December 2006 Archives

I will be back on Tuesday. Wishing you and your loved ones a very Merry Christmas!

Mark Ijlal

If you are new to Michigan real estate investing and planning on buying your first couple of deals in 2007 then using a real estate agent to represent you especially when you are buying bank owned foreclosures is a pretty nifty idea.

Consider the good things about the idea:

1. Buying Agents have access to MLS meaning they can pull out comparable sales for you on the fly. If you don’t have access to MLS personally then you are left with making wild guesses or relying to on crazy prices on for sale by owner’s websites.

2. Buying Agents will negotiate the deal on your behalf – if asking for discounts especially big discounts makes a you little nervous then may be it is a good idea to use them for your first deal.

3. Buying Agents will make sure that all the paperwork is done correctly.

4. A small niche of real estate agent’s work as buyer agents exclusively with real estate investors in Michigan. I know couple of them who are my Inner Circle members. They are investors themselves; so they really get it. If you are using somebody like them then they will also find foreclosures for you.

Consider also the flip side of the equation:

Some REO Realtors are not excited about splitting their commissions with a buyer agent ESPECIALLY if you are looking to buy a low end Junker – something like for $30,000. Believe me they don’t get paid that much. I know the insider workings of Asset Management firms and REO realtors and on these low-end houses they are lucky to make couple of hundred dollars. So they are not happy to see that you have a buyer agent in your corner who would like to get half of their already small check. But please make note that only applies to low end foreclosures - up to $50,00 or so and not to all of them but only few.

But overall it is still a good idea for new investors in Michigan – BUT the most important thing you have to understand that you have to find the right Buyer Agent to represent you. There are over 50,000 licensed real estate agents in Michigan. They are not created equal. A very small number; a very very small number is foreclosure savvy. You have to know how to find them. Otherwise you are just wasting your time if you decide to go that route.

Now for the fun stuff of Open Houses Version 2.0 I have done couple of open houses in my lifetime as for sale by owner flips. It was the most boring time of my life. I mean I cannot imagine how most real estate agents do them, week after week, sitting in empty houses, having no idea if anybody is going to show up or not. After doing couple of disastrous open houses I decided that 6% commission that gets paid to real estate agents is actually a pretty good deal. :- ) I would not do them for all the tea in China.

But darn it – people do want to see the inside of the house – and YES you can do all kind of simple but really effective things to screen out the non-serious buyers so if you do end up showing the house to couple of Michigan buyers they already jumped through hoops.

You can use “robots” to sift and sort and find the best applicants who might buy your foreclosure flip. But still they are a giant pain in the rear end to do.

That is why when I see websites like TurnHere and InmanStories, I am not happy but ecstatic. Because this is the shape of things to come. Two more years and more and more home buyers will want to watch a video – not a ugly grainy virtual tour that actually makes your beautiful hard wood floor look like it has sand all over it but real cool looking video.

You can buy an $89 video camera at your local Costco – the price already went down from $130 when I last wrote about them – this camera requires no tape and holds 30 minutes of pretty decent quality video. You hook it up to your computer; literally does nothing except upload your video file to either Google Video or YouTube – both of them are free and in less than 20 minutes the video of your beautiful flip is Live in glorious video. Now if this sounds complicated to you – turn to anybody in your life who is under 20 and they will do this in less than 20 minutes. Just because you don’t like messing with computers does not means that you cannot use Google Video do a virtual open house. Believe me once you have sat for hours in an empty house, bored out of your mind, you will run not walk to your computer and figure a way out on how to do this.

It is coming. It is inevitable. But I think that using video to save time and showcase your renovated foreclosure would become very mainstream very soon and I can see savvy investors using this technique not only to save time not talking to non serious buyers but also using this to gain upper hand on other Michigan real investors operating in their city plus for sale by owner homeowners in that particular block.

New to buying Michigan foreclosures? Where should you spend your precious time?

I sound like a grumpy old man once in while when I am teaching new real estate investors when I talk about watching your time. Most of us are trained at least mentally to watch our money. The smart ones figure out early that money could be got later but time lost is gone forever.

So when you are new to this buying and selling bank foreclosures in Michigan and you have a daytime job or worse your own business that has you as the hardest working employee (most small business owners are nothing but glorified employees.)

Robert Kiyosaki, Rich Dad Poor Dad guy has explained this thing far better than I ever could in his earlier and best works – Rich Dad, Poor Dad and Cashflow Quadrant

But anyway – you are busy; add family, God, friends, hobbies to the mix and you really don’t have too much to fool around with. So you must work smart and do the right things from Day 1.

The whole idea is this:

Step 1: Find and do one deal.
Step 2: Get a check; your first check.
Step 3: Smile
Step 4: Repeat Step 1

So how can you and I make sure that we don’t spend our precious time wasted in ho-ha stuff where the other guy in your Michigan city is going to the title insurance company to his closing, picking up the check and cashing it?

Some strategies you want to print and implement:

1. Dumb Deal Evaluation: I cannot understand when somebody is perfectly willing to spend months on rehabbing a bank owned foreclosure in Michigan but not spending three weeks on smart deal hunting and evaluation to finding a house which only requires paint, carpet and cleanup.

I am not big fan of rehabbing houses. Period! Anymore in Michigan. The number of Michigan foreclosures coming to the marketing is mind boggling. You can find a decent deal, negotiate a good deal if you know that part of business, and be in and out of house in a matter of weeks and then concentrate on selling that house.

But instead, a lot of our fellow Michigan real estate investing community becomes desperate when they start and they buy the first foreclosure they come across, seduced by the equity number and not thinking about our buddy called TIME.

Look it is not about the money that is needed to rehab foreclosures in Michigan – dozens of places will throw checks at you to do that with hardly just a check for appraisal out of your pocket.

It is the time that is needed to pull a $30,000 rehab, which is a killer especially if you are new to the game. I have Rita Dalian and Alan Boike in my Inner Circle who are rehab tigers – drop them inside a Junker, no matter how bad it is today; in a matter of weeks they will get it done.

But they are the exception and very good at fixing houses because they kind like the idea of turning garbage into gold. They also have half a dozen deals just in the last couple of months between them.

If you are new and your are spending months fixing the darn house then what you are telling me that is you are perfectly alright with not getting a check for couple of months.

Bad idea.

Your time is better spent on finding a foreclosure in the first place that does not require this kind of rehab. I say wait 7 more days, find the right deal, know how to negotiate with the bank to get a big ugly discount and then walk in and walk out of the house.

2. Waste time looking for deals on the Internet spending their money buying Michigan foreclosures lists that have nothing but crappy houses on it.

The above is a total waste of money. Period! These houses are either in really bad shape, or in war zones, or the rehab needed to fix these houses is so much that by the time you are done busting your butt fixing it – there is no money left.

Look in Michigan if you add together the months of the entire foreclosure process – it is almost 12 months right now; Wayne and Oakland are almost 13 months to actually eviction because the number of foreclosures has risen dramatically.

So you mean to tell me that a good deal literally slipped through the cracks and ended up on some Internet site? Come on!!! Every REO Realtors has couple of dozen houses on their list that have been there for a long long time – well there is a reason if you could buy a 3 bedroom house in East Side of Detroit for $3000. That is not a typo by the way and I am not missing a zero.

You can really buy a house for $3,000. But the point I am trying to make is should you buy a foreclosure for $3,000??? How is the area? How much is the rehab? How long is going to take to fix the house? Three months or six months? That is not a business but rather like buying an old car and trying to restore it to its former glory. Bad idea.

Understand these 2 key points and you will be able to buy the right Michigan foreclosure, at a right price to get a decent check on your first deal. Leave the dreams of becoming a rehab goddess till your Michigan Foreclosure Deal #5.

Friday: Using Buying Real Estate Agents for buying REO’s in Michigan and Open Houses Version 2.0 in 2007

I used to have an office one upon a time (I work from a home office nowadays) and the running joke in my office as that if you ask Mark how to cure world’s hunger or find peace in the Middle East – his answer would be, “ Lets run a classified ad and see who calls”.

I was simply, in a good way, obsessed with running classified ads and testing different things that popped in my mind. Instead of sitting and wondering whether somebody was looking – I would run a classified ad in Detroit News and see if somebody was interested

So you can safely say that I like newspapers and I like running classified ads in the local newspapers – Detroit News, Birmingham Eagle, Oakland Press – why bother with one? Lets run an ad in all of them.

But lately I feel like I am cheating on my first love of newspaper advertising; because with every passing week I am finding it harder and harder to justify the cost of running local area newspapers when I can go online and run classified ads for free and this is a very BIG factor – I can actually see what ads are working and which one are not.

I am talking about dozens of free online classified websites whose number is only going to increase as times go by. Sites like Craig’s List for Michigan, Edgeio, DormItem, Google Base allow sellers to list anything they want to sell – real estate, housing items, cars, job postings, and personal ads – for free. They let you search by keywords, by area – in Michigan for example you have Craig’s List for all the major metro areas: (Screen Shot down below)

I have been fooling around with them for all kinds of things – and the results are so good that I cannot believe that I ignored these sites for so long. It is getting harder and harder for me to pull up my credit card and let Detroit News whack my card for $100 every Friday for running a lousy 4 line ad where I can go to any of these sites and write a good ad to sell whatever for free.

The thing that makes these websites so interesting is that unlike running an ad in Detroit News or Oakland Press where somebody actually looks at your ad and makes sure that everything look all right before they ran it – here other users decide if your ad is right or SPAM.

You have be careful in what you post for example on Craig’s List – because if other Craig’s List users flag your post / advertisement as SPAM then it will get deleted automatically.

My suggestion – don’t post any ad on these sites yet; read them, browse through the ads, see what catches your eyes and ask yourself why this post is catching your eye.

The is an extremely important change happening in front of our eyes – real estate has traditionally been sold for decades via local classified ads. Wholesalers have built list of local investors to flip houses via local classified ads. I know I did both of the above with running ads in local newspapers in Michigan but this is so good – price is free, you don’t have to wait for response if you do it “RIGHT” – I ran an ad on Friday night, very late around midnight, by Sunday night I had over 14 responses. 3 of them extremely good.

The only bad thing I can tell you about them if you live in a very small Michigan City then you are not going to see too much action but I guarantee you that will change. The next wave of these websites will be local centered – a site for Michigan online classifieds, Oakland County classifieds etc. So even if you cannot find your Michigan City in these sites – bookmark these sites or keep an eye out for you local online classified site.

Something worth looking at next week if you are chilling at home. You may not use it right away if you are totally new to the game but these sites and there are a bunch of them out there are changing the way Michigan real estate has been traditionally bought and sold.

Expect 2007 a banner year for free online classified ads. Put some time on the side to learn how to use them properly.

Walk into any good business and you will see checklists. Checklists make life easy. They make sure that you do the right thing, over and over again. Buying Michigan foreclosures requires a checklist.

You got to have a checklist to stop yourself from wasting time on even looking at bad deals and concentrate on making offers on the good deals. This is even more important now because the number of foreclosures coming to Michigan has gone up so dramatically in 2006 and the next 12 months are not going to be any different.

I get emails all the time on how somebody found a great deal on a foreclosed 2-bedroom condo in Highland Park…. Well it is a good deal for a reason because no sane person in Michigan wants to buy it in 2007.

Majority of investors who complain about not being able to find good deals waste time, waste too much time looking at bad deals instead of putting offers on couple of really good deals.

One of the great rules of winning in a business is knowing what battles to pick to fight to begin with. Rodney Townsend, my Inner Circle member made a very smart remark last Thursday about doing Short Sales in Michigan – he said, “ I don’t want to even look at deals where I know I cannot get a $50,000 discount’.

Well there is two ways to look at Rodney’s comment – one to think that he is out of his mind; second to admire his game plan that he knows what he wants in a deal.

Way too many real estate gurus preach this crazy notion that it is all about doing a whole lot of deals – it is not. The game is about getting checks, preferably big ones with your name on it.

I rather do 4 great deals in six months with big checks then to waste time looking at 300 foreclosures and doing 12 crappy deals. The way you control this is by having a checklist – so here are 5 important points from my own 20 points checklist:

1. I have to know the city – it does no matter how good the deal is in Grosse Pointe – I have no idea about the city or what works there; I rather do something in West Side of Detroit or Birmingham. I am not even driving to Grosse Pointe to look at a foreclosure.

2. I know the kind of foreclosure I want to buy – 2 bedrooms, condos, no basements, and septic tank sewage – fall off the list immediately for me. It does no matter how good the equity spread is I know from experience that I would have a hard time flipping a condo in Michigan even in the Ann Arbor, Birmingham’s of the world.

3. I don’t want to do strange looking houses – meaning if fixing the house involves literally redesigning it then I am taking a walk. It is crazy right now with the number of foreclosures coming in the market to waste months rehabbing houses extensively.

For your first five deals you need to paint, carpet, clean up, may be new kitchen cabinets and upgrade the bathrooms. That is it. After five deals, five checks – if you want to go crazy, well go for it.

4. The foreclosure you want to look at and make an offer on – ideally it should be close to your house where you live or close to your work.

Why that is so important because when you start buying foreclosures in Michigan – you have limited time, especially in winter to do what you got to do to get the house bought and fixed – you really don’t want to spend one hour each day just driving to and back from the house.

If you live in Sterling Heights and just bought a foreclosure in Ypsilanti – well my condolences in advance. You will be suicidal in couple of weeks.

5. Being calm is probably a good thing in your personal life. In buying foreclosures especially if it is a killer deal – you need to move fast, make offer, win or lose and move on.

This is what I mean – it does not matters how good you are, sometime your offers will be rejected. Whatever the reason may be. But if the rejection is only 2 rejected out of five thrown out – then hey we are having a pretty good day.

Pretty much all motivational speakers talk about failing yourself to success – it is true in buying Michigan foreclosures also. I make an offer. I make couple of more offers. Some get rejected. Some get accepted at a price that I am not willing to pay yet. One gets accepted exactly the way I want. I am feeling great. I also did the entire thing in one week instead of waiting for six months and getting there.

Money and good deals tend to move to you fast if you move fast to them. Don’t wait – pick couple of deals out of a foreclosure list in your Michigan City; make offers and see what happens. Offers don’t cost anything. Wondering lost in the world of Michigan foreclosures will cost you couple of good deals that your competition will pick up.

Next: Online Classfieds and why running expensive print ads is not making any sense anymore to me…

Hat tip to Ijlal Inner Circle member Paul Mueller for sending this nifty little website – HousingMaps - it lays houses for sale at CraigsList on top of Google Maps. You get red dots and yellow dots on the side. Click on the Yellow dots and it will show you the pictures of the house on top of a Google Map.

So you can pick up a metro area in Michigan ; pickup a price and it will show instantly everything that is available and listed for sale in CraigsList for that city.

Yes! I know that your home is not listed at the “correct” market value in Zillow but I have been a big fan of this website since they came out – one reason is the price – it is FREE. Zillow lets you type in an address and it will give you "comps" or comparable SOLD price of the home itself and the surrounding streets. For quick and dirty check when you are sifting and sorting through a foreclosure list in Michigan (which keep getting bigger every day) Zillow is almost perfect and without any serious competition.

But Zillow continues to add features that will make the lives of real estate investors in Michigan easy. Case in point what they just came out with yestereday – asking homeowners who are NOT in the market to sell yet to put up a price and see if anybody bites…

Here are the details:

Home listing site Zillow is making it possible to shop for homes that are not necessarily for sale with their new Make Me Move function, which launches on Thursday. Home owners who may have no intention of moving, but certainly would for the right price, can list information about their homes on Make Me Move so that gutsy buyers can try to make a deal.

“What number would it take for you to call the movers and hand over your keys?” said Lloyd Frink, Zillow’s co-founder and president, in a release about the new function. “Make Me Move is our twist on the traditional ‘For Sale’ sign.”

A homeowner can post a Make Me Move price without exposing any personal information. Zillow then enables interested buyers to contact the owner through an email “anonymizer.” The service is free.
Free is the magic word at Zillow lately because the company also announced that it will provide free listings for all home owners and realtors. Listings can include photos, and realtors can also create Web sites for each listing.