Sellers Are Calling Us!

Greetings, Karen and Steven here...

We have had an exciting and busy two weeks, with our 1-800-BUY-KWIK television ads starting last Monday.

We started with 1 call a day, and today we had three! Momentum is picking up!

It is much less stressful to have people calling us rather than driving around calling FSBOs and trying to scrounge up motivated sellers any way we could.

But we have also realized our office setup is inadequate to handle the increased work so we will be spending some time this weekend rearranging and putting together a more workable, yet comfortable space. We also had to purchase a fax machine. We have been using Mighty Fax which is through the computer, but realized it is not adequate enough for what we will be doing.

One thing we are doing is a short sale...the gentleman called us last Thursday after seeing the TV ad. We have heard David and others say how confused and in denial people in foreclosure sometimes are...this gentleman thought his sale date was in Feburary. Thankfully, we looked in the Nashville Record last weekend and saw that his sale date is actually November 16.

The lender requires a phone offer first so as to not "waste my time" filling out the short sale packet if they offer is unacceptable so tomorrow we will make the offer.

We hope they will accept not just so we can make some money wholesaling the deal, but because it will help this gentleman out. He is a very kind and easy person to work with; he lost his job in April and has not been able to pay the mortgage or find other work.

I had somewhat dreaded working with people in foreclosure because several years ago when I was a career coach, I worked with many people who were under a lot of stress and some of them were quite negative and draining, so I expected some of the same with people in foreclosure...but I will just roll with the punches and hope that we get more people like this gentleman, who is pretty detached about the whole thing. Fortunately, he has supportive family members. We met his sister yesterday and got her stamp of approval. She found out we are not vultures!

Steven and I have had several discussions this week about how real estate investing is requiring us to develop completely new skills. Our backgrounds are in creative and helping professions...well, real estate is creative and it does involve helping people, but it also requires some sales and marketing functions that we don't have experience with. But we are stepping up to the plate, listening to David, listening to CDs, and learning as fast as we can. It's exciting!

My Third Real Estate Investing Deal, Another True Nothing Down Deal.

My third deal as a real estate investor involved almost no money out of pocket for me at all. The home was in good shape and had only been built about 14 months earlier. The home is in a neighborhood where several builders had unsold homes on the street making it very difficult to sell a used home. The seller had an unusual motivation for wanting to be rid of the house: he wanted to forget an ex-girlfriend as he had bought the house to get married and for them to live there. The seller contacted me through an online lead site and looking over the deal I knew it was in an area that isn’t very good for retailing homes right now due to over building in the area. So what I did was offer to lease option the property from him. Like many sellers, the idea of a lease option doesn’t sound that enticing. Most sellers need all cash and have no equity. Well my seller had a little equity, didn’t need any walking money, and knew he couldn’t sell the home otherwise and had been trying for a few months with no luck.
After about a month the seller contacted me again about doing the deal. So we met at his house and signed a purchase and sales agreement, a memorandum of option, an option agreement for 72 months, a lease agreement with right to sublet and a seller’s disclosure. We agreed to a $125k purchase price and a $1038 rental payment. Other similar homes in the neighborhood were listed at $145k and this seemed like a reasonable deal to me. I agreed to start paying him rent as soon as I found a suitable tenant/buyer.
I paid to run an ad in the local paper which was my only expense. I had several interested people and took applications from a couple of prospects and selected the best applicant. We received a $3500 non refundable option fee towards the future purchase of the home at a price of $149k and a rent agreement for $1250 per month with $100 credit towards purchase for every on time payment with a 2 year agreement. With my tenant buyer we signed a purchase and sales agreement, a lease agreement, an option agreement, pet disclosure, and a couple of other papers. This is a pretty good deal as I have a decent tenant who can probably qualify for a mortgage within the 24 month time span we agreed upon giving me about a 50% chance they will buy at the end of the option period. I received a non refundable $3500 check up front against my back end profits which isn’t taxable until the option is exercised, as well as a $212 monthly rent profit. I expect to make close to $30k profit on this deal once my tenant buyer refinances and cashes me out.
What I did wrong on this deal was agree to pay the rent directly to the seller instead of having the checks made payable to the lender directly. On a positive note the deal is decently strong and I have good cash flow and if my tenant doesn’t buy I can easily put another tenant buyer in this property and collect another option fee as this is a desirable area.

Don’t Be A Victim Of A Drive By BPO

Memphis, TN has its share of drive by violence. But we are talking about a different type of bad drive by, being the victim of a drive by BPO as a real estate investor. We have been victims and want to help you from becoming a statistic.
We are Memphis real estate investors and work extensively in the pre-foreclosure market. Many times sellers are financed 100% or close to it and there is no deal to be had so we try to negotiate with their lender to do a short sale or short payoff. As part of the process the lender needs a BPO to determine fair market value.
What is a BPO? A Broker’s Price Opinion is a market value assessment usually performed by a licensed real estate agent or broker. These are most often done on properties that are in foreclosure. A lot of times when the property is not sold before or at auction, the BPO that did the opinion will get to list the property. Sometimes it can be a full time appraiser looking for extra work that may do the BPO. Because of the fact the agent may eventually get a listing they tend to sometimes give a high appraisal.
Now realize that market value generally assumes a home in great shape needing no repairs. 90% of retail buyers will not buy a home that needs any repairs. Many lenders will not finance a home that needs wood replaced or roofing done.
What is a Drive By? A drive by consists of a BPO going to the house and stopping in front, taking a picture of the outside and driving off. They never get out of the vehicle, never to see the inside or any damage or repairs needed on the property. Comparable sales, past appraisals and tax records will be used to determine the value of the home without taking needed repairs into account. A lot of houses have good curb appeal, once you step thru the front door it’s a different story. We have had the BPO agent miss the fact that a tarp was on the roof to stop the rain from coming in the house because the holes in the roof were on the back of the house and the agent never stepped out of their vehicle.
How can I get an accurate BPO Appraisal? Be there early. Bring pictures and the list of repairs from your first visit. Develop rapport and become best friends with the appraiser. Do your homework on the neighborhood. Look for true comps. Example: If you are looking at a stucco home and the rest of the neighborhood is brick. You can’t find true comps. For future reference if you are in a mid to high humidity area, get a moisture test on the stucco and bring the results with you.
How can I keep from being a victim? Arrive 45-60 minutes before appt. Do not allow the home owner to greet the BPO instead of you. Stay where you can see the road. If you see a vehicle pull up and stop, jump out and holler politely,” Would you like to see the inside of the home”? To make the experience better for yourself and the BPO offer help. Tell them what you have found. Don’t take it personally if they don’t want help from you. Do your homework. Don’t let the homeowner show them around as they will try to point out nice things. Your job is to point out the flaws of the house and drive the appraisal down. Make sure the lender knows you are the point of contact for the BPO agent and to contact you to set up the appointment for the BPO. The pictures that you took on the first visit need to be printed out; if digital take them to a kiosk that makes prints. Have 3 copies made. Put two to a piece of paper, go with colorful construction paper, yellow is a happy color, go to your local office supply store and get printable file folder labels. In detail tell what’s wrong in the picture. Give the BPO agent 1 copy. Let them know what you have found wrong with the house or yard. Give them a repair list. Any true comparable sales you have found within a 5 mile radius will also help. Always pick the lowest comps. You will document a lot more problem area’s with the house than the BPO will see. This will be the difference of making 30k or 5k on a house.

My Second Real Estate Investing Deal, A True No Money Down Deal

My second deal was a sandwich lease option deal and a true nothing down, no credit needed, real estate deal. I rented the house from the seller with an option to buy, and rented the house to my buyer at a higher rent and a higher price to buy.
You may remember that I did an all cash deal for my first deal. It took several months before I entered my next deal. While I did speak to several sellers and received many leads I was short on cash to do my next deal. I have been self employed most of my life and haven’t had good credit for quite some time. I have paid my bills on time for several years but haven’t done well at obtaining the types of credit that strengthen ones credit scores. I had planned on borrowing out the cash I put into my first deal but was never satisfied with what loans I could receive against it and never did put a mortgage on that property.
About three months after the first deal this second deal of mine came about as a referral from a mortgage broker who had contacted me about selling his own property. This referral was a client of his who had to move from Memphis to Minneapolis due to a job transfer. The home was beautiful and required no work. The only money I spent on the house was to have the leaves bagged as it has a half acre lot with mature trees and a beautiful pie shaped lot with 80% of the yard being fenced in the back. The home is 4 to 5 bedrooms with 3 and a half baths with a very nice open floor plan and good solid construction. The area the property is in was being over built by new builders and used homes simply are not selling. The average selling price in our county is around $175k and this home had been on the market for $225k and not selling. Without all the overbuilding in the area it might be worth $245k or more.
When the seller contacted me they let me know they owed $215k and had an $1850 payment including taxes and insurance. All they wanted was to cover the note. I had taken Wendy Patton’s course on lease options and I knew that was a strategy I wanted to use. I agreed to cover the note once I had a suitable tenant/buyer and collected funds. I ran my first ads for the property in November which isn’t a great rental month. At first I tried to ask for a $6k option fee and $2195 per month rent. Had it been Feb or Mar I may have gotten it. I had little inquiry about the property. I had a yard sign with flyers and pictures online and ran ads in the local paper. Typically I got a call or two a week and had someone look at the property every couple of weeks. I had someone fill out the paperwork and seemed ready to pay their money twice and they couldn’t come up with the money and move in. Finally after almost 3 months I had a doctor and a nurse take the property with a $3000 non-refundable option fee and $1950 per month with a $100 credit for each month of on time rent. The agreed upon sales price was $249k which is the best part of the deal for me with a 24 month term on the lease. We did build in for the rent to go up to $2050 after 12 months. This tenant pays the rent on time almost every month and I think in the end they will likely buy the property. Most of the $3k option fee was eaten up with about $1500 in newspaper ads for the house. I make a $100 profit on the monthly rent. While I did spend about $1600 out of pocket I did get the $3000 up front. This is a very thin deal but if the current tenant doesn’t exercise the option I think I will be able to go up to $260k on the next tenant and get a bit more rent and option fee.
What you can learn from this deal: 1. I agreed to pay too much rent on this property. $1850 was too much and should have been more like $1600 per month so I could have made better cash flow. I think if I had held out another month I could have gotten more up front and a little more rent. A good rent guideline is to not pay the seller more than .6 times my selling price which would have been $1500 in this case. 2. We filed a memorandum of option on the property title. This shows the world that we have an interest in the property and it cannot be sold or refinanced without our approval. 3. This sandwich lease option only works if the seller has good credit and should continue to do so. 4. This property was really too expensive for a lease option and is much better in my market on a property that would sell between $100k and $200k. 5. It is hard to find sellers who will agree to this but there are lots of them out there, you just have to keep asking sellers to agree to this kind of deal. 6. Lease options are great for selling as you get tax benefits, and multiple paydays.
How many deals like this do you need in your pipeline to close each year to be financially free if each one made you an average of $30k?

My First Real Estate Investing Deal And What You Can Learn From It

Every real estate investing deal is an opportunity for both profit and education. Well my first deal was a good combination of both. When I decided I wanted to get involved in real estate investing it took me eight months to decide to do my first deal.
This particular deal came as a result of networking in my local real estate investor group. A local Memphis investor found a deal on a 3 bedroom, 2 bathroom home in a moderate to lower income area where people still like to buy homes. This was a wholesale deal for the other investor and he assigned his contract to me to close on the deal. I was buying the property for $58,000 and $5,000 of that went to the investor for assigning the contract to me and $53,000 went to the seller of the property. I had the cash available so I paid all cash for this deal and for $4,000 in repairs this property needed. The after repaired value of the property was approximately 95k.
I had decided I wanted to do a rent to own or lease option deal with this property. I put a yard sign out with property flyers and had links to a website with inside pictures of the property. At the time I was doing this a more experienced investor told me I should try to retail the property and take the quick cash and go on to the next deal. Well as a new investor I wasn’t sure how long it would take for me to find my next good deal so I wanted to get the maximum out of this property. After about a month(and about $800 in ads) I found a tenant I considered suitable and agreed to take a $2500 option fee plus $875 per month and a sales price of $99,000. If the tenant pays the rent by the first of the month then $100 counts as pay down towards the purchase price. If I had sold the property quickly I may have sold for $89k and paid $5k in selling fees and netted about $20k and would have paid about $7k in taxes on that income. Instead by going after lease option it may take 2-6 years to sell and I should get a $99k or better selling price with much less selling costs and should net about $35k of which about $5k will be taxed as capital gains. The lease option method will net me about double what retailing would have done, however it would have been nice to have access to that cash for doing more deals. I think the $15,000 profit quickly would have been better than $30,000 in a couple of years plus the things I could have done with the $62,000 in cash I put into the property.
The tenant I chose has not once in the first nine months paid the rent on time so he hasn’t earned the $100 monthly rent credit, and has on average had to pay an extra $100 each month in late charges. I don’t expect this tenant will be able to refinance, however his job status and income have been going up while he has been in the property, and the current market value is now $105k. The tenants father is a mortgage broker and if I get to the point of evicting the son the father has told me to let him catch up the sons rent before filing for eviction so that part is really in my favor.
From a humanitarian perspective I like lease option deals as I am really helping someone who could not rent otherwise. I will only do a lease option to someone I believe is improving their credit and job situation and should be able to buy the house within 24 months. With 12 months of on time payments verified by copies of checks many mortgage brokers can get your tenant financed as a refinance type of deal.
In the event the tenant doesn’t buy the property within the first 2 years I can either lease option to another tenant or just try to outright sell the property. Even though the property provides great cash flow I would rather sell it and get a big check and use the cash to go after the next deal.
Some things I learned on this deal that you can use: 1. We had a yard sign with flyers in a flyer tube plus links to view pictures on a website. Before we would show the inside of the property we insisted any prospects should view the pictures online first. We ran ads in the major local newspaper and we got 20 times as many calls from the yard sign than we did from the newspaper. However this street had decent traffic, other properties I have are more secluded. Always use a yard sign and flyer box and have pics online with good descriptions and always highlight the kitchen and bathrooms. 2. If I had the deal to do all over again I would have retailed the house and tried to sell it quickly. I could have rolled this deals cash into more and more deals and made much more money. My opinion now is that every investor who isn’t already financially well off needs to go for the quick income first and progress to long term deals second. 3. I probably should have waited a little longer for a stronger tenant. 4. You can not do this type of lease option transaction in Texas now due to some strange laws that got passed in 2005. However I live in Tennessee and we don’t have any anti-investor state wide laws yet. We do have a bad local one related to trash left over from evictions but that is minor in comparison.

The Art of Condo Conversions in the Real Estate Investors Market

Have you decided to start as a real estate investor? This is your moment and I'm going to tell you how can you do that! It is really easy, whether you buy houses and rehab them or you invest in a condo conversion. Dan Case, a real estate investor in condo conversion, is willing to tell us what a condo conversion is. According to him a condo conversion is an apartment complex. The ones built in the last 5 or 10 years. They kind of have the condominium theme because there's not a lot of distinction between an apartment complex anymore and a condominium. These condo conversions are a good opportunity and the main reason is the cost. If you start building right now the materials are very expensive. A developer recognizes this thing and it is better for him to buy an existing building. Another good thing about a condo conversion is the place where they are being sold. Typically there is a strong growth market area . The investor doesn't have to worry about losing tenats as all these are already occupied.
There are a couple of things you have to know when you buy tenant occupied. You take over the existing lease. If you don't like being a landlord then certainly you'll enjoy pre-construction much better than condo conversion. There’s a lot of work that goes with landlording or management of a property and it's understandable why many people don't want to manage tenant's. When something is converted take into account the renovations. These depend on the age of the building. Dan explained to us that sometimes they just repaint it. In some cases they replace the balconies. In some other cases they add a lake gazebo or a nice picnic place. In fact the developer will redo the landscaping. This renovation doesn't take into account only the exterior but the interior too. They paint the walls, add new carpets, sometimes new lighting or even new kitchen or bathroom so the conversion seems like a brand new unit. You get something new and what you have to do is to find someone to occupy it. There are also some custom additions and they go up to $ 1,000 standard meaning that you can choose the colour pattern you like, different types of lighting, and other options.
On a condo conversion there is typically a 5% reservation fee and this represents 5% of the sale price. Condo conversion one bedroom, one bathroom sell for around $150,000 while two bedroom, two bath is $180-200,000 in the Titusville, FL area. And on a condo conversion you don't have 12 to 18 month built time. As soon as you get the contract and have the exact sales price you call the inside lender.
Most of the condo conversions have an onsite lender. You need to talk to them but also talk to your own personal financing person just to get a comparison. You can buy a home as a primary residence or as an investment property and another as a second home. You may wonder what's the difference? The difference between the investment loan and the second or the primarily home loan is the payment. Investment loans typically require 10 %. There are a lot of mortgage companies that can do investor loans up to 100% . The difference is the prior interest because is an investment loan. You need the ability to treat it as the second home meaning 15 miles outside your primary residence. When you are buying as a second home you get the best policy and a second home only requires 5% versus 10% on the investment property. You are allowed to have multiple second homes but they don't have to be within 50 miles one another. For example, Dan has a home in Orlando as a primary residence, one in Orlando as an investment and another in Daytona Beach as a second home.
For the new investor the condo conversion is the right thing to do because of the limited amount of money out of pocket and the ability to have a place that you can rent out realistically. Make sure you are in a strong land market regardless so if you are buying a condo conversion or a new construction because you might have to carry a mortgage for certain time before you can sell it .

Great Starting Ideas For the New Real Estate Investor

In his interview with me, John Paul Moses, who is the founder of our Local Memphis Investors Group, was willing to give us some tips about how to start as a real estate investor. After reading “Rich Dad, Poor Dead” by Robert Kiyosaki he decided to start as a real estate investor. The book says to do this you need some preparation, so he went to the Internet and stocked every bit of information from the articles, news groups and discussion forums. By that time he started a long term friendship with Matt Scott who runs a great website called dealmakerscafe.com. That's how he learned the meaning of the word “escrow” and what the difference was between a mortgage and a trust and real estate basic terminology. The Internet might be one learning ground. If you buy a real estate course you have to be very careful. The first course John Paul bought was in his opinion the worst real estate course and never did a deal from knowledge gained in that course. But at least he learned real estate terminology and spending $400 on that course proved to him that he was willing to invest in his education.
John Paul started by making an announcement in a Sunday paper just saying “real estate investors group starting, for information give me a call” and he put a cell phone number there for people to contact him. At their first meeting they were about 16 people. He stood in front of those people telling them that he never done a real estate deal but he was there to learn and make sure that they had those meetings. They needed a leader and he took the initiative of being their 1st president. Since then the organization grew to over 500 members. Now they are a full fledged non profit real estate investors association with over 150 members in the Memphis area and since 2002 John Paul has been a real estate investing guy. He stepped down as the president and he is now serving as the executive director of the group. Most of the deals he has done in some way involve somebody from the real estate investors association, whether they were a buyer or a seller, money partner or whatever the case might be. Start working with people in your club because they are real people. You need to think who the buyers are if they have real cash or if they have access to the hard money. So, what you have to do is to pick only those motivated persons and build yourself a great network of successful people to work with and the investor groups are great places to find those people.
His advice for somebody who's looking for the structure of an investment group in another city is that you need to join the national real estate investment association; you need to get small groups of people together and join the National REIA (www.nationalreia.com ). They serve as an umbrella organization that supports the local REIA group. Another benefit of these groups is the availability of hard money lenders or private lenders within the group itself. You need to know what your resources are and just capitalize the costs or hard or private money in that part of the deal. For example they visited the National Group and invited some of their board members to have dinner together. That's the second thing John Paul recommends for everybody who wants to start a group: model yourself, don't try to figure out on your own!
Another thing a person should do is get those magnetic We Buy Houses signs for their vehicle. For John Paul they were worth the $87 investment as they brought him $12,000 profit from transactions altogether on wholesale deals. Nobody should be embarrassed of using them on their cars because the one who's embarrassed is letting money pass by.
John Paul's piece of advice for the new real estate investor is to not to be afraid to act, do not let yourself become paralyzed by fear and over-analysis. You need to take some time so don't panic. Give yourself six months and just consume information. A good way is to listen to tele-seminars or find information on the Internet or pick some books from the library.

So You are Unemployed and Want to Become a Real Estate Investor Right Now

These techniques should work in any country, city or area. The trick is to simply find the real deals. Let me tell you the quickest way you could start making money in real estate right away.
Call all the “We buy houses” classified ads and signs you see around your area and tell them that you are unemployed and would like to bird dog for them. Ask them for $100 when they sign contract to buy from seller and $400 more when they close ($500 is pretty typical amount). Ask them to let you go with them when they go see the property so you can get some experience. Also try to join you local investor group, in most cities they are $20 or less for each monthly meeting (it’s a bargain). Go visit your local section 8 housing office and ask for the list of landlords and contact some of the ones who deal in single family houses.
Also, go around and start looking for empty houses. Call real estate agents and tell them you are looking for investment properties. If you have lined up 5 or more investor buyers and you find a real deal one of them will snatch it up and pay you a bird dog fee. While you are out look for home for rent signs, call them, ask them if they buy houses, if yes get their phone, fax, email etc and send them deals too. If they don’t find out if they are looking to sell their rental homes. You will be able to find owner financed deals this way.
Shortly you will be able to know what properties to get under contract yourself and move up to wholesaling where you will make $2000-10,000 per deal instead of $500. It just keeps getting better from there.
If you are aggressive and get out and look for properties today, you could be making a few hundred dollars a week by next week, A thousand dollars a week within a month, and $10,000 plus per month within 6 months. These techniques work but they require work. Interestingly enough you could do a lot of this work from a bicycle if you had no car (but maybe not in Canada during the winter).
None of these techniques require cash or credit and will get you started in real estate investing right away.

Flip That House Style Real Estate Investing

I love those TV rehabbing shows like Flip That House. On the show people buy a house needing to be seriously updated and repaired. Usually the kitchen is heavily upgraded with new cabinets, cutting edge appliances, new countertops and more. The bathrooms are completely redone with new tile, tubs, showers, sinks and more. The living rooms and other areas usually have walls taken out to open up the floor plan and usually carpet is replaced with some type of hardwood flooring. It’s realistic to do what they show in a high dollar housing market like California to make the huge profits they usually get on that show. In a lower priced market like Memphis, TN rehabbers are looking to make $20-30,000 per house minimum. In California and on that show they are looking for $50,000-150,000 per house. That’s because homes are so much more expensive in California where the show is produced.
In a market like Memphis many of the same upgrades are done but maybe skipping the granite countertops and some other high end upgrades. In any market you are going to repaint and redo the floors. The areas to spend the most money to upgrade are the kitchen and the bathrooms. A great value add that sometimes adds tremendously to the value of the home is if you can add a 2nd bathroom to a home with only one bathroom. While this will probably cost in the $10,000 range to do, it could increase the value of the home by $20,000-40,000 and significantly add to your profit potential.
To do deals like this you need to go through several steps. First of all you have to get set up with a hard money lender as you cannot get a normal mortgage on a house in disrepair. You need to see what homes are listed for in your area and figure that when you fix it up you want it to be nicer and cheaper than all other equivalent homes on the market for that neighborhood. Working backwards from the price you could sell at to undercut the market, take out the repair costs and pad it by at least 50% for unforeseen costs(always there) and then subtract your expected profit and holding costs(interest), realtor fees(if you use), advertising and more. If you can still make at least $20k it should be worth doing.
Managing your contractors is a very important part of this whole process. Ask other investors who they know and trust to come in and do your work. Require the work to be done on time and put penalties in the contract for late completion. Don’t pay for the work up front, but agree to pay them a part like 25% as each 25% of the work is completed.
One thing important to understand about these types of deals is that they aren’t super quick money. Typically the work will take a couple of months and then it will usually take a month or two to find a buyer. Hard money lenders typically loan money for 6 months as this time frame usually is sufficient to sell the fixed up home.
Homes like these may be homes the sellers can’t afford to fix up or simply don’t want to fix. In real estate listings these may say things like handyman special. Foreclosure homes and bank real estate owned(REO) listings are generally good candidates. Mailing to out of state landlords can produce some homes that are good as rental homes typically need updating as they aren’t set up to sell retail.

How You Can Use Rehab, Refinance and Cash Out as Long-Term Wealth Building Real Estate Investing

Today we are discussing a somewhat advanced strategy for you to use after you have been in the creative real estate investing business for a while. I call this “Rehab, Refinance, and Cash Out”. This strategy can lead to true long term wealth and financial independence. This works very well in a buyers market like Memphis where prices have been quite flat for some time. You need to use this to augment your wholesaling for immediate income and retailing for bigger short term profits. Rehab, Refinance and Cash Out is a long term wealth building strategy and will be something you will be glad you did as it is a long term buy and hold strategy, and those are the strategies that lead to true wealth accumulation and financial independence.
Let me explain how this works. You find a good middle to low end 3 bedroom home that you are able to buy from an out of state owner or other motivated seller that needs a little work and you buy at 60% of after repaired value. You buy the house using a hard money lender like http://www.pleaseclose.com/memphistrading and do your fix up and have a property management firm manage the property and put a renter in the house. The hard money lender will typically loan you up to 65% of the after repaired value to purchase the house which you use to buy the house and then repair it. Now that the home is repaired you obtain an investor friendly mortgage and cash out by refinancing at 80-90% of after repaired retail value and you should be doing this with properties where this strategy gives you back at least $10,000 at the refinance that you can use in your business any way you need. Do not use this money to live on, use it solely to grow your real estate business. Once you have done this strategy on 10 homes you should be able to keep finding better and better deals because you can close quickly as you have cash in hand to make things happen. More cash equals better deals and more opportunities.
By the time you repeat this strategy 20 times you should have at least $200,000 cash plus about $200,000 equity and 20 homes giving you at least $2000 per month positive cash flow whether you decide to work this month or not since you have a property management company handling things for you. With average annual rent increases, within five years that $2,000 a month should grow to $4,000 a month. In 30 years you should have $2 to 3 million plus in paid off real estate. It’s a good solid long term strategy to add to your immediate selling from wholesaling, retailing and lease options that the extra $200,000 in cash will help grow tremendously.
The rent minus the management fees and all loan and other costs must leave you with positive cash flow or this strategy should be avoided. If you cannot cash out on the property I don’t recommend holding it long term as you want to be able to use your best mortgages to cash out.
You can purchase using http://www.pleaseclose.com/memphistrading if your Equifax credit score is above 550(which is bad credit) or you have a co-borrower who has an Equifax score over 550. A good investor friendly mortgage company will give you good rates if you are at 660 middle score or above and the very best rates if your middle score is 720 or above. Your first 10 investor mortgages in your name and 10 in your spouses name are the easiest to qualify and get the best deals. After those you really need a good investor mortgage company to work with. Take the time to find the real investor friendly mortgage companies that can help you get loans for 100 properties and not just the first ten and let them have the easy ones and the tougher ones. I do recommend having more than one good lender available though, but stick to the ones that specialize in investor loans. Find out from other investors who the most investor friendly mortgage companies are to use to refinance the repaired home.
I do not advocate becoming a landlord as I do not believe this is a valuable usage of your time and energy. I highly recommend asking around and finding a good property management company that will charge you 10% or less to start out with and gradually lower that % as you add more and more properties.
I feel this is an advanced strategy as you won’t see any cash in your pocket from this strategy for 4-6 months after you find the deal which is a long time to work and not see any pay. If you are wholesaling and making consistent money each month then it shouldn’t matter. This strategy will magnify the profits you make in your investing business in ways you might not have imagined. This strategy is a natural progression from wholesaling as you are already helping others find these kinds of deals, now you will be able to get the cash out typical of probably 2 wholesale deals, just paid slower, and at the same time building a nice future nest egg.

What's Your Excuse for Not Being Successful in Life?

Excuses! Excuses! When we fail to do something we are expected to do, we almost always have an excuse for it. However, if we analyze it closely, an excuse is a self-destructive alibi for having failed to do something, especially when it involves attaining a goal. Instead of trying to persevere in finding ways to continue achieving a goal, some of us resort to excuses.
Even a handicap cannot be used as an excuse. Many handicapped but determined people have become achievers and champions. Instead of using a handicap as an excuse, let us turn it into an asset. Let us explore this further.
A handicap need not be a reason for failure. On the contrary, a handicap can be a reason for success. People with a handicap always have an offsetting strength that allows them to overcome problems better than others.
A person with a handicap has one obsession - to lead a normal life. Depending on the handicap, a person would prefer to be as independent as possible. So he struggles and finds ways to overcome his impediment. When he is able to achieve his goal, this raises his self-esteem. In turn, he inspires others.
Everybody has handicaps in varying forms and degree. That is why; it requires effort and determination to overcome them. Handicaps can either be physical, financial, or emotional. And they can either be real or imagined.
Whenever we look at a handicap, we almost always look on the negative side only. It’s about time we take a look at the positive side of it. The positive side may be the difficult side, but it’s the one worth looking into. It’s the side that is going to lead us to excel in life.
If you think your handicap is physical, like having a weak body, you can counteract this through proper diet and training exercises. As long as the physical parts of your body are intact and mobile, there’s no reason why you cannot make it strong and useful. Why? Even those without a leg (for example) can be made to walk or run normally. With the advancement of science, artificial legs can help a handicap function with great mobility.
It your handicap is financial, then the more reason you have to rise above your present status. And if your financial status limits your educational attainment to improve your life, the school is not the only place to learn. Certainly, there are help centers to get you started even from zero level. Once you are initially warmed up with the basics of an education, the rest is up to you. Make use of libraries. Once you are educationally equipped, use your brain and come up with creative ideas to improve your life.
If you are emotionally disturbed with negative thoughts, it is like you are sitting on a chair with wobbling legs. Try sitting on a chair with sturdy legs; meaning, look at the bright, positive side of life. Put aside negativity and start thinking positively. The only one who can stop you is yourself.
If your handicap is a combination of any of the physical, financial, or emotional type, congratulations. You should strive more to overcome them, because a double layer of perseverance results to more than double the achievement. Where the odds are greater, the prize gets much bigger. After all the efforts you have exerted, the prize of success shall be a well-deserved one.
So what’s your excuse for not being successful?

Real Estate Investing and Goal Setting

What is the primary reason for success most people have that seems to elude unsuccessful people? Goal setting is the primary reason for success. Lack of proper planning is the number one reason for failure. Proper goal setting involves setting a business plan in place for your life. Too many people this doesn’t sound fun or sounds tedious. In practice though, goal setters have more time freedom, more money, and more success in all areas of their lives than those who don’t. Well it’s no different with real estate investing.
Real Estate Investing must be treated as a business and it requires planning that anyone can do. Much like an airplane pilot who goes through a pre-flight checklist, the real estate investor must go through many steps for every real estate deal. You must market to find the deal, do your research on the property to establish a value, have your contracts ready, make your offer, schedule a closing, have title work done, prepare your financing, get property insurance, etc. The reason the doers make money is because so many people aren’t ready to make money. Real estate investing seems like pie in the sky until you put your plan down on paper and it starts to crystallize. The planning process itself should give you renewed energy.
Before I daily setup my plan I didn’t want to get out of bed each day, but now I get up ready to work on knocking out my plan every day. Set your plan up into baby steps that you can review and knock out every single day. Your daily plan must include marketing to get motivated sellers to contact you. Regardless of the deals you have in the works, if your marketing stops, you will go through long dry spells. Even with consistent marketing you will have periods with few leads and periods where you are just swamped with sellers offering you great deals.
Constant daily review of your goals is critical. This is why so many suggest taping your goals on your bathroom mirror so you see it when you wake up and again before you go to bed. You can even buy giant poster sized post it notes that you can write your goals on and stick them on your wall. Reviewing your goals before going to sleep at night causes your brain to dream about your goals and program them into memory. So put your goals down on paper and start putting your real estate investing plan into action.

My Worst Real Estate Investments and What I Learned From Them

In doing wholesale deals there are certainly a lot of things that can go wrong. One example is a house that was bought and taken over subject to the existing financing (where the sellers mortgage remains in place and the seller deeds over the property). At first the seller seemed like a nice guy having good intentions, but he didn't pay his bills. Soon began the problems of getting the guy out of the house. The guy had come into a real hard situation, his daughter had been shot and he was given a lot of grace, basically he was allowed to live rent for free for quite some time. But eventually the guy left owing a $700 bill. It would have cost more money to try to collect from him legally than we could collect from pursuing legal action. We consider that we did two mistakes in this case: first, we didn't set appropriate boundaries with the seller and the second one, we trusted people a little bit too far. So, everybody should keep in mind what former President Ronald Reagan said: “...trust but verify!”
The next big mistake was on another subject to transaction. This guy said that all he wanted was $5,000 and he had a pay off statement that indicated his pay was off was $22,000 and that number worked, 22 plus 5 is 27. At $27k this is a good deal so we went to a money partner and said pull out the $5,000 and let the sign over the deed right and then we would go and pay the mortgage for a couple of months and then would pay off the house when we wholesale in the next 30 or 60 days. So, we gave the seller the $5,000, but we forgot to do the title search. What the guy didn't tell us was that the $22k mortgage was not the only mortgage, but he had a 2nd short term mortgage loaned from a mortgage company and he was already in the process of foreclosure on it too. Now we would have to pay off another $6k and so the deal was no longer any good. We felt it wasn't a good deal anymore as we had already given $5,000 and now we would have to give a $28,000 pay off and be in the house at $33k. The guy didn't give the money back and again trying to persuade him legally would have cost more than we had to collect. That's the way we lost $5,000. So, when you start a deal check the title first before giving the seller any money! You don't want to lose your money! This is also a reason to avoid kitchen table closings as opposed to spending the money with a title company or closing attorney, because in the long run doing it the right way will save you money and let you sleep better at night.

David Neese is a real estate investor, hard money lender, entrepreneur, ecommerce marketer, writer, motivator, father and athlete. David offers a free E-course on quick start strategies for getting started in real estate investing that is delivered free via email and tele-clinic at:http://www.FreeRealEstateInvestingCourses.com
and you can find more information about David at:
http://www.DigitalSuccessCoach.com and http://www.RealEstateTeleClinic.com .

Appraisal versus market value

David here today. This week i found out i have a stress fracture in my left foot and i have to wear a big "boot" which freezes my ankle and takes the pressure off my foot but its a major pain to wear and to drive or go up and down stairs. Anyways saturday i had to walk for 6.5 hours during a local scouting event called Scout Base in Tunica, MS
While it was great for my two boys it was tough on my bad foot and i am really feeling it today(sunday).
anyways, this week i passed on what could have been a major home run deal. In Memphis the average new home selling price is $175,000 which is very low on the national level. So when i went and looked at a home with 2 appraisals over $1.5 million you can imagine it was a very nice home. It is in a prestigious gated subdivision called Southwind which has a major TPC golf championship every year called the fedex stjude classic. The home has been completed for over 4 months and had 2 contracts to purchase fail at $1.45 million including one by a miami dolphins player who was arrested recently. Well the builder is strapped for money and his time is up on his construction loan and the bank wants it off their books. He owes 1.05 million and will sell it for what he owes plus all closing costs. Now for some reason homes are sitting in this subdivision. a big strike against it is that you cant see the golf course very well from the tiny amount that touches this lot and the yard is small and has no pool. while there are homes in this same neighborhood that have sold for over $2 million this one isnt moving. the biggest issue would be that if i bought it carrying costs would run $9-10,000 per month and quickly erode any profit. also upon selling any house retail you need to plan on spending 10% of the price on realtor and closing costs and prepaids for your buyer. In theory if we sold it for 1.4 million and took out 10% for closing costs and realtors that would leave 1.26 million against about $1.07 million purchase cost. that still leaves almost a $200k spread with $9-10k per month in carrying costs. Do you think this is a good deal or not? let me know what you think.

Coaching services on Ebay

I am kind of tired today. Spent most of last night doing my 2005 taxes and like most self employed business people i know I am filing today. If you arent self employed or have a business or real estate investments you really miss out on some great tax deductions. For most of us taxes are our biggest expense in life and as a w-2 employee you pay the most taxes possible even though your employer pays half of your social security taxes.

Anyways i wanted to let you know i like to help people so i am letting folks name their own price for my coaching services on EBay. Check the link below and look at my offers on ebay for coaching:

http://stores.ebay.com/Memphis-Trading-LLC

Well thats all for now as I have a lot of leads to follow up on.

Greetings...Karen and Steven here...

I took a mini-vacation last week and left Steven at home to get everything set up for our new marketing venture, 1-800-BUY-KWIK!

We anticipate that this venture into the world of television advertising will bring us loads of leads...and great deals.

Today is the first day for our ad to run and we are prepared for lots of calls!

The company, 1-800-BUY-KWIK, grants licensees in major areas across the country. Apparently, we are the first in Middle Tennessee. David tells us that the licensee in Memphis, where he is, does quite well with it.

To learn more go to http://www.buykwik.com.

In other news, David's free CD with exciting bonus is now available! Unlike most free CDs, this one delivers the goods, with lots of info on marketing, resources, and how to talk to sellers (my favorite part).

To order the CD, go to http://www.realestateteleclinic.com/freecd.htm

Nice Deal Pickup today

David here, so far October has been a bit of a slow start. i have done so many deals lately i need to catch my breath. today i bought deal 46 for 2006. A nice 3 bed 2 bath brick home built in the 50s that with probably 10k worth of work should be worth about $80-85k. In memphis anything that retails over $80k is a pretty decent moving area and is fairly safe. When i got the lead the seller had stated they owed nothing and would like 40k for the house and they wanted to move out of town. Well based on the comps and the fact this house is tax assessed as a 3 bed 1 bath home i thought i needed to go take a look. even a 3 bed 1 bath home in that neighborhood is worth about 70k. anyways i got there and the place is a mess but mainly needs cleaning, new paint, redo the hardwood floors(about the same cost as adding new carpet) new light fixtures, clean the outside brick with pressure washer or acid wash. anyways i offered the seller $30k and he thought about it for a minute and said he needed to talk it over with his daughter and as i was walking to my truck he asked if i could cover about $1500 in back taxes for him and i said i could probably get that worked out for him. anyways today he called back to tell me he would accept our offer and so i will pay $31,500 for it. i think i can clean up the house for 10k or less and be in it with a very good profit margin.

now i always try to wholesale houses first and i will probably try to wholesale this one at $45k as that still leaves plenty of margin for my potential customer. if it costs them $10k to fix it up then with repairs they will be in it at 65% of value which is a great deal for them and $13k for me.

The Art of Wholesaling

Steven and I were just discussing some of the crazy deals we see wholesalers offering.

Do they think other investors are just plain ignorant, or are they?

For instance, one wholesaler recently offered a 1910 house via rehablist.com. Now, this is the type of house that makes me drool!!!! So I paid close attention to this deal. He was offering the house for $129k, and just said it needed repairs but did not list them. He then said it had tenants in it so just drive by, then make an appt.

When I looked up the house on the Davidson County tax site, it was apparaised there for about 90k. Later, while persuing the MLS just to see what was there, I came across this very same house listed for $135k!!!! I guess he made just a low enough offer to get them to put it under contract with him. But it is still on the MLS, so I am assuming this wholesaler did not find a buyer for this great...ahem...deal! Presumably he used a weasel clause to back out when he could not find a buyer.

It COULD be a great deal if you could negotiate a much, much lower price because it is in a neighborhood that is just starting to be rehabbed, and is on the edge of another hot rehab neighborhood where homes are selling for $250k on up. But right now, $129k is not going to cut it with this house in a neighborhood that is still marginal. And I doubt the seller is going to find anyone who will buy it at the price they are asking anytime soon. Unless it is someone who wants to rehab it for their own personal use, live in it a few years, then sell for a nice profit.

Another wholesaler listed a house in a historic area of Nashville on craigslist yesterday. He did not give the specific address so I could not look it up on the tax site. However, he is offering it for $160k, said the kitchen and bath need updating and it needs other work (which he did not list but said it is livable), and said that it could sell for $175k! Wow! What a profit margin, huh? Maaaaybe one could update it, sell it, and perhaps make a couple grand!

Steven is a member of several online investor groups and says he sees these type "deals" being offered all over the country.

Bottom line: this is a perfect reason for new investors to have an experienced mentor and coach like David to help you cut through the C... and not make a costly mistake!

AND to teach you the art of living with integrity and negotiating with the motivated seller so you can offer GREAT wholesale deals where everyone makes money!

Upcoming CD Packed W/ Valuable Info!

Greetings, everyone...

Steven and I previewed David's upcoming CD, which will also offer an exciting bonus, and do we ever wish we had had this valuable info several months ago. There is no doubt it would have kept us from wandering around in the "no-deal wilderness" all summer!

We especially appreciated the section on how to talk to sellers. It is excellent, and as David says on the CD, you need to listen to that part over and over and practice!

There will be more announcements later about the CD and the fabulous free bonus! So keep watching!

Yesterday, Steven and I drove to Franklin to look at a condo that came from an internet lead. We had driven by the building last week and even though it was built in '69 it looked quite nice from the outside. Looks can be deceiving, though! When we got there, the inside hallway was in bad shape and stinky. When the seller arrived and opened the door to his former residence, my very strong gag reflex kicked in and I had to leave. The owner had had the power turned off and forgot to clean the fridge!!! We have had this happen before, but this time it affected me more. Maybe because I had just eaten lunch, which included a tasty Dunkin' Donut.

Anyway, Steven said the place was in pretty bad shape. Kitchen had most likely not been updated since '69, needed new carpet and painting, and the seller was not in a position to take less than what he owed. We had had a feeling while waiting for the seller to show up that this would be a no deal. Even though the condo is located in downtown Franklin, which is very quaint and a desirable area, and the comps were OK, it would have taken a much, much lower price than $57,800 to make this deal worthwhile.

An interesting thing happened, though, after we left. We turned down a side street filled with Victorian and 20s bungalow homes that have been beautifully restored and are worth in the $300k and up range when all of a sudden, there it was...the house that did not fit. Unkempt yard, dingy peeling paint, mailbox on the sidewalk, and a vacant look about it.

Using three online resources, we learned that the house was built in 1900 and the last sale date was January 1, 1901! It has been in the same family all these years, I guess. And the present owner's address is listed in Nashville so we are guessing that she is elderly and living w/ family (since the Nashville address is a residence, not a nursing home). Or perhaps she is in a nursing home and gets her mail sent to a relative.

That's one of the things I like about real estate investing...the chance to be a detective!

We plan to go back and talk to neighbors (who probably would love to see this home restored) to see what the story is, and go from there.

Happy investing!

Could you use a Real Estate Coach?

Hey its David here.

Marketing was a bit slower this week and was a welcome relief. I have been buying so many houses this week I dont get enough chances to slow down. Today i met a seller to sign a contract to wholesale the Peach house i have been writing about. My buyer is another wholesaler who is flipping it to a regular buyer of his. My sales price is $96,000. Now i wouldnt mind taking this house all the way through the rehab and trying to sell in the 170-190k range but I always will take a wholesale deal first and take the fast money as I always have more deals in my pipeline i can fix up and take all the way to a retail sale. We will see if this buyer follows through as so many investor buyers do not close.

Hi, Karen and Steven here...

I, Karen, had my first experience last night of talking to someone in foreclosure. The lead came through an online resources, so I was not 100 % sure before making the call that she was in foreclosure, but we suspected it since the online resource showed she had downloaded a report on stopping foreclosure.

Anyway, the gist of it was that her sale date is Oct. 17 (and this was Oct. 5!) and she thought we would buy the house full price and she could still live in it. I patiently and nicely explained that if she could not pay the mortgage now, that she most likely could not pay what the new owner would charge in rent, either, since it would be comparable.

She was not interested in a short sale even when I explained the benefits of it to her, and hung up.

I can see what other investors mean now when they say people in foreclosure have their heads in the sand.

This was a good experience. I think in the future, when working with people in foreclosure, we need not only knowledge and expertise in short sales, but the ability to really, really look at the situation from the other person's perspective.

This is one of the things that makes real estate investing an interesting career!

postcard mailings vs letters

Hey everyone, its David here. I had a weird lead source today. i have a series of postcards i send out to people headed into foreclosure and this lady called us off one but she owned the home free and clear but it was a rental so i assumed she was late on her own home. nope, turns out she works at the post office and saw a postcard and copied down our #. now that wouldnt have happened sending out letters. just a little tidbit i though you could use.

It's Karen again...just wanted to share that earlier this evening Steven and I made an offer on the "Clutter House" that I mentioned last Friday. I called the seller and asked to set up a time to meet w/ her on Saturday. AFter much discussion, we had decided to show her some comps since her dad has what I call "Williamson County Syndrome" (property values have skyrocketed there since it was named one of the 15 wealthiest counties in the U.S.). Her dad is convinced the house is worth $200k when in reality, it is worth about $150k at the most. For one thing, the lot is only 3/4 acre, and land is what is valuable in Wmson Co. For another, the house is pretty small and 50 yoa.

Anyway, she pressed me for the amount of the offer over the phone. I tried to point out the advantages of selling to investors, chiefly that she would not need to make repairs, clean out the clutter, and close when she wanted. Her dad apparently was on an extension or speaker phone because she immediately said he had slipped her a note and said they would not sell till spring and could get what they want. So I wished her luck and said goodbye.

It took me a couple of hours to process and realize where we made a mistake. We never really asked her what she wanted. I assumed she wanted to be rid of a house associated with sad memories when in reality all she really wanted, or dad wanted, was money. Which is fine...we all want money whether we admit it or not. Even Mother Theresa wanted money, she just wanted it for her charity and not for herself. But we did not find that out in any of our conversations.

I immediately contrasted our seller with the seller we visited with David two weeks ago. Sure, his seller wanted money, too, but when we visited her home she was asking $65k and by the next day had dropped to David's price of $35k.

What made the difference? What motivated this seller? Sure, she wanted money, but there was something she wanted more and David found out what it was on the first visit. She wanted out of the house by a certain date, and not have to make $5,000 worth of repairs, and he was able to offer her that.

This is a big lesson and an important one for our real estate investing success.

David is offering a coaching package in which you get to ride around with him for a couple of days. Our advice is: do it! It could make all the difference in your next deal. I definitely believe it will with ours.

Hi, it's Karen and Steven...

Steven made his radio debut Monday evening on the marketing call with David. Among other things, they talked about the sale of my mother's house to David, which resulted in a much happier life in Nashville for my mother and a nice profit for David! This definitely was a win/win situation for everyone. Even my mother's cat is happier in her new home!

David also discussed the marketing techniques that have enabled him to purchase 5-10 homes a month since February, and launched his new coaching program. If you missed the call, go to www.realestateteleclinic.com to replay it and consider boosting your investment career to new heights through coaching by David.

I can personally assure you that it will be well worth the investment. Besides being knowledgeable AND successful, David is one of the most genuine, honest people I have ever met. Whenever I wonder about how to present an offer to a seller, I think back to what I have heard him say, and it increases my confidence and makes everything so much easier!

More later!
Karen

Good Morning! Karen and Steven here...

After a relaxing and refreshing weekend, we are ready to hit the ground running with real estate investing again this week...

Friday afternoon we dropped off a packet of info at a house in pre-foreclosure. The house is in Brentwood, which is a highly desirable area just south of Nashville. Some of the homes were built in the 60s and 70s, but trendy Brentwood is also filled with multi-million dollar mansions that have sprung up in the past 5 years.

The house we are interested in was built in '71. From our online research, it appears that it was paid for and the owner sold it to a relative, who then took out a loan against it for $150,000. Now she is in preforeclosure. The actual value of the home is in the $250k range, so there is potential for a good deal. We are going to continue to follow up with her. This will be our first venture into the world of short sales.

We also went to a house outside Franklin, another trendy Middle Tennessee hot spot, to look at a house a bird dog told us about. He knows the owner. I spoke with her several times on the phone before we looked at the house. She does not want us to go inside because it is jammed with clutter and boxes. She has not lived in the house for 3 years. Anyway, we pulled up in front of the house and at first I exclaimed, "This can't be it...this is someone having a yard sale!" because she has one of these open carports (four poles and a metal roof) and it was full of clothes and junk. But it was, indeed, the house. From the outside it looks good. House was built in 52 but she remodeled, put on siding and a red roof. The deal breaker on this deal could be her father, who is convinced the house is worth $200,000 when in reality it is closer to $140,000. We probably will not offer more than $85,000, esp. if she does not let us in.

In many ways she is an ideal candidate to sell to an investor because she has been through some hard times and does not want to go back into the house and clear it out to show it through a realtor.

Steven and I were excited to read about David's goals and the amount of houses he will be purchasing in 2007. Shortly after joining our local REIA group, we went to a meeting in which favorable comments were made about people purchasing 60 houses in five years. So that is basically 1 per month. Not to diss what they are doing, but I thought, "That reeeeally doesn't seem like much to me! I'd like to do more." So it is wonderful to be coached and mentored by someone who has greater goals and is achieving them, and can teach us how to do the same.

Monday Nights Real Estate Case Study

Hey David Here. Just wanted to let you see the link i will be directing you to on the Monday night call this week which is http://www.realestateteleclinic.com/westperkins.htm
I will be on the phone with the person who brought me this lead and we will be discussing the mindset of a truly motivated seller. We will also be discussing marketing strategies to find deals.

Be sure to join us on the call. to join us go here and register for the call:
http://www.realestateteleclinic.com/mondaycall.htm