Take the oath


kid-taking-oath.jpgSo I am at this elementary school in Detroit in December, dressed up as Santa, having the time of my life and the last class we took the toys in is being taught by this very young gentleman named Mr.Uresti. 

After we had giving the toys out and the wrappers came off and everybody was happy and smiling; all the kids wanted to keep the dolls, dinosaurs and the racing cars out for a while and play which gave Mr.Uresti a pause. 

And the kids were all yelling please, please, please let us play; so he said, if I am going to let you guys play with your toys we have to raise our right hand and repeat after me: I promise not to take anybody’s else toy or blame anybody for taking my toy; I will be quite and respectful and play with my toys and have a great time. 

They all very seriously repeated the oath and went back to playing. And I thought what a wonderful idea…. May be I should have a MP3 here somewhere that every new Michigan real estate investor should repeat after me before they start flipping foreclosures in their Michigan cities especially when it comes to these 7 rules:

1. I promise not to give any money to any contractor without a written agreement between them and us. I also promise to check their references and get a W-9 form sign and filed from them before I gave them any money. And I also will not give them the final check without getting an Unconditional Lien Waiver Form signed and filed away.

2. I promise not to enter into any partnership agreement with anybody, no matter how long I have known them, without a contract, prepared by a lawyer.

3. I promise not to put any offers on any REO’s without having OPM lined up to buy it once my offer is accepted. That will insure that the REO agents I come across in Michigan will love and respect me for all the days to come.

4. I promise not to buy moldy, fire damaged, foundation destroyed, flooded with water houses in 2011.

5. I promise not to try and fix these flips myself so I can save couple of dollars. I will not be cheap and I will find good help to get these houses done fast so I can flip them.

6. I promise to find a great loan officer who can help me get my buyers approved and my flips moved fast so I can spend time in finding the next deal instead of playing mortgage banker all day long.

7. I promise to spend time networking with other experienced real estate investors in Michigan and go to networking meetings like local REIA’s and other entrepreneur groups and ask for help and not try to waste couple of years trying to ‘discover’ things that already been discovered long time ago.

Put your feet on the ground here in Michigan not in Florida

Karen and Don attended my bootcamp in January. One of the things they said in their testimonial video was that I have already heard couple of hundred times so far already is: “We tried getting into investing in Michigan real estate with a help from a coach / mentor in Florida or California and soon realized that they had no idea about how to make it work in Michigan real estate market.”

Look you got to understand something here. I believe there is real value found in reading a book like Cashflow Quadrant or IRA Wealth. There are fundamentals in real estate investing that never change: buy low, sell high, take care of your private investors, manage your contractors with good agreements and open eyes, follow every legal and ethical dot that using OPM requires you to do so. These are the basic building blocks of flipping foreclosures anywhere in United States.

So Yes; If you are starting out in real estate investing even a book written by Al Lowry back in 1969 about investing in real estate without using your own money is suffice to fill your head with great ideas and solid strategies. The basics never change. There is lot of wisdom found in those white hair folks in their sixties. RESPECT that.

But there is another big part of real estate investing that is all about local, local and local since the house you are about to buy and flip does not reside on Amazon.com but in a real zip code in Michigan.

So questions like which city to buy and which to avoid in Michigan; the easy referrals to good people in Michigan that will help you buy good deals (property inspectors / contractors / buy agents) and the ones who will help you flip fast (loan officers); the networking to keep you on track and inspired to do your first, second and third flip; the homeowners in foreclosure who have upside down mortgages and want to sell their homes with a short sale; the sharp REO agent who has built great relationships with Asset Managers and likes to moves lots of houses fast in Michigan; all this is found locally and YES, a local mentor can help you get to these doors fast and without costly detours.

Where do you think you will find somebody to give you all the OPM you ever wanted in Michigan?

If you are an online marketing genius and have some serious money lying around then you can put together a killer website or a slick Facebook Page and run some heavy duty advertising campaigns on Google and Facebook paying couple of bucks for each click and then doing more heavy duty follow-up marketing to the people who might or may not buy your reasons for putting up their funds to buy deals in Michigan real estate with you. They might be interested in doing real estate investing but just not in Michigan.

On the other hand there are already tons of people around you in Michigan who will be easier to find and approach and would require very little reasoning to invest in deals with you because they are here already and they want to do local deal in Michigan.

No matter which way you swing it – real estate investing is local in its heart.

Need I remind you on how badly the love affair with Florida condos and Arizona homes ended for out-of-State investors who ‘invested’ (gambled might be a better term) in these out-of-State real estate without putting their feet on the ground? Not the first by the way. Florida has a habit of taking suckers money every 2 decades with a consistency that would make Madoff envious yet people line up every time they open the doors to sell swamp land to out of towners.

Flipping foreclosures is a local game and you need local Michigan know-how and knowledge.   A local mentor to help you avoid the costly detours that thousands of real estate investors put themselves through every year for no reason.An easy mistake to fix.

No other way around it. Imprint that lesson in your head. It is one of the most profitable lessons you will ever learned in real estate investing.

I have been looking for you all my life

Back in days I rented a 2 room office in Southfield around 10 and Southfield Road. It was a small building owned by a real estate millionaire dentist who also ran his practice out of there. It was an eclectic mix with a massage guy, mortgage company, property management company and bunch of other little businesses.

We all got to know each other and talked frequently to each other while crossing the hallway. Everybody liked my business of flipping foreclosures and I was always telling everybody that hey if you know someone who wants to buy a beautiful home in Detroit or wants to partner up with me – let me know.

Do you know what I heard the most in that building: “I wish I could do something with you but I got bad credit and all my clients have bad credit and none of us have any money?”

After couple of months of hearing this over and over again there was a part of me that actually started believing in this. I had been invited in a bubble at this office building and I was almost in.

Luckily for me by that time I had realized I am a boater (new immigrant joke; boater = off the boat… get it?) and I don’t know anybody in Michigan so I got to go and put my mug shot in front of new people who might be interested in hearing more about flipping foreclosures in Michigan. I knew nothing about marketing or advertising just a common sense idea that instead of waiting for somebody to discover me in Southfield – why now show up instead of people who want to do something in Metro Detroit foreclosures?

So I ran some ads in Detroit News Real Estate Investing Section and I started getting phone calls. Within 2 weeks I was inside a bigger and much better looking world: people who had money to partner up with me AND had perfect credit. I swear when I asked so how is your credit (jaded person that I had become) I would get incredulous looks back as in: What a dumb question to ask… of course my credit is perfect; what else could it be?

Just because your best friend is going through some rough times in his financial life and your brother is not serious about keeping his credit score high… means absolutely nothing on what is happening in Michigan out there. Are there people with bad credit out there? Sure. Are there people out there who have no interest in investing in real estate and they rather invest in their 401K passively? Sure I have a good four dozen that I know very well.

See you don’t get to choose parents, siblings, relatives, co-workers and even sometime friends. But we do have a choice in who we choose to surround ourselves and know well in our flipping business.

Don’t lock yourself in one building like I almost did and think that is it. Know in your heart that there are a whole lot of people out there looking for somebody just like you to do business with. All you got to do is show up in front of them. No convincing required.

My third private investor who at that time made a whole lot more money than me was a very senior executive in the auto industry. One day we are hanging out having just come back from a closing from which he had gotten a very very nice check courtesy of yours truly and he looked at me and said, “Do you know how long I have been looking for somebody like you?”

Without missing a beat, I said, “I would guess all your life.”

And he laughed and said, “Almost Mark almost.”

Ask WHY not WHERE

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So you are at a REIA meet up and you run into Dennis. So you ask, Dennis what you have been up to? And he says, been buying rentals up at Eastpointe. You whip out your notebook and write down: buy rentals in Eastpointe although you cannot remember if Eastpointe is in Wayne County or in Ohio.

10 minutes later you see Allan Boike holding court in a corner talking about this REO he is about to close in Macomb Township and immediately your ears perk up and your notebook opens up again in which you write : buy REO‘s in Macomb Township although you live a good 45 miles away from Macomb Township in Ypsilanti.

That night later you stumble into Eric Tomei’s Facebook Page on which he is talking about the 3 foreclosures he just bought with Scott Baumgart over at Grand Blanc and Holly and Fenton and you make yet another note about buying REO‘s soon in those three cities.

I love your initiative but you are, in the beginning days of your real estate investing business are asking the wrong question from all these veteran real estate investors: you are asking WHERE they are doing their deals instead of asking WHY they are buying their deals in those cities?

The WHERE in most cases is useless to you. If you live too far or know nothing about these cities where they are doing these deals and if you are just going to copycat what they are doing without knowing what they know; you are most likely end up in wrong deals.

But if you ask Boike on WHY is he buying REO‘s in Macomb and WHAT made him buy this deal above all or WHY Eric and Scott focus on Holly then their answers will give you a solid template that you can cut and paste in your business and find a Michigan city close to you where you live or work that would let you cross out all the points that they told you about.

Instead of just memorizing city names learn WHY they are doing WHAT they are doing and you are going to walk out of this 10 minute conversation a much smarter real estate investor in Michigan who will pick a great city close to where you live and work and which is familiar to you instead of driving and getting lost in a new city that you heard in a conversation at a real estate networking event.

Long time ago I read that the quality of your life is determined by the questions you ask. Tony says that ask better questions if you want better answers. 

This asking of WHY instead of WHERE is one of those better questions. Ask it often and ask it every time you come across an experienced real estate investor in Michigan everywhere you go for networking and meeting other like minded folks.

Make it a habit from Day 1. It will give you the eyes to start spotting all those gold mine cities that are around you already that you have been ignoring while trying to find greener pastures somewhere far in Michigan which could be right for them but so wrong for you.

Do these Six to run your new business like a real business from Day 1

1. Form your LLC or S-Corp in Michigan:

These 2 are the most popular business structures that I have seen real estate investor’s use over and over again in Michigan. I am not, repeat not, a fan of people putting (rentals or flips) houses in their personal names or writing checks from five different accounts for a rehabbing a flip.

If you are confused about where the line is between your personal and real estate investing business in Michigan….just think what IRS is going to think about your business when they get your tax return next year with six flips spread all over your life?

This is one of those fundamental basic lessons in starting your real estate investing business in Michigan that you might be thinking… come on everybody does that. Well you don’t see or hear what I do on a regular basis which is a terrifying number of people owning rental properties in their personal name or many investors thinking that they will ‘get around to it’ after they have done couple of flips.

Bad idea. Do it right from Day 1 before you start flipping.

2. Open a business checking account:

And write all your rehabbing expense out of it. Get a VISA checking card from your bank preferably with rewards points attached to it. Make a habit to run all your business expenses out of your business account no matter how small they are. It is extremely important to do if you are doing your real estate deals with OPM.

3.Make a Facebook business page for your business:

Don’t waste time trying to learn how to make a website or use one of the terrible templates that came with your domain name. They give your business a bad name. Instead go where every smart company in the world is right now – on Facebook ’cause that is where 600,000,000 people are almost every day. Read my guide on how to use Facebook Pages for your Michigan real estate investing business here.

4. Get Google Voice:

If your job requires you to ‘vanish’ into your cubicle for extended hours and there is no way that you can pickup your cellphone; use Google Voice that gives you a local phone number (I am not a fan of 800 toll free numbers) which works like a regular phone number and you can make it ring to your cellphone or any other phone number but you can also use it for only getting voice mails with a twist: when somebody leaves you a text message, Google Voice transcribes it and emails it to you. And yes it is free for all USA calls.

5. Do you need a mailing address? Why?

REO agents (meet them at their office); Mortgage brokers (their office); private investors (Starbucks); families buying your flips (at your loan officer or title company conference room). So don’t waste any time in figuring out what address to put on your business card. The new rich in America are the ones who own their time and are not tied to any thing. The office address is necessary if you are planning to hire 40 employees soon. You and me don’t need it.

6. Get business cards.

VistaPrint.com or Overnight Prints are great companies who can get your business cards to you for couple of bucks very fast. Once you have them – exchange them. That is what business cards are for. But please don’t go to a networking meeting at a REIA or at my events and put a business card at every table. It is so rude and spammy to do so.

The idea is to exchange business cards with people who are interested in talking to you more about some part of your flipping business and not throw it from the second floor balcony of the 12 Oaks Mall. Put your Google Voice and Facebook Page address on your business cards so people know how to reach you back and not just your email address.

Make a list of your OPM Friends

Facebook friends photo grid

Sit down somewhere quite in your home. Open up your laptop; log into Facebook; open up your email service or software (Gmail, Yahoo, Outlook Express etc); take a look, one by one at all of your Facebook Friends and every name in your email contact list and ask yourself these three questions:

  1. What do these people do for a living?

  2. Will any of these people might be interested in partnering up with me to do flips where they play bank and put up the money to buy and fix up the foreclosure whereas I will do all the work?
  3. Who do these people might know that they have told me in passing?

Most new real estate investors in Michigan only think of 2 names when they start thinking about OPM: Mom and dad. And that is it. So if mom and dad have no interest in partnering up with you and mostly likely they don’t. They still remember finding you in the backyard, covered in your vomit with an empty bottle of Jack Daniel when you were 19. Those memories never fade away and no matter how mature you are act up right now, they are still stuck up with that picture. So forget mom and dad. Don’t even bother talking to them about investing in Michigan foreclosures because believe it or not we have a whole lot of people already in our lives that might be interested in playing the flipping game with us.

Best part about it all: you only need one.

Think about this for a second; your only target right now is to go and do one flip; get one check with your LLC’s name on it. That is it. You are not worried about building an empire or getting an army of private investors who are completely in love with you. Right now, on our list is only one thing: get one person to partner up with us so we don’t have to use any of our own money to do our first deal. That is it. No need to stress or bang your head against your keyboard.

Know that all of us like to play this game of ‘woe is me because look everybody….. how helpless and without any resources I am.’  when it comes to OPM. It is your brain who does not want to change anything in your lives. It is THE RESISTANCE (read the terrific The War of Art by Steven Pressfield if you want to understand this better) that speaks to you in your head to keep you firmly grounded on where you are already stuck: in a dead end boring job that pays enough to pay the bills but never enough money to do the things you have always wanted to do in your life.

So as soon as you utter the words in your head, ‘I need OPM to buy foreclosures in Royal Oak” it immediately tells you that you don’t know anybody.

That is not true.

In your Facebook Friends list and in your email list, there are at least a dozen great people who will be very interested in talking to you and partnering up with you for OPM. There might be a professional in a private practice there or a Michigan small business owner who adjusted her business when recession started and now she is doing even better than ever or somebody who took a buyout from the Big 3 and is looking to put part of their portfolio in real estate to get good returns aside from whatever they are doing in the stock market.

There is ONE PERSON in your life already who has been thinking about doing real estate investing in Michigan for a while now and just don’t know where to start. They don’t have the knowledge or the time to put that wish into action. You do.

One of the ways new real estate investors in Michigan self sabotage their own path of OPM is they talk about it to people who are not ‘right or ready’ for that talk.

I have two good friends who have no money to put in real estate. I still cherish their friendship and every time we go out, we have a great time. Their lack of money is a personal choice. I am not bothered by it. We all live our lives by the choices we make or don’t make. But I would never set myself up for disappointment and talk to them about OPM. It does not matter what my track record is or how money a potential deal can make both of us: their answer is simply NO because they don’t have it and will never have the resources to do it. I also know couple of people who are extremely negative about anything to do besides putting their money in stocks in their 401K. Once again I like them personally but I would never bring up OPM with them. No point in talking and then hearing NO. Why create frustration? Instead I know who in my email list and in my cellphone contact list are the ones who I should be talking OPM to. 

You should too.

Make this list before you even look at any foreclosures in your target city. This is the first step toward putting an OPM machine up and running in your new real estate investing business in Michigan that will attract great OPM partners toward your business.

Come Sunday, Go To 5 Open Houses


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You probably have some idea on what city you want to buy and flip your first five deals in Michigan. May be it is a city close to where you work or live.

You need to find out what your competition is doing. At my seminar last Saturday, I did a show of hand: raise your hands if you ONLY looked at one house when you were looking to buy a home for yourself. No hand went up. We all have this crazy dream that a home buyer is going to walk into our home and that will the be the first house on her list and she is going to stop right there and buy our house.

Well it happens. Sometime.

But almost all the 99.9995 times the home buyers have a stack of printouts from MLS or Craig’s List and they are looking at bunch of houses before they decide which one to buy so whether you like it or not: every house for sale around you is competition for their attention.

So before you put in any offers, before you look at bunch of REO’s, go and look at five open houses come Sunday in your target Michigan city to find out what your buyers are going to see when they start driving.

Are the kitchens new? How do the bathrooms look? Are the basements finished? What about garages? Did you see at least one house that literally blew you away or every house sort of an old, beaten down, lived in look?

This little spy-mission of yours will give you the confidence to look at horde of the people in your Open House in the eye and say without a doubt: “Hey you will not find a more beautiful fully remodeled house then mine in Livonia around here.” And you mean every word of it.

Second it will also stop you… AND THIS IS THE BIGGIE… to invest your rehab money in stuff you don’t need to be spending money on because now you know what your neighborhood looks like. 

Yes, your house is going to look 10 times better once you are done with it but at the same time you will not be making the biggest mistake most new real estate investors in Michigan make all the time – try to turn this flip into the house they would want to live in. 

Putting a $40,000 kitchen in a $100,000 flip just because you like to cook and always wanted a kitchen like this in your own home is a terrible idea and something you should never ever do. Going and visiting 5 Open Houses next Sunday will stop you making these kinds of rookie mistakes.

Finally, always keep a notebook and a pen in your car and when you leave every Open House, quickly jot down what you noticed in the house. Invest in a $40 digital voice recorder if you don’t want to write. 

Three hours and 5 Open Houses later come Sunday, you will know exactly what you need to put in your flip that will help you sell your house fast in the Michigan city of your choice.

Re-Shuffle Your Skills For 2011

new-skills.jpg If you asked me in 2005 on what skills you need to learn to become terrific at flipping foreclosures in Michigan? My answer would have been this list in the order of importance:

1. Most important: How to rehab houses because majority of the deals were available in Detroit, Pontiac, Saginaw and Flint and we are talking hard core junkers. There were no foreclosures in suburb where banks were discounting unless they had major problems. As a new real estate investor who wanted to fix homes; you would have to learn how to handle mold, fire damage, foundation issues, water soaked basements and everything in the middle.

2. How to find foreclosures: Seriously there were not just too many foreclosures in Metro Detroit. And if you were doing foreclosures in Detroit – you had to figure out which areas were homeowners-heavy (West Side, U of D) and which areas were more rent heavy (East Side). The REO broker industry had probably 20% of the players that it has right now.

3. Selling: Conforming, non-conforming, FHA, all kind of portfolio loans, 5% down, no money down – the mortgage industry was throwing programs out everyday at anybody with a pulse who wanted to buy a home.

4. Money: All kind available: hard money, business credit, mortgages and some private money but it was tough back then to get private money because the stock market was booming.You could stumble around and find some money lying around for you to buy flips. Seriously I used to spend may be one hour talking about money when I was teaching a bootcamp instead of almost an entire day that I do now.

Fast forward to 2011 and here is my list of the most important skills you would need to put in your bag to become good at flipping foreclosures in Michigan:

1. Other People’s Money

2. Other People’s Money

3. Other People’s Money: You have to become good at understand how to attract private money toward you in 2011. It is the only game in town as mortgages; business credit and hard money are still hiding and not coming out anytime soon. It is the difference maker right now – whether you will be buying foreclosures or not.

I know a lot of capable investors who got spoiled in the last couple of years on a steady diet of buying flips on hard money and mortgages and refusing to learn how to attract private money to them. They are hurting right now big time as the ones who built up the skills to attract private money are making a killing in this market. I am going to write a whole lot of stuff on private money in February so stick around.

4. How to evaluate great deals from just good deals: There are lots of foreclosures available in every city in Michigan. But you need to know how to sift and sort and go for the best possible deals and not leave them for more experienced investors.

5. Selling: Need an absolutely kick ass FHA loan officer on your team who will go to bat for you everyday and preferably is table funding the deals so they have in-house underwriters that will give you fast response for your flips. I got some good guys. If you need names, email me here. They do loans all over Michigan.

6. Rehabbing: Cleanup, carpet, paint, new kitchen cabinets, reglaze the tub, put new tiles in kitchen and bathrooms… it is not exactly rocket science anymore. Couple of trips to Home Depot and decent contractors can get most jobs done for you now in 2011. If you want learn how to do mold homes or how to fix foundations – learn those skills more for entertainment or curiosity but really hard core rehabbing houses where you are gutting them upside down and fixing them up is a choice you make when you are buying junkers in 2011. Not needed any more.

15 Means 15

soldout-sign.gifThe 2 day bootcamp on January 26,27 has been SOLD OUT for a while now. We had three very unhappy students whose enrollments came in late and we had to say NO much to their astonishment.

15 students mean 15 students around here.

I seriously don’t get it how can anybody in their right mind be happy to go to a seminar with hundreds of people, watch a Power Point flashing through the screen for two days, never has a chance to have a heart to heart talk with the teacher about what they are trying to achieve in their own real estate investing business or have the camaraderie that comes from being in a small group where you get to know everybody at the end of 2 days and you go home with new friends not just business cards AND think that this is the best investment of their time or the best way to launch their own flipping business in Michigan? Just don’t get it.

Kevin who is coming on Saturday wrote me an email on Monday saying that it is ‘tough’ for him to wait till Saturday. And I thought brother you have no idea what you are about to get. Wait till you meet the private investor group I have arranged for you guys to meet. Some of the coolest Michigan real estate private investor / flippers you will ever meet.

Update: My next 2 day bootcamp is on February 26 and February 27 in Southfield. 15 students allowed max as usual. 3 are already gone already so 12 left so don’t wait and reserve your seats now before they are all gone. Details are here. Got questions? Just call Nora at 248-561-3535.