an offer that builds in equity for you at time of purchase and likewise get the property sold immediately for the seller.  It’s a win-win deal.
  • Learn to Negotiate. Negotiation techniques can be learned and the time you spend understanding how to negotiate will pay big dividends.  There are training courses and seminars that will help you learn how to do this.
  • Create an Exit Strategy. Many first-time buyers think the exit strategy just means how they can sell the property when they are ready to liquidate the property.  Yes, this exit strategy should be considered when purchasing the property.  You don’t want to buy a property that is a dog and will always be a dog.  You want a property that can be put in a position to be sold with good curb appeal.  Forgetting this fact, is the reason why some investors are discouraged when they are left with a property that is in the wrong location and can’t be sold regardless of the price.
    The second type of exit strategy that must be considered is an exit strategy that allows you to exit the purchase.  If you make an offer on a property and soon find out that it wasn’t what you thought it was when you made the offer, you need to make sure that your offer allows you to walk away.  The “subject to” clauses are an important part of the purchase agreement.  Discouragement can come when you are locked into a bad purchase.

Secret #5 – Follow the Roadmap

Discouragement and anxiety usually appear when the investor has gotten off course in their real estate experience.  These individuals have usually failed to meet short-term or intermediate goals.  Perhaps the individual is discouraged because they haven’t found a great under market property in their local area.  Maybe they are depressed because they haven’t secured financing.  There are numerous reasons why discouragement appears, and in almost all cases it can be traced back to not following a plan and taking action.

  • Match your Roadmap to your Market.  It’s important for you to immerse yourself in the real estate market on a local basis.  Unless you are aware of those things that influence the market, you will be in peril of making decisions that are unwise and possibly fatal.You need to know what things are driving the job market, which schools are best, and where the people are moving to.  Sometimes when you first draft your business plan or roadmap you may not be totally aware of changes that are taking place.  When you become aware of these changes, make subsequent changes to your goals and timetables.  Your discouragement may sometimes be a factor of what is happening around your property and not the property purchase itself.
  • Keep a Real Estate Journal. The best way to keep yourself on track and following your personal roadmap is to record what is happening and what steps you have taken.  It is a good idea to write your specific goals in your journal along with the timeline for accomplishing those goals.  When you meet an objective, write it down in your journal.  You will find that by recording both the positive and the negative things that take place in your real estate adventure, you will have a guide book to help you on subsequent purchases.
    Be honest with yourself when recording both the good and the bad things that take place.  Accuracy in your journal is important.  It has been found that this recording of events reaps rewards.

Secret #6 – Upgrade your Mindset

Your mind is a powerful tool and it can change how you act and how you perceive what is going on in your real estate business.  If you want to eliminate discouragement from your existence, you need to remove those obstacles that influence those negative feelings, but you must also change the way you think.

  • Eliminate Negativity in your Life. It has been proven over the years that we act as we think.  This is true in all aspects of our life and is especially true in the real estate business.  Start by doing simple things such as removing negative words from your vocabulary.  Surround yourself with positive reminders of what you want to accomplish.  If you have decided to fix up a property and flip it, then get a rendering done of what the property will look like when finished, and then put this rendering or picture in plain view.Instead of saying “If this doesn’t work, I don’t know what I’ll do,” replace it with “When I finish this property purchase, I’ll be able to create a regular passive income with that rental money.”  Start looking at what you want to do instead of looking at negative outcomes.
  • Surround Yourself with Like-Minded People. There is nothing that creates more discouragement than “naysayers”.  You don’t want to be around people who will tell you what is wrong with your ideas.  These type people never take action on their own behalf and deep down are envious of your efforts in improving your life.
  • Read Books on Positive Thinking. Books by well-known authors about positive thinking will influence how you think.  And when you start thinking different, your life will be different.
  • Consider Getting Professional Real Estate Help. If you are discouraged because you think you are alone, then maybe you just need to enlist the help of good professional rental management or the help of a good accounting firm.

Secret #7 – Take Immediate Action

It’s no secret that action creates habits and when a habit is fully adopted, the task in question becomes easier.  If you are discouraged, make the decision to do something that requires real action on your part.  If you are still waiting to make your first offer, then go out and make an offer that you don’t even expect to get accepted.  The important point is to make the offer.  And you may be surprised to find yourself in control of a great property at below market value.

One action may not be enough to get rid of the feelings of discouragement.  If you are still feeling discouraged after accomplishing just one of your short-term goals, go ahead and fulfill the action for another goal on your roadmap.  As long as you are acting, you are progressing.  Success in real estate investing is a process and action is also a process.  Make it the same process.

There is nothing that discourages discouragement more than simply taking action.  You have a roadmap to success in your business plan.  If you are discouraged, take the specific action steps you have recorded on your roadmap.  When you act, you really do change things.

 

Your Personal Trainer

Your Personal Trainer

A little while ago I was speaking with a man who owns a personal training company. He is successful and the business is expanding. As I was speaking with him I realized it is possible to draw a lot of parallels between healthy training and trading the financial markets.

Discipline

It takes discipline for a lot of people to maintain a healthy weight, but the secret is really simple. It’s calories in vs calories out. If you take in more calories than you expend you gain weight. If you burn more calories than you take in, you lose weight. Now you could argue for healthy calories vs unhealthy calories but we’re just talking about weight in this example and weight is just calories in vs calories out.

One “cheat day” can ruin weeks of dieting. In a similar manner, one “cheat trade” can ruin weeks, months, or even years of proper disciplined trading. If you want to find long term success in the markets, you cannot afford “cheat trades” that don’t follow your rules.

Routine

Achieving peak fitness requires a commitment to following a routine. The same is true with trading. You cannot afford to take a week off because you were “too busy” or “too stressed.” If you take a week off you are that much further behind in reaching your goals. That doesn’t mean you have to be always trading, but it does mean you have to be always learning and paying attention to the market. It only takes 10 or 15 minutes a day to review the market and monitor your portfolio. Make the time and make it happen or you have no one to blame but yourself if you fall short.

Risk Control

One of the biggest dangers to any fitness routine is the risk of injury. There are steps you can take to minimize the likelihood of getting injured. Proper warmups, proper form and technique, and proper cool down and rest periods can all contribute to minimizing the risk of injury.

In trading the risk we talk about is losing money. Proper analytical techniques, management techniques, and position sizing all contribute to helping prevent catastrophic losses in your portfolio.

Long Term Goals

Your health and fitness should be an ongoing process. Most people who sign up with a personal trainer are looking to accomplish long term changes in their life. There may be short term goals along the way such as running a race or participating in a competition but the real goal is to be as healthy as possible long term.

Trading should be approached the same way. A focus on only short term goals such as weekly or monthly returns can skew your perception of your own success and lead to emotional mistakes. You are probably going to have short term setbacks in trading just like you would in a fitness routine. Keep in mind that you are in this for the long run. A focus on annualized return goals is a great way to keep things in perspective and can help you better handle the short term setbacks.

Summary

Just like anything else in life, if you want to be a successful trader it is going to take discipline, the commitment to developing a routine, risk control, and a focus on your long term goals. Enjoy the process, have fun, and make money.

 

 

 

 

 

Defining Hard Money vs. Conventional

Defining Hard Money vs. Conventional

When doing deals in real estate investing, the time could come when you need to borrow funds to buy, fix and sell a property for a profit or to buy and hold it as a rental. In either situation you can either borrowing the funds from a traditional lending institution, such as a bank or mortgage company, or from private and/or hard money lenders.

In this article I am going to break down the pros and cons associated with each, along with the details of each lending situation.

  • Traditional/Conventional Lenders – These are typically banks and mortgage brokers who require an approval process that can be very involved and sometimes extensive. It involves pulling a credit report for your current credit score, a thorough screening of your current and past financial status, and an evaluation of your total net worth and the cash value of your assets. You need to provide a number of supporting financial documents to show the lender that you are not only qualified but also highly capable to pay back the loan as well as the 10% or larger down payment. This screening process can most often take several weeks to accomplish. Despite these lending standards, an investor might choose this type of loan because of its much lower interest rate (typically below 6-7%) with much longer terms, such as 20-30 year loans.
  • Private and Hard Money Lenders – These are the lenders that real estate investors take advantage of the most. Private money lenders are typically individuals that loan their own money from their own accounts and assets. They usually charge a higher interest rate and points in accordance with what they believe is their risk in the deal. Hard money lenders are more often a group of investors that have pooled their resources to be part of a bigger group. One of the biggest reasons a real estate investor would consider borrowing from either of these two types of lenders is because of the simpler lending requirements. In the case of the conventional lenders, they first look at the financial status of the borrower more than the property. In the case of the private/hard money lenders, they look at the numbers in the deal as well as its profitability. These lenders can provide funds in less than 30 days on a regular basis and in some cases less than 14 days. This alone is one of the reasons this type of lending is so attractive to investors who buy, fix and sell properties. Despite the much higher rates (such as 8% and higher), the terms are usually much shorter and in most cases less than 12 months. Under these considerations investors that are rehabbing properties find this acceptable as they are usually on a much shorter time frame, around 90 days to 6 months, from close to close.

It is always to your advantage to look at all options when it comes to borrowing funds for deals. Always look at your budget and the direction you want to go before deciding which lender better fits your needs.

Workshop Update | Week 2 – Jan 10-11

Workshop Update | Week 2 – Jan 10-11

This week, Response delivered 11 Real Estate and Stock workshops. Our overall customer experience score, for all surveys received, was a 5 out of 5. We saw over 503 students. Here is what some students shared about their experience:

This was phenomenal!” —Emmanuel W.

“I have learned so much more than I anticipated! So glad I came!” —Linda H.

“Mind blowing information presented. Can’t wait to get started.”—Tad M.

Funding – Part 2

Funding – Part 2

Let’s visit a few ways you can find funds to complete a real estate deal.  What about those retirement accounts that aren’t performing as well as you would like?  Sometimes the stock market is up, but by the time you get done celebrating it is down again.

As you advance in years you may start to seriously think about whether you are going to have enough saved to live a comfortable life when you retire.  You can self-direct the money in your IRA, 401(k), or even RRSP (Registered Retirement Savings Plan in Canada), and use these funds to invest in real estate.

Note that it is extremely important for you to consult an experienced administration company that understands the laws and tax implications of self-directed accounts.   Some sites you may want to research are:

www.checkbookira.com

www.accuplan.net

www.mountainwestira.com

www.equitytrust.org

www.newdirectionira.com

The economy will continue to have its ups and downs, as will traditional savings, but people always need a place to live.  Rents stay the same or even increase when home prices drop.  Isn’t that interesting?  So once you have a self-directed account collecting rent, you are pretty darn secure.  That feels a lot better than being at the mercy of what the next election results may do to your savings.

Banks have tightened up their lending, but it is still possible to get traditional mortgages on investment properties.  If your personal financial situation is good, you have the option of mortgaging your investment homes.  Most banks follow the guidelines set by Freddie Mac and Fannie Mae, those big government agencies in the sky.  Therefore, the number of traditional mortgages you can hold is limited.

A good mortgage broker is your best guide.  You can likely find a knowledgeable broker at your local REI Club.  The cost of getting the loan and paying it for a few months can be greatly outweighed by the profit made in reselling the renovated home.

You can also get a mortgage on a property you intend to hold as a rental.  Just be sure you are getting more each month than the payment and other holding costs.

There are literally tens of thousands of banks and credits unions in the U.S. The smaller financial institutions (those with one to five or so branches) have more options for investors.  These local banks have portfolio loans that are kept in a house, meaning they make their own loan decisions over muffins and tea.

They are not bound to follow the guidelines set by Fannie Mae and Freddie Mac.  Go in and talk to these nice people. See what the possibilities may be.

Lack of funds should not be a roadblock.  Think in and out of the box and you will discover sources of funds you may not have previously considered.

Funding – Part 1

Funding – Part 1

For many investors, funding is a bit of an enigma.  Let’s clear the air with a couple solutions.

Let’s begin with no money.  You may even have lousy credit.  Or maybe you have money and good credit but you don’t want to use it or risk losing it.  Begin with wholesaling.

When you wholesale a real estate transaction, you essentially act as a matchmaker.  You find other investors who buy properties for cash.  You talk to these fellows and see what they buy, where they buy, and how much they pay.  Next, you essentially go shopping for them.  Who doesn’t like shopping?

Once you know what your cash buyers want, you find highly motivated sellers with matching properties.  These sellers might have their house listed on the MLS, in which case you will work with a real estate agent.  These sellers might have them advertised as For Sale by Owner (FSBO), in which case you work with them directly.  Or these sellers might not be waving any kind of flag saying “I want to sell my house” until you dig them up with your creative marketing.  You make a lot of offers, which costs nothing.

Once you have a property under contract (the owner has agreed to your price and you have a purchase agreement signed), you essentially sell the deal to your cash buyer for a fee.  You can wholesale, wholesale, wholesale to make money, money, money.

 Or you do have cash…

Now you’ve wholesaled some houses and you have cash or maybe you are starting out with cash.  Cash is king as the saying goes. You can make cash offers, get better deals, and then fix and-flip or hold properties for cash flow for yourself.

You may have sources of cash you have never considered.  One potential source of funds is a Home Equity Line of Credit (HELOC).  Do you own your home?  Is it worth more in today’s market than the balance of your mortgage?  If the answer is yes, then very possibly you could get a HELOC.  This can be a very effective way to use your money to grow more money.  If you took out a HELOC and were paying perhaps 4% interest and you used these funds to purchase, renovate, and resell a house to make a 10-20% profit, you are ahead of the game.  Or maybe you use the funds to purchase a home as a rental and get a 10-15% return on your money.  Again, you are ahead.

In fact, you have created what in the financial world is called “arbitrage,” a profit based on the spread of two purchase prices, or in this case two rates of interest. Just toss that word around at your next REI Club meeting and you’ll immediately sound like a savvy investor

There is a myriad of ways to fund real estate transactions.  These are just a couple.  Make your money work for you! Don’t let lack of funding be a roadblock in your investing endeavors.

Helping FSBOs Sell

Helping FSBOs Sell

Selling your house is a big and scary step as it involves a lot of uncertainty. Most people opt for a realtor so that they don’t have to handle the stress and hassle that comes with the sale of a house. Selling a house, yourself is no easy task, but the reward is well worth it. When you sell a house via a realtor, you lose about 6% of the sale price as that is shared between your realtor and buyer’s agent. Therefore, it might be prudent to sell the house yourself so that you get exactly what your home is worth. This process can be daunting but here are a few things that you should keep in mind.

Appraise your house

This task is often difficult because you might be biased towards your house. A good way to properly appraise your house is to look at the listings and pricing of houses that are in your neighborhood. You should also look at houses that are similar to yours and thus you can get a good estimate of what is a fair price on your house. Don’t make the mistake of overpricing because that will send all your effort down the drain.

Market your house

It is also important to get your house out there. To do that you can have someone build you a website or you can arrange for flyers and signs. This will let people know that your house is for sale. This process can be expensive, but it is worth it simply because this is the only way that people will know that your house is available.

Make your house look good

After you have done the marketing, you should start getting calls from people that want to see your house. You need to prepare for this. Give your house a thorough cleaning, hire someone if you must but make your house look the best it can. The yard and fences should also be touched up because that stuff counts a lot. Remember you only get one “first impression”.

Be prepared

Talk to a Real Estate attorney, someone that can help you look over contacts to make sure you don’t miss anything important. Have a title company chosen. Be ready to negotiate.

Success Is Not Final and Failure Is Not Fatal

Success Is Not Final and Failure Is Not Fatal

My parents taught me from an early age that I could learn some of life’s greatest lessons from historical figures and how they reacted to personal challenges. World War II was known as The Great War in Great Britain and Winston Churchill offered some advice gleaned from his role as Prime Minister of England during the War. He said, “Success is not final, failure is not fatal; it is the courage to continue that counts.” Perhaps the major challenge entrepreneurs face today is learning how to treat failure as a blessing instead of a curse.

As the Director of Real Estate Education at Response, I am acutely aware of the fear of failure that many real estate entrepreneurs face as they embark on a new venture. What is most important to remember is that failure is in fact the seed of success. It is a key element in helping us grow, and failure allows us the opportunity to evaluate our personal progress. If it is so helpful, why then, do we fear failure so much? Each of us has an ego. When we fail in any way, we experience shame of some kind. When we learn to overcome the “ego trip” associated with failure, we are well on our way towards eliminating or minimizing the fear of failure.

The first thing we need to realize is that failure is a natural part of the success process. Thomas Edison failed thousands of times in learning how to harness the power of the light bulb. Once he succeeded, he stated, “I have not failed. I’ve just found 10,000 ways that won’t work.” If you are starting a career in real estate investing, you will find some things that don’t work immediately for you. Some people will call these things failures, but I see them as simple steps toward your ultimate success. Remember that Response has an extensive library of training, resources, and strategies that can help you on your way towards success.

Overcoming the fear of failure is a worthwhile goal, but it is also a difficult thing to accomplish when starting a new venture. I’ve found that there are some simple strategies to eliminate the fear of failure. Remember we are not going to eliminate all failure, but rather we are finding a way to dispel the fear associated with it.

  • Strategy 1 – Don’t focus on future failures. When you start thinking about future mistakes as permanent failures, you will do nothing. When this happens, you will regret having done nothing at all. If you spend your time thinking about the failure taking place, you will soon wallow in negativity.
  • Strategy 2 – Become a positive person. Think, act, and speak positive thoughts about your goals and objectives. When you encounter a setback or small failure, look for ways to turn the failure into a learning experience. Visualize yourself turning the experience into a great success.
  • Strategy 3 – Stay focused on your goal. Unless you are committed to achieving your goal, the natural tendency is to do nothing at all. When this happens, you often move away from your goal and put off correcting mistakes.
  • Strategy 4 – Trust your abilities. Don’t be afraid of making a mistake. None of us is perfect and mistakes are part of the process of achieving success. Trust your ability to learn from mistakes.
  • Strategy 5 – Build on past failures. Since we all experience failures, use them as building blocks for a successful future. Review past failures and analyze how to correct the mistakes. Don’t, however, spend time thinking about how the failure made your life worse. You must stay positive when doing any evaluation of past failures.

Yes, failure hurts, and as human beings we spend time trying to avoid failures of all kinds. However, failure can be life’s greatest teacher when we adopt the attitude of Arnold Palmer who said, “The road to success is always under construction.” It is up to you to decide whether your future is one filled with hope and achievement or despair and inaction. Success is not final and failure is not fatal; it is the courage to continue that counts.

Real Estate Investing and Technology

Real Estate Investing and Technology

There was a day when real estate investing was done in person with carbon copy contracts. Just imagine working with a 25:1 acceptance ratio and having to go out and visit each and every property. That was the day where your CRM or lead data base consisted of a three-ring binder or notebook. This process was long and very drawn out, especially in comparison to today.

By simply logging in on the internet you are now able to access a sea of leads and knowledge. Anywhere from pre-foreclosure leads to probate or FSBO. You can also access the processes and information to help walk you through any of these transactions.

You are now able to view homes through pictures provided from online listings. You are able to run your numbers and submit your offers via phone or email.

Marketing online allows you the opportunity to reach out to a larger group of individuals and even customize it to be more direct. Don’t get me wrong, good old door hangers are still a great option, they just take a lot of time and online allows for you to keep marketing even when working on other things. This is a great and healthy form of multi-tasking.

There are tools and resources like software and programs that can be used to help with the process as well, whether it be evaluating a deal or simply data or lead organization. The number of apps that are geared towards this profession are amazing. Apps as simple as a mileage tracker can save an investor loads of time and energy that can now be used for other things.

Technology has made it so that you can invest remotely, or even simply just at home in your jammies at two in the morning. The way technology is changing this field of work is absolutely amazing and I only see it continuing to grow and continue to get better over time.

Exercise Danger!

Exercise Danger!

Would you ever sign a contract without knowing what you were signing? Hopefully the answer is no. Remember when you are trading options that you are signing a contract.

The simplest definition of an option is that it is a contract. Contracts have rights and obligations.

An option contract is the right to buy or sell an underlying security at a set price on or before a set date. For example, we may buy an option contract that gives us the right to purchase shares of a stock for $50 per share at any time within the next 90 days. In this example $50 is the strike price and the expiration date is in 90 days.

Exercising an option is the terminology used when putting into effect the conditions of the contract. In our example, we have the right to purchase a stock for $50 per share. If we exercise our right, we are choosing to purchase the stock for $50 per share. A standard option represents 100 shares of stock so that would cost us $5,000 plus whatever fees and commissions we owe.

There are two common types of equity options. European style and American style. American style options can be exercised at any time up to expiration. European style options can only be exercised at expiration. Most stocks and ETF options trade American style. Most index options trade European style. You should contact your broker if you are not completely sure which type of option you are trading.

Most options are not exercised. They either expire out of the money or are offset by closing positions prior to expiration. Most options that do get exercised get exercised at expiration, however, early exercise is a possibility on American style options.

The OCC (Options Clearing Corporation) uses a process known as exercise by exception to exercise options at expiration. Simply put, options that are in the money by the threshold amount will be exercised at expiration unless the OCC is instructed otherwise. Since June of 2008 the OCC has had an exercise threshold of $0.01. That means any option that is in the

money by $0.01 or more will be exercised at expiration unless the OCC is instructed otherwise. Individual brokerage firms may have a different threshold for exercise from the OCC.

Generally speaking it is safe to say that options that are in the money will be exercised at expiration. If you are unsure of whether your option is in the money or not please don’t hesitate to reach out to your broker for additional assistance.

Managing Trades

It is critical that we are aware of exactly what we are investing in. Since options are contracts we need to be sure that we understand our contractual rights and obligations. If our options are in the money at expiration they will be exercised.

For example, if we own a long call at expiration and it expires in the money we will end up buying the stock at the strike price of the call. We would then be responsible for the full risk of the stock position.

If we are short an in the money call at expiration we would be obligated to sell the stock. If we already own the stock then we have to sell it. If we don’t own the stock then we have to borrow the stock from the broker and sell it anyway. This means we are short the stock and are responsible for the full risk of the short stock position.

Early Exercise

American style options can be exercised at any time. Options that are deep in the money have a higher chance of getting exercised early. This is because they are made up of mostly intrinsic value. If an in the money option has little or no extrinsic value remaining then it has a high chance of being exercised early.

Let’s say we sold a $45 strike call. The stock is now trading for $50 per share. The call option is trading for $4.85 per share. The buyer of the call has a choice. They can choose to sell the call for $4.85 or they can exercise the call and purchase the stock for a $5 discount. Mathematically it makes sense for them to exercise the call early. As the seller of the call, we would be obligated to sell the stock for $45 per share. This could happen at any time. This is why it is so important to manage our trades properly and be aware of our contractual rights and obligations.

When we short a call we are also exposed to dividend risk. Since selling a call requires us to sell a stock if exercised we could find ourselves short a stock through a dividend. When short a stock we are responsible for paying that dividend to the owner of the stock we borrowed. If the dividend payout on a stock exceeds the extrinsic value of an in the money calls corresponding put, then that call is in danger of getting exercised early.

Let’s say there is a $50 stock that is issuing a $1 dividend. We own a $48 strike call on that stock. If the $48 strike put is trading for less than $1 then our call is in danger of getting exercised early for the dividend.

Education

Options useful tools when used properly. As option traders it is our responsibility to master the

fundamentals of options; be aware of the contractual rights and obligations involved in options, understand how options are priced, master risk management techniques, master basic option strategies such as long options and covered options, and learn vertical spreads and other more advanced strategies.

Most importantly, control risk. Options are leveraged instruments and leverage works both ways. Know what the maximum loss is. Don’t invest with money you can’t afford to lose. Don’t be intimidated by options. They are wonderful tools. Have fun learning, be safe, and allow us to assist you in this journey.

Overcoming the Fear of Making Offers

Overcoming the Fear of Making Offers

The first thing required to make deals in real estate is to overcome the fear of doing what is necessary to get properties under contract. Only then can you sell a property to willing buyers.

Obviously, if you don’t make offers, you won’t get deals. Having a “due diligence clause” and an assignable contract should help because you can sell the contract to a buyer if you find one or get out of the deal if you can’t without costing yourself any money.

For some people doing deals comes easy. Some investors even make money without using any of their own. The way to make money starting off without using your own money, or by using very little of it, is to get properties under contract and then sell those contracts to rehabbers or landlords and landladies.

Even if you only buy a home to live in, the home appreciates as the years go by and equity is gained as the mortgage is paid down. Naturally, most investors want to make more money and gain faster returns than just that.

The concept is simple: buy properties for less than you sell them for. When wholesaling you don’t even have to buy the property. Just get the property under contract at a price that allows a rehabber to buy the property from you at a higher price so you can make some money. By having a property under contract you have the right to purchase it if you so choose or you can turn those rights over to a buyer. As an exit strategy you should have a “15-day due diligence” clause. Never forget that this is how you protect yourself if you can’t use or sell the property.

The best way to remove the fear of making offers is to have a “due diligence” clause that allows you to get out of any deal for any reason during the time period of the clause. Here is an example of an effective due diligence clause that will allow you to just walk away as long as you exercise the clause with written notice as indicated in the clause itself: “Commencing upon receipt by Buyer’s Agent of a mutually executed Agreement of Sale, a Fifteen (15) day period shall begin (the “Due Diligence Period”) during which the Buyer shall have the right to carry out and perform all reviews and investigations deemed necessary by Buyers, including, without limitation, a physical review and inspection of the conditions of the buildings and the soil, environmental inspections, review of title, review of zoning, and review of any permits and approvals for property deemed necessary by Buyer. If Buyer, in its sole discretion, is not satisfied with the review, evaluation or investigation during the Due Diligence Period, Buyer may terminate this Agreement by written notice to Agent for the Seller prior to the expiration of the Due Diligence Period, and at such time, shall receive back deposit and neither party shall have any further obligation hereunder. If such notice is not given, this Agreement shall continue in full force and effect in accordance with its remaining terms.”

 

As you can see from the due diligence clause, there is nothing to fear. But, you may decide to be fearful anyway. If so, it is time to do a little soul searching. We can help. Give us a call on the Advisory Line.

Workshop Update | Week 49

Workshop Update | Week 49

Our overall customer experience score, for all surveys received, was a 5 out of 5. Here is what some students shared about their experience:

“Amazing class! I am very excited to start investing and learning more.” —Garrett J.

“Great training! Information was valuable and presented in an easy to understand format.” —Cristina Bolis.

“I’ve learned so much in such a small time. I plan to get additional training so I can excel at it and change my life.”—Mark M.

Follow “No-Fail” Checklist When Purchasing Your 1st Rental Property

Follow “No-Fail” Checklist When Purchasing Your 1st Rental Property

Every new real estate entrepreneur needs to understand the concept of “No-Fail.” Real estate investments have been proven to contain significant advantages in providing a way to both earn financial rewards as well as to protect personal assets. In the world of financial investing, there is no such thing as being a true “No-Fail” strategy. There are risks associated with all real estate investments, but rental property can be purchased in such a way as to approach the threshold of being a “No-Fail” strategy. In order to take full advantage of the benefits of owning rental property, it is recommended that the beginning real estate investor consider drafting and following a 7 Step Checklist when purchasing that 1st rental property.

Purchasing Your 1st Rental Property

Step 1 – Understand the Case for Owning Rental Property. When you make the decision to own rental property, you need to be aware of both the advantages and the disadvantages associated with this investment strategy. Yes, there are risks associated with rental property. Many of these risks can be reduced or even eliminated when a “No-fail” approach to ownership is adopted.

SEE ARTICLE “Understanding the 5 Risks of Investing in Real Estate

As we examine the benefits you receive by owning rental property, you will quickly realize that there are five power advantages that should be important for almost all real estate entrepreneurs.

  1. Power Advantage of Leverage. Leverage can best be described as using financial instruments or borrowed capital to increase the potential return from the investment. If you own a rental property that increases in value by six percent and you had purchased that property with “all cash”, your return on investment for that period of time would be six percent. However, if you had put down a 20% down payment and the property increased in value by the same six percent, your actual return would on the investment of 20% would be five times the original amount. This same power translates across all the real estate investments and is especially true for rental properties that generate a positive cash return. Keep in mind the fact that as you increase the leverage, you also increase your risk. A good rule of thumb is to keep the leverage at a level that allows you to be positive cash flow on the property.
  2. Power Advantage of Potential Tax Free Cash Flow. Every investor will have individual tax issues, but rental property has the ability to allow the investor to receive a positive cash flow while still being able to deduct depreciation and other expenses that in essence creates free cash flow.
  3. Power Advantage of Tax Deferred Investment Growth. Rental property will generally increase in value as a direct correlation with the increase in rental income and profits. While the property increases in value in real time, your tax obligation will not accrue until you dispose of the property.
  4. Power Advantage of Appreciation. As you pay down the loan on rental property, the rental property will actually increase in value. This power has been demonstrated long-term across almost all properties. The one major caveat to remember is that you must select the right property at the time of purchase. Rental property can in effect produce equity for the future.
  5. Power of Cash Flow for Retirement. Tenants pay rent, which increases in amount over time. This cash flow continues and increases in size as the rental rates increase. Well-selected rental properties can provide a retirement income.

Step 2 – Evaluate Your Personal Situation. The decision to own real estate comes with responsibilities and that is especially true for owning rental property. Even prior to beginning your search for the perfect property, you should examine two areas of your life.

  1. Personal Abilities and Desires. As soon as you purchase that first rental property, you take on the responsibilities of being a “landlord.” There are ways to mitigate this responsibility when you are in the position of obtaining professional management.SEE ARTICLE Five Keys That Can Open the Door to Professional Rental Property ManagementYou should be realistic when purchasing that first property by realizing that you will be a landlord with “hands-on” responsibilities at first. Yes, it may seem daunting, but the rewards can be significant. Ask yourself the following questions and decide if you are personally ready to get started.Purchasing Your 1st Rental Property
    • Do you want to be a landlord?
    • Do you have the experience to do the repairs or can you find someone who can?
    • Do you have the time to collect rent, do marketing, and complete repairs?
    • Can you manage that first rental by yourself
      It is important that you be realistic in answering those questions.
  2. Personal Financial Situation. When you purchase that first property you will be incurring added financial responsibilities. In order to make the purchase as “No-Fail” as possible, you should take the following actions:
    1. Pay Down Debts. If you have outstanding credit card obligations and short-term debts, you probably have large recurring expenses. When you purchase that first property you will most likely have additional expenses that need to be paid. If you are financially burdened by debt, you may not be able to make these expense payments on time, which will put your new rental property investment at risk. As much as possible, try and pay down your short-term debt. The more you do this, the better equipped you will be to make your rental property purchase a success.
    2. Secure Cash Requirements for the rental property purchase. In most cases, this is the down payment required to purchase the property. Additionally, you will need the earnest money deposit along with funds for immediate repairs and improvements to the property that will help in securing rental tenants. Don’t go into a rental property without the funds necessary to complete the purchase and get the property leased.

Step 3 – Find “No-Fail” Properties. Not all rental properties are equal in value and not all such properties make good first purchases. As a new real estate owner, you need to find the best properties that will attract the best tenants who will pay the highest rent. Because this is your first rental property, you need to decide whether you are looking for a single unit or multi-unit purchase. In most cases you will be safer in finding a great single-family home as your first purchase.

Single family homes have the advantage of requiring just one tenant, while multi-unit properties will need to be filled with more tenants. You will want to find a perfect tenant for the purchase and it is easier to find one great tenant than many great tenants. As you experience success with your first purchase, you will soon learn the skills to find more and more great tenants. Keep in mind the fact that when you purchase a single-family property, repairs are less, there is less upkeep and management involvement is much less.

Purchasing Your 1st Rental Property

When searching for the great “No-Fail” properties, it is important to remember that location is extremely important. When future tenants choose between comparable properties, they will compare them the same way you would if you were looking for a new home for your family. Search for properties that meet the following guidelines:

  • Near to Quality Schools. It has been proven that young families use the proximity to good schools as a major factor when choosing a home or rental. The closer you are to great schools, the faster your rental will lease up.
  • Near to Shopping Districts and Malls. If you can find a rental property that is within walking distance to good shopping, it is a plus.  When you separate yourself from the shopping, you are eliminating much of your market audience.
  • Close to Amenities. Your new tenants will want to be close to amenities like movies, entertainment, fitness centers, day-care, and personal services.
  • Near to Job Opportunities. If you can find a property close to major employment opportunities, you will increase your potential list of possible tenants.

Purchasing Your 1st Rental Property

Don’t forget the condition of the property itself. The more desirable the property, the greater chance for finding a great tenant.  Unless you are specifically searching for fixer-up properties, stay away from properties that need major repairs. There is a major difference between choosing a “fixer-upper” and being dumped into one when you weren’t looking for one. Make sure you know what you are getting by getting a competent house inspection.

Finally, look for a home priced below market with minimal repairs. A little bit of paint can go a long way. Curb appeal is important.

The best “No-Fail” property is one that can be purchased below market value. We don’t recommend buying in blighted areas or in economic distressed areas. Rather try to find a property that meets the criteria of a great property that can be purchased at a reasonable price. Your ability to negotiate is important in finding the right “No-Fail” property.

SEE ARTICLE Negotiation Real Estate

Step 4 – Believe the Numbers. If you are purchasing a property that has been used as a rental prior to your purchase, make sure you get access to the true expenses and rental payments on the property. If there have been major repairs made to the property, you need to know what they cost. Numbers don’t lie.

Start by doing an accurate proforma on the property in question.  If you enumerate all the potential expenses before you start calculating the rents, you will be more in line with real world figures.  Make sure you include all the expense items as well as a reasonable reserve for repairs.

Purchasing Your 1st Rental Property

Unless you have a property that is already rented, you will need to use rental income that is accurately based on comparable properties.  Look for other rentals in the area and your projected rental rates will be more accurate.

When completing the property analysis, you should avoid extreme assumptions on both the expenses as well as the income. The more accurate you make your analysis and pro-forma, the more realistic you will be in determining value. In the end, the key is to do the math.

Step 5 – Draft a “No-Fail” Contract. Once you have identified a great rental property, you need to negotiate a contract that will give you the highest probability of making a regular recurring profit and positive cash flow.  What you agree to with the seller of the property must be codified in writing as part of the earnest money agreement and subsequent closing documents.  The exact terms of your “No-Fail” contract will be determined through your negotiation process.  There are, however, some key elements to consider when drafting your agreements.

Purchasing Your 1st Rental Property

  • Determine Who Is Purchasing the Property. It sounds simple to say that the answer is yourself, but, you need to determine how you will take title to the property.  A great many real estate investors have found that they can establish a fence of litigation protection by taking title to the property through a properly organized LLC or Corporation.  If you are unsure of how you are going to take title to the property, a good option is to make the offer “under your name and/or assigns.”  If the seller questions why you put “and/or assigns”, you can honestly answer that you are consulting with your legal counsel on the best way to hold ownership.  One final thought on taking ownership is to allow yourself the option of bringing in a partner if the need arises.  The “and/or assigns” allows you to have this option.
  • Acquire Competent Legal and Brokerage Help. If this is your first rental property purchase, getting proper professional help for the final legal agreements is a priority.  Don’t make the mistake of thinking you know everything.  This contract is the key to setting up your future, so don’t skimp on the expense.
  • Allow Proper Timing for Closing. Once you secure the property through a well-drafted earnest money agreement, you will want to begin the process of finding tenants, preparing for needed repairs, and finishing your due diligence.  Make sure you have left enough time to get this done.  Finally, try and avoid the clause “time is of the essence” unless your legal professional has some sound reasons.  If the seller includes this clause and for some unforeseen reason you are unable to close by that specific date, the seller would be able to sell the property to someone else.  Remember, you are looking for properties priced below market and you don’t want to lose the deal because you are a day late in closing.
  • Include Escape or Exit Strategies. It is doubtful that you have been able to complete a full due diligence on the property when you make the offer, and you want to ensure that you can get out of the deal if the property isn’t what you thought it was.  You also want to make the offer “subject to” your financing unless you have already make financing that won’t fail.  The “subject to” clause can apply to financing, approval of a property inspection or a myriad of other things such as property zoning for rentals.  This is especially true if you are purchasing a property for short-term rentals and you aren’t sure if they are permitted in that area.
  • Include Access to Existing Property Expenses and Rental Documents. If the property has been rented in the past, you want to verify both the rental contracts as well as existing utility expenses, taxes, repairs etc. Even if the property hasn’t been rented before, you will want to review these same items.
  • Include a Survey and Property Inspection in the Agreement. You want to make sure that you are in fact getting everything you think you are getting.  The survey will document the physical aspects of the property and the property inspection will ensure that needed repairs are addressed as part of the purchase.
  • Include a Clause That Allows You to Start Showing Property to Prospective Tenants Prior to Closing. Your goal should be to have tenants in place as soon as you take ownership of the property.  If the property is not presently rented, make sure you can show the property to prospective tenants even though closing hasn’t happened.  Keep in mind the fact that your rental agreement will also be “subject to” closing on the property.

Step 6 – Identify “No-Fail” Tenants. Your future tenants are in fact going to pay off the loan on the property through their rent payments.  This being the case, you want to make sure that you can find the best tenants as possible.  If the property is presently being rented, take the time to interview the existing tenants and to verify their payment history.  If you are going to change the rent amount, you will want to see if the existing tenants will balk at the increase.  During the time you will own the property, you will undoubtedly need to find new renters.  The following tips will help select tenants who will protect the property, keep it in good repair, pay their rent on time, and avoid disputes.

Purchasing Your 1st Rental Property

  • Start with Verified References. Ask prospective tenants for three to five references.  If they have rented previously, ask for the information as to that property.  Then follow up with the references and ask probing questions like:
    • Did the renter pay rent on time?
    • Did the renter do minor repairs and keep the property in good shape?
    • Were there any disputes between the renter and neighbors?
    • Were there any legal problems with the renter.
  • Ask for Social Security Information and Get a Credit Report. Avoid Prospective Renters with Past Delinquency Issues.  This pertains to both past rent problems as well as credit issues.  If the prospective renter has a poor credit rating, chances are that your rent will be late or non-existent.
  • Ask for Employment Information. If the renter has a good job, then your rent will be a lot more regular.  In addition, the renter will not like a bad report to get back to his employer that he is not paying rent on time.
  • Do a Personal Interview. Don’t just accept anyone as a renter.  If possible, you want to make sure that you are getting people of good character.  When you interview them, take the time to find out their interests and hobbies.  Doing so will help you avoid having a renter dismantle a motorcycle on your new carpet, which I can tell you has happened.
  • Offer a Discount for Auto Payment of Rent. This discount will pay for itself each month.  The auto payment from their checking, savings, or credit card should also have a substantial penalty if the payment is not made or refused because of insufficient funds.
  • Require a Reasonable Security Deposit. When taking the deposit, you should specify how the deposit will be refunded and what charges will be taken from the deposit.

Step 7 – Prepare Yourself for Ownership. The purpose of a great “No-Fail” checklist is to ensure that your rental property purchase provides a long-term positive return.  Once you close on the property, your ownership responsibilities will fall into two different categories.

  • Management Responsibilities. As soon as the closing takes place, you will be a landlord and will assume ultimate responsibility of managing the property.  If this is your first rental property, you don’t have to start from scratch.
    • Enroll in rental property associations. These people will have suggestions on management based on personal experience.
    • Read books on rental property management. There are numerous books online and in the bookstore that include sample forms and ideas on keeping the books and being a landlord.
    • Attend seminars and webinars on property management. These forums will provide advice and guidance.  Pay special attention to new ideas on increasing cash flow through management techniques.
    • Become friends with other rental property owners. If you are purchasing a property in an area surrounded by other rental properties, find out who the other owners are and meet with them.  Become friends and accept their help when first starting out.
    • Start looking at professional management. If you have chosen a great “No-Fail” property, you will soon be looking at a second and then a third property.  It won’t take long and you will realize the value that comes with well-chosen professional management.  When the time comes that you are ready for professional management, you will already have someone in mind.
  • Financial Responsibilities. Yes, your tenants will be paying you rent and helping you actually pay down the loan on the property, but you will need to be prepared to pay for repairs etc on the property.  Make sure that you have the financial resources to make these payments.  Financial preparation is the key to finding both short and long-term success in rental properties.

Your success as a real estate investor in rental property can be increased dramatically by avoiding the dangers that come by being unprepared.  This checklist can be your guide to finding “No-Fail” rental properties that create wealth and prosperity.

Purchasing Your 1st Rental Property

Understanding the 5 Risks of Investing in Real Estate And How to Combat Them

Understanding the 5 Risks of Investing in Real Estate And How to Combat Them

In today’s tumultuous times, investing in real estate may very well be your best bet in protecting your future while at the same time creating new streams of income.  On the other hand, real estate investments don’t come without risks and the unforeseen dangers of foreclosure and the loss of capital.  Just as there are potential advantages and benefits associated with real estate, the perils of real estate are also real.  Each real estate strategy has specific risks associated with the investment method.  Every real estate entrepreneur should take the time to evaluate both the real estate itself as well as his or her investment temperament.

There are five major categories of risk associated with most real estate strategies. When you fully comprehend the dangers, you will be prepared to confront these risks and use real estate as a tool to create wealth and establish new streams of income.

Categories of Risk Associated with Real Estate

  1. Risk of Unpredictability. The future is unknown and you can’t determine in absolute terms what will happen to any specific property at a future date. Long-term historical data has shown that real estate has appreciated, but the rate of appreciation has varied and at times has even dramatically dropped in value.  When you purchase a property, you control the asset without any ability to control outside factors which can determine the value of the property.  Even when you purchase the property you may believe that you understand all the information about it, but experience has proven this to not always be the case.  There are unexpected events or undisclosed facts that may appear.  Naturally you try to minimize these factors, but it may not always be possible to do so.
    1. Economic Downturns. Recent history has shown that when the economy stumbles or even collapses, so do real estate values.  Thousands of home owners found themselves owing more money on their homes than they were worth.  When you are upside down like this, the value of your real estate can fall dramatically.  Historically, the values have returned to their previous values and even appreciated, but if you weren’t prepared for this situation, you would have lost money.  These economic downturns can happen on a nationwide basis, but far too often take place on a local or regional basis.  If a major employer closes or moves to another location, there are naturally more properties that come on the market, which in turn can cause values to decrease.  It’s all part of the supply and demand cycles.  When demand exceeds supply values increase, and when the opposite happens, values can also decrease.  Good real estate markets are best characterized for having strong occupancies and regular increasing rents.  When a downturn occurs, occupancy rates fall and rents decrease, which in turn can lower real estate values.
    2. Interest Rate Fluctuations. The majority of real estate today is purchased using other people’s money through loans.  These mortgages are secured by the properties themselves.  These loans are based on interest rates that can change with major impacts on both cash flows and corresponding property values.  When you purchase a property, through a bank or a private lender, it is imperative that you protect yourself from interest rate increases.  Many real estate purchasers were unprepared for large balloon payments or the requirement to refinance the property under the original mortgage.  When this situation occurs and you are unable to meet the terms of the mortgage agreement, you can face the condition where you are forced to sell the property at a reduced price.  Whenever possible, you should lock in long-term stable interest rates on your loans.  Failure to do so is disaster waiting to happen.
    3. Changing Demographics. With urban development comes change and the changing demographics associated with “Baby Boomers” and other age groups, real estate values can change unexpectantly.  The demographics of a certain location may include the need for more rental housing while other demographics may suggest investing in other commercial ventures.
    4. Legal Entanglements. Because you control the asset, the real estate could become at risk through legal disputes that may occur against you.  You can also be subject to risk associated with accidents that may take place on the property itself.  Additionally, there may be zoning or similar issues that could create some form of cloud against your property.  Finally, we seem to live in a litigious society where lawsuits are far too common.  Fortunately, most of these types of issues can be combatted effectively when choosing the right professional and legal help.
  2. Risk of Negative Cash Flow. Negative cash flow can be the demise of the unwise and ill-prepared real estate investor.  When cash out exceeds cash in, you have a situation that may be short-term, but can be the start of long-term financial headaches.  There are many reasons for this condition to occur.
    1. Rental Property Negative Cash Flow. When you purchase rental property and the expenses; such as interest, maintenance, repairs, and management exceed your rental income, you face negative cash flow.  In some cases, this situation is a short-term occurrence, while oftentimes the negative cash flow is ongoing.  When this happens, you may face the problem of finding outside capital to finance the short-fall.  Failure to prepare or to avoid this dangerous situation can ruin you.  It’s critical to complete an accurate property analysis prior to purchase of the real estate.  Once this is done, you need to evaluate your personal financial situation.  Negative cash flow from rental property can be reduced or even avoided completely by using proven real estate strategies developed by professionals.
    2. Land Negative Cash Flow. Many real estate investors purchase land on the expectation of increased appreciation.  This increase may happen through inflation or when urban development encroaches on the property or zoning laws are changed.  Regardless of the reason for the appreciation in value, you may have interest or loan repayment obligations, along with other expenses such as taxes.  In these cases, you can immediately experience negative cash flow without any income to offset the expense.  Holding land for resale can be an effective real estate strategy, but you must be aware of and prepared for the potential negative cash flow.
  3. Risk of Liquidity. Real estate is often categorized as a hard asset, and as such it may be difficult to get needed cash from the property in a short period of time.  Real estate loans and the sale of the property itself can provide the cash liquidity you desire, but there is always time required to complete these transactions.  When purchasing or controlling real estate, make sure you are aware of your personal liquidity requirements as well as that of the property itself.  It is important to prepare for needed cash infusions into the property as well as to insure that you can meet your personal financial obligations.
  4. Risk of Depreciation. This risk has nothing to do with depreciation schedules for taxes and accounting.  Rather we are referring to the situation where the property actually decreases in real value.  Even though this is a less frequent risk in a good economy, it can happen.  Property values can decrease when interest rates are increasing dramatically, when there is damage done to the structures on the property, when zoning laws are adopted that decrease the uses of the property, or when the economy itself suffers.  These risks can be minimized or reduced by wise purchases and through the use of professional help.
  5. Risk of Management Problems. Almost all real estate requires management of some kind.  Rental properties require more management than holding land for resale.  Even if you are just doing a “fix up” on a property there is management involved.  Management of real estate can be done by the investor, property owner, or through professional management concerns.  The potential problems associated with management of rental property generally involve tenant problems and repairs.  As the real estate owner or controlling party, you will need to be prepared to meedd these management problems and expenses.

These risks are real and happen on a frequent basis, but there are proven strategies that can reduce these risks dramatically or even eliminate them altogether.  Here are 5 proven strategies to avoid real estate risk.

Five Strategies to Avoid Real Estate Risk

  1. Complete a Property Analysis. As an investor in real estate you must start by completing a comprehensive and accurate property analysis.  Regardless of the investing strategy you are using, you must start by accumulating accurate complete information about the property itself.  You want to understand the history associated with the property and all expenses, past and present, that can impact the value of the property.  Don’t rely on the previous owner’s representations.  Take the time to consult tax records, property management records, and local zoning and urban information.  Eliminate the unexpected by doing your ground work before purchase.  Numbers don’t lie.  Spend the time doing a complete analysis of the property using the investment strategy you have chosen.  For example, if you are going to do a rehab on the property and then rent it out, you would want to get bids on repair work, consult records on comparable properties, and work with reliable realtors.  Every property analysis must include the bad information along with the good factors.
  2. Control the Money. All real estate investments require capital of some kind.  If you are going to involve financing, make sure you get the best rates and repayment schedule that meets with your personal financial situation.  If you have the capital to invest, make sure you aren’t using funds that have to be replenished in a short period of time.  Your ability to control the money and the financing in a way that meets your investment strategy will determine if you succeed or fail.
  3. Understand your Strategy. It can’t be over emphasized how important knowledge is to real estate success.  There are a great many ways to profit from real estate strategies, and they are all different.  When you decide which strategy you are going to implement, take the time to learn as much about the investment strategy as you do learning about the projected property.  If you believe you lack information or expertise in adopting a specific strategy, find help in learning more about the real estate strategy.
  4. Get Proven Professional Help. The importance of finding professionals who can become part of your real estate team is paramount.  Theodore Roosevelt once said, “Believe you can and you’re half way there.”  The importance of his statement is as true today as it was last century.  You may believe you understand the real estate strategy perfectly and you truly are half way there.  Don’t be fooled into thinking you can go it all alone.  Use professionals to build a team that works together.  Find people who can do the things you can’t.
  5. Protect your Future. It all starts with protecting your real estate.  Use insurance to protect real estate structures and insurance to protect your title to the property itself.  You can also protect your future by insuring that you can meet your liquidity requirements.  Don’t allow lack of capital to spell disaster.

Real estate can provide a second stream of income and help develop wealth.  Yes, the risks are real, but the rewards and benefits are also real.  Your ability to recognize the risks and to take the steps to avoid as many of them as possible will determine your overall success.  It’s your discipline that will provide the key to your real estate future.  Warren Buffett is regarded as one of the world’s best investors, and he summed it up well with his comment, “We don’t have to be smarter than the rest. We have to be more disciplined than the rest.”  Use real estate as the vehicle to your future and success can be right around the corner.

Workshop Update | Week 44

Workshop Update | Week 44

This week, Response delivered 13 Real Estate and Stock workshops. Our overall customer experience score, for all surveys received, was a 5 out of 5. We saw over 759 students. Here is what some students shared about their experience:

“Awesome presentation and the staff was exceptional. Great job!” —Mitchell V.

“Great information. Very educational to open up your mind to all the different aspects of real estate.” —Csantecia W.

“It was the best money I’ve ever spent. The knowledge was invaluable!”—Louise L.

Do you have what it takes? Advice from a Customer…

Work hard, see the results.

We’ve met a lot of great people over the years – thousands from all over the world – people who genuinely want to change their lives. Their stories are inspiring. As a company, we get together regularly to listen to customer stories – stories about their lives and the things that matter most. All have had to overcome obstacles in their lives. As much as we’d like to say these are just ordinary people, like you and me, we can’t. They aren’t ordinary people. The reality is most people aren’t willing to do what it takes in order to get what they really want. Srinivas Rao, author and host of Unmistakable Creative, put it this way: “If you want to live an exceptional and extraordinary life, you have to give up many of the things that are a part of a normal one.” We found an unsolicited customer review online this morning and felt they shared an interesting perspective of their experience with us.

They offer a good reminder to all of us: be committed and make the most of what you have.

 

If you’re not committed to real estate investing, then the money you spend on tuition packages will never be recouped. Response, for me, has been part glitzy, get-you-excited-about-more-money, prey-on-the-unsuspecting roadshow and ALSO…and more importantly, thoughtful, intelligent, caring instructors who have real value to impart to willing learners.

Our first presenter, Bonita, had a wealth of knowledge to share, which opened our eyes initially to the opportunities in real estate investing. She had some personal hardships that she shared, including the tragic loss of her husband…leaving her with 3 kids to raise on her own. Real Estate investing not only helped her financially with that situation but allowed her to also be able to help others outside her family who were in need.

Our trip to Utah to attend the Expo was full of many more presentations. Again, a helpful overview of many different opportunities in the field. Several talented presenters and an abundance of information. At the expo, there was one company, Veil, which sold their services to the attendees. Otherwise, there was no other real onslaught of selling at the expo.

Our Boots on the Ground session was taught by Joe. He was familiar with the Hawaii market where we live, although he resides in Florida. He was friendly, humorous and lighthearted. He also had a vast knowledge of real estate investing experience to impart.

Our purchase also included a 2-day one-on-one on-site visit and we requested that Joe come back. He was very personable and helpful. He was a great listener and helped us where we were at.

The advisory line is really good. Real people with investing experience that provide one-on-one phone consultation whenever you need it.

Don’t think that because the initial presentation may be free, that subsequent education is free as well. Often, the initial presentations are to open your eyes to the opportunities of real estate investing and to explain (sell) the more advanced training. While not going to post the price for packages, let me just say, it wasn’t cheap… and probably almost twice the price I would have thought they would have charged. Of course, the idea is that you will learn how to make money that you can use to pay off the tuition fee plus more. Also, that your accountant can help you to possibly write off the tuition expenses.

When you are on the side of not having done it yet…you don’t know and you kinda wonder if YOU will ever be able to make money in real estate…and if the load of tuition money spent will have been worth it. And this is an honest question that you should ask yourself. How committed are you to giving it a try? How open are you to learning a whole new vocabulary and to feel out of place and unknowledgeable for a while? Yes, you can spend a lot of money and you can criticize the program and say that they are not teaching anything that you can’t find online. OR, you can be positive and have an open mind. You can appreciate the live, educational setting and the real-life instructors who are wanting to see and assist you with your success. To sum it up…yes there were moments when “Response’s” smooth-talking, convince-you-out-of-your-hard-earned-cash vibe came across loud and clear, but also there was a real sense of caring and humanness too. Is the info original and earth-shattering? I don’t do a lot of extra online research…so I don’t know what else may be out there. But don’t you get that something extra when a real person teaches you something in real time, rather than YouTube? Did I have any buyer’s remorse? Some, but it’s a remorse that will only be predicated on the event that we fail at real estate investing… and the ball is in our court and not theirs.

 If we had spent less money, we would have more easily let this whole real estate investing thing fizzle out. With the amount of financial pain that it inflicted on us, we are committed now to making this thing work…if only to recoup our tuition money…but also to learn by doing something that we wouldn’t have otherwise done before Response. My advice to you if you are considering a Response workshop or package is to ask yourself if you are really committed to real estate investing, committed to learning many new things, and to try to make the most of it. Write down your questions and ask them. Make those presenters work for what they are being paid. Make relevant suggestions. Be civil and courteous. Pray about it. Be on the same page as your partner or spouse. Trust that while there will be mistakes, difficulties and uncertainties, there is also a way through. 

 

We’ve never promised anyone guaranteed results or that results would be easy to achieve. We reap what we sow. If you want what you don’t currently have, you’re going to need to give up those limiting beliefs holding you back. Be willing to do what everyone else isn’t.

5 Reasons Why Seeking Professional Help May Be the Key To Success in Real Estate

5 Reasons Why Seeking Professional Help May Be the Key To Success in Real Estate

As an eleven-year-old boy, I was acutely aware of the danger of being lost or stranded without help. My parents had taken the entire family to the Carlsbad Caverns National Park in New Mexico.  At that time there were no paved walkways in the caverns themselves and the lights were weak and far apart.  Our group of several hundred participants dropped into the cave immediately after several thousand bats flew out of the large opening.  The sights were amazing and our tour guide explained how the caves were discovered.  It wasn’t long before I left the group and started doing a little exploring on my own.  A short time later I was alone and scared.  Fortunately, a Park Ranger found me and guided me back to a common meeting place.  As we journeyed back to the elevators that would take us to the surface, the Ranger showed me where earlier explorers had perished while charting and mapping the caves.  After some three hours, I was reunited with my family.  I realized that if it weren’t for finding the professional help I could have experienced a very different outcome.

What does all this have to do with real estate investing?  The answer is simple.  Now, many years later, I can positively state that without experienced and qualified help, the real estate investor of today could be just as lost as I was at eleven years of age, and experience a very different and possibly much more dangerous outcome than anticipated.  In that light, let’s discuss five simple reasons why seeking professional help when starting in real estate may be the key to your future success.  There’s no reason to experience a dramatic and dangerous outcome when professional help and education is so available.

  1. Professional Help Can Overcome Personal Fear. It’s absolutely certain that almost all real estate investors experience fear of some degree or another.  Perhaps it’s the fear of losing money.  Maybe it’s the fear of interacting with people on a one-to-one basis, or it’s just the fear of acting without enough knowledge.  There are numerous different reasons why fear is such a burden for real estate investors, but regardless of the exact fear, professional help can help alleviate the pressure

Real estate professionals carry with them years of experience in confronting problems of many kinds. When you engage a qualified professional, they have the ability to share both potential problems as well as possible situation.  Take the time to access their knowledge and apply their advice to your personal solution.  When you do so, you will find that your fears diminish and sometimes vanish altogether.

  1. Professional Help Will Teach You the Do’s and Don’ts. It goes without saying that the professional’s primary job is to provide education that will guide you towards personal real estate success.  But there’s much more.  A good professional will be a complete guide that will escort you on the journey from start to finish.  During this time, you will learn new and different investment techniques.  Each of these strategies may have certain things you should do, and other things you definitely shouldn’t do.  We call them the “Do’s and Don’ts of Real Estate Investing.”  It is imperative that you learn and incorporate this information so that you don’t fall off the path leading you to your future success.

If you rely purely on your own experiences to develop your overall real estate strategies, you will be short-changing yourself.  Use the professional and learn from both the successes and failures of others, rather than falling off some unforeseen investment cliff.  A wisely chosen real estate professional can be the National Park Ranger that helps you complete your overall real estate investment journey without falling into some deep and dangerous cavern.

  1. Professional Help Can Be a Guide to Different Real Estate Strategies. There are multiple investment strategies that have been proven successful for real estate entrepreneurs across the globe, but there are never certain guarantees.  It’s a given that you must put forth effort and even invest financial resources.  A well-chosen professional can help you direct your efforts more wisely, as well as provide credible information that will assist you in deciding how to allocate your financial assets.

With such a wide variety of possible real estate strategies available today, it is critical that you get credible help in developing your own potential real estate strategy.  You may initially have an interest in simple renting and landlord strategies, but a wise professional can help you use your existing talents and resources in examining other new and profitable alternatives.

  1. Professional Help Provides Strength in Numbers. All real estate investors learn quickly that numbers don’t lie.  You can’t expect to have success in your real estate journey if you don’t collect accurate and true information.  A good real estate professional should provide the ability to gather and evaluate any numbers dealing with your specific real estate strategy.  When you have help in evaluating and analyzing the true numbers concerning your investment you won’t inadvertently slip off the cliff and experience a fall in value.

Another way that the professional provides strength in numbers is by ensuring that you are no longer all alone.  The real estate investor that relies wholly on himself or herself in evaluating a property or strategy is walking in the caverns without a Ranger to guide him.  There is a tremendous advantage in having someone to talk to and discuss possible investment options.  Allow your real estate professional to provide this strength.

  1. Professional Help Stops Real Estate Investor Paralysis. Paralysis in real estate investing can best be described as the state where you fail to take action.  As you gain knowledge and learn what to do, the one thing stopping you will almost always be the simple act of taking action.  The true real estate professional will help you avoid this state of paralysis.

When you have someone, who can listen to your ideas and provide feedback, you will be more inclined to move from the “knowledge” state to the “action” state.  This one quality of actually taking action will do more for your total success than anything else.  And a good professional will inspire you to move forward and actually do something.  Great ideas are nothing without actually acting upon them.

Seeking help from real estate professionals may improve your actual performance as well as add discipline to your real estate journey.  True professionals don’t magically appear out of nowhere.  You may have to spend time viewing web blogs, searching online, and attending seminars or training events, but the effort you put forth in identifying true real estate professionals is worth the effort.

When selecting someone to guide you on your real estate journey, make sure that the individual, company, or legal entity has the proven experience to help you form accurate decisions.  Never trust someone as a professional unless they can provide you with verifiable information as to their expertise or real estate success.  Take the time to investigate the prior success of the professional and don’t expect the true professional to work for free.  Even though there is generally a cost involved in securing professional help, you may find that the cost of seeking help is beneficial in gaining education and avoiding potential pitfalls down the road.

How To Calculate Fixed-Rate Mortgage Payments

How to Calculate Fixed-Rate Mortgage Payments

When financing a property a common question that investors have is: how to calculate fixed-rate mortgage payments? It is important for any buyer to fully understand how various rates in the agreement are computed. This allows him or her to recognize the right payment plan that fits his or her financial situation and to make better financial decisions. To calculate a mortgage payment, you’ll need to know the following:

Principal amount, interest rate, loan term, market value, mortgage insurance, property taxes, your monthly income, and other relevant fees.

Principal, or loan amount, is the home’s purchase price less your down payment.

Interest rate, usually charged as an annual percentage, is what the creditor charges you for the loan.

Loan Term is the number of years you’ll agree to pay the loan in full.

Property Taxes should also be put into consideration to avoid any issues with the government and unnecessary fees.

Monthly Income is important as mortgage payments will affect your after-expense, after-tax take home net income.

Other Fees may include additional taxes or business liability fees if you’re operating as an LLC or otherwise.

While you can always use an online mortgage calculator or check the Web for available mortgage payment tables covering different interest rates and loan terms, it is also important that you know how to do this manually, especially if you’re in the real estate business. Fixed-rate mortgages have the same payment and interest rate for the life of the loan, regardless of any affecting economic factors. Thus, you will only be needing a few numbers to compute your monthly payment.

To calculate, use this formula: P = L[c (1 + c)n] / [(1+c)n – 1].

Looks confusing? Not so much.

P = Monthly Payment

C = Monthly Interest Rate, which can be computed by dividing your annual interest rate by 12 monthly payments.

N = the total number of months in the term.

L = is the total amount you borrowed from the lender, or the home value.

Knowing this equation and understanding the intuition behind the math will help you better budget and calculate fixed-rate mortgage payments.

 

Getting Started in Real Estate Investing: Part 2

 

Getting Started in Real Estate, Steps 4-5:

Step 4: Move Forward on Your Selected Approach to the Market.

Here are some recommendations on how to move forward with the following approaches:

  • If you intend to “Buy, Fix and Sell,” finding and screening a good contractor is critical to your success. Even if you already have a background in this, it is still part of your due diligence. Attending real estate investment clubs and seeking referrals from other investors can provide some of the best sources for this search.
  • If you are going to “Buy & Hold” a rental property, then working with a good and well-respected property management company will be key. They will also be a great resource for managing your rental rates, as well the market.
  • Wholesaling – Here are three ways investors conduct wholesale deals:
    • Bird Dog — This consists of finding a property that meets or exceeds another investor’s expectations and criteria, then getting them to sign a bird dog consulting agreement with a pre-discussed finder’s fee that they have agreed to pay after an offer is made and closed on.
    • Assignment of Contract —This is when you find a property that fits your cash-buying partner’s criteria and put in a written offer on the property. When the seller accepts your offer, you then sell the interest in the property and/or the contract to your cash buyer for an assignment fee.
    • Double Close or Back-to-Back Close — This is the last of the wholesaling techniques. This is when you find a property that fits your cash buyer’s criteria and put an offer on the property between you and the seller with a second contract between you and the end buyer. Both closings will be scheduled to take place within a few hours of each other or within a couple of days. Your profit is received after the second closing.

Step 5: Find the Active Cash-Buying Investors in Your Market.

If you are going to be wholesaling, then this is one of the most imperative steps for you to take. Look for those who have closed on more than two deals in the last year. You might want to consider the following types of cash-buying investors: LLC companies, holding corporations, and/or trusts. You will often find these are the investors that do multiple deals a year.

Well, that’s it for getting started. Happy hunting!

How Leveraging Your Real Estate Investments Increases Your Return on Investment

How Leveraging Your Real Estate Investments Increases Your Return on Investment

Leveraging your real estate investment means using financing to increase your return on investment.  So how does this work?  Let’s look at two scenarios to illustrate how this is possible.

Scenario 1:

An investor purchases a rental property for $90,000 cash and puts $10,000 into improvements for a total investment of $100,000.

He or she then finds a renter and leases the property for $1,300 a month or $15,600 annually.

He or she has expenses of 35% for taxes, insurance, management fees, maintenance and a vacancy factor, equaling $5,460 annually and creating a net operating income of $10,140.

Since the investor’s Net Income is $10,140 and his total investment is $100,000, his return on investment equals 10.1%.

  • $15,600           Gross Annual Rent
  • –  $5,460           Annual Expense
  • = $10,140           Annual Net Operating Income
  • Divided by   $100,000           Total Investment
  • ROI           10.1%           Annual Return on Investment

Scenario 2:

If this same investor finances the purchase of this property by securing a loan for 80% of the purchase price at 4.5% annual interest, amortized over 30 years, his or her mortgage payments will be $365/month.

He or she will put $18,000 down and $10,000 into rehab for a total investment of $28,000.

The investor’s annual mortgage payments will be $4,380, decreasing his or her net annual income to $5,760; creating an annual return on investment of 20.5%.

  • $15,600        Gross Annual Rent
  • –  $5,460         Annual Expense
  • = $10,140        Annual Net Operating Income
  • –    $4,380         Annual Mortgage Expense
  • =   $5,760         Annual Net Income after Mortgage
  • Divided by     $28,000           Total Investment
  • ROI            20.5%             Annual Return on Investment

You can see from this example that an investor can increase his ROI from 10.1% to 20.5% by leveraging; thus doubling his or her income from the same monetary investment.

How to Start Making Money in Real Estate

How to Start Making Money in Real Estate

Let’s talk for a minute on how to make money in real estate. I am sure you have heard it a million times now: “There is money in real estate” or “Anyone who is sitting pretty has invested in real estate.” While both of these statements can be true, let me share with you the reason why. Real estate is a very lucrative business to be in. The most important note on that topic would be diversification. Without diversification, all of your eggs are in one basket and that isn’t a very promising business plan. Instead, you need to have multiple streams of income.

Cash Flow

You need to have passive income creating assets. For this, I always go by the 1% rule. The 1% rule says that you need to collect at least 1% of your all-in price (including closing and repair costs) in rent. Really, what it comes down to is how much is your money worth to you and what do you need to get back to make it worth your time.

Paying Down Principal

While your tenants may be giving you cash flow, you can also profit by paying down your mortgage. This will give you more equity in your property.

Market Appreciation

The market has a tendency to double every twenty years. It often goes up and down in the short period of time; however, overall it is always rising. This could be a great investment if you have the patience or you could pair it with another strategy, like cash flow, for instance.

Equity Capture

Often times this is seen in a fix and flip situation. If you were to buy a fixer-upper at a discounted price and then fix it up and sell it, your profit would be considered equity that you were able to capture.

Just imagine if you paired all four of these strategies into the same deal. Your profit margins could increase with time.

 

Cash Buyer Leads, How To Find and Generate Leads

Cash Buyer Leads, How To Find and Generate Leads

In the real estate market, cash buyers are considered important because they provide liquidity to the industry. Cash buyers, from the term itself, are people or groups who opt to make real estate deals with cold, hard cash. They can be an investment group, corporations or individuals. Cash buyers may be heirs of estate properties who can easily give out cash as payment for the deal, business owners who are able to pay a big amount of money, or seniors who have saved enough equity from their younger years and are now enjoying their pension benefits. In other words, cash buyers are individuals who are truly able to pay cash for real estate. They attract investors or sellers because of this. They can make deals easy with their cash offers. And, they can become long-term investors once they develop trust and faith in real estate.

Leads, on the other hand, are simply future potential clients. When you have an individual’s name and contact number, or other contact details, then you’ve got yourself a lead. It does not necessarily mean that this person is interested in real estate. It just means that he or she is a potential client because you have his or her contact information, and you can try your luck at introducing yourself, presenting the properties you might sell and getting yourself a deal.

Cash buyer leads, therefore, are just names of potential clients. Now, the question is, how do you identify a cash buyer lead from other types of leads? This is when a basic knowledge of real estate comes in. You need to understand the different between these types of leads to make things easier for you. And, where can you find cash buyer leads, you ask? Everywhere. Like other real estate leads, cash buyer leads can be found anywhere.

To find them you need good and effective marketing. There are a lot of ways to market your business. You may choose to run ads in the newspapers, on bulletin boards, and on the radio. You may also post ads on websites like Zillow, Craigslist, or your own website. If you don’t and can’t have your own personal website at the moment, but still want your ads or posts to be more personal, you can always turn to social media. Market yourself and your business through Facebook, Instagram, Twitter, LinkedIn — the list goes on. There are a lot of options to choose from on the Web.

Furthermore, an even more personal approach is an outreach. It’s more personal because you get to contact people, maybe through email, snail mail, or mobile messages and calls. Outreach is simply reaching out to a list of people with working and valid contact details and offering them your business deal right away, or simply inviting them over for coffee so you can discuss more. Even the open world can be a good source of leads, if you know where to look. One of the oldest yet most effective methods is word-of-mouth. Be free to roam around, knock on houses, talk to people, and the like. It’s a process that requires quite an amount of time and effort, but it still works.

Building Your Credibility as a Wholesaler

Building Your Credibility as a Wholesaler

So, you’re new to investing and you’re focusing your strategy on wholesaling. That’s a great place to start. I know you are all thinking, “How are these investors are going to take me seriously? I have no idea what I am talking about!” And your right, so before you go rushing out to build relationships with investors, do a little research. Let’s talk about some ways you can build your knowledge and credibility.

  • Learn the Lingo: Start by learning the language of real estate. Search out real estate terms online and make some flashcards or something to help you remember the concepts. Learn about the different investment strategies in real estate as well. Once again, just Google it.
  • Script it Out: There are hundreds of scripts you can hunt down on the Internet. Find some of them and make them your own by putting your words and personality into them. Next, practice your scripts with someone. Work out your nerves. You don’t have to be an expert, but be confident on how you present yourself.
  • Don’t Lie: Never make yourself out to be something you’re not. If you are new, let them know, but be confident on how you present yourself. People will want to work with you because of your personality. Never get caught in a lie with investors because if they don’t trust you, they won’t want to work with you.
  • Study Your Market: Get smart about your market by seeking out investment clubs in the area and attend their meetings. This way you will be around people who love real estate as much as you, and you can gain a lot of knowledge from these types of clubs. Next, search out your market statistics online. I suggest bestplaces.net because they have a ton of information for you and make it easy to understand. Also, talk to realtors who work with investors and get their opinion about the market.

These are just a few things I recommend doing to increase your understanding of real estate. Building your confidence using these methods will also build your credibility among your investors. Take your time to learn. Don’t rush out there and make yourself seem uneducated. Real estate is going to be around for a long time, so get yourself setup correctly.

Gypsy Real Estate Investing

Gypsy Real Estate Investing

Gypsy real estate investing is a great way to build a strong rental portfolio. My wife and I started our real estate investing this way by accident. We had a house built and had lived in it for a few years when we decided to move. I had just finished real estate school and received my realtor’s license. While attending real estate school, I met a mortgage broker who introduced me to real estate investing. I decided to research lease options and liked what I found, so I decided to give it a try. We decided to move and do a lease option on our house instead of selling it. After we moved, we acquired a couple of other properties that we lease optioned also. During this time, we kept looking for another great deal on a house for us to live in. When we found one we wanted to buy, we moved and lease optioned the one we had been living in instead of selling it.

The strategy is to find a great deal on a house to live in that gives you a better interest rate and smaller down payment. Live in the house long enough to find another great deal on a new house that you can move into, and then rent out the house you move out of. You can buy ready-to-move-in properties, or you can buy properties that need a little work. You can then work on fixing the house up while you are looking for another great deal.

One thing with this strategy that helped us be successful is to not be in a hurry to find the next deal. We were able to acquire other properties using creative terms in between each move, which helped.

Of all the properties that we have owned and rented out, or lease optioned, the ones we lived in before renting them out have brought us by far the largest returns. Obviously, you have to be okay with moving that often. But if you have a long-term plan, you can create a very profitable passive income using the gypsy method.

5 Ways to Stay Motivated When Starting a Business

5 Ways to Stay Motivated When Starting a Business

Starting a business is very challenging for most people. Not having a plan and clear goals are two of the most common reasons why people fail at getting their business off the ground. Many people love the thought of being their own boss. The freedom of running your own business sounds exciting; however, it takes motivation, discipline and following through to be successful. Here are a few ways to stay motivated while starting your next business venture:

 

  1. Find Your “Why”: Write down why you want to start a business.  This is a reminder of what your true reason and motivation are for making a change. Your “why” keeps you moving forward when things get tough or you’re having a bad day.

 

  1. Set Specific “Goals”: Write down at least 3 – 5 short-term goals with specific deadlines for reaching them. Have 2 long-term goals to reach for. Break your goals down into weekly tasks. Track your progress. Each step forward increases your interest and your confidence.

 

  1. Connect with a “Mentor”: We all look up to and admire someone who has had success. Reach out to that person for advice and counsel. Learn from their successes and failures.

 

  1. Say “No” to Negativity: When external events prevent you from reaching a goal, try not to fall into a negative mindset that will cause you to lose motivation. Surround yourself with positive influences, friends, and colleagues who are supportive through the good times and the tough times.

 

  1. Start a “Routine”: Start every day with a routine. This will help your mind and body be alert, focused and prepared to create new habits. Spend time reviewing your plan and make a list of what you need to do that day or week.

 

Too many people wait to feel motivated before they do anything. The truth is, happy productive people do not wait to “feel” motivated, they just get to work. “To be successful, you have to have your heart in your business and your business in your heart” – Thomas Watson

What’s the Difference between Residential and Commercial Real Estate?

What’s the Difference between Residential and Commercial Real Estate?

Real estate is simply a property of land, a building, or land and the building on it, including the other resources in it. It has four major types. The two most common types are residential and commercial real estate.

Residential real estate is a property type that includes newly-constructed and renovated homes. These are properties that are either built or rented for residential purposes. This may differ in types in accordance with the neighborhood they belong to and the entity owning the property. Apartments and condominiums are considered residential real estate. They are both individual units in a certain building. The difference between them is that a condominium has facilities that are co-shared with other condo-unit owners, like pools, fitness centers, concierges, and more. Single-family and multi-family houses also belong in this list. Mobile homes, as well, are considered residential real estate even if they are movable on wheels. These, and a lot more, are residential real estate properties because they are acquired for non-business purposes.

On the other hand, commercial real estate (also known as investment or income properties) refers to properties intended to produce a profit. These may be structures or land properties that are either bought or rented for that said purpose. These include office buildings, industrial structures (more known as commercial buildings), warehouses, healthcare units, and a bunch more. Any type of structure that generates income is commercial real estate, even restaurants, hotels, resorts and malls. Even multi-family residences (apartments) can be considered commercial because of their profit-generating status. They do differ in various places and tax obligations.

Commercial properties are known to be more pricey compared to residential properties. Not always but most of the time, they are more expensive because they generate income. And, anything that produces a profit is eyed by a lot of possible buyers or renters. The higher the demand, the more reasons to increase in value.

Having Confidence in Real Estate

Having Confidence in Real Estate

Investing in real estate is a risk. Like many other businesses, you cannot fully guarantee that you’ll get your money back as soon as you want. And, over the years, stories of recession and succeeding foreclosures affect the market. Stories of investors pulling out their shares from investment groups exist in the industry. When you invest in real estate, you invest a big portion of your assets into something uncertain. Thus, a lot of people hold back from investing in real estate.

Through the years, the industry has gone through a lot of forwards and backwards. Similar to other business industries, this is normal and painful, but true. There are some situations you can’t control. And, as a real estate investor, or any business owner for that matter, you need to learn to flow with the changes in the market. Or, better yet, navigate the changes and save your investments. Build confidence in your investments. Yes, it’s difficult to entrust your assets in properties and people. It’s hard to know if you’re making the right decision for your possessions and if you’re investing the right way. That’s why you need to be a well-informed investor. Be knowledgeable about the basics of real estate investing. Always allot time in studying your target market. Understand the difference in each market area and thoroughly review their economic and demographic status. Be very careful and meticulous in determining your goals for investing and the things you’ll have to do to attain those goals. Remember, you can never go wrong with the right amount of know-how.

If necessary, get yourself a mentor. It can be a consultant who’s already an experienced investor. Experienced investors have already been through a lot in the industry and already know how to play and, of course, win the game. Or, you might also want to join investment groups. Especially if you’re a beginner, groups like these can help you become the confident investor you’ve always wanted to be.

How Do You Successfully Negotiate a Real Estate Transaction?

How Do You Successfully Negotiate a Real Estate Transaction?

Closing a deal as a real estate investor requires much more than being a smooth-talking salesperson. Being successful at negotiating a real estate transaction is a matter of doing your homework. Every real estate investor should complete this checklist before bringing a deal to the table. Discover below what you need to do to negotiate a real estate transaction successfully.

Real Estate Investing Negotiation Checklist

Homeowners usually think they know what their home is worth. The problem is this number can be based on anything from sentimental value to market stats from the first real estate bubble. To leave the negation table with a price that the seller agrees to and is a positive cash flow producing investment, be sure to complete this checklist.

Recently Sold Data: Bring a detailed list of recently sold comparable properties in the neighborhood of your prospective investment. Instead of just rattling off facts and figures, consider printing out full detail sheets for the homeowner to review. The more local the comps, the better!

Estimated Repairs: While you might not have time for a full inspection, create a go-to list of estimates for common problems. Most homes purchased by investors have deferred maintenance. The homeowner will have lived with the issues for so long they won’t see them anymore. Respectfully addressing issues and needed repairs will help support your offer.

Closing Date: Investors have the benefit of a flexible closing date. Ask what the homeowner needs and adjust your date to meet their request.

Property Status: Do your research and find out why the homeowner is selling. Is there a lien placed on the property, are they in the beginning stages of foreclosure or is it a down market and they want to make a quick sale? By understanding what the seller hopes to gain from the sale of their home you can better adjust your terms.

If you do your homework before you attempt to make a deal with a prospective home seller, you can successfully negotiate your real estate transaction, no matter the market. Selling a home can be an emotional decision for many homeowners. By presenting the logic behind your price in a detailed manner, you can avoid alienating the potential seller. Take “salesmanship” out of the equation and use a business-minded approach to each real estate investment you negotiate.

Creating a System to Get More Offers Accepted

Creating a System to Get More Offers Accepted

You can benefit from having a system for each of the outcomes that happen when making an offer. Instead of getting the traditional one out of every 25 offers accepted, you could improve that statistic dramatically. Top investors get one out of 6 offers accepted, and some do even better. It is all about taking control. That control starts with understanding what can happen when you make an offer, and it improves dramatically when you develop a standard way of dealing with each possible outcome.

There are five things that can happen when you make an offer. Let’s look at them:

  1. Your offer is accepted.
  2. Your offer is countered.
  3. Your offer is rejected.
  4. Your offer is neglected.
  5. Your offer is not presented in writing or not presented at all by the agent.

You will increase your percentage of closing by having a system for each of these outcomes, as outlined below. Further, practice will also teach you how to increase margins.

Your offer is accepted: Once you have a written acceptance of your offer you should send an email with pictures and a deal analysis to everyone on your buyers list. Then you should follow up with a phone call. If you must leave a message, send a text also. It is amazing how many people will respond to a text that won’t respond to anything else. If this gets your deal sold, great! If your deal is not accepted here, you will want to go to some investment club meetings and drop by some buyers who have money. Never accept mystifying answers from anyone. When they say “no,” find out why. “Too much money for this property? How much is not too much?”

Your offer is countered: You gain control here by using the short time you have wisely. Regardless of what happens, you can resubmit your “same” offer every two weeks. As high as 75% of deals that are completed are on offers that were not originally accepted. If their counter offer is way off from yours, stay firm on your original offer by either countering with the same or something very similar. Resubmit again in two weeks. If they tell you the property is under contract, do everything in your power to be allowed to make a “back up offer.” About 60% of accepted offers by investors don’t close. Stay with it. You may still win.

Your offer is rejected: You already have some level of control here because your seller is communicating. Develop a system to resubmit your offer every two weeks. Set a timeline for trying to get an audience with the seller and/or his agent to go over the reality of the situation in a nice but firm way.

Your offer is neglected: You gain control here by having a system for what you do. Top investors automatically resubmit their offers every two weeks or so just the way they wrote them.

Your offer is not presented in writing or not presented at all by your agent: Ouch! Here you can gain a lot of control by creating an offer template with your agent that gives you what you want, such as the right to assign the offer and a 15-day due diligence inspection clause. Have everything pre-signed and initialed so that your agent only has 4 variables to fill in. Those variables are the date, the seller, the property address, and your offer amount. Since this makes it easier to submit your offers in writing, you will virtually eliminate “phantom offers.”

SUMMARY: Since there are only 5 things that can happen when you make an offer, it’s easy to create an automatic method or system for dealing with each possibility. By doing this, you can improve both the number of offers you get accepted and the profit you make on each one.

New Construction Must Knows

New Construction Must Knows

Have you ever dreamed of building your own home? Today’s market has allowed many to make that dream possible. That means your dream could become a reality sooner than you imagined. New construction is much more accessible when remembering the following three things.

It’s actually quite simple. First is that new construction homes may not be listed on the MLS. Most builders employ their own sales reps that stay on site. This means that the best way to find new construction might be to actually take a drive out to where you are looking to build and see if there are any billboards or signs advertising new subdivisions in the area.

Second, new homes are often sold before they are built. This allows future homeowners to customize the home to their liking. Builders will usually build a couple of model homes that they will stage to help the retail buyer get a general feel for what the home will be like once finished. This helps homeowners feel more secure and visualize the end product.

Lastly, first buyers have a better chance at getting a discount. When a project kicks off, builders want the homes in the area they are building to look extremely desirable. If the builder can say they have 10 homes under contract in a couple of months, that can help motivate future buyers because it looks like a high demand area. Usually builders will build in phases as well. This allows them to get a feel for the market and raise prices as the area appreciates. Discounts can be in the form of upgrades. Most builders will prefer to give an upgrade over a discount on the purchase price so the property or sale values in the area are not affected.

To close, remember that builders don’t have any emotions attached to their properties. They didn’t raise kids there and they don’t have memories fogging what they think the homes are worth. They are simply worried about spreadsheets and if the project will succeed. New construction is a great opportunity in today’s market. Let’s start making your realty dreams a reality.

Building Your Buyers List – Part 2

Building Your Buyers List – Part 2

Step no. 1 Identify the market that you wish to start investing in. This is critical as this will be the market you will start looking for cash buyers in. A real estate market can be defined in a number of ways, such as:

  • City Limits
  • County Limits
  • Zip Codes – this is the most common
  • District – in the larger and more populated cities

Step no. 2 Find realtors to help with your market research and analysis to determine the following:

Step no. 3 Find cash buyers. Here is a list of both online and physical resources you can use:

  • Local real estate agents, such as Keller Williams, RE/MAX, Coldwell Banker and Berkshire Hathaway.
  • Title companies, such as Chicago Title and Old Republic Title.
  • craigslist.com
  • biggerpockets.com
  • Various paid websites that offer real estate software products that allow you to search county records and the Multiple Listing Service for recent purchases of real estate that were done with cash.
  • County records. This can be done online or in person.
  • Real Estate Investor Clubs. Make sure to search online for the local REI club in your area and attend the next meeting so you can speak with cash buyers there.
  • For finding contact information, search the following websites:

Step no. 4 – The Qualifying of Cash Buyers – here is a suggested list, both scripts and questions:

RECEIVING INBOUND CALLS FROM INVESTORS

“Thanks for calling. I apologize, but I put the ad out a little premature. I haven’t got the contract accepted yet, but if this is what you are interested in I’ll call you back once I lock it up. Before I let you go, I assume you’re an investor, correct? What kind of deals are you looking for?”

MAKING OUTBOUND CALLS TO INVESTORS

“Hi, my name is [name]. I found your information online and it says you’re buying houses. I’m a real estate investor too, and I wanted to see if you have anything for sale. I can sometimes get great deals through other investors. Do you have anything available?”

QUALIFYING CASH INVESTOR QUESTIONNAIRE

Where are you investing? (City, County, Zip Codes, etc…)

What type of properties are you buying?

What property characteristics do you look for? (Beds, baths, sq ft, etc…)

What types of repairs do you typically do on your properties?

What is your maximum purchase price?

How much profit do you need?

How many deals can you handle per month?

Three Ways Real Estate Can Generate Wealth

Three Ways Real Estate Can Generate Wealth

Real Estate investors can generate millions of dollars through their real estate investments, but how exactly does it all work? Learn more about how real estate can transform into wealth.

For many, real estate is simply buying a home to live in. Real estate investors use properties to generate wealth in a variety of ways. Real estate can generate wealth for investors in the following three ways: appreciation, cash flow, and equity. Though there are many investment styles to choose from, real estate investors use a combination of these three ways to generate wealth from their real estate investments.

Appreciation

Over time real estate increases in value. This process is called appreciation. Though there have been some notable exceptions to this rule (2007/2008), real estate increases in value year over year. For example, home values in the US have gone up 6.7% according to Zillow.com[1]. They expect them to rise another 3.2% in the next year. So, if you bought a home for $200,000 a year ago, it could now be worth $213,400. Appreciation generated over $10,000 of wealth, in just a year.

Cash Flow

Cash flow is the term investors use to describe the amount of profit a rental property generates after revenue from rent and any expenses are accounted for. It’s most often expressed by this simple equation:

Rent – (Expenses + Mortgage Payment) = Monthly Cash Flow

Before purchasing a property, investors ensure that the final “Monthly Cash Flow” number is positive. For many buy and hold investments, this number can be modest; however, when you consider that investors generally have a portfolio of units, it adds up quickly.

Equity

Many investors take advantage of conventional financing to secure rental properties. For example, the $200,000 home they purchase, they put $40,000 down, and then take out a 30-year mortgage on the remaining $160,000. The rent the tenant pays goes towards that monthly mortgage payment. So the investor leveraged $40,000 to eventually build $200,000 of equity. Creating equity in a property is one of the ways investors generate wealth.

Generating Wealth Through Real Estate Investing

There is no simple formula for generating wealth through real estate investing; however, all investors use some combination of appreciation, cash flow and equity to create their personal wealth. Investment style, personal goals and market conditions affect what portion of the investor’s wealth comes from each element, but all work together to achieve the investor’s financial goals.

 

[1] https://www.zillow.com/home-values/

Building Your Cash Buyers List – Part 1

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.

Zoning in on Zoning

Zoning in on Zoning

Knowing what you can and can’t do with a piece of property is crucial; it can make or break many deals. I highly suggest you determine this before getting started in any real estate transaction. This can save you a lot of money, time, and energy. I am not kidding about the money part. So what is zoning, and why is it important?

Local governments create zoning ordinances to map out the physical boundaries of different zoning districts, which can occasionally be modified. To determine what your lot is currently zoned as, you will want to go to the municipal building. Zoning and some other ordinances can often be found online. However, do not, I repeat, do not rely solely on that as your only resource. Always go to the primary source to double check your information, especially if it’s a deal you intend to do yourself or invest in.

Now you are probably wondering, why the big fuss over zoning? Well, zoning determines what land uses are permitted in each district or classification. Some examples of classifications may include, but are not limited to residential, mixed residential, commercial, and conservation. Zoning ordinances also lay out all the juicy specifics, like lot size minimums and maximums, setbacks, and height restrictions. Please remember that land use and regulation laws vary from state to state. Therefore, you need to be familiar with the states you work with or at least know where to find the right information when needed.

Like stated earlier, zoning is a very important variable when doing any real estate transaction. Please familiarize yourself with zoning before you end up paying to do it later. Either way, you will have to know it. Now, take this and get out there and apply it.

Let’s Start Our Power Team – Part 1

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.

How to Get Started in Real Estate

How to Get Started in Real Estate

So you’ve decided you want to be a real estate investor — now what!?! The dynamic and fast-paced world of real estate investing can be daunting for any first-time investor. Follow this step-by-step guide to get your bearings and successfully launch your career in real estate investing.

#1 Define Your Goals

Many would describe the world of real estate investing as “limitless.” Despite the nearly endless potential for success, defining your goals is an important step. Determine what YOU want from your career as a real estate investor. Do you want to supplement your current full-time job and save for retirement? Do you want to eventually have monthly cash flow so you can quit your full-time job? By understanding your goals, you will be able to determine the direction of your real estate investing career.

#2 Find Your Niche and Investment Style

After you define your goals, it’s time to pick the investment style that will best help you achieve them. The common ways to invest are:

  • Buy and Hold: When an investor purchases a rental property, typically with a traditional 30-year mortgage, and uses the proceeds from tenant rent to pay the mortgage and create equity.
  • Fix and Flip: A short-term investment strategy where an investor purchases a property in need of repairs, completes the repairs and then sells the property for a profit. Because the property is in poor condition, a fix and flip deal is primarily a cash deal.
  • Wholesaling: An excellent strategy for a beginner investor, wholesaling is finding real estate deals and then selling the deals to investors who have capital on hand. They then take a commission.

If you don’t have a ton of capital on hand, a fix and flip might not be for you. Research all the investment styles and choose the one that makes the most sense for your goals and budget.

#3 Invest in Your Knowledge

Once you have defined your goals, secured your capital, and determined your investment style, the next step is to determine the best way to achieve your goals. While the Internet is an excellent resource, having the support of a mentor or teacher is invaluable. As a real estate investor, you will need to learn the tools to support your goals. You will need systems to hire the right people, as well as resources to find your ideal investment properties. Finding a teacher or mentor will help you avoid time-consuming and potentially costly mistakes.

Getting Started in Real Estate Investing

If you take your time and define your goals, you can embark on a successful career in real estate investing! Don’t bite off more than you can chew. Take your time and you will reap the rewards.

Fast Track to Your First Million

Fast Track to Your First Million

Are you looking to get started with real estate investing? If so, here are a couple of pointers on your first steps to making the big bucks. In order to make millions, you need to start thinking and planning for millions.

The first thing you need to do is get organized. Create some good habits now to better prepare for the hefty paycheck. When getting organized, you are going to want to get a business or entity, phone number, email address, business card, and work space. Establish a schedule and pencil in when you are going to have your weekly company meeting, even if it’s just with yourself. Create a model of what you are doing so it will be easily duplicated when your company expands.

Once you are organized, you need to get going on marketing your company. Go to clubs and send out flyers and other marketing materials. Also, don’t forget to introduce yourself as a real estate investor. Get out and talk with people. Let them know who you are and what you do.

Now that you are organized and are marketing yourself, I want you to get your power team built up. Create a list of resources of different people or companies that could be useful in real estate investing. This list may include investors, agents, contractors, title companies, real estate attorneys, etc.

Don’t forget to surround yourself with like-minded people. Find people in real estate that are killing it and talk to them. Pick their brain. Repeat some of their best practices. Do ride-alongs with them or go get lunch.

Once you have implemented these first steps, you will be on your way to getting some deals going. At this point, it’s all about getting those offers submitted.

How To Acquire a Certificate of Occupancy for Tenant Improvements in a Commercial Building

How To Acquire a Certificate of Occupancy for Tenant Improvements in a Commercial Building

This article is designed to help you through the permitting and construction processes associated with a tenant improvement (TI) project. Tenant improvements are defined as structural or nonstructural interior alterations to an existing commercial or industrial space. This includes electrical, mechanical and plumbing permits, a change in the permitted use or an increase in the permitted number of occupants.

To apply for a tenant improvement permit, you need to stop at the building counter in the public service building in your city and provide them with a complete submittal package. A complete submittal package consists of the following:

  1. A completed Tenant Improvement Worksheet.
  2. Four copies of a Plot/Site Plan showing the general layout of the existing building site, the location of the tenant improvement, the address, and the handicapped path of travel from parking to the accessible entrance(s).
  3. Four copies of construction plans and details, including but not limited to the floor plan, exiting plan, reflected ceiling plan, framing details, lighting plan, electrical/plumbing/mechanical plans and other applicable plans as listed in the Tenant Improvement Worksheet.
  4. Two sets of Title 24 energy compliance documents, when changes are proposed to the mechanical system, lighting or building envelope.
  5. A completed Hazardous Materials Questionnaire.

During the permitting process you will be asked to pay two separate fees: a plan check fee and permit fee. You are required to pay the plan check fee before they take your application for plan check. As for the permit fee, you must pay it at the time of permit issuance. Both fees are determined by the type of construction, the type of occupancy, the square footage and the extent of the tenant improvement.

After the development services technicians (DST) verify that the application package is complete, and you have paid the plan check fee, they will forward a set of plans/documents to each of the four departments/divisions: Building, Planning, Engineering and Fire. Approval from all four departments/divisions is required prior to permit issuance.

After you obtain all the required approvals and pay the permit fee, a DST will issue you a building permit. Now you can start construction. At certain stages during construction, you must schedule an inspection. The following list represents the sequence of required inspections for a typical tenant improvement:

  1. Underground plumbing and electrical
  2. Foundation
  3. Interior wall framing and rough electric
  4. T-bar ceiling and rough trades (electrical, plumbing & mechanical)
  5. Drywall nailing
  6. Electrical service
  7. Final Inspection

After all required inspections are approved and any required approvals from other divisions and/or departments are obtained, the building inspector will notify the utility company to release the electric meter and a Certificate of Occupancy will be issued. The issuance of a Certificate of Occupancy authorizes you to occupy and use the facility based on the permitted use shown on the Certificate of Occupancy.

Five Tips for First Time Home Buyers

Five Tips for First Time Home Buyers

Buying your first home can be an overwhelming experience. These 5 tips will help you stay on track during the emotional experience of buying your first home.

#1 Know Your Budget

Most real estate websites allow you to search by price. Know your budget and stick to it. Don’t be tempted to look at homes above your budget in hopes of “negotiating the price down.” By sticking to your budget, you will be able to enjoy your home long-term without it being a financial burden.

#2 Work with an Experienced Real Estate Agent

Try to get a referral from a trusted friend or family member. Your real estate agent is a very important part of your home buying process. In a hot market, a good real estate agent can be the difference between finding the right home as soon as it’s on the market and being the last to know.

#3 Know What is Your Non-Negotiable

Do you NEED something move-in ready, or are you ok with a bit of a project? Is space the most important thing to you or will you sacrifice that guest room for your preferred location? Know what items you are willing to compromise on and what you aren’t.

#4 Look at a lot of Different Houses in Your Price Range

Even though buying a home can feel like an emotional decision, it is also a financial one. By looking at a lot of homes in your price range, you can get a feel for what your budget will afford you. If you can’t find a single 4-bedroom home in your area within your price range, you may need to expand your search or save up.

#5 Anticipate Closing Costs

Part of tip #1, knowing your budget, is also knowing what to expect from closing costs. In most markets, the buyer is responsible for all costs associated with closing. From inspections to lawyer fees, there can be up to 3% of the purchase price in costs accrued. Knowing what cash you need to have on hand for closing is an important part of the budgeting process.

Buying your first home is an exciting time. Use these five tips to keep your home search on track and on budget.

It’s a Numbers Game

It’s a Numbers Game

Every aspect of real estate investing is a numbers game, and you have to be okay with that. From the number of properties you look at to finding the right deal, to the number of offers you put in to getting one accepted, to the number of realtors you go through to finding a good one, and on and on. It’s all about the numbers.

 

I often hear clients say, “I can’t find a good realtor,” or “I can’t find the right properties,” or “I can’t get a property under contract.” When I ask how many realtors they have talked to or worked with, they say something like, “I have worked with 3 or 5, and I just can’t find a good one.” When I ask how many offers they have put in they say something like, “We have put in 5 or maybe 6 offers and still can’t get one accepted.” This can lead to discouragement, which can lead to frustration, which can lead to giving up.

 

This is one reason many people are not successful at investing in real estate. You have to do what it takes, and if going through 8 or 10 or more realtors is what it takes, you have to be willing to do that. If it takes submitting 20 or 25 offers to get a deal under contract, you have to be okay with that.

 

One of my most used words in real estate investing is, NEXT. Next property, next realtor, next contractor, next lender, NEXT.

 

Sure, some people get lucky and find the right realtor right off the bat or they run into the perfect deal that goes under contract, but that is the exception. How many does it take to find the right one? It takes as many as it takes, and you need to be okay with that.

 

In real estate investing, you will always be shopping for the right deals and the right people. Find ways to stay focused on doing what it takes. Learn to use the word NEXT with a smile. Avoid any negative self-talk. You can do this! Keep at it, and happy shopping.

Wholesaling Rental Properties and the BRRR System

Wholesaling Rental Properties and the BRRR System

Almost everyone who gets started in real estate investing hopes that one day they will own a whole bunch of highly profitable rental properties. Yet due to lack of experience and money, they begin wholesaling properties to experienced, well-funded investors who rehab them and sell them to homeowners. This type of wholesaling has worked for many beginners over time; however, it might not be the fastest way to get to that long-term goal of owning all those “cash-cow properties.”

Some people find it easier to wholesale rental properties directly to landlords rather than to rehabbers who sell to homeowners. “Gosh,” they say, “there are hundreds of people who own rental properties that they paid for with cash in almost any area of the country. Not only do these people want to buy more rentals, some of them want to sell some of the properties they have.” This can be a goldmine for wholesaling rental properties because of a host of factors. Let’s look at those factors:

  1. It is easy to find buyers and sellers of rental properties through lists, title companies, real estate investing clubs, and even signs and ads posted all over the place.
  2. Rental properties are valued based on three factors:
    1. First is the return on what you put down to buy the property. This is called the “Cash on Cash Return.” To help your financing efforts, remember that many sellers are willing to carry mortgages for little down. Many banks will finance 80% of what you buy the property for.
    2. Second is the return in relation to the purchase price of the property. This is called your “ROI” or return on investment. It is difficult, even impossible, to find safe investments secured by real estate or anything else of stable value that offer such returns as real estate does.
    3. Third is the ability to fund the property. This is called the “DSCR” or debt service coverage ratio. Banks want to see how much you have after expense income in relation to how much the mortgage payment is. For many, this is a difficult math problem. But finding great rental deals is just that, a math problem! It is not based on fickle market conditions.
  3. Rental properties can be wholesaled at a profit based on the money the property makes. They are often even easier to sell if they don’t need work. Hence, you can make money very quickly. You just need to find the deal and present it to your buyer.
  4. Wholesaling rentals as an addendum to your existing wholesaling business will increase the possible deals you can do. Further, the more you learn, the more you can earn because people with money are always looking for skilled people to work with.
  5. Areas that are close to colleges, universities, hospitals, military bases, shopping centers, and fast public transportation are ideal and lend themselves to bigger profits. Homes on main roads that won’t sell to homeowners can often be rented for top dollar to accountants, consultants and other zoned businesses. It is often easy to rent properties on main thoroughfares with a simple “for rent” sign because so many people see the sign. It pays to advertise, and advertising skills are well paid.
  6. Can you manage a rehabber or do licensed rehab work yourself? If so, you can add value to what you offer as a wholesaler.
  7. Can you find a tenant and a property manager or are you a licensed property manger? If so, you can add value to what you offer as a wholesaler.
  8. Do you have or know someone who has money to invest in finding, taking ownership, and fixing a property to make it “rent-worthy” so you can put a tenant and property manager in place? If so, you can add value to what you offer as a wholesaler.
  9. Banks will often refinance a rental property for 80% of 100 times the monthly rent revenues. Hence, every $1,000 a property rents for will be valued at $100,000 and will finance for $80,000. Remember, you are fixing properties to increase their value. Every dollar in increased rent is worth $100 in value. If you can do the things above and find rental properties that will refinance for way more than the cost of buying them and fixing them up, you can add SIGNIFICANT value to what you offer as a wholesaler.
  10. Do all the above or call the advisory line to learn how to do all the above and you can make what other successful wholesalers are making doing what is called the BRRR System of Wholesaling (Buy, Rehab, Rent, and Refinance). There are wholesalers who make anywhere from $15,000 to $35,000 doing the BRRR System and don’t use any of their own money.
  11. Every one of you reading this has “all-you-can-eat” coaching help on the advisory line. Let us help you learn how to do this so you can make the long-dollar!
  12. Are you willing to learn how the numbers work? Spreadsheets to help you zero in on the values are included with this article! A website you can visit to learn how to use these spreadsheets is also included with this article: https://www.youtube.com/watch?v=3h7QmhFO3EI&t=2s

Wholesaling

Wholesaling

If you are just beginning to wholesale and finally have a property under contract, what’s next? Your focus now has to turn to finding a cash buyer, as quickly as possibly, who is interested in the property for a fix-and-flip or a rental. So, how do you find this type of investor?

First, create an email brochure that includes all the information about the property: address, description, price, rehab cost, after rehab value (with comps), pictures, an action line saying, “The first person to bring a non-refundable earnest money deposit of $2,500 will get this property,” and, of course, your contact information.

Next, send a copy of the above email to all the cash buyers you have qualified. Then call and let them know you sent them an email of a deal they will be interested in and get them out to see the property. Then start marketing the property by creating bandit signs and ghost ads that have all the information on the property, except the address. When potential investors call, get their email and send them a brochure giving them the address and encouraging them to see the property.

Next, attend several real estate investor clubs and pitch the deal to everyone there. Then hand out brochures and your business card as you collect their contact information. Also, attend foreclosure auctions and let the bidders know about the deal. Then start calling landlords and pitching the deal to them. Continue by calling “We buy houses” ads online and telling those investors about the project. Follow up by calling members of the Better Business Bureau who are investors and pitch the deal to them.

Lastly, if you are fortunate enough to have Response’s real estate software, you can look up and call cash buyers to let them know about the investment opportunity. Also, contact all your friends and relatives who have money to invest and let them know about the potential profits that can be made fixing and flipping the property or holding it for rental income.

Once you have an investor interested, collect the deposit and get them to sign an Assignment of Contract agreement. Submit both the Purchase Contract and the Assignment of Contract to the escrow company, and they will basically do the rest.

The MLS: How Important Is It?

The MLS: How Important Is It?

We’ve all heard it before, “Don’t bring me deals off the MLS.” Why do so many investors tell us this? Well, maybe they feel they can get those deals themselves, and as a wholesaler, they expect you to bring them off-market deals. I say rubbish. Go after deals on the MLS. Believe me, if you get something under contract at the price your investor wants, they will take the deal from you. They just want control of the deal at the right price. We all know realtors can help find and sell deals. According to a recent article by the Housing News Report, on average, 20% of all deals done last year were off-market, meaning not through the MLS and realtors. That also means that 80% of deals that were done were through the MLS. With a number that big, it is in your best interest to work with investor-friendly realtors and use the MLS.

The number of off-market deals is growing because of companies like OfferPad, iBuyer, Network Realty, Zillow and others. As a savvy investor, we need to keep our fingers on it all. Don’t give up on the MLS just because someone tells you it’s too competitive. Instead, use strategies to get offers out quicker than others. One technique I use is the blind offer strategy. Basically, when my agents spot properties I would like, I train them to immediately make an offer at 10% below list price with all my terms staying the same. Now, all I must do is sign the offer and they submit it. This strategy speeds up the offer and evaluation process, which is the most time consuming part of a deal. Once my offer gets accepted, I will do a proper evaluation before I purchase the property. Stay consistent with your methods to find deals, but make the MLS a core search engine for your deals.

4 Tips for Time Management

4 Tips for Time Management

In this era, people tend to be busy with multiple things every single day. It may be work, studies, family, social life, workouts, projects and more – all these things fill our schedule every single day. We tend to give ourselves a big pile of work and find ourselves unsure of how to get it all done on time. It is indeed hard to manage time, especially if you’re a person with a lot of responsibilities. Here are four tips to help you better manage your time and get things done.

First, determine your schedule in a certain timeframe (it may be within the day, next three days, this week, this summer, and more) and identify the things you need to accomplish. It’s better if you list them in your phone or write them down so you don’t forget something. You can also use your list to check off tasks/appointments you accomplish. After making a list, divide each item into different categories – schedule, urgency, and more. These will help keep you on track.

Second, learn to say “No.” I know for a fact that it’s good to say “Yes” to task assignments, opportunities, promotions and more, but if this will jeopardize your time management and give you too many things to do, then it’s okay to say “No” sometimes. You, of all people, know yourself. You know your capacities and limitations. Don’t force yourself to do something you can’t at the moment.

Third, avoid distractions. As humans, we are easily distracted for many reasons. If you set a time to do something, focus on it. Most of the time, you get something done faster if you give it your total attention. And, you make less mistakes. Be committed to the list you set for yourself. Be persistent to finish the task at hand. Avoid backlogs and save time.

Last and most important by far, enjoy and love what you’re doing. If you don’t enjoy what you’re doing, you will just feel lazy and end up unfulfilled. Engage yourself in the schedule and the tasks you set. Be consistent.

These are only a few of the many tips you can follow to better manage your time. Whatever you decide to do to succeed in time management, remember to keep it balanced. There’s a time for everything – work, studies, family, spiritual growth, social life, yourself, and more.

Four Real Estate Myths

Four Real Estate Myths

  1. Set your home price higher than what you expect to get.

This may work at a car dealership, but real estate is a totally different animal. In real estate, if the buyer doesn’t see your home as a deal or a bargain, you don’t make it to the top of their “must see” list and are often forgotten about. If your home is presented or listed as a bargain, then the buyer is going to put it at the top of their “must see” list, even if, over all, it was a little less desirable. When a property looks like a good deal, buyers feel rushed to get their offer in quicker due to the possibility that several other offers are being submitted.

  1. You can get a better deal as a buyer if you don’t use a real estate agent.

If the house is listed with a real estate agent, the total commission is already built into the sales price. Even if you as the buyer don’t use an agent yourself, the seller will still pay the entire commission to the listing agent.

  1. All of the properties listed on the Multiple Listing Services (MLS) are listed online.

This is not always the case. Usually the agent or homeowner has to actually go in and manually post the property online. Realtor.com has claimed that they have everything the MLS does. Yes, they do have a lot of great properties shown from the MLS; however, it is not the full MLS. It is considered limited access.

  1. Open houses sell properties.

Buyers who visit an open house hardly ever purchase that home specifically. Open houses are really used to benefit the real estate agent, as they are a great opportunity for them to find other buyers.

Real Estate Investing Due Diligence

Real Estate Investing Due Diligence

\As a real estate investor, you will be presented with properties in a variety of financial and physical conditions. Depending on your investment style, location and financial goals, you may be looking for something very different than your fellow investors. No matter what type of property you are looking for, be sure to complete your due diligence before it ends.

Financial Due Diligence

As a real estate investor, you are an investor first and a homebuyer second. While your personal home search was about forming a connection to your future home, an investment property is very different. As an investor, it’s all about the numbers.

When doing your financial due diligence, complete this checklist:

  • Is the price fair? Understand what has sold in the area and for how much.
  • Are there any liens on the property or is the property in the process of foreclosure? Tax liens come with a property, so knowing how much they are before purchasing the property is critical.
  • Does the property have a tenant in place and/or a rental history? If you are purchasing the property as a buy-and-hold investment, you will need to know how much monthly income to expect.
  • Does the property require any specialty insurance? Flood insurance can be a large annual expense.
  • What are the average utility costs and, as a landlord, will you be responsible for any of the utilities?
  • What is the cost to maintain the property?
  • What is the going rate for a property management company?

As you can see, financial due diligence is much more than just getting the best price. Answering these questions will help set any investor up for long-term financial success.

Physical Due Diligence

The physical condition of a property is closely tied to its financial value. No matter how well the numbers from the financial section add up, the physical condition of the investment needs to be accounted for.

Before purchasing an investment property, find out:

  • When the major home systems were last replaced (HVAC, water heater, major appliances, )
  • How many years are left on the roof
  • If there is any structural damage
  • If there is evidence that routine maintenance has been completed
  • If the flooring need to be replaced
  • What year the home is and if you will be dealing with any code violations

To get that new feel to your investment property, new carpet and a coat of fresh paint are recommended. However, as an investor, you need to look out for the big-ticket items that will require cash up front. Taking the condition of these items into account will help you determine your initial investment, as well as your capital investment over the course of owning the property.

Finding the Right Investment Property

Due diligence is a critical element in finding the right real estate investment property. Many “real estate gurus” claim they “go with their gut,” but nothing can replace due diligence! Don’t be tempted by a “too good to be true” price. Complete your due diligence to ensure the property will meet your investment goals.

First Flip Checklist

First Flip Checklist

So, This is Your First Flip? Where is Your Checklist?

Let’s talk about flipping. More specifically, let’s talk about what your checklist of items should include. Following the right process when buying a property will save you money and time after you have purchased the home. My list of the most important items that need to be addressed before and during the purchase of a property is below. Of course, there will be some flexibility to this — you decide where that will come in.

  1. Financing: Get your financing lined up. Find out what lender you will use and what their requirements will be for you to borrow funds from them. Also, find out their terms and repayment schedule so you can work that into your numbers.
  2. Insurance Agents: Talk to your insurance agent and find out what kind of coverage you will need while the renovation is taking place and how much it will cost.
  3. Contractors: Get some quotes on the rehab. Look for contractors that are licensed, bonded and insured. You don’t want to cut corners just to save a few bucks. Fix things right the first time around.
  4. Investor Friendly Agents: Make sure your agent has your best interest in mind throughout the entire process of purchasing the property. Never let your agent lead you astray. Make sure your agent is providing all the information you need to close the deal correctly.
  5. Interior Designer: Find one whose design aesthetics you like and one you can afford. A good designer will help you sell your properties quickly. They will work closely with your contractors to get things done right.

Before you start your search for the perfect property, find a financing lender, insurance agent, contractor, and interior designer with fees and requirements that fit your budget. Once you have your power team players in place, use your realtor to find the right deal. During your due diligence period, once you have a property under contract, you can have your contractor and interior designer walk through the property and give you bids. Contact your insurance agent and make sure the insurance will be in place and is affordable. Do all of this before your due diligence period ends, that way if something is not working you can cancel the deal.

There are some other minor things that need to be done during this process, but the items I’ve gone over are very important. Your list should look similar to mine. Remember to take things slow. Don’t rush into a deal, and never get into a flip if it feels like too much to handle. I suggest that first time flippers start off with a light or medium rehab. If you make a checklist before you start, you should have covered all of your bases to make money on your investment.

First-Time Home Buyer Programs

First-Time Home Buyer Programs

Buying your first home is no easy task. You will go through stressful steps that include paying fees and dealing with people. Purchasing your first home is a huge responsibility but also an opportunity; an opportunity to design your own space. But before we jump to the paintings and landscape of your first home, you need to go through some important steps, like finding the right real estate agent and determining your budget.

The money you borrow to buy your first home is usually considered a first mortgage loan. If the amount is a little less, it’s called a junior loan, enough to help you pay the down payment. The good news is there are many programs that can help you get ready. These programs come in a variety of forms. You just have to remember that, as a first-time home buyer, you need to be guided on what financial steps to take. This is why first-time homebuyer programs exist.

One common program is the FHA loan, where the lenders insure the mortgage. They are protected and will not take a loss if you default the loan. Some programs focus on the area you cover. If you are targeting a rural area for your first home, there are available programs that can help you, like the U.S Department of Agriculture assistance program. There are also loans specific for veterans and surviving spouses, which are usually provided by U.S Department of Veterans Affairs. Unique programs like Good Neighbour Next Door also exist. They provide housing aid for law enforcement officers, firefighters and emergency medical technicians.

You need to be prepared before finally experiencing the sweet taste of having your first home. That is the main purpose if these programs, to get you prepared. There are various organizations that can help you obtain affordable loans while also protecting the lenders against the borrowers’ defaults. There are also programs that will require you to attend a homebuyer education course if you are a first-time homebuyer. This course will help you understand the importance and responsibilities of homeownership.

Owning a home is equivalent to having the freedom to blueprint; the color of your walls, the garden, kitchen, and bedrooms, they are all in your hands. However, blueprinting will only be possible after taking the initial significant steps, which include getting approved for a mortgage, finding the real estate experts, and choosing the home that fits your financial capability. Now it is time to assess your eligibility and start evaluating the available programs that will help you get a hold of your first home.

Understanding the Amount of Your Buyer’s Profit on an Assignment Deal

Understanding the Amount of Your Buyer’s Profit on an Assignment Deal

One thing that is not stressed enough in our presentations to our buyers is how much profit is on the table for them. By understanding the buyer’s profit, we can better inform our buyers as to the amount they can expect to make. It also can strengthen our position when negotiating the wholesale fee.

When calculating an offer, understanding the type of market we are in will make us more effective. If we are in a cold market, the buyer has a stronger negotiating position. In a hot market, the seller has the advantage. We are currently in a hot market. Therefore, we need to use strategies that will strengthen our offers and help our bottom line.

Let’s run through some calculations and see what we can do to make our offer more competitive. As we run the numbers on an assignment deal, pay close attention to adjustments that can be made to strengthen our offer:

Asking Price- $179,000

ARV- $250,000

Buyer’s Profit- 20%

Rehab- $30,000

Wholesale Fee- $8,000

Now, let’s calculate what our max offer will be with this information:

$250,000- ARV

X .8- Buyers Profit 20%

$200,000- All-In Price

Less $30,000- Rehab

Less $8000- Wholesale Fee

$162,000 Max Offer

$179,000- Asking Price

 

Now, let’s calculate what our buyer can expect to make on this deal. We must first determine if we are in hot or cold market, as this will influence some of our decisions regarding the property. Our current conditions tell us that market conditions are hot. So, this is how to determine the profit our buyer will make from the above offer:

First, we must subtract the all-in price from the ARV. Next, because it is a hot market, our buyer should consider paying costs such as real estate fees, closing costs and holding costs. This would cost about 40% of the gross profit. The buyer would keep 60% of the gross profit or the net profit. Let’s look at it as a formula:

 

$250,000- ARV

Less $200,000- All-In Price

$50,000- Gross Profit

X .6- Buyers Percent of Gross

$30,000- Buyer’s Net Profit

 

This $30,000 profit would be attractive to most buyers. However, closing the gap between the asking price ($179,000) and our max offer ($162,000) may be hard to overcome. So, let’s look at the things we could adjust to present a more competitive offer:

$250,000- ARV

X .85- Buyer’s Profit 15%

$212,500- All-In Price

Less $30,000- Rehab

Less $5,000- Wholesale Fee

$177,500- Max Offer

 

As you can see, our new max offer ($177,500) is much more competitive and the gap with the asking

price ($179,000) is much easier to bridge. Let’s calculate the new buyer’s profit and see if it is a good

deal for our buyer:

 

$250,000- ARV

Less $212,500- All-In Price

$37,500- Gross Profit

X .6- Buyer’s expenses 40%

$22,500- Net profit for buyer

 

It is a smaller net profit for the buyer than the first offer. I will not try to tell you if the $22,500 is a good or bad profit because that is for each buyer to decide. With a few adjustments to our offer there is a greater chance that our second offer would be accepted. We don’t always make the money we want; however, $22,500 is better than nothing.

Best of luck in your investing. Be creative and you will complete more deals than those who do not think outside of the box.

Inexpensive Repairs for Home Sellers

Inexpensive Repairs for Home Sellers

Before selling a home on the traditional real estate market, many real estate agents recommend home sellers complete repairs. “According to the Real Estate Staging Association, homes that have minor repairs completed before going on the market sell 90% faster.”[1]   Home repairs can quickly become expensive home renovations, if you aren’t careful. Inexpensive home repairs will make ready any home for the sale on the traditional real estate market.

Curb Appeal

You only get one chance to make a first impression! There are so many great inexpensive repairs homeowners can complete to increase curb appeal:

  • Trim back bushes and trees
  • Spread fresh mulch in your flowerbeds
  • Repair any loose stones in your walkway

In addition to yard work, some paint can spruce up your entry and even add perceived value. “In a recent survey conducted by the Real Estate Staging Association, 79% of home staging professionals said that a colorful or statement front door can increase the perceived value of the home.”[2]

A Fresh Coat of Paint

A fresh coat of paint is a great inexpensive way to instantly clean up a home. If you’ve ever watched an episode of House Hunters, you know how prospective buyers can fixate on paint colors. New paint is a great way to make a space neutral and ready for any buyer.

Paint can also update your kitchen. Did you know, some kitchen cabinets can be painted? This task is best left to the professionals but is significantly less expensive than a whole new kitchen.

Weekend Walk Through

If you are handy, this repair can be free! Take a weekend to walk through your home with only basic tools. Check for anything from loose door knobs to broken screens to leaky faucets. While these repairs may seem minor, they all add up. Most buyers don’t want to purchase a project, so complete as many tasks as you can!

Listing a home on the traditional real estate market can be a long (and sometimes costly) process. For this reason many home sellers choose to sell directly to a real estate investor. When selling to an investor there are no repairs to complete; they purchase homes in as-is condition.

 

 

[1] http://www.realestatestagingassociation.com/

[2] http://www.realestatestagingassociation.com/

Seven Ways to Get More When Selling

Seven Ways to Get More When Selling

Nobody likes taking a hit when they go to sell something, especially when it is one of the largest investments of their life. Purchasing real estate is a huge investment and selling it can be an even bigger one. In this article, we will go over seven ways to get more for your home. Hopefully some of these tips will help and you will be able to put them to good use.

 

  1. List for less than market value. This will make your home look highly desirable in a tight market and create some urgency with your buyers. Buyers will act faster because they don’t want to lose out on a deal and this should increase your odds of multiple offers.

 

  1. Brighten up the place. Clean out the windows, open the blinds and turn on the lights. Open concept is what many new home owners are currently looking for, and you can help create some of that simply by making the home look more open and spacious with some light.

 

  1. On that same note, clean out the closets. You can make a home look like it has more storage by removing at least 50% of everything in your closets. This will definitely help sell your home.

 

  1. First impressions are key, so paint the front door. While you are painting your front door, go ahead and install a nice, sturdy doorknob and lock. The fresh coat of paint and new lock will help make the place feel newer and less used. Everyone wants to feel safe at home and putting in that new, sturdy lock can help create that sense of security your buyer is looking for.

 

  1. Clean. Clean. Clean! Dust from the ceiling fans all the way to the floorboards. Don’t forget to pull the weeds and grass growing between the cracks in the driveway as well.

 

  1. Make everything neutral. Yes, the pink nursery looks great for you and your home; however, you are trying to sell it. Since it will no longer be your home, you need to help the buyer feel like it could be theirs. What if they only have boys? Pink might distract from all the other amazing features your home has to offer. A fresh coat of paint in a neutral color can help make a huge difference when it comes to the atmosphere the home brings.

 

  1. Put away the photos. Again, little Suzie is adorable; however, you need the buyers to feel at home and not like they are invading someone else’s home.

 

Now get out there and get the SOLD price you are looking for!

Six Habits of the Successful Investor

Six Habits of the Successful Investor

The keys to success in real estate, as with most endeavors, are achieved not in great big leaps and bounds but in small, positive actions and habits that are consistently repeated every day. That’s what all of the sports coaches will tell you if you are trying to become a professional athlete. The same applies to becoming a successful real estate investor. Listed below are some of the daily habits you can adopt to become a successful real estate investor.

 

1 – Dream a little dream every morning

Start the day with a clear vision of what you want and why you’re doing what you do. Spend some time answering the question, “If everything was exactly the way that you want it, what would your life be like?” Be detailed in your dreaming. Where will you live? What will your house look like? What kind of car will you drive? What will you do with your time? Will you travel? Where will you go?

 

2 – Set up a plan for your day before you begin

Figure out what you need to do each day to conform to your financial goals in order to obtain the lifestyle you want. Be specific with timeframes to start each task, what the outcome should be and how long you’ll work at each task.

 

3- Take time to obtain knowledge

Study the information that successful people make available. Make sure you are reading material that is relevant and helpful to your ultimate plan. Remember that the best help available to progress from where you are now to where you want to be is the knowledge you gain and the people you meet along the way.

 

4- Give back

Find ways to help people without any expectation of what you’ll get in return. Share your knowledge, time, and resources with others who need help. Giving to others without expecting to receive anything in return will help you gain more enjoyment from the effort.

 

5 – Follow your plan

It’s really tempting to run right out and take action with the first opportunity you come across. After all, action is necessary to make progress, right? While that is true, you really need to focus on the big picture and keep your end goal in mind. If the “deal” doesn’t move you towards your ultimate goal then you should probably pass on it. Your ultimate success will come by thinking more clearly about your direction, asking better questions about the opportunities, and identifying the solutions that will move you toward your dream.

 

6 – Connect with at least two new people each day

If you meet and get acquainted with just 10 new people each week, they should be able to bring you enough leads to fulfill your goals. Some of those people are going to need to buy properties. Some of them will have properties to sell. All of them can introduce you to others who can help you with your real estate goals.

 

7 – Recharge your batteries

Always make sure to get enough rest and relaxation. It’s very easy to get too caught up in the everyday rush of investing and forget about your energy levels. Take time to do other things with your family and friends. As you recharge your mental and emotional batteries, you’ll think clearer and make better choices.

Reality TV vs. Real Life Fix and Flips

Reality TV vs. Real Life Fix and Flips

I really love golf. I used to watch it on TV all the time. Then I decided to take it up. Wow, what a wake-up call. It is a lot harder than it looks, and I need to practice all the time. Why do I tell you this? Well, reality fix and flip shows are a lot like golf. It looks easy and fun on TV but in real life it is serious work! The popularity of these shows has brought a lot of newbies to the business that get frustrated quickly because things do not go as planned. The shows mislead people into thinking it is so easy. Although this business can be lucrative, you need to understand how things work. Let’s go over what I feel are the missing links for people getting started in this business.

  • It’s all about the numbers: The TV shows only show the basic numbers on a deal and make their profits look so big. What they fail to tell you is how much investors must pay back to their hard moneylenders. This cost is known as holding cost, which also includes insurance on the property while it’s being fixed up. So, the bottom line might be shown on TV as $60k in profit, but it might actually be $30k. That is still a good profit but maybe not to everyone.
  • It takes time: Trust me, finding deals takes time and a lot of searching. You don’t get every deal you make offers on. The shows make it look easy to find a deal, look at it, and get an offer accepted. Well, in real life, you will probably get 1 out of every 25 offers you make.
  • It’s scripted: Most importantly remember you are watching a show and it is scripted. The way they find the house, do the bidding, complete the rehab — it’s all for your enjoyment. Real life will have twist and turns that are more outrageous than what you see on TV.

If you are serious about getting into real estate investing, go to a local real estate club to talk to investors and visit with a local realtor who works with investors. Educate yourself on the industry and the processes. Prepare yourself for this business. If done right it can give you great results and even change your life.

How to Fix Your Credit Score

How to Fix Your Credit Score

Having good credit is an important part of investing in real estate. With good credit you can get financing easier and you can also get better interest rates. Now, if you have a poor credit score here are some steps you can take to improve your credit.

  • Pay all your bills on time. This is a no-brainer, but make sure all your bills are paid on time, even if it is the minimum payments.
  • Don’t open too many new accounts at once. One thing that credit agencies look at is the age of your accounts. By opening several new accounts at once, the average age of your accounts will be reduced.
  • Do not cancel any unused cards. Another aspect of credit is the amount of credit you have used compared to the amount of credit you have available. The lower the percentage used, the better. Ideally you want to keep the ratio of credit used to credit available below 30%.
  • Keep your credit balances low. This ties in with number 3 in that you should not max out your credit. Keeping your credit balances low will help keep your credit score high.
  • Have a variety of different credit types. Paying on a car loan, a credit card, and a mortgage will show you are able to juggle and maintain payments on different credit types.
  • Debts in collections needs to be paid off. If you have any accounts in collections they will need to be paid off. Until they are paid off, your credit will suffer.
  • Get a personal loan to pay off credit cards. This can be a very effective way to lower your interest rates and pay off your debt faster.

In real estate investing having good credit will increase your opportunities to invest. As mentioned, it will save you money, give you better interest rates and help you qualify for better loans. Keep these 7 tips in mind, as they are great ways to maintain and improve your credit score.

Mindset in a “Seller’s” Market

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.

The Advantages of Building When Zoning Changes

The Advantages of Building When Zoning Changes

In this market, it is getting more and more difficult to find deals where an investor can simply fix up a home and flip it for a profit because sellers expect to get higher prices and there is an abundant of investors looking for the same deals. So don’t follow the crowd; find older homes in areas where the zoning has changed and build a new structure that will increase the value of the property. Here is an example of a deal I am working on in Los Angeles, California:

 

There is an area in North Hollywood near Universal Studios that is very desirous to live in. In this area, the zoning changed from single-family homes to multi-unit condos (three story condos with underground parking.) Because of the change in zoning, the property values in the area have risen tremendously, but that is okay, because the price of the condos units, when completed, are very expensive also; thus a great profit margin can be achieved. For instance, a friend of mine just inherited his mother‘s home which looks like a small, very old starter home: three bedrooms, two baths, and about 1500 square feet. It is not the house that is worth the money, but the property in its location. He was offered a $1,000,000 for his property by the next door neighbor. Should he take it? Maybe, but not necessarily. He asked me for advice.

 

First, I could see that the zoning had changed because all the properties surrounding him had three story condo complexes built on them. I investigated what the condo units were selling for and discovered that a 1450 sf condo demanded $700,000 and sold like a hot cake, and there were not a lot of units for sell. Then I laid out a building plan on the property after calling the building department to discover the set-backs and height requirements. I estimated that we could get 14 units on the property with a semi-underground parking structure. Fourteen units times $700K each equals $9,800,000.00 in retail sells. Then I calculated the building cost after talking with a local contractor to be $4,500,000.00 and I contacted a few financial institutions for a construction loan. By having the property paid for and the appraisal of the project as high as it was, one was willing to loan us the money to construct the building at a reasonable rate of 1 ½ points and 5.2 % ARM.

 

The projected profits, after paying to design and construct the building and demolish the old building, as well as taking away the financial charges, the marketing cost to sell the units, the closing costs and the holding costs for taxes, insurance and utilities, and paying my friend $1,200,000.00 for his property ended up being $2,562,500.00. I told my friend I would do a joint venture with him where he would put the property up as his investment and I would procure the construction loan and supervise the project: line up the architect, hire the contractor, see that the interior finishes are up to par with what is selling, line up the real estate company, create all contracts (using an attorney) and oversee the project. My friend would receive $1,200,000.00 for his property out of the proceeds first ($200,000 more than he was offered) and half of the remaining profits after all expenses are paid for. I would receive the other half of the profits with no money invested, but dong all the work. (A cool $1,281,500 in a year to a year and a half, with no money down). The key was finding the construction loan and that is why it pays to network with cash investors who may end up becoming lenders on future projects.

 

So, look for those unique deals that are a little out of the ordinary and think about building new.

Why You Should Promote Yourself from Landlord to Investor

Why You Should Promote Yourself from Landlord to Investor

There is a difference between being an investor and a landlord. Simply owning an investment property doesn’t make you an investor. If you are highly involved in the day-to-day operations of your property, you are a landlord. Investors treat their properties like any other investment: hiring professionals to manage the day-to-day operations and investing the profits from their property into their portfolio. Many real estate investors begin as landlord. Below are the three reasons why you should take the leap and promote yourself from landlord to real estate investor.

Get Out of the Daily Grind

Being a landlord is a fulltime job, if you do it right! From completing routine maintenance to answering emergency calls, keeping a rental in pristine condition is no easy task — not to mention all the work that comes with vacancy. Landlords are responsible for screening tenants, marketing the property and completing any other move-in related tasks. Real estate investors outsource all this work to a property management company. Not only does this get the work done, it ensures it’s being completed by a seasoned professional, and it can even decrease vacancy!

You Can Focus on Purchasing More Properties

Once you are out of the daily grind of being a landlord, you can focus on being a real estate investor. Finding deals and/or rehabbing properties requires focus. If you are wearing all the hats of your landlord responsibilities, it can be difficult to find the hours in the day to close more deals. You can also focus on making the most of your current investments. The better your current investment properties do, the more money you have in the bank for growing your portfolio.

Investors Are All About the Bottom Line

As an investor, your focus is simply on positive cash flow. You don’t have to worry about keeping tenants happy or your properties occupied. That is the responsibility of your property management company. Investors can enjoy the profits from their rental properties while also enjoying an additional check each month or even early retirement.

Many investors start their real estate investment journey as landlords. Successful investors, the ones enjoying financial independence and early retirement, take the risk and make the jump from landlord to investor.

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

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

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”?

 

 

Jump Start Your Career In Real Estate Investing

Jump Start Your Career In Real Estate Investing

So you’ve done your research and due diligence and are ready to start your career as a real estate investor. How do you take the step from considering investing in real estate to becoming a full-blown investor? Follow these 5 ways to jump-start your career as a real estate investor.

 

#1 Stop Waiting for the Perfect Moment

You can track market trends and interest rates forever and never pull the trigger. If you ask any real estate investor what their biggest regret is, it’s most likely not starting sooner. Stop waiting for the perfect market and instead focus on finding the right deal, right now, for your long-term investment goals.

 

#2 You Don’t Have to Start Small

There is no rule that you have to start with a small property. Carefully examine the pros and cons of large and small properties and see what works best for your financial and personal goals. The same rule applies for your real estate investment portfolio, invest in additional properties as soon as you are able.

 

#3 Focus on Appreciating Assets

You can buy and sell in hot markets across the US. However, you won’t see the full potential of real estate investing until you wait and cash in on appreciation. This sounds counterintuitive, but you can jump start your career in real estate investing by holding on to appreciating investments for future paydays.

 

#4 Get Creative with Financing

You don’t have to have a full cash offer on hand before investing in your first real estate deal. Get creative with finding the money for your first investment property. You can use traditional, low down payment financing or even use your IRA to purchase your first investment property. Once you start seeing monthly cash flow, you will have the funds to invest in future properties.

 

#5 Network in Person and Online

Don’t let the deal of a lifetime pass you by simply because you didn’t know about it. Create a network of professionals online and in your local community and always be in the know. From social media to networking sites, like biggerpockets.com, there are endless opportunities to make connections in the world of real estate investing.

 

Once you have the tools and resources, jump start your career in real estate investing today!

How to Create Wealth through Real Estate Investing

How to Create Wealth through Real Estate Investing

There are many ways to make money investing in real estate, but how do you create real wealth? There are four key factors that contribute to your long-term success and wealth creation in real estate investing.

 

Positive Cash Flow 

Real estate is an investment, and your cash flow is the return on the investment.  Your cash flow is the money left over after all expenses are accounted for.  Whether it’s the difference between the purchase price + repairs + carrying costs after a fix and flip OR the monthly rent – expenses – mortgage on a buy and hold investment, the numbers must add up to a positive cash flow.

 

Potential for Appreciation 

There are two types of appreciation when looking at real estate:

  • Appreciation over Time: The US real estate market has traditionally shown a 3% increase year over year, and if you buy in a “hot market,” you can hope for appreciation above the average.
  • Forced Appreciation: An increase in value due to improvements made to the property.

 

Paying Off a Loan

When you purchase an investment property using a traditional mortgage, the rent you collect from your tenant helps pays off your loan.  Even if your monthly cash flow is modest, you are rewarded with the eventual payday of cashing in on the equity that you build over the years through your tenant’s rent checks.

 

Tax Benefits 

There are significant tax benefits to generating income through real estate investing.  These benefits differ from state to state and property to property, so be sure to consult a tax professional before each purchase.

 

Building Wealth Through Real Estate Investing

Every property will not check off all four boxes.  If you purchase a fix and flip home, you will not be collecting monthly rent to slowly pay off the mortgage.  A fix and flip property is all about the forced appreciation you collect when you sell the home at its increased value.

 

Making sure these four factors are represented in some combination in your real estate investment portfolio will help you create wealth through real estate investing.

 

  • Cash Flow Potential
  • Appreciation
  • The Prospect of Loan Pay Down
  • Tax Benefits

Nursing Home Bird Dogs

Nursing Home Bird Dogs

Building a team of bird dogs is a great way to get deals done quickly and with more ease. One market I found that has been overlooked is adult dare facilities, such as nursing homes, assisted living facilities and active adult communities. Do a quick google search for these senior living properties in your area.
The way I see it is this, when a senior citizen needs to make changes to their living situation, they will talk to the executive director of a facility to get information about the specific facility’s cost, amenities, services and so forth. They will then budget because Medicare and Medicaid do not cover these costs for them. These administrators will know if the possible client has a property to sell off to help pay for the cost of the facility. This is where you would come in.
I would encourage you to talk face to face with the executive director in charge of admissions and let them know that you are a real estate investor who can buy properties quickly and with cash from their possible clients. You’ll want to ask them for leads to anyone who has a property to sell. This way you can go to the homeowner, or their heirs directly, and work out a deal. If you make a deal happen, then offer the administrator a referral fee, cash at closing. I usually give $1,000 referral fees, but the price is totally up to you. If your offer does not conflict with their business interest, they should be willing to work with you.
Now you are building a captive audience as your bird dogs. Seek out as many of these types of facilities and market to them all. Build your business with leverage — and this is a good type of leverage.

A Couple of No-Down Financing Options

A Couple of No-Down Financing Options

Typically, when you buy a home you must have some sort of down payment.  When you use a FHA loan (which usually requires the smallest down payment) you will need to have a down payment of 3.5 percent of the amount you offer on the property.  There are less known options available to homebuyers that will allow you to get into a home without having to have any down payment at all.
The first option to look at is an USDA loan.  USDA loans will give you 102% of the appraised value of the home, which will cover your closing costs. This loan will be a 30-year fixed rate loan, with an interest rate based on what the market is currently at.  You will need to have a 640 minimum credit score unless you have been through a short sale, then you will need a 660 credit score.  The draw back with this type of loan is that it is only available for specific areas, which are mostly rural communities.  There are income limits as well, which means if you make over a certain amount of money you will not qualify.  This loan is only for a personal home that you plan on living in, but most existing single-family homes and new construction single-family homes will qualify. Some condominiums and modular homes will qualify for this loan as well.  It will work for both first time homeowners and those that would like to move to a different home.   To find out more about this type of loan and to see if you qualify you will need to call mortgage lenders in your area and ask them if they do USDA loans and what the qualifications are.
There are also local banks and credit unions you can work with where you can get into a property without a lot of money out of pocket.  To find these banks, start calling local banks and ask to speak to their mortgage department.  Ask them if they have a low cost, or no down payment option loan to get into a home.  There are a lot of options for first time homebuyers in this area.  My son went through this experience last year.  He found a bank with a no down payment option and got prequalified (Getting pre-qualified is a must to know how much they will loan you to buy a home).  As he went through the process, he had to pay for the appraisal out of pocket which was around $500.  He chose to pay for a professional inspection on the property about $250-$350.   At closing he had to bring in $200-$300 for some closing costs.  All in all, he got into a $150,000 home for around $1,000 out of pocket, of which $250 was optional.
Lending rules have relaxed a little so there are now options to get into a home with little out of pocket money. If you want to buy a home and you do not have a lot of money saved up, consider these options, as there may be a way to get you into a home.

A Unique Way to Invest in Commercial Properties

A Unique Way to Invest in Commercial Properties

One way to invest in real estate is by investing in commercial properties.  Commercial properties consist of retail, office and industrial buildings with a subcategory of industrial buildings that include multiple storage units.  Storage units are a great investment because they are easy to build and easy to maintain.  Storage units are usually block buildings with metal partitions that can have either exterior roll up door entrances or interior hallway entrances.  The units can vary in size from 5’x5’ to 10’x30’ and rent from $50.00 to $175.00 per month.  These would be non-heated units; heated units would rent for a premium of $25.00 per month more.
A great way to create these units is to find one-story industrial buildings that are vacant, outdated and need a lot of work.  Purchase the industrial building for 70% of the ARV (price per square feet of an industrial building in good shape) minus the rehab cost to convert the building into storage units.  Once owned, gut the building and install simple partitions to create a hallway and individual storage units with 4’ to 6’ wide roll up doors on each unit depending on the size of the unit.  Put an electronic security lock on the exterior door and allow each individual renter to put a padlock on their unit.  Put security cameras on the inside hallways and security lights on the exterior of the building.
It is very easy to get a 20+ cap rate on storage units bought this way.  Taxes and insurance are low and maintenance is minimal.  Utilities are paid for by the landlord, but they are minimal also; one light bulb per unit and no gas or water.  You can hire a manager or manage the storage unit yourself.
These industrial buildings should be located near residential communities on a commercial corridor so they are easy to access by renters needing to store furniture and other items.  The industrial building should be a minimum of 4000 sf and 10’ tall on the inside.  The partitions can be built with wood studs and one sheet of plywood or metal studs with corrugated aluminum panels.  The hallways should be a least 5’ wide and have doors at each end for easy access.   You can create 40 units of varying size in a 4000 sf shell and lease them for approximately $1.00 /sf. Smaller units go for more per square foot than larger units.
This is just one more way to make a great return on your money by investing in real estate.

Benefits of Using a Real Estate Agent

Benefits of Using a Real Estate Agent

Though DIY is a very popular trend for all things home décor, one thing that should not be DIY-ed is buying or selling a home.
Real estate agents help homebuyers and sellers every day by putting all their experience into helping you secure your next real estate transaction.  Let’s go over some of the benefits of hiring a real estate agent.
Your Realtor Comes with a Team
Purchasing a home isn’t as simple as signing on the dotted line.  As a homebuyer or seller, there is a whole team of professionals involved in the sale. When you are buying or selling a home these are just some of the professionals you will need to work with:
Home Inspectors
Real Estate Lawyers
Mortgage Brokers
Contractors
Home Stagers
Photographer
When you hire a real estate agent, they bring a team of real estate professionals to your transaction.
Buyer Benefits
As a homebuyer, there are benefits to working with a real estate agent.  They are a partner for all negotiations and have early and sometimes exclusive access to listings.  When hunting for a home, information is key. Work with a realtor to make sure you have access to all the information available.
Seller Benefits
How many homes have you sold in the last year?  There is nearly a 100% chance that you sold fewer homes than a real estate agent, if you sold any at all.  Real estate agents sell homes for a living — take advantage of all that experience.  Real estate agents know how to showcase your home in its best light through photography and staging, so take advantage of the latest digital marketing and ensure that you get the best price for your home.
How to Interview Your Real Estate Agent
There are so many benefits to hiring a real estate agent for both buyers and sellers.  To have a successful partnership, you will have to pick the right agent for your needs.  Some questions to ask when you are interviewing a real estate agent are:
How many homes like mine have you represented buyers or sellers for in the past year?
How long have you been a real estate agent?
Do you offer any exclusive marketing opportunities?
Can you advise on how I can make my home more marketable?
These questions will tell you how well you and your agent will be able to work together.  It is as important to find a real estate agent you can work well with as it is to find a real estate agent at all.  Finding the right real estate agent will make your next real estate transaction a successful one.

3 Financial Benefits of Owning a Rental

3 Financial Benefits of Owning a Rental

There are several financial benefits that come along with owning a rental property.  A lot of investors focus solely on the rental income itself, however, there are other financial benefits to consider.

Rental Income
Owning a rental property, with a tenant occupying the property, enables you to receive rental income.  Let’s suppose that you have one tenant.  Your tenant pays you a monthly rent amount of $1,100 a month.  Your PITI (principal, interest, taxes, insurance) mortgage payment is $700 a month.  By subtracting $700 from $1,100 it will leave you with $400 cash to go into your pocket each month, right?  NO not exactly, there are 2 more costs to consider.

From the $1,100, you will want to assume about 5% a month for vacancy costs, and 5% for maintenance costs.  These are costs that you do not want to ignore.  After deducting these additional costs, you will now have about $290 a month that will count as your cashflow income.

Tax Write Offs
There are huge tax deductions for rental property owners.  For example, you can write-off interest on your mortgage and credit cards used to make purchases for your property.  Other write-offs included; insurance, travel expenses, legal fees, maintenance repairs and property taxes.  You can find a more extensive deduction list on www.Nolo.com.

Appreciation
Appreciation is when your property increases in value over a period of time.  It could also depreciate and experience a decrease in value.  However, real estate is a relatively safe long-term investment because of increasing value or “appreciation” that occurs over time.  Most appreciation happens because of increased demand for properties or a change in interest rates or inflation.

Let’s assume you purchase a property for $100,000.  This property appreciates 5% in value every year for 10 years.  After 10 years, your property will have increased in value by almost $63,000.

Owning a rental property brings immediate financial benefits along with long-term financial benefits, making rental properties a top investment option for investors.  With careful planning, rental properties can be a significant piece of your investment income portfolio.

5 Mistakes Buyers and Sellers Make with Home Inspections

5 Mistakes Buyers and Sellers Make with Home Inspections

What is a Home Inspection?
A home inspection is a mainly visual evaluation of a home’s condition.  Home inspectors typically provide inspection services to determine the performance of the home.  The inspection isn’t just about identifying problems with the house.  A thorough inspector considers the appointment of a master class in your new home. (1)
Not Researching the Inspector
Too many buyers and sellers take whatever name is recommended without doing research.  The inspection is only as good as the inspector doing it.
A few questions to ask:
How long have you been inspecting homes?
How many inspections have you done?
What are your qualifications, certifications and training?
What was your job before you were a home inspector?  (Ideally, your professional was in contracting or building.)
You want a certified professional who stays current.  “There’s a lot of stuff you have to know, and you want someone who’s keeping up with ongoing education.”
You’re looking for an inspector who can analyze the home’s strengths and weaknesses—then explain them. (1)
Not Attending the Inspection
Attendance may not be mandatory, but it’s a good idea.
Just reading the inspection report isn’t enough for most homeowners to get the full picture, so it’s very important for the homeowner to see it so they can understand it.
The inspection will take 2-3 hours to complete, so set aside enough time for the whole thing.
Many inspectors don’t want to give you advice on whether to buy the home, but a good inspector can give you an estimate of how much money you’ll need to put into repairs and upgrades and talk about how well that fits your budget. (1)
Not Reading the Inspection Report
Too many buyers and sellers just glance at the inspection report.
You need someone who uses “clear, concise” language in person and in the report.
One Clue:  Scan a few inspection reports.  Either check the website or ask for a sample.
A knowledgeable profesional will state simply what’s wrong with the house and what it will take to fix.
Reports are often in digital format, with photos to illustrate the home’s strengths and weaknesses. (1)
Not Getting a Presale Inspection
Many sellers elect to leave the presale inspection to the buyers, but that’s a mistake.
When the buyers get an inspection (and if they’re smart, they will), the sellers will have little time to complete repairs and keep the sale on track.
If the sellers have the home inspected before putting it on the market, they have more time to get repairs done and with the extra time, they can shop around and control costs.
Both buyers and sellers often wait too long to engage an inspector.  You should find an inspector long before you have (or make) an offer.  Some buyers and sellers will wait for the second-to-last day before they even call.  “Any good inspector will be booked out.” (1)
Not Prepping the Home
Inspectors are upset when homeowners don’t prepare the house.
“Don’t force the home inspector to empty the closet to get into the attic.”  If you have a crawl-space hatch, move anything sitting on top of it.
Have a lock on a utility closet, basement or shed?  The inspector needs access, so open it or provide keys.
For a seller, the best tactic is to be at home to meet the inspector, introduce yourself, provide your cell number – and then you can take off.
To reduce the need for repeat inspections, hire professionals to do repairs.
Too many times, when faced with a list of needed repairs, a seller will DIY or try to get them done cheap, but that shows up during the re-inspection and could mean another round of repairs – and a 3rd or 4th inspection. (1)

(1)= Dana Dratch (Bankrate.com) January 2016

How to Get a Realtor to Write Offers

How to Get a Realtor to Write Offers

Below is an example of a simple email you can send to a real estate agent that should trigger them into writing your offer so it will protect you from potential loss while giving you the best possible chance to do a deal that makes you money.

Dear (Enter Agent Name Here),

Thank you for your work with me on: 413 Buckthorn Drive Lexington SC 29072.

I would like to offer $70,900.00 on this property under the name (ABC, LLC.). Further I will need the contact info for the title company so I can arrange to wire funds to them. I will give the seller or their “Title Company” a $1,000.00 deposit as soon as they accept my offer or put a check in escrow with my attorney. This offer is subject only to the following 15-day due diligence clause (or your equivalent):
Commencing upon receipt by Buyer’s Agent of a mutually executed Agreement of Sale, a Fifteen (15) day period shall begin (the “Due Diligence Period”) during which the Buyer shall have the right to carry out and perform all reviews and investigations deemed necessary by Buyers, including, without limitation, a physical review and inspection of the conditions of the buildings (if any) and the soil, environmental inspections, review of title, review of zoning, review of any permits and approvals for property deemed necessary by Buyer. In the event Buyer, in its sole discretion, is not satisfied with the review, evaluation or investigation during the Due Diligence Period, Buyer may terminate this Agreement by written notice to Agent for the Seller prior to the expiration of the Due Diligence Period, and at such time, shall receive back deposit(s) if any, and neither party shall have any further obligation hereunder. If such notice is not given, this Agreement shall continue in full force and effect in accordance with its remaining terms.
(Enter Agent Name Here), I would like this offer presented in writing to the seller! Further, I will want you to resubmit the offer every two weeks until the property is under contract. Should the property end up under contract with someone else, could you please ask if we can submit this offer as a back-up offer?

All the best,

(Your Name Here)

The email above is designed to help you get your agent to properly fill out an official “written” offer form. By using this as a template, you can quickly initiate a lot of offers.  Please remember, it is critical that you get your agent to present your offer in writing, as verbal offers almost never result in a “done deal.” Agents have a fiduciary responsibility to submit your offer in writing if you request that they do so.

It does you no good to let real estate agents teach you how to buy at retail so they can make a bigger commission when your business revolves around closing deals that are profitable to you and/or your buyers if you are wholesaling.

Once your agent writes the offer, you should go over it with your agent to make certain that the contract says what you want said.   Many states that approved Real Estate Purchase Contracts (REPC) have a built-in, often even state mandated, “due diligence clause” to protect you as the buyer. However, many agents check the box that says you don’t want this protection because the agent is looking for a quick deal.

Recently, many state contracts have been rewritten to force buyers to use a licensed inspector and continue through with the purchase if the seller is willing to make the changes indicated by the licensed inspector. You or your buyer will want to choose your own inspector, perhaps yourself or one of your contractors.

While you won’t want to mention to the agent that you are using the “Due Diligence Period” to find a buyer, it is obviously paramount that you be able get out of the contract and get back your deposit back if you can’t find a buyer.

This letter is written to help you make your deposits to the title company as opposed to the agent’s brokerage. The reasons for this are that:
The title company has no reason to keep your deposit if the deal falls through.
The title company is unlikely to cash your check unless/until the deal closes.
The deposit in most cases is not due until 3 days after your offer is accepted.

Writing a deposit check to the agent’s brokerage will please the agent. They will almost always deposit the check to their escrow account. Further, they will most certainly keep the money if they can. Expect no mercy if you miss a deadline or make a mistake.

Obviously, this email offer and accompanying explanation is designed to protect your resources and get you only deals that will make you money. Perhaps the most important thing of all to learn is that the listing agent and the buyer’s agent are both paid by the seller. Hence, they will take the sellers side every time. Good luck and may your next deal come quickly and be a big one.

Benefits of Owning a Home

Benefits of Owning a Home

Benefits of Homeownership
You get married, buy a house, have 2.5 kids; people are less and less likely to follow these traditional rites of passages in any particular order, let alone the one listed.  “So why are people still buying houses? Why did the National Association of Realtors report that 5,250,000 homes sold in 2015”?
Buying a house is much more than a symbolic step in your life. It offers long term financial and lifestyle advantages whether you are single, purchasing the home with your partner or buying the home for your family.
Equity and Homeowners
A term that gets thrown around a lot when discussing the benefits of owning a home is equity.  Equity is a financial term that describes the money that results from selling your home after you pay the balance of your mortgage.  “Over the course of a standard 30-year mortgage, each monthly payment goes towards building that equity.”  Instead of throwing money away on rent, your monthly payments go towards building equity.  Also, any improvements, commonly referred to as “sweat equity,” work towards increasing the eventual sale price of your home.  Through hard work and monthly payments, homeowners receive a cash-out when they sell their home and liquidate their equity.
Tax Benefits for Homeowners
As a homeowner, you can receive many tax benefits.  The money you would already be spending on rent is now a tax deduction.  The interest and property tax portion of your mortgage are tax deductible.
Lifestyle Benefits for Homeowners
Communities are built on the collective pride of the ownership of its homeowners.  As a result, some of the best neighborhoods have very high owner occupancy. This leaves very few options on the rental market.  By buying a home, you will have easier access to communities with the best schools, amenities, and other opportunities.
Benefits of Homeownership
To review, buying a home isn’t something that you do because you should, it is a solid financial and lifestyle investment.
“You Build Cash Equity
Are Eligible for Tax Deductions
Contribute to a Forced Savings Plan
Experience Pride of Ownership
Opportunity for Sweat Equity

Overcoming Objections

Overcoming Objections

A natural part of working as a real estate investor is dealing with objections. This might include an objection to an initial offer, an objection during the negotiation process or an objection when making a counter offer.
For example, if your buyer offers you an objection that they are not interested in a property (because of the location) or don’t want to be north or south of a certain street, you have the opportunity to help them by meeting their request and finding a better location or property.
How you handle the objection shows your strength and ability to deal with everyday life as a real estate investor. It also demonstrates your professionalism by simply listening and acknowledging the concern.
Most confusion or conflict can best be avoided all together by simply asking good questions – where specifically are they buying properties and what type of properties do they wish to purchase? Clarify, is it a core item or is it a wish list? For which items might there be some compromise? Let your cash buyers tell you.
Once you get the home under contract, that is usually when the objections will start. If you can’t overcome the objections and you find yourself stuck with a home that no one wants, both you and your buyers are frustrated!
Not all objections are the same. Some are deal-breakers, but most aren’t. And with enough experience, you’ll know that even a deal-breaker objection can be overcome under the right circumstances. Instead of dwelling on what they don’t want, suggest another solution.
As you start any business relationship with a buyer, clarity and good communication throughout the process will help you better navigate and overcome objections.

The Importance of Housing Inventory Statistics

The Importance of Housing Inventory Statistics

We are all aware that statistics have an important role in many aspects of our daily life. They cover weather forecasts, medical studies, insurance, consumer goods, quality testing, the stock market and a lot more. Without statistics the numerical data gathered by marketing firms, companies that delve in the financial world, and researchers would be futile.  This is why any form of statistic is significant.
Housing inventory is simply the number of houses for sale. Its statistics, aside from allowing potential buyers to see meaningful trends and changes in the world of housing, basically includes the number of houses available in the market. Lack of housing inventory statistics could result in low housing sales. Housing inventory could mean many things, whether you’re a buyer or a seller. High inventory means greater selection for potential buyers, while low inventory could push sellers to spike their price. And an increase on the fundamental price of a property may result in buyers choosing to rent rather than buy. A low market inventory could offer sellers high earnings despite having less quality houses. And spending a high amount of money on a junky home means nothing but a distorted market. Inventory statistics can also be determined by the period of time. In USA, if it is spring time, the housing inventory elevates because it is the season where housing activities are increased.
When real estate inventory is extremely low, the economy is being affected.  In a healthy market, housing sales’ contribution to the GDP is roughly 20%. Residential real estate does not only provide housing for families but also could be the greatest source of wealth for many people. It specifically affects the economy through construction expenditures and consumption spending on housing services. When home prices continue to rise, homeowners gain more equity in their homes, making them put their house on the market.
Housing inventory statistics basically influence residential real estate sales. If the homes for sale are not enough, a price hike of the available homes would be the result, regardless of their quality. While higher inventory offers more choices to all the buyers, it also means the more chances of sales, thus the economy gains.

Understanding the Most Accurate Method for Determining a Comp

Understanding the Most Accurate Method for Determining a Comp

Trying to determine the correct value of a property before it has been rehabbed can be a challenge for an investor.  Understanding how to properly obtain the After Repair Value (ARV) of a property can be the difference between a money-making deal and one that fails. We are all in this business to make money.  Understanding the proper way to evaluate a property will help put that money into your pocket.

Let’s look at some different ways folks attempt to get an accurate number to determine the ARV of a property.   Perhaps you have tried some of these:

Some individuals ask their agent to run a report for them that gives the median or average price of the sold properties around the subject property.  They then take the average or median price and try to plug that number in as an ARV.  The problem in doing this is that there is no consideration of the exact square footage of the subject property.  This method might work if every house in the neighborhood were exactly alike. However, no two houses are EXACTLY alike, let alone an entire neighborhood.
Other individuals like to consider the active MLS listings their agent provides to help them determine a price. The problem with an active listing is that the number used is a “wish” price. That is all the asking price is, a simple wish.  Trying to determine an ARV off of a wish can turn bad very quickly for an investor.  The ARV needs to be accurate in order to make money on a deal.
Others like to determine an ARV by using the various estimates from online sites.  They might take the Zestimate or other estimates from real estate sites to try to determine the ARV.  This might give an accurate number, but on the other hand, the offer could be way off of the correct ARV.  By not getting an accurate number for the ARV, an investor could be facing a big financial problem in their rehab project.

So, what do you do to insure accurate number for your ARV?  The best place to start is to have a good real estate agent pull comps for you.  Inform the agent that you need comps that are sold. Tell the agent you would like comps that are within a half-mile of your property.  Let the agent know you would like comps that have the same number of beds and baths.  You would also like comps that are within 20% of the square footage of your property.  Also, let the agent know you want nothing that was sold more than six months ago.  These are the starting points for finding good comps in order to get an accurate ARV. If an agent understands how to find good comps, you are on your way with this property.  If the agent cannot find good comps, you should consider walking from this property.  If you can’t find comps, you may have a difficult time selling the property when the rehab work is done.

Value the property correctly and you will have a great time going to the bank. Have great success in your investing.  You deserve it!

Finding Properties – The Basics

Finding Properties – The Basics

There are many ways to find investment properties in any real estate market in the country. A few examples include marketing to: listed properties, for sale by owner properties, absentee owner properties, distressed sellers, etc. However, this article is not about the specific ways to find properties. Instead, we will discuss free vs. paid marketing. When all the details are extracted, marketing comes down to a cost of either time or money. This is something new investors must understand. To be successful in this business you MUST spend either time or money to find deals.
In real estate investing, money is made when an acceptable property is found. There are only two ways to find such properties. New investors, that don’t have any money, must spend their time searching for properties. One of the quickest ways to find possible deals, without any money, is to scour the Multiple Listing Service (MLS) and make offers on properties that are more likely to accept an investor-type offer. This technique only requires your time in evaluating the properties and submitting offers.
On the other hand, an investor could spend money to find possible deals not yet publicly listed. An example of this would be to acquire a list of probable sellers and then execute a marketing campaign targeting the list. The marketing campaign could be mailing out a series of postcards or hiring someone to place door hangers. An example of some costs associated with this style of marketing would be: acquisition of the list, the media in which you are using to deliver the message, the postage, and/or the person that places the door hangers.
The overarching lesson to be taken from this article is that investors must pay for finding properties with either their time or their money. Both techniques can be effective and one must be practiced consistently before any properties can be found. Therefore, if you find that you are not doing enough deals, then increase either the time/money or both that you put into finding properties.

The Fastest Way to Retire Investing in Real Estate When Starting with No Money

The Fastest Way to Retire Investing in Real Estate When Starting with No Money

If you want to have regular income to retire on in the future, follow these real estate investing steps.

First, start wholesaling properties by finding properties for other cash investors and flipping those properties to them for fast cash fees.  You can make between $5,000 to $10,000 in fees on each deal completed and build up capital for a down payment on a fix and flip of your own.

Next, find properties where you can use seller financing, by either assuming an existing loan, having the seller carry paper or lining up private money financing where you put 25% down and they finance 75% of the purchase price.  Make offers that allow you to make a reasonable profit after paying for private money financing or seller financing.  Start buying, fixing and flipping properties to create profits of $20,000 to $30,000 to continue building capital.  Do fix and flips every 4 months with the same down payment money and earn an additional $75,000 during the year.

Finally, pool your resources and find rental income properties that you can now purchase for cash so you can negotiate a great deal on it.  Find properties from between $50,000 and $100,000 that bring rental income between $750 and $1200 monthly.  These properties should have an ARV that is at least 25% higher than your purchase price after rehab.  Buy the properties with cash, rehab them, put a renter in the properties and then finance the properties with a new loan from a local credit union for 75% of the appraised value.  By buying properties with cash, fixing them and putting them under lease, you can finance them for 75% of the appraised value rather than 75% of the purchase price if you have held them for 3-6 months.  By doing this you will be able to finance the properties for nearly the amount you have invested, getting all your capital returned so you can find and purchase another property for cash and do the same process repeatedly.

An example is as follows:  A property has an ARV of $125,000 and will rent when fixed up for $1100/month.  Using the formula ARV x 75% – rehab = MO you make an offer of $75,000 and negotiate up to your maximum offer of $78,750.  ($125K x 75% – $15K rehab = $78,750) If you were to finance the deal up front, the bank would loan you 75% of the purchase price and you would need to put down 25% or $19,687 and pay $15,000 in rehab cost for a total investment of $34,687.  If you start with $100,000 in capital you can invest in three properties and then you will be out of money.

If you purchase the property with cash, rehab it, put a renter in and then finance it 3-6 months later, the bank will loan you 75% of the ARV ($125K) which is $93,750.  If you paid $78,750 for the property and put $15,000 in rehab, your total investment is $93,750; so, you will get back your entire investment through financing at the later date, making it possible to finding and purchase another similar property every 3-6 months until you have dozens of rental properties using the same $100K of capital.  You will receive a positive cash flow of over $3000 annually on each property with no money invested.  Once you have enough properties to live comfortably, it is time to retire and let the rent pay off the loans.  After a certain amount of years of appreciation, you can refinance again to pull out additional capital for more diversified investments or to just have fun in life.

Understanding Numbers on Buy, Fix, and Sell Deals

Understanding Numbers on Buy, Fix, and Sell Deals

When looking to buy a property to fix and sell for a profit, you have to understand the numbers behind the deal.  Here are the all the relevant numbers we must take in to account when flipping a property.
Rehab cost – This is the total cost to fix the property to get it into a move-in-ready state to maximize profit.
Profit – Make sure your profit margin is enough to make the flip worth your time and effort.
Closing cost – When you by a property, the buyer is responsible to pay closing cost.  3% is a typical number to plan throughout the US for what we will pay for closing cost.   I would suggest doing 3% of the after-repair value (that is the value of the property once it is fixed up and ready to sell).
Real Estate Agent commission – The seller is responsible to pay the real estate agent once the property sells.  A 6% commission rate will be standard throughout the US and Canada.  The Real Estate Agent commission will be figured on the After Repair Value as well.  When you have fixed the property and sold it, you will pay the agent 6% of what the property sells for.
Holding Cost – Holding cost accounts for the money you spend on owning the property while you fix it up to sell. Use 1% per month of the After Repair Value to calculate your holding cost. Holding cost will always very depending on the amount of time it takes to fix the property and the amount of time it takes for the property to sell.  To get these numbers, ask the contractor how long it will take to fix the property and talk to the real estate agent about what the average days on market is for the area your property is in.
When you run your numbers, make sure you take all these items into account.  There is always risk in doing flips on properties, so make sure you do your due diligence and your numbers are accurate before you move forward.

Extending What is Possible

Extending What is Possible

Investors, many times, enter the real estate investing business with little, but increasing, confidence.  During the stages when an investor is seeking to invest in real estate, purchase their own investments or unload investments, there may be times when the investor run out of ideas.  This has also been known as writers block, having a brain fart, or simply being at a loss of ideas.

Here is one of my favorite and greatest ways of opening my creativity box and extending what I think is possible.  This can be used in real estate but may also be used in any facet of life. It is a simple but very effective task.  I have personally used this idea to create new financing ideas, find more properties, open my potential closing and sale opportunities, and much more.

The idea comes originally from Bryan Tracy, a public speaker.  Here is how it works:

Write a question. This can be any question but usually begins with the word “How”.
For example: I may write the question: “How do I market to my prospective sellers without any money out of my pocket?”

Answer the question twenty times.  This may seem simple in the beginning but this format is intended to stretch your imagination beyond what you can currently see.

Remember, no answer is a bad answer.  This is simply a brain storming method to get your creative juices running.

Here is an example of how this may look:
How do I market to my prospective sellers without any money out of my pocket?”
Look for a marketing grant.
Partner with other people that pay for marketing and co-market.
Pay for marketing after a deal has been completed.
Do door to door marketing.
Use services, such as a library, that can help create the marketing
….

Taking the time to answer all 20 questions will give you ideas you may never have thought of and likely ideas others, like your competition, have not discovered.

Get Your Business in Order for the New Year

Get Your Business in Order for the New Year

Let’s start the New Year with a clean slate for your business. Clean out the clutter and streamline your process so you can function effectively. Organization in any business can help you improve your time and functionality so you can generate a positive outcome for your efforts. I will share with you my process of getting my business in order.
Organize your workspace: The place where you work the most needs to be organized. Have filing systems and color-coordinated or labeled folders for different tasks, clean up old files and get rid of old deals, don’t let paperwork pile up on your desk, and make it easy to find what you need, when you need it.
Update your technology: You don’t need the latest or greatest computers, laptops, iPads, smart phones, etc., you just need ones that have the features you use. Make sure you know how to use the features on your gadgets. If you need help, ask someone who is more knowledgeable in technology than yourself.
Marketing budget: Marketing is a must for your business. Take some time to figure out your marketing plan for finding deals or buyers. Also set a budget that is workable for you. Don’t over extend yourself if you cannot afford to market. Instead, find cheaper ways of getting your message out there.
Set your goals: Let’s get you focused with some S.M.A.R.T goals. Specific, Measurable, Attainable, Realistic, and Trackable goals. This method of goal setting will allow you to be flexible with your success but also keep you on track and accountable. Map out your business so you know where you want it to go and how you’re going to get yourself there.
Constant organization will keep you moving efficiently throughout the year. Now is a good time to really get started on the right track. There are many ways you can get organized. Choose your method of choice and get to it.

10 Books To Boost Your RE Business and Focus in 2017

10 Books To Boost Your RE Business and Focus in 2017

Real Estate investing is one of the best ways to build wealth.  As a result, there are literally thousands of books out there on real estate investing.  I, myself, have read a countless number of them.  I have also learned that although real estate gurus may agree and disagree on different strategies, the one thing they all agree on is investing in yourself.   If you have dreams of becoming a successful real estate investor, you have multiple resources to do so.

I’ve compiled a list of my top 10 books for real estate investors:

“The Compound Effect” by Darren Hardy
The Compound Effect is based on the principle that everyday decisions shape your destiny.  Little, everyday decisions will either take you to the life you desire or to disaster by default.  It’s the small daily habits that have compounding results.

“Eat that Frog!: 21 Ways to Stop Procrastinating and Get More Done in Less Time” by Brian Tracey
The whole concept of eating your frog is based on the premise that if you “ate a live frog every morning, that would be the hardest thing you do all day.” This book helps you understand the importance of managing your priorities to get more done.

“The One Thing: The Surprisingly Simple Truth Behind Extraordinary Results” by Gary Keller and Jay Papsan
“What’s the ONE Thing you can do such that by doing it everything else will be easier or unnecessary?”  The book is centered around this one question and the power of organizing every area of your life around ONE Thing.

“How to Win Friends & Influence People” by Dale Carnegie
This book teaches you six ways to make people like you.  The real estate business is as much about people and relationships as it is about properties.  You will learn important principles on how to work with and influence people that can in turn help you create more deals.

“Go Time” by Scott Yancey
“Go Time” brings all of the tools, resources and insider tips to every reader who wants to change their life and become financially independent through real estate.

“Think and Grow Rich” by Napoleon Hill
Napoleon Hill uncovers how to unleash your full potential and achieve guaranteed success in life and work by following principles outlined in this book.  You will learn how to conquer many common fears, such as poverty, ill health, criticism, loss of love and death.  This is a must read for personal achievement.

“The Four Hour Workweek” by Tim Ferriss
“The Four Hour Workweek” shows readers how to live more and work less.

“30 Days to Real Estate Cash” by Dean Graziosi
This book shows you different strategies on how to earn instant money with proven ways to go from zero cash to cash-in-hand in 30 days.  It’s a simple read with doable steps to help you get your first deal done.

“Every Landlords Tax Deduction Guide” by Stephen Fishman J.D.
A guide to learning how rental properties are taxed and what you should know as a landlord.  Every deduction that you should make as a landlord is included as well.

“Millionaire Success Habits: The Gateway to Wealth & Prosperity” by Dean Graziosi
This book is designed with one purpose in mind; to take you from where you are in life, to where you want to be in life, by using easy-to-implement “Success Habits” into your daily routine.  It’s not about adding more time to your day but replacing those things that are not serving your future with success habits designed specifically to assist you on your journey to a better you.  This is a recipe for success that anyone can follow.

The “How” of Financing

The “How” of Financing

The investment world is full of would-be investors tying to find their way in the real estate investing world and most investors have a goal of purchasing properties.  These purchases can be for a buy then hold strategy or a buy then fix and sell strategy.

A large number of investors, in the beginning, particularly, do not feel they have the financing or the capabilities to purchase real estate investments.  They may feel they cannot use their own financing to purchase or more commonly feel they do not have the financial knowledge, know-how or capabilities to invest in real estate.

The truth to anyone’s ability in purchasing real estate investments, at any stage in their career, is actually found in a quote:

“Empty pockets never held anyone back.  Only empty heads and empty hearts can do that.” — Norman Vincent Peale

To get out of the rut of the “financial inability woes” you need to start asking yourself one question each and every time you approach an investment opportunity.  That question is “how?”

Notice that the point is not, “I cannot so I must move on…” It is, “How?”   You are not limited when it comes to your answers.  The “How?” can come in any form as long as you are looking for the “How?”

You do not need to stay within the answers you received in school, from other investors, or from life experiences.  You can find ways to create opportunity for any real estate investment by asking “How?”

Next time you are facing a real estate investment opportunity, ask yourself “How?” “How do I purchase this?” “How do I afford this without money?” “How do I convince the buyer to work with me?” “How…?”  You may surprise yourself that you have found a way to invest, even when it did not seem possible.

Finding the Best Deals

Finding the Best Deals

Eighty percent (80%) of all homes sold are sold to first-time home buyers who are either a neighbor or someone recommended by a neighbor. These people want a 3-bedroom home with more than one bathroom. They prefer ranch style, low-rise bungalows without steps between living areas. In particular, buyers want larger kitchens that open into a family room that exits directly to the back yard onto a slab or a deck.

It does us no good as a wholesaler or even a rehabber to buy a property that people don’t want. It’s not only okay to find deals that need a lot of work; it is preferable, provided the finished property meets the criterion above. Successful rehabbers and wholesalers tend to work in areas where homes are selling quickly but this home has some issues. There are issues that you want and issues you want to stay away from.

You want a property that is regular for the neighborhood but needs work. Please realize that when a property has serious FHA failure points and code violations it will not fetch a mortgage. Unless an interested home-buyer has cash, they won’t be able to buy this home. Hence, you will only need to compete with other investors and that is what you want.

Another criterion that offers a better chance of obtaining a good deal is finding a property that is vacant. Many top investors only work with properties that are vacant. Because no one is gaining any value from a vacant property, it is likely that the buyer doesn’t want it. But, there are other indications of someone not wanting their property. Those include debt, disease, death, divorce, and having to move to another area some distance away.

Knowing which kind of lists to use, where to find them, and how to find the best deals within the lists, can be critical. Real Estate Pro Software can help you find pre-foreclosures, foreclosures and absentee owners who bought multiple properties in each area but live in a different state. Often, these people can become overwhelmed with the task of long distance management and not only can offer good deals but will often owner finance.

If you have RE Pro, just call the advisory line and we will walk you through ways to maximize the data. But if you don’t, everyone has access to Internet websites such as Redfin.com.

Redfin.com provides a simple list that is available to everyone but is seldom used to its maximum potential. Here you can select entire lists by zip code or by area.

Selecting all the Redfin.com properties in Murray, Utah, we find a list of 426 properties/homes. By exporting the entire list to Excel we can begin deleting properties we don’t want to purify our list.

Start by eliminating everything that is not a single-family home and 426 homes becomes 251 homes. This gives you just the easiest homes to sell and the homes that are more predictable price-wise. Homes that are older than 40 years are older than what many people want. Eliminating these older homes also eliminates potential issues with lead paint or asbestos. Eliminate these and you have 113 homes to review.

Homes that have only 1 bathroom can often be slow to sell, so we will eliminate them. Further, since homes with more than 3 bathrooms are not likely to be reviewed by your typical first-time homebuyer, we will eliminate those. This gives you 44 homes to review. In our list, we had 4 homes that slipped through without an address. Hence, we now have 40 homes.

After sorting by square feet, we will eliminate any homes that are over 2000 square feet, as they are often too big for almost all first-time homebuyers. In this list, you will have only 5 properties to review. In many areas, you can sort alphabetically by location and find unsafe “location” areas to eliminate. There were no unsafe areas in this particular list.

Lists will not always reduce down as dramatically as this one did here. Hence, the next item we can review is the price per square foot. This item may require inserting another field and dividing the price by the number of square feet but it will provide you with properties with the best potential to be a good deal.

Price is always important, but when you are wholesaling, it is critical because we have added ourselves yet another expense. Hence, what we bring to the table is the ability to know what is a good deal and to find those good deals for our buyers.

How Often Does an Investor Lose in Florida Tax Liens?

How Often Does an Investor Lose in Florida Tax Liens?

The answer is a resounding “NOT VERY OFTEN.”  Having a full understanding of what to look for in a lien should help to shape your decision on if you should buy a particular lien.  We are going to discuss three things to look for to determine if we will meet our goal of making money.  We should be able to walk away making 18% of our money on a regular basis.  This is the standard by which we should measure our success.  Let’s consider what we should do:

Do your best to buy current tax year liens.  In Florida, a lien is described as having a tax year, as well as a certificate year.  For example, a lien may have a Tax Year of 2016 and a Certificate Year of 2017.  This means the taxes occurred in 2016 and the certificate was issued in 2017.  The redemption period (the deadline for the property owner to pay you) will be in 2019.  Understanding when you are to be paid will help you to maximize your investment.

Check the tax records to see if there are any other outstanding tax liens for the property you are considering.  Having other tax liens can be fine on a property that has enough value to support paying additional liens.  It is when a property has accumulated more tax liens than the value of the property that there can be trouble.  Knowing the number of past tax liens can help us make effective decisions in our investing.  Avoiding properties that have acquired too many tax certificates will keep us from throwing our profits away.

In Florida, a lien will be paid several ways.  It can redeem on time.  It can redeem before its time.  A lien can be paid before the foreclosure.  It can be paid between the foreclosure and the auction.  The property can be auctioned and then the lien holder paid.  All of these ways will result in the lien holder being paid.  A little homework will ensure successful tax lien investing.

If you follow these guidelines, you will invest successfully.  In addition to above, avoid contacting the property owner.  The county will take care of all communications.

It is very difficult to lose from Florida tax liens.  Do not lose track of your certificates, as they act as money.  They have a seven-year statute of limitations.  If you forget about them, you lose.  Stay organized and on top of your investment and you will make good money.  Do not buy tax lien certificates on properties that have so many liens that the money owed in tax liens is greater that the property value.  If you can add and subtract, you can be a successful tax lien investor in Florida.

Goals

Goals

Obstacles are those frightful things you see when you take your eyes off your goal. – Henry Ford

Real estate can be a lucrative business. However, a person can also spend a ton of time spinning their wheels not knowing what to do. There is one way to help you to stay focused and that is to set goals. As my career rolls on, I have realized the importance of setting goals. This article is to serve as a basic guide to setting goals. This guide will help you get started, however, you will eventually create your own ritual for setting goals.
The first step to setting any goal is to be clear about what you want. Do you want to buy rentals, flip homes, or generate quick income? Don’t worry if your goals don’t seem “realistic,” but do be realistic about where you are starting. When working towards your goals, you’ll find that achieving a goal requires work…and the bigger the goal, the more work you’ll be required to do. So, set your goals per the amount of work you are willing to put in.
Next, select the desired time frame in which you want to accomplish your goal. If you don’t have a time frame attached, then it will be difficult to take the necessary actions to accomplish your goal. Without a time frame, life will most certainly get in the way.

Now that there is a time frame attached, what are some smaller steps you can take to move toward your overall goal? I like to set small, frequent goals that will get me closer to the big goal. I set daily, weekly, monthly, and quarterly goals, thus removing the guess work of what I should be doing daily. There are two reasons for doing this; 1) I achieve goals along the way, which keeps me motivated and 2) if I only have one big goal with a time frame of a year, it is easy to lose sight over a 12-month period. Therefore, it’s important to set small, attainable goals to make it easier to get to the big goal.
The research doesn’t lie: goals are a necessity in creating success. To begin, start by deciding what it is you want. Second, set a time frame in which you will acquire your desire. Third, set smaller goals that take you toward your bigger goal. Following this basic, simple process will help you achieve success.

How to Calculate After Repair Value Based on the Cost Per Square Foot of Comparables

How to Calculate After Repair Value Based on the Cost Per Square Foot of Comparables

When calculating the after repair value or ARV of a property, we always suggest using comparables or comps. from a real estate agent.  Let’s go through the math of how to use these comparables to get the best ARV possible.  As a quick review, remember the best comps have 3 important factors: They are close to your subject property, they have sold recently, and they are similar to your subject property. 

When you get comps from your agent, you will need 2 numbers for each comp you receive: the amount that the property sold for and the number of square feet in the property.  Once you receive this information, you will want to calculate the cost per square foot for each comp you have.  You get the cost per square foot by taking the amount the property sold for and dividing it by the square feet in the property (for example a property of 1000 square feet sold for $100,000, so take $100,000 / 1000 = $100).  In this example the cost per square foot is $100.  You will need to perform this calculation for each comp you have. 

Now that you have the cost per square foot for each comparable property you received, you will need to evaluate those numbers.  If you have 6 or more comps, you can take the high cost per square foot and the low cost per square foot and throw them out.  With 5 or less you will use all of them.  This will help dial in your ARV a little better.   

Once you have the cost per square foot on all the comps you are going to use, you will need to get an average cost per square foot.  To do that, take the cost per square foot on all the comps you are using, add them up, and divide by the number of comps used. (example: You have 4 comps with a price per square foot of 103, 98, 90,108. 103+98+90+108=399, 399 / 4 = 99.75).  $99.75 is your average cost per square foot. 

The last calculation you need to do is take the average cost per square foot and multiply it by the number of square feet in your subject property.  Let’s say are subject property is 1100 square feet, so take 99.75 * 1100 = $109,725.  $109,725 is the ARV.

This is a great way to calculate your ARV, because it is based on what similar properties in the neighborhood are selling at right now.   

Successfully Working with Realtors

Successfully Working with Realtors

Since over 80% of real estate is sold through realtors, it is important to learn how to work successfully with realtors.

First, let’s look at what an agent can do for us:

  1. Promptly provide complete and accurate comps.
  2. Literally unlock the door to potential deals so we can see the property at our convenience.
  3. Submit all our offers immediately as requested with our amount and our terms.
  4. Promote our low offers to the seller and other agents, improving our chance of acceptance.
  5. Help us get the seller to finance the deals.

Realtors can help you find properties using the MLS (multiple listing service).  Not only can realtors help you find properties to make offers on, they can also help you obtain information on similar or comparable sales, also known as comps, using the MLS.  Comparable sales can give you an idea of what investment houses will sell for.  Realtors provide the most up to date and accurate comparable sales.  These comparable sales are one of the most important items to know when calculating offers.

Anyone serious about wholesaling or rehabbing properties needs to look at properties that are vacant and in need of work/repairs. Realtors can help you here. Realtors are the only legitimate way to see listed properties that meet the criteria of needing work and being vacant. Here is where a realtor can help promote your low offers to the seller and dramatically increase your chance of getting your offer accepted. Your offer is much stronger if you include as an addendum captioned pictures up close and ugly showing what is wrong with the property. This can make an amazing difference in getting your offers accepted.

While it may seem that all realtors will be happy to work with you, such is often not the case. Eighty Percent (80%) of new agents are out of business within the first year.  Worse, some realtors don’t even want to submit offers or give the third degree about your credit worthiness. They do this because they fear doing a lot of work and not getting a sale. You need to train them to work with you your way. Does it make sense to invest in learning how to buy at wholesale and then let a realtor teach you how to buy at retail and they make a big commission while you lose money?

A new investor will often come across to the agent community with what is referred to as “rookie-breath.” The agents think the newbie investor doesn’t know what he or she is doing and will attempt to get rid of them. This is a sign to them that they must do a lot of work with no commission money in return. Further, they see your low offers as an embarrassment in front of the seller who was expecting them to get them “all the money.” Hence, they refuse to submit those offers, don’t return your phone calls, or insist you do things that are difficult, costly or even impossible, such as making a huge deposit and proving you have cash ready to complete the transaction.

Finding good agents, and training them is the first, best, and easiest way to become successful in investing, especially wholesaling. The good news is that even if they don’t want to submit your low offers, they have a fiduciary responsibility to do so. It is not their job to decide the acceptability of offers. They are merely there to submit the offer presented to them and let the seller decide.

You can remind them of their responsibility. You can present the problem to their broker or/and the local real estate association. Do this and see how quickly they decide to submit your offer.

Don’t let realtors get away with submitting your offer verbally over the phone.  Remember that verbal offers will never work. Your offer must be submitted in writing to have a chance. Further, you will want to resubmit your offers ever two weeks or so. As high as 75% of the investment deals that are done are either on resubmitted offers or offers submitted as a back-up to a deal that is under contract. Hence, you will want your agent to resubmit your offers.

Finding agents who are also investors can be a great strategy. They see and understand what you are doing. They may even be willing to partner with you on deals. Hence, they will be quick to recognize the value of getting seller financing. Typical Realtors see seller financing as negatively delaying their commission collection.

To find investing realtors just ask receptionists if they have any realtors that are also investors. Then ask to visit with them. Not only are you more likely to get your offers submitted, these realtors can often show you where the bones are buried. Just a little selectivity and training of realtors can dramatically increase your success in real estate investing.

Make More Money by Finding Off the Radar Deals

Make More Money by Finding Off the Radar Deals

Off the radar deals are properties that are not listed with an agent. They have the potential to be more profitable because there is less competition. Obviously, being able to notice these quickly is critical because if it is a good deal it will go quickly.

The ability to find deals is critical, and it is equally important to find either buyers or investors for your deals. Hence, you will want to work on both areas all the time. In many cases, you can earn a year’s pay on a single deal!

Here are the six areas of focus to find Off the Radar Deals:

  1. Out of the Box Deals (Off Market)
    1. Probate/Estate
      1. Nursing homes (make certain your sellers are not senile!)
      2. Obituaries
      3. Funeral Parlors
    2. Preforeclosure: You can buy property with a built-in mortgage by getting a quit-claim deed. A properly drawn up Power of Attorney for your “mortgage assumption” can open the communication door with the mortgage company for the duration of the mortgage. A good attorney can help you put your property in a Land Trust where you become a beneficiary and executor. Good marketing will find buyers who love the fact that their down payment is their credit approval.
    3. Vacant Observation: You will want to learn how to spot vacant properties and then find the owners through software like “Real Estate Pro.” You can find cell phone numbers and even email addresses, in many cases, using websites like www.Intellius.com for $20.00 a month or less.
    4. “Don’t Wanters”
  2. Investor Clubs – Learn how to use and exploit these clubs.
    1. People with Money: Everyone you know either has money or knows someone who does. “Ask, seek and knock!”
    2. Hidden Deals: Watch how quickly inside secrets are shared as you smile and greet others.
    3. Rehabbers & Contractors: These people go to the meeting and could be your inside track to future success.
    4. Buyers: People who are looking for deals you can easily find will be there.
  3. Landlords – Key to the Mother-Load.
    1. Find Signs: Take pictures of “For Rent Signs.” Call them. Some will be looking for more deals, and some will have deals to sell you.
    2. RE Pro Software: Ask your sales person to cut you a deal.
    3. Lists Anywhere: Start looking for lists. Just about everything is in a list somewhere.
  4. Serious Marketing – What It Is and Why It Wins.
    1. Yellow Signs: More testimonies of success with “Yellow Signs” than anything else.
    2. One-on-One Visits. Go and see the people who can help you. Remember, people like to do business with people they like. Become a friend.
    3. Free Marketing: Learn to use emails, text messages, Facebook, Craigs List, YouTube, Smart Phones etc.
  5. Reticular Awareness – Develop a sense of what a good deal looks like. Learn how to smell the money.
  6. After They Say NO! – Master the art of offer resubmission. Change nothing! Resubmit offers every two weeks. Between two out of three and three out of four offers we initially rejected!  Ask to be a backup offer on deals under contract. Sixty percent (60%) of deals under contract fall through. Your chance of getting a good deal is much better once a deal falls apart.  Always do a thorough “dead deal autopsy.” Find out what the winner of the deal is doing with the property and who they are using to help them. How did they beat you?

Tips for Saving for a Down Payment for a Mortgage

Tips for Saving for a Down Payment for a Mortgage

Buying a home is typically the largest single purchase a person will make in his or her lifetime. When you are preparing to make a big purchase in real estate, it is important to understand the complexities of what you can afford, what everything will cost, and how to prepare for your purchase.

Before you start looking at homes, your first step is deciding what you can afford and what you want from a home. List your basic requirements such as location, size, and other features.

Then, you will need to save for a down payment for your home.

Different mortgage programs require different amounts for a down payment. If you qualify for a FHA home loan, you can purchase a house with 3.5% down. In addition, many other mortgage programs allow a down payment as low as 5% of the purchase price of the home.

If you are financially able to put 20% down, it can be beneficial. Lenders will not require you to purchase Private Mortgage Insurance (PMI). PMI is an additional cost built into your mortgage that protects the lender in the event of a default.

Here are some tips to help you save for your down payment:

  • Pay yourself first. Make saving a priority by setting aside a certain amount each month.
  • Consider having money automatically transferred in your savings account each month. If you never see the money, you are less likely to miss it.
  • Cut back on your Spending. Choose one item to give up or cut back on and put that money in the bank. This item could be a drink, which is a small expense that tends to add up quickly.
  • If you have the option, consider working overtime and add that money to your savings.
  • Get a second job or do freelance work to earn more money.
  • Sell stuff on eBay. eBay is the ideal place to offload your unwanted household items in return for money. You can convert your clutter into cash.
  • Eliminate the luxuries. For example, put your cable television subscription on hold.  Take your lunch to work every single day. Don’t go shopping for new clothes.

Over a period of twelve months, you could easily save a few thousand dollars. 

Part 2 – Getting Started with Residential Land Development

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

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.

How to Check and Repair Your Credit

How to Check and Repair Your Credit

People who never had to do anything with credit scores and then encounter them for the first time when applying for a loan can often be baffled by what they learn. A

or a school, car or mortgage loan, your credit score will help determine your approval.

Even insurance companies charge higher rates to people with poor credit history.

 

Where To Check Your Credit Score

 

It is important to know your credit score, particularly if you are planning to apply for a credit card or a loan. You can have more than one credit score and your credit score can vary when you check it. You are entitled to a free credit report from each of the three credit reporting agencies: Equifax, Experian, and TransUnion, once every 12 months. You can also review your credit score for free at www.AnnualCreditReport.com.

 

The Difference Between no Credit Score and a Bad Credit Score

 

Credit scores can be determined through factors like your payment history, amounts owed, length of credit history, total debts and recent inquiries. However, there are times when a person has no credit score. This happens when a person has never used a credit card or never had a loan payment to make.

 

There are also cases of people with bad credit scores. It is harder to improve a bad credit score than it is to build a credit score when you don’t initially have one. Bad credit is defined as a past failure to make your obligated credit payments on time, resulting in a credit score below 620.

record items, and too many inquiries.

 

Whether you have no credit or bad credit score, you need to work on improving your credit.

 

Ways To Fix Credit Scores

secured credit card is backed up by a savings account to be used as collateral on
secured credit card is backed up by a savings account to be used as collateral on
the credit available on your card and can help establish the credit rating of the

 

People who find themselves in a situation where they have no credit scores are usually advised to apply for a secured credit card to start their credit history. A

 

 

cardholder. The key to increase your credit score after obtaining a secured credit

another credit card.

 

People with bad credit scores can begin the “repairing” process by requesting free credit

company who listed the information on your credit report and wait for their response for at least 45 days. If you were successful, the bureau will make the necessary changes and alert other credit bureaus of the changes. You will be able to receive an updated copy of your credit report.

 

It is also wise to deal with past dues as it affects 35% of your credit score. There might be instances where some of your accounts are charged off but if you want to get approved for new credits and loans, settle your charged offs. Remember that you are still responsible for your charged off balance and they can make loan applications in the future hard or even impossible to get.

 

There are several free credit consultation companies who are willing to assist and advise you with ways to improve your credit history.

 

Applying for a secured credit card is also a good way to quickly rebuild your credit score, as these cards are designed to help people with a credit problem.

 

Repairing your credit scores cannot happen overnight and some negative marks can remain on your credit report for as long as seven years. That is why it is very important to maintain your credit score.

Negotiation in Real Estate

Negotiation in Real Estate

You might have heard the expression, “everything in real estate is negotiable,” and it is true! Nearly every part of the purchasing phase of a real estate transaction is negotiable. Understanding more about the negotiation process creates additional options, and confidence increases the chance of getting the outcomes you desire.

Negotiating is the process by which two or more parties with different needs and/or goals work to find a mutually acceptable solution. Because negotiating is a process, each negotiating situation is different and influenced by the process and what compromises are available.  We often look at negotiating as unpleasant because it implies conflict, but negotiating need not be characterized by bad feelings or angry behavior. 

If you do not think you are good at bargaining, just reflect on how much we all negotiate in our daily personal and professional lives.  Everything from when a project is due to when a meeting is scheduled is negotiated. 

Sometimes it is easy to negotiate; however, if there is a great deal at stake or we are anxious about getting a particular property, then it seems more daunting and even difficult. 

Here are several tips to improve your effectiveness in negotiating:

Timing Matters

There are good times to negotiate and times that limit a deal. In real estate, the longer the home has been on the market, the better! If someone has just listed a home, then they are far less likely to negotiate.  Additional considerations include: Does the listing say it must sell fast? Is the home already vacant? Gathering additional data and choosing when to make an offer is critical to your ability to time the offer.

Evaluate the Data 

Negotiation includes doing research and, ultimately, both parties are trying to find a solution acceptable to close a deal. Ideally, one needs to understand the other person’s needs and wants, with respect to the listing. How much did they previously pay for the home? What is the condition of the property? What data do you have about the listing? Is the home vacant?

Remaining Neutral 

It is normal to become emotional during the negotiation process.  However, if one gets more emotional, they are less able to channel their negotiating behavior in a constructive way.  It is important to maintain control and not let pure emotions control the deal. There are also times that the purchaser gets to emotionally attached to a property.

Explore Options

Before entering into a deal, prepare some options that you can suggest if your preferred solution or price is not accepted.  Anticipate why the other person may resist your offer, and be prepared to counter with an alternative.

No Need to Argue  

Negotiating is about finding solutions and arguing is about trying to prove the other person wrong.  When negotiating shifts into an effort to prove the other one wrong, no progress is gained. Do not waste time arguing. If you disagree with something, state your disagreement in a gentle but assertive manner, emphasizing what you want to achieve.

Conclusion    

Negotiating is a complex process; however, it can be mastered. If you focus on what you want to have happen, practice these suggestions and utilize the professionals on your power-team, you will be a strong negotiator and win over the deals you desire.

Getting Started with Residential Land Development

Getting Started with Residential Land Development

There are those of you who would like to pursue land development, but you lack the knowledge and courage to do so. I’ll try to help you learn a little more about it with 3 basic tips. The courage part is something you’ll have to work on yourself. Get some guts dude!

  1. Discuss Financing Options with Banks, Brokers, and Private Lenders

It’s common practice to have a discussion with a bank before buying a car or house. This helps you figure out what you can afford. It also helps you understand the shopping process and what you need to do to secure the loan. The same applies to pursuing a land development project. Find out how much money is needed for a down payment and what loan terms are available. This will help you understand what types of projects will work for you. You will also know if you need to bring on any partners. This takes us to tip number 2.

     2. Find Some Partners

Don’t let greed get in the way of bringing the right partner into your project. You’re likely to lose a lot more money with ‘rookie mistakes’ than you would lose by sharing the profit with a good partner. I use 3 different types of partners to do development projects.

  • Private money lenders will loan the money needed for the project and have some advice or resources that will help you.
  • Joint venture partners are also a great option. They invest their own money and can offer expertise and effort.
  • Other investors and developers are important if you want to pass on the project for a finder’s fee.

      3. Find Some Property

As with most real estate, a good real estate agent can be helpful in finding the right property. Search the MLS or websites like Redfin.com for properties that are oversized compared to the surrounding properties. These are the types of properties that can be subdivided into smaller lots. You can also drive around your local market and search Google Maps for oversized properties.


    Go through these 3 steps and start finding some development opportunities. You can learn and network while you go through the process. Peace be the journey.

Suggestions for First Time Flippers

Suggestions for First Time Flippers

Buying real estate properties for a bargain, fixing them up and then reselling them for a profit is a great way to make money as a real estate investor. This is often referred to as “house flipping” or doing a fix-and-flip.  You look for a home, buy it cheap, fix the home up, then sell it for more than what it costs you to buy and fix it up.  You can make a huge profit. There are a few ways to improve the experience or ensure you do not lose money.

Plenty of real estate savvy investors are making money with fix-and-flips, but while it looks and sounds easy to do, house flipping has some risks involved. If there are more repairs than estimated, the flipped property does not sell immediately and/or you encounter other unexpected issues, one might not break-even.

Here are several suggestions to help you be successful:

  • Get a Mentor:

Successful “flippers” educate themselves and know the ins-and-outs of the real estate market. If you are just getting started, one of the ways you can get off on a good foot is by finding a successful house flipper to mentor you. The things these seasoned investors have experienced or learned along the way are invaluable. Offer a percentage of your profit for advice if you need to. Then do your research on properties in your local area and find a house you want to make an offer on. 

  • Save Money On Materials

Buy the materials to fix up your house yourself.  Contractors do supply materials but they will mark up prices. If you buy the materials yourself, you will save money and only pay for labor. 

Because costs for materials vary, it’s best to get to know your local stores. Some stores who offer discounts to contractors will give you the same deal if they know you are an investor and plan to do more than one house. Don’t be afraid to ask for a discount.

Home Depot, Lowe’s and Costco offers great deals. Also watch for any clearance sales on materials. You can also go to second-hand stores to find great deals at a lesser price than buying new materials.

  • Save Money on Labor

Some investors buy a house during off-season. This way they can complete the job on time since contractors have less of a workload on their hands and can focus more on the job you have for them. Contractors are sometimes cheaper in the off-seasons.

Hire reputable sub-contractors instead of a contractor and run the job yourself. This will save you money because a contractor also marks up the price of the sub-contractor they hire. 

Doing some of the work yourself will also cut labor cost.

  • Save Money and Time by Using a Realtor

Once the home is fixed-up and you’re ready to sell the house (vs. keeping it as a buy-and-hold property), studies show if you use a reputable real estate agent, your property will sell quicker than selling without one. The longer you hold on to the property, the more holding cost you incur. Realtors know plenty of possible buyers and having them list your house on the MLS helps sell your property faster. While they are selling your house, you can spend your time looking for your next deal.

Overall, utilizing a few basics will help you in the process of doing a fix-and-flip. All it takes to be successful is having the right attitude and information. And getting out there and doing it.

Knowledge + Action = Results

4 Steps to Overcome Analysis Paralysis

4 Steps to Overcome Analysis Paralysis

Most beginning investors will deal with analysis paralysis or overthinking a situation so that action is never taken.  A couple of the biggest causes behind analysis paralysis are lack of confidence and fear of failure.  Beginning investors feel like they do not know enough to take action.   Here are some steps that can help one overcome analysis paralysis.

  1. Remember your goals and what you would like to accomplish with real estate.  Write you goals down somewhere you can look at them on a regular basis.  If you have not set goals, you need to.  Having goals in front of you will help give you the motivation to take action.
  2. No one is going to do it for you.  This is your business so don’t count on someone coming to help.  You need to take action because if you don’t, things won’t happen. 
  3. Find your fuel.  This is a key in getting moving.  This is also different for everyone.  Why do you want to invest in real estate?  What will investing in real estate help you achieve?  Lite that fire within you, start taking action, and never look back. 
  4. Are you willing to do what must be done?  Investing in real estate is not easy.  It takes perseverance.  You will be told no over and over again.  The investors that are successful figure out how to get through whatever obstacle is put in front of them.  They are willing to do what must be done to be successful. 

Taking action with investing is the most important thing we do.  Of course we need knowledge but if knowledge never turns into action we will never make money.  It is important to understand that we will not be perfect as we get started investing and we will make mistakes, but it is all part of the learning process.  As we continually take action, we will make money investing in real estate.   

Three Common Obstacles for New Investors

Three Common Obstacles for New Investors

The career of a real estate investor is riddled with obstacles. The very job of an investor is to find and fix problems and overcome obstacles. However, there are difficulties that can blindside new investors and stop them before they even start. This article will illustrate three common obstacles investors will face upon entering the business.

  1. First and foremost, new investors will be hit with the realization that real estate investing is not a get rich quick program. This job can be equated to running a marathon rather than a sprint. Although a person can make sizable sums of money rather quickly, a person will not get rich overnight. In order to make it long term, a person must be persistent and consistent. There must be discipline to complete the necessary tasks to be successful. Therefore, the first obstacle is to overcome the idea that you will be able to retire with little effort.
  2. The second obstacle is gathering the right people for your power team. A successful investor will need other industry professionals to help with their business. The right person for your power team is someone that will support you in what you are trying to accomplish. We need to surround ourselves with like-minded individuals and limit our interaction with negative people. There are many industry professionals that have a limiting mindset and will only serve to bring you down; therefore, these connections should be avoided at all costs. Work to bring positive and supportive people onto your power team.
  3. When a new investor jumps into the game they are usually anxious to gobble up all the information they can get. There are countless “experts” in the field that have a special way of making the business work. You can jump from video to video and article to article outlining all the “best” ways to make money in the real estate industry. This information overload should be avoided at all costs. A new investor should find one strategy and focus on it until they are comfortable enough to move forward without new information throwing them off track. It is easy to hear so much information that it places you in a state of inaction. Beware of this trap.

All new investors will encounter obstacles that are unknown until they pop up. All new investors should prepare themselves to overcome the three difficulties outlined in this article. Remember, stay focused and be consistent to meet with success.

6 Ways to Use Facebook to Build Your Real Estate Business

6 Ways to Use Facebook to Build Your Real Estate Business

You have probably noticed plenty of advertisements for various products and services on your Facebook page every time you log in to your account, and you may have even clicked on some of these ads to learn more about it.  Initially, you had no plans of buying, but because of the time you spend on Facebook and the frequency of these ads passing your page, you somehow found yourself convinced and planning to purchase. 

The use of social media such as Facebook as a means to platform your real estate business will prove to be one of the best moves you ever make.  According to a recent study, Facebook is the most used social networking media among real estate professionals and other businesses because literally almost everybody has it, and you can easily spread the word about your business through ads, conversations, or by creating a business page.

By harnessing the power of Facebook, I have found these tips helpful to building my real estate business.

  1. Be Visible

First things first, setup a Facebook page for your business.  Make your presence known by sending invites to “LIKE” your page to your contacts and clients.  Ask family and friends to share or recommend your business page.  Having your presence known makes it easier for prospects and clients to connect with you, increasing customer retention and loyalty.

  1. Post Stunning Photos with Detailed Captions

Make sure that the pictures of real estate homes or properties you are posting are appealing enough to make it to sell.  People love beautiful things and there is nothing better to capture your prospective clients’ attention than beautiful pictures of the properties you are selling.  As an added bonus, people may even share them, making more people see what you are selling.

Don’t forget to post pictures of your buyers with their new home.  People love real life stories with happy outcomes!

  1. Share Interesting but Valuable Information Related to Real Estate

Give practical advice like how to increase the value of a real estate property through DIY projects or share links about interesting real estate topics.  Encourage people to interact with you by asking real estate trivia questions or by answering their questions about the real estate business.  Not only does this make your business page active and interesting to your followers, answering their queries will create connections with possible loyal clients in the future.  Fans and likers may even recommend you to people in need of your services if they like you.  It really pays to be helpful.

  1. Building Relationships with Your Fans and Likers

As I mentioned earlier, having conversations with your fans and likers creates a connection between you two and, in the long run, builds relationships.  Like any other relationship, trust and dependability are very important, especially in business.  In the real estate world you are not just selling houses, you are also selling yourself.  There are plenty of studies that show that people are more likely to talk and do business with you if you are warm, trustworthy and dependable.

  1. Post Regularly

Now that you have made your presence known in the Facebook community, being able to maintain a consistent presence may be a challenge when you are struggling with your busy schedule.  It is wise to always remember to incorporate it with your daily routine until it becomes second nature.  Other realtors make a big mistake by not continuing to stay active after setting up their business page, not realizing that Facebook is an interactive media platform.  By posting regularly, you are letting people know that you are still in business, and it keeps their interest in your page active.

  1. Connect Your Facebook Page with Other Social Media

After successfully launching your business page on Facebook, don’t sit back and stay content.  Facebook allows you to connect with other forms of social media, so take advantage of it by letting your followers know where they can find you.

The Importance of a Positive Attitude in Real Estate Investing

The Importance of a Positive Attitude in Real Estate Investing

Having a positive attitude is extremely important to becoming successful in real estate investing, as it is in any successful endeavor in life.  Negative speech and thoughts can be debilitating and keep a person from accomplishing their goals.  Learn to change the way you talk to yourself and others and you will change the outcome of your life’s journey. 

For example, let’s look at the subject of attempting to get into better and healthier physical shape.  If your thoughts and speech follow the lines of, “I can never lose weight,” or “I can’t stop eating sweets,” or “No matter how much a work out, I never get more muscular,” you will create a mind-set that causes you to lose faith in the fact that with proper eating and exercise you can lose weight, get stronger, be healthier and look better.  It is important to start have the right self-talk. Try changing the phrases you repeat over and over again to, “I know I can lose weight if I eat healthy foods and exercise regularly,” “I will gain muscle if I work out 3-4 times a week consistently,” and “I enjoy eating healthy protein, vegetables and fruit, and I feel better when I do.”

This same technique works when it comes to investing in real estate.  If you keep making statements to yourself and others such as, “I can’t ever find the time to do this business,” “There are no deals to be found in this area,” “There are too many other investors in my area to compete with,” or “People will know I’m not very knowledgeable in investing when I talk to them” then stop. Change your self-talk to, “If I use proper time management I will find the time to be successful at this business,” “The more offers I make, the more deals I will create for myself,” “By being persistent, I will be the one to find the deals in my area,” and “The more times I talk with people, the more confident and knowledgeable I will become.”

Every endeavor and business adventure is a learning experience. With faith and confidence in yourself, you can be successful at the things you work hard for.  Talking in a positive manner can help build confidence and faith with which you can succeed, especially as your experience starts to prove your statements true.  Whatever you say and think will become your reality. Change the way you talk to yourself and others and you will change the direction of your life.  Now, go out and make it happen!

Being a REALTOR and an Investor

Being a REALTOR and an Investor

When new investors discover that I am a licensed real estate agent AND an investor, the usual question that follows is: “What are the benefits to obtaining a real estate license?” I then explain that there are both pros and cons to being a licensed agent AND an investor. In this article I will review both.

Cons

  1. Question: What do you get when you cross a used car salesman and a lawyer?

Answer: A real estate agent.

The stereotype is that agents are usually salesmen that will do anything for a commission. Therefore, when potential sellers learn that I am an agent there is an emotional wall that is immediately built. This division sometimes makes it difficult to proceed with a conversation about their property. Because of this, I have a reply that I use every time to overcome their objection.

  1. Another downside of maintaining a real estate license are the annual dues and fees. Every state has fees to renew the license. Additionally, costs for required continuing education, an MLS subscription, and dues to the various real estate boards can be in the thousands of dollars. Real estate investors without a license don’t have any expenses outside of normal business costs.
  2. A licensed real estate agent must use a state-approved real estate purchase contract. Therefore, with a license I am unable to draw up a contract with my own terms contained therein.

Pros

  1. With a real estate license and an active MLS subscription, properties can be found without the assistance of a third party. I can scour the MLS database for properties without having to wait for an agent. Similarly, I can submit offers directly to sellers or seller’s agents, again, without having to wait for an agent.
  2. Another positive is that any property I buy from the MLS to rehab or add to my portfolio will pay me a commission. Therefore, adding another possible stream for income.
  3. If, for some reason, the seller and I cannot come to terms for me to purchase the property, I can list the property on the MLS for the seller, thus earning a commission when the property is sold.

I have outlined a few of the pros and cons for having a real estate license AND being an investor. In the end, the decision to get a license is up to the individual or partnership. Final thought, it is not requisite for a person to have a real estate license in order to be an investor or even to make money in the real estate industry.

Five Mistakes Investors Make When Building Their Business

Five Mistakes Investors Make When Building Their Business

Being in the real estate industry over the last 20 years has allowed me to see many forms of success and failure.  I have learned a lot from each of these categories.  You might think I’m going to tell you how to make sure you run your numbers correctly or not overbuild for the neighborhood.  You might think I’m going to suggest that mistakes are made by not seeing all the hidden costs in a fix and flip property.  Yes, these things are important and I’ve made my share of mistakes with these along the way but the biggest mistakes I’ve seen in my 20 years of experience is that real estate investors forget to PLAN for their success and they don’t realize the most important success habit is your mindset.  Investors seem to have a hazy idea of what they want to happen and then they just throw all their efforts at it to see if it sticks without really taking the time to create the success they want.  I’m going to share some of the top mistakes I have seen over the years and the success markers I’ve implemented in my business and have helped successful real estate investors implement in their business. 

The first mistake I see entrepreneurs make, especially real estate investors, is they are not clear about what they want.  They say “I want to be a successful real estate investor” but they really don’t know what that means nor have they taken the time to really find out what that means.  In order to be successful, you need to know what it’s going to take to be successful.  You need to know what education you are going to need, what foundation of your business you are going to need to build and how to create a power team around you to help you build your success.  For example, take some time today to ask yourself. 

  • “How much money do I want to make on each of my real estate deals?” 
  • “How many will I need to close each year to accomplish the dollar amount goals I have set for myself?”
  • “What needs to be done to make this happen?”

As you can see, there is some planning that needs to go into setting yourself up for success.  When you begin to ask these questions, then what needs to be done to make it to the next level of success in what want to accomplish will become clearer.

The second mistake I see entrepreneurs make is not prioritizing what needs to be done to create their own success.  Too many times I hear the excuse, “I don’t have enough time.”  My answer is a little blunt and not really easy to accept if you are committed to this excuse.  I gently say we all have the same 24 hours in a day.  The way that we use those 24 hours will determine our success.  My suggestion is to make a list at the beginning of each week of everything you NEED to get done for the week.  Then make a second list of all the things that you must do to be successful as a real estate investor.   Go through both of your lists and prioritize each activity with an A, B, or C for priority level.  Sometimes it also helps to put a time frame on each item.  Then grab your PAPER calendar (yep, we’re going old school for a minute) and put all the “A” activities on your calendar for the week, then add your “B” activities.  Your “C” activities will fill in any free time you find for yourself during the week so keep your list handy throughout the week.   This is going to be a work in progress and I will GUARANTEE…. Yes….. GUARANTEE you will fail the first week you put this in place so realize that this is going to be a work in progress and you are going to have to keep doing it to get better at it.  Remember that failure is just information.  It doesn’t mean you give up; it means you do it better the next time.  Your calendar is going to be somewhat flexible but you are also going to start becoming very responsible with your time and learn to manage it, so you can master it.  My favorite saying for time management is, “Either you run your day or your day runs you.” 

The third mistake I see investors make is giving up.  The commitment level is there when the hope is high and the excitement level is at its peak but when it comes to doing the hard work, putting in the hours, staying persistent, trying something new when one thing doesn’t work, I hear, “This doesn’t work”.  I want to say, “Does this not work or do you not work?”  Sometimes success is not found overnight.  In fact, I would say in most cases success is not found overnight.   If you interview any successful entrepreneur, they will tell you it was a long climb to the top and they fell down a few times.  They will also tell you that staying the course and being persistent with successful habits is the reason they found success.  Decide now that you are “in it to win it,” that “if it is to be, it’s up to me” …whatever silly mantra you need to come up with to remind yourself to stay the course and be consistent and persistent with your efforts.

The fourth mistake I run into over and over when working with new real estate investors is they are blown like a plastic bag in the wind with everything they read or are told.  They become consumed with what everyone else is saying instead of doing the research themselves and coming up with their own opinion.  They go to a real estate investment club and listen to everyone whine and complain about “how hard it is right now.”  They jump right on that band wagon and complain that this can’t be done.  I’ve got news for you.  It can be done but you have to do what others are not willing to do so that you can have what others will never have.  It’s really that simple.  What you focus on you will create.  If you are going to dwell on what someone else said and drag it along as your victim story, you are not focusing on the solution.  You are not creating something new. You are stuck, and I promise you are not going to go very far, and you will end up right back up in mistake number three —  giving up!  You must be aware of the people you are surrounding yourself with, the news you are allowing to come into your life, and you must determine that you will only “listen” to what is working.  The great thing about real estate is that when it’s good, it’s really-really good and when it’s bad, it’s even better but you have to know what strategies to employ.  You must become a problem solver. You must know that there is always a solution, and you must be determined to find it. 

A fifth mistake I see people make when building their real estate business is they forget to take a little time to evaluate what has worked in the past, what could be done better and what needs to be done completely different.  Taking a step back to evaluate every so often — maybe monthly, maybe quarterly or maybe even more often — helps you to build on the strengths and define where the weaknesses might be.  This isn’t a time to dwell on the problems and what’s not working, it’s a quick evaluation to see what needs to be tweaked.  When you can identify what is working and what is not, you can play to your strengths and put practices in place to build the weaknesses into strengths.  For example, if you are getting more properties than you know what to do with and you’re getting accepted offers but your cash buyers are not interested, then maybe you need to re-evaluate how you are running your numbers.  Take a little time to question what is working — and do more of that.  Then making sure if something is not working, you find a solution. You are learning equally from your failures as well as your successes, both have great information to share with us on our journey to success.  By evaluating what is not working and finding a solution to make it work, then evaluating what is working and doing more of that, you keep “building” a successful foundation for a thriving business. 

These are the top mindset mistakes I see real estate investors make.  There are other mistakes you will make along the way and that’s ok. As long as you have the right mindset, you will make it through the other slip-ups.  Remember to plan your way to success, make small and attainable goals.  Become friends with your calendar and make it work for you.  Make sure you are aware and conscious about what you are putting your focus on and commit to your success with consistent and persistent effort.  After putting all these success habits in place, stop from time to time to do an evaluation of your efforts and make them better.  Buying a house to flip in the wrong neighborhood is not as detrimental of a mistake as doing the same wrong thing over and over and over again.   You must have a plan for your success, so take some time today to make it happen.  Good luck and happy investing!

The Pros of working with REOs

The Pros of Working With REOs

A class of property owned by an investor, such as the government, the bank or an agency, after an unfortunate sale at a foreclosure auction is known as Real Estate Owned. These properties are owned by a bank or financial institution.

Advantages of working with REOs include:

  • The properties are free from liens/encumbrances. The banks completely remove unwanted records attached to the property; hence no reclaim can be done. The unwanted records attached may include taxes, second & third mortgages or mechanic’s liens.
  • REOs/Bank owned properties are always vacant because once the bank owns the property, they evict the previous owners, which saves the buyer’s money, time and the hardships of the eviction process.  The properties are well maintained; hence they are safe and good for new owners. Financiers can save an incredible amount of time and energy because the dislodgment process has been taken care of by the bank.
  • Lower market prices and payments with low-interest rates is another advantage of working with bank owned properties. The banks usually don’t sell the properties at the market price since they have the need of selling to compensate their loss and removing property from their books.

There is a great deal of competition involved when buying bank owned properties. Working with REOs attracts more customers, but involves less risk because the properties are free from any liens; therefore, it’s easier for the investor to weigh their options and negotiate.

Unlike properties at foreclosure auctions, REOs can be inspected prior to making offers and are listed with real estate agents. While many foreclosures are often in deplorable condition, REOs are typically restored to at least a readily salable condition by the lending institution. The bank or lending institution that owns the property will often offer financing with better deals than they would offer on traditional properties.

REOs are an awesome win, win for everyone involved.

3 Common Mistakes New Investors Make When Working with An Agent

3 Common Mistakes New Investors Make When Working with An Agent

Like any other business, real estate investing needs to be carefully planned and seriously scrutinized. In an industry where competition is rampant, it is crucial to avoid making mistakes as much as possible. While there are many new investors starting out with the best intention of making a career out in real estate, only a few succeed.

Ideally, a working relationship between an investor and a real estate agent is a win-win alliance. However, there are a lot of misconceptions about these two characters in the real estate world. These problems usually start when an inexperienced investor chooses the wrong kind of real estate agent, thinking he or she is the one best suited for the job.

Here are the 3 most common mistakes new investors make when working with an agent:

Hiring an agent with the cheapest commission.

Newbies in the real estate business tend to think that they will be saving a lot of money if they choose an agent with the lowest commission, without thinking about how marketing and advertising their property can be expensive. To equate the situation, reduced commissions often means reduced marketing resources in promoting to get your property sold. So, don’t go with the cheapest but go with the best.

Not being honest with your real estate agent.

Agents are professionals trained to appraise properties in a manner that can be different from yours. In order to get your agent to best help you, provide him with the necessary details about your plans and expectations about the property. Lying or keeping things from your real estate agent can be toxic for your working relationship, especially if they find out about your deception and decide not to work with you anymore. Bottom line here is, without the necessary information, your real estate agent won’t be able to do their work for you correctly.

Thinking all real estate agents know the same thing.

One of the most common myths about agents is that they are all the same; therefore, they know the same things. Wrong. Real estate agents have different experience levels, different skills and different specialties that they have acquired after years of being in the business. Think of it this way, a real estate agent who deals with buyers may not have as much skills to sell a property than an agent who spent years selling them. Also, choosing the wrong real estate agent can affect your financial situation for years. You wouldn’t want to be financially burdened for the next 2-5 years just because you chose the wrong real estate agent.

3 New Strategies to Find Motivated Sellers on the MLS

3 New Strategies to Find Motivated Sellers on the MLS

It is estimated that 85-90% of properties that are sold in the United States are listed for sale through a real estate agent.  This would mean it’s a good practice as a real estate investor to develop good relationships with your real estate agent(s).  Typically, as a real estate investor, we are looking for properties that are vacant.  We also want to find properties that are distressed or need some updating.  Third, we are looking for a motivated seller.  This is the typical criteria you want your real estate agent to be looking for when he or she is searching for properties for you.  After you have a steady stream of these types of listings flowing in from your realtors, you might want to ask then to add a few other categories to your search parameters. 

Three simple additions will give you more properties to look through and research so that you can be making even more offers each week.  Ask your agent(s) to send you expired listings, withdrawn listings and listings that have gone back on the market.  These three categories will each come with their own unique characteristics to research, so let’s dive into that.

1. Expired Listings.  These are houses that were listed on the MLS and did not sell.  The purchase price may have been too high or there may have been other issues that you will need to research.  The best strategy is to contact the homeowner and let them know that you noticed that their house had been listed in the past but is not currently listed.  Ask if they are still interested in selling and let them know you work with a team of investors and can offer cash for their house.  Because their house is no longer listed, the listing has expired, they will no longer be working with a real estate agent and, therefore, the agent’s commission will not need to be a part of the purchase price.  On a typical transaction the selling agent and the buyer’s agent will have a commission total of about 6%, so taking this out of the equation might help the seller net what they wanted on the property.  This might be a really attractive offer to the seller because they don’t have to pay that commission.  It may also be attractive because it can be a fairly quick sale and not include a buyer needing to get financing from a bank.   

You’ll need to contact them and ask some questions to determine how motivated they are to sell and if you will be able to deliver a cash offer that will satisfy their motivation.  Keep in mind that these home owners might be getting calls from other real estate agents trying to get them to re-list their house with them so you want to set yourself apart as a real estate investor interested in their home. You can say something like, “My partners have been working on a few houses in this area and noticed that your house was on the market and now it’s not.  Are you still wanting to sell your house?”  This can start the conversation.  Make sure you are leading the conversation to find out what is really going to motivate them to sell so you can take quick action to address their motivation.

2. Withdrawn Listings.  Withdrawn listings are properties that were listed for sale but for some reason the owner of the property cancelled the listing with the real estate agent.  There are numerous reasons this might happen.  They might have changed their mind about selling, they may not have liked keeping the house clean for the showings, they may have decided that they wanted to do some work on the house in order to get a better asking price or maybe they did not like the way the real estate agent was marketing their property.  Whatever the reason for withdrawing the property, they could potentially be a motivated seller if you can offer a cash price quickly without a real estate agent.  This phone call would go something like, “Hello Mr. Seller, I noticed you withdrew your house from the market.  Are you still interested in selling your property?” Then let the conversation start from there.  Again, just like with expired listings, you want to be leading the conversation to see if there is still any motivation to sell.

3. Back on the Market.  This category is my favorite and has been a very successful strategy for me and many other investors.  When a property goes back on the market it is because the sale has failed for some reason.  It may be because the inspection yielded unfavorable results and the potential buyer didn’t want to buy the property any more.  It could also mean that the potential buyer was not able to obtain financing for the property.  Whatever the reason, this is good news for us because the seller is a bit more motivated because they thought that their property was sold and they were headed to the finish line.  Now their thoughts are along the lines of, “Ugh!  I have to start this whole process over” and their real estate agent is thinking the same thing.  This is when they may entertain a lower offer with the promise to close much quicker.  Again, it always depends on the motivation of the seller. If you can have your real estate agent do a little homework with the selling agent before you make the offer then you can find out if they are more motivated by a quick close offer or getting the right price.  I have personally found that once the process has been started and they thought they would be closing soon, they are much more likely to take a lower offer just to be able to close near when originally planned.

In the first two scenarios above, expired listings and withdrawn listings, you will be getting the listings from your real estate agent but they will not be getting commission on the deal so make sure you have a conversation with them up front on how you might be able to give them a referral fee if you close on one of their properties. By doing so, they will be much more likely to want to assist you.  As in all of entrepreneurial ventures, it’s important to think outside the box and look for more ways to bring in deals.  Spend some time thinking about what a motivated seller is and where you can find them.  Then come up with a plan to get in touch with them.   Get creative in other ways you might be able to use your real estate agent and the MLS.  As always, happy investing!

Can I Get Rich Quickly Doing Fix and Flips?

Can I Get Rich Quickly Doing Fix and Flips?

Most people think that real estate investing is a quick and easy way to get rich. The popularity of the “fix and flip” shows on television have led a lot of amateur investors into believing that investing in flips is quick and easy. This is so far from the truth. Making a lot of money in this business takes time. Before you get started, identify what “feeling rich” means to you. Have a financial goal set. There are a lot of things to consider when doing fix and flips. Even though these types of deals can produce a large payday, they come with one of the highest risk factors among investment strategies. To give yourself the best opportunity to get the deal done right consider the following items:

1. Run Your Numbers Correctly: Find a good agent to help you get correct, recently sold comparables. Compare similar properties to each other and run your numbers off of your after repair values (ARV).

2. Account for All Costs/Expenses/Fees: When you run your numbers you need to account for all of your costs involved with the purchase, fix-up and resale of the property.

Lender Fees: All lenders will have a cost for the loan. You can get this number from the lender.

Purchase Cost: Usually this will include appraisal and inspection fees. These will generally be around $300-$500 for the appraisal and $400 for the inspection.

Closing Cost: The easiest way to get this number is directly from your title company. Closing costs include things like documentation prep fees, taxes, recording fees, etc. You should generally use 3% off ARV to cover these costs. 

Holding Cost: Taxes, insurance, maintenance, HOA (Home Owner Association) dues, mortgage payments or hard money interest payments need to be covered while you are fixing up the property. There are other items that can fit into this category, so cover your bases.  A general rule use 1% of ARV for as many months as you feel it will take to fix up and sell the property.

Realtor Fees: If you plan on using an agent to resale the property then account for 6% of ARV for this cost.

3. Rehab Cost: Get a good contractor and please, please do some research on them before you hire them. Make sure the contractor you go with is licensed and bonded! You can always ask for a copy of their license and bond. Make sure they are in good standing. Also get them to give you some referrals that you can talk to and ask for reviews. Then get rehab bids from at least three contractors. I usually go with the highest bid as the number I will use for my rehab cost, during my analysis of the numbers.

How to Find Responsible General Contractors or Sub-Contractors

How to Find Responsible General Contractors or Sub-Contractors

The business of rehabbing homes generally involves hiring a general contractor to manage the project or lining up several sub-contractors yourself as an owner/builder.  If you are not a general contractor and don’t had any experience rehabbing or building homes, I suggest you hire a general contractor to organize and manage the construction of your project.  If you have some experience or feel you are a pretty good manager of people and resources, then hiring sub-contractors individually can save you a general contractor’s fee.

For those in the first category, you will want to find a general contractor with a good reputation for quality work, dependability and being reasonably priced.  You will want to get referrals from people you trust who have used these general contractors and have had a great experience with them.  If you don’t know people who have built in the past, then drive around and find homes that are being built or remodeled in the neighborhood and call the owners to inquired about their experience with their general contractor.  After finding 3 to 4 highly recommended general contractors, have them individually bid your project and consider the one that gives you the best price.  Be sure to compare the allowance items that each includes in their bid for items such as plumbing fixtures, appliances, tiles, countertops, light fixture, etc and make sure they are using the same amount.  The best way to approach the bidding process is to give each contractor a list of specifications with a unit amount for each category in which you have not yet made an exact decision. 

Be sure to get a fixed price from your contractor so you know upfront that they will do the work within the budget you have allotted.  Then go over the specifications up front and pin down exactly what will be included in the bid and make sure everything you want done is included so you don’t have additional charges after you start.  Then see to it that your contractor does everything they promised.  Keep track of their progress and keep the line of communication open so that the job moves along smoothly and on time. 

If you are going to sub out all the work, then follow the same procedure with your sub- contractors. Get referrals from other people you trust who have used tile men, granite counter top companies, electricians, plumbers, etc, and are satisfied with the results.  Then get bids from at least 3 sub-contractors in each field and consider the one that gives you the best price.  Be sure they are all recommended and that the feedback from those who have used them is that they do high quality work, they are dependable and they finish on time.  After signing a contract with the sub-contractor, be sure to stay in touch with them and keep encouraging them to follow through with the agreements they have made.  Remember, the squeaky wheel gets the grease.  If you use quality sub-contractors, you should get the job done properly, as well as to code, without needing to know how to do the work yourself.  If you have time, watch the sub-contractors and learn from them so you can supervise other sub-contractors in the future.  Use your managerial skills to organize each sub-contractor to get their job finished on time so the next sub-contractor can begin their work and finish on time.  If you are supplying the material, be sure to have them on the job site on time so there are no delays.  Better yet, have the sub-contractor bid material and labor so they are responsible for supplying the materials and you don’t have to worry about it. 

In all of this, be sure you stay within your budget.  Getting several bids on each item that needs to be rehabbed will insure you get the job done for the best price.  You will be amazed at how far apart the sub-contractors bids can be.  When a sub-contractor is very busy and doesn’t need work, his or her price can escalate rapidly.  When a sub-contractor is out of work and needs to keep his men working, his price can become very reasonable.  If all of the bids you receive are over your budget, negotiate with each sub-contractor and see if one of them will come down to your budget price.  Many times they will if they want the work.  Remember, if you run over your budget, every dollar comes out of your profit, so stay on budget.

Pre-Foreclosure: The Secret Sauce to Success

Pre-Foreclosure: The Secret Sauce to Success

Pre-foreclosures are the secret sauce to success because they can be extremely profitable, are easy to find, and are low risk.  Pre-foreclosure begins when someone receives a NOD (notice of default) letter or in some states this is referred to as a “Lis Pendens” (legal action started) letter. There is a distinct advantage to reaching people going through foreclosure quickly before they are inundated with letters, emails and phone calls from collectors or competitors. At the time most recipients get an NOD letter, they will not yet have their property on the market.

Approximately, 60% of the people who receive a NOD letter are able to save their home by working things out with the mortgage company or supportive government entity such as HUD.gov, Fannie Mae or Freddie Mac.

The other 40% is where the deals are. However, most of these people are in denial and many remain so until a day or two before the actual auction is to take place. Like any other kind of deal, look for owners who don’t want the property. One of the best signs of a winner is finding the home to be vacant but still in pre-foreclosure.

In most cases if they vacate the property, they are planning to let it go back to the bank. Unlike “rehab flips” it will be easier to sell the property or get a lease option if it is in good condition because you are not wholesaling but selling directly to someone who will live in the property.

Odds are good that the people who are going through pre-foreclosure are being continuously harassed by all manner of bill collectors. Hence, the type of people who have the most success knocking on the doors of people going through pre-foreclosure are women under 5’3″, slight of build, with a baby or two in tow. Men, who are tall of stature and have larger build can be intimidating and have an uphill fight to get their message across.

If the property is vacant, one or more of the neighbors may know how to reach the owners. Once, the owners are reached, the message is simple. “Thank you for your courtesy in seeing me. I’ll be brief because it is very possible I can help you immensely. Your name came up as having received an NOD or Lis Pendens letter. There are many things you should know about what that means. Are you familiar with the loopholes in the foreclosure process?”

This will give you a good chance of being able to continue the conversation. “Loopholes” has a nice ring to it. Obviously, it is important to know what those loopholes are. But, it is even more important to know how to find out if you are dealing with someone who wants or doesn’t want the home that is being foreclosed on.

The next move is, “I would be happy to share what I know about how to avoid pre-foreclosure or at least be able to buy the time necessary to resolve the situation. There is no charge now or in the future for this, I ask only one thing.” Ideally, wait for a “What’s that?” “I only ask that should you decide that you don’t want this home, you would allow me a chance to buy it from you with your approval at a very fair price. Some people call me a ‘full price offer guy.’ Would it be ok to discuss some ideas on strategy that might be helpful to you?”

“During the depression banks often foreclosed on homes where the owner was both current on payments and also had substantial equity. Obviously, this was an abusive process and fortunately the federal government has mandated some new regulations to protect homeowners like you. As a general rule, in most states including this one, the NOD/Lis Pendens letter gives the homeowner 90 days to clear up unmade payments owed to the bank with a minimum of extra legal expenses.”

“Once the 90 days is up, they must publish their intention to foreclose three weeks in a row. This can take as little as 15 days. After that, the earliest they can hold an auction is 10 days after the third printing of notice. Hence, in the worst possible case, homeowners going through pre-foreclosure will get at least 115 days from the date of the original letter.” … “At this point, it would be good to find out where you stand so I can help you develop your strategy. Could you give some kind of idea about how far behind you are money-wise to catch things up?” WHATEVER THE AMOUNT “Well the obvious question is, what is the likelihood that you can raise that money before the bank lowers the boom? Further, is it wise or more simply, do you want to keep the house?”

If they indicate that it doesn’t make sense to try to save the house, then say, “I would be happy to try to help you avoid foreclosure by making an offer on a short sale if you owe more than the house is worth, or better yet, catching up the mortgage by paying what you are behind and then putting the home in a trust where you might be able to at least get something if there is value in excess of the mortgage. This would, if possible not show up as a foreclosure against you but would show you caught up the mortgage and every payment that I make in the future would help improve your credit.”

“While I would need a copy of your mortgage, I promise to show you comps so you can get a feel for what it is worth. Further, I will make the best offer I can and you can judge for yourself the best direction for you to go. Is that fair enough?”

The market has changed a great deal since the melt down of 2007-2008. Banks are exempt from any “equity theft” laws. If the bank makes money on a foreclosed house, they keep it. Mortgage contracts contain a “due on sale” clause. This doesn’t mean the mortgage isn’t assumable, it just means the bank can call in the note upon sale. A home in pre-foreclosure is on their books as a non-performing asset. Hence, if you catch up the mortgage, it goes on their books as a performing asset.

It isn’t generally wise for the bank to call in the note unless current mortgage rates are much higher than the existing mortgage. Banks aren’t stupid! They just want the money. When purchasing a home that is behind on the mortgage, banks are usually quite willing to accept the money to catch up the mortgage. However, problems can come up later in dealing with the bank because the mortgage is in the previous owner’s name.  Previously people who bought homes subject to the existing mortgage were able to present an “authorization to release information form” and the bank would cooperate giving all the current mortgage details. Banks tend to look at this form with a purpose of paying off the mortgage and getting a new one. Hence it is seldom honored after three months to a year at the most.

Because the banks no longer honor this form after a few months, it is critical to get a “Durable Power of Attorney” authorizing you to discuss the details about the mortgage with that bank and or their assigns. This form should be for the entire term of the mortgage. Including “and or assigns” is critical if the bank turns the mortgage over to another institution.

It is also critical to get the previous owners to properly sign a Quit Claim Deed. This deed should be recorded with the county or parish once the bank has accepted the catch-up payment. Further, there may be liens or encumbrances against the property. Due diligence would be wise.

There is clear logic to putting the ownership of the home in a Land Trust. First, a trust with multiple beneficiaries has dignity in a court of law because it is clearly not one person hiding behind the entity. Beneficiaries could include the previous owner, you for services, the person who lease options the home and, of course, the agent who lists and sells the home.

Further, properly configured trusts can be exempt from the “due on sale” clause. This is another reason to make the previous owner a beneficiary. As an executor of a trust, it is easier to communicate with the bank or financial institution once you have a Durable Power of Attorney.

If you can find someone willing to pay what the mortgage is behind, for an option to purchase the property, you have a deal regardless of the amount. In the event you don’t have someone ready to buy or option a purchase, a good rule of thumb is if the arrearage of the mortgage is no more than 10% of the value of the property. Of course, the mortgage payment should be reasonable for that kind of home in that area. The logic here is that most people who want to buy a similar home in the area and go to the bank for a mortgage will have to put 10% down. There are plenty of people who can come up with 10% down but still can’t qualify for a mortgage from the bank. They will welcome this kind of opportunity.

A marketing headline that has been successful in finding option buyers is “Your Down Payment is Your Credit Approval.”

Should the homeowner indicate that they want to keep the property but acknowledge they have no way of catching up in the prescribed arrearage, you can ask them, “If you weren’t behind right now, would you be able to make your payments like you used to?” If they say yes, ask, “Have you spoken with the bank?”

Either way, if they have spoken with the bank or not, they need to be reminded that the federal government has instructed banks to try to work things out with these people if they can make the original payment. The banks can put the arrearage on the back of the loan if they want to. Helping someone in this way is a karma worthy service.

If the home is vacant or you can’t get them to open the door, you will want to try different techniques to reach them. Emails, text messages and phone calls can work great, especially in combination!

Current contact information of people who are going through pre-foreclosures and have moved can often be found at: <http://www.intellius.com> or <http://www.Spokeo.com>.  Both of these sites will often provide both landline phones and cell phones. They may even provide email addresses. Intellius costs about $19.00 per month and Spokeo starts at about $60.00 for 6 months.

Below are some critical criteria for becoming successful in doing pre-foreclosure deals.

1. Find “Don’t-Wanters.” Look for people who no longer want to own the property.

2. The money needed to catch up their mortgage is less than 10% of what the home is worth.

3. The home is move-in ready. Homeowners who buy will want this home to be move-in ready. So will tenants willing to rent.

4. The pre-foreclosure property has a marketing advantage because it comes with a built-in mortgage through the mortgage assumption.

5. Get the previous owner to deed over the property. This is critical and Quit Claim Deeds or Mortgage Assumption Deeds are often used.

6. Put ownership into an LLC or a land trust. Document that the owner going through pre-foreclosure was paid something or, if you are using a land trust, make the previous owner a beneficiary for a small amount of money. This offers protection from equity theft suits.

7. Only record the deed once all the details are worked out such as covering the arrearage on the mortgage and having a POA (Power of Attorney) enabling communication directly with the current or future assigned mortgage company.

8. Get the current owner to write, witness and notarize a Durable Power of Attorney allowing communication with the mortgage holder. This needs to be written to enable full communication with the mortgage holder and their assigns for the entire term of the mortgage.

9. Put the property in a trust so you can control receiving your profit over time. This will require help from an attorney. Do this yourself without an attorney at your own GREAT risk.

Assuming mortgages on pre-foreclosure properties can be rewarding to all concerned. The banks get to turn a non-performing asset into a performing asset. The previous owner avoids getting a foreclosure on their records. The lease option buyer can buy his or her own home when turned down by the bank.

Always remember that few people have a problem with paying out profits later, so make sure you become a beneficiary and the executor as well. A good attorney will show you how to do this. One word of warning, collecting rent from an option to purchase and not paying the mortgage could land a person in jail. Hence, it will be wise to use an escrow company to handle the finances.

Pros of Working with Tenants in Common

Pros of Working with Tenants in Common

Tenants in Common refers to an arrangement whereby two or more individuals co-own real estate without having a right of survivorship. This kind of ownership allows each owner to choose who inherits his or her interest once he or she dies. This is unlike the joint tenancy ownership where the interests of each of the co-owners pass to other co-owners upon dying (Clifford 29).

Tenants in Common have become very popular today. This popularity has been motivated by the continued rise in of real estate prices while communities are adopting an ever-stricter growth restriction. This situation has caused people to turning to tenancies in common as a way of maximizing their selling and buying power. These arrangements usually lower real estate prices while increasing buyers’ choice through allowing them to pool resources. This arrangement further increases marketing options and sale prices for sellers by allowing them to sell their share of real estate at a price higher than the one they would have received from single buyers. The popularity of Tenants in Common has further been enhanced by the introduction of fractional loans that allow co-owners to have their own mortgages. This arrangement substantially decreases the risk of co-ownership.

The other advantage of working with Tenants in Common is that each tenant has the ability to sell his or her tenancy in common interest anytime he or she wants. This is contrary to the belief among most people who are unfamiliar with Tenants in Common.  The sale of these interests involving group loans are subject to rights of first refusal in addition to buyer approval to insure that the other co-owners can first verify the prospective buyers and make sure they are fully qualified. At the same time, marketability is enhanced if the group has a complete track record of paying its bills and solving its problems, something that greatly reduces the risks of the buyers.

The other pro of working with Tenants in Common is the ease in which decisions are made. In tenant groups that are small, decisions are usually determined by the owner vote. Here, there is distinction between decisions made on a day-to-day basis and those made by a majority, which involves purchasing very expensive non-emergency improvements, repair or alterations in the allocation of expenses, which are made by unanimous vote. The manners in which decisions are made in these groups are often transparent, thereby allowing all members to take part.

The other benefit of Tenants in Common is that it enables investors in real estate to maximize their investments’ value. They are able to achieve this fete through marketing their property as SACCO Tenancy in Common, a strategy that results in not only the quickest sales but also the highest price as a result of the presence of more single-unit buyers than investors in today’s marketplace and a rapid increase in sale prices in most communities. At the same time, Tenants in Common also offer the flexibility of selling compared to selling the entire property. This flexibility allows owners to replace tenants with Tenants in Common owners in a gradual process while diversifying his or her real estate portfolio (Karp and Klayman 53).

Works Cited

Clifford, Denis. Make Your Own Living Trust. Berkeley, Calif: Nolo, 2009. Print.

Karp, James and  Klayman, Elliot. Real estate law. Chicago: Dearborn Real Estate Education. 2003. Print

Real Estate and a Magnifying Glass

Real Estate and a Magnifying Glass

In real estate investing there is a tendency to jump from one subject of training to another or from one geographical area to another with the expectation that “the grass is greener” on the other side.

It is often very tempting to think that where you are investing is not the best or where you are putting your efforts is not the best.  Often, this feeling is because, if you are like me, you compare yourself to other investors that have been in real estate for years and have carved their niche with hours and hours of specific work.

Comparing yourself to others, working in multiple areas, jumping areas and working multiple training directions can really slow your business.

I suggest, heavily suggest, you pick one, yes one, geographical area and work one training direction in that area to get the fastest results for your business.

To help explain that idea I want to talk about a magnifying glass:

  • Magnifying glasses can be used to … well … magnify items, or, what little boys use them for: burn things.
  • When a magnifying glass is used to burn things, the energy from the sun is focused to a fine point and, in fact, the finer the point or focus, the faster things burn when under the magnifying glass. 
  • However, if the focus point is spread or unfocussed, the speed of the fire decreases because the energy of the sun has been spread.
  • Once a fire has been started, you can move the energy without fear of the item you are burning going out.

The real estate investing business is no different than a magnifying glass.  If you work two geographical areas, then you have spread the energy or focus of your business and slowed your ability to “burn” quickly.  Though there are hundreds of methods for purchasing real estate, you can imagine that the more methods or trainings you implement, the less focus you have and the slower your business runs.

After you have successfully created a business in one area and with a specific method or training, you can move your energy.  It is a lot easier to move areas or work on other methods once the “fire” of success is burning.

Focusing energy in your real estate business can help you succeed or “burn” quickly. 

Finding Off-Market Deals

Finding Off-Market Deals

To be a successful investor you need to have a pipeline of potentials deals. It is no secret that the Multiple Listing Service (MLS) is the common source for finding properties to make offers on. However, the investor that can find deals outside of the MLS will find that there is less competition and more possibilities. In order to capitalize on these deals, an investor must utilize some less common tactics. In this article I will outline three techniques for finding off-market deals. Disclaimer: There are many techniques for finding off-market deals but for the purposes of this article I will outline three.

First, is direct mail marketing. A direct mail campaign can be extremely valuable if it is implemented correctly. Begin by identifying your target list in which to mail. One such list is absentee owners. This list contains people that own the property but don’t live at the property. A more common name for these owners are landlords. Some landlords want to be in that position while some landlords want to unload the burden of being a landlord. It is the job of the direct mail piece to find the landlords that are motivated to sell. A key component to implementing a direct mail campaign is to be consistent. This technique rarely works if you only mail a one-time piece. Therefore, you should mail a marketing piece to the same list multiple times in a year.

Another technique for finding deals is “Driving for Dollars.” You can implement this technique in two different ways. One, you can intentionally drive neighborhoods in which you want to invest looking for houses that are vacant, with overgrown yards, or deferred maintenance. On the other hand, most of us travel to the same places every day. We go to the office/work then back home utilizing the same streets, turns and maneuvers so often we could travel the route with our eyes closed. Therefore, the second way to implement this strategy is to take a different route home every time you make the trip. By doing this, you will effectively kill two birds with one stone. This strategy is as old as the hills but still very effective.

The third technique is networking. The saying goes, “Your net worth is directly related to your network!” This is true in many industries but especially real estate. There are many deals that are completed between investors. Co-wholesaling, partnering, and joint venturing are all common tactics in real estate investing. Therefore, if you are looking for off-market deals, networking with other investors and real estate professionals will yield hearty results. One of the best places to find other investors is at a real estate investing club. When attending a meeting, make it a goal to meet 10 new people every time. This tactic will substantially grow your network over time. All of these people can be valuable sources for off-market properties.

In this article I have outlined three common techniques you can use to find off-market properties. If faithfully implemented, these techniques will be valuable resources for finding deals with less competition.

Tips for Maximizing Profits Using a Rental Contract

Tips for Maximizing Profits Using a Rental Contract

When we buy rental property our primary goal is to make money.  In this article I would like to give some tips on how to maximize your profits by using the rental contract.  Not only can you increase profits, you can also increase the control you have on your property.  Let’s consider the following things you can do to help yourself:

  1. Consider when you make the rent due.  On most contracts the rent is due on the first of the month and then there is usually a three to seven-day grace period.  Stop allowing these grace periods.  Your cash flow is important and you should expect your money on the first of the month.  Understand you are making a free loan when you use a grace period.  None of us are in the business to provide free loans. 
  2. An effective way to maximize your investment is to offer a discount instead of having a grace period.  Let’s say we want to have a rent of $600 on our rental unit.  Tell the tenant that the rent will be $700 per month, but a discount of $100 will be extended if the rent is paid on or before the first of the month.  This will be beneficial to you in a couple of ways.  First, you are getting your rent paid on time.  Second, in the event there is a dispute regarding non-payment of rent, you will be able to claim the $700 as rent and not the $600.  At times judges may not allow all of the late fees, but rents are always allowed to be recovered. 
  3. Typically, we sign rental contracts for one year periods.  By so doing we are giving a lot of control of our property to our renters.  Try evicting a renter who is not taking care of the property, but is paying rent.  A solution to taking back control of your property is a month to month contract.  You can then raise the monthly rent each month until they leave or begin to take care of the property.  With the proper notice you will be able to raise the rent and have more control of your investment.  Also, consider the fact that the world’s greatest renter would break their lease in the event of a job transfer or other major life changing events.  Why should you be giving such control to someone else?  Instead you maintain control and maximize your investment.

   By taking a few simple steps you can make a rental contract more effective for you.  Be aware however, if you are going to have Section 8 renters you will have to use the government contract.  For all other renters use these simple techniques and have fun making your bank deposits!

Real Estate Demographics Research – Rental Rates

Real Estate Demographics Research – Rental Rates

There are many things that could affect the real estate market.  The main factors that forecast the trend in the real estate market are the economy, the population growth, the rates of interest for loans, and the demographics.  In fact, according to a study conducted in 2014, there will be an increase of demand for housing over the next few years.  The reason for the increase in housing demands is the surge of population growth.  Population growth depends on two basic components, natural and non-natural population growth.  Natural population growth is rate of live births that occur in the area.  Non-natural population growth refers to the migration of people in a place affecting the demand and supply for food, housing or other needs in that environment.

Demographics are defined as the study of a population’s characteristic. Age, sex, race, education level, economic status and other factors used by the government and private sectors for many purposes, such as forecasting and identifying the buying capabilities of a population on a regional or national basis.

POPULATION

Real estate researchers have forecasted the surge of population growth.  If the data from the research proves to be true, there are four generations in today’s market on the lookout for housing and two generations play a very significant role in the development of housing demands.  The economic capabilities of today’s population tend to favour more on rental rather than homeownership.  The recession has greatly impacted the demand for owning a property and the demographics show that many people are opting to rent rather than own.  Even property owners who had initially planned to sell their homes are renting them out instead because rental rates and high tax rates are lower for rental investors.

GEOGRAPHIC REGION AND JOB OPPORTUNITES

Since the current market is now recovering from the recession that lasted from 2008- 2011, unemployment rates are going down.  A lot of Americans now find themselves moving or migrating to areas where work is available.  This migration makes a lot of people choose to be practical by renting rather than buying a house.  There are certain cities across the country like Los Angeles and New York where rental rates are surging due to the demand for rental properties.  Even industrialized parts of these cities are transforming into residential areas to accommodate the ever-growing number of young people who want to live there.

AGE

Age is another demographic variable the greatly affects the rise in demand for rentals.  Young people ranging from 18-35 years old are the largest percentage of renters.  Traditionally, these young people would have become first time homebuyers as they advance in their careers.  They are predicated to choose renting versus owning due to changes that happened in the economy (recession, job loss, low-income).  Another reason young adults find renting a more attractive choice is that they don’t feel the need to be burdened with a mortgage loan.  Most young adults believe could not afford to own a house and face the financial obligation that it entails.

Demographics cannot be ignored because it greatly affects, if not, dictates the fate of business investments. The basic rule of supply and demand tells us if there is a high demand for a certain product, the more valuable the product becomes.  If there is a high demand for rentals in an area, the higher the rental rates become.

Qualifying Hard Money Lenders

Qualifying Hard Money Lenders

There would be instances when a real estate property owner or investor would find himself hard pressed for cash and time to finance his investment. As opposed to going to the banks to apply for a much needed loan, some would-be borrowers go to a hard money lender. For whatever reasons real estate investors can choose to go to hard money lenders for a loan. One big attraction to these lenders is how quickly you will be able to get the loan.

Requirements for Hard Money Loans

Hard money loans are considered as mortgage loan since the lender will be using a real estate asset as the collateral for the loan. The amount of money the borrower will be able to get is primarily based on the value of the property itself and not on the credit standing of the borrower. However, it is wise to take note that hard money loans are short term loans and are usually expensive compared to bank financing. The interest rates for this type of funding varies – ranging from 10-18% with additional charges called points.  It is often that hard money lenders charge 3-8 points (points are an percentage of the loaned amount.  For example: $100,000 loan charged 3 points or 3% would be $3,000). Although the higher interest rates would seem to be scary for first time borrowers, seasoned investors are less daunted by it. They would simply reason out that the benefits of being able to get the much needed financing quickly outweighs the higher cost it entails.

Qualifying the Lender

Not all lenders are created equally.  Also, not all lenders lend the same.  Unlike traditional bank financing that have similar interest rates, similar costs and similar qualification methods hard money lenders are quite different.  Think of it this way: Lender 1 is your neighbour and Lender 2 is an unfamiliar person from a real estate investment club you attend.  They will both lend differently and will charge you different interest rates while also having different lending requirements.

Get to know the Lender

The absolute best thing you can do is to determine how the lender will do business.  A ten-minute conversation can give you great insight into how they will lend to you and what their requirements would be.

Questions to Ask

Here are a series of questions that will help you understand what the lenders will consider.  However, before you go running and calling the lenders keep in mind most lenders are not asked this many question so they may   But, these questions will also show that you know what you are doing better than most the lenders may speak with.

  • What are their points?
  • Can points be charged at the end of a loan?
  • What interest rate do they charge?
  • What is their LTV?
  • Will they lend the LTV upon the value or purchase?
  • Will they fund repairs?
  • Can you pull cash out of a loan?
  • Do they lend in residential financing?
  • Do they lend in commercial real estate?
  • Do they have a pre-payment penalty?
  • Do they offer a Proof-of-Funds?
  • Do they check credit?
  • Do they look at the property more than you?
  • Do they have an application fee?

Hard money lenders are widely used in real estate but when you use them think: “Are they good enough to work with me?”  This will help you understand the purpose of qualifying the lender and find the best funding for you and your business.

Private Money Lenders

Private Money Lenders

What is a Private Money Lender?

A private money lender is a company or individual that loans money, usually secured by a note and deed of trust or mortgage, for funding real estate deals. Private money lenders are typically considered more relationship based in comparison to hard money lenders.

Three places to Find Private Money Lenders

  1. Real estate investment clubs

Real estate investments clubs are a great way to find any part of your power team including private money lenders. Be proactive in networking with as many people as possible when you attend. The point is to let people know you’re doing deals and looking for more possibilities on raising capital. This is a great way to find out if the person you are speaking with is a private money lender. If they aren’t you may get a referral to people that are.

  1. Online searches

You can find just about anything with online searches. There are several websites out there that have lists of private money lenders or lenders that have their own website. A good place to start is www.privatemoneylendingguide.com and browse the lender directory. When contacting a private money lender, you could say “Hi, my name is John Doe and I found your information on the Private Money Lending Guide directory website. I have a deal that I’m working on that I would like to discuss with you. Do you have a few minutes?”. If they have a few minutes to speak, this is the time to start asking any and all questions about the potential loan you need (points, interest rates, terms, etc.) and how the lender operates. If they don’t have enough time, schedule an appointment with them so you’ll have the time to discuss things.

  1. Referrals

I briefly touched on this with real estate investment clubs, but don’t underestimate the power of referrals. Typically, referrals come from people you trust that have had dealings with the private money lender they are referring to you. The great thing about referrals is you can get them anywhere. Family and friends, co-workers, social media (LinkedIn, Facebook), Realtors, etc. The old adage goes “if you don’t ask, you don’t get”, so don’t be afraid to ask for what you need.

Using these methods can help you find the private money lenders you need to make your real estate business a success. Having Private money lenders lined up can also give you confidence in your deals knowing the money is there when you need it.

REO Properties: Marketing to Buy REO Properties

REO Properties: Marketing to Buy REO Properties

Nowadays, the cost of purchasing a house or any real estate properties has skyrocketed so that people are now looking at other alternatives to acquire a property. A lot of buyers would search for properties at auctions and sales while others opt to buy bank owned properties in hope of saving money by getting a great bargain.

REO properties or real estate owned properties have been foreclosed by the bank or the lender after the previous owner failed to make payments on their mortgage loan.  These types of properties have undergone the necessary foreclosure process and are usually auctioned unsuccessfully, making the bank or the lender the default owner of these properties. The bank would consider these properties as liabilities that would need maintenance. If the property would sit long on the market, it would usually be found in a rough shape and in need of repairs. For this very reason, REO properties would sell for less than its average market value.

Where to Find REO Properties

Take note that even if the bank has many REO properties in their inventory, they will not advertise it for a very low price. If you are interested in purchasing REO properties, the best way to do so is to find a reliable real estate agent who will do the searching of REO properties for you from various banks or lenders and guide you on the right price. If you want to do the searching yourself, you could contact the lenders directly and ask for their list of REOs.

Making an Offer

Banks foreclose the property to recover what was owed to them by the borrower and although they would be eager to get REOs off their hands, be prepared to negotiate hard. There are other investors such as yourself also interested in making a great bargain, too.

Lenders would prefer cash offers for REOs especially when there are multiple offers for the property. Another reason lenders would prefer cash is because most of these properties need so much work that these properties cannot qualify for traditional financing.  Even though some banks may aprefer cash some would be willing to consider financing if the price is right. To increase the chance of landing your desired property, be prepared to make an offer closest to the lender’s asking price.

Savvy homebuyers will usually make an offer on an REO properties 20% below its asking price. Other buyers would rather get a great deal and offer more than what is expected than missing out of a great deal.

The bottom line is buying REO properties can be very stressful.  However, having your real estate agent to advise you will help you navigate through paperwork and legalities to shorten your negotiation process and make REOs a valuable investment for your portfolio.

Demographic Research – Housing Inventory

Demographic Research – Housing Inventory

There are many statistics a real estate investor should pay attention to. One of those statistics is housing inventory. This statistic is commonly referred to as “months of inventory”. A simple definition could be, “The number of months it would take to sell all of the homes currently on the market.” For example, ten months of inventory would signify more of a buyer’s market, meaning more homes to choose from. Whereas four months of inventory would denote more of seller’s market meaning fewer homes for retail buyers to choose from. Knowing this statistic would help an investor tell where the market is and what strategy would be most beneficial.

One of the best ways to research the housing inventory is visiting www.realtor.org. This website is hosted by the National Association of Realtors (NAR). The NAR has an interest in gathering housing statistics so that REALTORS and other real estate professionals can keep their eye on housing movement. At the tops of the webpage you will see a tab entitled “Research and Statistics.” By clicking on this tab you will find many types of statistics including housing inventory.

Another resource to find these statistics is your states’ board of REALTORS website. You can find this website with a quick google search. The state’s Board of REALTORS will also keep tabs on housing inventory to help local real estate professionals. An investor is able to use this information to help in evaluating deals.

The previously mentioned techniques will give you good statistics. If you want local statistics, and you do want local information, you should turn to your real estate professional. A REALTOR who has access to the Multiple Listing Service (MLS) would be able to research housing statistics for an individual neighborhood if you need data as specific as this.  The data from the MLS is much more accurate and local than other resources you will find. Simply ask a REALTOR for the data on the current housing inventory. A good REALTOR will supply you with this information along with other statistics that will benefit your business.

Using the housing inventory statistic to determine the market is important for the investor. If we are in a seller’s market then a buy, fix, and sell strategy would be a good choice. Conversely, an investor in a buyer’s market would be better served using a buy & hold strategy. Therefore, the housing inventory statistic is key to determine the market we are currently in.

How to Qualify Private Lenders

How to Qualify Private Lenders

Private lenders can be a great way to start your “fix and flip” real estate business.  Typically, a private money loan is meant for short term lending purposes and then the property is either sold or refinanced.  Private money lenders base their loan on the equity of the property and not the purchasers credit or income credentials.  Private money lenders are typically a private individual or group, not an institution.  When speaking with private money lenders it’s important to qualify them to find out what you can expect from them and what they expect from you.  You’ll want to know the terms, the conditions and just how much they are going to be involved in your project.  They will also have their own qualification process of you and your property but for now we will focus on the information you will want to obtain from your private lenders.

First of all, you will want to know the terms of the loan you will be getting from your private lender.  Typically, the interest rate will be quite a bit higher than if you were to go to a conventional bank, don’t panic, as long as you run your numbers correctly and there is a profit at the end of things, this is a win-win for everyone until you can make enough profits to buy the property with your own capital.  Also, make sure you ask if there will be any points charged in this transaction.  It is very common for a private lender to ask for 2-3 points when the property is sold.  These points are equal to 2-3% of the purchase price.  This might seem like a lot but it’s all about running the correct numbers.  Keep in mind that once you prove yourself to your private money lender, they may be willing to negotiate the terms of your next “flip” because they now trust that you will be able to renovate and sell the property and they want to keep you as a customer.  The next thing you will want to know about the terms of your loan is how much the private lender is willing to lend to you.  For example, they may be willing to give you 90% of the purchase price but you will need to come up with the final 10% as well as the rehab costs.  In other instances, you might find a private money lender that is willing to give you the rehab costs for a higher interest rate and you will approach another source for the majority of the purchase price.  You will also want to discuss if and when any payments will be due during this process.  Keep in mind, because this is a private individual or group, they get to set the terms.  Some will require monthly payments and others will not require a payment until a certain number of months have passed.  It is imperative that you understand exactly what terms your private lender is giving to you, so that you can make sure you are running your numbers correctly and ensure you will make a profit.

Another thing you want to find out from your private money lender is what will happen if you go past the agreed upon number of months they are lending.  In some cases, the interest rate will go up.  Other times, payments with penalties included will begin.  In the rare occasion that the property is not sold within the allotted time you need to know what your private lender is going to require.   This is a rare situation but it’s better to have this conversation up front and know what needs to be done so that there are no surprises for either party if the situation arises. 

The last thing that you want to talk about with your private money lender is how much they plan on being involved in your project.  Some private money lenders want to have a say in the plans, the colors and the selling of the property.  They feel because their money is involved they have a right to some of the decisions.  Then there are other private money lenders that will quietly let you run the project unless they see a huge red flag and need to step in with their opinions.  Either way, you want to prepare yourself for which type of “partner” you are teaming up with so that you will not be insulted if your private money lender wants to have a say in your project.

At the end of the day, a private money lender is an excellent way to get your foot in the door as a “fix and flip” real estate investor if you don’t have the capital yourself.  Getting creative about using other people’s money to help you get started is a great option to begin this process.  There are a lot people out there with money that want to make their money grow and you want to make your new “fix and flip” real estate business grow.  By using their money to start your business, it’s a win-win for both of you.  Just make sure you communicate clearly the terms, the conditions and what expectations you have of each other so that the relationship can continue through many more projects.

How To Find Private Lenders

How To Find Private Lenders

A great way to leverage your funds in a deal is to work with some private lenders. I would define a private lender as a private individual or company that loans money, for the purpose of funding real estate transactions. The lenders will usually secure their loan to you with the note on the property or some other kind of collateral from you. They are more flexible than hard money lenders and usually less expensive.  There are several ways you can find these lenders.

  • Online Searches: Use your favorite search engine like Google, Yahoo or Bing. Do a search for “private money lender, your city and state”, this should produce a list of places you can contact and qualify to see if they would be a good lender for you.
  • Family or Friends: You would be amazed how many of your family and friends want to get into real estate investing and how much they might have to lend you. One thing to remember, always be cautious which family and friend you want to work with. Make sure they have some business savvy, also make sure they can afford to lose the money they invest into your deal, not that you are going to lose that money but if something were to happen then the loss would not ruin them or you.
  • Real Estate Investment Clubs: This is one of my favorite places to find good lenders. Attend your local real estate investment club meeting. At this meeting you will usually run into private lenders and that face-to-face meeting will help you establish a working relationship with these guys.
      • www.meetup.com on this site, get to the search button, type in “real estate investment club”, then select your city and distance you want to search. Then you will get results of club in or around your area. Click on each club individual, read about who they are and contact the organizer and get registered to go to their next meeting.
      • www.creoline.com from this site, search your area and a list of clubs will be listed out. Contact the organizer and get registered to attend their next meeting.
  • Networking Sites: The following sites will allow you to network with people and/or specific groups within these sites that will give you good leads to the lenders.

3 Tips for successful Apartment Management and Operations

3 Tips for successful Apartment Management and Operations

Becoming an investor in apartment complexes is a big step in real estate investing. Depending on how much time and ambition you have, you are going to either manage yourself or you are going to pay a management company to do that for you. Typically, investors will hire a company to do the work for them when the complex is 20 units or bigger. When this is the case you are passing a lot of the stress and work of to someone else.  When you are looking at a complex that is under 20 many investors will take on the management responsibility themselves. Being an owner of rentals as well as having managed a 72-unit complex in the past I’m going to give you my 3 tips to being a successful apartment investor when managing them yourself.

  1. Hire a live in property assistant manager

Obviously this is not what you need for a fourplex but when you are looking at 8 units or more this can be a big help. You are still the owner and manager of the property but you’re handing off some of the responsibilities. For example, have them do showings, collect the monthly rent, take maintenance calls, and even take care of some basic lawn care needs. All of this can be done for just giving a discount towards their rent. If you have a bigger unit where you have an office at the complex, they can staff that as well and receive free rent.          

  1. Set a standard and keep to it

The biggest mistake you can do in an apartment complex is start giving special privileges.  Once you let one tenant have a pet or accept late rent they are all going to take advantage of you. Decide from the beginning what your line is going to be and don’t change it. 

  1. Have a solid contract with a solid damage repair cost contract

It may be overwhelming at the beginning for a new tenant but it’s there to protect them as much as it is there to protect you. This way you can start off showing “I have rules and I expect you to keep them”. It will also protect you from having someone damage your property and not get all the funds you need from them to repair it.

  

These are just a few tips on what I believe helps being an investor in apartments to be a good experience rather than a bad one. Just make sure to do you your research and talk to those with experience before you take the big step.     

9 Keys for Successful Comps.

9 Keys for Successful Comps.

Using comparable properties, also known as comps or comparables, is the best way for you to get an accurate after repair value (ARV) for a property you are interested in making an offer on. Your goal is to get a minimum of 3 good comps, you will take as many as are available, but you need at least 3.   Here are 9 steps that will help you get the best comps on potential properties you would like to make an offer on:

  1. All comps have to be sold properties.  You do not want listed properties or properties that are under contract.  The sales process has to be completed.
  2. No fore-closures, short sales, or rehab properties. You want move in ready properties only.
  3. Look for comps that have sold within the last 3 months.  If you need to go back further because you did not get at least 3 comps. you can, but you do not want to go back further than 1 year. 
  4. Comps should be within a half mile to one mile away from your subject property.  If you do not have enough comps with in the mile radius you can expand your area further to find sold properties that would make good comps.  This is most common in rural areas and I have seen comps go out to 3 miles away the subject property. 
  5. Interior square footage needs to be similar.  Use a range of 500 square feet or 20% whichever is greater.  Here is an example of how to use your square footage range:  Your subject property is 1258 square feet, so, you should get all properties that fall into a range from 1000 square feet to 1500 square feet.  That gives you your 500 square foot range.  When using the 20% rule take 20% of your subject properties square footage for your range.  For example: your property is 3500 square feet.  When you take 20% of the square footage you get 700 square feet.  Now you will use 700 square feet as your range.  Your comp range would be 3150 to 3850
  6. Your comps should have the same number of bedrooms and bathrooms as your subject property.
  7. Structure of the comp property needs to be the same as your subject property.  For example: If you have a 2 story home you want 2 story homes for comparables. 
  8. Acreage or lot size of your comps needs to be similar to your subject property. 
  9. Age of properties comps should be within 20 years of your subject property. 

The closer you can get your comps to what your subject property is the more accurate your ARV will be.   By using these steps, you can assure yourself that your comps will give you the best ARV available and helping you create a more accurate potential value for your subject property.

3 Reasons to Use Hard Money Lenders

3 Reasons to Use Hard Money Lenders

Hard money lenders are private people or companies that use their own money or lines of credit to finance real estate. These lenders are often familiar with real estate. They have often built lending companies as well as purchased, sold and exchanged many forms of real estate throughout their business life. Because of a hard money lenders extended knowledge their prices, interest and other costs are set. Their interest rates usually run about 10-18% with additional costs (called points) around 3-8% of the loan amount being lent to you. These large costs may deter first time and new investors from using hard money lenders for their real estate investing businesses. However, here are three large reasons you should consider using hard money financing in your own real estate investing businesses:

  1. Cash Financing

    You have likely heard “cash is king”. In no other business is this truer than in real estate.

    Think: if you were selling a house and you received two offers. One was cash and the other was traditional financing. With all other items being equal you would be more likely to accept the cash offer. Cash gives strength and power to your offers. Hard money financing is often considered as “cash” financing and gives you the same strength, power and value as actual cash.

  2. Speed

    One of the similarities and benefits of cash and hard money financing is the speed.

    If you were at a grocery store to purchase a candy bar and purchased the treat with cash it would only take you minutes to purchase the candy. Similarly, real estate purchased with cash or hard money financing can be completed very quickly. Unlike the candy bar real estate purchases have a need to clear title. However, after a cleared title real estate transactions can be completed in days. This speed can also give large strength to your offers.

  3. Easy qualifying

    Hard money lenders do not have the same lending requirements as a bank. As you may know or have experienced: banks often require down payments, good credit scores, years on a job and sizable bank statements. This is not likely the case for hard money lenders; instead, their evaluations are usually on the property and the equity you are purchasing as a part of their property review rather than on you.

    Easy qualifying allows more investors like you and I to purchase.

Reading these easy steps, you can see the value of the financing offered by hard money lenders. To add to the benefits of these types of lenders if you know their costs you can deduct the costs from your offer formulas so that there is little to no change to the profits you could make in real estate transactions. Consider using hard money lenders to finance your next real estate transactions.

Networking by Attending Foreclosure Auctions

Networking by Attending Foreclosure Auctions

To most people, being a real estate investor is all about making a lot of money through buying and selling properties. Although that idea of real estate investing is not far from the truth, there’s more to it than that. To make it to the top, real estate investors need a lot of help from other people inside the real estate industry. That’s where networking comes in. Networking is the inexpensive method of establishing friendly and professional relationships with other people in order to increase their number of business contacts and future prospects.

One of the many networking events an investor must not miss is a foreclosure auction. Attending foreclosure auctions does not mean you have to join in the bidding. Instead, just get to know people. Because foreclosure auctions are a great way to acquire properties below market value, they attract a large numbers of local and non-local investors. You’ll meet serious buyers that are fast deal closers and pay with cash. These are the people you’ll want to network with and put on your growing lists of buyers. If you know someone attending a foreclosure auction, ask him or her to show you around and introduce you to different people.

For beginners or even seasoned real estate investors, having a database of people from the same business is very important in building a career. As like many other industries, the more people you interact with, the more business prospects you will get. It’s practically impossible to run a real estate business without the right contacts.

Referrals

Establishing strong business connections with the right people can be beneficial when starting in the real estate world. Accumulating a large network of real estate agents means getting many business referrals.

Mentorship

Business networking can offer a variety of opportunities such as being educated and mentored by people who have already made a successful career for themselves. Learning from these people with varying talents and techniques can help you and guide you in becoming a success investor.

Potential Business Partnerships

Networking is also a great way to meet other investors that could become potential business partners. Investors work, help, and makes deals with their fellow investors, so keep in contact with each other.
Meeting Service Providers

Reliable contractors can easily be found if you just ask around. Since most properties in foreclosure auctions are not in good shape, a skilled and trusted contractor is someone you want to have on your networking team.

Working with Purchase Contracts

Working with Purchase Contracts

When making an offer on a property, either through an agent or FSBO, a purchase contract will always be used. All the details of a purchase contract will not be discussed so if you have specific questions talk to your agent or attorney.

Eighty-five to 90 percent of properties that are for sale are listed with an agent. If you are making an offer on a property where this is the case, the agent over the property will be required to use a purchase contract (unique to each state) and will fill out for you. When the agent fills out the contract, there are certain things you will want to have them change or put in the contract to protect you.

The first thing you’ll want to have in the contract is a 14-day inspection period. Every state will have a different standard for their inspection period but make sure it’s changed to at least 14 days. In states where the inspection period is longer than 14 days, feel free to keep the standard inspection period. Sometimes the inspection period will be called the due diligence period. The due diligence or inspection period gives you 14 days to cancel the contract without losing any of your earnest money in the chance that you find out something you don’t like about the property.

A second change you can make in the contract is the amount of earnest money you will put down. In general, it’s a good idea to keep earnest money between $500-$1000. Some government foreclosures like Fannie Mae or HUD may require up to 10% earnest money, so you might have to go over $1000 on those specific foreclosures. Push your agent to put in the lowest amount of earnest money possible.

The last part of the contract you need to pay attention to is the addendums or additions. This is where you can give yourself the right to assign the contract, the right to show the property, or include a partner’s inspection and approval. Additionally, anything that is not in the contract that you would like included or anything in the contract you want to change will go in here.

When making an offer, you’ll need to tell the agent the specifics you want in the contract and then double check to make sure they were put in before you sign. You do not have to be an expert on contracts, you just need to know how to protect yourself, and by checking these three elements, you can.

Tips for Getting An Investment Property Ready To Sell

Tips for Getting An Investment Property Ready To Sell

Getting an investment property ready to sell does not need to be difficult or stressful but somehow many investors find it becoming just that. Some investors become emotionally attached to their property, some become nostalgic and find it painful to let their property go, and some have difficulty selling a tenant occupied property. Regardless of the reason, when selling a property, the key is to keep things simple. The minute you decide to sell, you need to stay firm on your decision and your emotions need to stay out of it. Here are a few tips that can help make the process of selling your property easier and more stress-free.

Deciding to Sell

When deciding to sell an investment property, think of your property as an investment and figure out how to make a profitable deal out of it.
For Landlords, it can be quite a dilemma when you want to sell a property with tenants in it. Most landlords will want to wait until the lease or contract is over before selling the property because, typically, the fewer the people involved, the fewer the complications. Although a vacant rental property could mean fewer complications, whether or not you have tenants, you can still sell your property. It’s just a matter of finding the right buyer. There are new investors out there that would like to start their investing career by becoming a landlord, and buying a tenant occupied property might be just what they’re looking for.

Hiring An Agent

Find a real estate agent that you can comfortably work with. After all, they should have your best interests in mind. Real estate agents are very knowledgeable and can give sound recommendations for those that are new to real estate investing. Agents will evaluate your property and provide a CMA or comparative market analysis for your property. Make sure to choose your agent carefully since they will handle the legal requirements of selling your house. Agents are also in charge of the advertising, marketing, and showing the property to perspective buyers.

Preparing The Property

Make your property appealing by understanding your selling audience. Are you planning to sell your house to an owner-occupier or an investor? Different buyers will likely have different ideas on what to look for in a property. Prospect owner-occupiers need to “fall in love” with the property. If you can afford it, staging your property can do wonders.

Declutter unnecessary items to make your property spacious. This does not necessarily mean that you have to remove everything inside and present your buyers with a cold and vacant property. Buyers need to experience the property in its “lived-in” state without having too many personal belongings in the way.

Paint the walls with neutral colors. Buyers are usually excited to have a fresh start to their new homes. Give the place a fresh coat of paint to make your property look new and clean.
Clean the property. If the property is clean, it will smell clean. Unpleasant odors inside the property are a big turn-off to buyers. Pay special attention to the bathroom. If you can afford it, make it look like a spa. Fix holes in the wall, broken windows or anything that needs to be mended. Buyers need to see that the property is well maintained and, of course, nothing makes a property more appealing than cleanliness. It’s cheap and shouldn’t cost a lot money.
Make sure the exterior of the property looks beautiful as well. Don’t become the property that buyers refuse to enter because of an unkempt landscape. Boost your curb appeal by trimming the shrubs, painting the door and keeping the walkway clear. First impressions matter.
Not only will these preparation tips help you sell your property faster, they will add value to it.

Pros of Using Trust Deeds

Pros of Using Trust Deeds

Buying and holding trust deeds is a great way to offset buying and holding a property. Trust deeds are also known as real estate notes, seller financed notes, and/or mortgage notes. Notes are usually created by the seller of the property to help finance all or part of the transaction. This service the seller provides usually attracts a lot more buyers for them. The terms, conditions, down payment, interest rate, due dates, payment amount, late charges (if any), length of the loan, and anything else associated with the note will already be negotiated between the buyer and seller of the property. Therefore, you do not have to renegotiate anything. As the investor buying the deed, you need to review the entirety of the note and decide if this is something you want to buy. Deeds are a great investment opportunity for investors. The pros of using trust deeds as an investment tool are as follows:

  • Usually a higher rate of return, meaning better cash flow for you.
  • Less risky than owning the property out right or investing in stocks.
  • No management of the property is needed.
  • No need to pay mortgages, taxes or insurance.
  • You are in first lien position on the property, meaning the trust deed is secured by the property.
  • You can possibly sell your note to other investors, usually at a higher profit than at what you acquired it.

Simply put, you are acting as the bank when you own a trust deed. Your investment is secured by the property, which means if the borrower is not able to make payments to you, you have the right to foreclose on the property, as long as you are in first lien position. Investing in deeds is a great investment strategy to add to your portfolio. I would suggest only getting notes that are first lien position notes. You can find other type of notes, but for now stick to these kinds and you will be in good shape.

The Benefits of Using a Real Estate Attorney as Part of Your Power Team

The Benefits of Using a Real Estate Attorney as Part of Your Power Team

For most people, the purchase and/or sale of their home will likely be the largest financial transaction they will make. Likewise, as a real estate investor, you will be involved with numerous and large financial transactions. The amount and risk of such transactions merits the use of a real estate professional. Additionally, several states require the use of a real estate attorney in the sales transaction.

From the time you make your decision to buy a home or investment property, there are a number of important decisions that must be made and which have legal consequences. There are several aspects of the sale and different ways your attorney will assist you in evaluating, assessing and closing the real estate transaction.

Prior to closing, instructions from the lender are sent to the real estate agent and/or attorney. The attorney is responsible for evaluating the details of the sale, preparing necessary closing documents, assisting in scheduling the closing, explaining the necessary closing documents and then ensuring the title company has properly executed and recorded all the documents.

A real estate lawyer’s primary focus is to ensure that the real estate transactions are executed according to all local (state) laws and the process of document preparation and review follows correct procedures. This includes the review of sales documents, the negotiation, assessment of the terms and conditions, and finally, the transfer of titles.

Real estate attorneys may also be consulted to ensure that real estate laws and regulations are followed when buying or selling real estate. When a breach of contract or a real estate fraud occurs, real estate lawyers assist to correct the problem and represent their clients to resolve any actions or issues.

Overall, real estate lawyers serve two major primary functions in the real estate world. They either act as litigators and oversee the legal aspects of real estate transactions or they defend the rights of their clients as they try to protect their interest. Real estate attorneys focus on real property and mediate real estate transactions that have legal issues.

If you are investigating a property and have questions concerning the legal meaning of any portion of the real estate purchase contract, you should consult your attorney before engaging in the legal transaction and signing the contract. This contract is a legal document and is binding for both the seller and the buyer.

Various real estate lawyers are skilled at consulting a specific aspect of real estate law. Some attorneys focus on litigating fraud cases and others might specialize in mortgage fraud, while some concentrate on land use (including zoning laws). Their expertise can also be focused on residential or commercial real estate.

Thus, an attorney’s role in real estate is broad, but they ensure that real estate transactions are done according to the law. This work is done in coordination with the buyers, sellers, realtors (agents), and/or lenders. The attorney’s main purpose is to assure that this complex procedure is legal and assists all involved in fulling their wishes to buy and sell the property. Therefore, choosing to work with an experienced real estate attorney is essential to safely handling purchases and closing real estate transactions.

Marketing to Cash Buyers

Marketing to Cash Buyers

When you begin marketing to cash buyers, there are several ways you may want to go about doing it. You could set up a direct mail campaign or even send a postcard with some jazzy marketing hoopla. Of course, there’s also the option of using bandit signs, which our students have found to be wildly successful. As you can see, there are a number of ways that you can market to cash buyers, but before you begin your marketing campaign, whichever way you choose to structure it, it is important to know the mindset of a cash buyer. Over the years I have had the pleasure of working closely with several cash buyers on projects, and I’m going to share a unique look into the day and life of a cash buyer so you can have a better understanding of just who they are. When you know who your client is, you will better understand how to solve their “problem,” and marketing is all about letting your client know that YOU are the solution to their problem.

First of all, cash buyers are busy! They are on a timeline and they are moving as quickly as they can to get from point “A” to point “B,” and they do NOT like to waste time when they are working. A cash buyer usually has a time frame in which he needs to complete his “fix and flip” project, and he sets his days, weeks and months to be as efficient as possible. You won’t find a cash buyer lollygagging on social media or strolling through the mall. Cash buyers are precise and focused in their daily routine. They have their job planned from start to finish, and they know the specifics of how long each task should take to accomplish in order to move on to the next task. When you create a marketing piece or if you are simply calling a cash buyer, keep this in mind: Let them know that you are aware of how busy they are and that you respect their focus. If you can tell they are too busy to talk to you, don’t be offended. Instead, offer to call them back at a more convenient time for them.  **Hint Hint…this is an excellent way to illustrate to a cash buyer just how valuable you are to them. Also, let them know you will be finding them properties so they can stay focused on what they do best, flipping properties! Can you see how you can show them that you are the “SOLUTION” to their problem…? Even if they didn’t know it was a problem…? Yep, that’s called marketing!**

Next, remember that a cash buyer is all about his bottom line. He is good at what he does because he knows how to walk through a property, put together a budget for the property, and stick to it so that he can make a profit. A cash buyer has a box that he must stay in with each project. It’s not emotional; it’s all business. If the numbers don’t work, the answer is “no.” There is no need to take anything personal; it’s just the way he runs his numbers. The better you know how he runs his numbers, the more valuable you will become to him. A cash buyer also knows that there will always be little things that pop up that weren’t accounted for in the budget. However, a cash buyer will usually have given himself enough room on his profit to have a little cushion. When he is negotiating a deal, he is firm but flexible. He knows that getting a deal is better than not getting a deal. He also knows that he has competition, and he’s always on top of his game to put together an aggressive offer.

A cash buyer is also a master of project management. He knows where his time is best spent and what projects to leave to his experts. As he dives into a project, he is able to see where he can save a little time and money and then invests that time and money into something else that may have not been in his original plans. Any little details you can suggest might make you an invaluable part of his process. When developing rapport with a cash buyer, make sure you let them know you understand how important HIS bottom line is to you and that you will be negotiating aggressively to find him a smokin’ hot deal.

Responsibilities of a Real Estate Agent

Responsibilities of a Real Estate Agent

A real estate agent is someone who holds a state license and represents a buyer or a seller in a real estate transaction. Real estate agents are the people you deal with face to face when buying or selling a property. Agents execute many functions, such as showing homes to perspective buyers and negotiating transactions on behalf of their clients. Agents work on a 100 percent commission basis, which means their pay depends on their ability to find properties suitable for their clients and to close transactions. The purpose of this article is to discuss the responsibilities of a real estate agent.

The First Step is to Guide: Prior to touring a home, an agent will need to understand their client’s budget, preferences and wants/needs, as well as their motivation. They will then narrow the search and identify each priority.

The Second Step is to Educate: A real estate agent should offer information on homes in the local market and comparable sales. This process can be complicated and a good agent will advise and counsel the client every step of the way.

The Third Step is Networking: A real estate agent must be familiar with the target neighborhood and know the homes for sale before they are formally listed. Experienced agents should know and have a good working relationship with other agents in the area. Additionally an agent should be capable of referring a client to trusted professionals such as lenders, contractors and home inspectors.

The Fourth Responsibility is to be an Advocate: Buyers should work with an agent who can fully represent them. Your agent should be an expert who is looking out for your best financial interests and is contractually bound to do everything in their power to protect you.

The Fifth Responsibility is to Negotiate: A Real Estate agent handles all the negotiation details such as preparing all offers and counter offer forms. After the home inspection is complete, an agent can be beneficial in making sure the repairs are done in a timely fashion.

The Sixth Step is Managing Minutia: A good real estate agent understands the deadlines and details of all the paperwork involved in a deal and can help navigate this complex process. They will make sure all the boxes are checked, all initials are in the right places and all the paperwork is complete before submission.

The Seventh and Final Step: The final role of a real estate agent is to “look out” for you. Any form of errors can damage a deal before its closing. These errors can include a lender failing to meet financial timelines, unclear house titles or a seller failing to disclose a problem with the property. Any small error can kill a deal. A great real estate agent knows to watch for trouble and can skillfully deal with challenges as they arise.

In conclusion, the road to home ownership can be bumpy and can be filled with unexpected turns and detours, but having a real estate agent’s assistance can help guide the way. They are crucial in the real estate business.

How Do Real Estate Agents Get Paid?

How Do Real Estate Agents Get Paid?

Real estate agents are individuals who are licensed to assist clients when buying, selling, or renting real estate property. Unlike other professionals who get paid by the hours they spend on the job; real estate agents will only get paid once a transaction has successfully closed. The agent is then paid by receiving a commission for their services. The commission is calculated based on a percentage of the selling price from the sold property.

A typical real estate agent fee can be as much as 6%. However, the agent will not receive 100% of this fee. To better understand how real estate agents are paid, it would help to first know about the relationship between a broker and an agent.

The broker runs the real estate office. In the real estate industry, the broker has acquired more skills and experience having underwent more education and intensive training. A broker is legally responsible for all real estate transactions he has done himself and/or by his sales agents. He can work independently or with another broker as an associate broker. A broker can also act as an agent in a real estate transaction. All real estate commissions must be paid directly to the broker. It is the brokers responsibility to split the commission as stated in the Broker/Agent contract and with any other agent involved in the transaction. Usually, the broker and the agent split the commission 50/50 or depending on what was agreed in the Broker/Agent contract.

A sales agent works for and under the broker. An agent cannot work independently and is prohibited to accept payments directly from clients. The agent is the person the clients will personally work with throughout their transaction.
Generally, there will be 2 parties involved in a transaction – the listing agent with the listing brokerage and the buyer’s agent with the buyer’s brokerage. Sometimes, the real estate agent can be both the listing and the buyer’s agent depending on the deal.
How much do real estate agents really get paid? The example below will better illustrate the process.

Mr. Client wants to sell his property, for $280,000.00. He meets a real estate agent named Bob, who works for the WiseBuy Realtor. Mr. Client agrees to pay a 6% commission, of the selling price. Bob and Mr Client sign a listing agreement. Bob lists the property on the MLS and puts a “For Sale” sign up in front of the property. Bob is contacted by Agent Sue who has a client that is looking for a house. Agent Sue takes Mrs. Buyer to Mr. Client’s property and shows her the house. Agent Sue submits an offer, on behalf of Mrs. Buyer, for $275,000.00 that was accepted by Mr. Client.

The agreed 6% commission paid by Mr. Client was split 50/50 between the selling agent’s brokerage and the buying agent’s brokerage. Agent Bob’s brokerage received $8,250.00 and Agent Sue’s brokerage received $8,250.00. Since Bob is on a 50/50 commission split with his brokerage WiseBuy Realtor, his total commission is $4,125.00.

The breakdown of commissions earned by Bob and his broker.

  • Total commission paid by the seller $16,500.00 (Typically, the seller pays the realtor fee unless otherwise negotiated)
  • Total commission paid by the buyer $0.00
  • Bob’s commission $4,1250.00
  • WiseBuy Realtor brokerage commission $4,1250.00

Staging Investment Properties

Staging Investment Properties

In today’s market, property owners have found it worth their while to invest in staging their home when they plan to sell their property. Property staging is the art of decorating a property to help it sell faster. Statistics have also shown that staged properties are perceived to have a much stronger value meaning a higher selling price that would result in more money for the property owner.

Recent studies have shown that a beautifully staged property can draw in more potential buyers as it makes the property visually inviting to prospective new home owners. By creating an ambience of comfort and warmth, would-be buyers are given an example on how to plan out their own designs to use in the property rather than being presented with a large empty room.

You get one chance to make a first impression when trying to sell your home, therefore, it is really important that it is presented at its best. It is ok if you want to do the staging yourself but it does not necessarily mean that you can do it as well as a professional home stager would. Remember, staging can require a lot of time, skill, and energy so it would be wise to be realistic about whether you have the patience to take on this important task yourself or hire a professional. Here are some basic tips when staging a house:

  1. PAINT: Light neutral colors are recommended to help inspire prospective buyers in visualizing where to put their own household items in the house. Neutral colors are also the easiest colors to decorate with.
  2. CLEANLINESS: A clean, well-maintained property is always the first thing buyers will notice when entering your property. Scented candles will make the house smell good and clean.
  3. DE-CLUTTER: De-clutter and remove personal items. Home staging is beyond your normal redecoration. Do not forget that the house is now a commodity you are planning to sell and stop thinking of it as your home.
  4. FURNITURE: Buy or rent new furniture to replace anything old and shabby looking. Old, ugly, and outdated furniture can be an eyesore and could be the reason holding you from making a home sale.

Hiring a staging expert and how much it would cost would depend on the property and how much work is needed. Contact various home stagers and ask for estimates. A home stager will want to look in the property and make recommendations. It could mean stripping your house of all furniture and furnishing your property from top to bottom if needed to improve the appeal and marketability of your property. A professional home stager will showcase your property to make it stand out against its competitors. Although it sounds like it would cost you a lot of money, it is a wise investment. Staging your property will help you get the highest price for your property and help it sell faster.

Why Hire a Property Manager

Why Hire a Property Manager

Having a competent property manager on your power team can add substantial value to your investment. I would recommend investors who are planning on doing a buy and hold strategy to get a good property manager to work with them. They can save you time, money and legal issues from tenants. I will outline eight reasons you should hire a property manager.

Screening Tenants: PM’s (Property Managers) have a lot of experience in screening for the right tenants for you. They know how to quickly analyze a good tenant from a bad one, saving you hassle in the long run.

Tenant Retention: It will be important for you to have long term tenants and one way to insure the tenants are happy is to have a good PM taking care of the tenants needs. A good PM will have general business practices that will ensure good tenant retention, so be sure to ask them what programs they have in place.

Rent Collection: Too often when investors try to manage properties themselves they let tenants walk all over them. A good PM will be your barrier between yourself and your tenants. PM’s are doing a job and will follow the terms of the lease and tenants know they don’t make the final decision, you do, and they don’t have access to you. Therefore, this process keeps you out of the light and lets the PM do their job.

Maintenance Cost: Knowing who to call to fix problems with your property is huge. Most PM’s know experienced contractors who have already been vetted by them, who can also give you price discounts on repairs. Keeping the properties in good condition will save you on costly repairs and keeps your tenants happy.

Vacancy: Shorter vacancy time is better for your revenue. A good PM can help improve and prepare the property for rent to maximize profits. They can determine proper rental rates to maximize the units. Lastly they can effectively market your properties to potential renters via many advertising mediums.

Legal Problems: Seasoned investors can tell you that a troublesome tenant can cause enormous legal problems. That’s why a good property manager is important to have because they will have knowledge of the most current landlord-tenant laws and can save you from any potential law suits.

Taxes: Most PM’s can help you understand what tax advantage you can claim. They can also help organize all your paperwork to give to your accountants.

Owners Benefits: A good PM will keep your stress level low because they will handle all the day to day activities on your properties. They have a network of people they will utilize so you don’t have to go searching around. They can free up your time so you can focus on other aspects of your business.

It will take time to find the ideal PM, so use this outline to find the right one for you. They can help protect your assets and keep your cash flow coming in. Make sure to interview several to get an idea on whom to go with.

What is a Home Inspection Report?

What is a Home Inspection Report?

A home inspection report is a useful tool in the real estate market for both buyers and sellers. A home inspection is an examination of the conditions in a house. These conditions are those that affect the property values and include such items as structure and mechanicals. “The home inspection takes the uncertainty and emotional barriers out of buying a home.” (Gonzalez)

A home inspection is not an appraisal. An appraisal is a method of determining property value and takes into consideration items such as square footage and property value. The home inspection will take these factors into consideration but also accounts for the inside prospective of the home.

The home inspection report is unique to residential properties and is used to determine and diagnose the property characteristics.

We will explore the expectations of a buyer or seller when entering into a home inspection. During the home inspection, the condition and structure of the home will be documented by an inspector after taking a simple visual assessment of the property.

After the exterior is visually inspected, the heating, ventilation and air conditioning systems are examined and their performance recorded. The inspector will not disassemble the equipment but turn it off and on to see if it is in working condition. The inspection will report any observed material defects.

Plumbing is an important component of a home and the inspector will visually examine the operation of the plumbing system. The water flow is expected to be free of any obstruction so clear, clean flow of water should occur. The inspector is making sure that sewage and waste return is separate from the fresh water supply. Additionally, the inspector will visually check the water heater.

The electrical system is also visually inspected and lights and outlets randomly checked. The notation of the type of electrical box as to whether the service is fuse or switch triggered will be documented in your inspection.

In conjunction with the electrical and heating review some inspectors will offer a thermal imaging inspection using an infrared camera to give the information on heat loss and any electrical problems that are not visible to the causal observance.

Choosing a home inspector can be a difficult process in some areas because of the large amount of inspectors available and their different levels of education and competency. When considering a home inspector, there are several approved education institutions, and although not national, they can be found on the individual state sites such as nachi.org or npiweb.com. These national home inspection schools add credibility to the training given to the inspector. These sites will also give a list of the inspectors in your area by zip code.

The average fee for this service is between $350 and $500 and varies according to location, size and type of inspection needed. The home inspector will ask several questions before quoting a price so it is best to call and discuss prices with a few inspectors in your home area. It is prudent when buying or selling a home to get a home inspection. This will save money on expenses later on after the purchase and in some cases help to firmly set the selling price.

 

 

References

Gonzalez, Britttany. “American Society of Home Inspectors.” 2012. Financial Firsts:. [online]. 18 January 2016. Accessed January 2106.

Bates, Ronals. NPI. 2015. http://npiweb.com/. [online] Accessed January, 2016.

NACHI (National Association Certified Home Inspectors) – http://nachi.org

Buying a Rent Ready Property

Buying a Rent Ready Property

When looking for properties to purchase as rentals, many investors prefer to focus on “rent-ready properties”.

The first and most important part of buying a rental property should be to learn about the current market conditions of the area. Always keep in mind that this is a rental, not a high end home. However, the way that your property stacks up to the direct competition in the area determines your rental amount and occupancy rate. You should make an effort to learn about what type of rental properties you’ll be competing for renters with, to make sure that you’re buying a property that’s in a comparable condition. This should of course be done before you even make an offer on the property to begin with.

 

Always keep in mind that this is will be your own property even though you are not going to live in it yourself. Make sure that the outer shell of the property is sound and in good condition and that all necessary improvements are completed. If the exterior of your building is compromised in any way, then the inside will be at risk as well.

Also decide what appliances you are going to provide by learning what other rental properties in the area are providing. As you evaluate a prospective property, look for possible liability risks more than minor blemishes. If you can’t physically visit the property yourself make sure that you get a copy of an inspection report.

 

Here are some issues to look for

  • Are all of the electrical plates present and in good repair?
  • Are there enough smoke detectors and are they placed properly?
  • Are there any issues with lead paint, mold or asbestos?
  • Check the handrails for a good tight fit.
  • Assure that the there are no plumbing leaks.
  • Pay particular attention to the big replacement cost items such as:
  • the Heating system – boiler, furnace, heat pump, etc.
  • air conditioning/cooling system
  • water heater
  • dish washer
  • garbage disposal

 

Make sure that the house you’re buying looks good so that you can retain the best tenants but you shouldn’t expect custom cabinets and granite countertops in a rental. High end fixtures are typically not required. Just make sure that it looks nice and clean. It’s ok to buy a lower grade home to use as a rental but make sure that it is actually livable.

 

Remember, if you agree to buy a property in “as-is condition” then you will need to make any necessary repairs that are needed. If you don’t want to do that, you should negotiate with the seller to fix things before closing.

 

Once you’ve owned the house for a while you may need to replace or repair some things. When you need to replace something in the house, try not to be too cheap. Some investors will take the attitude of “It’s a rental, we’ll just put in the cheapest products that they make and call it good. After all, renters typically are not as careful with houses as they would be if they owned the place.” Unfortunately for you, plastic faucets and cheap door locks break easily and can cost you more in the long run. If while your renter calls you to say that the faucet is leaking, or a locked door handle won’t turn, {because they’re cheap}, you have to fix it. Consider putting in just a bit higher quality than the absolute cheapest, especially if it doesn’t cost a whole lot more.

Selective Tenanting Through Marketing and Promotion

Selective Tenanting Through Marketing and Promotion

Tenants have a “Shelf-Life,” because they need to be replaced from time to time. They move on or you move them out. Show me a cash-flow investor with a two-year track record of making money and paying the bills and I will show you someone who bankers want to take to lunch and discuss low interest mortgages. There are plenty of rental properties where the numbers can work. The key is having quality tenants who take care of the property and pay their rent on time.

All the promotion you may need for a rental unit that caters to University students might be a giant big screen TV and computer with high speed Wi-Fi. A property on a busy street may only need a simple sign in the front yard. But, in most cases, to rent for top dollar and select the highest quality tenants you want to reach a lot of people in a hurry.

Response
Selective Tenanting Strategies

Anyone can throw money at the problem with lots of expensive ads. Here are some things you can do on a ZERO or near ZERO-dollar budget:

  1. Zillow.com/Rental-Manager – Here you can place a complete ad with lots of pictures and full disclosure information. You will get a link to your own page that you can even email to people while you’re visiting with them on the phone. Zillow may be the biggest name in real estate. I have never run an ad here that didn’t get my phone to ring.
  2. CraigsList.org – The secret is in timing. Place your ads at 11:45 AM and/or 6:30 PM so you can stay “above the fold” during peak view times. “Above the fold” means your ad can be see without scrolling. People click they don’t scroll. Do not repeat the same ad or anything close to the same ad before the required 48 hr. wait time. They tend to not post ads till they are “below the fold” for people who abuse their system.
  3. Print flyers that present not just your rental unit but puff up the neighborhood as well. The back of your flyer can include Elementary, Jr. High, and High School Principals or Vice-Principals contact information. Do the same for Churches, Boy Scouts, Girl Scouts, Town Hall Meetings, Health Clubs, Little League, Police, Fire, etc.
  4. Be creative in where you place your flyers. Got a washer and dryer included? Hit the laundromat bulletin boards. Got the big screen TV? Hit the University bulletin boards.
  5. Visit other rentals especially where your property appeals to a different kind of renter than they cater too. They could send you leads. Visit the Section 8 Housing Department. They will give you the lay of the land on how to work with them so you can have half or more of your top dollar rent put in your checking account on the first of each month.

 

Regardless of how you market or promote for tenants, your future depends on getting good tenants who take care of your property and pay you on time. History repeats itself so here is what you can do to protect yourself:

  1. Have prospective tenants fill out and sign an application allowing a credit report.
  2. Run a credit report. Anyone under 600 probably has late rent pays.
  3. Walk out to their car with them and see how they take care of their car.

How to Use an Inspection Contingency

How to Use an Inspection Contingency

Almost every real estate transaction contains an inspection contingency. It is imperative that we understand how to use this type of contingency to our advantage whether we are buying a retail or investment property.

First, we should know the definition of a contingency in a real estate purchase agreement.

“A contingency clause defines a condition or action that must be met in order for a real estate contract to become binding.” (Investopedia, 2013) Therefore, in this case, the home must pass an inspection in order for the purchase to be completed. The details of inspecting the property will be defined in the purchase contract.

Most people hear “inspection” and automatically think of the physical condition of the property. However, inspections can include more than physical condition. Here are a few other things that can be covered under the inspection contingency:

  • Zoning and Ordinance Restrictions
  • HOA Details
  • CC&R’s (Codes, Covenants, and Restrictions)
  • Cost of Repairs
  • Profitability of the Transaction

The real estate purchase contract will define what is required in the inspection contingency. For example, some contracts require a copy of the inspection report be presented to the seller in order to withdraw the offer. This means we would have to hire a home inspector to physically go through the property and create the report. This could cost anywhere from $300-$500 depending on location and size of the property. As investors we need the freedom to withdraw from the contract without having to present an inspection report. As a remedy to this obstacle the investor will insert a new, favorable inspection clause into an addendum that supersedes the requirement in the purchase contract.

These contingencies are always associated with a time frame. The standard time frame is 14 days. However, the length of time is dictated by the market. If the market is moving quickly the length of time could be 7-10 days or less. This time frame could be much longer than 14 days during a slower market. There are two take-a-ways from this:

  • Pay attention to the type of days – are they business days or calendar days? Typically, but not always, the “days” in a contract refer to calendar days. It is preferable to have business days in the contract to have a definitive benchmark for all deadlines.
  • The time frame is always negotiable. Therefore, as an investor, negotiate the longest amount of time possible.

Regardless of the investing technique we are pursuing there should be an inspection contingency included in the contract in order to protect yourself.

Refinancing Your investment Property

Refinancing Your investment Property

The major difference between refinancing your primary residence and an investment or rental property, is that in addition to the standard paperwork, a lender usually requires at least six months’ worth of mortgage payments (as liquid assets) and a higher loan-to-value ratio for mortgages on investment properties.

What could refinancing do for profitability or return on investment (ROI)?

  • If you need to get cash out of the property to purchase other investments.
  • If you want to benefit from a drop in interest rates.
  • If you plan to move out of your current location and wish to rent the property and/or the loan is due.
  • If you want to maximize your (ROI) by lowering your monthly mortgage payment and increasing your rental income.

If you have ample equity, meet borrower requirements, and will benefit from a drop in interest rate, there are just a few more things to consider before you move forward with refinancing.

  • LTV Requirements. LTV stands for loan to value ratio, which means exactly what it sounds like. The higher the percentage, the closer your loan amount is to the appraised value of your property. Of course, the higher that percentage, the less equity you have built up in your property.
  • You need to have equity in your property to refinance it – plan on at least 20%. Realizing that the more equity you have, the better position you’ll be in to qualify and reap the benefits of a new loan.
  • Additional Debt and Loan Eligibility. If you have long term goals of purchasing more rental properties, be mindful that taking on additional debt could have an effect on your eligibility for future loans.
  • Mortgage Rates: Lenders consider investment properties riskier than primary residences. Mortgage rates for investment properties usually run about 1 percentage point above owner-occupied residential mortgages.
  • NOTE: Lenders will typically not refinance a home that is currently listed for sale.

Even though it is slightly more difficult to refinance the mortgage on your investment or rental property than it is to refinance the mortgage on your primary residence, depending on your current interest rate and loan terms it may be worth the added “hassle” in the long run. Even a small decrease in interest rates or a refinance to a shorter loan term can save you thousands or more over the life of your mortgage loan. If you think it will be beneficial to refinance, reach out to a lender, compare rates available on investment or rental property refinances – then calculate the savings before you move forward with the refinancing on your investment property.

Understanding the HUD-1 Settlement Statement

Understanding the HUD-1 Settlement Statement

Before being able to purchase or sell a property there are a lot of legal documents to prepare. One of the most important documents required by the government in securing a mortgage loan is the HUD-1 Settlement Statement. HUD is the acronym for Housing and Urban Development.  Housing and Urban Development is a department of the government that is responsible for any legal transactions concerning real estate ownership and property development. It is the branch of the government that develop and enforce fair housing laws.

According to the Real Estate Settlement Procedure Act (RESPA), the HUD-1 Statement is a standard form used by a settlement or closing agent to account for all of the charges and fees incurred for a real estate transaction.  The HUD-1 statement is given to both the borrower and the lender with a complete breakdown of all the costs and adjustments involved before a loan is approved. The HUD-1 is sometimes referred to as a “settlement form” or a “closing sheet”. The borrower has the right to view the Settlement Statement one business day before settlement.

The HUD-1 Settlement Statement comes in three pages and divided into sections that are required to be filled. The first page of the form is composed of three main sections.

  1. Sections A – is the title of the document and does not need
  2. Sections B-I – asks for the basic information aboutthe buyer, seller, Title Company, lender.
  3. Sections J and K – are the transaction summaries of the buyer and the seller. The borrower’s details will be found on the left side and seller’s details on the right.

The second page of the HUD-1 settlement is where the entries of the fees and settlement charges are shown. Again, the buyer’s charges are in the left column and the seller’s charges in the right column.  These fees and charges are then added together and totalled at the bottom of the page. The total costs are reflected at the first page and added to the appropriate columns of the buyer and the seller. Generally, it is an inquiry of who pays and the total costs incurred. Often there are missing and unanticipated charges but these are common mistakes and the HUD-1 statements are changed before the closing.

The third page of the HUD-1 is divided into two sections. The first section at the top is a side by side comparison of the Goof Faith Estimate and the charges for the borrower that is also listed on the second page of the HUD-1. The Good Faith Estimate or GFE is an estimate of all the costs the borrower expects and is similar to the actual cost of the settlement statement. It is just an “educated guess” but it does not guarantee the actual closing costs.

This section of the third page summarizes the key terms of your home loan, from interest rates to closing costs. There are certain charges that cannot increase at all; other charges that, in total, cannot increase more than 10%; and other charges that can change.

The second section of the third page specifies the Loan Terms in detail.  It include the question of how much is the loan amount, what are the loan terms, the interest rate, the monthly principal, the interest and the mortgage insurance payment. It asks whether or not the interest rate can rise, and if so, by how much and when. It also lists if there is a pre-payment penalty and the total monthly amount owed. Basically, it indicates by how much the final closing costs can legally change as compared to the estimated costs shown in the GFE.

It is very important to thoroughly check the HUD-1 settlement form for errors to be able to make adjustments before the final approval and not be ashamed to ask questions to the closing agent if there are discrepancies in the figures or something is unclear.

20 Steps on Rehabbing a Property

20 Steps on Rehabbing a Property

Author: Sherry Carlson

If you are new to flipping homes or just thinking about getting started and don’t know where to start, here are 20 steps to walk you through the process.

  1. Make sure you have insurance on the home and you turn on all the utilities.
  1. Thoroughly inspect the property identify all areas that need work. Should include the heating and air conditioner, plumbing, electrical system, roof, attic, any visible insulation, walls, ceiling, floors, windows, doors foundation and the basement. If you are not a contractor you can hire a home inspector. The cost of an inspection varies by the size and geographical location of the property.
  1. Take multiple pictures of home before, during and after construction.
  1. If there is a home for sale in your neighborhood make an appointment to view it. This is your competition and you want to make your home one step above that home.
  1. Create a rehab checklist that will include interior and exterior items.
  1. Create and stick to a budget. The budget should be itemized for each individual repair and if a repair exceeds your budget, you will need to make some changes to your checklist.
  1. Have a meeting with your contractor or line up your sub-contractors and meet with them in order to get bids. Remember to get 3 bids on all work.
  1. Award the bids to the contractor or to the sub-contractors. Get everything in writing including a start and finish date. When paying contractor or sub-contractors make sure you get a lien waiver. (A document from a contractor, subcontractor, supplier or other party holding a mechanic’s lien stating that they have been paid in full and waiving future lien rights to the disputed property.)
  1. Get all necessary permits. Could include installing new electrical wiring increasing the square footage of the property, installing a fence over 6 feet tall and anything that involves a public sewer line. Contractor can help you with the permits.
  1. Order all new material that will go into the home. Cabinets, countertop, carpet, tile, paint etc. Contractor can do this for you.
  1. Create a schedule and time for each sub-contractor to start and finish their job. Contractor can do this for you.
  1. Begin with demolition and trash removal. Remove any trash from the inside and outside of the property. Remove any items that are damaged or that you will be replacing. (i.e. flooring, cabinets, appliances, light fixtures, toilets, water heater etc.)
  1. Get home ready for the painter. On the outside if roof needs repair.  Get that done to stop the roof from leaking into the home. Remove wallpaper patch walls.  Get new hard surface floors put in. New baseboards installed and new doors delivered.  So painter can paint.
  1. Have the interior of the home painted.
  1. While the painter is painting the home have a crew move to the outside to do repairs.  Examples; fix fences, decks, etc.  Get the exterior of the home ready to be painted.
  1. Have painter move to the outside and get the outside painted.
  1. When painter is finished with the inside put the home back together. Example install cabinets countertops hang doors appliances carpet goes in last.
  2. Clean house.
  3. Stage the home for selling. (Home staging is the act of preparing a private residence for the sale in the real estate marketplace. The goal of staging is to make a home appealing to the highest number of potential buyers, thereby selling a property more swiftly and for more money.  Staging techniques focus on improving a property’s appeal by transforming it into a welcoming, attractive product that anyone might want.) I like to stage the front room and kitchen and put towels and accessories in the bath room.
  1. Put house on the market for sale.

Section 8 Vouchers

Section 8 Vouchers

A Section 8 Voucher, also known as Housing Choice Voucher is a program set up by the federal government to assist low income, elderly and disabled Americans to rent properties at a reduced rate by subsidizing a portion of the monthly rental fee. This program is available in every major housing market within the country and is administered by local public housing agencies. Those who qualify for this assistance can find housing available almost anywhere in the city, not just in subsidized housing projects.

Pros

  • Landlords like the program because they don’t have to hassle with collecting monthly rent, following up on late payments or dealing with excuses about why tenants can’t pay.
  • Renters that have financial hardships, like a job loss or illness, that cause them to have unpaid absences from their work, don’t need to be evicted. Instead, the Section 8 Voucher program will pick up 100% of the monthly cost, until the tenant is able to work and pay again.
  • The Section 8 Voucher program matches prospective tenants with 1, 2 or 3 bedroom properties. The rent is pre-set by the local public housing agencies and tends to be higher than non-Section 8 rental properties.
  • In order to qualify for this program, tenants must consent to annual property inspections. These inspections are performed by a third party at no cost to the property owners. Although these inspections will turn up repairs that are needed, they also help spot damage done by tenants and will assist the landlord in getting rid of the abusive tenants.
  • With over 3 million low income households participating in this program, there is no shortage of possible renters. Many areas have huge waiting lists for Section 8 Housing, so vacancy time is virtually non-existent.
  • Some states provide websites that can be used to advertise properties at a substantially lower cost than other marketing methods.

Cons

  • Section 8 Voucher programs, like any other program managed by the government, has its share of regulations and paperwork.
  • Each property is required to be inspected before a tenant moves in and annually thereafter. The inspection criteria are stringent and sometimes can be costly.
  • Depending on the area that the rental property is located, the Section 8 housing rental caps may be less than the going rate for renting the same property in the normal market. In this case, it may not be financial feasible to go with Section 8.

The Section 8 Voucher program is a win-win situation for by landlords and tenants. It ensures the tenants are getting move-in ready properties and the landlord is guaranteed rent.

What is a Home Inspection Report?

What is a Home Inspection Report?

A home inspection report is a useful tool in the real estate market for both buyers and sellers. A home inspection is an examination of the conditions in a house. These conditions are those that affect the property values and include such items as structure and mechanicals. “The home inspection takes the uncertainty and emotional barriers out of buying a home.” (Gonzalez)

A home inspection is not an appraisal. An appraisal is a method of determining property value and takes into consideration items such as square footage and property value. The home inspection will take these factors into consideration but also accounts for the inside prospective of the home.

The home inspection report is unique to residential properties and is used to determine and diagnose the property characteristics.

We will explore the expectations of a buyer or seller when entering into a home inspection. During the home inspection, the condition and structure of the home will be documented by an inspector after taking a simple visual assessment of the property.

After the exterior is visually inspected, the heating, ventilation and air conditioning systems are examined and their performance recorded. The inspector will not disassemble the equipment but turn it off and on to see if it is in working condition. The inspection will report any observed material defects.

Plumbing is an important component of a home and the inspector will visually examine the operation of the plumbing system. The water flow is expected to be free of any obstruction so clear, clean flow of water should occur. The inspector is making sure that sewage and waste return is separate from the fresh water supply. Additionally, the inspector will visually check the water heater.

The electrical system is also visually inspected and lights and outlets randomly checked. The notation of the type of electrical box as to whether the service is fuse or switch triggered will be documented in your inspection. In conjunction with the electrical and heating review some inspectors will offer a thermal imaging inspection using an infrared camera to give the information on heat loss and any electrical problems that are not visible to the causal observance.

Choosing a home inspector can be a difficult process in some areas because of the large amount of inspectors available and their different levels of education and competency. When considering a home inspector, there are several approved education institutions, and although not national, they can be found on the individual state sites such as nachi.org or npiweb.com. These national home inspection schools add credibility to the training given to the inspector. These sites will also give a list of the inspectors in your area by zip code.

The average fee for this service is between $350 and $500 and varies according to location, size and type of inspection needed. The home inspector will ask several questions before quoting a price so it is best to call and discuss prices with a few inspectors in your home area. It is prudent when buying or selling a home to get a home inspection. This will save money on expenses later on after the purchase and in some cases help to firmly set the selling price.

What are Trust Deeds?

What are Trust Deeds?

A trust deed is a legally binding agreement between a person and his creditors. The agreement gives the trustee the mandate to manage the assets while repaying outstanding debts that the owner of the asset owes the creditors. With trust deeds, the agreement between the asset owner and the creditor is voluntary. As a result, creditors who opt not to sign the trust agreement can seek an alternative means of recovering the debt that the person owes them. On the contrary, creditors who sign the trust deed are bound by the terms of the agreement in that they can’t seek an alternative means of recovering their debt.

Types of Trust Deeds 

There are varied types of trust deeds, and they are outlines as follows:

  1. Asset free deed 

The asset free deed is taken by individuals who don’t have any assets. The agreement of this type of deed allows the trustee to get some portion of income from the affected individual and use that money in paying creditors. Taking an asset free deed helps the individual who doesn’t own any asset to avoid bankruptcy.

  1. General Trust Deed

Also referred to us a regular deed, the general trust deed is taken by creditors under a voluntary basis. The individual should appoint trustees who are well skilled as insolvency practitioners. He then goes on to transfer all the assets that he owns to the trustee. With the use of the general trust deed, the individual is protected from undergoing the bankruptcy process.

  1. Protect Trust Deeds 

These deeds are enforced by a court of law. The asset owner seeks the aid of the court to bind the creditors to the deed. A protected deed can also be used to protect the home equity of the individual. Once the deed is discharged as per the agreement, the asset owner becomes debt free.

Buy and Hold Strategy

Buy and Hold Strategy

The Buy and Hold strategy, as it applies to real estate, is a more passive strategy which requires a little faith in the market and time.

What is Buy and Hold Strategy?

It is basically a long-term investment approach. A buyer will purchase a property when it is priced low, and then wait for a number of years until the value of the property has gone up. When the buyer is happy with the price increase, they sell the property and make a profit.

Why Does it Work?

The key to using this strategy is understanding the long term life cycles of the housing market. Three telltale facts that make it likely that investors will get their money back are as follows:

  • First, the long-term population is growing, so homes are in need continuously.
  • Second, costs of construction rise, which ensure an increase in housing costs.
  • Supply and Demand rules apply and all markets normally move this way. Although politics can affect this, so investors must keep an ear to the governmental changes.

 

Benefits

The buy and hold strategy presents a relatively low risk investment, assuming that all trends follow their normal path. When buying a property low, it is most probable that over time, the value will increase.

The buy and hold strategy can be very valuable, although there is a considerable amount of research to perform before jumping in. If the time and price is right, and you have extra income you can invest for a set number of years, the buy and hold strategy may be the investment option for you.

Self-Directing your IRA – FAQs

Self-Directing your IRA – FAQs

An IRA is merely a savings plan for the retired. The plan allows people who have not yet retired to invest a certain fraction of their retirement package without paying tax on the invested amount. This condition of an IRA is valid either prior to retirement or shortly after retirement. IRA stands for Individual Retirement Account. A Self-Directed IRA is unique because it has more investment options than any other type of IRA that is available on the financial market. Here are some important frequently asked questions related to the Self-Directed IRA.

What are some of the most notable benefits of a Self-Directed IRA? When you have an IRA, you will be entitled to tax deductions, asset planning and tax free profits. But, a Self-Directed IRA enables you to invest in various alternative assets, like real estate. The investment options in an IRA that is self-directed are more diverse than those which are associated with a standard IRA.

Is a Self-Directed IRA common? Self-Directed IRAs have been around since the early 1970s. However, they’ve received little attention because the custodian financial institutions do not usually allow alternative investment options that come with the self-directed plan.

How do self-directed investments work? There is a very slim difference between investing in a normal IRA and a self-directed one, other than the fact that you’re able to invest your retirement funds in other alternative assets if you so choose. The basic steps that are followed when investing in a normal IRA also apply to a Self-Directed IRA.

Disclaimer: The Company introduces general information and education concepts about self-directed retirement accounts (such as 401(k) and IRA accounts). Like any investment, there is risk in using retirement funds for investing in real estate assets. It is possible to lose a portion or all of an investment in real estate – including those purchased with retirement funds. Please review IRS Publication 3125 regarding the use of retirement funds for alternative investments. The document can be found at: http://www.irs.gov/pub/irs-pdf/p3125.pdf. Every individual is different, with unique circumstances. We do not offer tax, accounting, financial or legal advice. Prior to acting upon this information, you may consult your own accounting, legal and financial advisors to evaluate the risks, consequences and suitability of that transaction. The Company is not a retirement account custodian, trustee, or securities dealer.

Value of Land Banking

Land Investments

The Value of Land Banking

Have you ever seen a property and thought it would have been a great investment had you gotten involved a few years back? If people only knew how much value a property could have after a few years, they would likely get involved as an investor sooner. Fortunes have been made with Land Banking.

If you’d like to possess a property with hopes it will appreciate over time, then Land Banking is an area of real estate to look at. This is a process of acquiring future property development sites now, at the present value (speculating the increase of value in the coming years).

Numerous property development enterprises purchase large pieces of land and place them in their land bank. This assures them that they will have enough land available for future property developments or parcel sales.

Even though big profits have been generated from holding a bank of land by numerous developers, there is also a flip side. Land Banking has caused the ruin of some developers when the values of the banked real estate declined. As always, take these risks into account.

When land banking, you’re basically banking on

  • The fact that you think the value of the land will increase over time.
  • In due time, you could very well move forward with a property development plan.
  • Sell the property at a higher value.

Land Banking is a good investment method. The value of land can appreciate every year. You can even decide to build on the land to further increase its value.

Land banking, much like the buy and hold strategy, takes time. But, that time can also lead to an increase in value and a greater ROI for you as the investor.

Using your IRA To Acquire Investment Properties

Using Your IRA to Acquire Investment Properties (Updated)

Depositing savings into a self-directed IRA could be a wise choice for those who are looking for long-term tax-free real estate investment (specifically buying investment properties). Whether this is a good choice for you depends on the circumstances.

Eligible properties

The purchased real estate must be used for business purposes an example would be private homes, secondary residences or weekend estates do not qualify. Similarly, purchasing a property already in your possession is not allowed.

The governing rules state that in any case, it has to be a new purchase directly into the IRA.

On the other hand, you would be allowed to buy real estate into a self-directed IRA for flipping purposes. There is an annual limit on the number of purchases and sales you can make, all profits will be tax-deferred or tax-free. Thus your IRA will grow without any deductions.

IRA investment concerns

You are not allowed to get a mortgage loan in an IRA. If you’re planning on keeping real estate as a long-term rental it’s essential to have enough cash from your IRA to purchase the property. Don’t forget the IRA carries administration costs, that should be considered in your financial plans.

The IRA investment depreciation or other kinds of losses will not result in tax savings.

Have a Plan B

Most people will lose out because they fail to diversify their savings. Considering the option of failure and spreading out your investment. Investing wisely and having a plan B can save you a lot of money in the long term.

Disclaimer: The Company introduces general information and education concepts about self-directed retirement accounts (such as 401(k) and IRA accounts). Like any investment, there is a risk in using retirement funds for investing in real estate assets.

It is possible to lose a portion or all of an investment in real estate – including those purchased with retirement funds.

Please review IRS Publication 3125 regarding the use of retirement funds for alternative investments. The document can be found at http://www.irs.gov/pub/irs-pdf/p3125.pdf. Every individual is different, with unique circumstances. We do not offer tax, accounting, financial or legal advice.

Prior to acting upon this information, consult your own accounting, legal and financial advisors to evaluate the risks, consequences, and suitability of that transaction. The Company is not a retirement account custodian, trustee, or securities dealer.

Facts about real estate investing

Real Estate Investing EducationFacts About Real Estate Investing (Updated)

Real estate investing refers to the buying, ownership and manning of real estate for the purposes of generating profit. It’s a popular form of investment that requires proper management. Good management could yield the desired result but like all investments, it is not without its risks.

This is often the case when the investor doesn’t take into account the limited liquidity and the capital-intensive nature of the investment. Since the investment is actually capital intensive, it’s the form of investment that could require upfront capital.

Keeping in mind the risks of investing, and learning how to properly navigate them, is important if you are to successfully invest in Real estate market.

Like other investments, the successfulness could depend on whether or not cashflow is being generated by the actual investment. Investment failure in real estate is often as a result of the investor being plunged into a negative flow of cash for a prolonged period of time.

If you’re an investor and you decide to resell your property at a lower price, you may incur losses.

Most investors often fail because of this factor. Luckily, there are a variety of strategies and tactics designed to help you navigate the risks of the current markets.

Sometimes real estate investing involves taking chances as they arrive. A good example is buying real estate during a period when prices have dropped significantly. You can choose to hold on to your properties until the prices have risen.

This strategy, buying at the bottom, has the potential to yield great returns in the future as properties further appreciate and values increase.