Archive for the ‘Real Estate Investing’ Category
August 7th, 2009 | 
Author: It is said that the Japanese have a formula that allowed them to become one of the greatest forerunners of technological development – the “3 I’s”: Imitate. Improve. Innovate. They took an existing idea and used it enough to understand it. Next, they tried introducing changes and improvements and generally exercised a bit more creativity than was envisioned by whoever conceived that original idea. And then finally, they create an entirely new concept from what they learned.
Notice where the formula begins – Imitate.
One common mistake of newbie investors is thinking and believing they know enough to survive and so they try to wander off into the forest all alone. While a handful actually succeed, the vast majority fails within the early part of their investing career, eventually giving up and end up missing out on a world of income.
Don’t get me wrong. I admire people who take matters in their own hands and strive to succeed on their own. I have the same attitude and it has served me well in my years as a real estate investor, as an entrepreneur and as an individual. But the point is, alone, you can only do so much. Sooner or later, individual creativity and resourcefulness fails. It is at this crucial point that a lot of investors get lost and eventually fold – especially if they reach the point where everything they try fails.
But just as I have mentioned in the previous post (see “Why You, Me And Everyone Else Need A Mentor”), the most logical, yet surprisingly the most overlooked, step to take is to get a mentor.
First off, a mentor (when properly chosen) can provide you with the right direction to take in order to shake off the ‘bad vibe’ and move on. More or less, a mentor will have experienced that same situation and has the answer to the question, “What’s next?”.
Secondly, a mentor will help you shorten your learning curve by showing you exactly what works. You don’t have to go through the entire ‘trial-and-error obstacle course’ just to find out that the shortest distance between 2 points is a straight line. A mentor will provide you with a map that will take you directly from ‘lost newbie’ to ‘cash-vacuuming animal’ in no time at all without having to go through expensive ‘failure detours’.
Furthermore, a good mentor will know the most effective way to encourage you into taking the all important first step and go further to motivate you to maintain your drive, passion and hunger. Take for example my student Fiona Camberun. She was scared of talking to prospects over the phone, much more for talking to them in person. That fear was what was holding her back. But with just a few words of encouragement and motivation, she finally took the plunge and made close to US$13,000 on her first deal! A good mentor will do that to you.
Moreover, a good mentor will have developed a deep bag of tricks that he can share with you so you can start doing what he does the way he does it and with the same results. A mentor will know the most effective way to get a seller to agree to give you their property at 50 cents on the dollar, the most mind-blowing way of getting a buyer to eagerly give you their money in exchange to whatever deal you have, the most magical way to put 2 and 2 together so you get the most out of every deal and be a hero in the eyes of both the seller and the buyer, and a host of other ‘tricks of the trade’ that you would have spent 5 lifetimes trying to learn and master on your own.
And these are but a few of the myriad advantages you’ll get from having a mentor.
So take this advice and get a mentor now by clicking this link: http://dodeals.com/mentorshipprogram
Remember, when all else fails, steal – from a mentor…
…And I’m glad to open my coffers for you to plunder
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Let me tell you a short story that happened to me when I first got into real estate investing:
Before my ‘Real Estate Investing Days’, I was working for a top IT company. I thought I had it made and then suddenly, at the onset of the new millennium, the IT industry crashed and my company was forced to let go of most of their people – myself included.
I didn’t have a whole lot in my bank account and I needed to find me a new money-source - FAST.
Then I stumbled upon a free real estate investing seminar. I attended it, listened to the speakers, took a bunch of notes and towards the end, they pitched us a $3,000 course that promised an entire universe of wealth.
I was so impressed that I didn’t have second thoughts and immediately made the investment.
And then it hit me.
I had no idea how to get started. I had more questions than answers and I didn’t have anyone to ask.
My precarious predicament became more apparent to me as I watched other newbie investors close one deal after another while I (along with a bunch of other clueless greenhorns) scrambled for the scraps they left behind.
I knew right there and then that those hot shots knew something that I didn’t and that they were doing something that I wasn’t doing. So instead of retreating away from the scene to lick my wounds like a beaten dog, I did the most logical (yet surprisingly, the most overlooked) course of action…
I took a mentor – and everything went as smoothly as possible.
You see, I’m never afraid to try things out for myself (I don’t think anyone should). I have had my share of trial-and-error, dead-ends and a truckload of failed prospects and projects when I was starting. I tried to learn as much as I can from those experiences. But there’s one thging I learned early – if I can avoid failure, I won’t risk it. By taking a mentor, I eliminated a big percentage of the probability that I will fail. Since I have someone who knows the business guiding me and showing me the ropes, my chances of success increased immensely – now look where it got me. J
I was able to accomplish more in a shorter period with my mentor than I can ever hope for had I continued on my own.
Not only was my learning curve shortened, my learning process became more efficient.
That’s why even up till now, I still make sure that I consult with a mentor on things that I am not sure about.
I’ll tell you more about having a mentor on this week’s webinar which will be on Thursday, August 6, at 8pm Central (6pm Pacific, 7pm Mountain, 9pm Eastern). Just go to this link to register and grab a seat: http://dodeals.com/specialwebinar.
It is true that experience is the best teacher. But it didn’t say YOU have to be the one experiencing it. If you learn from other people’s experiences, THAT’S still experience being the best teacher.
Agree?
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A lot of people say that it’s difficult to get deals nowadays.
While that may be true (depending on how you look at it and depending on how you do deals), that’s just one side of the coin. Once you actually find a seller willing to sell, the next big question that you get is, “Where do you get a hold of buyers?”
And that’s not even the end of it yet.
You may find a buyer interested in getting the property, but if he’s not qualified (he does not qualify for a loan or any conventional financing), then that’s no better than not finding a buyer.
So the better question will be, “Where do I find ‘qualified’ buyers?”
But again, that’s not where it necessarily ends yet.
What if you can’t find a qualified buyer (someone who’s approved for a loan)? What then? Do you give up and move on?
Not necessarily.
In cases where you find yourself in a situation where you have a seller willing to sell and a buyer willing to buy but is not qualified for a loan, you can always do “Creative Financing”.
There are several ways of doing this:
Owner Financing
This usually happens when the property being sold is ‘free and clear’, meaning the seller does not owe anything on the house anymore.
Since the buyer cannot qualify for a loan or a mortgage, the seller ‘acts as the bank’ for the buyer by deeding the house to the buyer and allowing the him to make monthly payments on the house, so much so that when the buyer fails to make his monthly payments, the seller can foreclose on the property.
Wrap-Around Mortgage
This occurs when the seller still owes the bank a certain amount on the property being sold.
So what happens is that the seller applies for a second mortgage on the house for the buyer and the buyer pays the seller monthly (with interest). The seller deeds the house to the buyer.
Since there are now two loans/mortgages on the house, the second one ‘wraps around’ the first one, hence the name.
Again, as with owner financing, if the buyer fails to make his monthly payments, the seller can foreclose. If the seller fails to make his payments despite the buyer making his, the bank can foreclose on the property.
Subject To
In this scenario, there’s an existing loan on the house. The loan remains in the seller’s name but the buyer will be making the payments to the bank and either pays the seller the difference (between the selling price and the amount owed) or making payments to the seller for it.
Contract for Deed
This is another common creative financing method where the buyer makes payments on the house and the seller only deeds the house to the buyer as soon as all the payments have been made and completed.
Lease Option/Rent-to-Own
As the name implies, the buyer agrees to pay a monthly lease or rental fee on the property for a specified period after which he has an option to purchase the property at the original price.
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In all these methods, it is important to cover all necessary scenarios so as to protect the interest of all parties concerned.
At first glance, these creative financing strategies may seem like a lot of extra work (paperwork, that is) but when it all comes down to it, the point is being able to find a way to convert a property being sold into cash as quickly as possible without having to wait for a qualified buyer to come along – which in this economy may take a significant amount of time.
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It’s true!
Andrew Carnegie once said, “Over 90% of millionaires become so through owning real estate.”
Before your eyebrows encroach on your hairline, let me explain.
It is a proven fact that investing in real estate (at least when done properly and dynamically) is the surest way to secure financial security in any economy.
Let’s face it. There’s one commodity that stays at constant supply no matter what the shape of the economy is and its market value, more or less, fluctuates in a rather predictable manner – real estate.
During recessionary times like what we have at present, real estate values plummet. Foreclosures are at a record high. Homeowners desperately seek out buyers just to stay financially afloat. Buyers hold on to whatever cash or credit they have like a lifesaver and wait out the storm. Banks and lenders start asking for souls of your children as collateral for loans. While traditional entrepreneurs scream death, a new breed of savvy investors take advantage of the situation and of the rock bottom prices and make offers on every available real estate deal they set their eyes upon.
And the reason is simple.
Sooner or later, the recession will break and guess what happens to real estate prices?
Now you may be saying, “That can only be true if you have enough cash to buy real estate today. What if you don’t have money to buy real estate at the present low prices and hold them till the market normalizes again? What then?”
Easy!
You get a hold of the properties at their bargain prices then flip them immediately to investors who do have the means to hold them till the market breaks. Finding these investors is actually easier than you think. Most of them (since they have money), don’t care about getting the deals themselves. They’d gladly pay people like you to bring them the deals.
This way, you don’t have to wait out the recession to profit. You actually put money in your pocket during the recession.
Think about it. With all the foreclosures going on, some realtor or broker or investor is going to get paid for them. Why not you?
This is exactly how most underground investors make millions in real estate during a recession.
Of course, those investors who get to hold the properties until the prices are up again make a lot more than you, but you won’t be doing bad either. Besides, they’ll make their money after the recession – you make yours during.
“But even if you go for this strategy, you’d still need some cash, right?”
Believe it or not, even in the middle of this recession, you can still make deals work without using your own cash or credit.
They’re called hard money lenders.
Unlike banks or traditional lenders, hard money lenders are more interested in the deal that you have than your credit score. And if they see a winner, they won’t hesitate to open their wallets for you because they know that there’s something in it for them too.
“You’re making it sound all too easy which can mean it’s not…”
Gosh, you’re a hard sell, aren’t you? J
But that’s okay. It’s understandable.
But to answer your question, you may be right – then again you may be wrong too.
Look at it this way, how much do you want to change your financial situation? If you really want it, would you let anything get in your way? Would anything be so hard? I can show you a bunch of people who have made it in real estate investing starting with nothing. I have also met a lot of people who say they want to achieve financial freedom through real estate investing but when it came down to it, all they did was bicker and complain so, they ended up worse than their original situation.
Being successful in real estate, or in any business for that matter, entails not only a strong foundation on the basic principles and strategies of the business, but it also requires a lot of positive thinking and optimism. There’s no sense getting started in a business with negative thoughts and the belief that you’re going to fail.
That being said, fact remains that history has proven over and over again, that the only business endeavor that has produced more millionaires in any period of time and in any economic situation, with or without any cash or credit to start with is real estate investing.
It is up to you to believe it and make the title of this article as true or as false as possible for yourself
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Most people believe that investing in real estate during a recession is a risk that’s not worth taking. They claim that the market is too volatile, that no one is buying real estate since cash is very limited and that instead of buying houses, people opt to rent apartments since it’s a lot friendlier to their pockets and because most of them probably got foreclosed on and so on and so forth.
This is simply untrue.
You see, from the last argument alone (that people are moving to apartments and rental properties because they probably got foreclosed on), you’ll already be able to see two real estate investing opportunities – rental properties and foreclosures.
All you simply need to do is to try to look at the situation at a different perspective.
It may be true that this entails a risk that’s too high for comfort – if you’re using traditional or ‘old-school’ investing strategies.
What you need to understand is that recessionary times call for a more creative approach to real estate investing. You don’t necessarily have to abandon the business altogether. You just need to ‘shift your gears’ and approach your deals from another angle.
So what strategies DO work during a recession? Here’s a few:
Owner Financing / Subject To’s / Lease Options
A lot of homeowners who need to sell their houses find it difficult to find buyers so most of these houses are just sitting there vacant and sometimes even neglected but most of the time, these homeowners continue to make mortgage payments on them so these properties become more and more of a financial drag that they need to get immediate relief from.
Now you don’t really need to have these properties at a deep discount in order to make the deal work. As long as you can make the homeowners agree to owner finance the properties to you and so you can take the property under terms then that’s already a good deal.
For example, the property is worth $100K. You can buy it for $200K and still make money.
How do you do it?
If the owner is willing to owner-finance it to you (and most of them would be happy to do that), and you don’t have to make any mortgage payments for 30 years and after that time, you pay them $200K, do you think that will make the deal work? Of course it does! That’s because the home price will go up and you didn’t have to pay any interest and all that.
These strategies work really well right now because a lot of these homeowners really need to sell their houses fast.You just need to get these houses under flexible terms to make it work.
Wholesaling
In the present economy, this strategy is really hot. This is because you can get a house at deep discount so you can still sell it cheap and make a lot of cash.
The reason you can do this is the same as the first one, we discussed. Homeowners are really desperate to get rid of their unwanted properties right now because they have a hard time finding qualified buyers and a lot of them would settle for literally pennies on the dollar (40 to 50 cents to the dollar). All you need to do is grab these properties and flip them for a quick profit.
For example, a property with an actual value of $100K which the owner desperately needs to sell and would settle for $50K. You get the property under contract for $50K, flip it to another buyer or another investor for $60K and you pocket a quick and easy $10K.
Short Sales
Short sales work like a charm nowadays because there are so many foreclosures going on and a lot of homeowners actually owe more than the actual value of their houses (mostly because they probably got their house on 100% financing or did a cash-out refinance and now that their property value dropped, they end up owing more than what the property is worth).
With foreclosures at an all time high, banks are finding themselves with more foreclosures than they can actually handle and so they are need to move these properties real quick.
That’s where short sales come in.
In a nutshell, what you do in a short sale is to negotiate with the bank to accept payment on a property that is lower than what is owed on it or even lower than its actual value. Banks are very willing to do this since they’re not in the business of owning homes. Simply put, they’d rather take a short sales offer on a home and make some money than to be stuck with a bunch of properties they don’t need and want.
Indeed, as a real estate investor, there are a lot of alternative ways of approaching deals in the present economic situation that will still prove to be profitable for you.
You don’t have to listen to all those doomsday-mongers who keep screaming that the world is coming to an end.
Well is you go ahead and believe them and abandon your real estate investing business, that may exactly be what will happen to you.
It’s true that the times are difficult, but that does not mean all hope is lost. You just have to look at the situation from another angle and take it from there.
Remember, “Extraordinary times call for extraordinary actions.”
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Real estate investing offers the best opportunity to make a really profitable living for any one. This diverse market can provide profitable deals in all sizes and shapes that fit anyone’s taste for business opportunities. Depending on your personal preference, you may indulge in wholesaling, retailing, rehabbing and a whole lot more. You can choose to focus your attention to ugly houses or pretty houses. It all depends on which area you’re more comfortable with.
One of the most sought after deals are those involving foreclosures. Whole most investors think that handling foreclosures is quite complicated and should be left to the hands of seasoned professionals; it can actually be quite a fulfilling experience once you get the hang of it. It is true though that you should pay attention to a lot of details when handling these deals. You owe it to yourself to go through these details and familiarize yourself with them right from the start. And that means from the moment a lender decides to foreclose on a home and sends out the very first notice of foreclosure on the property, up till the moment you find a buyer and close on the deal, you should be right at the thick of the action.
A smart investor knows that a foreclosed home presents a bargain, especially those who are looking for real estate investment properties. Usually, homeowners try to avoid foreclosure situations, as this hurts their credit, thus they usually agree to close at lower prices than the actual market value.
If you are a bargain shopper and are currently on the hunt for an investment property or even a house to buy for yourself, you may have heard stories of people finding great deals by buying foreclosed homes. And in the current market, there’s definitely no shortage of houses going into foreclosure. This is especially true if you are looking to buy properties in areas like Ohio, Indiana, or Michigan. The lending standards of the mortgage industry, particularly pertinent to the subprime or “bad credit” market, became increasingly lax during the last housing boom, this allowed homebuyers to get into homes they couldn’t afford with loans they didn’t understand. Now that the housing market has dramatically sobered up, most homeowners’ equities have dried up, and a lot of these homeowners found themselves neck-deep in trouble. Those with adjustable rate loans, especially those with ‘exotic’ loans like pay option ARMs or interest-only mortgage’s, have found it difficult to make their payments after their loan interest rates adjusted higher.
Learning from these, the first step in buying a foreclosed home is to make sure that you have the credit and resources to truly afford the house, no matter how great of a deal you get on it. This is to ensure that if push comes to shove and the housing market proves to be a real tough ride, you’re assured of ample financial cushioning.
Next, you need to know how to buy a foreclosed home. You can go to a state auction and try to outbid others for such a house. The risk though is that you are practically buying a house without having seen it first. You might end up buying a house at a price higher than what it ought to be and then find out later that it actually needs more repairs than you can afford. Thus, instead of finding a great bargain, you’d find yourself a great deal of headache. You will also have to be prepared to pay upfront with cash or a cashier’s check when you buy at an auction. Furthermore, in an auction, you might also find yourself in the unpleasant situation of having to evict the current homeowners if they are uncooperative about moving out. Despite these downsides though, auctions usually prove to be good enough venues for landing great deals.
You can also try buying a foreclosed home that is Real Estate Owned (REO.) This is when the bank repossesses the house and then accepts offers from other buyers. The benefit is that you get to inspect and have a title search done on the house before placing your bid. The downside is that the bank would probably want to get the highest amount possible for the property in order to cover the foreclosure losses – sometimes eating into whatever equity has already built up into the property. In which case, you might end up buying a house at its actual market value instead of a discounted price.
After all is said and done, buying a foreclosed house will probably save you some money right at the onset. However, you may have to shell out some money to cover for listing services or for necessary home repairs, as the previous owners probably didn’t have money for the home’s upkeep. The good thing about today’s market is that because of the overstocked inventory of new and existing homes on the market, as a buyer, you have a lot of negotiating leverage. And done right, this spells the potential to make a great deal of profit whether the house is in foreclosure or not.
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At this time, you’re probably tired of all the brouhaha about the economy being in a tight spot and the real estate industry hitting rock bottom and all those doom and gloom horror stories that would give even, Hannibal Lecter nightmares.
At this time, you’re probably even “tired-er” of them so-called gurus saying, “Hope is not lost! I know the way, the truth and the right tools to earn you money! So whip out your credit card and let’s get to work!” In all fairness, some techniques work, some don’t. There are even times when the technique works, the advise is as good as it gets but the person who’s supposed to do the work is just too lazy or too busy whining.
Bottom line is that more than ever, we are trapped in a state of dog-eat-dog, survival-of-the-fittest kind of business atmosphere that is almost too primeval. And to survive, you don’t really need to go super-complicated or ultra-sophisticated in your strategy. Sometimes – better yet, most of the time, the simplest strategy is your best bet. Sometimes, you just have to go back to the basics. And to this effect, I have two words for you – Wholesaling and Foreclosures.
I know you know the concept of wholesaling. You take a property that’s worth a certain amount, get the owner to sell you the property at a bargain price, you re-sell the property to another person at a higher cost than what you had it for, and you pocket the difference. That’s it! It does not come any simpler than that. And the beauty of this is that it takes very little to get started with this. All you practically need is resourcefulness (learn to use search engines and real estate websites to spot possible prospects), more resourcefulness (scout the properties you find, take pictures, write down addresses, track down owners if possible and keep track of the goodies you come across), a lot of honey on your tongue (convince homeowners and get them to agree to the best possible price), a little bit acid in your veins (talk to angry homeowners and try to convert them) and the determination and drive to succeed (you got to do it over and over again especially if you hit several roadblocks early on).
The problem with some people who try to plunge into the real estate investment business is that they look and expect big results right away. As such, as soon as they get burned the first time, frustration already starts to creep in – and creep in strong. Soon enough, after just a few setbacks, they readily hang the towel and give up. Which brings us to another necessity in this business – or any other business for that matter – the right attitude.
It can not be denied that wholesale deals exist. They may be a lot tougher to find than before, but they’re there – probably around the next bend on the road, or over the next hill or on the next town or whatever. If you know where to look, and I have given you an option earlier, they’re there and you just have to find them.
On that same note, the current economic upheaval has left on its wake a trail of foreclosed properties. If you didn’t know better, you’d avoid these properties like a plague and pray you never come across one you can’t escape.
That’s probably one of the most common misconceptions about foreclosures. Truth is that, foreclosed properties have the tendency to become chests of gold and silver and all manner of treasures.
Now if you don’t know what a foreclosure is except for it being a situation in which a homeowner is unable to make principal and/or interest payments on his or her mortgage, so the lender, be it a bank or building society, can seize and sell the property as stipulated in the terms of the mortgage contract. Let me enlighten you a bit on how a foreclosed property can metamorphose into a vault filled with cash. 
You see, banks or lending companies exist for basically one thing, to lend money at an interest so they can make a profit. They’re not interested in accumulating property. Besides, owning a property that the bank does not want in the first place is like living with your parents and your in-laws in one house – they don’t like it and would want to convert the property into cash the soonest possible time in order to settle accountabilities. Moreover, the government requires banks to reserve eight times the value of the house for liability risks – meaning the banks would not be able to use this money readily nor can it be lent out and all.
This just goes to show that banks and lending companies who foreclose on properties usually find themselves owning an unwanted piece of real estate.
In which case, these properties become prime candidates for wholesaling since most of these banks and lending companies would want to cash-in now on the property while they still can and/or to avoid losses in the future. You’d be surprised how many of these banks would be willing to sell these properties at bargain prices just so they can get rid of it and the headaches that come with it.
Also, homeowners in the verge of foreclosures also become perfect seller prospects as most of them would opt to sell the house quickly in order to be able to gather as much cash as they can to buy/rent/mortgage a more affordable residence.
This just goes to show that there are techniques and strategies in real estate that work no matter what the shape of the economy is. You just have to find your angle of attack and press on.
Indeed, as the old saying goes, when the going gets tough, the tough gets going. You don’t have to cry rivers of tears because you think that your real estate business is already kaput. You just have to learn to adapt to the situation and find profit potential where most people think there is none. Again, remember, in the survival of the fittest, it’s usually the simplest organism that has the upper hand. Same is true to this business. In times of difficulty, the simplest approach to solving the problem is to go back to the basics.
Why don’t you check these automated wholesaling real estate tool?
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