This guy is a bit of an extremist on his love for Silver right now, but he also has some very good points about silver. One interesting one I found that he likes is that when the market bottoms out and people move out of gold and silver that those who hold these commodities shouldn’t sell them, but instead use them as collateral for buying things. Things like cars and houses. That way you get to keep the commodity and you get to keep the house. If you sold your commodities and then bought a house and paid off the house you’d only have the house and not the commodity. There are a couple more things to consider for selling all of your commodities.
After the last bubble in the late 70’s early 80’s in precious metals, it took decades for its price to come back up although they did hold their purchasing power the entire time due to inflation of the US dollar. Another reason to sell the commodities would be to purchase more assets then perhaps you would otherwise be able to. This is just conjecture on my part as it very well may be possible to buy just as many assets using the commodities as collateral as with just purchasing them outright with the cash received for selling your commodities, but I don’t know and so I can’t say for sure.
People may also want to get out of commodities since they provide dividend yields like certain stocks and bonds do. They may want to do this since we might be back on a gold standard and inflation will be kept under control for the foreseeable future and so the price of precious metals may flat line for years to come.
Overall though this concept is smart as it is similar to Robert Kiyosaki’s infinite return principle in that he purchases an asset, cashes out of the original investment via a refinance, and rolls the proceeds into another investments. All the while maintaining ownership and cash flow of the first investment.
Wednesday, January 18, 2012
Tuesday, January 17, 2012
Three Criteria of Irresistible Short-Sale Offers
1. Fast and sure closing—their most important criterion. No 60- or 90-day escrows; they want to finish the deal in 30 days or less
2. Cash only! Lenders won’t finance a short sale for you.
3. No contingencies. Lenders will be leery of short-sale offers that have so many weasel clauses, they look like Swiss cheese. One easy way around this is to use a liquidated damages clause to give you a pain-free, covert way to walk from the deal if worst came to worst.
2. Cash only! Lenders won’t finance a short sale for you.
3. No contingencies. Lenders will be leery of short-sale offers that have so many weasel clauses, they look like Swiss cheese. One easy way around this is to use a liquidated damages clause to give you a pain-free, covert way to walk from the deal if worst came to worst.
Monday, January 16, 2012
Six Tips When Working with Lenders on a short sale
While every lender follows different procedures, these powerful tips will help you successfully negotiate a short sale:
1. Keep a detailed log of all the calls and letters listing the date, time, who you spoke with, what you discussed, and any important details you’ll need later. You will always be in a stronger negotiating position if you can reference the exact history of your conversations with a lender.
2. Make sure you’re dealing with the real lender and not a “loan-servicing” company.
3. Be sure you’re negotiating with the person who has the authority to say yes. Ask if that person is able to accept the short sale or if someone else will have to make that decision.
4. Respond to all the lender’s calls and letters. Lenders in this department are used to working with borrowers who hide and ignore their correspondence. You can build a really strong relationship from which to negotiate a winning deal
by consistently communicating with the lenders.
5. Gently remind lenders of their real costs to foreclose on properties. The best way is by asking questions to draw out what hassles and expenses they face if they have to foreclose, take the property back, and resell it.
6. As a last resort, hint at or openly discuss the “BIG B”—bankruptcy. When the lender learns that the borrower might be forced to declare bankruptcy if you can’t work out a short sale, the lender just might have a change of heart.
1. Keep a detailed log of all the calls and letters listing the date, time, who you spoke with, what you discussed, and any important details you’ll need later. You will always be in a stronger negotiating position if you can reference the exact history of your conversations with a lender.
2. Make sure you’re dealing with the real lender and not a “loan-servicing” company.
3. Be sure you’re negotiating with the person who has the authority to say yes. Ask if that person is able to accept the short sale or if someone else will have to make that decision.
4. Respond to all the lender’s calls and letters. Lenders in this department are used to working with borrowers who hide and ignore their correspondence. You can build a really strong relationship from which to negotiate a winning deal
by consistently communicating with the lenders.
5. Gently remind lenders of their real costs to foreclose on properties. The best way is by asking questions to draw out what hassles and expenses they face if they have to foreclose, take the property back, and resell it.
6. As a last resort, hint at or openly discuss the “BIG B”—bankruptcy. When the lender learns that the borrower might be forced to declare bankruptcy if you can’t work out a short sale, the lender just might have a change of heart.
Friday, January 13, 2012
Notes from a webinar I watched with my wife.
Rich dad webinar 10-10-11
3 KEYS FOR SUCCESS:
Identifying the opportunity
-HUD has predicted 6-10 million foreclosures in next 2 years
*You never take ownership of anything unless its rented leased or sold!!!
1. Knowledge
-29-6-3-1 formula: for every 29 properties I run numbers on, only 6 are physically worth viewing. Of those 6 only 3 are worth writing contract on. Of those 3 I will only close on 1
-Residential/multi unit formula: YGRx 7 +/- 10% = MAO
YGR= yearly gross rents
MAO= Max allowable offer
7 is the gross rents multiplier, and is the number he uses based off of experience. Add 10% if it is in GREAT condition. If in OK condition ignore 10%. If in POOR condition subtract 10%.
1% rule: 1% of purchase price is monthly payment. This covers all worst-case costs and THEN SOME with wiggle room.
P.I.T.I (principal interest tax insurance)
EXAMPLE: (see MAO excel model)
725 rents
725
750 x 12 then multiply by 7
Condition needs work. POOR
- Biggest problem for a new real estate investor: EMOTION. How do you eliminate emotion?? Never look at another property again.
The Rich don’t use their own money
Banks are not loaning money to people who are flipping. They will lend to notes that are performing. In fact, banks need to lend out twice as much as they used to 3-4 years ago just to make the same amount of money because interest rates are so low.
OPM sources
1. Partnership
Never do business with friends and family. Unless you want to get rid of them =) it will go bad.
2. Seller Finance
Needing to get creative
3. Equity Line (HELOC)
“Don’t touch or leverage your equity so you can sleep at night.”- Old Way of thinking/brain training
Get home equity line of credit on everything because then when people come after you in a lawsuit they can’t get to the money because it has a lien to it and it is hard to get to.
A paid off house is a liquid asset that someone could get to in a lawsuit.
4. Hard Money Lending
“Stay away from it!!”- Old Way of thinking/brain training
REAL Hard money lender does not want money down. They do not do a credit check. They lend money within 48 hrs. They are asset-based lenders. If you Google “hard money lenders” all you’ll get for the first several pages are the hard money lenders who can afford advertising and those are the ones that will the first ones to appear in your search results.
**Investors don’t care about rates and fees. We care about the availability of the funds
“Get the 15% interest rate or stay broke!!!”
“JOB= just over broke” =)
“Right to show clause” in EVERY contract:
Buyer reserves the right to show the property prior to the settlement for the purpose of either renting it or re-selling it and seller agrees to permit access to the buyer at any time up to the date of settlement
- If I cant find anyone to lease buy or rent I will not close the deal. DO NOT SPECULATE
NUMBER ONE EXIT STRATEGY BY FAR #1 is Lease Option
Second: rent
Third: Wholesale.
When you get a property under contract then you sell the contract.
Fourth: fix up and leverage
Rich dad webinar 10-10-11
3 KEYS FOR SUCCESS:
Identifying the opportunity
-HUD has predicted 6-10 million foreclosures in next 2 years
*You never take ownership of anything unless its rented leased or sold!!!
1. Knowledge
-29-6-3-1 formula: for every 29 properties I run numbers on, only 6 are physically worth viewing. Of those 6 only 3 are worth writing contract on. Of those 3 I will only close on 1
-Residential/multi unit formula: YGRx 7 +/- 10% = MAO
YGR= yearly gross rents
MAO= Max allowable offer
7 is the gross rents multiplier, and is the number he uses based off of experience. Add 10% if it is in GREAT condition. If in OK condition ignore 10%. If in POOR condition subtract 10%.
1% rule: 1% of purchase price is monthly payment. This covers all worst-case costs and THEN SOME with wiggle room.
P.I.T.I (principal interest tax insurance)
EXAMPLE: (see MAO excel model)
725 rents
725
750 x 12 then multiply by 7
Condition needs work. POOR
- Biggest problem for a new real estate investor: EMOTION. How do you eliminate emotion?? Never look at another property again.
The Rich don’t use their own money
Banks are not loaning money to people who are flipping. They will lend to notes that are performing. In fact, banks need to lend out twice as much as they used to 3-4 years ago just to make the same amount of money because interest rates are so low.
OPM sources
1. Partnership
Never do business with friends and family. Unless you want to get rid of them =) it will go bad.
2. Seller Finance
Needing to get creative
3. Equity Line (HELOC)
“Don’t touch or leverage your equity so you can sleep at night.”- Old Way of thinking/brain training
Get home equity line of credit on everything because then when people come after you in a lawsuit they can’t get to the money because it has a lien to it and it is hard to get to.
A paid off house is a liquid asset that someone could get to in a lawsuit.
4. Hard Money Lending
“Stay away from it!!”- Old Way of thinking/brain training
REAL Hard money lender does not want money down. They do not do a credit check. They lend money within 48 hrs. They are asset-based lenders. If you Google “hard money lenders” all you’ll get for the first several pages are the hard money lenders who can afford advertising and those are the ones that will the first ones to appear in your search results.
**Investors don’t care about rates and fees. We care about the availability of the funds
“Get the 15% interest rate or stay broke!!!”
“JOB= just over broke” =)
“Right to show clause” in EVERY contract:
Buyer reserves the right to show the property prior to the settlement for the purpose of either renting it or re-selling it and seller agrees to permit access to the buyer at any time up to the date of settlement
- If I cant find anyone to lease buy or rent I will not close the deal. DO NOT SPECULATE
NUMBER ONE EXIT STRATEGY BY FAR #1 is Lease Option
Second: rent
Third: Wholesale.
When you get a property under contract then you sell the contract.
Fourth: fix up and leverage
Thursday, January 12, 2012
Realty Rules and Questions
How old is the property?
When was the roof put on? How much longer will the roof last? Has the roof had any leaks or water damage throughout the house?
Are the neighbors noisy? Messy? Complaints against them?
Are there rodent or bug issues? Termites?
What is the financial situation of the house? Are there liens on the house?
How old is the air conditioning unit?
Do appliances stay with the home?
What plans were there for improvements and why?
Is the total PMI for the life of the PMI payment higher or lower than putting down twenty percent to forgo paying PMI?
Should I worry about getting a tax sheltered account or just save in a regular savings account when saving for a down payment and closing costs?
Did my siblings get pre-approved before going house shopping? Is that why Lincoln got contacted about buying the house because the seller’s already knew that he was pre-approved?
How exactly does interest paid on a mortgage lower your taxes or get you that ‘deductible’ that ‘they’ are always talking about?
Would ARMs be smarter for short term flips than FRMs?
Don’t go looking at homes or dreaming about homes till you’ve got savings for a down payment and closing costs.
Get pre-approved for a certain loan amount and then pick from that amount what you’ll actual borrow before you start to go looking for homes that you couldn’t actually afford if the lender finds things that would hamper you from securing lending.
Minimum of 6% return after paying mortgage every month
Rents should not exceed average weekly wages for the area
Never close on a mortgage on a Monday because prepaid loan interest may be held on Friday, Saturday, and Sunday.
Budget one percent of the purchase price of the home per year for maintenance. (Put into my model)
Getting pre-approved for a loan makes sellers look at you as a serious prospect for purchasing their property.
Underwriters determine how much of a risk you are when lenders give them a loan to look at or you to look at.
Example of equity sharing: Non-occupant investor pays the down payment and closing costs for a 25% stake in the home. You the occupant are responsible for everything else. That includes the mortgage, insurance, maintenance, and taxes. In return you get a 75% stake in the property. When the house is sold you each get the portion that you committed to in the beginning.
Tell your lender to shop around for different PMI provider because the numbers do vary.
Ask about prepayment penalty (Read Federal truth-in-lending disclosure and or promissory note-> same for negative amortization, but that is for arms.
When was the roof put on? How much longer will the roof last? Has the roof had any leaks or water damage throughout the house?
Are the neighbors noisy? Messy? Complaints against them?
Are there rodent or bug issues? Termites?
What is the financial situation of the house? Are there liens on the house?
How old is the air conditioning unit?
Do appliances stay with the home?
What plans were there for improvements and why?
Is the total PMI for the life of the PMI payment higher or lower than putting down twenty percent to forgo paying PMI?
Should I worry about getting a tax sheltered account or just save in a regular savings account when saving for a down payment and closing costs?
Did my siblings get pre-approved before going house shopping? Is that why Lincoln got contacted about buying the house because the seller’s already knew that he was pre-approved?
How exactly does interest paid on a mortgage lower your taxes or get you that ‘deductible’ that ‘they’ are always talking about?
Would ARMs be smarter for short term flips than FRMs?
Don’t go looking at homes or dreaming about homes till you’ve got savings for a down payment and closing costs.
Get pre-approved for a certain loan amount and then pick from that amount what you’ll actual borrow before you start to go looking for homes that you couldn’t actually afford if the lender finds things that would hamper you from securing lending.
Minimum of 6% return after paying mortgage every month
Rents should not exceed average weekly wages for the area
Never close on a mortgage on a Monday because prepaid loan interest may be held on Friday, Saturday, and Sunday.
Budget one percent of the purchase price of the home per year for maintenance. (Put into my model)
Getting pre-approved for a loan makes sellers look at you as a serious prospect for purchasing their property.
Underwriters determine how much of a risk you are when lenders give them a loan to look at or you to look at.
Example of equity sharing: Non-occupant investor pays the down payment and closing costs for a 25% stake in the home. You the occupant are responsible for everything else. That includes the mortgage, insurance, maintenance, and taxes. In return you get a 75% stake in the property. When the house is sold you each get the portion that you committed to in the beginning.
Tell your lender to shop around for different PMI provider because the numbers do vary.
Ask about prepayment penalty (Read Federal truth-in-lending disclosure and or promissory note-> same for negative amortization, but that is for arms.
Wednesday, January 11, 2012
Real Estate Buying Tips Part 6
The longer you can spend talking with the seller of the property about why he or she wants to sell, needs to sell, wants to sell and needs to sell to you, the more likely you are to get a great deal.
In real estate investing when negotiating with sellers, establishing rapport, building motivation, and maintaining reluctant positioning is what closes the deal.
If you don’t think the seller did a good job negotiating then please don’t say that he did. If that is the case, l then just skip that part and move to injecting a little bit of doubt or hesitation into the deal.
Let the seller sell both him and you on the merits of the deal. Say something like, ‘Mr. Seller, while Nancy is out checking to see if she has a blank agreement to use, tell me again-scrunchy face, voice getting softer and lower-‘why was this deal such a good fit for you?’ The seller will give you the benefits he gets. Listen to him and use selective hearing to get him to repeat himself here to reinforce the benefits he is selling himself on. ‘I’m sorry Mr. Seller, you said that our making the payments would allow what?’ You could even ask the seller a question like this one, ‘Mr. Seller, if you were me, tell me again why would you think that this deal works me?’ Or, ‘Mr. Seller, if you w3re me why would you feel this deal is even good enough that you would want this property over any of the other houses you had considered buying this week?’ These last two questions subtly inject a lot of fear of loss into the negotiation and are like a tonic to close the deal.
The most important shift for you to make right now in your investing is to let go of the need to be perceived as professional and expert.
In the real world of real estate investing, when you are meeting directly with the owner of the property, you need to help them feel smarter than you and to help them feel like they are in control of the conversation.
Motivated sellers just want two things. They want to have a specific real estate problem handled as quickly and painlessly as possible. And motivated sellers want to feel safe and secure with choice they made of working with you, the investor.
??? Since he was taking title subject to that loan, he wouldn’t have any loan costs or personal liability on the loan.
Four choices for an exit:
1 Flip the deal to another investor
2 Sell the property to a retail buyer (this is the typical buyer of a home)
3 You could get a hard money loan for the purchase price and close on the two houses
4 You could bring in a money partner to fund the deal and split the profits 50-50
Any contract is fully assignable unless something in the contract expressly prohibits it from being assigned
Most tenant buyers will choose not to buy
This means we get the property back at the end and rarely had to do any real maintenance or fix up to the place during that time.
The tenant buyer treats the house much better than the average renter and typically is much better about paying their monthly rent on time. On average, you’ll find one out of four tenant buyers buying, with three out of four choosing not to exercise their option to buy.
??? Non-recourse Financing (e.g. seller carries back a $100,000 mortgage with no personal guarantee of repayment)???
For every $1 of his cash he is willing to put in a deal, he wants $4 of immediate equity.
In real estate investing when negotiating with sellers, establishing rapport, building motivation, and maintaining reluctant positioning is what closes the deal.
If you don’t think the seller did a good job negotiating then please don’t say that he did. If that is the case, l then just skip that part and move to injecting a little bit of doubt or hesitation into the deal.
Let the seller sell both him and you on the merits of the deal. Say something like, ‘Mr. Seller, while Nancy is out checking to see if she has a blank agreement to use, tell me again-scrunchy face, voice getting softer and lower-‘why was this deal such a good fit for you?’ The seller will give you the benefits he gets. Listen to him and use selective hearing to get him to repeat himself here to reinforce the benefits he is selling himself on. ‘I’m sorry Mr. Seller, you said that our making the payments would allow what?’ You could even ask the seller a question like this one, ‘Mr. Seller, if you were me, tell me again why would you think that this deal works me?’ Or, ‘Mr. Seller, if you w3re me why would you feel this deal is even good enough that you would want this property over any of the other houses you had considered buying this week?’ These last two questions subtly inject a lot of fear of loss into the negotiation and are like a tonic to close the deal.
The most important shift for you to make right now in your investing is to let go of the need to be perceived as professional and expert.
In the real world of real estate investing, when you are meeting directly with the owner of the property, you need to help them feel smarter than you and to help them feel like they are in control of the conversation.
Motivated sellers just want two things. They want to have a specific real estate problem handled as quickly and painlessly as possible. And motivated sellers want to feel safe and secure with choice they made of working with you, the investor.
??? Since he was taking title subject to that loan, he wouldn’t have any loan costs or personal liability on the loan.
Four choices for an exit:
1 Flip the deal to another investor
2 Sell the property to a retail buyer (this is the typical buyer of a home)
3 You could get a hard money loan for the purchase price and close on the two houses
4 You could bring in a money partner to fund the deal and split the profits 50-50
Any contract is fully assignable unless something in the contract expressly prohibits it from being assigned
Most tenant buyers will choose not to buy
This means we get the property back at the end and rarely had to do any real maintenance or fix up to the place during that time.
The tenant buyer treats the house much better than the average renter and typically is much better about paying their monthly rent on time. On average, you’ll find one out of four tenant buyers buying, with three out of four choosing not to exercise their option to buy.
??? Non-recourse Financing (e.g. seller carries back a $100,000 mortgage with no personal guarantee of repayment)???
For every $1 of his cash he is willing to put in a deal, he wants $4 of immediate equity.
Tuesday, January 10, 2012
Real Estate Buying Tips Part 5
The Instant Offer System Bridge Questions
1 Leading into the Rapport Step of the IOS: “Thank you for inviting me over _____, can you show me around?”
Just use the first bridge question and then as he shows me around the house find things we have in common and allow him the chance to open up and share about his life. Look for places where I can genuinely admire and esteem him. Keep the conversation focused on him personally and off real estate. Remember, the Rapport Step is about building a relationship and not about discussing the defects or merits of the property.
2 Where’s a good place for us to sit and talk this through?
I don’t know if any of the things we’ll talk about will end up working for you or not. If the things we talk through were clearly not a fit for you, would you be willing to let me know?
That’s good ____. On the other hand, if what we talk through is a fit for you, are you okay telling me that?
Great. I’ll be doing the same thing. If things aren’t going to work for me where I feel I can meet your needs and make a conservative profit I’ll let you know that I don’t want to buy your house. On the other hand, if I see that I can meet your needs and make a conservative profit then at the end of our time together I’ll tell you that, yes, I do want to buy your house. The one thing I am going to ask _____ is this: I promise to let you know when we’re done either, yes, I want to move forward with this deal or, no, I don’t, and I am asking you for the same courtesy in return. Is that fair?
The bottom line is that is just means getting the seller to agree to give you a decision at the end of your time together so you don’t end up with the infamous, ‘I’ll think it over.’
Always refer to your time with the seller as a ‘visit’ or ‘conversation’ and not a ‘negotiation’
3 So what are you hoping I could do for you here today?
There are three goals with the Motivation Step: first is to help the seller emotionally connect with why he needs to sell. Second is to help eliminate the seller’s other options so that he is left recognizing that you are his best option. And third, to flush out the seller’s real time line to sell in such a way that the seller recognizes a sense of urgency with handling his property.
Examples of reluctant-buyer language patters: being a reluctant buyer means you are structuring your negotiation so that the seller is constantly being put in the role of selling you on the idea of making a deal happen. The real key with negative phrasing is to soften both your voice and body language when you use it so that you come across as naïve or optimistic rather than sarcastic or condescending.
MOTIVATION before MONEY
4 So what was it you were asking for the property again?
With the money step you need to gather up all the financial details on the property that you’ll need to craft a win-win fit with the seller of the property, and to gather this information in a way that lowers the seller’s expectations.
Three R’s to Dramatically Lower the Price: Range Technique, “Realistic” technique, and Real Estate Technique, which refers to subtracting out a realtor’s fee for me making the deal happen
Instead of ‘full price’ use the label ‘full amount’. ‘Full amount’ is a label that doesn’t have anything attached to it until you link it to the $$$
5 Terms Deal: I don’t know if I could do this or not, but what if I were to make you payments for a period of time, and at some point down the road I completely cashed you out of the property. Is that something we should even talk about, or probably not?
6 Cash Deal: Mr. Seller, I’m not sure if I could even get my partner to go along with this or not, but what if I could talk him into paying you an all-cash price for the property? Obviously we’d need to get a pretty steep discount off the full $$$(insert full amount number)$$$ to make this work for us, but is this even something we should talk through? I mean you probably hate the idea, huh?
The key to this step is that when you put out ideas and potential solutions to the seller, you will never be committing to any of them until the seller has told you that, yes, that offer will work for them.
Use negative phrasing and PLAY THE RELUCTANT SIDE so that the seller feels they aren’t being tricked or that they are making any mistakes.
Taking action is key
Three appointments in the next 30 days
Learn to act in the presence of your fears
Whenever you are dealing with a husband and wife or a property with multiple owners, you are going to want to make sure that both people are there at the property to meet with you. If you don’t, you’re chances to close a deal diminish.
You can’t force a deal if the deal doesn’t exist
1 Leading into the Rapport Step of the IOS: “Thank you for inviting me over _____, can you show me around?”
Just use the first bridge question and then as he shows me around the house find things we have in common and allow him the chance to open up and share about his life. Look for places where I can genuinely admire and esteem him. Keep the conversation focused on him personally and off real estate. Remember, the Rapport Step is about building a relationship and not about discussing the defects or merits of the property.
2 Where’s a good place for us to sit and talk this through?
I don’t know if any of the things we’ll talk about will end up working for you or not. If the things we talk through were clearly not a fit for you, would you be willing to let me know?
That’s good ____. On the other hand, if what we talk through is a fit for you, are you okay telling me that?
Great. I’ll be doing the same thing. If things aren’t going to work for me where I feel I can meet your needs and make a conservative profit I’ll let you know that I don’t want to buy your house. On the other hand, if I see that I can meet your needs and make a conservative profit then at the end of our time together I’ll tell you that, yes, I do want to buy your house. The one thing I am going to ask _____ is this: I promise to let you know when we’re done either, yes, I want to move forward with this deal or, no, I don’t, and I am asking you for the same courtesy in return. Is that fair?
The bottom line is that is just means getting the seller to agree to give you a decision at the end of your time together so you don’t end up with the infamous, ‘I’ll think it over.’
Always refer to your time with the seller as a ‘visit’ or ‘conversation’ and not a ‘negotiation’
3 So what are you hoping I could do for you here today?
There are three goals with the Motivation Step: first is to help the seller emotionally connect with why he needs to sell. Second is to help eliminate the seller’s other options so that he is left recognizing that you are his best option. And third, to flush out the seller’s real time line to sell in such a way that the seller recognizes a sense of urgency with handling his property.
Examples of reluctant-buyer language patters: being a reluctant buyer means you are structuring your negotiation so that the seller is constantly being put in the role of selling you on the idea of making a deal happen. The real key with negative phrasing is to soften both your voice and body language when you use it so that you come across as naïve or optimistic rather than sarcastic or condescending.
MOTIVATION before MONEY
4 So what was it you were asking for the property again?
With the money step you need to gather up all the financial details on the property that you’ll need to craft a win-win fit with the seller of the property, and to gather this information in a way that lowers the seller’s expectations.
Three R’s to Dramatically Lower the Price: Range Technique, “Realistic” technique, and Real Estate Technique, which refers to subtracting out a realtor’s fee for me making the deal happen
Instead of ‘full price’ use the label ‘full amount’. ‘Full amount’ is a label that doesn’t have anything attached to it until you link it to the $$$
5 Terms Deal: I don’t know if I could do this or not, but what if I were to make you payments for a period of time, and at some point down the road I completely cashed you out of the property. Is that something we should even talk about, or probably not?
6 Cash Deal: Mr. Seller, I’m not sure if I could even get my partner to go along with this or not, but what if I could talk him into paying you an all-cash price for the property? Obviously we’d need to get a pretty steep discount off the full $$$(insert full amount number)$$$ to make this work for us, but is this even something we should talk through? I mean you probably hate the idea, huh?
The key to this step is that when you put out ideas and potential solutions to the seller, you will never be committing to any of them until the seller has told you that, yes, that offer will work for them.
Use negative phrasing and PLAY THE RELUCTANT SIDE so that the seller feels they aren’t being tricked or that they are making any mistakes.
Taking action is key
Three appointments in the next 30 days
Learn to act in the presence of your fears
Whenever you are dealing with a husband and wife or a property with multiple owners, you are going to want to make sure that both people are there at the property to meet with you. If you don’t, you’re chances to close a deal diminish.
You can’t force a deal if the deal doesn’t exist
Monday, January 9, 2012
Real Estate Buying Tips Part 4
On terms deals you make sure that the property can afford to pay for it long enough for it to go up in value enough to resell at a profit. Or you make sure the property is one in which the financing is so valuable that you are able to use it to make your money regardless of whether or not the property goes up in value.
Good debt is debt that the property itself can afford to pay and debt that is no recourse. Bad debt is debt that you have to personally feed, and its debt that you have to personally guarantee.
Money that you borrow and personally guarantee repayment on is called recourse financing.
Rules of safely structuring a terms deal
1 The property must be able to pay for itself
2 Don’t take on domino debt – no recourse debt is one of two criteria of good debt because it isolates and partitions off your risk
Ideally you want all your terms deals to cash flow- to have income in excess of the expenses producing a net profit- by a minimum of 10 %
If the property is in a great area that is strongly appreciating and that has a good long-term outlook, I am much more willing to take a break-even deal or maybe even a small negative cash flow. However, I will make sure that if I do this that I am getting my initial price low enough sot that I already have some equity from day one so that, if need be, I can immediately sell a property for a small profit should my personal circumstances change.
Also, if there is some other sweetener in the deal that I am able to negotiate that makes the deal good enough, I am more than willing to take on a small negative cash flow.
Subject-to= seller deeds you the house and you make payment every month on the existing loan in the seller’s name…. the reason/money made in subject to is by avoiding buying costs associated with the loan?
We recommend beginning investors get started investing without using their own cash.
Ask around for referrals for the best agent in the area of town and for the specific type of property you are selling
Interview at least three agents prior to listing your property and get a written commitment from them of the specific actions steps they will take and by when to get your property sold fast
The way you build deep affinity and trust in any relationship is to really listen for what the other party’s needs are and honor them by doing your best to help them get those needs met in a way that wins for you too.
Good debt is debt that the property itself can afford to pay and debt that is no recourse. Bad debt is debt that you have to personally feed, and its debt that you have to personally guarantee.
Money that you borrow and personally guarantee repayment on is called recourse financing.
Rules of safely structuring a terms deal
1 The property must be able to pay for itself
2 Don’t take on domino debt – no recourse debt is one of two criteria of good debt because it isolates and partitions off your risk
Ideally you want all your terms deals to cash flow- to have income in excess of the expenses producing a net profit- by a minimum of 10 %
If the property is in a great area that is strongly appreciating and that has a good long-term outlook, I am much more willing to take a break-even deal or maybe even a small negative cash flow. However, I will make sure that if I do this that I am getting my initial price low enough sot that I already have some equity from day one so that, if need be, I can immediately sell a property for a small profit should my personal circumstances change.
Also, if there is some other sweetener in the deal that I am able to negotiate that makes the deal good enough, I am more than willing to take on a small negative cash flow.
Subject-to= seller deeds you the house and you make payment every month on the existing loan in the seller’s name…. the reason/money made in subject to is by avoiding buying costs associated with the loan?
We recommend beginning investors get started investing without using their own cash.
Ask around for referrals for the best agent in the area of town and for the specific type of property you are selling
Interview at least three agents prior to listing your property and get a written commitment from them of the specific actions steps they will take and by when to get your property sold fast
The way you build deep affinity and trust in any relationship is to really listen for what the other party’s needs are and honor them by doing your best to help them get those needs met in a way that wins for you too.
Friday, January 6, 2012
Real Estate Buying Tips Part 3
Consistently follow through in your marketing activities. Your investing business will thrive or die based on your ability to consistently find great deals.
The key to structuring a winning deal is to plan both your way into and out of any deal
Intelligent investors know that they make their money when they buy, not when they sell.
The key lesson here is that you will never enter into any deal that you don’t have a clearly laid out strategy for gracefully exiting.
The point to understand is that any time you give cash to a seller, you need to get something of equal value in return-like a deep cash discount
In a cash deal that way you get rewarded is by getting a deep cash discount
Cash=bank
If the seller is receiving all of his money at the closing, then you are buying for cash
I’ve already built in my profit on the deal from the moment I purchased the house by getting a deep cash discount or by getting excellent terms of financing
Cash Price Formula = Highest “All Cash” price you can pay = 70% of the “As Is” value of the property
When you are buying for cash, never pay more than 70% of the as-is value
“As Is” Value = The after-repair value of the property less the CONSERVATIVE cost of getting the house in the condition so that it will SELL in 90 days or less
The bottom line is this: when you are buying for c ash you need to be using the Cash Price Formula.
Ideally you’d be paying 60% or less of value. But as long as you don’t pay more than 70% you should conservatively be making a profit in all you cash deals.
Using your own money still costs you in three big ways. First, you take on magnitude more risk. Second, using your money isn’t free (arbitrage). Third, be careful about using your own money is the opportunity cost of tying up your cash.
You are going to have to begin your cash negotiations at 50-60% to leave yourself room to negotiate up if you need to. This will kill many deals. That’s okay; the ones that do work out will be easy to find the funding for because there is plenty of potential profit to warrant an outside party funding your deal.
The most important point is to understand that if the deal is right, you will find the money. Never lose sight of that.
The key to structuring a winning deal is to plan both your way into and out of any deal
Intelligent investors know that they make their money when they buy, not when they sell.
The key lesson here is that you will never enter into any deal that you don’t have a clearly laid out strategy for gracefully exiting.
The point to understand is that any time you give cash to a seller, you need to get something of equal value in return-like a deep cash discount
In a cash deal that way you get rewarded is by getting a deep cash discount
Cash=bank
If the seller is receiving all of his money at the closing, then you are buying for cash
I’ve already built in my profit on the deal from the moment I purchased the house by getting a deep cash discount or by getting excellent terms of financing
Cash Price Formula = Highest “All Cash” price you can pay = 70% of the “As Is” value of the property
When you are buying for cash, never pay more than 70% of the as-is value
“As Is” Value = The after-repair value of the property less the CONSERVATIVE cost of getting the house in the condition so that it will SELL in 90 days or less
The bottom line is this: when you are buying for c ash you need to be using the Cash Price Formula.
Ideally you’d be paying 60% or less of value. But as long as you don’t pay more than 70% you should conservatively be making a profit in all you cash deals.
Using your own money still costs you in three big ways. First, you take on magnitude more risk. Second, using your money isn’t free (arbitrage). Third, be careful about using your own money is the opportunity cost of tying up your cash.
You are going to have to begin your cash negotiations at 50-60% to leave yourself room to negotiate up if you need to. This will kill many deals. That’s okay; the ones that do work out will be easy to find the funding for because there is plenty of potential profit to warrant an outside party funding your deal.
The most important point is to understand that if the deal is right, you will find the money. Never lose sight of that.
Thursday, January 5, 2012
Real Estate Buying Tips Part 2
Sort out all the nonqualified sellers as fast as possible to leave you with a pool of potential motivated sellers you can spend more time with later.
Seller’s motivation and the financing equaled 90 percent of a good deal
The property itself does not matter, until you have satisfied yourself that the seller passes muster.
The second coaching point I want to make is that many of you spoke very quickly on the phone, slow yourself down.
You want to sound just like a potential buyer or renter for the first ten to twenty seconds; the way you add that is by being a little scared, hesitant, and unsure of yourself.
Local library to get copies of all the old newspapers and create my list of aged ads of for-rent and for-sale properties
Be less polished on the phone.
A short sale is when a lender agrees to take less than what’s owed on a loan on a house that is in foreclosure. It’s a way to buy a house that doesn’t have enough equity to make it a good cash purchase, and build a conservative profit in by getting the bank to take less money in exchange for a fast solution.
For every 100 signs you put up, you should be able to get one deal.
Make sure you put it in the right paper and in the best section of that paper
Which paper would they advertise a moving sale in and to use that publication as the first place to test out their I BUY HOUSES ad
3 biggest mistakes most beginning investors make: waiting to start marketing until they know it all, getting ‘bored’ with winning marketing campaign, and not systematically tracking your marketing
The first is to test out a postcard c campaign to out-of-town owners. These are people who own property in a specific zip code, but the mailing address on file for the property tax statements goes to a zip code that is at least an hour away.
Postcard campaign to landlords in a specific area
How much does toll free cost?
Specific extensions all the outgoing messages pre-scripted
Go out and buy two I BUY HOUSES magnetic car signs for your car and put them on
Two things to find deals inn the beginning: invest the time, or invest your money
Seller’s motivation and the financing equaled 90 percent of a good deal
The property itself does not matter, until you have satisfied yourself that the seller passes muster.
The second coaching point I want to make is that many of you spoke very quickly on the phone, slow yourself down.
You want to sound just like a potential buyer or renter for the first ten to twenty seconds; the way you add that is by being a little scared, hesitant, and unsure of yourself.
Local library to get copies of all the old newspapers and create my list of aged ads of for-rent and for-sale properties
Be less polished on the phone.
A short sale is when a lender agrees to take less than what’s owed on a loan on a house that is in foreclosure. It’s a way to buy a house that doesn’t have enough equity to make it a good cash purchase, and build a conservative profit in by getting the bank to take less money in exchange for a fast solution.
For every 100 signs you put up, you should be able to get one deal.
Make sure you put it in the right paper and in the best section of that paper
Which paper would they advertise a moving sale in and to use that publication as the first place to test out their I BUY HOUSES ad
3 biggest mistakes most beginning investors make: waiting to start marketing until they know it all, getting ‘bored’ with winning marketing campaign, and not systematically tracking your marketing
The first is to test out a postcard c campaign to out-of-town owners. These are people who own property in a specific zip code, but the mailing address on file for the property tax statements goes to a zip code that is at least an hour away.
Postcard campaign to landlords in a specific area
How much does toll free cost?
Specific extensions all the outgoing messages pre-scripted
Go out and buy two I BUY HOUSES magnetic car signs for your car and put them on
Two things to find deals inn the beginning: invest the time, or invest your money
Wednesday, January 4, 2012
Buying Real Estate Tips Part 1
First key ingredient of a great deal is finding a seller who has a strong motivation to sell. The seller’s compelling reason to sell, with a perceived time crunch within which to do it. The foundation of all winning real estate deals is the seller’s motivation to sell.
To make money on a deal you need to either purchase the property for cash at a steep discount, or you need to get great terms of financing.
Spend less time thinking about the perfect location in which to do your investing and more time in mastering the art of finding and negotiating with motivated sellers. You need to spend less time falling love with the physical property and more time e learning to structure deals with price and terms that guarantee you a profit.
“Because I’m an investor who focuses on nice homes in nice areas can you tell me, is your home a nice home in a nice area?”
The single greatest time waster in real estate is trying to do a deal with a Non-motivated seller.
As an investor, if you can’t get either discounted cash price or attractive terms of financing then you shouldn’t be buying the property.
To be qualified for situation you need to be able to check off one of these four boxes: Vacant, Rental, Other, Massive Equity
If the seller passes any one of them, the seller has enough of a situation to merit taking the next step with them.
The key to making this work is to use the script to quickly sort through potential sellers to only spend time with sellers who are more likely to be ready to do a deal with you.
The key is that the seller can’t need all their equity out of the property at closing.
Needed to find out if that contract was contingent on this house selli9ng. The softer way of getting same information is to ask the, ‘If this house doesn’t close, are you still going to close on the other house?’
With a for rent property the owner needs to pass all three qualifying questions: First, they must be open to a long-term lease of at least two years.
Next, you qualify for the owner being willing to sell you the property at some point in the future. Finally, you make sure the owner understands that you are an investor using that powerful.
FSBO=for-sale-by-owner
When on the phone your goal is to find a motivated seller.
To make money on a deal you need to either purchase the property for cash at a steep discount, or you need to get great terms of financing.
Spend less time thinking about the perfect location in which to do your investing and more time in mastering the art of finding and negotiating with motivated sellers. You need to spend less time falling love with the physical property and more time e learning to structure deals with price and terms that guarantee you a profit.
“Because I’m an investor who focuses on nice homes in nice areas can you tell me, is your home a nice home in a nice area?”
The single greatest time waster in real estate is trying to do a deal with a Non-motivated seller.
As an investor, if you can’t get either discounted cash price or attractive terms of financing then you shouldn’t be buying the property.
To be qualified for situation you need to be able to check off one of these four boxes: Vacant, Rental, Other, Massive Equity
If the seller passes any one of them, the seller has enough of a situation to merit taking the next step with them.
The key to making this work is to use the script to quickly sort through potential sellers to only spend time with sellers who are more likely to be ready to do a deal with you.
The key is that the seller can’t need all their equity out of the property at closing.
Needed to find out if that contract was contingent on this house selli9ng. The softer way of getting same information is to ask the, ‘If this house doesn’t close, are you still going to close on the other house?’
With a for rent property the owner needs to pass all three qualifying questions: First, they must be open to a long-term lease of at least two years.
Next, you qualify for the owner being willing to sell you the property at some point in the future. Finally, you make sure the owner understands that you are an investor using that powerful.
FSBO=for-sale-by-owner
When on the phone your goal is to find a motivated seller.
Tuesday, January 3, 2012
Matt Atkinson Notes Part 2
Matt picks a specific city he likes to work in so that he becomes an expert in that area
Pick a five-mile radius that you’re interested in, either where you work or where you live.
A mile in salt lake county is 8 city blocks
Matt typically budgets 10-15k for a buy and hold home and 25-35k for a fix and flip home.
Rental, vinyl versus Pergo/hardwood, KSL appliances vs. stainless steel, flush mounted vs. recessed lights
He’ll redo guts/plumbing cause who knows when the last time it was done for a rental
Buy and Holding benefits: taxes, cash flow, equity, appreciation, diversity, and portfolio
Holding negatives and costs: property management, tenants, property maintenance, vacancies, vandalism, and market change
Rule of thumb: don’t purchase anything more than 300-400% of your income, i.e. make 30k a year don’t buy something more than 90-120k or 50k is 150-200k.
Fix and flip benefits: quick income, opportunity, less exposure, no tenant/landlord duties
Fix and flip negatives and costs: drug substances, market, no wealth, and budgeting/timing issues
Bought one, then another and another and THEN he created a system. Moral of that story, build the system first and then do real estate.
20% increase to budget for starting out fixing and flipping cause you don’t know what you’re doing
If condo is not Fannie/Freddie approved you’ll have to put 20-25% down with a portfolio lender
203k’s are so much work Matt says.
Hard money financing and investment was 14k out of pocket to fix a home bought for 60-65k cash, and then refinanced using receipts and justification for increase in value. You can have 10 of these on your own credit/name. 0-4 you can go 80% LTV, 5-10 you have 70% LTV per Fannie Mae. He recommends hard money lending in your name and then at refinance do it to the LLC.
Fix and flip in company name, buy and hold in personal name.
Fix and flip favorites: paint and carpet, kitchen, bath, windows, landscaping, adding square footage (i.e. he’ll run heating duct into garage and that adds another x amount in square footage)
Pick a five-mile radius that you’re interested in, either where you work or where you live.
A mile in salt lake county is 8 city blocks
Matt typically budgets 10-15k for a buy and hold home and 25-35k for a fix and flip home.
Rental, vinyl versus Pergo/hardwood, KSL appliances vs. stainless steel, flush mounted vs. recessed lights
He’ll redo guts/plumbing cause who knows when the last time it was done for a rental
Buy and Holding benefits: taxes, cash flow, equity, appreciation, diversity, and portfolio
Holding negatives and costs: property management, tenants, property maintenance, vacancies, vandalism, and market change
Rule of thumb: don’t purchase anything more than 300-400% of your income, i.e. make 30k a year don’t buy something more than 90-120k or 50k is 150-200k.
Fix and flip benefits: quick income, opportunity, less exposure, no tenant/landlord duties
Fix and flip negatives and costs: drug substances, market, no wealth, and budgeting/timing issues
Bought one, then another and another and THEN he created a system. Moral of that story, build the system first and then do real estate.
20% increase to budget for starting out fixing and flipping cause you don’t know what you’re doing
If condo is not Fannie/Freddie approved you’ll have to put 20-25% down with a portfolio lender
203k’s are so much work Matt says.
Hard money financing and investment was 14k out of pocket to fix a home bought for 60-65k cash, and then refinanced using receipts and justification for increase in value. You can have 10 of these on your own credit/name. 0-4 you can go 80% LTV, 5-10 you have 70% LTV per Fannie Mae. He recommends hard money lending in your name and then at refinance do it to the LLC.
Fix and flip in company name, buy and hold in personal name.
Fix and flip favorites: paint and carpet, kitchen, bath, windows, landscaping, adding square footage (i.e. he’ll run heating duct into garage and that adds another x amount in square footage)
Monday, January 2, 2012
Matt Atkinson Notes Part 1
Lease option: If they don’t do 3k down minimum then I won’t consider them. For foreclosure/chapter 7 bankruptcies, somebody must wait three years before buying again, but not for a lease option. Don’t do lease options longer than 3 years you’re setting yourself up NOT to succeed.
Start the refinance as soon as you own the home if you bought the home originally with hard money lending, does not apply if you bought the home with the traditional 20% down payment.
New roof, new kitchen, new furnace/air conditioner, windows (should be $200 a window installed) are all considered mechanical upgrades. Matt suggests doing just one mechanical upgrade per buy and hold (rental). If the house needs two of those three then it isn’t a buy and hold, but a fix and flip.
Matt thinks you can manage 6 rentals by yourself easy and then it gets hard beyond that.
Don’t buy a flip to put on the market unless you can show it from March-October timeframe due to Christmas (people are in debt and don’t have any money to put into buying a house), school (scheduling a move during school is a disaster people will avoid), and bad weather, which means fewer buyers. Buy and holds are good anytime.
Owning rentals makes you a good saver. You learn to manage your money and projects.
Hold four buy and hold properties before doing one fix and flip.
Paint, carpet, bath, kitchen, landscaping, and adding square footage are best ways to increase value of home.
Start the refinance as soon as you own the home if you bought the home originally with hard money lending, does not apply if you bought the home with the traditional 20% down payment.
New roof, new kitchen, new furnace/air conditioner, windows (should be $200 a window installed) are all considered mechanical upgrades. Matt suggests doing just one mechanical upgrade per buy and hold (rental). If the house needs two of those three then it isn’t a buy and hold, but a fix and flip.
Matt thinks you can manage 6 rentals by yourself easy and then it gets hard beyond that.
Don’t buy a flip to put on the market unless you can show it from March-October timeframe due to Christmas (people are in debt and don’t have any money to put into buying a house), school (scheduling a move during school is a disaster people will avoid), and bad weather, which means fewer buyers. Buy and holds are good anytime.
Owning rentals makes you a good saver. You learn to manage your money and projects.
Hold four buy and hold properties before doing one fix and flip.
Paint, carpet, bath, kitchen, landscaping, and adding square footage are best ways to increase value of home.
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