September 2004 Archives

When i first started my first forays into real estate investment - soley motivated by envy for the big fat checks that one of Nora’s clients was getting - my first questions were always about getting some knowledge. I wanted to know:
- where to go and get foreclosure leads?
- how can i buy homes with equity?
- how can i fix homes if i have no money?
- how to make passive cash flow from rentals?
- what the heck is a lease option?
- how to find good tenants?
- what is the right way to fix houses?
and so on

I was looking for technical knowledge - the ABC of investment real estate and the Internet was a good place to look into it. I do have an admission to make - I rarely used to watch T.V. back then - it is just hard to do anything when you are working yourself to complete exhaustion every day, 12 to 14 hours per day. So I never saw the infomercials for No Money Down Real Estate till I have done some real estate deals.

I found great information on websites like creonline, and rich dad. These sites had great deal of information - and some great posters (sadly most of the founding posters of richdad.com vanished without a trace - some of them started doing seminars and got too busy to post on the sites anymore).

Both of these sites gave me lots of great information and motivation - people just like me , starting, looking around, trying to figure it out, a little scared of screwing up - so it was great to hang around lots of people just me - and find lots and lots of quality information.

But I had one problem with these forums which still exists till this day - no Systems of doing anything, a false assumption that real estate is same every where, no emphasis on testing what works and what does not works and furious objections towards doing anything new in real estate.

What i really wanted, looking back, is the knowlege and more important a blue print of starting, running and managing a profitable real estate business. I am just impatient - dont give me a 300 page book - just tell me the 24 things I need to do in the next 30 days to bring foreclosure leads, motivated sellers, houses with equity and hungary buyers to my doorstep and I wll do them all - By God!

I will read the book once I have made my first $10,000 in real estate.

What I wanted was specific steps, check lists and a very specific plan to go and be successful in real estate.

So far, four and a half years in living the drama of being a full time real estate investor i thought that it would be great to actually put together something like that and see what happens.

So the premise of the coming posts is this : if i had to start all over again, this is the stuff i would like to have in my laptop bag. All the courses bought - on real estate, internet marketing, search engines optimizations, books read on real estate, marketing, small business, success, motivation, selling - condensed into couple of very specifice 123 steps to do for any real estate investor.

Today is the first day of my attempt to work from home! Apart from some non-scheduled visits from my 2 year old daughter, Hailey, who promptly went on to throw all my files on the floor, it has been a very productive day.

I tried this 3 years ago, but lots of things have changed since then. My real estate business is almost running completely off the web and I found a great assistant. So last night, on a complete whim, I decided to one week off from the office and try working from home and see how the whole things pans out.

My office lease is ending December 15th and I have been contemplating moving closer to my home (right now its 20 minutes, all freeway) but if this thing works out - then may be I will just go the route of shared office space and let my assistant and my partner work out of there.

The inspiration partially came from reading Dan Kennedy pricess book on managing time for entrepreneurs - The No B.S. Books - are an essential part of my day to day library. I highly recommend them to anybody who wants to make more money, have a life and keep their sanity.

From The July 2004 Issue of My Real Estate Newsletter;

This is a frequent complain against realtors. They have access to REO’s (Real Estate Owned by Banks because of foreclosure) and they are not that co-operative about showing you the properties or negotiating aggressively on your behalf.

I get emails all the time from members complaining about realtors not returning their phone calls or generally giving them a cold shoulder when it comes to showing or making offers on multiple properties.

Another big complaint is big realtors seldom send Pocket Listings to new investors even when the investors have given them pre-qualification letters, proof of funds etc.

Over the next four issues, I will be dissecting the strategies that I have used very successfully in building a powerful realtor network and getting pocket listings from them on a regular monthly basis.

If you want somebody to do business with you and give you “Most Preferred Status” , you have to look at the world from their eyes.

I am not a Realtor, and don’t intend to become one. Although I can tell you the advantages of getting a real estate license (unlimited access to MLS? Anybody ???) but that is the topic of next months newsletter. But coming back to being the devils advocate part – I have good friends in the Realtor community, some of them have made me in access of $50,000 in the last three months,

But reality is most of the investment deals put forward by investors fall through. Now realtors work on commission and whether you like the house or not, whether you can arrange the financing (cash or mortgage) or not – they still have to drive around, show you the fifteen properties so you can maybe make an offer on ONE or worse you want them make low ball offers on 10,15 properties– frankly speaking, most of them go pale in the face as soon you tell them you are a real estate
investor.

Now, if you think from a business perspective, the interests of the realtor are aligned with yours – you want to make money – they want to make money, so what is the problem??

This is the technique that I have used very successfully in the last two years to build up a team of kick butt realtors in Michigan (just a quick note – in any market there are may be 8 or 10 major Realtors active in the REO market, they are the ones who are getting listings from the big boys – the Chase Manhattens, Citibanks, Standard Federals, Fairbanks, Homecomings Financial of the worlds – the rest are fringe players having minor or no say with their lenders. The major players can save you on an average – these are my numbers - $5000 to $8000 per deals. If you do just four deals per year, that is an extra $20,000 to $32,000 per year.

Coming back, I suggest you treat the Realtor the same way that you would any prospective investor in your business. Meaning strive to build credibility.

Your goal should be to create an awesome impression to the point a Top Dog Realtor is running after you, faxing you, emailing you, calling you late at night to give you the hot hot hot pocket listings that nobody else have!

I got suckered in today - big time! I never show my houses to anybody - simpley too much time wasted. So prospective buyers go through the hoops of website, phone call, proof of funds etc to make sure that only somebody really serious is shown a house we have.

Well today, I was on the road and Nora called and she wants me to show these two people this house we have and since I was minutes away I assumed that she already went through the loop - alas that was not to be. She was too busy, I was in the area and that is how this day started:

Well the first sign that the buyer for your property is serious - I am talking about a wholesale deal here by the way - is they have a notebook in their hands and perferably a pen and they are taking notes as they are going through the house. She had both the items.

The car she was driving had signs on the side saying that We Buy Houses! Another good thing in my book - serious buyer.

She had (Gasp!) done her research before she started driving - she had already pulled the SEV and pulled comparables. She knew that the potential was.

She had already read the details about the house on the website so she knew what was needed to be done.

Very pleasant experience.

The second buyer walked in - no notebook, no pen, no notes, did not asked any questions about the potential about the house except, "Dude, do you think that this house needs lots of work?" which is pretty much going to a restuarant and asking the server if the salmon is good?

I just dont get it. So much profit potential to be gained - how come nobody wants to do their homework?

When you are not a realtor, how do you do it?

I do it all the time or well truth be told, Theresa does it all the time. We do by doing a little bit of psychology and a little bit of sugar.

Truth of the matter is everybody wants to feel important - realtors being no exception. When we call realtor offices and want to go and see and evaluate bank owned properties, I want to go there when I feel like and not be bound by their appointment book. Plus sometimes i just passwords for my Gold Plus group so I really want to get the codes for the lock boxes and not the realtors opening the doors for me.

So what we do is this - we call the realtor office, ask the assistant to the realtors over the phone and tell them that "hey we would like to go and check out the house that you have listed but we dont waste your time, guess what we are real esate investors and we look at tons of houses but pick only few to buy so instead of meeting you there and wasting your valuable time, why don you give us the lockbox code and we promise that we will lock the door on the way out.!

Works like a charm ten out of ten. Works for Theresa, works Gold Plus member Mike L. and Nick M.

Try it yourself!

There is enormous amount of money to be made by losing a deal!

I think this has happened to me personally at least 5 times this year alone. I put an offer in for a REO, get a call back saying that somebody is willing to pay a full price instead of negotiating (huh?) and would I like to offer MORE than the asking price?

Obviously, that is not the way we do business here. So I say no!

Knowing fully well that anybody walking in and offering full asking price has to be a newbie.

And being a newbie also means that 100% they are going to put a Property Inspection clause in the Purchase Agreement with a 7 day contingencey.

It also means during these 7 days they are going to talk themselves out of buying real estate.

It also means that the Property Inspection guy whose job is to literally talk you out of buying this property (real words from a property inspector, not mine).

It also means that all I have to do is call back after 14 days, confirm that the deal fall apart and offer around $5000 less that what I offered before and

get my offer accepted in 4 hours.

You gotta love this real estate thing!

Hello Mark; what the heck happened to the no money down real estate thing????

Can you do real estate without money? Yeah you can but here is the catch 22 - you will lose some really good deals if the only deals you can do are the no money down deals.

But here is the biggie - it took me sometime to figure out myself - you dont need to have your own money but rather access to money.

I think it is actually good to use other resources other than your own personal funds because they come with greater responsibility.

For example, I think using hard money lenders for your first couple of deals is actually a good thing - it forces you to go out and find better deals with at least 40% equity, otherwise no fundings from them.

Your chances of screwing up just got significantly reduced. If you are just adequately knowledgeable, you will do just fine - I mean you have enough screw up equity in that 40%.

Even though I know better but once in a while I still fall victim to it.

For a real estate investor, One is a dangerous number.

One way to attract foreclosure leads.
One investor to fund your deals.
One hard money lender to finance deals.
One realtor for bank owned properties.
One way to sell your homes.

Way too dangerous! Three days ago, I was taking incoming calls for Call In Consulting days and one after another (this is a new group, just starting) and it was the same story: I did this one thing and it is not working out.

The tone vaired but the message was the same:
I went to this ONE hard money lender and they wont do the deal.
I send this ONE postcard out and it is not working.
I saw THIS one house that i am in love with and the owner are not interested in doing a deal.
I called this ONE realtor but he will not return my calls.

I mean are we talking a pattern here or what??

And belive me, I understand why everybody wants ONE way of doing things. Hell, it is easy!

I have a deal going on right now - with another investor/deal split and I slipped - send the deal to one hard money lender, turns out she is a nut case and now the deal is in limbo.

I had to call another group of investors to finance the deal and paid a little bit extra for the headache. Stress for no reason.

Good deal - cannot afford to lose it - around $20,000 net for 90 days of work, split in the middle. Not a bad payday.

But I could have lost this payday if I was not careful. I should have anticipated the drama and send the deal to two banks instead of one and this would have never happened.

And it never will. Ever again. The Lesson is learned.

Please! first thing banks do when they get a property back is disconnect the electricity. That disables the sump pump. Now the basements floods every time it rains. Then molds starts growing on the walls. Or better still, forget to winterize the house so the pipes explode in kitchen or leakage all over house forcing them to give huge discounts to sell the house to somebody like me.

Saw four houses in the last month, same story on all of them.

Good for us! Bad for banks.

I love stomping the banks.

Today was a horrible day! Young woman calls me out of nowhere telling me that she has a house that she is losing in foreclosures and she needs help. Nora tells her to come over and her story just made me sick.

It turns out that some guy offered them some quick cash, put a house in their name, cashed it out, pulled $60,000, gave them $8,000, never fixed the house (it looked horrible) and vanished after making two payments.

Payment on the house is $2,000, they cannot afford to make it and now the house is in foreclosure. I was furious. I mean, why screw people when you make money the right way in this business. Cash back at closing is pretty common in creative real estate but this is outright wrong. I have done it in the past. But you have to come through on your promises and not let people leave hanging in the middle.

I am going to negotiate a short sale to save this lady's credit. This is going to be a really interesting conversation with the lender once I explained to them what is the condition of the house is!

I don't like letters any more. Just too much junk coming in every month in the mail box. Sending a simple 4x6 postcard to preforeclosure leads is much more faster, more effective and get pretty much the same response.

Cheaper too - plus I like the fact that you can buy different colors for the same price. Best site so far i have found is Desktop Supplies on the internet.

What is going on here??? Oakland county, the 3rd richest county in North America is oozing foreclosures all over the place. 457 last month alone.

I was talking to two of of my coaching group guys who who also operate in the same area and they both had the same complaint - way too many deals coming in every month. And one of these guys does not even do real estate full time. He works in corporate America 9-6, the other partner works in real estate, does mortgages and owns a pizza shop.

I have said it before and I will say it till I turned blue - there is no "shortage" of good deals, no matter where you live. Now a good system that will go out and fetch them to you - requires a little bit of work.