Author Archive
No Seller Wants Cash – EVER!
Posted on August 1, 2015 byJust got a call from a realtor. She represents a homeowner who needs a quick sale. The realtor said, “Bill, my client will only consider an all-cash offer. We’re not interested in any of your creative razzle-dazzle deal structures, understand?”
Kim and I get a lot of calls like this. I’ve learned not to say, “No seller wants cash – EVER – ya dingbat!” Saying such would ruin the relationship and destroy the possibility of meeting face-to-face with the seller.
So what do you think? Do sellers really want cash or could I possibly be right?
In this situation, what if I immediately agreed to pay the seller’s $80,000 asking price – in cash? There’s only one condition: The seller must put the $80,000 on her kitchen table, cover it with plastic wrap, and agree that once a month the seller, realtor and I will get together and marvel at the big stack of money.
Sure, this is a silly stipulation that no seller would agree to. But why – since the seller is getting exactly what she wants – wouldn’t she agree to it? Think hard on this. It’s an important question to contemplate! Read More→
What Makes the Best Rental Property?
Posted on July 2, 2015 byOver the past twenty years, Kim and I have bought a wide variety of investment homes – everything from a one-bedroom, one-bath duplex to a six-bedroom, four-bath McMansion. Experience has taught us what makes the best – and worst – rental property!
Jack Miller said: Everything else in real estate is harder than a house. With that said, Kim and I stay away from townhomes, condos, duplexes and apartment buildings. We’re not saying these are bad investments; it’s just that they require a lot of hands-on attention, and our goal is freedom, not a j-o-b.
When it comes to single-family homes, the most in-demand property is a three-bedroom, two-bath home…with a garage…without steps…on a level lot…in a nice, convenient neighborhood. We call these Walmart houses.
Think of a Walmart house this way: Go to a checkout register at Walmart that has ten people in line. You hold up a picture of your investment property and ask, “Who would like to live in this home?” You want eight out of ten hands to go up. Next – and this is the most important question of all – you ask, “Who can afford to live in this house?” The eight out of ten hands need to stay up. If several hands drop, then your rental property is too high-end – which means you’ll have fewer prospective tenants able to afford the monthly rent…and having fewer applicants is not better when it’s time to rent your property! Read More→
How Do We Fund Our Deals?
Posted on May 29, 2015 bySince we don’t use banks, how do we fund our deals?
Do banks have money to lend? Think carefully – this could be a trick question! Don’t banks “borrow” the money they lend from their depositors? And why do depositors keep their money in the bank? Because it’s the safest place to keep it, right? But is it really?
What interest rate is your bank paying on savings these days – 0.3%? And what is the current rate of inflation…something like 4%?
Here’s a broad-brush picture to help you understand what’s really happening. You put $10,000 in the bank earning 0.3% interest. One year later, your nest egg has grown to a whopping $10,030. But let’s not forget about inflation. In reality, after you factor in inflation, the actual buying power of your $10,000 dropped by 3.7% to $9,630! What – you LOST money? Read More→
How to Make a Written Offer
Posted on April 30, 2015 byLast Saturday, I took thirteen real estate investors from the Chattanooga Real Estate Investors Association door-knocking. Before heading out, we discussed how to make a written offer to a seller.
The group had a number of questions: 1) How do I find a property’s fair market value? 2) How do I discover market rents in the area? 3) How do I make a written offer right there on the spot?
The first thing to remember is that an offer is different from a purchase contract. A purchase contract is often a formal document written in legalese that no one – especially the buyer and seller – understands. On the other hand, an offer can be written in plain English on a Post-it note that makes sense to everyone! (NOTE: On North Georgia REIA’s Facebook page, you’ll see three of the written offers I made in Chattanooga.)
Randy Shelley is an investor who lives in that area. We spent the day knocking doors in his subdivision. Though he already knew the fair market values and approximate rents for his neighborhood, I asked him not to share this information with the group. Read More→
Would You Break Into A Vacant House?
Posted on April 3, 2015 byYou’re out working foreclosures and see an obviously vacant house. There is a sign in the window saying the home has been abandoned and winterized. You look through the window and confirm that it is vacant. Do you open the door with your “investor key” (a credit card) and go inside to look around?
Over the years, real estate investors have hotly debated this topic. Some investors would never go in the home, while others think nothing of slipping the lock so they can inspect the interior before bidding on the property.
I know investors who regularly go into vacant homes. The popular thought is that there’s nothing wrong with that. The investor is not there to steal or vandalize anything, he’s there to estimate the rehab cost so he can accurately determine his maximum purchase price. What can possibly be wrong with this?
There are a lot of funny stories told by seasoned investors about things they found in abandoned properties; things you can’t believe a homeowner would leave behind – like artificial limbs, stuffed (taxidermy) animals, porno magazines, etc. After hearing these stories, many new investors come away thinking that it’s OK to break into vacant homes. But I’m here to tell you – think again! Read More→
How to Work Pre-Foreclosures
Posted on February 27, 2015 bySince 1995, Kim and I have been buying properties at the foreclosure auction. Over time, we’ve built a unique system that’s very effective. It has allowed us to buy many properties pre-foreclosure, at the auction and from banks after the auction. Today, let’s talk about how to work the pre-foreclosure market.
When it comes to foreclosures, our best deals come from buying pre-foreclosure! At the foreclosure auction, there are always investors willing to work on much thinner margins than what we’re comfortable with, and so we’re often outbid.
On the other hand, when buying pre-foreclosure – that is, before the auction – there’s very little competition. Why? When homeowners are facing foreclosure, because of unfounded fear, few investors will knock on their door.
There’s another BIG benefit to buying pre-foreclosure. Since you’re buying from the owner, there are many more creative deal-structuring tools you can use to construct a win-win deal. If you buy at the foreclosure auction, there’s only one tool – a big dang hammer…CASH! There’s no creativity, beauty or imagination when doing an all-cash-on-the-barrelhead deal – nor is it a win-win deal. Read More→
How to Make the Impossible Deals Possible
Posted on January 30, 2015 byDid you know that every month, within 5 miles of your home, there’s a $15,000 net-profit deal waiting to be had? The hard part is finding it, and then knowing how to creatively structure it into a big-profit deal. There won’t be a large sign in the yard that reads: Stop Here – $15,000 Deal Inside!
A common mistake made by many would-be real estate investors is to run a We Buy Houses ad, then sit back and wait for the phone to ring. A truth: The phone rarely rings! Because of this, most new investors go out of business long before they find their first deal!
To succeed at real estate investing, you must get face-to-face with sellers on a regular basis. The fastest, cheapest and most effective way to accomplish this all-important task is to simply knock on sellers’ doors and ask why they’re selling.
In addition to door-knocking, you must continually learn creative deal structuring techniques from experienced real estate investors. The best creative deal structurer I know is Pete Fortunato. With nearly 50 years of deal-making experience under his belt, he’s the master!
To show you how to make the impossible deals not only possible, but also very profitable, let’s look at one that Kim and I just completed. Read More→
“Impossible” is a Human Invention
Posted on January 1, 2015 byRobert Schuller came up with a great quote in 1973: What would you attempt to do if you knew you could not fail?
As 2015 begins, after finding yourself a quiet place to write down your goals, place Mr. Schuller’s quote in front of you. Next, with each goal you put to paper ask yourself: If failure is impossible, is this still a worthy goal for me to pursue?
At the beginning of each January, many of us make goals – they’re called New Year’s resolutions. This flood of goal setting is evident by the huge increase in the number of folks in the gym, and also by the number of people reading self-help books.
Sadly, by February, we’re back to seeing just the regulars working out – with the exception of two or three new people who’ve gutted out the pain and continue coming to the gym. As for the self-help books, most lay half read on shelves gathering dust…never to be opened again. Read More→
Starters, Estate Builders and Enders
Posted on November 28, 2014 byThere are three stages of real estate investing: Starters, Estate Builders and Enders. Do you know which stage you’re in? Many flippers and wholesalers think they’re Estate Builders when, in fact, they’re actually running a highly taxed retail business – they’re not real estate investors! (Saying this is sure to ruffle some feathers, but read on before you call me a liar.)
As the stage implies, a Starter is someone who’s just getting started in real estate. He usually knows little about contracts, rehabbing, landlording or how to creatively structure and fund a deal. He’s been to the closing table less than six times. We’re talking about someone who’s wet behind the ears!
An Estate Builder may still be new to real estate, but his focus is different from a Starter’s. An Estate Builder’s deals are structured to increase the investor’s monthly mailbox money! Mailbox money is money made when your capital assets are working for you instead of you working for your capital assets. Examples of capital assets are rental property and notes.
An Ender has been investing in real estate for decades. He’s very experienced at creatively constructing deals. Many Enders cut back on the number of rentals they own in exchange for simpler-to-manage capital assets like notes, options and master leases. Read More→
Would-be Tenants From Hades
Posted on October 31, 2014 byLandlords, what’s the best way to deal with tenants who are a pain in the tail and make you want to vomit? Easy answer: Never let them in your rental property in the first place. And how do you accomplish this feat? Read on, my friend – it’s actually pretty simple! But first, a story…
Several weeks back, we had a property go vacant in Cartersville, Georgia. It’s a nice three-bedroom, two-bath home with a two-car garage. Though a good number of applications came in, one stood out above the rest.
The application was neat and complete. The prospects were from Cartersville, so they have a lot of ties to the community. The husband was an experienced contractor who knew how to fix things. The wife was disabled and received a guaranteed monthly government check. They didn’t have any kids or pets and didn’t smoke. They were looking for a place they could live in for the rest of their lives. Looking at the application, there was nothing not to like about these folks!
Because Kim and I have been managing rental property for almost 20 years, we have learned that no matter how good tenants look on paper, there are a couple of steps we must take before letting them move into our property. Read More→
The Truth Can Run Around Naked!
Posted on October 1, 2014 byDavid is a real estate investor from the Northeast. Many folks don’t know this, but “Northeast” is a Latin word that means: Where’d you get that Yankee accent? Honestly, even though I went to college up north, I only understood half of what came out of David’s mouth. Don’t know about you, but Yankee talk hurts my ears!
He came down to beautiful Dixie because he wanted me to watch him negotiate with sellers. The thing was, even though David has been reading our column, he wasn’t having much success working out win-win deals at sellers’ kitchen tables.
During our time together, we met with six sellers and made six written offers. By any measure, it was a successful day. One other important thing happened: By the time David finished making his second offer, I had discovered his problem…actually his two problems – and boy were they doozies! No wonder he was having trouble getting deals.
At the first seller’s house, when we got to the kitchen table, David talked about himself for twenty-five minutes. On and on he went – bragging about his greatness and business conquests. This first problem could easily be fixed with a roll of duct tape – also known as Alabama chrome! Read More→
Making $13,000 With No Money Invested
Posted on September 2, 2014 byWant to see how to make $13,000 in two short weeks with no money invested and without owning the home?
With creative real estate investing, Jack Miller taught us to structure on purpose. Pete Fortunato taught us to use what we want, to get what we need, to get what we want. Let’s take a look at these two all-important lessons in action.
Jonathan and Christie help us maintain some of the rental properties we manage. About a month ago, Christie told Kim that her mom wanted to sell her home in Acworth, Georgia. After meeting with Christie’s mom, Kim determined that the home was worth $90,000 and needed a $10,000 rehab. Kim offered either $63,000 cash or a $90,000 owner-carried note with payments of $300 per month, but the mom turned down both offers.
Kim then asked, “What’s the house of your dreams?” The mom answered, “One out in the country.” Unfortunately, we didn’t have any such property available.
The next day, Kim had an idea. Our friends Joe and Ashley English had a house on the outskirts of Adairsville that had just gone up for rent. Kim called Christie’s mom and asked, “How would you like to trade your house in the city for your dream home in the country?” The mom got so excited at the idea that she loaded up her family and immediately drove to the Adairsville house. She LOVED it! She agreed to a trade. Read More→
