Profitable Investing Strategies

"My Sub2 Blog Is Number One...!"

2011-08-13T12:32:00.000-07:00

Yes, I'm the number one Sub2 blogger on the internet!

How do I know that?

Well, google says so! This blog site shows up on the first page when you google "Sub2"

"So what?" you ask.

Well, Sub2 financing, can be the most powerful, if not creative, real estate financing tool ever ...used correctly.

What other method of real estate financing allows us to avoid banks like they were drunken alcoholics?

Or what other way do we know that doesn't require a job, a down payment, a credit report, and routinely enduring an anal examination of our financials?

What other ways don't depend on appraisals ...or allow us to buy without going through agents that just cost us money and routinely interfere with our creative negotiations?

That all said, what other strategy allows us to finalize a deal so fast we can use the trunk lid of our BMW to close on?

So, if...

bypassing banks,
never having our credit checked,
never proving funds, or...
never enduring failed appraisals, ...or
farting around with ignorant agents sounds good...then
lightening fast closings should seem like a no-brainer!

With today's Sub2 financing, we can buy real estate even if we haven't had a job since the Reagan administration... or even if our credit is so crappy we can't borrow a toothbrush...!

Now, you've probably thought that sub2 was a 'last resort." You're thinking it's only for those with lousy credit and no down payments, right? WRONG, oh one ignorant assumptions...!

Of course Sub2 financing is the FIRST RESORT for the sophisticated investors. Otherwise, why have a bunch of loans show up on your credit report for no reason other than you don't know how to avoid that?

Or why risk being denied a conventional loan only because you have 'too many loans' already? The smart investors use Sub2 for privacy sake, too.

When we're not pulling out new loans, we're also not broadcasting our business to the world.

However, the very best part is that we can make money so fast that the conventional buyer is still trying to get his loan closed, or find a renter, or worse...trying to resell ...by the time we've pocketed ten or twenty thousand in cash.

Wanna know more about this first resort (first class) financing system? Just click on the link to see what's possible "No More Banks!"

P.S. You'll never pull your pants down for an anal examination of your financials again, unless you enjoy it...!

The End of Seller Financing?

2011-07-16T12:16:00.000-07:00

Sub2 Financing About To Be The Only Alternative Financing Technique

2011-07-15T17:01:00.000-07:00

I've been really busy lately....

LOTS of stuff coming down the pike regarding seller financing that will either make or break the seller financier.

By the way, I'm considering archiving this blog, since I will be using Word Press for all of my marketing in the future. Why?

Because there are more professional apps for it, and I'm now relying on Optimized Press for the structure, and it is not compatible with Blogger. Sooo....

Back to the point....

In the next few days, the most worst news for anyone attempting to seller finance their houses, is about to be realized, unless we protest with our congressman. The legislation is designed to focus ALL financing toward institutional financiers and away from any competing alternatives.

This doesn't effect sub2 deals, but it really impacts reselling our houses.

One of the really bad thing is that the contracts we offer can be rescinded by the buyer within 36 months of the initial term!

Another really bad thing is that there can be no balloon notes created; they must go for 30 years.

So, leases with options are going to get real popular as the main exit strategy for resale, unless something else is done here.

Stay tuned....

The Cost of Freedom Has Been Paid...

2011-05-02T19:27:00.000-07:00

We waited a long time for the demise of OBL

Last night Geraldo Rivera had a spark of insight, when he was first on television news to suggest that the president's late Sunday evening announcement was not about the death or capture of Muammar Qaddafi, but about the death of Usama Bin Laden.

Well, Geraldo guessed right.

The 10 years we've waited to get this Al Qaedan terrorist has been a long in coming. However, it was worth it.

There was a climax to be had, and it was seen in the happy, jubilant faces of all those kids celebrating across from the White House and at Ground Zero, in the early hours waving flags and the "V" signs for victory.

With all that celebrating beaming from those young faces, I was reminded how fortunate they are, and I am, that we still have the freedom to pursue life, liberty and happiness ...and to celebrate our God-given rights to free speech. Many across the globe do not share any of these God-given gifts.

I was also reminded that life, liberty and the pursuit of happiness comes at a cost. Last night OBL paid the price ...for our liberty. Otherwise, we would have born the price of it once again ...somewhere ...someplace ...as we did on September 11, 2001.

Osama Bin Laden wanted to take away our freedoms. He looked to both control us, or destroy us. Unfortunately, he sort of got his way, when our government decided that for our security we be treated like terrorist want-to-be's to be searched, scanned and felt up before we were allowed to travel. For this reason alone, I'm quite happy to know that OBL is now fish food for the ages.

The question now of course is, "How long we'll continue to have our dignity robbed from us in return for our security, because of those who remain sympathetic to OBL's objectives?"

Regardless, will still have the right to life, liberty and the pursuit of freedom, and I'm happy God has validated our pursuit of one small happiness that allows us life and liberty ...and that is ...the death of Usama Bin Laden.

Praise God Almighty!

"Better Framing" Is Not Just What Better Carpenters Do...

2011-04-18T12:19:00.000-07:00

He Made a Mountain Out of a Mole Hill...

2011-04-05T18:17:00.000-07:00

Many years ago there was a guy I knew very well that started out in real estate investing with no real money to his name. He earned a small paycheck from his employment in a non-profit organization, but that barely provided the basics.

What set this poor man apart from other poor men, was that he had a dream of financial independence and wasn’t going to take "no" for an answer.

He was old school. He wasn’t a fast-buck operator. He didn’t settle for a string of short term gains from quick flips, and pant like a rodent endlessly rotating his Hamster wheel looking for the next quick profit deal like many insist is only possible to do today.

Instead he kept his nose to the grinding stone looking for solid, long term deals that would eventually provide for a comfortable retirement and time for his family in the meantime. These were just “mole hill” deals. Nothing to get excited about.

As careful and thoughtful as he was, his first "mole hill" deal resulted in a catastrophic loss. After literally saving up for several years for a down payment on his first investment property, the major employer in the area closed its doors and fired thousands of people.

This tsunami of unemployment decimated the rental market as hundreds of landlords lost their tenants and homes became vacant, including my friend’s rental house. Many had to give up. My friend also lost his house, along with all his cash he'd saved and invested.

However, another difference emerged in this man, and that was that he believed that he could overcome this setback and achieve his dream of financial independence ...somehow.

Starting from scratch, he began saving money again, slowly, in order to invest again. Within months, he took another risk and began offering his tiny amounts of money to sellers who would agree to finance him. He endured much rejection. This included negative attitudes and opinions about his goals and ambition from those who knew him and what he'd previously "accomplished."

People also scoffed that such a poor man could make any progress in this market, and that real estate investing was a dead-end, or a fool’s folly. Meanwhile, it wasn’t long before he found a seller, or two, who wanted his money more than their property. So, with that little bit of success, he began looking for ways to come up with more down payment money to give to more sellers.

He decided to buy and sell cars he found cheap. He worked swap meets and fairs selling car accessories. His wife worked a part time job for extra cash. Of course, the important thing to remember was that he maintained a vision of financial independence that kept him motivated when he was tempted to get discouraged.

None of his deals was anything to write home about. They were all small potato deals, or “mole hill” deals.

However, after plodding away unceremoniously investing in deals that anyone would consider small time, he emerged the owner of over two hundred income producing properties in about ten years.

Scoffing turned into admiration and amazement as onlookers and former naysayers proclaimed him to be a genius, and that everything he touched turn to gold. Otherwise, how could such a modest man accomplish so much with so little, they thought.

My friend pushed all those mole hill deals together to create a mountain of wealth. In fact those mole hills together represented over fifteen million dollars in equity. Those small potato deals turned into a mound of steaming mashed potatoes with a slathered helping of gravy on top.

So the moral here is to move forward how you can, and remember that mole hills become mountains, if you get enough of them together, and there’s no stopping you if you are willing to start where you can, and continue without stopping ...and ignore those who can’t imagine your success.

If you are anxious and willing to make a mountain out of mole hills, but you need a way to get gobs of down payment money for profitable, long term deals...or you just want a way to get cash... I have a proven way to scrape up that cash, and would feel privileged to help you.

Click here

Shark Bait Marketing | Sub2 Deals

2011-03-28T21:46:00.000-07:00

LANGUAGE WARNING

Only For Shark Marketers...

My "Five Point Solution" to marketing for profit...

I can't quote Frank Kern here, because this is a "G" rated blog. However, I'm heading into "R" territory for the purpose of clarity and emphasis of relating what one of the most respected marketers told me yesterday.

Meantime, what Frank taught forced me to rethink my marketing. Before I get to that, there are four marketing keys that are missing from 90% of the marketing I'm seeing. I am guilty of missing a couple of them myself, which makes this post important to share. Yes, my blog has content!

Very quickly the four keys are...

1. Headline must easily and immediately expose a "need" in the prospect.
2. The offer must easily and most likely appeal to a certain prospect.
3. The prospect must easily and effortlessly take advantage of the offer.
4. The prospect must benefit from what we have to offer, opposed to other offers. Easy, huh?

Well, if we can translate those four keys into our advertising of houses, apartments, or whatever, then we'll almost own our market. I say "almost," because Frank got me thinking about this one fundamental marketing question to ask regarding my message to market advertising.

That is, to ask, "What is my prospect's biggest, 'Bad Ass Problem'?" (B.A.P.) I told ya Frank has an "R" rated style. The answer to that question is foundational and fundamental to making money. All profits flow from the quality of that answer.

Meantime, my prospective buyer's B.A.P. is not being able to buy their dream home with conventional financing. So, my "bad ass solution" is offering financing on their dream home. Now, as you'll see in a moment, there has to be a distinction between what I offer and what someone else might. What is that?

Well, I don't do credit checks for one thing. And for another, I don't qualify them. If they've got the cash, and can fog a mirror, they qualify. Simple, yes.

I'm out of room here, so let me summarize the formula I'm now following (hopefully they're self-explanatory).

Five Point Formula...

1. Determine the prospect's biggest need.
2. Headline the need.
3. Appeal to a specific prospect with that need.
4. Offer an easy solution to that specific prospect.
5. Highlight the advantage of your solution over every other.

Much more can be said, but that'll get you thinking.

Sub2 Masterminding...? From the Source.

2011-02-18T15:09:00.000-08:00

Uber Junk Mail Copy

2011-02-16T13:37:00.000-08:00

Recently I read a long report on how to do direct mail correctly. The author explained that bulk mailers will "do anything" to get you to open their mail piece.

As a result, he informed us that we should do the same thing. I disagreed. If everyone else is doing the same thing, how do we stick out from the crowd. Well, we don't.

If everyone is mailing "yellow letters" to pre-foreclosures in our farm area, does it makes sense to mail yet "another yellow letter" to the same prospect? Well...? If so, what sticks out here? We're just another yellow letter.

Imagine, however, getting "yet another letter" from Publishers Clearinghouse... Do we open those? Do we? My grandma does. Why...?

Because hope springs eternal, and the envelopes are gaudy, messy, urgent sounding, and unique.

Just being gaudy, or messy, or just urgent wouldn't do much in my opinion. All my other junk mail fits that description. However, "uniquely" gaudy, messy and urgent sounding is what separates the sheep from the goats, as far as I'm concerned.

Meantime, again, Publishers Clearinghouse does a fantastic job of overcoming the din among fellow junk mailers by being uniquely gaudy, messy and urgent.

So the question remains... "Why does Publishers Clearinghouse" have to go to so much effort at standing above the crowd?"

The answer is that they really are sending "junk mail" and it looks like it. So, they've got a deforming handicap, as it were. Something must be done to overcome or disguise that problem. What might this be exactly ...and why again?

Let's take a woman who needs to take attention away from her gigantic nose.

What might she do to "hide" her nostril-laden features? She might wear big glasses. If that isn't enough to do the job, she might wear huge glasses with all sorts of distracting "jewels" glued on them. Think Dame Edna. Now, of course wearing huge, jewel encrusted glasses is not to flaunt wealth... No, it distracts attention from her anteater features.

It's the same with Publishers Clearinghouse bulk-mailish appearance. They need a way to keep your mind's eye off the fact that there's NOTHING inside that doesn't require a purchase, or worse ...there's nothing we actually want.

So, how's this fit into our direct mail efforts, you might ask.

I say, don't mail what everyone else is. Stick out. Be organic. Don't mail Click2Mail for example, or use any other "bulk mailer." Why? Because we'll have to work overtime, overcoming the "bulk mail" look that cause most recipients to file our mail in the trash.

So, what actually works, you ask. I say, "whatever that is not being used by the majority of competitors. That's what works." I'll add, "Be unique. If everyone is mailing handwritten "birthday cards" to prospects, then it's time to send "checks" in the mail."

If everyone is doing "checks," then we send DVD-size mail. If everyone is sending DVD-sized mail, then maybe it's time to send Zebra-printed postcards. If the zebra thing is getting over-sent, we try pictures of ugly, run down houses with a housewife standing on the front lawn in curlers with a caption, "If you're still doing open houses ...call me."

Of course this doesn't address having high quality mailing lists in the first place, regardless of the mail piece. However, that's the other secret of successful direct response marketing; having a good list.

If you would like to discover a way to make money without a job or credit, check out the free video presentation below...

No Job! No Credit! No Problem!

"No Down" Sub2 Deals

2011-02-14T17:39:00.000-08:00

Way back in the 1980’s Robert Allen told a group of us that no down deals are every where, but that’s just the beginning. He said, don’t rely solely on no down deals after you’ve got some money. Cash lubricates would be cash cows that are a bit sticky to glue together. So, limiting ourselves to no down deals, will keep us from making LOTS more money off deals that actually take some money to glue together.

I’ve never forgotten that.

Meantime, I’ve always loved learning about ‘no down payment’ financing techniques. And when I discovered the “Holy Grail” of “no down” financing strategies a few years back, I always had options available to me that I never realized were possible before.

Sub2 has been the holy grail for most of my friends, too, who’ve discovered how powerful it is. If we can make $10,000 in four days by flipping a house we only paid twenty dollars to control, imagine our giddiness in pocketing fifty thousand in cash on a nice home ...and only giving the seller just five or six thousand in “play money” for the privilege.

Going back to Robert Allen for a sec ...limiting ourselves to “no down” deals may be necessary for us at the beginning, but after getting some cash in our pockets, we can start negotiating really juicy deals for ourselves that nobody else would dream was possible.

Speaking of dream deals, do you realize that owners of expensive homes are more likely to bail on a house if they have half an excuse... than owners of “bread and butter” homes...? Yes, these upper end sellers know how make money, but like anyone might, get temporarily strapped. These are the same sellers that often believe that they can make it again, and are willing to do what’s necessary today to solve an immediate cash flow problem. And that includes giving us their deed in return for getting out of a loan payment.

Five or six thousand in moving money, debt relief, pain relief, and a chance to regroup is often the right recipe for pocketing what three agents combined could make in a year.

Think outside the box. If “no down” Sub2 deals are fantastically profitable,. imagine what “small down” Sub2 deals can do to grease the skids to wealth...!

If you would like to learn how to do these fast money deals click here: Fast Sub2 Deals

"Why Sub2 Investors Give Up..."

2011-02-12T22:40:00.000-08:00

The real estate business is always making room for those who are not afraid to work. The fact is the harder one "works" in real estate, the more one learns, the more distinctions one makes, and eventually ...the more money one makes. It's just the law.

Of course, we see the pros make this business look like a walk in the park. And all the gurus tell us that if we just follow their prescription that we'll be just like the big boys in no time.

Well, that's true that gurus do offer meaningful short cuts and systems that help us get traction very fast. However, just because somebody has the gold mine, doesn't mean they're committed to mining it.

I've witnessed students buy my Sub2 course, which is specifically geared to bypass as much wheel-spinning and frustration as possible, and then do practically nothing with it. Here they've got a tool that could help them buy their own dream house, or dream car, and instead they put the tool on the shelf "until they can get around to using it." How long do they want to wait to live prosperously, I ask myself.

Other students, have turned terrible situations around for themselves. They didn't wait around for the stars to line up, to get cracking.

Last month a student contacted me about his investing objectives. He wanted some help getting organized and putting a system together to buy some income property. When I found out what his deadline was, I was practically gulping air, it was so ambitious.

I'm not sure whether it was out of desperation, vision, or what, but his goal was short-fused. It's inspiring an fun to help someone reach an important, if not difficult goal. So, what was the deadline? March 1. So we got cracking! He took the steps necessary to familiarize himself with data sheets, and started making calls on properties. Now he's advertising for sellers and I am excited about helping him reach this goal...

At the same time, this was happening, I had just about had it listening to other newbies complain, "there's no deals," "I can't find anything to buy," "agents are jerks," "sellers want too much," and blahdy blah, and "I want to give up", because they can't find low hanging fruit like the gurus all promised will happen if they fork over $5,000.00 for their boot camp. Of course I don't promise "low hanging fruit," but I do promise the ability to recognize it! There's a difference.

Well, "Reality Knocking! Hello!" It's takes effort to do real estate profitably. That's what my new student is learning, too. I told him that he needed to complete 50 analysis sheets on 50 different properties so that he could learn to instantly recognize a deal. Slowly and painstaking we plowed through a couple income property data sheets so he could get acquainted with the process (and I relearned some important assumptions at the same time). Did you know that sellers will lie about their numbers to gather interest? Anywhoo...

Well, to really drive this point home about the work involved in finding deals, I received a call from a car salesman who wanted to lease purchase a house for himself. I told him that I had nothing in his area, but I would help him find something that he could negotiate on his own (after all he's a professional negotiator). I told him that he would have to put in some hours on the phone, and pointed him to the most likely prospects.

The next day he called me to let me know he found four potential deals ....after about 8 hours of cold calling. After he told me the terms he was throwing out, I could only sit in awe at what the sellers said they were interested in doing with this guy. Of course the next thing out of his mouth was that he wanted to bird dog for me. Of course I said, "nah, I work my own deals, thanks, but no thanks." NOT! Of course, I took him up on his offer as soon as I could get the word "Fantastic!" out of my mouth.

Well, I've got a student digging for income property gems and learning to recognize deals on the spot, and a used car salesman looking in just the right places for deals for himself (and me) and neither of them are complaining about the hard work involved so far.

So, forget about finding the low hanging fruit, and start digging for buried treasure in your own gold mine, and dig out the juicy deals that nobody else knows exists, like my students and bird dogs are willing to do. Then in no time, you'll reach your goals and somebody will assume it's just as easy as the gurus say it is!

"Mortgage Assignments vs Sub2"

2011-02-11T13:32:00.000-08:00

For the luv of gawd do not do fall for this "mortgage assignment" fad. Traditional Sub2 deals are fine, but assigning a mortgage (transferring title from a seller to a buyer who cannot get a loan, and collecting a fee off the deal, and walking away, is the stupidest, most short-sighted strategy ever.

Imagine with me...(I'm sure the MA gurus have a quick, if not torturous answer for my objections)... Say, we transfer title to a buyer who cannot, for a variety of reasons qualify for a new loan, and perhaps he puts up as little a 3% of the sale price as a "down payment" on an underwater property... Of course this is a recipe for default, if not severe credit damage the seller, and an abject case for a lawsuit.

Consider a default on a loan by the original borrower... That borrower often squats in his home until the bank either pays him to leave, or the bank agrees to a short sale offer, or the bank modifies his payments, etc.

Either way, the original borrower enjoys free rent (especially since the bank won't even talk with him UNTIL he stops making payments.

Well, what in gawd's name does a defaulted "mortgage assignment" buyer have to lose by sitting in that same house rent free? His credit isn't on the line, and even when the bank forecloses, the foreclosure doesn't show up on HIS credit ...and he can't be evicted until after a trustees sale, which might take a year or two...

So, what's the downside for the buyer if he defaults and then sits in the house rent free for months? Losing a couple thousand in down payment money? Hey, the more he put up, the more incentive he has to be a squatter! After all, he saving many potential thousands of dollars living payment free regardless of what he paid up front.

Bottom line the original borrower's credit is getting screwed six ways from Sunday. Nice. By contrast, in a traditional "subject to" transaction, the buyers (us) stay with the transaction until our end/user buyer refinances the loan(s), or bails on us.

Either way, our buyers DO NOT get the deed before paying us off first.

At the same time, we protect the original seller/borrower from loss and damage by making sure the loan payment is made regardless of what our end/user buyer is doing. Frankly, we make more money when our Sub2 buyer bails on us, because we can resell the house for another down payment! This is a professional (and profitable) service we provide to the original seller. We've built a back-end profit into the deal.

With a mortgage assignment, again, the person putting the seller and buyer together (us) walks away once the fees are collected, and the deal is consummated. That's all fine and dandy as long as our buyer doesn't default and/or get stupid by squatting in the property. In that case, nobody is assisting the buyer in getting financing either. He's on his own.

Sellers rarely have the expertise to assist a buyer in getting financing. That's why sellers rely on real estate agents most of the time to handle this detail. In this deal, we have no incentive to help any further. We've got ours!

Meanwhile, with a Mortgage Assignment, if the buyer either decides he's tired of the property, or can't get a loan (isn't being assisted by anyone like us in getting a loan), and/or has a fight with the seller, and/or decides to screw the seller by not making any more payments ...and finally, just to add insult to injury does NOT move out... what recourse does the seller have?

Well, the seller just evicts the "mortgage assignment" buyer for not paying right? Uh, no. The MA buyer is the TITLE HOLDER. The only entity that has the right to evict a defaulted MA borrower/owner is the lender/lien holder ...and that right only comes after a trustee sale.

So the original borrower is up a creek without a paddle. The original borrower's credit is being screwed AND he can't evict the MA deadbeat from the house.

On the other hand, if we were still in the Sub2 deal, like we should have been, we would be protecting the seller from a Sub2 deadbeat buyer by NOT transferring or assigning the DEED to our buyer before he paid us off. Also, we reserved funds to keep the loan current until we got a new buyer in place.

The MA gurus are saying that escrowing a Grant Deed back to the seller is the insurance policy against a buyer's default. That bogus, if not tenuous alternative, touted by the MA gurus, is ILLEGAL to perform in several states that require judicial foreclosures if ever, and whenever there is a transfer of equitable interest.

This includes Contract For Deeds (in CA). Well, if we have a buyer who actually HAS the title in his name, there's nothing short of a judicial foreclosure that will legally force the MA buyer to abandon the property despite being in default.

So, if we want to make money on pretty, low/no equity homes, we stay in the deals, and DO NOT transfer title to our credit challenged buyers, while at the same time protect the original seller from damage and loss.

Otherwise, we better make sure we do our MA deals behind a corporate entity; plan to be sued and hide our assets, because we WILL be sued by the seller who gets his credit trashed by a MA buyer who defaults and won't pay, and ...won't move.

Mortgage Assignments are the dumbest strategy to hit the creative real estate market in recent history.

Why not just shoot yourself in the mouth right now and save yourself the grief of doing 3 to 5 in Leavenworth after your seller gets a judgment against you for fraud.

Wait! You say? Is a mortgage assignment fraudulent? No.

However, explain to a judge how you didn't take advantage of an unsophisticated seller by "talking" him into transferring his deed to a credit challenged buyer, and collecting a HUGE fee at the seller's expense and ignorance, and later damaged his credit, inhibited his borrowing power, upended his reputation, and thwarted his earning ability.

That'll be interesting testimony.

Stay away from mortgage assigning.

Free Corvette With Purchase ( Sub2 Deal )

2011-01-25T14:02:00.000-08:00

Finding treasure is fun! Finding antique bottles lying around in an abandoned house is a joy for me.

My friend Chip and I used to scrounge in abandoned railway stations and old warehouses in Kansas City and find the most fun stuff ever. We scavenged the old dispatcher’s office that had been empty since the 1970’s. I found a hand-made note paper roller that was nailed loosely to the wall. I still have it as a reminder of good times spent scavenging with my friend Chip.

Speaking of Chip, he led me to this secluded little dump outside Olathe, Kansas where we found a rotted box of old, colored glass insulators. I was in heaven. Chip could care less. I still have those insulators. They’re pretty to me. Violet, blue, aqua, pink, brown and white. It’s like Christmas looking at those things. I imagine the history each of those pieces of early artwork disguised as electrical hardware.

The reason I mention all this is that finding treasure is the spice of life. Everyone loves to do it. It’s addictive behavior. Why else would people scour beaches with metal detectors for necklaces and coins...on beaches!!!

Well, Barney Zick wrote once that leaving treasures behind in homes we want to sell will compel buyers subconsciously to buy our houses. They may not even have liked our house the best, but the thought of getting something for free just makes some buyers irrational buyers. We’re talking about leaving pianos, sewing machines, bicycles, rockers and what not. Buyers love free stuff.

My friend John told me once that a week before Christmas one year he had sold three or four houses, but the last one was not selling. So he went to his used car dealer friend and asked if he had any “sexy cars” on the lot. His friend had an old Corvette available. So John bought the Corvette, put it in the garage of the house that wasn’t selling, raised the down payment by a little more than the cost of the car, and had the house sold in two days. He advertised “Free Corvette With Purchase of Home.”

John says he likes to include freebies with his house to make them more attractive. I have always loved this concept. I’ve left antique bicycles and appliances behind before. I’ve also left bedroom sets. It really helps sell a house, when the buyer believes he’s getting something for free.

So, think about what you can “accidentally” leave behind in the next house you try to sell, and see if your days on market are shortened up substantially.

"Why Sub2 Investors Give Up..."

2011-01-16T17:01:00.000-08:00

Of course, we see the pros make this business look like a walk in the park. And all the gurus tell us that if we just follow their prescription that we'll be just like the big boys in no time. Well, that's true that gurus do offer meaningful short cuts and systems that help us get traction very fast. However, just because somebody has the gold mine, doesn't mean they're committed to mining it.

Other students, have turned terrible situations around for themselves. They didn't wait around for the stars to line up, to get cracking.

Push In The Clutch...! Or Else.

2010-12-21T18:16:00.000-08:00

“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”

Treat Your Business Like A Business, Not A Job.
Keep Good Records.
Test And Track Your Marketing.
Market.
Maintain A Protocol For Moving Prospects Through Your Pipeline.
Discipline Your Work Schedule
Protect Your Most Precious Commodity (Your Time).
Charge What You’re Worth.

Merry Christmas To You

Why I Can Still Make Money Creatively...

2010-12-12T13:59:00.000-08:00

Character and Personality Matter In Sub2 Negotiations...

2010-12-01T19:22:00.000-08:00

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."

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

2010-10-25T22:51:00.000-07:00

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.

QUOTE:

"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, no legitimate Sub2 investor buys houses that are behind in payments unless they are severely under-priced.

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, because of illness, divorce, or relocation --- and the need for a SURE closing.

Meantime, once a loan defaults, no Sub2 investor in his right mind is going to take title. The lender will be all over that loan with investigations and profiling. Banks may not call a loan in this market simply because it's in default... but by gawd they'll call the loan if it's in default AND there's been a change in ownership!!!!

Just because we can get the deed on a property doesn't mean we should. This particular idea of buying defaulted properties is financial suicide, if not setting oneself up for abject failure.

Furthermore, if the loan was somehow brought current, and the bank didn't call the loan after an equitable transfer of interest, we would have to get a BOATLOAD of cash from a new buyer for our "lease option" or "land contract" in order to cover the expenses of bringing the loan current (including paying the legal costs and reinstatement fees charged by the loan servicers.)

These costs are always too high for a profitable Sub2 deal to work. So burying our buyer's down payment in loan reinstatement costs, we've got nothing for our work, 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 only for sellers with current loan who may not have sufficient equity to pay an agent to market their property, but it's not the 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 make great money in Sub2 investing without the a black eye

"One Sub2 Ringy Dingy, Two Sub2 Ringy Dingy"

2010-10-12T20:46:00.000-07:00

"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."

The Big Sub2 Stick...

2010-09-19T15:07:00.000-07:00

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 )

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

2010-09-18T13:59:00.000-07:00

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:

Motivated seller who writes with crayons (just kidding) and has burned through a couple agents and failed escrows.
Low interest rate loans with no balloons or adjustments.
At least 10% equity.
Wants to buy another house immediately.

Bad deals:

Motivates seller who writes with crayons (just kidding, again!)
Teaser rates, high rates, negative amortizations, high interest caps, early payoff dates.
No equity, or upside down.
Dreams of buying another house sometime before the "rapture"

3 Steps To Sub2 Success...!

2010-09-16T14:36:00.000-07:00

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...?

What is my most important, pressing, must-have, goal?
What is my absolute deadline that it must be achieved?
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.

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

2010-09-11T01:18:00.000-07:00

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

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

2010-08-13T22:19:00.000-07:00

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.

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

2010-08-09T13:37:00.001-07:00

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)

2010-08-06T15:11:00.000-07:00

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!

Starting Out or Starting Over?

2010-07-04T22:33:00.000-07:00

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.

Sub2 And Multifamily Income Property

2010-07-02T16:38:00.000-07:00

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.

Sub2 Marketing Future!

2010-05-12T11:11:00.000-07:00

Sub2 Demographic Marketing

2010-04-15T16:48:00.000-07:00

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?

Yes.

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.

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

2010-03-31T18:12:00.000-07:00

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...!"

"Using Sub2 Deals To Scrape Up Cash...!"

2010-03-26T23:33:00.000-07:00

Making Your Own Sub2 Luck...

2010-03-25T23:23:00.000-07:00

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

The Sub2 Chihuahua Rides Shotgun!

2009-12-21T16:35:00.000-08:00

This 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!"

"Pimp My Sub2..!"

2009-12-16T19:25:00.000-08:00

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: "pimpmytattoo.com" 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...!"

2009-12-16T11:55:00.000-08:00

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!"

Open Wide and Say "Sub2!"

2009-12-14T18:22:00.000-08:00

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 time 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

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

2009-12-11T12:18:00.000-08:00

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]
**************************

[quote]
If I seller finance my primary residence the mortgage is still on my credit report

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 county?

What?

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 have...you 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.

Later!

Jay

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

Successfully Finding The Juicy Deals Without Competition

2009-12-09T14:46:00.000-08:00

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!

2009-12-09T00:13:00.000-08:00

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

When Spam Is Not A Delicious Lunch Item...

2009-12-04T18:30:00.000-08:00

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

2009-12-04T18:29:00.000-08:00

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

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

We "undress" them!

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

Happy Thanksgiving everyone!

149 Ways To Find Sellers!

2009-11-11T21:28:00.000-08:00

Can't Read This? Click Here For PDF

Incoming!

2009-11-10T22:04:00.000-08:00

Okay, I had to 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 their 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!

2009-11-07T18:09:00.000-08:00

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.

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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!

2009-10-27T21:15:00.000-07:00

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

2009-10-18T16:43:00.000-07:00

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?

2009-10-02T18:40:00.000-07:00

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

2009-09-28T21:53:00.000-07:00

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?

2009-09-21T13:11:00.000-07:00

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

2009-08-24T23:02:00.000-07:00

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.

2009-08-22T13:25:00.000-07:00

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!

2009-08-16T12:42:00.000-07:00

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."

2009-08-09T16:02:00.000-07:00

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!

2009-08-02T21:09:00.001-07:00

The "White Pad" Analysis

2009-07-30T19:32:00.000-07:00

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!

2009-07-26T02:42:00.000-07:00

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Up A Tree?

2009-07-08T21:00:00.001-07:00

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.

2009-07-06T18:51:00.000-07:00

Kick Mutt!

2009-07-04T22:58:00.000-07:00

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:

Clear.
Forceful.
Memorable.
Easy to understand.
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...

2009-06-30T12:30:00.000-07:00

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!

2009-06-30T11:33:00.000-07:00

How To Turn A Lemon Into Lemonade!

2009-06-02T11:19:00.000-07:00

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!

2009-04-06T09:37:00.000-07:00

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!

2009-01-17T22:23:00.000-08:00

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.

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The Last Man Standing WINS!

2009-01-12T20:03:00.000-08:00

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!

2009-01-05T19:12:00.001-08:00

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!

2008-12-15T19:14:00.000-08:00

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!

2008-12-12T12:53:00.000-08:00

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!

2008-11-19T17:22:00.000-08:00

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.

2008-11-16T22:32:00.000-08:00

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

2008-11-11T18:22:00.000-08:00

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No Truer Words

2008-10-30T23:29:00.000-07:00

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!

2008-10-07T20:20:00.001-07:00

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 economic 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!

2008-09-18T13:22:00.000-07:00

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!

2008-09-10T16:44:00.001-07:00

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!

2008-08-27T18:06:00.000-07:00

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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