January 2011 Archives

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.

chase:

1. to pursue in order to seize, overtake

2. to follow or devote one's attention to with the hope of attracting, winning, gaining

"So what are ya chasing today?"

I started saying it some time ago to couple of my entrepreneur friends who all own successful businesses in Metro Detroit and pretty soon they all started saying to each other. It is our way of asking: Are you doing anything worthwhile with your time? In your business and in your life. What are you chasing today? What are you chasing tomorrow?

The line outside my local Weight Watchers branch in the first week of January was outside the door. Today same time but no line. I guess that January 24 is a good day to give up on whatever they were planning to chase back on December 31 for a lot of people; after all that was soooooooooooooo long ago.

To help you get going with your own chasing, here is how I do it:

1. Never ever type up what you want out of your business and life AKA your goals (I hate the word. It is the second most overused word in business. The first being 'relationships'" and the advice about building them.) and SAVE that list in My Documents. That is the folder on your hard drive where your dreams go to die every year.

2. Write what you want to chase on a paper. Write it. There is something emotional and deep that happens in your head when you write it down in your own handwriting on a piece of paper. I don't understand it but trust me on this - it is there and it works. Write not type.

3. Leave that paper somewhere where it stares at you. You cannot chase what you don't see every day. The stuff I want is everywhere around me in my home office. It is taped to the wall. It written on cards. It is on a board. It surrounds me. They are my dreams and if they are not around me all the time then why am I even bothering with them?

4. Should you tell somebody about them or not? Be careful here. They are fragile when you are starting out with them and some people in your life are harsh toward what you want to chase. Their harsh words will effect you more than what you want to believe. 

I am careful on WHAT I tell to WHOM. I have friends who are entrepreneurs like me, been free for a long time like me and they get it. I can tell them. Inside Ijlal Inner Circle, my mentoring group for Michigan real estate investors...everybody is pretty open and shares everything that they are working on. Encouragement and feedback are like sun and water for your dreams to grow and take a life of their own. 

5. There are days where nothing will happen. Today was such a day for me. I got lots of things done today that needed to be done but none of them was about the chase. So I am a little miserable today as I am writing these lines on 9:54pm but it's O.K. I will get on track tomorrow.

The thing I have in my head is this - make everyday counts or no day counts. Even if I move the needle 1.3 inches everyday toward what I want - that is good day. Anything is better than zero. 

And for you in the end it is more about building a habit of thinking in terms of what you are chasing and not just making money to pay your bills. There is a difference between making a living and living a life of your dreams. They are two separate highways.

6. I use the one month Action Plan found here. I built it so I can focus on two things: learning and people as much as getting whatever needs to be done in my business.

If you want dramatic jumps in your income: Go from making $40,000 per year to $140,000 per year.... that jump will not come unless you add new phone numbers to your cell phone and add new knowledge to your head.

I take new people and new knowledge seriously. Most find 4-5 people that they like to hangout with or read 2 books / goto one seminar and then they stop. This never stops in my life. I learned something new today. And I am about to meet 15 new friends this Saturday. Do you count? I do. On paper. My Action Plan template keeps me on track. Make something like this for yourself or use mine. Counting is good habit. 

7. Also from the lower half of the Action Plan: there is a terrifying thing about crossing out days on the monthly calendar with a big fat black marker. It chills your blood on how fast time moves. From New Year to January 24. It is a wave that moves relentlessly indifferent to what I do or don't do. 

Every night before I cross the day out on the paper that lies on my desk I know that I have to make the next day and the day after count for something. My hands move because of what is in my head. My head moves from what I see. That is why it is important to 'stage' this chase all around you and not just in your head or in our laptop's hard drive.

8. Also a rush to see when things get finished, checks come in and you get to do something interesting with the crumpled pieces of paper with dead presidents: travel, invest, start another business, take time off to make a movie or write a book or read 20 books.

It is THE feeling that only the 20 percent of the population, the ones who made the deal with their dreams to go on a chase only get to experience. So know that if you are chasing your own dreams in real estate investing instead of just going to a job in 2011; it is the best gift you can give to yourself in 2011. You are on a good path. Don't stop.

Here is how you put yourself at complete ease when you are going to a seminar or real estate networking meeting. Forget about what you will get out of this meeting tonight and just focus on making new friends.

Your entire goal is to find some people that you will have fun talking to, exchange business cards and do the most important thing that very few will do at the event: Setup a time and date right then and there to have a cup of coffee in the coming week. Don't think too much about it. Don't worry about if you have a deal right now in the pipeline or not.

People got to these events, make good first contact and then completely screw it up by waiting two weeks (I mean come on are you really that busy?) before even emailing the people they met at the seminar.

It is one of the best ways to self sabotage your own efforts. Before you leave that night, setup the next point in turning this handshake into a deal.

Tim O'Riley sent me this and I loved every word of it. Here is the link to Holstee website

As soon as you are done with rehabbing your flip and you have people walking in looking to buy your home - ask them nicely if they are pre-approved yet? If they say no, you need to whip out the business card of the loan officer on your team and tell them that you highly recommend them and they should call them up immediately so they can get their loan going fast and not risk losing this beautiful home to some other buyer.And after that you need to delegate the whole loan thing to your mortgage professional.

It is a complete waste of your time to get involved in the mortgage process and start meeting their home buyer to collect documents or trying to figure out their credit situation especially if they have some blemishes on their credit. Leave all that to your mortgage professional. That is all the they do every day, all day. They are good at it. And they are getting paid for closing your deal. You have better things to do: find another deal to pull the trigger on when this one closes; go to networking meetings to make more contacts, attend seminars to add to your knowledge base and build your bank of private investors....

Real estate investing is a team sport. You as the investor occupy the position of the team captain but a good captain is not supposed to play at all positions but rather play at the position that he is great at and delegate the rest to its other team members.

Winning championships in our business AKA going to a closing and collecting a check with your LLC name on it cannot be done by yourself. Not only you need good teammates but you as the top guy needs to let them do their job. You will score more often.

I went to a 'business lunch' on Friday to meet a new private investor who has been hounding me (it is always better when they are chasing you instead of the other way around) to do some business with me.

This by the way is how all of my business meetings about private money / private investors are setup. Food plus table. No other way.

It helps that I am incapable of  eating alone. I can actually tell you all the times I ate by myself last year: ONCE. That is how unusual for me is to eat by myself that I actually remember it when I do. Part of it comes from my mother who would not allow us to eat wherever we wanted. Nobody could open up the fridge and eat. There was a time for lunch and dinner and if you had class / late work then she actually sat with me and talked to me when I finally made my way to the dinner table no matter how late it was.

Anyhoo, so I went to the meeting and had some incredibly good food with him. We spent around 90 minute together without any interruptions. We talked about the food, my obsession in 2011 at discovering new dive restaurants in Metro Detroit and staying away from chain restaurants as much as I could, Rich Rodriguez, Kwame's ongoing troubles, NBA and why the 'old guys' at Spurs have a good chance of winning it all come June, iPad 2 and the iPhone coming to Verizon and about our kids.

Hold on, you might be thinking... did I forget to talk about real estate and private money - the reason I went to the meeting?

No I did not forget but to me it is always: 'get to know people first; let them know me second; good business happens on autopilot.' Unlike most people who go on business meeting determined to start and end the meeting solely talking about 'what they want?" - I am more interested in getting a new friend in my life then just a one selfish deal.

Finally we finished eating. The conversation was great filled with lot of laughter and good vibes. He asked me about the business at hand and how can he partner up with me. I told him exactly my terms. He said, consider it done. We shook hands and I left. 

The business part took around 10 minutes from start to finish in a 90 minute meeting plus when I left not only I had gotten everything I had came for but I also walked out with a new friend, somebody who is going to do a lot of deals for years to come.

Here is the BIG, BIG, BIG LESSON for new real estate investors in Michigan who get a little nervous when talking to people they have just met or people they already know about private money, self directed IRA's or deal partnerships:

Do you know what is the real collateral in all private money deals in Michigan? If you said the house that has the lien on it with the investor's name on it then you are 50% right.

The real collateral in all private money deals is always YOU.

This is the secret that the most successful real estate investors understand and the ones who wonder why private money continues to elude them in Michigan don't. 

So when you and I are meeting to arrange OPM for your deals, don't rely on an email, go to lunch with me or have a drink with me, tell me about yourself and talk to me like a human being. 

Don't think about how much money I have or whether you are going to say something wrong. Be yourself. I want do business with you otherwise why would I bother meeting with you? 

What I want to know more than the details about the property is whether I can trust you or not? You are my real collateral. So give me a chance, leave your nervousness at home and instead come and talk to me as you would to a good friend and let's have a good time. 

You will attract an enormous amount of OPM easily toward you if you understand this serest about private money.

Reminder: I am teaching a 2 day bootcamp on December 29 / 30 in Southfield. Only 3 seats left. 

Not only I am going to turn you into a razor sharp private money magnet in our 2 days together BUT I also got some extremely cool private investors coming to hang out with you on Sunday. These guys buy and sell Michigan foreclosures all the time but not as an investor only but more as private investors / financiers / deal partners. You will hear how they think, what they like and dislike from new real estate investors in Michigan. That alone is worth the price of admission as it will stop you from making costly mistakes in getting OPM on great terms in Michigan for all of your deals.

Got questions? Call Nora ASAP at 248-561-3535. I am only allowing 15 students and we only have 3 seats left so don't wait. Details & enrollment links are here. 

Nobody is good at doing everything. Simply not possible.

At your day job you have certain things that your employer pays you to do everyday. You are not required to run the whole company all by yourself. Do you work on the assembly line, sell the products, provide the support and fix the computers and answer the phones in your company? Why not? Because you are good at certain things that you have skills for and your employer put you in a job position to utilize your best skills whether there are numbers or people or computers.

Yet new investors in Michigan make this mistake all the time. They try to do everything themselves. From finding, rehabbing to even selling their house. Everything has their fingerprints on it.

I understand however why people do this. For a very long time I could not bring myself to trust anybody to do as good of a job as I could for doing anything in my business.

But there is a price to pay for all this perfection; you waste time, a lot of it. When you are fixing and painting the house - you are skipping on going to seminars and networking events where you can learn valuable knowledge and make good contacts that will help you in doing five more deals later.

When you are sitting in an Open House for four hours instead of looking for deal #2 on coming Saturday - you are delaying the start of your next deal.

Are you saving some money by doing it?

Absolutely.

Are you going to end up doing probably 25% of what you targeted this year to get done?

Absolutely.

In my company, all the rewards and my love and affection is reserved for those people who help me get things out the door and stop me from wasting time in trying to do everything myself.

The people I work with are not considered an 'expense' at year end. They are actually the reason why the rest of the profits came in so fast and furious.

Don't do everything yourself. Fight yourself. This is a bad business habit to build in your self. You will leave a lot of money and opportunity on the table because of this.

PS: A very good book to read that will 'cure' you out of this disease is E-Myth Revisited.

What is one of the biggest "Honey we got to have IT..." when it comes to people deciding where to buy a home to live in 2011 in Michigan?

A great school district.

So how do you find out which school district is great in and around the target area that you are thinking about buying and selling bank foreclosures in Michigan in 2011?

Some cities are obvious: Birmingham (excellent) or Detroit (not there yet) for instance.

You might be flipping foreclosures in the city you live in and where your own kids go to school so you have first hand knowledge.

But when in doubt and not sure about which one is the absolutely best out of 2 or 3 cities that you are thinking about hitting some offers out; go and ask the teachers in your kids class.

Teachers hangout with other teachers. They know which schools are great and which ones are struggling. If I had just moved to Oakland County in Michigan and was not sure which cities I should be looking at to buy some deals in and the school district was a big factor in my decision as it should be - I would go and ask the two teachers who teach my daughters. In 15 minutes I would know firsthand where to look and which cities to skip in 2011.

When in doubt... ask the ones who live in that world. Good information is a powerful ally. You want it in your corner before making new offers in 2011.

I was talking to Ken Yamamoto, Mike Simmons and Doug Benson at our mastermind recently and all three of them did an incredible job at December 11 seminar. Ken and Doug have never talked about their business in front of a big room of this size. My advice to all three of them was: all of you did a great job but you need to do more of it in 2011 because that is the fastest ways of becoming very good at networking.

One of the goals that you might want to add to your real estate investing list is to go to at least two networking events every month. Not when you find a deal and are looking to either finance or flip it wholesale. Every month whether you are planning to buy a house right now or not. Even if your schedule is crazy right now and you know that you won't be able to buy your first REO in Michigan before March; you should drag yourself out of the car and still go to every networking meeting in January, February and March.

Two things will happen:

1. The most successful people at these events are 'regulars', meaning they show up month after month. They take their business and their networking seriously. When you go there on a regular basis, they will notice you and will make an effort to know you. 80% of the population never shows up. You will.  We notice when people show up. And I will make sure and my friends will make sure that we come and say HI to you.

2. You will become better at talking to people about your real estate investing business in Michigan. I know that you are probably terrific in talking to your co-workers and friends about everything in the sun but investing in real estate is not something you talk about everyday neither is your business. Everybody is rusty in the beginning and the easiest way to get rid of the rustiness is to talk more about your business and not less. Twice a month, 2-3 hours in the zone talking flipping, short sales, private money, finding deals, REO's or rehabbing will get your head working and your mouth saying all the right things all the time.

Go to 2 events. Every month. Don't try to find the time because you will never find the time. Find out the dates and block them off. Nothing is happening on these dates except you are going to leave work and drive to the networking event with bunch of your business cards with a good mood and a much focused desire to meet new friends. The right kind of friends who are going to take you with them on their own flight to success in Michigan.

Eagles learn to fly with other eagles. Hangout with chickens and you will learn is how to make a lot of noise with them. Hangout with eagles and they will teach you to fly and hunt. Think about this choice when you hustling to block time for these events.

I had just recently started flipping foreclosures in Detroit. One day my contractor called me and wanted to know what color I want the outside of the house painted. This 'picking color' thing was one of those I am completely clueless about so I took the easy way out and said pick whatever you want from Home Depot. Next day I pulled over to the house. It was summer and bunch of neighbors were standing outside, pointing to my house, some were laughing, some were shaking their heads. I stared at the house speechless. It was painted the brightest shade of canary yellow you can think of. The space shuttle could probably spot it out from outer space without too much trouble. This picture which I got from the Internet to give you some idea of what I was staring at. My house was 20 times more brighter and yellowish.

During the same period, one of the top top top real estate agents in Detroit ended up walking through three of my houses that had just got finished up. We were thinking about listing at least one of them with her and she wanted a tour of our properties as she was an investor herself.

After the tour was done, she told me that these houses looked great expect for one little thing: they reminded her of hospital rooms as majority of them were painted in white. She said hey I understand that you are a man and might have problem picking up any color besides white but I am sure that there is somebody else in your life that you can ask you to help you pick great looking colors at least for the bathrooms and kitchen. Leave the rest in a nice off-white shade and even there you can choose warmth over dullness. It was a good 'shellacking' and much needed at that time in my business.

You and I both have people in our lives that have great eyes when it comes to picking up and putting colors together. A great looking house is not the same as 'finished house'.

Take a close look at Deborah Benson's handiwork here. Her houses are gorgeous by choice and one of the reasons that their houses sell in a matter of days.

What you did in the basement and on the roof and behind the drywall matters but in the end it is the eyes of your buyers during the open house that are making the big decision to buy the house and turn your investment into a big check with your LLC name on it.

If you cant figure this whole color thing out, stop being shy and ask for help from people in your lives to make your deal the 'best looking' deal in the neighborhood. Not just 'best remodeled' but also 'best looking'.

Easy on eyes translates into faster in your bank account flip.

Photo credit: http://stavangerphotobytanty.blogspot.com/2007/01/house-series-10.html

"You are not your mistakes." - Dr.Maxwell Maltz 

Almost 90% of the time at real estate networking events or at my seminars, somebody would approach me at a break and eagerly share a story about something that went wrong with them in the last 12 years in all its gruesome details. And that is all they are going to talk about during the entire conversation.

It is said that people who don't learn lessons from history are bound to repeat it. So I appreciate that you are not forgetting the mistake you made last time you were attempting something completely new on your own but as a Michigan real estate investor and as a new entrepreneur, you cannot obsess just all over mistakes. That is not healthy and done over and over again will rob you completely of your self confidence.

Sure you might have screwed up on one thing on your last deal that you could have done better but at the same time you probably did right on 12 other things. Why not talk about them also?

The first tip that an experienced recruiter will tell you that during a job interview you want to build upon your strengths and not your weakness. Nobody is perfect. Everybody makes mistakes. But you cannot teach yourself just to talk about them. If you are doing it over and over again; you are teaching yourself a certain way of talking and pretty soon that is the only way you would know.

If you and me just met and you feel that I might be completely open to partnering up with you and fund your deals for you; do you think it is a good idea to center the whole conversation about a contractor screw-up that you did six months ago? By all means talk about it but then also tell me the lesson you learned out if and the way you consistently find good deals and why you love this business so much. That to me makes for a good real estate investing conversation and it shows that you have grown as an investor and an entrepreneur. 

Misery might like company but it has no place in business conversations. I like many successful people I know in Michigan are simply bored by it. Successful people don't complain. They learn from their mistakes, move on and try not to repeat them. These are not just words but two different ways of living a life. Think about it next time you are talking to a potential deal partner.

What is the first thing a real estate agent will ask from you BEFORE they show you any houses or even email you any listings?

An approval letter from a mortgage broker to show you are qualified or if you are buying the house with cash then a current bank statement showing the money sitting in your bank account - also known as Proof of Funds in our world.

Proof of funds is the way real estate agents (whether they specialize in residential listings or bank foreclosures in Michigan) determine if you are serious (and will show up on closing with a check) about buying a home or just wasting their time.

If you are using private investors to fund your foreclosure purchases; whether they are partnering up with you on a deal partner basis or lending you money from their self directed IRA's (with a lien against the property) - you would still need a proof of funds from them before you can make offers on REO's in Michigan.

Many new real estate investors in Michigan feel mightly awkward here. They don't know how to tell their investor / partner that they need some 'proof' that they have money.

Here is a simple way to get it done: pick up the phone (don't email) and tell your private investor or deal partner that you need to immediately start making offers and the REO agents and banks require to see proof of funds especially when the deals are cash to insure that they are not wasting time so can they please fax or email you a current bank statement or the last quarterly IRA statement so you can fax it to the real estate agent.

That it is. Don't make a big deal about it. Be straight and tell them why you you need it. 99% of the time nobody is going to ask you anything but your fax number. For the remaining 1%, you can tell them to fax the bank or IRA statement directly to the realtor. Just make sure that you have the realtor fax or email handy with you when you are talking to them and also turn around and let the realtor know that what is coming to them and whose name is going to be under so they don't mistake it for junk and shred it.

That is it. Nothing hard. Just one phone call and you can start making offers.

They say that time changes things, but you actually have to change them yourself.
Andy Warhol

If you are going to the airport to pick the person you love and there is a big traffic jam on I-275, you don't turn around and say, screw it, I am not picking her up instead I am just going to file for divorce when I get home. Millions of people walk around this world without having any idea what love feels like. If you are one of the lucky few who have found love, I would say it would be pretty rash to throw it all away just because of a traffic jam.

Instead you will probably turn the GPS on and try to find different route to get to I-94. You will turn on 950AM on your car radio and try to find out if the traffic is clearing up or not. You will call her on the cell phone and even though she cannot answer the phone as the plane has not touched the ground yet, you will go ahead and leave a message that sorry you are running late but trying to find a way to get to you, can't wait to see you and I love you...

Detours and traffic jams are nothing but minor annoyances. Sooner or later you will find yourself driving on I-94 and taking the exit toward the Metro Detroit airport. You will not be deterred from seeing the person you love.

The pursuit of finding the love of your life is as important as finding something that you absolutely love doing when it comes to work and money. They are both halves of your life so why not drive till you get both the ones you always wanted? Why settle for a life of boredom and unfulfilled dreams?

So how come when people are talking about investing in real estate in Michigan or building a business and they are hit with a traffic jam that slows them down a little (auto industry meltdown, national recession, a general pessimistic mood, not too much time right now, some hustle required to get OPM) majority of them just turn back and go home and file for divorce?

I have been on my own for eight years now and even in the beginning during some really tough days where nothing seems to be going right ("stuck in a traffic jam"); the thought of quitting and going back home ("forget about this flipping and being my own boss thing for myself.") never crossed my mind. I was massively frustrated some days in the end it was always, 'dang it, I am late and I can't wait to see her..." type thought that came to me as I was building my business knowing that Lady Success was far but not as far as most people choose to believe.

A new year is starting today.

There is money (lots of it, trust me on this) and freedom (it is always earned never gifted) waiting for you somewhere on a road that you need to start driving on. Put yourself on that road today. Get a map. Get a guide who can keep you on the road. Get some new friends who might even want to come with you for the ride but don't make her ('money and success") wait for you too long. She is patient but not a saint. She might leave with somebody else who was determined enough not be deterred by couple of traffic jams if you don't show up. So instead of spending the next 365 days wondering if you should start or not, learn about the business or not, get OPM or not, buy a house or not, flip a house or not...

Instead of being stuck in doubt...why not just go?

My kids are young and they are just getting into sports and other activities. They just finished learning swimming and roller skating and now they are starting on ice skating. All new stuff. A little scary in the beginning but so much fun once you get it going that the kids who have never tried it (fear?) has no idea on what they are missing out on.

So today I want to tell you something, the same thing I tell them.

If you don't go... you will never know.