Author Archive
Where Do I Get The Money?
Posted on February 27, 2015 byProbably the most asked question we get, but before I answer it this question must be answered…
Money For What?
Everyone is so concerned about where to get the money when the reality is most of the best deals in real estate don’t require any or very little.
You don’t need a dime to do ACTS deals or sandwich lease options. No down payment, closing costs or even earnest money.
Subject to deals usually only require closing costs, sometimes a little to the seller.
Wholesale flips require only an earnest money deposit and so do options. So raising capital is really only applicable if you intend to pay cash for houses.
Truthfully, you can spend your entire real estate career and make a good six figure income and never pay cash for a house. Many do.
Spend a little to get properly trained and it will become abundantly clear you don’t need money to make money, especially not in real estate. In fact, the minute you do raise capital you’re now at a risk. Read More→
The Fatal Flaw
Posted on January 30, 2015 byAfter spending almost 30 years teaching good folks how to use real estate to take their life back, I’ve learned there’s a very short list of things that stop some from rapid growth. In fact, it even keeps some from developing a life-long career and separates them from financial freedom.
With today’s automation and systemization, there’s only a few things for the real estate business owner to do. Everything else should be done by someone or something else, thus freeing up your time to focus on the business—not be a slave to it.
However, if these few things aren’t set up and put on auto pilot, it’s the kiss of death, and many owners spend years doing stupid, nonproductive stuff or worse, quit and go chase another shiny object.
The ones who get it and actually do what they’re taught excel quickly and start making money without a major interruption to their current job or profession. All my seven figure annual earners clearly understand this basic principal and did what it took to get automated. Read More→
What’s Wrong With Work?
Posted on January 1, 2015 byWhen I want to play, I play. When I go to Alaska, I don’t work; I go there to kill stuff, and I make darn-sure before the day is over that something dies out there– every single day. I’ve never been on a trip to the resort in all these years where I didn’t fish every single day I was there. I enjoy that. I go fishing every chance I get. When I’m out there, I might be thinking a little bit about work, but I’m thinking more about fishing. When I dive, I dive, and that’s the way entrepreneurs are. Nobody is going to take that away from you, nor should they try, nor should you let them. We’re constantly on the job, and there’s absolutely nothing wrong with it.
I go on cruises, too. Yes, when I go on cruises, I’m working. Every once in a while, Beverly, my wife, talks me into going on a cruise where we don’t work, and I must confess it’s the most boring cruise I take.
Even then, I take something to write. I could not possibly stand to put in the time it takes to go on a cruise without getting something productive done. I’d rather have a root canal on both sides, simultaneously, with no anesthetic, than to go on a cruise and spend all that time just killing time. Entrepreneurs can’t stand to just kill time. At least smart entrepreneurs. I was raised on the beach, but I can’t fathom somebody coming down and throwing a blanket on the beach and laying there all day, with no clothes on, in the sun, getting fried, without absolutely nothing going on but sweat. I don’t get this. I never could get this. It just seems like a waste of time! They call that relaxation, but not to me. I gotta work! Read More→
Subordination
Posted on November 28, 2014 byThis technique will be used frequently and is one of my favorites to make a property easy to fund. It simply means the seller will take back a second, allowing you to get a new first to cover down payment and other costs.
The big advantage is it sets the stage for you to negotiate a deal that’s easy to fund because you can borrow the first at a low LTV making a hard money loan easy to get.
Example:
Seller wants $1,000,000 for an apartment complex that needs $100,000 in work. She owns it free and clear and fixed up and rented, you feel it’s worth $1,800,000. Seller says she’ll take $100,000 down and the balance within 24 months but will subordinate to a new first and take low or no payments or interest on the $900,000 second.
Purchase price $1,000,000
Down payment $ 100,000
Seller second $ 900,000
New hard money 1st $300,000
Less down payment -100,000
Less rehab costs -100,000
Cash to you $100,000
Financing structure
New 1st $300,000
Seller 2nd +900,000 – no or low payments
$1,200,000
Your exit is to buy, fix and refinance with a good, permanent loan, or sell. You should be able to get a $1,350,000 loan (75%) or more and pull out cash once it’s stabilized. Read More→
Why I Still Teach
Posted on October 31, 2014 by“Tell Me, and I Forget; Teach Me, and I May Remember; Involve Me and I Learn” ~ Benjamin Franklin
I just finished a very successful Quick Start Boot Camp here in Jacksonville, and I remember why I keep teaching. We had people from all over America and a couple Canadians, and even a Brit in the class of 175 students.
On the first day, I called for all who were doing deals to stand up and then invited them to the front of the room as a group. Frankly, I was shocked at the number. You see, quick Start is where people get the basic training to start their business, not usually where more seasoned veterans hang out. Oh, we always have some returning for a refresher, but I had about 50 people stand and come forward this time, and I asked all to tell a little about their businesses.
The numbers were staggering. A few were seven figure earners. Some built sizable businesses and a couple had become trainers. All my children. All starting from a point of ignorance. None taking no for an answer. Here’s another quote from old Ben… “We are all born ignorant, but one must work hard to remain stupid.”
Read More→
Follow Up and Close the Sale of a Lease Option or Owner Financing Deal
Posted on October 1, 2014 byOkay, we’re almost at the end of our series of articles on how to get through the entire process of buying and selling on a lease purchase, ACTS or owner financing deal. The last two steps in our process are to follow up with your buyer to get them to the closing table, and set up the closing so you can actually get it down and collect the final check.
Alright, so let’s assume that to this point you have been out into the market place and attracted prospects to call you and have found one or more that have enough money to get your attention. Now, you’re ready to move forward. In our case, we try to find 2-3 prospects, and, of course, the ones with the most money rise to the top quickly. Unless they get screened out from something we discover about them, they usually win the battle.
Once they are located and they have seen the house, now it’s time to get an oral commitment from them that they want it. Then, it’s time to do your due diligence prior to setting a meeting. When we put a lease option tenant buyer in a house or sell it with owner financing, there are a few things we want to see in the form of a report. That list is a credit report, a Megan’s law report for sex offenders, a background check, a criminal check, a debt-ratio report, and proof of income. Read More→
Constructing and Presenting Offers to Buyers
Posted on September 2, 2014 byLast month, we talked about locating buyers and finding out if they had any money and/or credit, which is the definition of prescreening them. In this issue, the next step is getting them to the point to where you have a meeting of the minds and collect a deposit so you’re only a few days away from either lease optioning it to them or selling it with owner financing. Of course, this is assuming that our exit strategy is either lease purchase or seller financing. If it’s not and your intent is to cash out with a qualified buyer, your mission is to simply determine that their credit is good enough, which is usually a credit score of 620 or better, and/or their debt ratio is good enough and they have enough down payment to satisfy FHA or the lender’s needs. This is done by putting their application in the hands of your mortgage originator and letting them come back to you and tell you whether they will qualify or not. Once that’s done, on these cash buyers, it’s just a matter of setting up an appointment with the loan originator and letting him get the application and take it from there.
But in the case of seller financing or lease purchase, now it’s up to you to be the loan committee, and to do that you’ll need to have collected the facts and then have the meeting, get the commitment and set up the closing; we can do this all in one meeting. Before you call a meeting with the potential buyers, you should know how much money they have to put down, what they can afford per month and what their credit score is. Of course, all these numbers have to be satisfactory to you. Once you have arrived to the conclusion that you like this potential buyer, you then set the meeting. This is where you will determine if they have any more to put down and if you can get any more per month from them, and make sure there’s nothing about them that turns you off so bad you do not want to move forward. Read More→
Pre-Screening Prospects
Posted on July 28, 2014 byLast month we talked about locating prospects, meaning buyers, and discovered that the two main ways we do it is, putting out signs and running ads on sites like craigslist. This month, we must discuss how to pre-screen those prospects when they get to us so we can determine the difference between someone we should work with and someone we should ignore.
We must start by deciding how we are going to capture these leads as we generate them. They will come in two forms: 1. Phone Call 2. Online. The first thing we must do is figure out how we are going to take the inbound calls. We use PATLive. Here, you have the choice of either having them taken live, or driving them to a voicemail box and just leaving enough information for you to decide whether you want to call them back. And here, my friend, is the key to pre-screening. The goal is to collect enough information to determine if they are worthy of your time. We’ll come back to that in just a minute.
If you use a voicemail system, check with PATLive on what’s called an IVR, Interactive Voice Response system. They can now set it up so the machine can ask several questions from your buyers without any human intervention. You might note, this is how we receive all our leads that we drive in from the radio at Global Publishing. A voice recorder handles all of the information and does a couple of upsells before they even get off the phone. This use of the IVR has changed our industry and now PATLive can make it available for you as a real estate investor. Read More→
Selling Houses Fast
Posted on July 1, 2014 byIn our last several issues we covered the entire process of buying houses step-by-step. Going forward, we’re going to cover the process of selling houses, but they include the same five steps, which are:
- Locating Prospects
- Prescreening Prospects
- Constructing and Presenting Offers
- Follow Up
- Close Quickly
Fortunately today, locating prospects to buy houses from you is almost free, and, in fact, many of the things you do will be free. Here in Jacksonville, where we buy 6-12 houses per month and sell them, mostly to lease option tenant buyers, there’s only a couple of things we do. The main thing is running ads online to attract buyers to call us, and obviously there’s no cost to that. The only other thing we really do is put signs out in front of houses we have ready to sell and pointer signs in several places around the house to drive people to it. Read More→
Closing the Deal
Posted on May 31, 2014 byLast month, we talked about follow up and got to the point where we were ready to prepare contracts and even had a discussion on some of those. This month, we are going to finish the “closing the purchase” process regardless of what kind of deal it is we’re closing. That means getting a contract and, when applicable, getting it to the attorney and letting him or her close the deal.
There are several types of deals you will be closing. The first is a lease option with a sandwich lease which you intend to stay in and then sublease out to your tenant/buyer. The second is a lease option that you intend to assign to a buyer, which we now call an ACTS deal. The third is an owner financing deal which you intend to buy and close with owner financing and stay in the deal. The fourth is an owner financing deal which you intend to put under contract and then assign to a buyer and get out of the deal. The fifth is a taking over debt subject-to deal, which you likely intend to stay in, and the sixth is an all cash deal. The only thing left is an option that does not involve occupancy of the house or installing tenant buyers. We’ll ignore that for the sake of this article.
In the case of a lease option agreement, whether it be a sandwich or an ACTS, this agreement is signed in the house, or you leave it with the seller, and they bring it to you the day after or whenever you can get them to finally put their signature on the dotted line. Once this happens, there’s nothing else for you to do except find a tenant/buyer for the property, and when that’s done, your attorney will close the tenant/buyer with the appropriate lease option agreement while simultaneously contacting the seller and getting anything else signed we need for our own protection. Of course, this is the easiest closing you will do because as soon as the seller signs the agreement, in effect, you’re closed. There’s no formal closing at an attorney’s office until you locate the tenant buyer. Read More→
Follow Up – Part 2
Posted on May 2, 2014 byAt this point, we’re down to the area where we’re ready to fill out a contract. And we’ll come back to that in step five after we get through the follow up step which is the next one on our list. But before we do all of that let’s talk about the other steps involved in getting to the point where we’re ready to fill out a contract. I guess the first one is knocking on the door at the appointment time you’ve set. What I usually do when they answer the door is say, “Hi, I’m Ron. I’m here to take a look at the house.” They’ll greet you and invite you in and I’ll say, “Can I take a walk through the house?” and they say “Yes” and I say “Okay, no dogs or naked people?” and then they chuckle and say, “No”, and I do exactly that, take a walk through the house.
My walk through the house will take less than three minutes because I’m not going to pick it a part and point out any obvious issues that the seller is already aware are there. If the walls need painted, we all know that, I don’t have to point it out. If the house has an odor, no sense in mentioning it because there’s nothing the seller is going to do about it. Regardless of what the situation is, you do yourself no good by making the seller feel small because of the issues that are readily apparent with the house. The best thing you can do is walk around, take a look, shut up, and get to the next step.
The next step, in my case, is I always simply ask the seller, “Do you have any questions?” If they say yes, I’ll answer them as briefly as I can and go on to the next step. Be careful here, when you answer questions, your goal is to answer them briefly, not get in to a teaching seminar. The worst thing you can do for yourself is get diarrhea of the mouth. Your job is to get in the house, get the job done, and get out of the house. You’re not there to make friends. You’re not there to have a fireside chat. You’re there to answer questions, get an agreement, and leave. And believe me, the seller wants you out of the house probably worse than you want to get out of it. So when you ask questions, answer them briefly, shut up and move on to the next one until they’re out of them. Read More→
Follow Up – Part 1
Posted on April 4, 2014 byLast month we discussed presenting offers. This month, we’ll talk about the next step which is follow up; the fourth in our five steps to success. There are actually three times when you’re going to need to follow up so we’ll discuss each one.
The first is when you’re dealing with a prospect after you prescreen them, which means, that it’s a yes on the property information sheet yet we’re not ready to complete a deal today. This means this prospect should be followed up on because a lot of these will be converted to deals at a later date if you do the follow up, which I will confess, most won’t.
The second type of follow up you’re going to need is on the hot prospects where they say yes now and now you’ve got a few things you’ve got to get done to get it under contract.
The third type of follow up is the follow up after you get them under contract. Follow up is such a neglected portion of the steps that are required to make money in any business. If you will master this, you’ll make a lot of money where a lot of folks won’t and you’ll find the deals that you do get will go better because you took care of the details along the way. A small detail left out can create a large problem, and has many times prior. Honestly, most people have no system whatsoever to do the follow up; they rely too much on memory and therefore issues come up that really could have easily been avoided. Read More→
