Monday, December 21, 2009

The Sub2 Chihuahua Rides Shotgun!

his is my Terrier/Chihuahua mix Wolfie resting on the way home from a prospecting journey.

We checked out a new farm of multifamily income properties that look like fabulous Sub2 deals in the making.

Nobody knows these properties are for sale! YES! And the sellers are scared spit-less about the vacancy rates in the area, and don't have the courage to weather a storm. YES!

Not to mention that the unit prices are shaping up to be fantastic high cash flowing deals for a knowledgeable investor. Meanwhile, taking over poorly operating buildings and getting them turned around without any financing obstacles is REALLY nice, if not just a giggly thing to ponder.

Did you know the most cash flowing properties are the same ones the bank is least desirous to lend on, or likely to finance for a decent rate?

Yes, we can find the baby cash-cow dumps with a potential 25% capitalization rate, but because those properties are located in C-minus or D-plus areas, the bank holds its nose and says, "no thanks" to our requests for loans. How come the most secure deals are the ones banks don't like, I ask?

Here's one hypothesis. Banks are like low-return pride of ownership types of buyers. They like to plow money into low-return ["A"] projects that they can point to and say, "We lent on that!"

How nice.

Now if you ask the bank's borrowers what their returns are on those same "A" properties, they might say, "Uh, about 2.5 percent." Uh, huh.

Well, I like bigger returns. We prefer meaningful returns, not ones that can't even match the costs of rising energy. We find these juicy returns where the average investor doesn't want to shop, and the average bank doesn't want to lend. Yay!

There are so many opportunities waiting for the courageous and the proactive.
Meanwhile Wolfie, the Sub2 Dog, will ride soon again looking for stray cats and bicyclists to bark at while we talk with sellers who don't know how to turn a lemon into lemonade the sub2 way!

If you would like to know how Wolfie buys cash-flow opportunities without a credit check or down payments, click here: "Screw The Bank!"

Wednesday, December 16, 2009

"Pimp My Sub2..!"

Only in San Bernardino, CA will you find the "Pimp my Tattoo" mobile tattoo clinic and bus conversion! [well, i guess this bus actually goes 'anywhere']

Yes, friends step aboard and take a trip directly to the psychedelic express to "tat" nirvana! Or not.

I barely got this photo snapped before the bus turned left at the next light. If you notice the graffiti all over the back of the bus in white spray paint. I had to laugh at the graffiti on graffiti situation. I could barely tell which was supposed to be there, and which was not.
[It's supposed to be there! Who knew?]

Meanwhile, the bumper read: "" so I gleefully refer you to them, because I'm so impressed with their marketing gimmick! At their site, you'll see better pictures of the actual bus I saw (being driven in Ohio).

The real reason I post this, is because it draws attention to the cash flow opportunities that exist in these areas. These are management intensive locales, but at the same time opportunities to create an income stream that doesn't require an arm and a leg to get into.

Anytime I hear someone say that there's no opportunities in real estate anymore, I now just direct them to San Bernardino County. Owners change hands often in these places. Often the owners that knew there was cash flow, also didn't know how to manage a business, or how to market correctly. They're the same ones that become, "don't wanters," as Robert Allen describes them; those who want out of their properties. These same owners will accept very creative terms just to save their butts.

I bought an apartment building in an economically depressed area very similar to this. I got in free. All I had to do was apply my professional management skills to turn the place around. It didn't need rehabbing as such. It was just in need of some a consistent, professional, management application to create both cash flow and a substantial amount of equity on paper.

It's simple, but not always easy, however. Tenants that were used to a loosey-goosey management style from the previous owner, which created the mess for the owner in the first place, underwent a severe case of "management overhaul shock" after I pulled in.

Many tenants bailed on the situation, because they had no intention of following any "new" rules, or actually paying their rent on schedule. Did I mention my gigantic late fees?

Anyway, Sub2 financing came in so very handy for this situation, because nobody in their right mind would have tried to get financing on this failed management hell hole, otherwise. The seller knew it. I knew it.

Find a seller with a problem, not a property with a problem, and get rich solving the seller's problem with the property. Yay Sub2!

If you would like to know how I bought that property without new financing click here: "Screw The Bank!"

"Creating Money Out of Thin Air...the Sub2 Way...!"

Sub2 financing can offer the fastest track to wealth creation ever.

When my family first started investing in single family homes in the late 1960's, credit was THE most important thing to "worry" about, apart from scraping up the 20% for a down payment on a conventional loan. Of course that was for our OWN home, not for an investment property. Trying to get a loan for an investment property was a whole different animal. The rate and terms were worse, AND you had to qualify for the loan as if you were servicing the loan yourself, without considering the rent from the property.

Things have changed since then. What hasn't changed, is the practice of taking over existing loans. This method has been used to get around the qualifying process banks have required since loans were invented.

However, the government institutionalized 'non-qualifying' loan assumptions. Wasn't that convenient? Yes, one person would originally pull their pants down and expose their financials to some bank, and qualify for the Federal Housing Authority-backed loan. Then when it was time to sell, they could just let somebody take over their loan just by signing a couple of documents.

This was technically "subject to" financing, but had no name until after the "Due on Sale" clause was invented. Meantime, there was no income verification and no credit check to take over these FHA loans! Yay. And the original borrower, yes, was still on the hook for the loan...! Nothing had changed. Except...

Eventually conventional lenders stopped allowing their loans to be taken over without qualifying. They included a term called a "Due on Sale" clause. Why did they do this? Because they were losing money when sellers would allow buyers to take over their low-interest rate loans at 10% instead of qualifying for brand new 18% loans. Well, this 8% spread wasn't going to be lost to a bunch of amateurs! Nosirreee Bob!

So, banks scared off the "sheople" (who were otherwise seller-financing new buyers at 10%, instead of 18%) by including the dreaded "Due on Sale" clause in all new loans. Now this clause didn't mean that a bank WOULD call a loan that was not properly assumed, but it just wanted the right to make more money off the new buyer in the event it was profitable for them.

Well, ever since interest rates fell to the point that most seller financed deals were MORE expensive than conventional bank's terms, no bank in their right mind would call in a perfectly healthy loan.

As a result of the lower conventional rates, the DOS clause has been a flaccid threat to anyone taking over a loan the old fashion way.

Now, how do we create money out of thin air with Sub2?

There are two ways (at least), but the fastest way is simply to resell a house for a higher price, on terms to someone who "really" wants your house, who cannot qualify for the "cheaper" conventional loan. This could be for reasons including being new to the community, changing careers and employment, recently losing a house in the bubble market crash, and other reasons that temporarily keep them from qualifying for a new conventional loan without putting up 20-25% down.

So how exactly does this help us create money out of thin air, again?

Well, we're not going to sell a house to a buyer who needs financing from us for the same amount we paid. We're going to raise the price as a premium for our service. Typically we'll raise the price by 10% over retail ----- or if we got the house for 10-20% under retail, we can ensure a FAST resale by offering the house for today's retail value, and then work to get our buyer refinanced as soon as possible. Usually this takes at least 12 months.

The second way to create money out of thin air, is to charge a slightly higher interest rate than what we're paying. This isn't usually a large amount, but it all goes directly to our bottom line.

So creating money out of thin air just means that we created extra "value" out of thin air. We market our houses to a niche of potential homeowners that will pay a premium price in return for the privilege of owning their own home --- without having to qualify for a loan, or even having their credit checked, and most importantly putting up less down than any bank would require.

The value of what we offer is SO POWERFUL that we can actually create value (money) out of thin air!

Meanwhile, our buyers will beg, borrow, and 'probably' steal to give us a down payment and take advantage of what we have to offer them with sub2 financing.

For more information about a turn-key system that will allow you to do this over and over again like clockwork click here: "Screw The Bank!"

Monday, December 14, 2009

Open Wide and Say "Sub2!"

Getting information out of some sellers is like pulling teeth.

I had to laugh last week (again), when a FSBO kept answering my leading questions with "I don't know," and "no" and "yes" answers.

I mean, they were playing so close to the vest (which isn't unusual for FSBOs) that they couldn't expound on the description of their house to save their life.

It was ready to water-board them!

One answer that is always hilarious to me when I request the seller to describe his house is, "What do you want to know?" Is that the worst answer ever?

What do I want to know!!!!!!?????

Just tell me about your friggen house!

However, I used to confuse this with lack of salesmanship on the part of the seller. Not anymore. Sellers that can't express themselves are often hiding a problem they need us to solve. At the same time, "un-forthcoming" sellers often need desperately to sell, but are in denial, or exhibiting "pain avoidance."

On the other spectrum, we have the "Chatty Cathy" who cannot stop talking about her house, and expounding on every single real and imaginary (as in made up) feature and benefits of her house. Sometimes, these folks are as desperate to sell as any close-vested seller out there. However, the "Chatty Cathy" is going to be less work to close on, if it's gonna happen.

So what? Well, it's important to figure out if we're dealing with a time waster, or as as Robert Allen puts it, "a wanter," or a desperate "don't water." Either way, we NEED to know why a seller is selling.

This usually requires a 30-minute routine of friendly questioning according to Barney Zick. He said that a seller can't lie to us for more than 30 minutes about why they're selling. I agree. However, some sellers are so slow at giving information we can't tell what they're lying about for probably 45-minutes.

It's in the cases where the seller is not forthcoming that we might be tempted to walk, or short-change the negotiation process by not allowing ourselves, and the seller time to "work" on the deal.

We don't like to admit that, as buyers, we have a need for satisfaction in the negotiations just as much as the seller does --- even if the seller is not aware of his need.

So going slow, controlling our emotions, and allowing the conversation to meander across all the seller's motivational elements, allows us ti
me to naturally develop a rapport with seller, find the "becauses" that are necessary to justify what we want, and find out what we can give up in order to give the seller what he needs (and less about what he might "want") --- and achieve satisfaction in the negotiations so that all parties know they worked their butt off to get a deal struck. This is an important moment to remind ourselves why we want all the decision-makers present during the negotiations or "everybody" won't feel satisfied."

Meantime we'll equity strip the fast-talking, motivated sellers that have diarrhea of the mouth! j/k

Friday, December 11, 2009

Give Me $8,000 So I Can Buy Another House!

The following is a response to a guy who wanted to know how to Sub2 his house that had no equity. Here's the text of an email where I showed a guy how to pull cash out of his no-equity house, and come up with 20% down to buy a cheaper house for himself. [please excuse the typos, this is the exact text (me in blue), the seller is green]

If I seller finance my primary residence the mortgage is still on my credit

Yes, this is true.

how does it help me purchase the REO as my primary residence?

You have to show that your old house is "sold".

You will have documentation showing the sale (HUD1 Statement) and copy of Land Trust, or Land Contract, or Promissory Note (Cognovit Promissory Note), or Deed of Trust, or whatever you use to facilitate a sale. I like Land Contracts coupled with Cognovit Promissory Notes.

This doesn't
transfer title, but the Cog. NOTE makes the Buyer personally liable for the entire balance of the note without having to get a judgment (this is a rarely used or understood document, but I use it for leverage in getting a deadbeat out of my property in the event they become delinquent).

The REO wants $88,000 cash I may be able to scrap up 10% but the hard money I contacted wants 30% down and charges 13.99%.

Hard money lenders do not lend on owner occupied properties that I'm aware
of. And their money is only temporary. As far as the price is concerned, you're talking about raising $8,000 as your total down payment?

This would equate to 10% for an FHA loan. Are you
sure you can't get conventional financing with that much down on an REO? Are you wanting to use a hard money lender to avoid having to provide a credit and financial statement? I would talk with a mortgage broker and explain your circumstances and see what he tells you.

Selling your house on terms is EASY. There's lot of folks with five to ten
thousand down and need seller financing with no credit check.
What's your house worth in this market?
What's the payment? What are the existing terms of your loan? Are the payments fixed, or is this an adjustable interest rate with a "bad" future payment?

Assuming the payment is fixed, and the loan has no balloon payment, I would advertise your house as "owner financing", or "seller financing" or whatever people will recognize and do the following to get it sold:

1. Ask 10% down (Take what they have, and finance the rest over six month
at most)

2. Say "No qualifying (and/or) No bank Qualifying" in your headline

3. "Take over payments"

4. List principal and interest payment only, not the entire payment with tax/ins/hoa's, etc. Take nice pictures of your house inside and outside.

Go to photobucket and upload your pictures.

Copy the html code from photobucket and paste that in the body of a craigslist ad. This will show all your pictures of your house with no limits in the body.

Go to craigslist and advertise your property.
List all the amenities of the house. Figure out which type of buyer would most like your home. Who would it most appeal to?

Young families that need a yard?

What is the best features of your house?

Large Yard, rural---no neighbors?

Close to the largest shopping mall in the country?

Best schools in the


Emphasize that to the most likely prospect. This is called
"message to market" advertising. You don't want to pitch senior citizens on your house if it has lots of bedrooms, or two story, etc.

However, a large
family would be very interested, so mention that in your ad. Put your contact information ever three or four lines in your ad copy and create a sense of urgency about the deal "This won't last long with these terms!" "Don't Snooze, or you'll lose on this deal!"

Call Johnny today!

List the schools, shopping centers that are close by including any entertainment centers, etc.

Now... Go to Kijiji and set up an ad for your house with pictures you took.

Include all the amenities in the information box they provide. List the
size, bedroom, garage size, fireplace, sprinklers, appliances included in the price, etc and every three or four lines put a call to action in the body inviting the prospect to... "Call Johnny today at (333) 333-3333 or email at "noequityseller@aol(dot)com" before it's too late!"

Repetitive calls to action get results. Answer the phone every time. Don't let prospects go to voice mail if you can help it.

That said, it's better to hold a "cattle call" for your
prospects. This means you're having an open house on Thursday at p.m., or whenever it works for you.

This may be hard if you're not getting a lot of
calls. So do your best here. But creating scarcity is a great motivating tool, if you can find a reason Buyers need to act quick. When two more Buyers show up at the same time, it creates some competition. You get it.

Make sure you've got your contracts together that you want to use.
In your case, you're not going to get a spread on the payment, so don't
worry about that. You just want someone to babysit your over-leveraged loan until the value comes back. Chances are the Buyer that you sell to will move in the next three or four years without refinancing. This will happen.

Just re-market the house for
another 10% down and see what happens. Eventually the loan will start paying down significantly. You might end up keeping the house after 10 years, when the loan balance returns to a retail amount. Who knows.

Keep the objective in mind: Sell the house to someone who can afford the
payments, so you can qualify for a cheaper house, not so you can make money off the house anytime soon. Don't get greedy, when you discover the house has some appeal. Meanwhile, if you can get $8K from a new Buyer and then use the $8k you already now have $16,000 for a down payment. Could this help you qualify for a new loan easier without using a HML?

This amount would be 20% down! There's Sellers who might finance you, even
at a premium, but without qualifying you, if you gave them $16 in cash. Just saying.

That's it for me right now.
Hopes this helps.



Want to know exactly how to do this step-by-step? Click Here: "Screw The Bank!"

Wednesday, December 9, 2009

Successfully Finding The Juicy Deals Without Competition

The latest news from my "MIT" (Millionaire In Training) is that he just spent about $1500 mailing out to 4,000 prospects this week.

I'm so proud. He's going to be making a bunch of money in just a few weeks. Usually, the newbies start out with such baby steps, and the results are so minuscule up front that they want to quit before they even get going.

Do you know what the average small business start-up cost is? It's around $100,000. So even if MIT spends $5,000 in postage while overcomes the learning curve, and pitches "Sub2" deals for a couple of months before he makes his first $10,000 of the $50,000 in equity he's likely to capture, he's still so far ahead of the average business starter-upper that it's sinful. Imagine if MIT just finds four deals this year and grosses $50,000 each deal. That's $200,000. Not bad for a "tiny" postage bill.

If you would like to learn what MIT is doing to make money click here >>> "Screw The Bank!"

"Screw The Bank!" - The Training Course!

Whew! Finally. You can relax now! Yes, my course is ready and coming in January in FULL FORCE.

The launch is being rolled out first as a professional training program offered to the San Diego Creative Investors Association members and friends.

I have received so much help, encouragement and feedback from them that I thought I would just give that group first crack at what I've got to offer. Plus, this is a hard group to satisfy since they didn't just fall off the turnip truck.

Meanwhile, this course has been a challenge to assemble, but very satisfying at the same time. Now, what I hope happens is that I catch a comet with this program and begin to share it nationwide.

There's a lot of folks who don't know how to start, need a step-by-step program that is easy to following...and makes lots of money for them.

There's lots of stuff to say about this money-maker of mine.

Those interested in knowing more, or are just curious about what I'm offering the SDCIA group, click on the picture of the "SCREW", or click HERE

Friday, December 4, 2009

When Spam Is Not A Delicious Lunch Item...

Pardon to any posters to my blog, but I'm now having to implement all the security checks to keep anonymous spammers off my site.

Unfortunately somebody thought they would advertise their (bogus) m.l.m. affiliate product as a "comment" on my blog (which of course broadcast to all the rss feeds to you all).

And...I couldn't remove it the normal way.

Well, that sucks because that means deleting blog entries and then re-posting them.

Not gonna happen twice.

Turkey Day In Southern California

Yes, wishing you yet another wonderful Thanksgiving from Sunny Southern California!

We don't "dress" our Thanksgiving Turkeys out here...

We "undress" them!


Just being thankful today for God, my family, the food, and you!

Happy Thanksgiving everyone!