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Welcome back...again! Quick refresher: We’ve been discussing two classic & powerful, tried & true real estate investing strategies:
Wholesaling and Lease Options, aka “Ugly” vs. “Pretty”.
Part One of this series was devoted to Wholesaling, and Part Two was focused on Lease Options. Examples were given. Terms discussed. Money put on the table. Moving on...
Whenever a ‘newby’ investor asks me where they should start, I usually tell them that wholesaling is a great way to earn some great money while learning the business, so they should consider starting there. After a while, and when their marketing starts generating leads from pretty house sellers, I tell them that it’s a great idea to learn that part of the business so that they can start to make money from those leads as well.
It’s a beautiful thing when a deal fits easily into a ‘type’ of transaction we know how to do, and it’s even more beautiful when all the stars are in alignment & a deal closes smoothly. But we live in the real world here, right? Besides, we’re problem solvers, and that’s why we get paid the big bucks! :) Read More >>
Last Saturday, I took thirteen real estate investors from the Chattanooga Real Estate Investors Association door-knocking. Before heading out, we discussed how to make a written offer to a seller.
The group had a number of questions: 1) How do I find a property’s fair market value? 2) How do I discover market rents in the area? 3) How do I make a written offer right there on the spot?
The first thing to remember is that an offer is different from a purchase contract. A purchase contract is often a formal document written in legalese that no one – especially the buyer and seller – understands. On the other hand, an offer can be written in plain English on a Post-it note that makes sense to everyone! (NOTE: On North Georgia REIA’s Facebook page, you’ll see three of the written offers I made in Chattanooga.)
Randy Shelley is an investor who lives in that area. We spent the day knocking doors in his subdivision. Though he already knew the fair market values and approximate rents for his neighborhood, I asked him not to share this information with the group. Read More >>
Savannah REIA is excited to announce that Don DeRosa will be our special guest speaker this month at our Monthly Meeting on Tuesday, April 14th at 6:30PM at the Savannah Board of Realtors located at 7015 Hodgson Memorial Drive in Savannah, GA (map). Don will be sharing with us many of the "New Subject-To" strategies, tools, and techniques he uses every day to create winning deals for himself as well as his buyers and sellers. Don is a part time real estate trainer and mentor and full-time real estate investor who actively buys, sells and holds properties each month for huge profits and long term cash flow.
Today Don is working feverishly at buying properties "Subject To" using the existing financing on the seller's home instead of having to go to a bank or a hard money lender for funding. This allows Don to buy multiple properties fast, without coming up with all the purchase funds on the front end. This is the perfect strategy for buying and holding pretty houses in today's market where easy funding is not readily available for real estate investors.
Don will walk you through real deals, step-by-step to demonstrate how to evaluate the lead, determine your exit strategy, structure the deal, negotiate with the seller and get the paperwork done almost instantly and without any of the hard work you normally do to get your deals done.
By the end of the presentation, you'll know...
And if this is not enough, Don will be back with us on Saturday, April 25th for a full day workshop on The Ultimate "How-To" Workshop on Buying Houses "Subject-To" where he will really drive these points home and give you all the subject-to details you need to succeed in real estate investing. Once you are armed with Don's training and the tools, you will be able to make this your best year ever!
We look forward to seeing you at the meeting! Read More >>
On Saturday, April 25th from 9AM to 5PM, Don DeRosa will be conducting a special full day workshop with Savannah REIA on "How To Do The New Subject To" at Keller Williams located at 329 Commercial Dr, Suite 100 in Savannah, GA. This class is all about how to buy and own real estate and make lots of money with little or no money down.
Learn how to buy houses…
Beginner or experienced real estate investors can find immediate success using Don’s simple formula. There are six easy steps to follow when buying “Subject To.”
Once you learn to follow these steps you can do this over and over again for an average profit of over $20,000 per property.
There are many ways to make money in real estate and there will be something for everyone at the event. Don will be teaching you his trade secrets, including little-known buying techniques that have made him a very successful investor.
PLEASE NOTE: If you want to gain the cutting edge you need to succeed and bypass your competition, register now for the workshop and bring your iPad, tablet or smart phone and join us at the event!
PLEASE NOTE: Non-Members who join Savannah REIA between April 1st - 14th, 2015 can attend the workshop for FREE. When joining Savannah REIA, please indicate that you want to attend the workshop at no charge.
This event will show you from start to finish how to buy "subject to" properties… from raising capital, to finding leads, to meeting with the seller and closing the deal.
This workshop is jam packed with very important topics that Don will cover such as:
My wife Stephanie and I have been doing Creative Real Estate Deals for over 30 years. In fact we have done close to 2,000 of them with none of our own money or credit.
We have mentored hundreds of students across the country and Canada. We love to teach what we do to others and our reward is watching them succeed.
Well, back in 2007 the market started turning down and we all know about the Greatest Recession of all times that followed. We quickly found that a lot of the techniques we were using suddenly were not working anymore. So we created a technique that we actually had used since we started investing and named it ACT, or Agreeable Contract Terms.
With ACT, we were able to get sellers to give us terms or pricing that was agreeable to us right up front. This worked for about 2 ½ years. Then in 2012, the market started changing again. It became more of a retail market. Have you talked to a seller lately? I bet they want ‘CASH, Full Retail, or More than Retail’ for their home, right? Well, we are seeing this across the country. Read More >>
At Fortris we have several levels of Mentoring and in the past one of these levels was the Generals Club. That club has now been retired. But several years ago we opened it up to 8 investors. The concept was total immersion into the tax sale business and working through an entire deal utilizing the General’s capital while teaching them the entire process of construction management, sales, the associated legalities, and the basics on how to become a very successful real estate investor. At the end of the project we gave the General back all their investment, as well as their mentoring fee plus half the profit on the project they had been tasked with. Currently we still maintain partnership investments with five of the original eight members.
Ann S., one of our Generals, invests in the city of Baltimore which is a very tough market. Baltimore doesn’t allow any scraping of tax sale data from their site, so we needed to pull all the enhanced lists manually. The bidding process is different than any other I've ever seen. First the interest rate is bid down which means that you can offer to take a lower rate of interest payment to win the lien. It is also a sealed bid including a premium offer you are willing to pay, over and above the interest, added in. The county processes all the submissions and the best combination of bid and premium gets the lien. If the property does not redeem, the bid will be packaged according to the best offer combination. For example, if the lien is $5000 and the interest rate is 24%, the bidder may structure their offer to take 7% interest on the $5,000 certificate and then pay a premium of an additional $6,000 above the lien cost if the lien does not redeem. A fairly complicated structure. All the premium bids are sealed and no re-bids are possible. You only get one crack at getting it so you have to use your opportunity to make your best offer possible. Read More >>
Like most investors, I too send out yellow letters to distressed homeowners. Obviously, the intention is to find a property that can be acquired below market in order to make a profit. In most cases the properties that are contracted are either sold as a wholesale deal or are purchased to be renovated and sold. In a few instances the opportunity to contract a property subject-to presents itself but this situation is not usually what you expect it to be. Let me describe my most recent experience with a potential subject-to situation.
Most investors already know what a subject-to is but for those that do not let me give you a simple explanation. A subject-to is when a homeowner deeds the property to the buyer but the mortgage that the homeowner has remains in place. When the buyer is deeded the property he/she now owns the home “subject-to” the existing mortgage. In other words, the buyer will begin to make the mortgage payment or find a renter or new homeowner to do so in order for the buyer to one day own the home free and clear. Read More >>
Picture this: a man purchases a house in 2007 with a loan from a major mortgage lender who then securitizes the loan. After 7 years of making payments, the homeowner loses his job and defaults on the loan. The lender sends a foreclosure notice to the homeowner, claiming the ability to foreclose on the loan. But does the lender actually have the right to foreclose? The answer is a bit complicated, and does not look good for the major banks. To understand why, let’s take a closer look at exactly what the banks did and what it means for homeowners and real estate investors.
When a loan was securitized it was lumped together with a massive pool of loans and then sold in parts to investors around the world. The investors were then paid from the principal and interest payments on the loans based on their percentage of ownership. It sounds simple enough. If it was that simple, why did mortgage lenders begin the process by selling each loan in the massive pool of loans through a sequence of sales? And why was the last sale almost invariably to a single-purpose entity, usually a trust with a major bank as the trustee? The point of this sequence of sales was to separate the pool of loans from the assets and liabilities of the originating lender. They did this in case the lender was to file for bankruptcy or go into receivership. If the loan had not been completely separated from the lender, the lender could then claim the loan by right of redemption, effectively leaving the investors with nothing.
If the homeowner continues to make their payments, this is the end of the process for them until they have paid off the loan. If the homeowner misses payments and the foreclosure process begins on their loan, that's when things get hairy. Read More >>
One of my favorite business books is Good To Great by Jim Collins. In this book Mr. Collins gives a great example that I realized applied to me when I was building my real estate business and will apply to you too. The author gives us an example of a great big fly wheel. He describes this as a giant metal disk on a thin pole. Imagine this disk weighs thousands of pounds and is currently stationary. Your job is to get this disk spinning.
It is easy to imagine that it will take time and effort to get the giant, heavy wheel to spin. You will begin with a single shove on the wheel. Very little will occur with this initial input from you. The wheel may move very slightly. You will push and push and the wheel will slowly start to move. Your effort will be great and the results will be minimal. Shove and shove and shove…the giant wheel begins to spin slightly faster and faster.
At a certain magical point the wheel will become much easier to spin. The weight of the wheel is now working for you. Its own momentum will keep it spinning with very little effort on your part. You can now give small gentle pushes and the wheel will keep spinning on its own. Read More >>
As investors we have to be mindful of some basic principles. While knowing the value of a property is extremely important, real estate investment itself can prove to be particularly challenging.
Knowing the true value of real estate is critical, try to do a deal without it and see. The guidance and data within REIAComps.com has consistently shown investors how to determine both solid acquisition value and after repair value to earn lasting profits.
Use the following six things to get a handle on your business before you start pouring money into a real estate investment.
1. You must be honest and realistic when working with others.
If you want to separate yourself from the competition, tell the truth.
There are a handful of opportunities where you can make a large amount of money in a relatively small amount of time. Real estate is one of them. However, it seems these types of businesses also tend to attract the less than desirable. Read More >>
Plan for retirement
What should you do with your Real Estate IRA? If you are a Baby Boomer, you may want to consider using a Real Estate IRA to purchase that dream home before you hit retirement. Then, when you reach age 59 ½, you can take the home as a distribution and begin enjoying your new retirement home. Remember, you may not use this home for your own personal use until you reach 59 ½ and take the home as a distribution.
One important point that people forget when talking about taking a home as a distribution is the taxes due on distributions. If the home was held in a Traditional IRA, then taxes will be due on the amount of the distribution (the appraised value of the home) in accordance with the individual’s tax bracket. That’s why most people recommend using a Roth IRA for this strategy. With a Roth IRA, taxes are due at the time contributions are made, after that all profits grow tax-free and since you paid the taxes at the time the contributions were made, distributions are tax-free as long as you have reached age 59 ½ and the account has been open for at least 5 years. Read More >>
There are times when we are going to purchase a short sale and then rehab the property for a higher profit. During the rehab on the property, I take my partners shopping. We go to Home Depot and look at all the items I normally put in my cookie cutter houses and I show them why I have chosen each and every product. Then they get to pick their own products and we discuss the price differences to analyze the affect on our profit. It is really fun shopping for an entire house in Home Depot, but the bottom line is to save money. After our trip to Home Depot, we will head over to the cabinet shop if it is a higher end property and we will pick the cabinets and handles. Then we are off to the granite company with a piece of floor tile and a cabinet door so that we can match our granite throughout the house. I call this program my Mentor Program as I bring everything I have learned and taught through my Real Estate Junkie course to my students. By the time we are done, it’s been a “power-shoppin’ day!”
I always recommend that you have a Pro Account at Home Depot which gives me an automatic 10% off everything and if you are a member of a REIA group, you can save another 2% so … working with me already has saved you the cost of a new kitchen on the rehab or more. Read More >>
“Americans spend 3 billion hours per year filling out tax forms and keeping tax records.” ~ Jim Ramstad
There are two things I’ll never do again: first, teach one of my own kids how to drive; and second, help my Aunt May file her tax returns. I’m pretty sure you know Aunt May, or someone just like her. She’s a really sweet lady whose house looks spotlessly organized until you open a drawer or a closet. When she hints that she needs help with her taxes, you volunteer. I mean, she needs you, and she’s so nice! How hard could it be?
Anyway, that’s what I thought. But a day before taxes were due, Aunt May came over with six boxes full of paper. Six boxes! Each contained every manner of paper from receipts to bank statements to movie tickets to Christmas cards. Everything under the sun – except the things I needed. It took sixteen hours, eight aspirins, and three pots of coffee to figure out that she was getting a refund of $1.47. Nope. I adore my Aunt May, but I’m not going through that again.
I’ve never been quite as disorganized as Aunt May, but I’ve certainly had my moments. I discovered pretty quickly that I had better organize my business so I could find what I needed, when I needed it. When you’re trying to convince a potential seller that you run an organized, professional operation, it’s best if you can find the contract they signed. Read More >>
As an active investor, I get a ton of deals regularly from other wholesalers especially with springtime rolling in. They come in all sorts of shapes, forms, fonts, graphics and so forth. While they all have a variety of information, it is rare that ads come with enough information to make a decision on whether it is worth spending time on them. So as a Buyer as well as a wholesaler, I thought I would share some do’s and don’ts to apply when you put ads out to your Buyers to set yourself up for success.
DO put the address – I am amazed at why anyone would think I would look at a deal without an address but it happens.
DO think like a homeowner wanting a perfect house to describe repairs – This is what your Buyer is going to be aiming for. As an example, you may be ‘ok’ with the minor carpet stain however that won’t cut it when your Buyer’s Buyer will want new carpet. Description trumps number estimates since each Buyer has their own contractor with their own pricing.
DO give comparable sales that make sense – radically mixing styles of homes, comps that are too far away for the geographic area, large square footage differences, ignoring unique features such as lakefront, acreage and many more considerations can radically affect what are the best comps. Read More >>
It is the goal of this column to answer questions about QuickBooks and how it is used in the REI arena. Know how to record transactions in the proper way and have your set of books in good shape when it comes time for taxes. It is our intention to do this by you the members submitting questions to Karen@smallbusinessadvisor.biz, and getting answers here in this column.
Q: From time to time I have an entry that I really don’t know how to enter properly. It may be a deposit or a check and I don’t know where to either show the income or the expense. Where can I put this until I can find out from my CPA how to handle it?
A: Create an account named ‘SUSPENSE” and make the type of account a “Bank”. It will live on the balance sheet and will immediately get the attention of your CPA. If you use only this account for these types of entries you can eliminate the Miscellaneous, Uncategorized and Ask my Accountant accounts. Too often these types of accounts get used and the information is scattered across them instead of being in one single account. I usually delete these accounts after I have moved all the transactions to their proper place and then only have Suspense to work with. Read More >>
I actually added this to our lease after a tenant called us at 6:30 one evening to tell us her kitchen sink was stopped up. It turned out that her small child had stuck a cup down into the garbage disposal. It just needed to be removed. The way my lease reads now, that tenant would be charged a fee of $65.00 to have my repair guy go out for something that wasn’t a repair. This one clause will save you from a lot of unnecessary trips to your units for repairs.
I also have someone who checks my rental units every sixty days or so to make sure they are being cared for properly and that the tenant has not added animals that are not on the lease. We also make sure they have not moved in any more people who are not on the lease. This is grounds for immediate eviction. Within the body of our lease, we also cover how long visitors can stay as well so there is a clear definition as to what a visitor is and what an extra tenant is. You can also hire a property management company to handle your units, but I just feel like our units are better handled by my staff. I also send letters to the neighbors surrounding my rental units letting them know that we are interested in any input they may have about my units and my tenants. The neighbors become kind of a watchdog for me to let me know if there are any problems I should know about. Read More >>
Well, it’s been over three years now since ACTS came into the world, and so much has changed since its origination in October of 2011. If you’re not aware of what ACTS means, it stands for Assignments of Contracts and Terms System. It has changed the business of a lot of my students throughout the country and added a lot of additional revenue into their lives, including my own.
However, some people think ACTS is all about over leveraged houses, which is not correct. In fact, ACTS pertains to any kind of terms deals with the seller that can be assigned to an owner occupant tenant buyer, thus the term Assignments of Contracts and Terms System.
Today, I rarely do an overleveraged property because it seems like the number of them is continually declining. In fact, the last time I looked, about 17% of the properties in America were over leveraged according to USA Today. Today, I deal more with free and clear properties and those who have a mortgage with some equity on them. I buy these properties either through owner financing or on a lease purchase. Then, I either install a tenant buyer in them or sell them with owner financing. You will have to decide which one you should do, but I’ll show you how to determine what’s right for you in your area and your personal business objectives. Read More >>
Welcome back! In our last article, we talked about how trends come & go in all things, but we specifically discussed the fact that there are two tried & true strategies that have seemed to stand the test of time in Real Estate Investing. Those strategies are: Wholesaling and Lease Options.
Wholesaling was discussed last time - it’s mainly done in the “Ugly” house business (houses that need a lot of work). And Lease Options are typically understood to be done in the “Pretty” house business (houses that don’t need much work).
Thanks for hanging in with me so far, veteran investors. Keep reading. It gets better.
Lease Options have been around for a good, long time. Certainly as long as any of the well-known, current ‘Gurus’ have been teaching. The way they work is basically like this:
A homeowner/seller wants to sell their house, but a typical wholesale-style deal (usually with a lowball price offer) doesn’t work, or they just don’t like the offer… or the offer doesn’t make sense. I mean, why would any sane seller sell their house that doesn’t need much work that they have a ton of equity in for a deeply-discounted price? Read More >>
You’re out working foreclosures and see an obviously vacant house. There is a sign in the window saying the home has been abandoned and winterized. You look through the window and confirm that it is vacant. Do you open the door with your “investor key” (a credit card) and go inside to look around?
Over the years, real estate investors have hotly debated this topic. Some investors would never go in the home, while others think nothing of slipping the lock so they can inspect the interior before bidding on the property.
I know investors who regularly go into vacant homes. The popular thought is that there’s nothing wrong with that. The investor is not there to steal or vandalize anything, he’s there to estimate the rehab cost so he can accurately determine his maximum purchase price. What can possibly be wrong with this?
There are a lot of funny stories told by seasoned investors about things they found in abandoned properties; things you can’t believe a homeowner would leave behind – like artificial limbs, stuffed (taxidermy) animals, porno magazines, etc. After hearing these stories, many new investors come away thinking that it’s OK to break into vacant homes. But I’m here to tell you – think again! Read More >>
Because money has been easy to get over the past 15 years I wanted to show you how leverage can truly maximize your profits regardless of your credit history. If you can think about the conservation of cash idea borrowing money from banks can definitely be a thing of the past. Leverage is one way how you can use the limited money you have in the most effective way to maximize your profit potential on every property you buy. If you have less than good credit or if you simply don’t want to use your credit you may want to learn how to use less money and with leverage maximize your profits. If you already have limited money you can use what money you currently have to buy one house but you will only profit or grow your money from that one house and nothing more when you rent or sell the property you bought. Leverage can accelerate how you build wealth if done correctly.
Here is a simple example of what I am talking about. For this example let’s say you have $100,000 you have worked hard to acquire over several months or years or you have the ability to borrow $100,000. One day you decide to buy a rental property. You quickly find a house you believe will be a good rental. The sellers of that house are asking $100,000 for their property. During your face-to-face discussions with the sellers you find they would be willing to allow you to make payments to them every month until the property is eventually paid for over the longest period of time you can get the sellers to agree to. Read More >>