Tuesday, December 21, 2010

Push In The Clutch...! Or Else.

“Push in the clutch.”

That was my first driving lesson.

I learned more later.

As we all piled back in the car with our milkshakes, hamburgers, Cokes and what not, I was excited to continue to demonstrate my prowess as a newly minted driver.

Seat belt: check. Mirror: check. Adjust steering column height: check. Everything was good.

Ignition key: check. Then I gently, but firmly turned the ignition on. Suddenly like awakening a drunk who didn’t know where he was, and with a spasm and lurching motion, the car heaved forward and immediately died.

Everyone’s food landed on the floor along with milkshakes and pop all over the upholstery, carpeting, and our laps. Whoopsie! I forget to push in the clutch. My bad.

Well then, I tried that twice. Crap, it was like a McDonald’s exploded all over us. Now, nobody was in a mood to ride with me. Never mind I got them to McDonald’s safely and without a hitch. Such short memories!

Well, I see the same misfortune today as newbie real estate investors don’t do first things first. They might know what to do, but they try to take shortcuts, or just forget.

What is this first thing? Treat the business as a business, not a hobby ...or a job.

Doing just that ...first, puts anyone down the road an extra two hundred miles.

Speaking of doing first things first...

Here’s a Christmas Present for You...

“7 Secrets For Success In Business, Plus One”

  1. Treat Your Business Like A Business, Not A Job.
  2. Keep Good Records.
  3. Test And Track Your Marketing.
  4. Market.
  5. Maintain A Protocol For Moving Prospects Through Your Pipeline.
  6. Discipline Your Work Schedule
  7. Protect Your Most Precious Commodity (Your Time).
  8. Charge What You’re Worth.
Merry Christmas To You

Wednesday, December 1, 2010

Character and Personality Matter In Sub2 Negotiations...

Put on a happy face...

Have you ever been fed up with rejections on your offers, or received lame reasons for having your offer rejected?

Has it ever occurred that the seller just didn’t like you, or worse; didn’t trust you?

While getting meaningful concessions out of a seller, Barney Zick once suggested that building both rapport and a relationship with a seller, if we want terrific terms on real estate, was an indispensable element in the negotiations.

About four years ago, I heard John $Cash$ Locke say, “People will listen to you if they like you. They’ll do business with you if they trust you.”

Frankly, I used to confuse “like” with “trust.” Probably because I would trust someone only because I liked them. That’s bad judgment of course, but I learned the hard way.

Meantime, con men depend on that confusion and lack of sophistication to take advantage of people. Americans in general are suckers for confusing a friendly personality with a trustworthy character. It’s a wonder that more people don't buy tire chains for a trip to Death Valley in August if the salesman is successful at making them feel good about it.

As professional negotiators, we may find prospects that confuse good personalities with good character.

I called a real estate agent about his property. He told me that he was desperate to sell, but jokingly informed me that he wasn’t “some unsophisticated dipsh-t that wrote with crayons.” We both laughed, but I got his point.

He was telling me that he was looking to deal, but wasn’t prepared to give away the farm. He disarmed me by being likable, but also let me know the limits, so that we weren't taking up each other's time on an unworkable objective; that was me stealing his property, and him giving up the farm...

Well, he really wasn’t giving away the farm, and so I didn’t get my steal. But those extremes are for amateurs, not pros.
However, I had a good feeling toward the agent that day and I looked forward to listing one of my properties with him when it was time to sell. Why?

Because he was likable, and showed me that he could communicate with character. He didn’t lie to me, or lead me on a goose chase and waste my time. That agent was one of the most successful in the area.

I think it’s because he knew how to be likable and trustworthy.

When we’re looking for deals where the seller is going to be participating with the financing for any length of time, doesn’t it makes sense to make friends, build rapport and create trust?

If not, we’ll turn our negotiations into battles; turn win/win into win/lose; and fail to capture the juicy deals that only come after the prospect lets his guard down.

Now, some investors don’t learn this until they run out of money or credit.

If we’ve been practicing in the “blow in, blow off, and blow out” method of deal making, then we’ll be incredibly rusty when it comes to negotiating the cream puff deals that require rapport and trust to get the seller to participate in long term financing schemes ...and in order to make the big bucks in this Sub2 business .

I say, "Start now with a charming personality and winning character."

Monday, October 25, 2010

"Sub2 ...No Down, My Black Eye...!"

I was alerted to this article written about three years ago that still circulates about Sub2 investing. The author attempts to show that Sub2 was a viable investing strategy (which it is), but then floods the article with the worst advice and misunderstandings ever. Me in Blue.


"Of all the real estate investing strategies available to investors today, probably my favorite is what is called sub2 or subject to. Buying subject 2 basically means that you as the investor agree to buy a sellers home subject to the underlying financing on the property. One of the things that makes buying this way so effective is many times you can purchase homes without any money of your own, or putting your credit on the line, in other words real estate investing with no money down. You then can turn around and find a buyer of your own that you’ll sell to on a lease-option agreement.
  • Subject to– real estate investing with no money down
Probably 99% of the time when a person agrees to sell their home subject to they are a number of months behind in their mortgage payments and are seriously close to losing their home to foreclosure."
Uh, no. It may be that 99% of those behind in their payments WISH they could sell their home Sub2. However, few Sub2 investor buy houses that are behind in payments unless they are actually bargains.

Well, way under-priced houses rarely get sold using Sub2 financing, unless they're wrecks. In fact, the best candidates for Sub2 deals then, are newer homes with little, or no, equity that need ZERO work ...and the owner needs out yesterday, for any number of reasons --- and the need for a SURE closing.

Meantime, once a loan defaults, the lender will be all over that loan with investigations and profiling.  Banks may not immediately schedule a foreclosure auction, simply because the loan's in default... but by gawd they'll schedule the auction if the house isn't being maintained, is vacant, has 'enough equity,' AND there's been a change in ownership.
Meantime again, just because we can get the deed to a property, doesn't mean we should.  

If the loan was somehow brought current, and the bank didn't call the loan, we would still have to capture enough equity to overcome the arrears/fees, and/or get enough money from a subsequent buyer to make a profit.

Well, lease/options don't command very big 'considerations.'  Especially on houses that aren't bargains.  Maybe you'll get 2% down from a tenant/buyer, and that's if the house needs nothing.  That is unlikely enough to cover the costs of reinstatement of the defaulted loan(s).

So burying our tenant/buyer's consideration in loan reinstatement costs, and we've got nothing for our efforts, except maybe a promise of future equity. For that we must wait forever ...meantime no spending money.
"So when it comes to those payments in the arrears, someone must take care of them, either you as the investor-buyer or someone else. What you will obviously do is leave that to your lease-option buyer."
Oh, yes, Lease Option buyers always have enough money for us to make a profit, AND enough bring the loan current. Please.
"They will do this by giving you a down payment or what is called option consideration. This amount should be high enough to cover the back payments and any fees or penalties..."
Yes, it sure better bloody be enough. Fat chance.
"They then will take over the payments already in place on the home and then at a certain point, for example in 12 to 18 months, apply for a new loan during which time you will be “cashed out” of your position..."
Yes, that happens just like that ...in a parallel universe. What actually happens is the tenant/buyer bails, and we sell the house twice, and get another $30,000 down. Yippee. That's the only saving grace for a deal like she's describing.
"There are a myriad of real estate investing strategies, anyone when utilized the right way can prove to be very profitable. But of the many investment strategies buying sub2 is still my favorite. Simply put, buying subject to allows for real estate investing with no money down and you don’t have to go through lender qualifying."
It may mean no money down for the investor, but it also means NO PROFIT anytime soon for him either.
"So for those credit-challenged individuals, that last part makes this one of the most valuable investment strategies, in fact not just for those starting out looking to learn real estate investing but also for seasoned professionals."
Anyone learning real estate investing from this author is doomed to a horrifying crash and burn.  Sub2 is NOT for those with no cash, or a way to buy properties that are months behind in payments.

It's suited more for sellers with a current loan, and who may not have sufficient equity to pay an agent to market their property, but it's not a good answer for a defaulted loan situation.

P.S. I'm supposed to give credit to the author here, but for the sake of the author, I'll just leave that part out. I don't want to expose her ignorance.
If you would like to know how to actually make a LOT of money in Sub2 without getting a black eye ...without rehabs or making back payments ...but find the sellers who are happy to give you their deeds ...without questions ...click below and watch this 22-minute Sub2 presentation I have for you...

How to create huge, passive cashflow without the a black eye.

Tuesday, October 12, 2010

"One Sub2 Ringy Dingy, Two Sub2 Ringy Dingy"

"Is this the party to whom I am speaking...?"

Unfiltered calls are the pits!

Last month I abandoned all heretofore protocols of mine and posted an unfiltered craigslist ad.

Why? I had a friend who had a friend who needed out of her small house yesterday. Frankly, I don't like doing low-end deals, especially, if I can't get the deed, and it's going to be lease/option deal --- and especially when the house isn't that nice.

That's nearly 3 strikes. The third strike would be trying to cover an adjustable loan, on an underwater house. Forget that.

However, my friend's friend needed help so I thought, "Well, if I owned an upside down rental, and needed a way to protect my credit, and I didn't know any way, and I found a guy like me to help me, he would be my hero." So I succumbed. I'm so desperate to be a hero.

I didn't have a buyer's list ready for either a lease/option house, or one this cheap. So I had to scramble to get things together. So, I experimented with the generic craigslist "lease option" ad, based on some proven ad copy I developed from earlier times. However, I left most of the qualifying information out of the ad to get the largest response, in my attempt to remind myself why highly tailored ads are critical to maintain --- and used to avoid having to wade through a bunch of trash calls.

My experimental ad copy worked, but I left out another important ingredient. Meantime, I got exactly what I advertised for...a pile of unfiltered buyers with no money for down payments. Whoops!

The real point of this, is that certain shotgun ads work. However, when it does, we'll be on the phone forever with "Looky Lou's!" who aren't serious (or ready) to actually buy our houses if we don't first say what we must have... Otherwise, we just get the just curious, and the tire kickers, that waste our time.

So what was the missing ingredient here, besides not qualifying with the ad copy?

Why, it was not using voice mail to capture and qualify leads. If we're not using a 3rd party lead capture, then what? It means that we're gonna have to do the screening in person.

In years past I was the "Marvin Milquetoast" of phone interviewers. I all, too often, operated from my heels. I rarely felt in control, or confident about how to cut to the chase. That was then. Not no mo.

Now, I've got one question that I ask every buyer before we get down to business...to see IF we can get down to business, so that I'm not wasting my time personally helping the curious weigh their options at my expense. And what is that "one question?"

You can find it in my creative real estate investing course I call, "Screw The Bank!"

It's my "no credit - no down payment - no hassle" real estate investing system that allows me to find the most anxious buyers and sellers in this market who will let me pocket $30k in 90 days."

Sunday, September 19, 2010

The Big Sub2 Stick...

It has occurred to me that too many creative investors really aren't that "creative" at all, in the usual sense.

Once, creative investors defined themselves by looking beyond the obvious (thus creative) to find profitable ways to make money in real estate that traditional (non-creative) investors might look passed.

Subsequently, the creative investor found ways to make even more money during the holding time, that the average investor wouldn't consider.
Let's look at "seller financing" as an exit strategy. "Ugh!, says the traditional investor, whose only exit strategy is buy/hold/sell for cash.

Yes, seller financing is considered the red-headed step-child of exit strategies for traditional investors. Nobody wants to look at it, or claim it as their own, because to the traditional wholesaler, flipper, or merchandiser, this represents a failure to perform...

That is, the objective of the traditional investor/flipper is to buy for cash and immediately sell higher for cash. So having to finance a sale, is like saying, “Mommy, I did a boo-boo, please spank me...” Okay, maybe that’s just me... :)

The old way of flipping works fine until there's a hiccup in financing, appraisals, or inspections that make the property unsellable for the "right price". Then "Plan B" goes into play...or, "Plan C'... or, "Plan D'..., or Oh, crap, not the "Last Resort Plan?" Yes, seller financing. This exit strategy just represents a "muck up" if you will of the original plan to “get out fast for cash.”

For the Sub2 investor whom isn't bound to traditional liquidation methods, "seller financing" is "Plan A", not the “Oh, crap!” plan." Before I go further, one of the biggest sticking points about the “Oh, crap!” plan of seller financing is the risk of default by a buyer.

The average investor fears the "liar loan squat." That is, the buyer stops paying and won't move, and forces the investor to cover the payments on his own investment situation.
This is what the amateurs sweat, twitch over, and dread and dread, as if it were a diagnosis of terminal cancer, or permanent head injury (just to make it vivid).

Yawn...this only happens to amateurs who don’t know how to limit risk with the “Big Stick.”

For the professional Sub2 flipper, “liar loan squatters” are some faint anecdotal thing that happens to others. At the same time, those who inform themselves on how to limit the risk using the “Big Stick” make consistent, huge money in less time than the average investor does.

Meantime, the profits on a Sub2 deal, that appear at face-value to hover between "average and 'don't do it'," are substantial. And of course, the profits can be unbelievable on Sub2 deals that hover between "dreamy and heavenly".

However, limiting risk, is only the beginning of the profits. The juicy profits are in these five words: “Down Payments. Rinse And Repeat.” That just means knowing how to find buyers with down payments, and when/if a default occurs, elegantly moving in another buyer who can "hopefully pay", but nonetheless has ANOTHER down payment. Yay, for repeat seller financing and multiple down payments...!

Frankly, I'm only talking about seller financing of marketable homes that "everybody" would like to own...not the 45-year old, stucco boxes with one-car garages, gravel roofs, and wall heaters (I've owned many of those).
Who wants to buy one of those and put up a bunch of money...? Nobody. That's why the government invented low-income, no down, HUD loans, so buyers with no taste (j/k) can buy these unmarketable, ugly, obsolete hovels that nobody wants (after making sellers do all sorts of retrogrades to make them "habitable" and financeable).

So, what is the “Big Stick?” you might ask...? Hmmm?

You can find the "Big Stick" in my Sub2 investing course I call...
( Click Here )

Saturday, September 18, 2010

"Honey, I Found A Sub2 Sucker...!"

I've been offered some bizarre sub2 deals. One lady had several rentals to get rid of that she was ready to walk away from. I didn't know why she would walk away, but they were all over-financed by a large margin.

Sometimes, upside down deals can be worth "messing" with, if there's no time limit to refinance the loans, and the existing financing is stable. That is, the loans are not "neg ams" negative amortizations, interest only, or adjustable loans with high interest caps, and the like.

When the principal keeps going up, and the income doesn't...trouble happens. When the payment goes up and the value doesn't...trouble also happens. Anytime, the payment structure is unpredictable or likely to get out of control...trouble happens...for those that, without thinking things out, do these deals against all better judgment.

Well, when I found out what her payments were, I thought, "This was either the worst terms ever, or the best ones ever. She was $200,000 underwater (over-leveraged) with her loans, but her rents covered her payments.

Well, after talking with her I discovered the most amazing thing... And it wasn't what I expected...

She had pulled a quarter million out of these properties two years previous, then the market tanked, and finally she was left with a quarter million in the bank, and upside down by the same amount. Of course, I'm kidding... She didn't have squat in the bank...left. Like many amateur investors who accidentally "hit a jackpot" in real estate timing, she blew the money on...whatever...!

Okay, whats this have to do with "a Sub2 sucker deal"...?

Well, despite the common misconception, not every seller writes with crayons that gets themselves in a crack with real estate and is willing to do a Sub2 deal with us. Some sellers are quite sophisticated. Meantime, it's up to us to figure out which deals are worth a hoot, and which ones just make us "look" like we write with crayons in the aftermath of a deal gone terribly wrong.

That all said, let's take a look at a good deal and then compare with some bad ones...

Good deal...
  • Seller has one or two loans that total 90% loan-to-value, or less (or 10% equity remaining, or more).
  • Seller needs out of the payments/situation "yesterday"
  • Seller has "gone through" at least one failed escrow and perhaps two real estate agents.
  • Seller has a fully amortized, fixed rate, or reasonably-capped ARM loan, with no balloon payments coming due.
  • Seller needs to salvage/maintain/improve his credit.
  • Seller needs/wants to qualify to buy a cheaper/different home.
When the stars line up, we've got a good deal. Now, here's the anatomy of a "bad" deal from a "good" prospect.
  • Seller has one or two loans that total over 100% loan-to-value, or more (or no equity remaining).
  • Seller needs out of the payments/situation "yesterday" and can only short sale, default, or modify the financing .... and screw his credit...
  • Seller can't list his house conventionally, because he'll have to pay out of pocket for the closing and real estate costs..
  • Seller has a fully amortized ARM loan with higher interest payments, high cap on the interest and a balloon payment due (all of which will torpedo this deal).
  • Seller needs to salvage/maintain/improve his credit (He's screwed).
  • Seller needs/wants to qualify to buy a cheaper/different home ( His option used to be to, "buy and bail," until last year, when banks got wind of this tactic ). That is, the seller maintains his credit, buys another house, cheap, and then lets his old house "go back to the bank" (maybe the same one that made him the new loan...! heheheh.
To recap: Good deals:
  1. Motivated seller who writes with crayons (just kidding) and has burned through a couple agents and failed escrows.
  2. Low interest rate loans with no balloons or adjustments.
  3. At least 10% equity.
  4. Wants to buy another house immediately.
Bad deals:
  1. Motivates seller who writes with crayons (just kidding, again!)
  2. Teaser rates, high rates, negative amortizations, high interest caps, early payoff dates.
  3. No equity, or upside down.
  4. Dreams of buying another house sometime before the "rapture"

Thursday, September 16, 2010

3 Steps To Sub2 Success...!

I responded to an email last night that I think you should read...

A newbie investor wanted advice on how to get into real estate investing...

I receive requests like this every week and a half.

Frankly, I used to lap up the opportunities, until I realized that the ones wanting my help didn't really know what they wanted. I discovered that unless I had a very clear, precise idea of where they wanted to go, it was a case of the blind leading the blind. No thanks. What really frosted my cake, was that none would follow my advice anyway, since they really weren't committed to their blind journey in the first place.

So, I decided I was done with that. Now, when anyone wants help, I have them do a little exercise (not little) before I waste time. Here's what I said to my future "mentee" last evening...

"John [name changed],

Size yourself up...
Evaluate yourself honestly and frankly...and ask...

  • What are my skills?
  • What are my strengths?
  • What are my weaknesses?
  • What have I set out by “faith” to accomplish, that seemed impossible, but succeeded in doing despite the obstacles? That is, how determined have I been at following through to the end of a difficult achievement...?
  1. What is my most important, pressing, must-have, goal?
  2. What is my absolute deadline that it must be achieved?
  3. What is the consequence of it not being achieved other than my life will come to an end, and/or I’ll be embarrassed to the point of committing suicide, because I’ve told everyone in the world what I was going to do, and by what date so it MUST happen, or else?

Frankly, if you can answer the last 3 questions, I would love to help you further. However, if you’re not really sure about these yet, then I’m going to be a poor source of help.
Don’t feel bad, if this isn’t a solid situation for you yet. I understand.

However, nobody does squat, really, without knowing the answers to those three questions first, including me. So I just gave you some very important feedback that will set you ahead of the pack.

Meanwhile, read everything you can on real estate, and above all control your thoughts. Remain positive and thankful for everything you have, and completely STOP focusing on failures, doubt, worry, self-doubt, or what others might think of your goals, dreams, deadlines, or accountability to them.

Finally, I highly suggest you get a copy of both of Tony Robbin’s books, "Unlimited Power” and “Awaken The Giant Within”, and finally “Get The Edge.” You might not be ready for these yet. You have to be in the mindset of changing the way you think.

It may take something fairly traumatic to “get you there”. Meanwhile, the books are a lot to absorb, but “Get the Edge” is not hard, and is fun to listen to. However, if there’s a problem or challenge in your life right now, Tony Robbins has enormously helpful things to offer, that have changed my thinking habits 180 degrees."

Now, I'm waiting to see if John examines himself well enough to be open and clarified in his thinking to absorb and appreciate anything else I have to offer. We'll see.

Saturday, September 11, 2010

"When You Absolutely Must Have $30k In 90 Days..."

Wow, after three weeks of preparation, I just finished the final touches on a 30-minute presentation outlining how I learned how to do "subject to" deals from my friend Mitch.

In the video, I share the story about Mitch, the guy that we all thought was a drug dealer, because he drove nice cars and lived in a view home with a pool, but nobody ever saw him at work.

Ha Ha! Little did we know that Mitch was a professional negotiator and sales trainer that morphed his training into buying upscale houses from motivated sellers without down payments or using his credit...

Well, I got Mitch to tell me what he was up to several years ago now, and frankly, what he showed me changed my life forever.

Normally I put content here, but today, I'm just offering a free video presentation that shares exactly how my friend Mitch made thirty or forty thousand dollars in just a few days of buying pretty houses without qualifying for loans, or offering up his credit. In the video, I also show examples of what can be bought using "subject to" financing that surprises most people.

Here's the link to the video... FREE VIDEO PRESENTATION

Friday, August 13, 2010

"When Cash Isn't King...Then What...!"

We've all heard the term "Cash Is King." And cash certainly open doors in most circumstances. A couple of questions...

What happens when a lot of players have cash? What advantage can we maintain here? Answer: Sometimes there is no obvious advantage and it's just a matter of who came first; who has the best relationship with the "gatekeepers", or perhaps who has the best "proof of funds", and finally, who has the lowest barriers to a closing.

Well, that's all fine and dandy, but once we've got the property, paid all cash, and buried all our equity into one egg (or two), then we're done investing for a while. Unless we can pull our cash back out, we're stuck waiting...and watching those with remaining cash buy up more deals. What to do? This is exactly the question my friend "Joe" [name changed for privacy] asks in the following actual post made in a forum I participated in dated 8/13/2010...

Quote - "Bob" :
"...most of my purchases were all-cash, many which I refinanced later, in order to buy more properties. You might logically think that paying all cash was a big advantage, but it really wasn't at that time. There were so many multiple investors with all cash bidding on the same property (ie.30 offers and 15 being all cash), that "all-cash" just got you in the door but didn't guarantee anything. And in addition, in order to have your offer get serious consideration, you had to waive termite expenses, waive all repairs, buy AS-IS, waive appraisal, etc., etc.

Now I am maxed out and cash poor, looking for loans that are almost impossible to get (keep getting turned down). Before, I was a sheep in wolf's clothing but now I will be forced to get creative to get into any more deals.
Now my friend Bob has to get creative, because all his cash is buried in a couple of deals. Just for giggles, let's imagine that Bob decided not to pay all cash, but do some creative financing at the get-go to make money.

Let's say that instead of paying cash, he found a seller who wanted out of his mortgage payment "yesterday" if you will, and Bob offered to take over his payment today, instead of waiting for a conventional buyer. Let's list some criteria for the creative deal...

  • the house was in the upper/middle price bracket of $500,000 (not some dump).
  • there is less than 10% equity remaining (>$50,000).
  • the seller needs out today, not in 30, 60 or 90 days which a conventional sale/escrow would require.
  • the payment was fixed for 30 years at 5% with no balloons due. ($2,415/mo)
  • the seller gave Joe his title in order to seal the deal and get relief from the debt.
So Joe gives the seller some moving money, takes title, and takes over the loan payments. Now what? How does Joe make money again, you ask.
  • Joe only gave the original seller $2,000 to move.
  • It cost about $200 to close and record the deed and another $300 to clean the house, mow the loan, and treat the pool for a total of $2,500 in overhead costs.
  • Joe advertises the house for sale with seller financing.
  • He asks for $525,000 with no qualifying, and a small down.
  • He finds a buyer with $25,000 for a down payment. This is less than 5% if the purchase price, but several times more than Joe gave to the seller.
  • Joe nets $22,500 in cash from the sale today.
  • Joe now waits for the buyer to refinance the loan and pay off his remaining equity $50,000.
So, again, how much money does Joe have tied up? Did I hear a "zero"? How much money does Joe have in his wallet now? Over $20,000? And how much money does Joe need to do another deal? Less than $3,000?

And who is giving Joe permission to make all this money so easily? Nobody, except Joe.

No banks are telling him "no".

Not even his wife is saying "no" to this deal. Hmmm.

How many deals can Joe do before he runs out of money? If you have an answer, you're the profit prophet of the millennium, because there are not limits --- except Joe's time, energy and desire.

This was called a typical "subject to" transaction.

P.S. If you would like to know how Joe will do this without burying his money in deals, click the following link:

"Make Money With No Credit or Down Payments Today!"

Scroll to the bottom of the page and click on the product image for a free video presentation.

Monday, August 9, 2010

"What's It Worth To You..?"

Bernard “Barney” Hale Zick (1948 - 2005)

"If you will do for two years what nobody else is willing
to do, you will be able to do for the rest of your life
what nobody else can do."

(Barney Zick - Creative Real Estate Investor / Trainer)

Friday, August 6, 2010

Vision says…
  • "I will have this happen REGARDLESS of the outside circumstances.
  • The world will either see me victorious; pounding my chest from the summit of the mountain, or find me dead along the way, because I refuse to give up.
  • I will not be denied!

Sunday, July 4, 2010

Starting Out or Starting Over?

I just came across a professional blogger who reminded me how important it is to wear the hat of "poverty mindset" when negotiating the purchase of income property. Okay "poverty mindset" goes completely against the grain of all us Tony Robbins disciples. You know, "you are what you think", "I can do what I believe I can do", etc. All good and important stuff, but not helpful if maintained at the "WRONG" time.

Have you ever noticed that when you've got a few bucks in your wallet, you tend to spend it? And later, you discover you didn't have as much as your remembered having, when you really wanted it? And then couldn't remember where the money went in the first place?

This is exactly what happens when we've got money in the bank and lots of credit when buying income property. We're tempted to spend and use up what we've got without REALLY analyzing whether or not we are actually negotiating the "best" deal for ourselves or not. We get lazy, and give in to prices that are too high. We are tempted to "get along" when we've got cash and credit.

When I first star ted investing I didn't have any cash or credit (I had some of each, but not enough for what I wanted to accomplish). As a result, I was literally forced to get creative and force deals to work that I could actually close on. This meant waiting for the juiciest deals and the most motivated sellers. I necessarily could not put a lot down, or depend on my credit and "overpay" for any real estate. It kept me on the narrow path of wealth. Later, when I had money and credit, I got lazy and would think "average" deals were just peachy. After all it didn't require all that pesky hunting and pecking for the really profitable deals. That was of course unbelievably stupid. This is where "buyer's remorse" was invented, I'm sure.

I am hearing about investors all the time, who over-pay and under-negotiate their real estate deals. Yep. I cringe at their ignorance and impatience. I really cringe that I would do that today, if I didn't know better myself...as I have done in the past.

Frankly, the laziness is short-lived regardless, or at least can only occur in spells, because eventually we run out of credit and/or cash once again. Then what? If we want to continue to invest we have to rediscover how to be creative in our real estate financing. Guess what? That's when we start really making the money again.

What's better, is we can just simply pretend we have neither credit, nor cash, and keep that hat on accordingly when we negotiate for deals, and then we can know that we're striking the most profitable deals for ourselves and not giving away too much...or paying too much.

It costs us a lot to wear the wrong hats during a negotiation.

Let me simply sum this all up with the instruction: "Keep the right hat on, at the right time".

If you'd like to know how to buy income property without one ounce of credit, and no down payments and keep the right hat on at the right time...
click here.

Friday, July 2, 2010

Sub2 And Multifamily Income Property

I'm in the throws of "master lease option" negotiations on two mid-sized apartment buildings in California.

One building has low rents and the other has missing rents. One seller wanted to know what happens to his credit if I missed a rent payment. The other one objected that I was making no guarantee that I would refinance before his loan came due.

These are great objections, because once they are met, then we get that much closer to a deal.

There's more.

I've re-learned never to negotiate over the phone. I was sandbagged on the phone two days ago by a seller who insisted they I tell him what I was going to offer him right then.

This was my second phone conversation. The first time I talked with him, I mentioned the out of state units that are presently master leased. He didn't flinch. However, this time, he was impatient to literally tell me to "go to....(a hot place down under), if I was going to suggest a master lease with him!"

Well, I'm used to flat rejections, but this is a time to remember that telling a seller over the phone what you want to do without first putting something in writing is a mistake. We need to make the offer in writing first (even if it's a letter of intent), and at worst followup on the phone after first submitting something in writing (with all the objections handled in writing).

It's all about the order of things.

Interestingly, I'm still gathering up potential objections to study. So the worse the seller's attitude is, the more I'm gathering ammo for my next "objection-meeting" presentation. The question I'm asking myself today is what my limit is on the security deposits? My thought was to offer only one or two month's worth of mortgage payments.

However, this one project is so underwater, that any money I give the seller is just money I can't use to cosmetically upgrade the project, keep it current, and make it more marketable. Hmmm.

Meanwhile, I'm sending out more letters this week to the same group of sellers I found online, and in my driving two months ago.
Anybody care to give me advice here?

Meanwhile if you would like to know more about taking over loans, getting the title, without credit or cash, click this sentence.

Thursday, April 15, 2010

Sub2 Demographic Marketing

For the last year I've been experiencing a much lower response rate on my direct response marketing. Frankly, it's my fault. I've gotten lazy. And greedy! Yup! Instead of tightly narrowing the niche of prospects that I wanted to call me, I opened up the spigot and included a larger portion of loser prospects. Well, including a larger number of unqualified leads, just sends the response rate, by percentage, into the toilet. Whoops. I hate toilets.

So, what to do?

First, I had to remember that in today's market, the stigma of being in foreclosure is practically non-existent. Without over stating this point, it's almost a badge of honor for someone to be included in the "bubble market" foreclosure club, as I put it. So why does this effect the sub2 game?

Well, in the recent past, our direct response marketing would attract those who wanted to avoid foreclosure like flies on you-know-what. Today, with government interference with the foreclosure process, and buyers waiting for the next "bail-out option", borrowers headed for trouble will think seriously about squatting in their homes until the last minute, expecting the bank to pay them cash to get out, or....offer them a "rent option" in return for the deed. This negatively effects the motivations of our more likely prospects.

So, what to do, again?

We focus the niche more tightly. We limit our profiles (farm prospects) to just those homeowners that are the most likely to want to save their credit, and not take advantage of the bank...get free rent...and/or a cash pay-out to move. Who are these folks?

These are folks in the upper price point neighborhoods. These folks have more to lose. They have assets that a bank will attach in the event they go into default. These are the borrowers that have too much in the bank for the lender to even consider a short sale, or even a loan modification, in most cases. Do these sellers actually get motivated to give us their deeds?


Every price bracket has motivated sellers. However, in the upper price ranges, the sellers are more proactive and practical in ridding themselves of a property they must sell. I'll go out on a limb here and say these same owners have more faith in themselves than the cheaper homeowners have in themselves. As a result, they see themselves recovering faster, taking a step to save their credit, and put themselves into a more empowering position by selling their houses to us...even though we represent a non-conventional approach to selling.

Now, you're thinking, "Wait Jay! How do you make money off of high priced homes that are under water. I don't. I focus on the sellers that have little or no equity, not negative equity. That's the all-important distinction. This also narrows the playing field dramatically. Now, our response rate climbs by percentage drastically, since we're dealing with proactive sellers who need to get out, but have something to offer us --- a title and a tiny bit of workable equity.

BTW, how many dollars of equity is there at 10% of a million? $100,000?

How about 10% of $100,000? $10,000?

Would you say that's about a $100,000 difference? That's why spending our time on skinny deals in the upper price points is so much better than the "bread and butter" deals. The actual dollars are huge, despite the percentage of the deal.

So, limiting our focus on the most likely sellers that want to protect their credit, their reputation, and their immediate financial picture, are the same ones we can make between $100,000 on with a sub2 transaction that can be completed from start to finish with just a few days.

If you would like to know exactly how to make $100,000 investing in high dollar properties without credit or much cash, click this sentence.

Wednesday, March 31, 2010

"Ugly Sub2 Coughs Up $26,000 in 18 Months...!"

This house is going to cough up $26,000 in rents over the next 18 months.

Meanwhile, we found this house after two hours of driving our farm area and taking down addresses of vacant and abandoned property.

I researched this property and found out the owner lived close by. The property is in default, but not scheduled for a trustee sale.

It's been vacant since last Fall.

Now all this information helped me know how to pitch the seller. The fact that the seller wasn't even trying to rent out the house tells me this seller was tired of dealing with it and out of options.

Well this house is a great candidate for a loan mod and/or a short sale. The property is in terrible shape outside, and needs a cosmetic overhaul inside. Flooring, paint, some hardware replacement, and built-in appliance installation(s). Then there's landscaping overhaul (cleanup, trimming and watering). Total estimate $3,500 (less if we don't replace the flooring).

Market rents are $1.00 per square foot or $1,460 a month with 1,460 square feet of rent-able space, not including the garage.

While we rent the house out, we'll work with the owner to modify the loan, or short it. The 2nd will get about $3,000, and the first will be reduced by $30,000 for a total encumbrance of $90,000. Plenty of room for profit with a sale of $158,000 to a credit challenged buyer.

Meanwhile, our rent of $1,460 over 18 months will net us about $26,000. We'll pass on the cost of back taxes to the end user, if our short sale/loan mod is successful, and include it in the sale price. Meanwhile, we've got insurance costs of about $700, and we're paying the buyer a few hundred for granting us title (held unrecorded in escrow, which is our personal safe deposit box), until we can successfully negotiate either the loan mod or short sale.

All this to say, Sub2 profits come after taking action, not sitting around wishing things were easier!

Normally, I would tell you about just the pretty houses we buy, but this proves that money can be made out of something ugly, too!

If you would like to know how we structure deals just like this one, click the link below.

"How To Make $26,000 in 2 Hours...!"

Thursday, March 25, 2010

Making Your Own Sub2 Luck...

My partner Jim called me up a day ago and said we need to go 'drive for dollars' tomorrow (or something like that). I said, "Great, let's go!"

So we arranged to meet at our regular car pooling place at the bourgeoisie "Le McDonald's" home of "Le Big Mac de Deliciose". After getting on the road, Jim pulled out his folder packed with prospective deals, and gave me directions on where to head.

We drove by some familiar houses that we'd negotiated on, and a few others that had just become obviously vacant and abandoned.

After driving around the farm writing down new addresses for about two hours or so, we came across a house that once had quite lush landscaping. I pulled in the driveway, got out, and walked up to the garage door and found it unlocked and opened it. Thankfully, someone had already bashed in the entry door from the garage to give us access! Jim and I went in and explored. It was beautiful and well laid out. Later, I discovered that the owner lived around the corner.

As we continued driving, we saw a woman out in her front yard appearing to rake the dirt of her rental house. I got out and jokingly asked if she was preparing the house for rent? She laughed, and said, "No, I live here." I laughed, too, and added for giggles if she was interested in selling. Before she could answer, I said, "Come on! Tell me you want to sell this place." She laughed again at my forwardness (I think), and said, "OK, it's for sale, if you say so."

With the conversation set firmly on friendly ground, I was able to discover that she owned a condo nearby that was in foreclosure, but the bank hadn't filed an NOD yet. She had just stopped making payments when the renter bailed. Her interest payment was very low, but the rent didn't quite cover everything.

My mind whirled. If I sub2'd this condo and resold it on a Land Contract for the loan balance, but at market interest rate, I could not only get a $10,000 down payment; make a couple hundred dollars a month on the payment spread, but save this lady's credit, and become a hero. At this point Jim interrupted me and saved me from offering this woman any money! Just kidding. I didn't offer her a dime.

Bottom line: We're taking title, reselling the condo with $10k down; making $200 a month in cash and giving the seller nothing, but a credit boost. Yay. All that just by asking a "landlord" if she wants to the sell the 'hell hole' that she's raking the dirt on.

Back to the other house. We're talking to the seller, offering them a few hundred bucks for the right to control the property, lease it out, and negotiate a loan modification (if that fails, we've collected rent for about 18 months at $1,300 a month) without paying property taxes, but maintaining the seller's fire insurance.

Both these prospects came just from driving around YESTERDAY! Does this happen every time? No. But it happens often enough to keep us jazzed up about doing small sub2 deals.

BTW, how much money does this mean we made with our two hours of driving around? Well, $1,300 x 18 months is $23,400. Then we've got the condo with $10k up front, and $200 for another 18 months. That's another $13,600. So we will have made $34,000 in 18 months for maybe 2 hours worth of prospecting.

Now you might ask, what's it gonna cost to fix the condo and clean up the house? We'll have $3,500 invested total. So, $30,500 isn't too bad. That's still about $15,000 an hour less prep work. Okay, Jim and I are splitting the profit so it's actually $7,500 an hour. That's better than my surgeon makes an hour.

If you'd like to know exactly how Jim and I put these profitable sub2 deals together click the link below.

You'll have an opportunity to provide your name and email address and then be directed to the Screw The Bank information page via email.

Screw The Bank! Sub2 Profit System