Incoming!

Okay, I had use a ringing phone gif, yes!


This post is about what we do when prospects respond to our ads.

Before I illustrate a good script let me say I just read a lousy sub2 phone script. It suggested asking Sellers all sorts of threatening, qualifying questions.


Questions such as,

• "What do you owe on your house?" which sounds to the prospect like, "How much equity is there left to steal?"
  
• Or, "What are your payments?" which sounds to the prospect like, "I'm in FBI interrogation training, what's your problem?"
  
• Or even, "Are you behind on your payments?" which sounds to the prospect like, "How can I take advantage of you in your most vulnerable situation?"
  

Nice.

Yes, nothing quite like getting straight to the point with a vulnerable prospect. Why not just wave a mirror and a cross in front of them, like we'd do with Dracula? Same effect. Everybody runs!

What good then is a script if we're not using it to qualifying leads, somebody asks. Aren't we supposed to qualify our leads so that we're not wasting time on the "curious" and/or the "unmotivated?"

No, we're not. We just want appointments. Later we'll find out what's going on with the Seller's property once we know if they're ready to play ball.

What's the point of knowing all sorts of technical information if the prospect isn't ready for our type of deal yet? We can only discover that by meeting the prospects face to face. Yes...it's that intimate.

So on the initial call, all we want is an address and the name of one of the title holders. We actually don't need the name of any of the title holders except to verify the address we have is correct when we look up the property information.

So, if we just need an address and the name of one of the title holders then, why not just get that information via a website? Why have a prospect call us in the first place?

Websites are for siphoning off the truly unmotivated. Prospects that won't call, are the same ones that go to a website because they can't overcome their fear of "high pressure" phone sales pitches, and/or they need to be cajoled, educated, and otherwise warmed by what we have to offer on the web page. That's fine, but rarely will these folks be warm enough for our purposes. So what?

Well, the phone call itself IS the screening process. "Forcing" a prospect to dial the phone and call reveals that the prospect doesn't need warming up. He's already motivated enough to overcome his fear of the unknown and make the call. That's good enough for us!

At the same time, the unmotivated will also call us. "But wait, Jay, you said that only the motivated will call on the phone?"

No, I said phone calls filter out those that need warming up, or the mostly unmotivated. However, those that are just curious, and not really warmed up also call us on the phone.

I realize this may be confusing. If the unmotivated, but just curious call, and the motivated also call, then what's the use of a phone call to sift out the unmotivated from the motivated if both call anyway?

Well, glad you asked for clarification. The desperate callers are going to call us. They just do. However, they also rarely tell us they are desperate. They are usually coy about their situations. They don't want to sell themselves out as desperate, anxious prospects.

On the other hand, the curious will often play desperate anxious Sellers, so they can pump us for information, weigh their options, and then do for themselves what we are offering to do for them ourselves, if that makes any sense. They also represent the competition. I've called many "I Buy Houses" ads just to see what they have to say, but I'm not in the least motivated.

Meanwhile, I get calls from competitors all the time that will sound desperate, but they're only desire is to smoke me out as a fraud, huckster, or the competition, but not as a solution.

Meantime, the desperate and the curious can sound identical on the phone. Neither group always shows us their cards. And asking embarrassing, threatening questions sets the tone for our future negotiations. We don't want to set a "bad" tone!!! Correcting a tone is hard work, once a "bad" tone has been initiated.

So, our method then is to sift out the motivated from the unmotivated with a face-to-face meeting. Man, that sounds time consuming, huh? Well, it's not too time consuming to make $42,000 in pure profit from a forty-minute face-to-face presentation is it?

I mean even if we had to make 10 of these presentations at forty-minutes a piece, that's 400 minutes spent, or $105 dollars per minute. Or about $6,300 an hour! That's better than most any doctors I know, and better than most attorneys.

So, when do we find out if the client is motivated or not?

Well, we find out at the front door. Our negotiations begin before we even step into the Seller's house. At the porch we ask the seller, "Are you ready to sell today if we can come to terms?" If the Seller responds with anything other than a solid "Yes", I will say, "I understand." and add, "When you decide that you are ready to actually sell, please give me a call and I would be happy to come back."

I turn and walk away (slowly). However, I always give the Seller a chance to correct himself. Not all Sellers will. So, I want to know the answer now. It's that cut and dry. I've walked away many times.

What do Seller's actually say? They often say, "We're just weighing our options." Or "We're thinking about re-listing our house and wanted to see what you had to offer first.", etc. etc.

Uh, no, thank you. We're dealing here with a tire kicker. No tire kickers for us. We don't have time to educate the curious. We only want to deal with those who don't think (or feel) that they have any options, not those who are weighing them.

So we use the phone script only to get appointments, not prequalify prospects with embarrassing and/or threatening questions. We can get the rest of the information later in a non-threatening, elegant fashion that helps us better negotiate our deals without putting the Seller on the spot.

Meanwhile, we qualify our prospects in person because Sellers can't lie about their true motivations for more than 30 minutes. After that point we can either get down to business and make forty or fifty thousand, or walk away and make the same from someone else that is actually anxious, desperate and truly motivated.

Successful sub2 negotiations are born out of mutual trust, and a meeting of the minds, not hard-selling, strong armed negotiations. As a result, we can only successfully close on the truly motivated that we've developed mutual trust and credibility.

After all, is it really possible to strong arm a person into giving us their deed, letting us take over their payments, leaving them on the hook for their credit history on their old loan? No, is the answer.

The client has to want this, and know this is the best of both worlds for him; a painless, sure, and fast closing; a fair price; and restoration/protection of his credit. This can't happen by hard-selling the unmotivated.

Yay!

Making It In The Big Leagues!

I've got a champ in Sub-To training as we speak. I'm going to provide a real time commentary on the base running of this newbie so I can develop a testimonial about how easy it is to make money using my system.

This trainee emailed me a couple of weeks ago asking for help, and after getting a rib dinner out of him in return for some quality feedback, I realized this guy was going to make me richer if I played my cards right! He's chomping at the bit to make a go of a fresh investing career, and so I'm feeding him tools and training.

-----------------------

These posts are going to be dangerous for me. Normally I would wait until a newbie actually accomplished something before I would post anything of this nature. However, this time, you're gonna know just as fast as I do if my system works for this guy or not. Of course it works, but not everyone is willing to work it, if you know what I mean.

Meantime, let me bring you up to speed. I provided my "millionaire in training' "MIT" for short, about 300 quality leads to mail postcards to this week. These are leads I provided to what turned out to be a not-yet-ready-for-prime-time trainee late last year. Meanwhile, these are virgin direct mail prospects that have never been contacted by my marketing machine. MIT sent out the 300 postcards this weekend.

Meanwhile, just to confuse things, I've mailed to a separate, experimental group of MLS "victims," who's homes are currently listed by an agent in the same farm as my trainee. It'll be interesting to see what kinds of responses I get to compare with. I'm sure about 80% of my experimental group are REO listings by a bank, but I'm hoping I can get at least a .001 response rate from the remaining list. My experimental group is different from our normal farm niche in that we have filtered for nothing except disgruntled, tired Sellers who who will be/are fed up with their real estate agents. he he

When we get our first calls, I'll give you the blow-by-blow accounts. So cross your fingers that we get responses from a least four or five MLS victims.

Here's one side of our postcard just to give you a glimpse of how low-budget these cards are. Click for a larger view.

Happy Halloween!

Dad and Mom from a 1977 photo.
David my brother from the same photo.
Me from 1977 and 2008! HA!
Enjoy and Happy Halloween to you!

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My First Student! :D

I came across this video from Preston Ely, the probate real estate guru. He posted this on FaceBook and I just laughed my head off.

One reason I post this, is just to prove that ANYONE can do real estate. It just takes passion, persistence, and a program! I give this guy kudos for plugging away.

Note: The guy's wife's fingers pic at his nose --- Hilarious!

Enjoy!


f

So You Have A Problem, Huh?

God gives each of us a talent. Sometimes our talent is hidden behind a huge challenge, setback, or problem. Unfortunately, there's lots of folks who are so busy reminding themselves of what they can't do, they never discover what God has empowered them to accomplish.

After watching this it would be an understatement to say that I was reminded about how wonderfully blessed I am, and that any challenges I face are insignificant by comparison.

Rocket Test 1

What a week!

In preparation for my own product launch I've been practicing my marketing skills on a real estate related affiliate course. The course is very good, but the sales page is weak.

My "click rate" is three times better than what I imagined right off the launch pad, but I'm not happy with the zero conversion rate to date [sad face].

I'll be REALLY glad when I get that first conversion! Then I can reverse engineer my approach to see where that one conversion came from, and then focus on doing MUCH more of whatever I was doing! :)

After I get the "conversion" mechanics figured out, and I'm pulling in at least $30 a day, then I'll have to consider the next step.

BTW, what is $30 a day? Is that about $900 a month? Well, that's a new Vette payment.

Whoopee!

If you'd like to see what I'm mercilessly pushing as a test click here:

Click Here!

Which DVD Cover Makes You More Curious?

Which of these DVD covers is the most "attractive"? (distractive?)

You can post, or PM me. Any response is OK, even if you think it's the most manipulative, provocative, useless thing you've ever looked at. I'm open.

Websites are "Bug Zappers" For The Unmotivated

To be "distressed" means different things to different investors. I only want "distressed" Sellers that have new homes they can't afford anymore; that don't need work; that are easy to sell; that aren't over-leveraged; and all beckon me to live in them!

Meanwhile, I don't think there is any secret other than being chronic, persistent and repetitive in letting a targeted niche of prospects know what you have to offer. Otherwise, "one-off", or short term advertising puts the "pain" in campaigns.

I'll go further and say that ugly mail always works better for me than pretty mail. The less I explain on the piece, the more compelling the mail is. I never mention anything negative, and only pique the Seller's curiosity in solving ONE problem they are most likely having.

That said, I believe in direct mail. I profile a zip code for all homes that have been owned for a certain period of time, had "x" amount of equity at the time of transfer, have fixed rate mortgages, no recorded 2nds, are 3/3/2's or 3's, over 1,100 sqft and under 3,500 sqft and built within the last four years.

These are going to be excellent Sub-To prospects. Now, the entire mailing list conforms to a similar profile.

So...now I know who's not going to call me. No acreage owners; no farm owners, no condo owners, no massive fixer owners, no McMansion owners, etc. These are not popular properties to resell. The buyer pool is smaller, and the resale time is LOOOOONGER.

Meanwhile, when Buying, unlike the amateurs who think they need fancy websites because guru "X" says they're the "bomb", or whatever, I only provide my cell phone number to Sellers. If the Seller is too unmotivated to call me on the phone, they'll be too cool to say, "yes" to me asking for their deed, taking over their payments, and leaving them on the hook for a loan.

I only want to bother with desperate, anxious Sellers that don't know they have any other options, and are willing to overcome their fear of the unknown by calling me directly on the phone.

Websites serve as "bug zappers" for the unmotivated, and/or the idly curious.

I encourage the competition to always rely on websites for Buying property! he he. They've got lots of time on their hands. Meanwhile, I've got too many fish to fry to screw around with either the curious or the "web sniffers".

Jay

Walking Around In A Dreamer's Dream.

Home Movies At DisneyLand - 1956 from Jeff Altman on Vimeo.

My new friend, Jeff Alman, discovered a 16mm film made by his grandfather in 1956.

Lo and Behold! Help us Hannah!

There was his grandmother shaking hands with none other than Walt Disney himself! She's the one wearing the white cowgirl outfit and hat.

I post this because Walt Disney is a role model for me and anyone who won't take anything less than "yes" for an answer to their dream(s).

Walt stuck, and stuck, and stuck, and stuck to creating high quality animations that he hoped would become profitable...but failed; went bankrupt; borrowed again up to his neck; was ripped off...and that was just his first attempts to realize his dreams. Of course Walt finally achieved his dream of creating profitable, high quality animations. Animations that set him apart from all others, apart from being profitable.

We know, too, that Walt Disney was a dreamer. He also had goals. Furthermore, he lived with self-imposed, goal-related deadlines all throughout this life and career. And of course he understood that goals without deadlines were just daydreams. Walt was no daydreamer.

Watch this precious, previously unknown, and un-circulated video showing off the realized dream that Walt so persistently drove for. Thanks Jeff.

There's No "Due On Sale" Jail!

Even if there was a jail for Sub-To "violators", the jail would be empty.

Read my response to a guy who was warning off about 2,500 would-be investors “that banks call loans in on Sub-To investors because they want to make sure they're on the hook for the loan."

Dear So and So,

"I admire your efforts to keep folks out of trouble. And with all due respect to your desire to keep us informed of what banks will and won't do with Sub-To, I can say from experience that banks do NOT "invoke" the DOSC to assure [that] the TRUE owner of a property is on the hook," as you've postulated.

Meanwhile, in the event of a transfer of equitable interest, subject to the existing financing, the DOSC allows a lender to exercise it's right to either call the loan due, or require the new owner to qualify for a new loan, and/or assume the existing loan(s) --- as a practical matter. However, the motivation for calling a loan due, if it's ever happened with a "current" loan, is NOT to mitigate risk, but to otherwise secure a better interest rate on the existing financing, and certainly NOT to create more REO's for itself.

The only reason the banks started inserting the DOSC was because there was a rash of Sellers in the late 1970's and very early 1980's that were seller financing their homes at 10%, because buyers couldn't qualify with the bank's 18% interest rate. As a result, the banks were losing business --- because they wanted 18%. So the DOSC, short of a default, is all about making money, not mitigating risk.

Today, the bank interest rates are very hard to compete with. Seller financing is usually more expensive than bank financing. So Buyers will look to get bank rates as soon as possible.

As an aside, I'm fairly certain that banks know that their rates are generally more attractive than the average seller is offering. So, short of a credit issue, they're attracting most of the potential "profitable Buyers" already.

There's no need to force the rest to qualify, or mitigate risk, or create REO's for themselves. It would make no sense for the bank.

Anyway, I appreciate your conservative approach, but in practice, what you're suggesting just is not happening. If bank rates climb back up to 18%, your scenario may very well become likely, but not before.”

What I didn't mention was that there is already a person "on the hook" for the loan. Yes, it's the original borrower. Sub-To financing doesn't change this.

The bank still has a person it can "go after" in the event of default. So it's not like the bank has lost anything in the transaction. What's more, there is now not one, not two, but three parties that are motivated to keep the loans "current!" It's the bank itself, of course, but also the borrower, and the new sub-to title holder. That's a better position for the bank than what they originally bargained for.

So banks don't deliberately "switch out" borrowers just because they can.

However, if the loan becomes delinquent, all bets are off.

Share this with anyone who claims banks are calling in "current" Sub-To loans.

"Bigger League Negotiations" Let The Seller Say, "Yes."

Loon wrote [PropBot Forum - 5+ Units - 8/8/09]

"I always start at zero, assumptively[sic], and make the seller explain to me why that won't work. If I pay more than 5% I expect a real bargain price. It all depends on what your competition might be offering, but don't assume there even is any competition until your seller shows their hand."

This short post by "Loon" from PropBot.com demonstrates tremendous sophistication. So many investors are afraid of negotiations. They just are. They're afraid of the Seller and/or his reactions to a profitable offer. Worse, the amateurs fall into a trap of offering their "last best offer" trying to achieve a clean, acceptable deal. That is usually stupid, unless there's lot of competition. If so, then I ask why am I competing with anyone over any property in the first place?

Notwithstanding, doing this undermines the ability for both the buyer and seller to "work" for a closing --- and achieve satisfaction for doing so.

Yes, we all once dreamed of making clean, acceptable, profitable offers --- where all the chips fell into place with just one offer and no "pesky" negotiating. Well, that's reserved for dreamers, not for professionals. The fact is, if there isn't some emotional satisfaction involved by both the Buyer and Seller in reaching a deal, the deal will likely not happen. This is sad.

It's sad because the essence of getting either good terms, or a good price is allowing the seller/buyer to achieve emotional satisfaction from the negotiation effort. And we do that by opening the bid far away from where the seller/buyer wants to "end up,": as it were. Otherwise, what Seller doesn't want to say, "Yeah, I finally ground that guy down until he paid me what I wanted," or a Buyer bragging about how he beat the Seller to a pulp?

I say, ahh the satisfaction of getting exactly what I wanted by "forcing" a Seller to "cave" by making me to pay 50% of retail value!" Get it?

Well, the Seller's achievement may be debatable from an objective point of view. However, the point of this post is about negotiating "assumptively" to coin "Loon's" phrase here. Loon suggested assuming that "zero" percent interest is acceptable for all parties, and unless the Seller can prove this won't work for him, (apart from his greed, and no competition), the Seller has to show his cards and/or cave, all the while put the Seller on the defensive regarding the interest rate. I love it. Why not assume things are in your favor when initiating negotiations? The post goes further...

Someone commented: "Loon, Did I understand you correctly? They [the Seller] gave you free carry back financing?" [talking about one of Loon's four "zero" interest loan deals]

Loon: "Absolutely. You rarely get what you don't ask for. If they insist on interest, well, then let the negotiating begin!"

This is is so important. Let the Seller defend his position. But the Seller won't feel compelled to defend his "greed," if we don't put him in a place where he MUST defend his greed. That means starting low, and working to the satisfactory conclusion. BTW, the satisfactory conclusion has nothing to do with an objectively equitable position.

I've seen Seller's cave to fantastic prices just because other things were more important than price. So, if we don't know what the Seller's motivation is, it's very good that we assume the Seller wants to finance us, and finance us for free --- or.... give the property to us...because.... (he's dying with no heirs; likes us a lot; hates his children and doesn't want to give them a dime; has a lapse in judgment....etc.), or otherwise force them to defend charging us anything.

[As an aside, about 15 years ago a guy in my church made friends with a freight shipping company owner. He asked the owner to literally give him the company in his will. The owner had no wife or children. My friend ended up with the company just by asking. He simply made an offer "assumptively" and gave the owner the opportunity to say, "yes". My friend went from earning $60k a year to making $$760k a year.]

As Loon puts it, "....[we] rarely get what we don't ask for."

The moral is to ask for the moon, and expect to get it. This is precisely what big league negotiators do in the real world. It also provides a way to create satisfaction in the deal for everyone. That's how we get into the big leagues.

Those Who Don't Learn From History Are Doomed To Repeat It!

The "White Pad" Analysis

It pays to know your numbers. I've been plowing through lots of operating data sheets for apartment buildings lately. When I first started looking at them after so many years of not doing that... I was hilariously rusty.

I used to be able to rattle off percentages and do mind calcs like "Rainman." However, for a while, I looked blankly at data sheets trying to remember why agents continue to pawn off "Pro Formas" on me, and never offer the actual operating numbers.

I've had agents tell me that they don't provide the actual operating numbers without a written offer. In other words, the Seller is testing the water, and doesn't want to get organized unless he's got an actual sucker on the line that would actually fall for that approach.

Normally, I would pass on a situation like this, but let me tell you a story about a Seller who had no numbers, did not know his numbers, and as a result gave me several hundred thousand dollars in equity because of his ignorance.

The Seller had just foreclosed on the building that he had previously seller-financed. He didn't have any numbers, except the taxes and insurance invoices. He also didn't have a clear idea of who was in the building, or who was paying rent. He didn't know the market rents or vacancy factor in the area. Otherwise, I had to make my own assumptions of what the potential was. This was my first apartment purchase.

After all was said and done, I bought this property for less than 25% of it's retail value because the Seller himself didn't know his numbers whatsoever. He offered a sale price I felt was too good to be true, and I recognized the sale price as being so grossly under market that I could literally barely hold the pen to write up the agreement. To make matters worse, I didn't have a pre-printed sale agreement with me, so I had to write a "shorthand" contract on a sheet of yellow lined note paper. All I listed was the price, the down, the closing date, the loan balance, and the interest rate. I closed three months later.

Now because I knew my numbers I was able to confidently and quickly, if not not nervously and feverishly act! :D

The Seller, meantime, did not know what he'd done to himself until he went back home and found his answering machine full of inquiries about his building. I would love to have been a fly on the wall and saw his face after listening to 30 messages asking about his apartments! he he he

I did spend 90 days defending my contract after the Seller realized what happened and wanted to back out for obvious reasons. I wouldn't back out, and we finally closed after threatening to tie the property up six ways from Sunday, or until his great grand children were dead, whichever occurred last.

This story would have never happened had I not analyzed over 100 operating data sheets in depth, and performed forecasts and what-ifs on every one of them to see what I could do under various scenarios. I knew my farm, and my numbers.

Since I knew exactly what I could do with 30 newer units in downtown Kansas City, and the Seller did not know, I achieved a 75% discount.

The moral of this story is, know your numbers, be able to make educated guesses, and then seize the opportunities when they present themselves.

Somebody might say, "But Jay, that was a gross steal. How could you not know that, regardless of whether you had analyzed 100 other data sheets, or not?" Well, the analysis gave me confidence to avoid second-guessing myself, and flinching at the last moment. Months before, without having done hardly any analysis, I had come across other "steals," but hadn't really appreciated what I was looking at...or the scarcity of deals like this. As a result, I blinked...and lost deals to investors that did know my farm better than I knew it.

Meanwhile, the fact remains that the Seller did not know I WAS BUYING A STEAL --- from him.

Someone recommended that we, "Know Thy Numbers". I never recommend this to Sellers! :D

Who Says I Has No Rithem? Yo!

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Up A Tree?

It's just a matter of time before the bank says, "Um, your loan is denied."

Gulp. "Wait I've got 20% down, and a 720 credit score!"

"Yeah, sorry 'bout that, but the appraisal came in short... we want 25% down, not 20%... and... besides --- you're ugly!"

This is today's market. And...unless we've got all cash, and are happy doing one deal a year (or less), we've got to have alternatives.

We've got to be able to buy without banks, or cash, or credit, or a job...and by golly we've got to be able to do it over and over again!

[Cue Mighty Mouse theme song] Sub-To to the rescue!

Back in the early '90's we wanted to buy two board and care facilities in Orange and San Diego counties. But, alas, we were equity rich, but cash poor. And without bunches of cash to put down, we were also essentially credit "sunk".

Banks don't lend money to people who need it. And they don't lend money to people who don't fit their mold. Normally, the bank looks to the business operating data and history to "justify the loans", etc. Well, that's the bad part.

Only one of the two operations was actually "operating". The other one was non-operational, but had a huge upside with good management applied. Unfortunately, we didn't have demonstrable experience operating a board and care facility, and so the bank wasn't interested whatsoever in loaning us money at any price (or terms).

What to do? Somebody in our brain tank suggested just going around the bank. What? Yes, it was suggested that we just give the seller what he wants and take the rest. Well, the seller wanted cash, and we couldn't get it without selling things, and this would take forever! Also, we had to be on title to operate the board and care facilities lawfully.

Our brain tank buddies suggested that we trade properties all subject to the underlying loans, including ours...and just take title to the real esate under the care facilities. Brilliant!

What? Yes, we traded a property with enough equity for their two businesses, and we took title subject-to the loans on the board and care real estate, and the seller took our property subject-to, and later refinanced cash out of it. What's more they turned our property trade into yet another board and care facility to sell for profit.

Problem solved!

Well, we got everything running, and successfully operated two care facilities, and essentially used dead equity from our property to buy two businesses without getting new loan, without coughing up any cash, and operated them lawfully with genuine title ownership. Such a deal!

P.S. If we had been smarter and a little less enamored with our management expertise, we could have managed to keep control of our equity rich property and not trade it up front, but simply got the numbers on the board and care facilities looking good, and used the new credit from our business operation to pay off a note to the sellers. This would have been simpler, and more profitable, but alas, we made money anyway.

In my new course, you'll learn how to buy a business without credit, and very little cash, from motivated sellers.

Jay

Off Topic, but...It's OK.

Kick Mutt!

There are five elements in good advertising that I want to discuss here. I'm talking mainly about direct mail pieces, and I'm offering a video clip for discussion. Meantime, many businesses fall prey to making up in design, what they lack in ad copy. That is to say that amateurs make the mistake of thinking "pretty" mail pieces produce higher conversions than ugly ones.

It's been proven time and after time that {controlled for ad copy alone}, ugly pieces are read 2 to 1 over pretty pieces. Hmmm. Regardless of the "look", here are five elements to include in good advertising copy:

1. Clear.
2. Forceful.
   
3. Memorable.
   
4. Easy to understand.
5. Call to action.

Play the video below see how this advertiser included all five elements in the video. I'll say that this add is a bit cloying, but they sure get their point across.

Consider how you might improve your own advertising. This has been very helpful to me.

The Right Tool...

Of course this post will make any guy cringe. However, the point of this post is to illustrate how important it is to use the right tool for the right job (or...really not try the job at all!).

In fear of devolving this post into a vulgar double entendre, the real story of using the "wrong tool" in question was used by a young man to perform what would expectantly result in an unsuccessful effort to give his "own tool" a circumcision.

Ouch!!! No really!

After the aborted surgery, the young man was rushed to a hospital at Stevenage, Hertfordshire (England). The wound was disinfected and cleansed before he was given a bed in an observation ward.

"This is something we would advise men never to attempt," a medic said, "The results can be quite horrific and long-lasting and have quite an affect on a man's sexual performance."

Oh, really...? "advise never to attempt!" Such words of wisdom.

So, how does this apply to real estate investing? Well, for one, I've seen enough newbie investors try to create/use "one-size-fits-all" negotiations and presentations that sent them out the door in a bloody mess of rejected offers.

That's why having/using the right tools to qualify/disqualify prospects as soon as possible in order to produce successful outcomes is vital. Otherwise, we get promises of the moon by passive-aggressive, codependent sellers that want to please us more than they want to sell, or.... we get a punch in the nose. Whichever, we lose the deal.

Meanwhile, we can burn out real fast knocking our heads against unmotivated seller's skulls! So why pitch those who don't initiate a sign of motivation in the first place?

The answer is we don't want to. However, in order to avoid this we need to use another "special" tool. This is a tool that eliminates most of the Sellers that ask retail prices, have options, can afford real estate agents, are maintaining their homes, and then look forward to rejecting our profitable offers (otherwise known as "low-ball" offers).

BTW, unmotivated Sellers just LOVE to turn down our profitable offers. These are a DIFFERENT species of sellers.

So what is this "special" tool? The tool is the thing that not only helps us uncover the motivated sellers, but gets them to call us first, before they think to call anybody else.

Okay the tool is...(drum roll, please)

The U.S. Postal Service!

Yes, using the mail system to market ourselves to the most likely prospects is the BEST tool we have available. It's private, confidential and "below the radar" of nearly all of our competitors. Mailing to the most likely prospects is likely to keep us from getting bloody noses, and/or empty promises.

The challenge then is creating the best mailing list. Not just a mailing list, but the BEST one. One that has the most likely prospects. Ones that don't need extra "warming up". One's that just need to believe that we're not showing up to scalp them. Remember we can sheer and sheer, but only skin...once. So, we only do a nice, comfortable, enjoyable, satisfying coat sheering. This way the sheered will recommend us to others.

The next question revolves around the definitions of what the most likely prospect are that we put on the mailing list. That is the subject of a chapter in my new investing course coming out soon.

Jay

Thomas Paine Has It Right!

How To Turn A Lemon Into Lemonade!

I just came away from an appointment that I would not normally have made. The seller showed me all the "wanter-itis" "sores" I could stand to look at.

However, ever a masochist and always curious, I wanted to see the cute 1 acre property anyway, and keep my sub2 pitching arm toned up, so I played the interested "wanter" role anyway and asked to see the property today at 9 a.m.

I brought in my credential book ready to "yellow pad" the crap out of the victims, er the sellers, again just to keep my pitching arm toned up.

First I knew they wanted $25,000 up front. Deal killer. They owed $19,000 more on the property than it was worth. They were asking $100,000 more than what is was worth. Really a deal killer. They told me, point blank, they weren't desperate to sell the house. Really, really, really a deal killer. And finally, if this wasn't the straw that broke the camel's back, they wanted their Realtor buddy to be present at my presentation. OK, no really?

Well, upon arrival I discovered that the agent was one I made a verbal offer through two years ago on a pre-foreclosure. I know he was desperate to sell something, but I wasn't seriously interested in that deal either. I let the agent beat the seller up with my low-ball opinion. I know how the game works. I was helping him get a closing. He sold that house for 80k less partly because I gave him ammunition to discourage the seller with. he he.

Wow so now I've got an ally, I hoped. I introduced myself again and then pitched down the center. I showed everyone the examples of houses we buy and sell, and the referral and reference letters, that we support little league and the better business bureau, and offered the "bad news" RE articles, etc.

This was my second time at the property. I already toured the house the day I called, so that part of the presentation was moot. So, we just analyzed the numbers as if, and I outlined all the costs, carrying costs (based on 23 months of inventory! wow), and finally showed them that they would have to cough up $20,000, if they waited for a retail buyer (as if the price weren't $100,000 over retail as it was). Frankly it would take them 10 years to find a buyer for that extra $100,000k in price. Actually, just one day, if they went with me! Who knew?! Lots of laughs.

I informed the sellers that I was there to qualify them for our system of buying and selling (following the "cash now" script/pitch exactly).

During the scripted presentation, I uncovered all sorts of nook and crannies of need. Problematic for me was the wife was a ditz. She couldn't quite comprehend what "take over payments" meant exactly. Argh!

So it was an uphill battle. I digressed from the script in order to come at something the sellers could understand without having to defer to my now agent-buddy.

After explaining that I could make it possible for them to buy a cheaper house in Arizona (and with the agents help in suggesting they could find a "low-down" lender in Arizona), the entire pace of the negotiations picked up speed.

All of the sudden the need for $25,000 as a down payment disappeared, the fear of having to be responsible for repairs disappeared, and the fact that they could get out of the payments on the house, move to a cheaper home with a cheaper mortgage, could enable them to continue paying on their credit cards, and protecting their credit became a genuine solution to them. Who knew?

So again, I suggested two alternatives to the sellers; 1) a lease option (which I only suggested so that I could knock it down), or 2) take over the payments (which I showed all the more benefits of doing as opposed to "renting" their house for 10 years, etc.). It took me a while to explain how this could work as a long term solution to their $100,000 over-pricing.

Here's where you sharpy's might ask, why didn't the "yellow pad" analysis enable me to knock off $100,000? Well, it did. However, I used the analysis to demonstrate that even their over-retail asking price wasn't going to net them anything. And from talking to them, they would rather have an R E O, than let someone equity-strip their perception of equity.

I could see how $400 or $500 extra a month just waiting for a gestation period would be worth my time anyhow, so I met their price, if they were willing to give me my terms. This was the crux of the negotiations.


Well, the couple can't continue paying on $40,000 of credit card debt, AND make their mortgage very much longer (of $287,000) --- and they really want to move to Arizona a.s.a.p., so the hubby can die near relatives.

Meanwhile, they wanted enough out of the deal immediately to pay off the credit cards originally. I said, in not so many words, the best I can do is take over your first mortgage loan, and promise you the extra $100,000 in 120 months. And at this price, I'm not going to put anything down, or pay interest on the extra $100,000, or make credit card payments. And btw, you'll need to leave everything here when you leave so that I can attract a decent buyer willing to pay $100,000 over retail.

They asked the Realtor buddy to confirm what I've said was true, and he backed me up 100%! Who knew?

Bottom line, they want to make sure that if they sell this way, they won't have to come back and fix anything, regardless if they lease option, or sub2, me. I said fine.

And their other concern is that one of them won't live out the 10 years, and will be stuck with the whole credit card bill and have to wait for the remaining $100,000. I said fine. No, just kidding.

I just said I can only one thing here, and give you a silent, no interest 10-year balloon for the extra $100,000.

So, now they're getting back in touch with the mortgage broker in Arizona to see if they can actually buy a "used house" with very little down, and if they can, they said they want to do the deal. That's a far cry from we want $25k, and "What the f--k does 'take over payments' mean!"

What I should have done is had them sign my preliminary Buy Agreement, and then let them do all their due diligence, and then actually force them to cancel our agreement. But, leaving the "printing out a contract" task until eighty thirty this morning, and discovering that my printer server wouldn't recognize the wireless router (which has never happened), I went without being my usually prepared self.

So, after this couple finds out that they can get into a smaller house, with a lower down in Arizona, and still qualify for a loan since they've barely been able to keep their credit card and house payments current --- I believe I can resell this place for a contract price of $390,000 in 10 years, realize a monthly spread on the payments of about $400 a month, with about $15,000 up front.

Just thought I'd share this scheme with you guys. The things that make this work are that the first mortgage has a low fixed interest rate for $1,700 mo. PI which is very marketable; I'm not paying anything on the perceived equity until 2018, and I'm able to get into the deal without any real cash, just notary and recording fees; I'm only paying $1,400 taxes on a 1988 valuation/purchase; and I've got buyers for this thing in the pipeline.

Who knew any of this would be likely had I not made an appointment and made an off-the-cuff offer presentation, on a house I was only curious to use for comparison --- and was otherwise a "loser deal".

Anyone else have a war story they want to share?

I'll let you know what happens when this couple realizes NOBODY else has what I have to offer them.

How To Steal Houses!

Imagine hypnotizing your juiciest prospects into handing over their deed without so much as asking!

Of course this is ridiculous. However, consider the guy in this video and what he does to the cashier at a supermarket.

The reason I post this is because making an offer using a scripted presentation is the next best thing to putting your prospects into a mental headlock and getting their deed without ever asking for it. This is a chapter in my new course coming out soon.

Guerilla Online Marketing!

Matt Bacak is one of the most successful internet marketers I've come across. Many of the folks that visit my blog are also interested in learning how to market online. So I'm posting this for their benefit.

The Last Man Standing WINS!

Is anyone else tired of the "Instant REO Profits" scams being offered these days?

Let me provide just two examples of what I consider outright fraudulent advertising. One makes the promise that anyone can learn to profitably buy and flip REO's completely sight unseen. Puhleeze.

The other is that "anyone" can learn to flip 10 houses in less than five hours a week. Really again, "Oh Puh-leeze".

As an REO buyer goes, the nuts and bolts for successful prospecting, marketing, and investing haven't changed much, except for the ease of locating REOs' on the net. REO inventory used to be a guarded bank secret. Anyone who bought an REO course in the 1980's read a chapter about the "unknown secrets revealed" of how to get a banker to reveal their REO inventory. Back then lenders with REO's were as nervous as pregnant nuns about word getting around that their banks had become poor risks.

Several years ago I had the worst time getting a bank to tell me what they had on the books. They did offer me "onesy-twosey revelations" of "pretty" houses that they were marketing at full retail. "Next!", I said.

Even as recently as 1995, a bank officer dropped his voice as if sharing a dark "secret" with me about his "one" REO. Of course he had more than these, but he couldn't afford to let somebody spread the word this bank was "loaded with REO's [OREO's for those of you on the East Coast]. Someone's head would roll if this happened!

It was hilarious. I was respectful, but it was somewhat annoying.

Today? No problem. Banks barf up REO listings on the internet. They don't give us details often, but at least we can see how many properties are listed in say, Sacramento, CA (not only the State Capitol of CA, but the REO Capitol of CA, too!)

Now the information I'm going to offer here is not just for the pros, but for those just starting out. Once we've developed a reputation as a solid reliable buyer, things snowball. Agents, bank officers, friends of friends, and referrals will eventually keep you as busy. Meanwhile, I offer these real world tips...

From my experience in no particular order... (A. B. --- this is for YOU!)

The very first shortcut is...(drum roll, please)...

1) Treat your REO investing as a full-on business enterprise. Anything less, and success will be long coming, if not bumpy and inconsistent.

Next...

I'm not describing a part-time effort with a promise that you can do this in your underwear and never have to talk with anyone, or view property. If you want this strategy, I've got a bridge you can buy for cheap!

If you're still reading, here's my take on buying REO's profitably and efficiently (the true short cuts):

• As you immerse yourself in the process, you'll discover which banks are dealing, and at what price point. Right now I know of three banks that are dealing, and at what price point. This is to say I know three lenders that are dumping their inventory at about .60 cents on the dollar (rather, .60 cents of current retail --- there's a distinction).
  
• I always say focus on a farm area. However, with REOs, your farm may necessarily be defined as a certain property profile, not necessarily a certain geographical one. You'll probably discover that the REO's you can buy for a cheap price, are scattered over three counties in a given month.
  
• Be prepared to compete harder in the more densely populated areas. There's a lot of amateur competition that will agree to pay much more than we will if we stay in highly populated areas.
• Be patient. Remain friendly. Until we start getting referrals and inside information, we've got to try to be the last man standing, as it were, until after the bank wades through all the flakes that offer to pay more, but ultimately fail to close for any number of reasons.
• Accept that 1 in 50 offers gets accepted early on. This statistic dramatically improves as our reputation improves --- and after we become more confident in making wholesale offers at the outset.
• It can take two or three months of waiting, being ignored, negotiating, and countering before we close on a profitable deal at the beginning. Again the processes shorten up and become somewhat more efficient once we get a full head of steam.
• Some banks want proof of funds regardless of where you're getting your money. Before we've proven ourselves as buyers, we'll be asked to jump these hoops, meant to filter out the seminar grads.
• We only want to make "profitable offers". That is, if we plan to buy at 65% or less of A.R.V., we've got to initiate an offer that allows you to go up to that limit. If we start at 65%, where can you go, but upside down at that point.
  
• Our opening bids should start at 40 to 50 percent of the retail value, minus repairs (giving the bank a "net offer", or letting them know exactly what they'll receive after all closing fees and sums are paid.
• This practice alone will separate you from the amateurs. Amateurs can't seem to have the heart to actually make offers they can make money with, and will feel "good" making retail offers of 80 to 90% of ARV. That IS Stupid. Especially when the first 20% of the deal, not accounting for repairs, goes to everyone, but US. So, buying at 80% of ARV, minus repairs, means we make NOTHING!

Ok, here's two property inspection/negotiation options for your consideration...

• Option 1) Complete a thorough inspection of the property (which I do love doing), and then make a fully informed offer with tactical wiggle room for negotiations ******OR******
  
• Option 2) Analyze the comps, assume $30k in repairs, subtract the repairs form the ARV, chop that number in half, and submit the offer. If you do Option 2, and get an accepted offer, you'll then inspect the property and 'find' all sorts of things you "didn't expect," and then try to "educate" (beat the crap out of) the bank over a lower price.

[edited] I omitted my suggestion to avoid Option 1, because following option 1 would mean checking out three dozen properties before making an offer. Well, that's fine if you're only making an offer or two, and have lots of time to waste. It's better to look carefully at a property after you've got an accepted bid, especially when you have more than a dozen outstanding offers to make.

Frankly, for those of us who are actually trying to get 50 offers out at a time, physically inspecting that same number of properties before making an offer is a time waster. Option 2 is the more practical approach, because we're only spending time looking at properties the bank has indicated it's willing to counter on.

With irregular, if not "onesey-twosey offers, we can theoretically "afford" to go do pre-inspections of properties, and then make fully informed offers. That's nice when it's practical, but it's a poor expenditure of time when we've got 50 offers cooking at once.

So...if we've got lots of irons in the fire, the only way to be efficient is to make the offers based on Option 2, and then upon a counter offer, go inspect. Lots of lenders won't counter. So, we don't want to have wasted valuable time looking at properties where the bank hasn't indicated an interest in negotiating.

And...

• Be willing to wait patiently for the bank to wade through the amateurs. After the listing is stale and the bank's gone through a couple failed escrows, we start looking like REALLY good alternatives.
• Again, be professional and friendly. Bank employees will find us to be a breath of fresh air, when we relate with them in a friendly fashion (specially when they've rejected our offers). Rejected offers DO NOT MEAN "dead" offers.
  
• Again, we want to be the last man standing. This means that if we're patient even after being ignored for a "better" offer a couple, two, or three times in a row, we'll still be there with an offer in hand...and much more likely to win a closing after the dust settles.

There's more to be said, but that'll have to wait. A mind can only absorb what the butt can stand sitting to read.

Jay

Trust Me! I'm An Uber Negotiator!

A recurring theme on this blog is the ability to negotiate profitably, if not professionally. I say profitably, rather than successfully, because some folks forget they're negotiating for a profit. Instead they settle for successful negotiations.

So what's the difference?

Roger Dawson and Barney Zick were the first two gurus that introduced me to both negotiating philosophies and resultant gambits.

Barney Zick taught me about "Targeted Negotiations" and how superior this was to generic "win/win" negotiations. In fact, I would be embarrassed if anyone thought I was still negotiating for banal "win/win" transactions.

Anyone who knows, knows that "win/win" is the code word for "trust me" that the amateurs and residential real estate agents use to con the unsophisticated into thinking that they are being served in some altruistic fashion. Agents work for their own best interests. They work for closings and nothing else. Some agents are smoother about it than others, but without closings everybody starves.

Meanwhile, the Uber Negotiators I find are the ones that pull in the big bucks. These are the negotiators that focus 100% on the objective and don't get knocked off the tracks with win/win sob stories of one kind or another that would cause them to lose track of their primary objective which is to make money --- and lots of it.

Recently I heard of an investor who got tangled up in a sob story, and failed to ask for what he wanted in the deal in a professional manner, and ended up failing to close profitably. He confused his objective with that of some humanitarian effort of some stripe.

What's worse the story was relayed to testify to what an honest guy he was --- that his first priority was to "help people," and then passively allow the stars to line up as other party came around to ostensibly forge a profitable deal with him later. Ho hum. It's the old "Trust me. I'm really a nice guy." or the "Karma" approach to negotiations. Puh-leeze!

Been there. Done that.

Win/win is...more often, than not, a con. Or maybe at best its a way to deal with a neurotic guilt trip over actually making a profit off of somebody. Either way, run from anyone who says "Trust me. I'm a great guy! Look what I've given up to help others." The ones that impress me, are the ones that never say what they've done, but let others share the good fortune they've had dealing with that person. This would be called a "referral."

Of course I'm not suggesting that we shouldn't be honest in our dealings with those we do business with. It's a small world out there, and once a person wrecks his reputation by cheating people, or taking "undue" advantage...it just makes doing business that much harder and more expensive --- if he can stay in business.

I like cheap and easy business dealings. So I suggest that we remain honest about what we're about, and not confuse our identities with "frustrated priests." We're in the business to make money, not compete with charities.

To illustrate the otherwise confused mind that some folks allow to occur, let me share a situation that happened several years ago with a family friend.

Our family "bud" had a TV stolen from his motor home. After the police caught up with the thief, our friend was so sympathetic to the crook (with emphasis on pathetic) that he offered to drop charges and offer the burglar the TV to keep "if he really needed one".

The cops told him that was stupid. We told him that he was naive. Everyone told him that he was missing the point of the whole "prosecution" effort. However, our neurotic friend was so motivated to let this crook off the hook, as it were, that he lost all perspective of the situation and essentially undermined law enforcement efforts.

That's exactly what happens when the negotiator takes his focus off of making money, and internalizes a victim's situation to the point where the problem becomes the personal property of the negotiator. When this happens the negotiator begins operating from a position of weakness. He confuses his objectives with that of the prospect. And sabotages his own position.

Now let's consider the opposite...

There are a large number of negotiators that go overboard in their advantage taking. They'll equity strip Grandma Moses, if there's an opportunity. That's not what I'm saying we should do. What I am saying is that it's not a sin to make money. It's honorable if we are acting in good faith, doing what we say we'll do, not making false or empty promises, and keeping our intentions and actions clear and respectable.

Advantage taking, of course, is not a virtue by any account. However, keeping our heads on straight, and not confusing our efforts with some secondary objective is a virtue.

When a client calls me, they already know that I'm an investor. I don't call myself anything other than that. If the prospect doesn't like investors, he won't call me. That's fine. There's a bunch of other crap he won't like either if, for starters, he doesn't like those who negotiate for a profit.

So I say be honest about yourself. Don't lose perspective by internalizing the prospect's problems and fail to negotiate clearly in your own best interest. Remember there's a huge difference between having sympathy and being empathetic. Sympathy will draw you into donating blood. Empathy will motivate you to find blood donors.

Jay

"SubTo" --- Subject To This Market!

Subject To "financing" still works in this down market!

In fact there so many prospects willing to give us their deeds its ridiculous. Of course most of these folks are also way under water equity-wise, and we have to be just as choosy over what we're willing to accept as we ever were. After all we're taking title and taking responsibility for paying a mortgage that doesn't have our name on it!

[The portrait above is called "Subject". Hey it's close to "Subject To" in name -- and reflects the non-conformity of creative financing, huh?]

Notwithstanding, SubTo is NOT a hard sell right now.

I overheard an investor in 2007 say that, "Sub2 is dead in this market." Now we understood what his reasoning was even without hearing anything else he said. His reasoning was typical of amateurs who don't have an adequate understanding of the SubTo financing tool. Nevertheless, we knew exactly what he was thinking.

What he was thinking was, that prices were correcting too fast, and too far, to make a profit flipping a house using SubTo financing. If not that, then he probably thought that he couldn't seller finance a property and wait for a new buyer to refinance in the typical 12 or 24 month time period, because the house wouldn't appraise well enough by that point. Ho hum.

Sub2 is meanwhile an extremely valuable, effective and simple, if not an aggressive financing tool, but that's what it really is --- a financing tool. And since folks with equity in their houses still need to "Get out of Dodge" every month of every year in every cycle ---- for any number of reasons ---- regardless of the market, then we'll always have opportunities to solve yet more problems using SubTo. What solves people's problems faster than a cash buyer? Nothing, except SubTo financing! It's a beautiful thing.

The issue then isn't that SubTo can't be used to finance our deals in a down turn, or can't be used to finance long term holdings in a down market. No, that's not true. The issue is locating those desperate anxious sellers (which are the only ones we talk with regardless of the market), that are ready to deal and give us the equity we need to both protect their credit, make a quick transaction, and allow us to make a profit by offering appealing down-line terms and financing to our desperate anxious buyers waiting in the wings. Simple.

Someone might ask, "Isn't your marketing, prospecting and buying requirements stiffer now then they used to be?" My answer is, again, "No."

Everything is the same including the critical necessity of knowing what current "retail" is in our farm. The amateurs crash and burn all the time, because they don't drill into the farm consistently enough to really understand values in a particular farm --- if they work a defined farm in the first place.

Knowing our farm values allow us to effectively and dramatically re-educate the seller regarding his opinion of the value of his house. The problem remains for the amateur investors that don't know their numbers and are effectively unable to negotiate the sweet deals we do --- in any market. It's all about negotiations and facts supporting the negotiations.

I can just hear someone say, "Jay, you mean that negotiations are the only barrier to successfully using SubTo?" Pretty much. Along with a tailored direct market list of the low LTV homeowners that are ready to deal for whatever reason (usually inexperienced homeowners that get themselves into financial trouble within months of buying).

And I'm saying that these types of folks are everywhere. However, we've got to get to them before the competition does. And the best way to accomplish this hasn't changed a bit.

So, is this is a GOOD time to put our SubTo financing to work with desperate anxious sellers in this market cycle?

The answer, in a word is, "Yes!"

Twitter Is An Electronic "Business Mixer" Without The Alcohol!

I came across this fantastic explanation of how social networks can actually work for us in creating profit without appearing to "sell" anything. One marketer claimed to be the "The Top Twitter Dominater" on a nationally publicised PR site...and got slammed on Digg instead as being the "The Top Twitter Douch Bag!" Whoopsie. This video shows us how to keep from becoming slandered as "DB's" on Twitter, FaceBook, and MySpace" by accident.

Thankfulness Goes a Long Way!

So very thankful am I for God's blessings on my life. My life is abundant and full. It's only just a few days before my family gathers around for a traditional Christian Thanksgiving feast.

A meaningful thing we've done in the past, is to spend time rehearsing all the things we have to be thankful for. After a while, you'd think that we were special or something.

However, as we've all made a point to center our lives around the Word of God, and intentionally live our lives as a reflection of the living God --- loving others as ourselves --- and doing our best to surrender to the Will of God --- our lives really are continuously filled with thanksgiving, joy and peace --- even when bad things threaten to shake up our lives.

The word of God says that the "rain falls on the just and the unjust". As a result we don't spend time licking wounds. We don't live our lives in denial either, when things are going wrong, or even against us. We don't say to ourselves, or to anyone around us that we "have no problems". However, we live thankfully, joyfully and in peace despite what we face. That's one beauty of putting our faith and trust in someone bigger than ourselves.

Meanwhile, most folks around me are starting to gather for annual Thanksgiving festivities. I have a fun family and this is a tiny number of them that are spread literally around the world.

Here's a shot from my uncle's 80th Birthday celebration five years ago. The lady on the far right in Navy blue is my mom Neva --- affectionately referred to as "The Neva". She was my primary financial backer back in the day. The others include from left to right, back to front: Chris (Carolyn's husband), my Uncle Marion, my Aunt Dorothy, and again my Mom; Carolyn my cousin with son Kevin in her lap and finally Kyle in the center. Such a nice bunch of folks they are!

Yours for an abundant Thanksgiving holiday where you can count your blessings, and let your blessings count!

Jay

Houston. We Have a Problem.

I'm now officially sixty days behind schedule in launching my training course. It's been unbelievably complicated and time consuming. I'm glad I'm not having to hold my breath --- or my bladder!

I've still got writing, editing, and tons of loose ends waiting to be nailed down. Who knew how much brain power was required to put together something like this, I ask.

Meanwhile, I'm motivated by the fact that one of my mentors offered two-day training camps every two months for about ten students at a time for about two thousand dollars each person. If my math is correct that's about ten thousand dollars a month gross before expenses. He probably spent about thirty percent on overhead. He told me that it wore him out and he's no longer offering the training camps. Hmmm. Maybe it was too inexpensive?

My other mentor meanwhile is grossing nearly four hundred thousand a month selling a newsletter! I'm almost tempted to go into the newsletter writing business! :) Nah.

Yesterday I was writing advertising copy. It read well enough that I was halfway tempted to pull out my VISA card and order my own course from myself! Ha! Maybe I should do that anyway just to make sure everything works?

During my research of various account providers I discovered that PayPal has a LOT of restrictions, including holding back money from it's clients for six months in the event they suspect fraud. I also learned that one of the merchant account providers held up several hundred thousand dollars of my mentor's VISA receipts because the credit card processor was surprised by and consequently suspicious of the huge amount of money they were processing. They are still holding back several hundred thousand dollars of his --- after six months! Another vendor is still holding about thirty thousand dollars. Wow. That would be scary and irritating!

I just learned that my credit card company wants to know what my sales estimates are before they "approve" my merchant accounts. With all the 9/11 security checks and money laundering schemes they want to know what to expect. I have zero idea. For safety reasons I'm going to say, "Exactly Six Quadrillion Dollars a month."

That's a start, huh?

Meanwhile, back to the writing, editing and marketing "stone." I'm so anxious and excited about my course launch that I'm giggly on my way to bed every night!

More to come later...

Der Bubble

No Truer Words

• You cannot help the poor by destroying the rich.
• You cannot strengthen the weak by weakening the strong.
• You cannot bring about prosperity by discouraging thrift.
• You cannot lift the wage earner up by pulling the wage payer down.
• You cannot further the brotherhood of man by inciting class hatred.
• You cannot build character and courage by taking away people's initiative and independence.
• You cannot help people permanently by doing for them, what they could and should do for themselves.

----William J. H. Boetcker

Happy Halloween!

I'm having "Halloween" moments all month long scaring myself half to death thinking that a well-manicured and smooth-talking socialist may make it to the office of the president. Frankly I would rather have the Wicked Witch of the West, who lets us know exactly what she's all about --- scary details and all!

I hadn't planned on talking about politics on this blog, but the case can be made that George Bush's tax economy has made a bunch of us a LOT of money since 2000. Despite the downturns attributed to the greed and power grabs of the left who pushed lenders to offer non-sensical loans to those with no ability to perform, there is hope.

There is hope if enough folks realize that socialism hasn't put any country that has practiced it, into a "fatter" position than the worst economies of the United States. All the socialist European economies including Russia and China aren't even close to the US in it's economical power. Yet socialsim seems to draw some like flies. You know what draws flies, right?

After all is said and done all of our problems and challenges devolve down to the characters of those we put in office. There's 545 people in congress that absolutely control the future of the United States economically. Unfortunately this mostly failed class of people DO control our Destiny on several macro economic levels --- mainly through regulation and taxation gyrations.

It's important that we vote for character-driven people for congress and the white house, because character drives decisions that affect all of us. More immediately and specifically, we have a choice of putting a polished, wealth- spreading socialist clothed as a "tax cutter" ---- or a crusty un-smooth, Viet Nam era fighter clothed as a quasi-conservative into the presidency. I'm pulling for the quasi-conservative. Otherwise I'll just write in, "Wicked Witch".

Maybe if I click my heels I'll get better choices.

Meantime let's vote for honest, character driven people that won't fake us out.

Please vote!

Popularity Contests!

Rental demand in San Diego is crazy right now. Who knew?!

A few years back, we accidentally started a rent payment bidding war on a 3/2/2 rental house. We had already been scheduling cattle calls for our units, but this once, we had prospective renters actually offering to pay more rent than we had advertised.

Obviously we didn't know our market. Obviously we had advertised too low a price. Obviously we got a hint when our phone rang off the hook.

It's fun knowing what we offer is in high demand.

However, it's a hidden sin to lease out a house for less than it's worth. Sure, we get all giggly listening to all those voice mails.

But it's smarter asking for more money and being OK with fewer calls. This seems self-evident, huh? Well, there's lot of landlords that are too ignorant, insecure, if not impatient to negotiate top dollar rents.

Today we can spot an amateur in a nano-second that doesn't know his market, when he brags about how fast he leases up his units, and the numbers of call he got. Uh, huh. After he finishes indirectly bragging about how ignorant he is about his market, we ask facetiously, "Wow, you got ninety calls for your unit and rented it in less than a day!? That's just fantastic. So how many more dollars do you plan to continue to drop in the toilet each month so you can remain popular?"

That's our polite way of asking a braggart how much money he plans to lose by negotiating stupidly, if at all. Maybe that's not more polite... Oh well.

Meanwhile, several years ago now, we advertised a 3/2/2 in Orange County for a $1,300 bucks which we reasoned was probably market value. At the time, this was actually $300 under market. We're guerilla market testers, and just needed some feedback. Our phone r.a.n.g. o.f.f. t.h.e. h.o.o.k from prospects!!! We scheduled our routine cattle call, not realizing the full impact of our offering price on demand. We had a stampede of "Lookee Lous".

After all was said and done we had negotiated the rent up to $1,600 a month, received a gigantic (probably illegally large) deposit, and had the unit re-rented within seven days of the last tenant moving out. We probably could have reduced the down time by three days, if we had scheduled our cattle call the day we had the house ready for re-renting. However, a week is acceptable in our book. A month used to be acceptable until we learned better.

"Are auctions always good?", one might ask. Yes, we believe they are. However, at the auction, we don't want prospects feeling like they are being treated like suckers, or they bail in disgust and contempt for us.

The secret we think in having a successful auction, especially if the prospects are not expecting an auction, is first to create scarcity through the cattle call itself, and then "let the cat out of the bag" to the prospects privately, that there is an outstanding bid from "x" dollars for the house. Then we give the prospects the chance to mull it over, while asking which of them would be willing to pay this much, or say Twenty-five dollars, more. Frankly some prospects that were only curioius, but not really prospects will leave immediately. We want them gone!

Meanwhile, as experienced negotiators, we can deftly go round robin with the prospects until we get the rent we sense we can command under the circumstances. We've had tenants pull out wads of cash trying to get to the head of the line. It's important to remember that the most likely prospects to win the bid, will have terrible credit. For us that's great. It just gives us that much more leverage on deposit sizes, co-signer requirements, and higher rents --- and longer leases.

It's OK to say, "We'll rent to you, but we want a 24 month lease, so we can cover ourselves in the event you get 'flakey'". Or to be a tad more professional, we couch the demand as a benefit to the lessee (who is paying over retail rent) by saying, "...to give you time to improve your credit and establish a positive rental history, we need to commit to a 24-month rental agreement."

Notice what we said here. "time to improve your credit", "establish a positive rental history", "we need to commit". We're saying.... The tenant "needs" time... The tenant "needs a proof positive history of on-time rent payments... and we've included ourselves, as the Landlord, in the tenant's problem with the use of "we need to commit" [to a long term lease].

The only thing we're committing to is gobs of extra cash for two years from this guy! Yay!

I love auctioning off gargantuan rent payments, collecting confisicatorily huge deposits from desperate, anxious, credit challenged people!

Anyway this might be an alternative way for some to positively get retail (or more) rents, from people happy to pay --- and not throw money down the drain trying just to be popular. You can be "popular" and get all the money due you! Who knew?!

Old MacDonald Had A Farm, Too!

If you stare at this picture long enough, you'll discover a smile on this couple's face. Look closer! See them smile?

Yes, this couple is out front of their house letting everyone know they're making a killing in real estate. He's got a pitchfork in hand ready to poke any trespassers that try to send any postcards to his farm prospects.

She's ready to back him up with that "ol' school marm warning" expression, which barely hides her exuberance over the $40,000 they pocketed as a down payment yesterday from the house they just seller-financed.

Yup! This couple flips houses bought from desperate, anxious sellers, and then turns around and seller-finances new credit-challenged buyers. More specifically, they take over loans and resell those loan terms to those that couldn't borrow a rake (or a pitch fork) at this point.

Two years ago, this couple found out what kinds of houses were selling the fastest and in what area over the previous 90 days. They discovered that the three and four bedroom houses in the 37237 zip code were the most common, and fastest selling properties. So they staked a claim in that zip code and mailed postcards to all the three and four bedroom home owners letting them know they buy houses. This stake, or claim is referred to as a "farm". Not to be confused with raising crops of course, but cultivating a profit nonetheless.

Farms are important to investors for several reasons. First, they focus the investor on an area that he can become intimately familiar with. This is important, because familiarity with values/comps trumps about anything else, even cash, when it comes to finding, funding, and flipping houses.

Others may have cash, too, but the professional investor that is cultivating a well-defined geographical farm area (defined here as something one can drive to and back from in 45 minutes) can and will beat any potential competitor to the punch because he can first instantly recognize the deal for what it is --- and land the deal like a seasoned airline pilot, before anyone else knows there's a deal.

Meanwhile, the amateurs are still compiling comps, addresses, computer print-outs, and pouring over last-minute CMA's (comparative market analysis), biting their nails, second-guessing themselves, if not simply flying blind. That's no good.

The best way to start and maintain an investing career is to first choose, and cultivate a farm area. It doesn't really make difference where the farm is, as long as the investor has enough prospects to pick over in a given geographical area, and become more intimately familiar with it than practically anyone else is/can/will.

The fastest way to fail in real estate investing then is to fail to have a farm defined. "Southern California" is a "region", and for our purposes of discussion would be considered a lousy farm. Any one zip code in "Southern California" would be superior to the entire region.

I'll just say, nobody can be an expert in a region, but few can be more of an expert than the investor who cultivates a familiarity around a one mile square. Of course the uniqueness of a property may dictate the size of the farm. For instance, say we're looking to buy a slightly used nuclear power plant, we might have to resort to a farm the size of a "region" just to get enough prospects on our mailing list!

Short of this, however, we need to focus on a specific territory, or farm area, so that we can be the fastest, most reliable buyer around.

After all, there's no such thing as "stealing in slow motion".

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A Little "Yellow Padding" Goes A Long Way!

OK, pull out your ugly, yellow note pad! This cheap thing is what separates the sheep from the goats in negotiations.

What do we do with a seller who wants to believe his house is worth say $325,000, but is really only worth $285,000? Do we walk away, and say, "Next!"? Or do we lead the seller back to reality, in an attempt to get a bargain? Well, if you're patient and answered, "Lead the seller back to reality to get a bargain", then you'd be the one making the big bucks!

In the Fall of 2003 I sat at the kitchen table of Denise, a lady who was in pre-foreclosure. She was NOT upside down, but had lost her job, could not afford her payments, and wanted out --- for a good price.

Well, of course not being in the business of paying retail for anything, I empathized with her plight, but politely reminded Denise that, "The only way I could help her was to steal her blind, equity-strip the crap out of her house, and pray that she didn't sue me later for buying her house for half of what it was worth". In the nicest way possible, of course.

Nah. Just kidding. I didn't say that!

Actually I simply went through a checklist of "Yellow Pad" questions that started with what she thought her house was worth. She told me. I said "Fine", after suggesting that I wanted to analyze the rest of the numbers with her in order to find a reasonable sale price that we could both agree on (How does anyone disagree with that, I ask.).

Let me show you exactly what I did for Denise.

BTW, my approach is used by professional negotiators worldwide, and isn't a proprietary strategy, BUT it's amazing how many professional negotiators don't use this simple tool. Also, this negotiating approach is successfully used to buy anything for a decent price --- without insulting the sellers, or worse.

This is a powerful tool, and we should be careful not to use this to cheat sellers, or take advantage of their ignorance. Used legitimately, this is a fair and honest way to analyze the numbers for any purchase, and may be used to talk yourself OUT OF BUYING. I've come to the conclusion not to buy property using this analysis tool, when the seller failed to cooperate with the discussion, or the numbers didn't make sense after all. It's also the most fantastic way to show the seller, using his own numbers, why he is unrealistic in his expectations on a certain sale price.

So, here was Denise's scenario --- analyzing the numbers with my over-size calculator, my ugly, yellow note pad and bold blue Sharpie.

Jay: Denise, what do you believe your house is worth. (She lies and gives me a huge, over-retail figure).

Denise: I think my house is worth $550,000.

Jay: Ok, fine. (Writing that figure at the top of the yellow pad) Would you be willing to take five percent off that price in order to sell more quickly. (She wants to know what 5% is equivalent to so I calculate it to be -$27,500).

Denise: Yes, that would be OK.

Jay: So that would be a -$27,500 discount, correct. (listing that amount with a minus sign in front of it with my bold blue Sharpie)

Denise: Yes.

Jay: In a conventional sale the real estate commissions runs between 5 and 7 percent. For our purposes we'll use 6%, ok. That comes to -$33,000. (We use the full retail price as our working number, not the discounted price. I list that figure in bold black numbers with a minus sign in front).

Denise: OK, $33,000.

Jay: Now we have conventional closing costs of about 3% of the purchase price. That comes to -$16,500, ok. (I list that number with a minus sign in bold fashion.)

Denise: OK, -$16,500

Jay: Now, we have about $26,000 in repairs; new paint in and out, new carpet, roof repair, tree removed, pool resurfaced, and driveway replaced (we previously discussed and estimated repairs immediately before we started the yellow pad analysis), ok (This is stated as a fact, not a question).

Denise: Yes, -$26,000, that's about right, but maybe less.

Jay: Yes, it could be less, but we only use competent, licensed professionals, because we're not in the contracting business, you understand, ok. (Again, not a question, but a statement).

Denise: Yes, I understand.

Jay: Now, if you remember a few minutes ago, we showed you that there was 23 months of inventory on the market for used houses. So, as a result, it will take 23 months to get a house like yours sold at full retail only if the agent is competent, correct (a statement, not a question).

Denise: Yes, 23 months I think. It's taking a long time to sell these days.

Jay: You showed me that your monthly payments on the house are $2,844 per month plus taxes, insurance and the HOA of $750 for a total of $3,594 per month, correct.

Denise: Yes. -$3,594.

Jay: Well, if you continue making payments on this house for the next 23 months (as "carrying costs"), it's going to cost you an extra -$82,662 to hold things together until a buyer comes along according to the market data, correct. (I list that number under the rest of the numbers with a minus sign, of course).

Denise: Yes, but -$82,662 is quite a bit, and if I discount the price, it might sell it faster, right?

Jay: Yes, maybe, and for discussion, let's agree that it takes half the time to sell with our -$27,500 discount. That's still -$41,331 dollars.

Denise: But I'm going to have to pay to live somewhere, so I don't see that figure really meaning anything to me.

Jay: Yes, but you won't be living here by then. (She will lose the home, and will have to find someplace MUCH cheaper anyway, maybe not $3,594 a month cheaper, but we don't go into that unknown. She might have to live with relatives, or even in a shelter if she can't find a job. Who knows?).

Denise: Yes, that's probably true.

Jay: Now you said you owed approximately -$450,000 on your first, correct.

Denise: Yes.

Jay: Well, let's 'add up' our numbers here (we don't say "subtract") and see what we come up with.

$550,000 Current Value (Actual Value was $520,000)

< $27,500> Less 5% Discount for "quicker sale"
< $33,000> Less Realtor's Commission of 6%
< $16,500> Less 3% Closing Costs
< $26,000> Less Repairs
< $41,331> Less 11.5 months of PITI paid until sold
<$450,000> Less Mortgage Balance
----------------------------------------
<-$44,331> Seller pays this amount just to sell home conventionally.

Jay: Not a good solution is it.

Denise: No, I can't afford that.

Now Denise sees her numbers used, and realizes that she used an inflated value of about $30,000 to throw me off at the beginning of my analysis. Whoops, even with her over-stated retail value, I still showed that she was upside down. Who knew?!

I offered Denise $1,500 to move out. Promised to get her house sold and refinanced asap. She gave me the title. I did as I promised, and re-sold the house immediately to a credit challenged buyer, offering no credit check, for $572,900, with -$30,000 down, at 7% interest for 30 years, or $3,611 a month P.I. I got the buyer refinanced in twenty months.

Using the "Yellow Pad" I negotiated a gross equity spread of $122,900, and a payment spread over 20 months of $15,340 (my buyer's principal/interest payment to me of $3,611, minus my $2,844 on the original mortgage --- $767 dollars per month cash flow).

So that's $122,900 plus $15,340 for a grand total of $138,240 in gross profits --- over 20 months, all while using the yellow pad analysis to redefine the seller's expectations and perception of value.

BTW, Denise went and bought a brand new, cheaper house with zero down from a builder, got her credit improved by me, and lives happily ever after.

What was the actual retail discount I achieved? Well, $520,000 was the true retail, less the first mortgage of $450,000, which comes to a 13.5% discount. That's not much! But when we sell to a credit challenged buyer for a premium of about 10% more, we've effectively achieved a 23.5 discount! This all without having to go pull our pants down to have the bank do a financial anal exam on us, require us to put down 20% in order to secure new purchase money loan! It's a beautiful thing.

Caveat: Sub2 does work in a falling market! However, we may have to offer longer term financing, focus on lower LTV prospects, and/or become much more aggressive in our final offers. Today, I just tell the seller, I have to make $50,000 on this deal, and discount that much at the end of the analysis, and say, "Or I can't help you." This means there actually has to be that extra fifty thousand somewhere. Meanwhile, sellers know I'm an investor, and seller's expect something like this, and they call me anyway. I advertise myself as an investor, so there ya' go.

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Row, Row, Row Our Boat --- In The Same Direction!

Partnerships can be juicy shortcuts to creating massive increases in wealth.

Donald trump is the master of profitable partnerships. Everything he builds and produces is a result of sophisticated, mostly profitable partnerships.

Meanwhile, after talking with many, many investor wanna-bees, the average of them are suspicious of partnerships. It seems like they all have uncles that got screwed somehow or other. I, too, have a bad partnership story from, whom else, an uncle. Who knew.

However, bad partnerships are a result of bad partnership agreements, or partners with bad characters, or a combination of both. Primarily partnership are ideally a team of individuals "rowing together" toward a common objective. Some call these partnerships "teams". But "team" is overused, mis-applied and otherwise a bit pedestrian for our purposes today. That said, this post is a primer on how to qualify partners, and partnership agreements so that we can increase the likelihood of a good, profitable partnership --- rather than listen to our “loser” uncles!

That aside, again partnerships can be extremely profitable when large amounts of cash are needed to take advantage of “value-added” projects. Value added projects are anything with a HUGE upside, or potential that the investor isn’t necessarily paying for up front.

At the same time, it can be very difficult to attract partners for value-added projects unless the managing partner has a good track record, or the partners have experience and can visualize the potential, or the managing partner has the ability to paint a vivid picture of what’s possible, probable, and profitable to the partners.

On the other hand, it’s seems easier to attract partners for otherwise low-return, pride of ownership investments, or high profile buildings. It's about safety and bragging rights it would seem with this niche. On that last account, I don't have extensive experience, because I don’t buy anything pretty with partners.

Meantime, I've formed several partnerships that were critical to my forward momentum financially. All were value-added investments requiring extensive personal involvement and cash. I’ve also endured a couple of real dog partnerships, so I know both sides of this coin).

Nevertheless, just like marriages, partnerships have similar qualities and maintenance requirements. First, you have to have "partnership vows" that each member of the partnership must agree and adhere to. All the partners need to have the same goal, and agreement on when to get out. If this is not established, things fall apart, and spectacularly.

Here's a few points to consider that can help assemble a “good” partnership that is more likely to function profitably, effectively and smoothly. (in no particular order)

• Each member of the partnership needs to contribute something that the remaining partners don't have. Uncle Joe doesn't get to be a partner because he's got a funny laugh, and has a supportive "spirit". Nuh, uh.
• Again, nobody gets to be a partner who isn't supplying a critical piece of the partnership puzzle; money, contacts, or expertise.
• There has to be a managing partner with 100% control of the asset/partnership. Zero exceptions. That doesn't mean the remaining partners can't chime in, but they have no vote, or veto power.
• It's ok to turn down money partners that can't agree to a managing partner. They would be partners from Hell anyway.
• There's lot of folks who just want a return, and if they trust you, and you aren't emptying their retirement portfolio, they're happy. It's the members who are investing all/most of their cash that are insecure, itchy and scratchy, and insist on input, votes, and veto power of the partnership decisions. Again, reject these low-quality investors. They'll make your life miserable, and ultimately can cost you the partnership profits.
• There has to be a buy-out clause available to any of the partners, but especially the managing partner, based on some pre-arranged parameter.
• Talk to those who've assembled and dissolved successful partnerships and get their advice before you write up a partnership offer and make any presentations.
• All the terms and expectations of the partnership are put in writing; everything.
• Only those who can afford to lose the money can join the partnership.
• Only those that fulfill their obligations as stated in the partnership agreement can stay IN the partnership. That means that "Buzz" the manager expert, better actually be a management expert, and actually manage, or he's out without compensation. This goes for every contributor to the partnership who's not contributing what they promised.
• There must be a dissolution instruction to follow if the investment goes bad. That is, the remaining assets are split according a pre-planned distribution schedule if the project does not perform. This may or may not mean that everyone gets all their money back in full. This has to be negotiated up front without making promises that can't be kept.
• Make it clear in writing that you are presenting a "horribly risky venture, where all the partners are likely to lose every last dime" --- which also supports why the upside is so ridiculously juicy [If this is a high risk venture, that is].
• Keep the agreements as simply worded, and clear, consistent as possible.
• Let the potential partners either offer a, "Yes, or a "No" to the partnership offer.
• Remember it's hardest getting the last 10% of the partnership assembled. Unfortunately, the last to join, are the mostly likely to want to negotiate.
• Partnership agreements aren't open for negotiation as far a you're concerned. If so, then plan to start giving away everything to make it work for "everyone".
• Have a minimum investment amount to keep out the amateur, insecure, call-you-every-other-day types from investing. Unless you're desperate and are happy with high maintenance folks.
• Try to form partnerships with fewer than four partners. This would be a goal, not a requirement.
• Partners get a monthly profit and loss statement. Period. Always. No exceptions.
• Books are audited for everyone's benefit each year. Period. Always. No exception. This alone will remove a lot of grief and management headaches and lawsuits.
• Always pay yourself based on benchmarks, and performance, and don't be shy about being paid generously. If you can't pay yourself generously, then you're not going after good enough investments.
• Bad partnerships are bad regardless if the project makes money or net, it seems to me.
• Exit strategies are a must, and can include partial splits of the partnerships, or include options for each partner to buy out the others, or make buy out offers, and maintain the partnership --- with the managing partner's written approval.
• There should be a clause prohibiting any partner from selling their interest without the written approval of the managing partners. The last thing you want is a loose cannon, ex-husband, mixed up in your deal because of a divorce settlement, and suing to liquidate the partnership so he can get his hands on the ex-spouse's contribution, plus profits. Trust me on this.
• Be friendly. Be honest. Be consistent. Be reliable. Be firm. Be fair. Be bitchy when necessary.
• Leave out any of the above recommendations (plus ones I can't recall off the top of my head), and you should NOT go into a partnership.
• Partnerships are reserved for people with character. Otherwise, if things go good, the bad characters will take advantage. If things go bad, same thing.
• If anyone suggests that they are religious, in order to secure a partnership position ---- run!

Think about finding character-driven partners with more than enough cash to do your WHOLE deal. That's the best scenario.

I believe that that most partnerships go bad because of failed expectations --- in either the management, or the quality of the partners, and of course the outcome of the deal. The latter is why I think it's real good to temper everyone's expectations at the outset, so that anything remotely good just looks like frosting on the cake. Meanwhile, again it's better to involve the fewest people with the most money, rather than including lots of wanna-bee investors with little bits of cash.

Don't be afraid of partnerships

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Pitching "all" the "Don't Wanters"

My first attempts at getting sellers to accept my offers were painful, embarrassing efforts. I had a poor pitching arm at the beginning.

I had almost no idea how to present an offer in an elegant, efficient and effective manner. What's worse I failed to understand why it's important to have all of the decision makers present while the offer was being presented, discussed and negotiated.

Few things give a negotiator more of a sinking feeling then to make a smooth presentation, work through tough negotiations, get agreement from all parties, ask them to sign --- only to be told that "Uncle Henry has to review your offer before we sign." "Uh, huh. 'Uncle Henry', you say?"

After a few minutes plummeting into a verbal debate over whether Uncle Henry really has any real authority, blah, blah, blah, I walk out the door with only a polite verbal promise under my arm that, "After Uncle Henry let's us know, we'll let you know --- for sure!"

"Yeah right.", I say to myself, adding, "Next!"

Today I refuse to make a presentation to the sellers until "all the decision makers are present during the presentation".

I get objections anyway that include: "My wife doesn't need to be present, because I make all these types of decisions anyway so just give it to me." [Yeah, sure Bud, whatever. I'll bet she chooses your clothes, too!"] Or, "My husband's out of town on business, so I just relay the offer to him over the phone. [Nah, you've never heard of the word amortization before tonight. I can't imagine how you'll explain "intestate" to him.] Or "I'm the only one on title, so my wife/husband doesn't need to be there". [Really and you've making making all the family decisions for how many days?"]

These are just disqualifying objections as far as I'm concerned. If the seller won't cooperate, then I just move on. I only want to negotiate with desperate anxious sellers that will follow my lead, because they don't know about any viable alternatives. Not ones that believe they have other options and want to weigh ALL of them at my expense.

Of the very most important things that I needed to know about making "hard sell" offers [low-ball offers, sub2, etc.] was that ALL of the decision makers had to be present; husband, wife, and Uncle Henry, or I would wait --- or walk. Without all the decision makers present, the trail that led the negotiations to a closing disappears, and the absent parties can never clearly translate how those negotiations progressed, or how each conclusion was reached, or "why" all the targeted elements of the transaction were satisfactory.

All Uncle Henry hears is that somehow the investor is equity-stripping his nephew and wife, because Uncle Henry didn't get to help "work for the deal" and wasn't led through the "assumed close" --- and didn't hear that the nephew had tried to sell the property through an agent three times in a row, and finally wasn't educated by the "yellow pad" analysis that his relatives were now upside down on the deal in the first place with all the repairs, real estate fees, and closing costs included. So Uncle Henry's operating with blinders on, and meanwhile offering uninformed feedback on the quality of the transaction.

Here's a incomplete list of reasons why all the decision makers must be present for the presentation/negotiations:

• There is no "higher authority" the seller can appeal to. Seller's will say they need to consult someone else, when in fact, they want to shop our offers by going back to Mr. Investor #4 and see if he'll pay more than us.
• We have about 40 minutes to make our presentation, analyze the numbers and look over the house and get the offer approved. If we leave without an accepted offer, we leave without a deal, and the likelihood of ever getting a deal signed is nil --- all because the seller was given the opportunity to consult the phantom higher authority, but in actuality was shopping our offer.
• We need the decision makers to fish or cut bait, because we can't be strung along with too many pending offers at the same time. We make offers on what we can do today, not what we might be able to do a week from today. Things change. Money gets spent. Opportunities rarely present themselves twice. So we need to know now.
• If the seller's insist on the need to think, I offer to go outside on the (back) porch, until they've reached a decision. Of course they want me to leave them alone, but I don't. Meanwhile, I don't go to the front porch, as they may decide never to open the door! j/k! Somehow sellers get a tad "itchy and scratchy" when some guy's out sitting on a lawn chair in their back yard waiting for an answer. This hurries things along in our favor --- either by disqualifying the seller, or seeing them cave to our terms.
  
• If the sellers insist on thinking about my offer overnight, and I know there's no other offers, I might allow this with the caveat that the offer expires at "x" o'clock that evening. And put doubt in their minds about whether I can extend my offer at the current price and terms --- since things change daily in my business.
• I don't want my offers shopped

So correctly "pitching don't wanters" includes making sure you pitch all of them at the same time. Otherwise, it's like pitching with a missing arm! :)

Really "Low-Budget" Postcards

I am a strong advocate for ugly, non-threatening postcard ad copy. With years of experience, and a boat-load of wasted money sending "pretty" postcards ---- I recommend a bigger boat-load of profits made by only sending non-coated (not shiny), plain 60#, 4x6, "Insane Asylum Green" postcards with bullets of information...

Meanwhile, check this out. This guy's approach is even more low budget! And I actually thought that was impossible until now! Take a look.

In a future post I'll give you some proven ideas for simple ad copy that really works at sifting out the "don't wanters" and converting them.

“Win/Win” Is For Amateurs.

We rarely are given what we want. Rather we negotiate for it.

Even more, we HAVE to fight for it, or the deal is likely to fall apart. Part of negotiating successfully is offering satisfaction in “reaching” a conclusion, and also knowing what the other party wants and needs to come to a suitable settlement. Simple Win/Win negotiating is inadequate in many situations as illustrated in the following scenario.

Two hunters went hunting together looking for a large buck to take home. Finally a trophy animal showed up and both hunters shot at the same time. The deer fell over dead.

Upon investigation, they could only find one bullet hole in the animal, and neither of the hunters knew whose bullet killed the animal. Now it was a "win/win" dilemma to figure out which hunter “owned” the trophy.

Well, there’s no conventional “win/win” solution to this dilemma. After all, in this instance, both hunters wanted the rack, and so one or both is screwed. At best, one hunter has to settle for the left hand side of the rack, and the other has to settle for the right hand side, or one must give up the whole rack. Or they have to have a tug-o-war match to decide who gets what ---- and/or shoot each other to come to a conclusion?

Well, a mutually satisfactory solution has to be worked out nonetheless. So I say, “Win / Win is for amateurs!”

There’s a better solution to win/win.

For starters, we ask more questions of these hunters. Do they actually both want the racks, or is this an assumption? Do both hunters actually want the skin? Or is there anything else they want specifically? Is there a focus of need or desire that doesn’t clash with the other party?

Barney Zick calls this “targeted negotiation” or, “He who talks first “wins”. Yes, instead of making assumptions that each party wants the same thing, we instead ask lots of probing questions before we ever begin negotiations.

To our ultimate surprise, and sake of discussion here, we discover that the one hunter wants the rack, and the other hunter wants the meat, and neither wanted the skin.

Well, isn’t that convenient?

So after some questions we achieve a satisfactory "split" of the animal. In this case we discovered what is beyond the “obvious” --- in this case the real needs --- the non-negotiable needs, if you will and achieve a successful, targeted negotiation.

Well, this is no less true in real estate negotiations. We have to get beyond price in many cases and target our negotiations toward a specific objective. Price then isn’t always the primary motivation for all parties. However finding out what the true motivation for selling is the professional negotiator’s responsibility. And “win/win” for sake of “win/win” in these cases is not adequate to reach a solution.

To illustrate further, I bought a house from a bank at a huge discount. The price wasn’t the most important factor for the bank at that moment, but regaining the ability to borrow several times the value of that bad loan from the government, and making ever more loans was ---- way MORE important than price. Who knew?

In another case, a seller couldn’t complete a remodeling project because he was in jail. Who knew? His wife needed cash to pay legal bills, and she was willing to discount the price heavily to get the cash quickly. So, because we asked lots of questions, we got passed all the normal lies sellers tell us about why they’re selling --- and used that information to help solve her problem --- quickly --- because we couldn’t steal in slow motion.

Meanwhile, we ask lots of questions until we get down to the meat of the motivation, and use that information to go after the kill. Sounds a bit too aggressive for you? Then you’ll be a victim of someone who knows better than you. Keep reading.

We make profitable offers after we get all the facts, and then let the sellers say “yes” to our offers because they now “want” to, because we will solve their “real” problem.

Here’s a list of problems we’ve uncovered and solved over the years:

• assumed seller’s liabilities and negotiated a discount after we closed on the property.
• purchased appliances for seller to use in new house
• negotiated discount of seller’s second/third mortgages.
• paid off seller’s vehicle loan
• bought life insurance for seller
• bought down (shorted) the seller’s second mortgage
• paid off seller’s bad debt (at a discount) and upgraded their credit
• gave seller moving money instead of conventional down payment
• took over seller’s mortgage payment to protect seller’s credit.
• took over seller’s car payments
• gave seller cash in return for car in the garage

These are qualified win/win examples. We uncovered the real motivations the sellers had for dumping their property, and focused on solving THOSE problems. It allowed us to buy cheaper, whether through speed, discounting, assuming debt, or whatever. But we wouldn't have known without uncovering the seller's true motivations for selling, and negotiated those problems away in return for a great price.

To illustrate this more closely to home...

A few years back, my true motivation for selling a house had nothing to do with price, but just getting rid of a tax burden. I wanted to dump the house a.s.a.p. by discounting the price by 20% off retail to a friend (who didn’t know the market) --- just to get it out of my hair.

What’s interesting is that since I didn’t force my friend to “work for the deal”, and he was not appreciative of the facts of the deal --- I had a much more difficult time selling to him. It's like trying to get a horse to drink, that doesn't know he's thirsty!

In other words, I removed all the road blocks and normal marketing ploys I used, and it resulted in taking longer to unload the steal, than if I had listed the stupid thing conventionally and marketed it professionally. I guess I learned that, “No good deeds/deals go unpunished”, huh?

This was a classic, amateurish, albeit inadequate win/win” solution. I assumed that my discount would be immediately obvious and create motivation, but I failed to take into account that part of the “win” for the other party was “fighting” for the steal deal. So taking away the “fighting” part, nearly destroyed the deal, because the satisfaction level of the buyer (and myself) was short-changed.

The fact that because the buyer didn’t know the market, hadn’t been “working” to find deal in the first place, and that I made it too easy to buy, the buyer then resorted to “creating work” for himself in order to feel some satisfaction in an otherwise negotiation-free situation. Moreover, the buyer second-guessed the terms and price I offered --- with stalls, over-analysis, but finally grinding himself down to the conclusion that I was actually giving him the deal I said it was.

You’d think my credibility was enough? Nope.

Finally I also should have tried to “take away” the deal, by informing my friend of my “other buyers”; my reluctance to sell so cheaply to a friend; my “other alternatives” I had in mind about selling; etc., etc. This would have lit a fire under his feet and not allowed him to "steal in slow motion" ---- which is how it turned out.

So, asking the seller's why they're selling (repeatedly until we get to the root of their motivation), forcing both parties to work for a solution, and focusing on solving problems rather than on price is what defines a better win/win strategy called "targeted negotiations".

In a future post, I’ll discuss the “Take Away” in more depth and why it’s the “be all, and end all” in motivating "wanters".

Assembling the $125k Credential Book (followup from 7/12/08)

This is for any newbie who wants to come out punching and immediately establish credibility, reliability and professionalism when meeting sellers and prospects! Yes, in order to make that first $125,000 on paper I've mentioned before! Here goes:

1) Get a business license.
2) Get the tiniest, cheapest PO Box rental you can find.
3) Open a business checking account and order the cheapest checks available NO ponies, sunsets, or logos either.
4) Go to a little league team and donate just enough cash to get them to give you a team photo that you place into your CB ("Credential Book", I'll cover this again later) $100.00?
5) Sign up with the BBB and get a certificate. People think this gives you credibility. (BBB is a scam, but they've been a scam for 50 years...and those who know, know... and those who don't, don't) Buy their approval anyway.
6) Get a cheap one or two page personal website with a domain like http://www.mylastname.com , or if your company name is unique enough try http://www.Ialsobuyhousesat65percentofarv.com (Wtvr!) Put your bio on it, and add all the things I'm going to suggest you include in your CB.
7) Get a Vonage Phone Line with a toll free number attached (This is good for making flat-fee long distance calls, not to mention people can call you free on the toll free line.)
8) Get 1,000 business cards printed without graphics, logos, or fills. Just name of co.; your name; your title, ie: "Acquisition Manager". Don't call yourself the "President" . I've lost count of the number of people who called themselves "President" that I saw drive away in some beater Toyota Camry. And few people come in contact with real "presidents", so unless you're driving a newer 500 series Mercedes, you sound cheesy. Include PO Box, Cell #., Fax #.(??), 800 #, Email, Website, and never a home address. (think "attorney business card")

Next... 1) Go to Office Depot and buy the $40.00 leather, 3-ring, zippered binder with calculator, and pockets for 8.5x11 yellow lined note paper pads. This is your "Credential Book" (CB). (The CB shall be treated with more reverence and care than your family Bible ever will!)

2) Go online and download the following:
a) Little League web page and Photoshop your company name on it somewhere and insert it into your CB across from your team picture (remove from plaque if necessary, or make a copy).
b) BBB web page and Photoshop your company name on it somewhere and insert it into your CB across from your BBB certificate.
c) find and print about 5 separate negative news articles (Yahoo, Fox, Newsmax, etc.) regarding the real estate market and insert it into CB.
d) find and print FSBO website photos of houses for sale in your farm area similar to the ones you want to buy and insert them individually into the CB....and separately print the property details including the address for future reference, but do not insert in CB.

3) Assemble all the contracts you need to open escrow and insert them into the CB.

4) Load 50 business cards into the CB.

5) Download and print maps of where all the child molesters are lurking in your farm. Map To Child Molesters

6) Reference letters. Get two or three friends (if you have no friends to help you, then reach back into your childhood and bring up the imaginary friends you had) and write glowing reports on your character, integrity, and professional performance, etc. I knew someone that wrote a glowing character reference of himself, and asked a friend to sign it. After all, he told me, who would write about him better than him? Plus the friend was a tad bit completely illiterate, and preferred to write with crayons, used the word "ain't" a lot...and well?

7) Referral letters. Write them yourself describing the situation you helped someone out of, and have the person you helped sign it as if they wrote it themselves. People will always do this, even if what you wrote was a bit "gilding of the lily", as it were. Get them from all the professionals you come across and have good relations/experience with.

8) NOW>>>> Take your credential book to all your appointments.

FAQ’s

a. What are the house pictures for?

You thumb through these pictures and show prospective sellers the kinds of houses you buy (you are not saying you owned these...these are just examples) If the prospect stupidly assumes you own them, then just let them continue in their ignorant bliss) Perception is reality, not reality itself. And we have no business trying to bend their reality to fit our reality, if you get my drift. Later when we have some houses under our belts then we can show them off in another section of our CB called "My Kills!" j/k!

b. What are the Little League photos for?

This says you are stable, local, established, and a family person who loves kids and families...and little league!

c. Why the BBB certificate?

Hopefully its obvious that you are an honest, reliable, and character driven company/individual (apart from BBB's reputation!) Just a note here. You won’t be able to get a BBB certificate until you’ve been in business for 24 months. SO....just Photoshop a page with the BBB logo, your company logo, your picture with a bold statement saying you “support the BBB”. This doesn’t say you’re a member...yet, but you DO support them. The inference of course is that you are a member. Well, since they won’t let you be a member, you’ll let everyone know you “want” to be one. It’s a little sneaky, but unfortunately, there’s a lot of sheople who actually take the BBB seriously, and don’t think it’s a scam. So, capitalize on their ignorance, and don’t fight it!

d. Of course the map to the child molesters should be obvious.

///

And The Winners Are...

Short Sale Prospect!

MY thanks goes to those 12 virgin "profitable investment strategies" survey responders!

According to our survey, the top two most important issues we face are, 1) "Finding Deals, and 2) "Finding the strategies that work today".

Well, thankfully that is the purpose of this blog; to offer, discuss and brainstorm the best ways to find "deals", and what is working "best" today.

Of course, the "best" strategies for finding deals differ for each particular niche we mine. For now, we'll talk about short sales. For instance, driving neighborhoods, and looking for "short sale" candidates would be really inefficient, and the long route to success.

On the other hand, a more efficient strategy would include focusing on those prospects who've been sent a Notice of Default. That's obvious, except some prospects want to try a short sale, when they can't sell, but their house payments are current.

Meanwhile, even more efficient...is focusing on those in default, who also have more than two mortgages.

Uh, yes! To continue, the even more efficient strategy is to focus on those who have mortgages with two or more lenders --- and those with mortgages older than 18 months old.

Still further...those with mortgages that have been sold more than once. Wow! There's more. The owner is also bankrupt, cannot recover, has a story to tell, has a house that's in terrible shape, and requires more than 10% of the value in repairs.

Do these houses exist? Of course they do. However, the amateurs don't know that they need these criteria to line up before "messing" with them. Short sales are already "hard sells" with lenders, so it's important to focus on the most likely candidates. The fact is finding these gems takes patience and work.

This is a "wholesaling" approach to short sales, not to be confused with the approach a typical real estate agent would use to help a residential buyer negotiate a "mild" discount.

Here's a more comprehensive list of things we look for in a true wholesale transaction:

• all loans in default


• more than 2 loans in default
  


• each loan with a different lender


• loans are older than 18 months
  


• loans sold more than once


• 2nd loan exceeds 30% of current LTV
  


• 3rd exceeds 10% of current LTV
  


• Combined junior liens exceed 35% of current LTV


• borrower cannot recover financially


• borrower is insolvent


• borrower has a "sad story" (less useful when negotiating with with larger lenders)


• house has more than 10% worth of repairs needed (the worse the "better")


• lender has local loss mitigation dept.

Focusing on homes with these qualifications will put the investor way ahead of the pack, if not massively increase the likelihood of a successful negotiation.

Of course I'll just add here that we're building a case in our short sale package submission for the senior lien holders. In a gross nutshell, the junior lien holders typically discount their face values roughly 90%. That is a $70k 2nd might be sold to us for $7k without much hassle, and sometimes with just a couple phone calls to the lender and very little paperwork. So we'll focus less on these, and more on the mechanics of discounting senior liens.

Meanwhile, we want to make sure we've built a convincing case that can be easily understood by the lender...and make it as easy as possible for the lender to accept our proposal. That doesn't mean they'll just roll over. However this does mean we include pictures, and supporting information that sells our proposal...including making sure the bank receives our photos of the dump which requires both faxed and FED-EX'd, copies of the short sale package.

When/if the bank counters us, we would then supply negative demographic information. On the second counter we would include as much negative market data as available. In the third and final counter, we include criminal data, and anything else that offers a negative picture of the situation.

Why do I say "final". Our experience has been we've got three chances at bat. After this, there is a diminishing return on our investment of time. This doesn't mean we have "no" chance, but at this point, we've pitched the price a half dozen times in conversations with the lender.

With experience, one can read the writing on the wall, and know when to fold.

Care to respond, or add two cents?

"...and that is why I succeed".

Here's a powerful 30-second testimony!

Frog Kissing! Just Do It!

There is SO MUCH opportunity right now, it's a riot! Auctions and REO purchases are all the rage as I write this. Short sales are happening, too, but the universal theme on those is, "you've got to have a lot of those in the pipeline" to make up for the losers --- and the only "buyers" are end-users.

As for the auctions, the banks are just now (July 2008) loosening up the terms of their reserves (here in So. CAL) to effect actual investment grade deals.

That all said, if one doesn't know their farm, they won't recognize a deal, unless it was SO obvious a blind person would trip over it ---- and then they would be self-doubting and suspicious anyway.

You know, that's the theme of the real estate business.

There's just no short-cuts other than knowing your farm.

That's why 95% of the would-be investors are scared to pull the trigger. They don't know if they're shooting at a good deal, or shooting themselves in the foot.

Nevertheless, sifting through a bunch of crap is still the name of the game. I'll call this "Frog Kissing". It takes time and money to "frog kiss", or wade through a ton of responses from even highly refined and tailored direct mail prospects. It's just the law.

We've got to expect that we'll kiss a bunch of liver-spotted, warty reptilian organisms before we finally discover the prince/princess!

Even then, turning the frog into a prince, isn't just a matter of kissing the thing. No. The devil's in the details.

Meanwhile frog kissing is what we do as investors. That's why RE is so profitable, too. Very few people want to spend the time, energy, and money doing that.

The squeamish, lame, and/or lazy won't do the spade work required to find those green, slippery buggers. What's worse is the newbie frog kissers get things backward. They look for princes/princesses instead of the frogs. We don't really find the princes/princesses by looking for princes or princesses. No. We can only find the "royal gems" by looking first for the frogs, and well, "kissing them" first.

That is, looking first for "problems". Or better; recognizing problem properties or owners with problems. Then analyzing the numbers (comps, repairs, etc.); making offers; waiting for counter offers; being patient; and finally being willing to "unsuccessfully" negotiate a deal --- over and over again. That last part is important. The impatient investor often is unwilling to "lose" a deal, and then puts himself in a weak position, or worse --- "marry" the frog.

Meanwhile, the impatient investor thinks by insisting on bargaining that the frog will by sheer force become that prince of a deal. Wrong!

Frogs don't become princes because we're desperate and settle. Frogs show themselves as princes when we care less than the "frog" sellers do. That means that we search patiently for the frog that will become a prince only by making many, many profitable offers in the first place; by knowing our farms better than anyone else, and being willing to kiss as many frogs as it takes for the princes to appear! That's always just a lot of plain ol' frog lips to wade through, huh?

So be patient, know your farm, make lots of "profitable" offers, care less than the frog sellers when negotiating, and eventually one of the frogs you kiss will turn out to be your Prince.

Great RE Website (Plus some)

This is what happens when two investors get together at a theme park!

Agents work for themselves, not us!

There's just something about relying on agents as a professional investor that goes against my grain.

I suppose it's just the fact that the agent has a different objective than I do. They want a "closing". I want a "deal".

Agents "have" to have a closing to pay their bills and overhead.

I don't "have" to have squat.

Frankly, to put our opposing objectives into relief, if I don't insist on only buying "deals", I'll only have "squat" in the end.

Recently I interviewed a professional (full time) real estate agent that I'll call Pedro, that was listing a short sale property. The acreage had a stick built home on it, and at roughly $80k an acre, it seems like a great price --- not wholesale, but a good price for an end-user.

After talking to Pedro for a bit, I realized that even though this agent was open and frank about his feelings regarding the market, I had to pause and remember I was not only talking to Pedro ---- I was talking to a Pedro. Yes and this Pedro was quite persuasive informing me that I shouldn't wait until the market bottomed out before I bought, but should realize that a bargain now, held on for many years, would prove a decent investment --- especially if I had "staying power".

Well yes, this might be true enough, but my objectives are not to rely on my staying power, just so that I can survive until the next rebound. I want only juicy deals that I can profit from today (regardless of my staying power thank you).

So, what's the Pedro thing anyway, one asks. Here's the story...

Once upon a time there was a feisty US Marshall chasing two stage coach Banditos that had robbed the stage of it's gold.

While capturing and handcuffing the robbers, the Marshal realized the thieves spoke no English. The Marshall was helpless to find out where they hid the gold without a translator. So he dragged the scoundrels into town and found a man called Pedro to translate. When Pedro found out why the Marshall needed his help, Pedro smiled and happily obliged.

Meanwhile, the Marshall was waving his six-shooter at the thieves heads demanding to know where they hid the gold, and threatening to blow their heads off if they didn't tell him what he wanted to know.

Pedro translated exactly what the Marshall requested to the two thieves saying, "If you don't tell the Marshall where you hid the gold, the Marshall says he'll shoot both of you in the head!" They looked at the Marshal waving the pistol back and forth just waiting to shoot them. Fearful the Marshal had a trigger-finger they gave in and explained to Pedro that they had buried the chest of gold under the Oak tree at the Three Forks river bend.

Desperate, the Marshall demanded to know what the bandits said. Pedro turned to the Marshall and replied, "They said, 'Go ahead and shoot!'"

The Dead Cat Bounce? Specu-tard vs. Specu-vestor

This article was forwarded to me and I think it's a good reminder and warning to avoid following the lead of impatient amateurs, and specu-tards in this current market. The definition between that of a "specu-vestor" and a "specu-tard" is market timing!

Also, I want to provide a link here to the real estate timing expert of all time, Robert Campbell ("Timing the Real Estate Market"), who has a popular web site (I get nothing financially out of this referral, expect a warm and confident feeling that you'll benefit as much as I have from his book) that you might consider.

What's more Robert's book and information will help more of us avoid making the mistake of interpreting a "dead cat bounce" as a full-on RE rebound.

Robert Campbell's Webpage

What do you think?

Rating John T. Reed and his Guru Rating BS Chart

[Unconfirmed Photo]

FYI: John T. Reed sells RE guru material! Commercial Review of J.T. Reed

He also spends a considerable amount of time in self-serving criticism of a majority of other RE gurus and their courses. I consider Reed, at best, classless in this regard, and at worst unethical and unprofessional, if not unsuccessful in real estate.

Why do I care? And why would I critique Reed?

Well first, quality operators don't make personally directed comparisons in order to sell their own products by putting down, impugning, or indulging in efforts and activities that otherwise diminish the reputations of their competitors.

Secondly, as a professional investor with several years of RE ownership under my belt, I've received a lot of insight from many of the gurus Reed bashes. In fact, I'll go as far to say that, I probably wouldn't have had the guts to do 30% of what I've done since 1981, had it not been for one of Bob Allen's No Down Payment workshops I attended, specifically.

Robert "Bob" Allen has certainly taken a fall, or two, over the years, as Reed is all-too-happy to inform you. But it's not the fact that one got knocked down a couple of times that counts. No. It's where one is headed! And it's about not giving in, or giving up! Allen got back up!

Notwithstanding, Reed takes specious quotes of Allen and blends them into a nefarious, evil, advantage-taking context. I had to laugh at one alleged quote of Allen that goes, "We're not in the RE information business. We're in show business". Well, of course Allen is in show business!

That's a lot of what marketing is. Duh?

But this is an anathema, if not a surprise for Reed.

Meanwhile, I have much respect for Robert Allen, if only that he's been willing to risk everything, several times over, in order to both become prosperous himself and help others do the same. Reed would not agree. Meantime, I don't mind one wit that Allen used "show business" to sell me on a "Possible Dream" many years ago.

This is the thing that John T. Reed doesn't understand. He doesn't understand that part of selling is creating a romantic image, even a dream in the buyer's mind of what could be possible. Yes, what's being sold can be mostly a romantic dream or image, but it's the romance that spurs imaginations and creates momentum in our hearts and minds to achieve something bigger than ourselves.

Look at John F. Kennedy. He made a romantic speech once about "...going to the moon, in this decade!"

If that's not a romantic picture --- that he motivated a nation to "waste" 30 billion on --- money that could have been spent on the homeless and hungry, I don't know what is.

No, Reed's all too mechanical and logical. He really doesn't understand people, or marketing. He prefers that RE guru materials must somehow equate to some MBA program with Harvard-like certificates (in what...Lease / Option Finance?).

Meanwhile, John T. Reed won't market himself out of a wet paper bag. He's afraid of the risk. He writes that he doesn't sell his books in stores because he doesn't want to risk printing too many copies at his own expense --- or let bookstores profit from his book (or something along that line). Whah!?

Essentially he won't take the risk that his book won't sell well, and he doesn't want anyone else to profit from his book either. How low-budget and greedy is this, I ask.

Anyway, let me just say that I did buy three copies of John T. Reed's superb book on Property Management. I bought them at Border's Books in Overland Park, KS back in 1991. Evidently someone bought several copies to be resold commercially, because I was shocked to hear him say his books have never been sold in stores. All I can say is, "Well John, yes they have been, and I liked them, too".

Meanwhile, I do not recommend John T. Reeds Guru Review or his BS checklist. The entries are subjective at best, and misleading and irrelevant at worst. Again, for example, who cares if Bob Allen filed BK 14 years ago, or several times since? Doesn't even the Bible authorize bankruptcy as public policy in the Old Testament --- as opposed to holding debtors in prison for the remainder of their lives --- both as a testimony of mercy and grace toward those who've gotten themselves in a financial jam?

We can only hope that John T. Reed never gets himself in a crack, and asks for financial mercy. He'll get none from me, because he gives none to others, and does his best to both embarrass and humiliate those who've once, or twice, been in a ditch.

Credential Books - What are they good for?

I'm working up a post to explain how extremely valuable, helpful, and most of all, profitable a "Credential Book" can be for any investor, regardless of their investing strategy. This is a misunderstood, and undervalued sales tool. I used my first credential book to make me $125,000 in paper equity within six weeks of first using it.

It's that powerful.

Determination on Steroids!

Want to know what the secret to any success is?

Watch this video and find out.

BTW, Napoleon Hill's book Think and Grow Rich offers a similar message in Chapter 3.

How much do you want the results you're after?

Guerilla Creation of Mailing Lists

I've been asked many times where to find prospects for a direct mail campaign.

I always suggest subscribing to First American Real Estate Solutions (FARES). However, after explaining that it's going to cost them about $1,500 hundred dollars a year for that subscription, their eyes glaze over.

Newbies mostly don't realize that this is just the cost of doing business consistently, and routinely.

FARES is not just for compiling mailing lists however. It's also for searching property and comp information before we commit to buying.

For example, I check out their (the prospect's) property profile (this time thoroughly) to see if that prospect still "qualifies" for my program before I meet with the prospect. If the property fails to qualify anymore, I cancel our appointment. What disqualifies a prospect is usually a recent refinance, a new A.R.M.-bomb loan (negative amortization, adjustable loan that spikes to 12%, etc.)

Fortunately, there are other alternatives for compiling a mailing list that can be just as helpful, and practically free for the newbie (or the cheap!).

Here's a step-by-step method I used to jump start a shoe string direct mail campaign several years ago.

I'll be writing editorially hereafter.

We went to the local title company and asked for their sales rep. We explained that we needed assistance from them in assembling a "farm package". These folks knew exactly what that meant. Title companies routinely assist agents and mortgage brokers in putting together "farm packages".

So what is a farm package? This is a specific mailing list that only includes prospects with a certain profile. For instance, mortgage brokers want lists of prospects that are due for a refi, or would likely want to create an equity line of credit. Agents want lists of those who've owned their homes for a period of years, that would allow them to list their homes for sale when the time comes.

Our farm packages usually included all those with purchase money mortgages that were less than two years old and showed at least 10% of equity, or more, at the time of refinance, or purchase. These folks are the most likely to get in trouble with their debt load, as discussed in a previous post.

So the title company culls out our custom farm package (prospect list) that includes only certain LTV's at purchase, a certain length of loan (by date of Record of Transfer), by zip code, house size, lot size, etc. We wanted a very precise profile that was nearly identical from prospect to prospect. That way we knew exactly what every prospect that called us was likely to own, and it made determining values extremely easy.

BTW, the title company doesn't offer us farm packages for free just because they can't think of anything else to give away. This information actually COSTS them money to provide. Remember the $1,500 or so, we're saving by not subscribing to FARES? Well, somebody paid for this information, because there's no free lunch in this world.

As a result, we made sure the sales representative knew that we were committed to them exclusively to handle our closing and insurance needs when we sold our properties; and we ensured that their "small" investment in us would pay off in an "obscene" fashion eventually! Of course we don't come out and say that exactly, obviously!

To sum it up, we established a relationship with a title company. We let them know that we plan to bring all our title insurance work to them in return for help in assembling a custom farm package.

So, title companies can be very helpful in assembling our custom farm packages, and save us a bunch of money up front --- just for bringing them all our business. Not a bad trade off, huh?

Doing business with those you like and trust --- and why!

This is from the active-rain RE broker's website.

RE agent, Aaron Mendez (Corona, CA) explains how he handles low-ball offers in this "buyers market". It's good advice for investors in dealing up front with folks that are emotionally connected to their houses and neighborhoods.

How to low-ball more elegantly and correctly following a professional RE agent's advice