The End of Seller Financing?

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

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

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.

Uber Junk Mail Copy

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

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..."

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"

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.

"Why Sub2 Investors Give Up..."

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!

"One Sub2 Ringy Dingy, Two Sub2 Ringy Dingy"

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

Unfiltered calls are the pits!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• Seller has one or two loans that total 90% loan-to-value, or less (or 10% equity remaining, or more).
• Seller needs out of the payments/situation "yesterday"
• Seller has "gone through" at least one failed escrow and perhaps two real estate agents.
• Seller has a fully amortized, fixed rate, or reasonably-capped ARM loan, with no balloon payments coming due.
• Seller needs to salvage/maintain/improve his credit.
• Seller needs/wants to qualify to buy a cheaper/different home.

When the stars line up, we've got a good deal. Now, here's the anatomy of a "bad" deal from a "good" prospect.

• Seller has one or two loans that total over 100% loan-to-value, or more (or no equity remaining).
• Seller needs out of the payments/situation "yesterday" and can only short sale, default, or modify the financing .... and screw his credit...
  
• Seller can't list his house conventionally, because he'll have to pay out of pocket for the closing and real estate costs..
• Seller has a fully amortized ARM loan with higher interest payments, high cap on the interest and a balloon payment due (all of which will torpedo this deal).
• Seller needs to salvage/maintain/improve his credit (He's screwed).
  
• Seller needs/wants to qualify to buy a cheaper/different home ( His option used to be to, "buy and bail," until last year, when banks got wind of this tactic ). That is, the seller maintains his credit, buys another house, cheap, and then lets his old house "go back to the bank" (maybe the same one that made him the new loan...! heheheh.

To recap: Good deals:

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

Bad deals:

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

3 Steps To Sub2 Success...!

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

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

I receive requests like this every week and a half.

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

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

"John [name changed],

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

• What are my skills?
• What are my strengths?
• What are my weaknesses?
• What have I set out by “faith” to accomplish, that seemed impossible, but succeeded in doing despite the obstacles? That is, how determined have I been at following through to the end of a difficult achievement...?
  

1. What is my most important, pressing, must-have, goal?
2. What is my absolute deadline that it must be achieved?
3. What is the consequence of it not being achieved other than my life will come to an end, and/or I’ll be embarrassed to the point of committing suicide, because I’ve told everyone in the world what I was going to do, and by what date so it MUST happen, or else?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bernard “Barney” Hale Zick (1948 - 2005)

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

(Barney Zick - Creative Real Estate Investor / Trainer)

Starting Out or Starting Over?

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

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

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

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

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

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

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

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

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

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

Sub2 Marketing Future!

There's No "Due On Sale" Jail!

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

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

Dear So and So,

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

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

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

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

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

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

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

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

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

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

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

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

How To Turn A Lemon Into Lemonade!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

Anyone else have a war story they want to share?

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

"SubTo" --- Subject To This Market!

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

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

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

Notwithstanding, SubTo is NOT a hard sell right now.

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

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

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

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

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

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

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

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

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

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

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