June 2007 Archives

"You don’t get what you deserve in life. You get what you negotiate." Jim Camp, Author of Start With No - Negotiating ToolsThat Pros Dont Want You To Know

How to buy Michigan foreclosures fifty cents on the dollar in 2007 from the banks when they don't need nothing more than paint, carpet and cleanup in Michigan? What is the first step? It is the OFFER which constructed properly especially in Short Sales and even in REO's that will make all the difference in the world on what kind of check you will end up once you flipped the house.

My students routinely pick up Michigan foreclosures using short sales AND knowing how to write killer offers for huge discounts in all parts of Michigan. Rajesh Patel, a Quick Start 2007 grad, bought a foreclosure for $75,000 that is worth AS IS $250,000 - no repairs needed; fully furnished in Freeland, Michigan in June 2007. Flipped within 3 weeks. What does he know? What is he saying to get big discounts while most Michigan investors struggle to get a lousy $20,000 discount from banks?

Here are my 10 Rules for Writing Killer Offers for buying Michigan Foreclosures with big discounts:

1. What is the top most number you are willing to pay for this Michigan foreclosure? Do you even know? Do you even know how to calculate that or do you think somehow things are going to work out for you in the end and there will be a check left? You always decide what you are going to pay for a foreclosure before you start doing anything. This is not an EBay auction for an iPhone where you are letting your emotions and ego driving you instead of your head. Got to know you FINAL NUMBER before you even write an offer.

2. Do you know how much money you want to make on this flip? Cindy Crawford once said that she will not get out of the bed for a modeling gig unless she was making $50,000 that day. You number may be lower that Ms. Crawford but you should have a “get out of the bed number.”

For every deal that you intend to do. For every Michigan foreclosure you want to make an offer on. I have a spreadsheet that actually calculates what is the least amount I got to have in anything and everything I do before I even bother looking at or making an offer. If the spreadsheet says “NO” then I walk away. Bigger question is of you don’t know that number then who does?

3. Do you know that this is NOT THE ONLY foreclosure available in Michigan right now in 2007? There is a whole lot more if you know where to go and find them. Which means that you don’t need to have a desperate look painted on your face, your voice does need to shake and you should be perfectly calm and happy and alright with walking away from the foreclosure if the numbers are not swinging your way. Another important thing to know is that most of times in 2007 banks are coming back “afterwards” and saying we tried selling the darn thing and now we are O.K. with your lowball offer. Off course at that point in time you need to lower you number even more.

4. The bank might tell you that they have “other offers.” You need to open your mouth wide open and yawn when they say that.

5. This is a hard thing to sallow for most new real estate investors in Michigan but here it is – if your foreclosure needs rehab than sure you can ask for and get bigger discounts. But if your Michigan foreclosure DOES NOT NEED MAJOR REHAB you can still ask and get big discounts in Michigan no matter what city you live in or intend to buy and sell foreclosures in.

6. Just because somebody asks you to pay a price for a house; it does not morally obligates you to say YES. Learn the word “NO” – it is the best word in English language. If you have problem saying “NO” then stand in front of a tall mirror and practice it. After a while you will get it right. I am really good at saying NO. Most people choose to sit in the muck and buy bad deals by forgetting to say the word NO.

7. Deduct $5,000 from the FINAL number that you really want to buy the Michigan foreclosure at and start your offer from there. At least now you have $5,000 to fool around with and go up.

8. Ask for Seller Concessions – at least 3% on every Michigan foreclosure you make an offer on. Banks are pretty cool about giving out seller concessions on REO’s; a Short sale requires a different treatment though.

9. Pretty much every self help book out there talks about developing a “Prosperity Mindset” – if you ever read one or set thorough a self help seminar then you know what I mean. It sounds really good to ears but nobody practices it real life. Prosperity Mindset to me in flipping foreclosures is simply knowing beyond the shadow of doubt in my head that there is always “more” – more deals, more houses, more buyers, more money – where this is coming from.

So even the bank / sellers says NO or wont budge to a price that makes sense to me – Oh Well! There is always more. I am not going to fall to the floor, curl up in a fetal position and cry hysterically just because they are not taking my number. Who cares? There is always more.

10. One is the worse number – always have more than one offer in the pipeline – REO’s or Short Sale – the same way a bank comes back and says “we have another offer” you should also tell yourself in private “ I am looking at several Michigan foreclosures – THIS IS ONLY ONE OF THEM. Screw them if they don’t take my offer at my number and my terms.”

1. Why do real estate investors in Michigan are killing themselves rehabbing foreclosures when there are dozen available every 3 mile that don’t require nothing more than paint and carpet? Is it laziness or ignorance or a combination of both?

2. Why do real estate investors in Michigan spend 3 months, 4 months, 5 months, 7 months fixing a basement, a roof, massive electrical work, new heating and cooling, dry walling the entire house - but balk at the idea of spending 30 minutes setting up a system on the Internet that will bring you Short Sale deals that require nothing more than paint and carpet and still has $40,000, $70,000 in equity left over?

3. Why do real estate investors in Michigan try to recreate their rehabs to look like the homes they live in themselves even thought their buyers have never asked for all that over the top rehab they are doing? “Hey this is a $125,000 house – lets spend $50,000 rehabbing the kitchen and one bathroom- I am sure our buyers will appreciate the Italian granite counter tops we are putting in the kitchen.”

4. Why do real estate investors in Michigan never put aside any money to do a kick ass promo to sell the house when it is all fixed yet are perfectly happy thousands and thousands of dollars in rehabbing the house?

5. Why do real estate investors in Michigan never put aside any money to do a marketing campaign to sell the house yet are perfectly O.K with writing their contractors $20,000 checks every Friday?

6. Why do real estate investors in Michigan hate the Internet so much when it comes to putting a decent website for their own business for $500 (Craig’s List Gigs section) yet are perfectly O.K. with spending $10,000 rehabbing a basement?

Or worse insist on designing extremely crappy looking websites that are not readable and are pain to even look at for more than 30 seconds? (garish colors, third grade English, links that don’t work, long rambling paragraphs and an overall terrifying appearance. O.K. if you are tying to prove that you are an amateur newbie who just has no clue about anything related to the Internet….). Look pick who you want to be? A real estate investor in Michigan who will get big checks or a minimum wage web designer?

7. Why do real estate in Michigan investors wait till the rehab is done to sell their properties? Or better still don’t even give any thoughts to selling till the last contractor has left the house?

8. Why do real estate investors in Michigan feel morally obligated to spend every single penny their money source (hard, soft or private) gave them for the deal (HINT: websites don’t cost $35,000 in 2007) yet never allocate a dime to marketing or selling the house?

9. Why do real estate investors never spend three hours going to all the open houses in the neighborhood in which they are doing the rehab to see what their “competition” is offering to their buyers before deciding on what they are going to rehab in their homes?

10. Quick – given a choice between having sex and going to Home Depot – which one would you pick? If you choose Home Depot than congratulations you just joined the 95% of all real estate investors in Michigan who rather spend hours walking in Home Depot in a state of perpetual bliss with a goofy smile lining up on their faces as they gently caress a sheet of drywall. Hey at least take solace in the fact that YOU ARE NOT ALONE IN YOUR DECISION TO PICK HOME DEPOT OVER SEX. You have an entire community of your fellow Michigan real estate investors waiting for you at the gates of your local Home Depot.

Ijlal Inner Circle member from Auburn Hills, Michigan and the incredible flipping machine that is Rodney Townsend dissects his latest Oak Park flip last Saturday hanging out with me and 20 other fellow Ijlal Inner Circle members during our foreclosure bus tour in Oak Park, Harper Woods and West Side of Detroit.

I spent the last Saturday checking out four foreclosures that three of my Inner Circle members have recently bought in Detroit (in rehab), Oak Park (sold already) and Harper Woods (on market) with 20 of Ijlal Inner Circle members – foreclosure bus tour style.

This is the first house we saw in the West Side of Detroit – if you wonder what a real life foreclosure look like before rehab or what typically gets fixed in a Detroit foreclosure – well here is your chance to tag along and watch the video that I shoot with my RCA Small Wonder camera. (turn up the volume and hit PLAY)

There are all kind of currencies that you can use to launch, grow and turbo charge your Michigan real estate business.

Cash is just one of them.

Gratitude is another type of currency that most Michigan real estate investor never gather, never bother to collect, never learned how to use effectively in their business.

For example, I just finished teaching the Quick Start 2007 Bootcamp (next Quick Start is happening on July 13,14,15 in Troy – we were SOLD OUT! Two weeks earlier for June – don’t wait and miss out again.) and I freely give away my Michigan real estate contacts away to the grads. Most of them are shocked with my openness but as I explained to them - it is a strategy that they should copy in their own Michigan real estate business also.

I do it to collect the currency of gratitude from my money sources, contractors, my property inspectors, my landscaper, my title company, and my appraiser in Michigan

So when I need something (a property inspection done in the next 4 hours; an appraisal done and emailed by tonight; a hard money deal closed in 3 days) I can call and expect immediate, rapid, fast response because I have given and given and given before I have asked.

Very hard for people to sallow especially if they work for somebody 9-5 for a paycheck on Friday because they are used to exchanging what they do for somebody for money only. They are “trained” to expect wages in exchange for work. I think a little differently. When you own your business you cannot be that short sighted. You want to collect markers from people that can help you grow your business.

You should do it too. When you find good people in your Michigan real estate investing adventures – you should promote them, give their contacts away, keep them fat and happy in their fields by sending them referrals so when the day comes when you need something done quick – they will walk on hot burning coals for you.

Cash is good; gratitude sometimes is even better.