Atlanta Real Estate Investors Alliance Blog

To maintain the spirit of the season (Halloween) I thought I would tell you about a few of the mistakes that I have made in the real estate business and share the lessons with you.

Know the value of something before you buy it!

My first mistake was to pay way too much for my first deal. It was a duplex. The numbers worked as far as cash flow was concerned but I never researched my comparable sales in the area. I paid twice what everyone else had bought duplexes for. It cash flowed so I was able to operate but that killed any exit strategy of selling or refinancing. Cash flow is great but you must always have an exit strategy before you buy. Make that a part of your deal analysis.

If something is cheap… there is probably a reason.

I have bought some tough properties in some tough areas. I have been successful with them but I also managed them myself. Learning the art of management has been great but it has also been a tough road and has kept me from buying more deals sometimes. What I have learned is that if you want to a reposition a deal you need to make sure it is in a good area. Most of the repositions I have done were in areas of town that were not so great. When you see an apartment complex that is selling for a good price you need to analyze the deal with your eyes wide open. Sometimes properties are selling at a discount because they need physical repair and sometimes they are selling cheap because they need repair and are in bad area. When looking at reposition deals pay close attention to the demographics of the area the deal is in. Look at the median income of the area. Is there job growth? What is the vacancy of the other properties in the area that are like yours? Look at the rent roll in the delinquency column. Are they actually collecting rent? You don’t want to do reposition deals in marginal areas even if you can buy them cheap. Your property is only as strong as the tenants you can rent to. No matter how much work you do to the property…if you can’t collect the rent it’s not a good deal. Read More→

It is the goal of this column to answer questions about QuickBooks and how it is used in the REI arena. Knowing how to record transactions in the proper way and have your set of books in good shape when it comes time for taxes. It is our intention to do this with you, the members, submitting questions to info@smallbusinessadvisor.biz and getting answers here in this column.

From time to time I have clients ask me questions that are related to the finances of their business and how they should implement certain business practices. These questions do not always relate directly to QuickBooks® but how these things are handled may directly affect how they are entered in QuickBooks®. I felt that one of these may be of interest to the AtlREIA membership and have compiled a few answers here:

Q: Why would I need a Receipt of Payment Policy- in writing – for my business?

A: A uniform payment policy keeps customers and employees on the same page and improves cash flow management. You may use your payment policy to spell out accepted methods of payment and accounting practices. If your business extends credit to customers or sells a subscription or membership service, you should clearly define the expectations for payment as well as the consequences for failing to make payment. As a landlord you should have already done a credit check on your tenant – which does not mean they can’t have problems from time to time. Read More→

The third-quarter results of the Atlanta real estate market are exciting and positive!

It IS possible to make money in this market, and I’ve been in this business for long enough to guide you through it.

On the market right now there is a

• 3.5 month to 5.3 supply of single family houses above $250,000
• 2.9 month to 5.1 supply of single family       houses below $250,000
• There is high demand from cash buyers
• There is an increase in demand and value in the rental market

What do YOU need to know?

Marketing through your own resources for “off market” leads is the best tactic. Hedge funds have slowed their buying. They are recovering their assets right now because they moved too fast and have a lot of vacant inventory that is nonperforming.

Consider your time value. Working FMLS and hoping to get a 30% off price tag is not a good strategy because you will spend all of your time making offers just to get one deal. Realtors are doing a great job of pricing properties correctly to sell in 90 days; take advantage of this. Even the beat up properties are being priced right. Read More→

As many of you know I have taught hundreds of students over the years and I am constantly asked what the most important things a new real estate investor needs to know. First of all I believe every new investor needs to realize that if they plan to be successful and make money from the real estate they buy, they will find that every situation will require a different strategy and structure that they will need to learn if they wish to achieve their goals and dreams.

The key to make almost every deal work is not to “Buy High and Sell Low”, it’s how you structure the deal. Actually this has happened to me a few times over my 35 years as an investor, this IS NOT a good strategy to adopt but it shouldn’t mean you need to lose money. Over the years I have done two deals where I bought a property and because of circumstances beyond my control I was forced to sell those properties for less than what I paid for them. Even though I paid too much for those properties “over time” I made a nice profit on both of those deals.

Each of those properties I bought with seller financing terms and then sold each with seller financing terms. Even though I sold each property for less than what I paid for them I received a higher interest rate when selling than the interest rate I was paying to buy each property. I was able to make a nice profit on each. Read More→

“If it weren’t for the fact that the TV set and the refrigerator are so far apart, some of us wouldn’t get any exercise at all.” ~ Joey Adams

As autumn arrives and the summer heat evaporates, it’s a great time to “reset” your fitness routine. Last month, I talked about the importance of taking care of yourself, and why you should do it now. I also told you about one of my favorite apps, MyFitnessPal.com, which is a great tool for building and executing your good-health plan.

But there’s a lot more to getting healthy than just downloading an app onto your smartphone. There’s eating right, and exercising, and yearly physicals, and – well, all the stuff your mother told you to do. And she was right!  

But I’m not your mother, so let’s just stick to the workplace. You probably spend more waking hours in your office than anywhere else. Hopefully, you’ve done your best to create an office that’s efficient and comfortable. You’ve got a desk and a comfortable modern chair. Maybe you have a couch. And while you might move around a little bit while you’re working, you probably spend most of the day sitting. For hours and hours at a time.

But hey, you go to the gym after work, so it’s okay, right? Read More→

The quickest route I have seen many investors take to failure in the real estate investing business is by quitting before they ever have the chance to see their business succeed. Some obstacle comes along that just feels overwhelming and instead of forging on, they just say “I Quit”. Think about it, it’s easier to just quit than it is to forge ahead and solve the problem even when it’s not the easiest solution at the moment. It’s also easier to blame the market, blame your lack of education, or just adopt the “it doesn’t work where I live” kind of attitude than to take responsibility for the success or failure of your real estate business. I have heard “want to be” investors come up with every excuse imaginable not to get started in this very profitable business, and I have heard every excuse as to why it “just didn’t work for me”.

Believe me when I tell you, I have heard it all, and I feel sorry for the folks who adopt these attitudes. They are missing out on a wonderful opportunity to change their lives forever. If I had listened to that kind of negativity or thought so little of my personal abilities when I got started in this business, I wouldn’t be the wealthy entrepreneur I am today.

There are two critical moments when you must have faith in yourself and in your business; when you first begin your business and when your business is in some kind of trouble. It’s easier to be much more optimistic at the onset, it’s not so easy when you are overwhelmed, feeling like you are being pushed in several directions, or having trouble with cash flow. Sometimes quitting may look really attractive and your friends and family may suggest to you that you quit the real estate business and get a job if things aren’t going along just the way they should. Read More→

I recently had a transaction wherein the Homeowner was attempting to use a Stated Income Loan Program which requires 1) that the property be purchased in a Limited Liability Company and 2) a 35% to 40% down payment. I was very concerned, yet excited about the Loan, due to the fact that these lenders are very picky and it was a new loan product for Investors. The mortgage broker that I was working with had “NO doubt” that this Buyer would be entitled to this loan, considering that he was giving such a large down payment.

Well … that is when it all started. After the appraisal was done, survey completed and the loan was being submitted to this Lender in St. Petersburg, Florida, all we were waiting for was the hazard insurance policy. However, the lender decided to use a program called CoreLogic which tracks if the Buyers currently have or previously had any outstanding mortgages and guess what? Yep, they did, and I was furious! This mortgage should have shown up on his credit report and when title work was pulled for a name search for the Buyer, we should have been notified that he owns another home. However, there was a HUGE lack of communication with the mortgage broker and the Buyer. The mortgage broker did not speak the native language of the Buyer. So … when the mortgage broker asked the Buyer “do you have any outstanding mortgages on any homes,” the Buyer replied “no.” However, they did say that the old mortgage they had on their personal house was “short-saled” and since the Bank wasn’t reporting it on their credit, the mortgage broker never mentioned it to anyone! This was a big mistake and costing the Sellers, the students and I, lots of time, money and effort to get this deal to happen. Read More→

A high percentage of real estate investors and sellers begin their research on some of the popular websites like Realtor.com, Zillow, Trulia and Homes.com. Also, thousands of websites with aggregated data that provide bits and pieces of information might seem helpful.

For those of you already connected to REIAComps, the control and feeling of confidence you have over your deals is priceless. Using REIAComps to investigate the value of houses as they come to market, against other less reliable sources continues to be a no brainer.

Today almost 90 percent of investors go to the web for information at some point during research, and, quite a few will possibly connect with a real estate agent during the buying or selling process. Only investing agents can actually offer and help to interpret the abundance of data and guide an investor or seller. Unfortunately, there are very few actual investing agents.

Anyone looking to buy or sell a home these days has more than likely surfed and discovered one of the many online home valuation tools. Every investor must ask themselves, are these tools really useful? Well, are they? Read More→

As mentioned before, real estate investors wear numerous hats and play plenty of roles in their business. If you know me, I am a very hard worker and take my business very seriously. However, any time you see/meet me I am usually in a great mood and in good spirits. People ask me what I do and when I mention being a real estate investor and agent they ask how come I’m not all wound up. My reply is I have a great team behind me that assists in leveraging everything in my business. The more you leverage the better off you will be.

The biggest questions are: How can you risk all that money on a home? What if after you close there are more problems than you expected? What if you cannot sell it? As investors we learn to evaluate a potential real estate investment but you do not want to spend time evaluating deals you may not have a good chance of acquiring. To prevent wasting time I have a team of agents, wholesalers, and bird dogs that I invested time in training to evaluate a deal the same way I do. Therefore, they are out submitting offers on my behalf and only contact me when a seller agrees to consider a price I would like. At this point, I schedule a time to meet the seller at the home and make sure my contractor meets us there as well. I let the contractor who already knows what I expect to look at the home while I get to know the seller. Once the contractor has finished putting his numbers together I ask the seller to give up a minute to discuss what the contractor just evaluated. Before coming to the property, I run a CMA and know what the property can be worth fully renovated, the contractor just told me the cost of renovation, and know I can calculate my offer. I present the cost of renovations to the seller to justify my offer. If the seller agrees I am ready with a contract at that moment. At this time, I now have a property under contract and a bid and the time I personally invested was about 2-3 hours. Of course, the contractor may have over looked a small item or two and there may be a hidden issue discovered during demo but there is always a miscellaneous number built into the budget for these items. Although this is an investment and there are risks, investing in real estate is a very calculated risk and the investment is tied to something tangible. If it does not sell fast I can always drop the price. I may not make as much as expected but you can’t hit a home run on every project. Read More→

Many people present wholesaling as a great way to gain capital for investing in real estate. One of the toughest things about getting started investing in real estate is saving enough money to invest.   There are ways to invest with little money down, but you are still going to need some money to buy properties. Wholesaling may be a way to get started investing in real estate without much money. Wholesaling may not make you super rich, but it will teach you a lot about real estate investing and I think is a great place to start. For one, because that’s how I started, and two, I’m still doing it.

What is wholesaling real estate?

Wholesaling real estate involves an investor (“wholesaler”) buying a property or getting a property under contract and then selling the house or assigning the contract as quickly as possible. The investor may wholesale the property to another investor who will then fix up the property and rent it or flip it. The key to a successful wholesale deal is finding properties cheap enough where there is still room for a profit for the end buyer.

How can you find properties to wholesale?

I think a wholesaler’s biggest opportunity is to find off market properties. I call it the “Direct to Seller” method (no banks, no Realtors). Off market properties are houses that are not listed for sale, but are still for sale. The owners may be too far away, too busy, or too beat down to list the homes. The owners still want to sell the home, they just need the right person to find them and make an offer. Read More→

So there you are – a proud real estate investor or business owner! You’re doing some marketing, talking to sellers, driving out to meet them, making offers, following up, raising private money, selling your houses, and a million other things.

 Meanwhile, you’re (maybe) still working a job, being a husband, a father, a friend, a family member, a neighbor, and a member of your community! You don’t even know the meaning of the word “sleep!”

 You’ve got a lot of balls… In the air, and everything is going great with your juggling act.UNTIL… IT happens. What is it? “It” could be anything, like… you could get sick. Or someone in your family gets sick & needs you to take care of them. Or a deal goes sideways & winds up taking way more time than you had budgeted (inconceivable!). Or a vehicle breaks down. Or some technology doesn’t work the way it should (what? that never happens!). Or… shoot, just fill in the blank. IT doesn’t really matter what “it” is.

 Suddenly, your whole world gets turned upside down, and all your balls fall to the floor. The next few weeks find you frantically trying to put the pieces of the puzzle back in place again, only to find that the picture will never quite look the same no matter how hard you try to shove the pieces back together to where you had them. Read More→

David 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→