Real Estate: Are You Expecting a Retail Buyer?

I know I was. Let me back track a little. What I mean by this title is you think you buy a property, do a little rehab and resell it. I mean that is what I have seen on TV. Well that is not how it works. We had a property just like that. If you expect to do some work on a property and resell for top dollar, I am here to tell you that will be a tough road even if you give the buyer a great price. Let me explain with our example.

We purchase a great piece of property. We bought @ 60 cents on the dollar and we were looking to sell at 75 cents on the dollar. Great profit for us and a great deal for the buyer. Well it is not as easy as that. We do have it sold but what we went through to get it sold was more than I thought we would need to do.

We put the house on the market for a great price. We posted it on craigslist everyday. We got lots of calls while we were still in escrow. We got so much activity that we did not fix the property up. We just cleaned it out and thought people would come by the carpool. We held our Open House and people showed but a lot of them came with their realtors and they were not happy that we did not list the property and were not paying any commission. We did not think we needed to - big mistake. It will not cost us money but it did cost us time. So no offers after the first open house.

Plan B: We spent two weeks cleaning, repairing, painting the house. We put in a new floor and cleaned the backyard. We also did a flat fee listing with a 5% commission for the buying agent. We raised our price to compensate for the listing and repairs. Second open house: We got a few people through the house. Not as many as the first open house. But the agents did start to notice the property. We also had agents going to the property during the week to preview the property for their clients. We got questions about the rehab and why the kitchen was not done or that there were no blinds on the windows or dual windows. We acknowledged all of these items but pointed to the fact that the house was well below market value. But this pointed to the way the market is right now. Buyers can be very picky and want it all. They want the price lower and the property in pristine condition and and and... you get the idea.

So we answered all the buyer's questions and gave allowances for some rehab, but the house is sold and we can move one.

What have we learned:

1. Perform full rehab on property
2. No retail selling (unless you are selling at 50 cents on dollar)
3. Sell with owner financing
4. Lease purchase option

So sell at your own risk but it would behoove you to sell with owner financing and not rely on a retail buyer. It will help you sleep better at night. Now that we have that property sold I know I will. Our focus will switch to an owner financed property we have in Ripon. Anybody want to buy or lease a 3 bedroom/2 bath, give us a call or visit our website: JM2 Sells Houses

See Ya,
Mike

Ouch That Hurts!!

Wow, sorry guys and gals! I just reviewed the last couple of posting I have done on this blog and I see that I have fallen into the same trap everyone else is in. As Eor would say "...it'll never work". That is where we are in the economy but we do not have to participate. In fact I am standing up right now and going to my window and shouting - "I'll mad as hell and I am not going to take it any more."

OK, so the I borrowed the line for the movie "Network" but it still applies. We are looking down and thinking how can we reach the stars. Well the first way is to look up. I do not want you to think that I am down on Real Estate - I'm not. Real Estate is the ultimate wealth building business in the world. It is simple but not easy. So life will throw all kinds of curve balls at you and you just have to hang in there. You will get your pitch to hit. (Sorry baseball season is coming).

So don't let the news of the day bring you down. In fact throw the paper away and turn off the TV (well maybe leave it on for Life and Lost) and work on your action plan. Send out letters to motivated sellers; return seller calls; talk to buyers. Talk to positive people and remember the incredible buying opportunity we have today. People will be talking about this time for decades to come and you will be able to say... "I bought several income properties for my retirement in Maui" (or any other exotic place you choose). Because that is what we are doing ;-)

See Ya,
Mike

Weekend Happenings

Well as you can see I have changed my blog layout. That is the problem when you have an architect writing a blog. I am still looking for that perfect layout but in the meantime this layout looks good.

The Open House over the weekend went pretty well. We had more people show-up on Sunday than Saturday which goes to show that I do not know how the market will react. I would have thought the it would have been the other way. We got a few people who are interested in the property. We did discover that the flat fee listing we had done did not display in the local MLS. We are still learning things everyday. We have corrected that problem and we got a bunch of calls from realtors asking if the property was still available.

So the house maybe sold by the end of the week. That would certainly be good news. Once we have this sold we will concentrate on the next property. Hey anyone want a fixer in Tracy $165k all fixed up make offer as is, owner will carry.

See Ya,
Mike

Open House Reality

Open Houses are boring. You prepare very hard for the flood of people that will come through the house and very few come. That is just the way the market is right now. We spent a lot of time on clean and fixing and prepping to show the house to 8 people. For a four hour open house that is one person every 30 minutes. Let me tell you that is a lot of sitting around. I find that I look over all the things maybe I should have fixed. By the end of the day it is a long list and can be discouraging.

But in the end we did get one or two people who were interested in the house. Managing expectation is key. I always think we will sell the house in one day. A house is just too big a purchase for someone to walk-in and say "YES, I'll take it" There are just too many houses on the market. The prospective buyers need to see it, usually more than once, and compare it against other houses on the market. So I am preparing mentally for day two of our open house and we will be looking for those people who came through on Saturday to return and start talking price.

I will let you know how it goes.

See Ya,
Mike

The Real Estate Market Waits for No One

Hi everyone,
I am just getting back on my feet after being sick all weekend and I still have the same problem I had last week. Being sick did not make it go away. In fact today is my cut off day. I will either find a source of funding for our latest property or I will end escrow and work out getting my deposit back. That could be a fight. I still working with several private lenders but the problem is timing. I may not have enough time to get the funds here without paying a penalty (which I do not like to do).

The market - any market is running scared right now. There is so much uncertainty that people would rather do nothing for the time being then lose money. I can't say I blame them if you read the paper or listen to the news. My job is to help them to look beyond that and look at the long term return they will get from a investment that is secured by real estate. Property values are down in California but they will not remain there for long. Too many people like to live in this state and there are too many jobs for them not to. That means housing demand will grow sooner rather than later. It will take time for people to realize that they have a job and can spend money again before we see any recovery. But that means we have an opportunity to increase our investment portfolio. I don't know about you but we are buying houses that cash flow in California. Something that was unheard of only 12 months ago.

Meanwhile we are doing what everyone else is doing in this economy. We are cutting expenses and limiting spending to only what we have to do on the properties. That is the new model. You need to hold properties for a longer period and have them cash flow. I see holding the properties for many years. Though some we will hold forever as a great source of cash flow. Ultimately reaching our goal of 15 to 20 houses that are free and clear with a great positive cash flow.

Let me know what your model is and how it is working.

See Ya,
Mike

New Valentine's Day Tradition

Happy Valentine's Day!!! Now I know it may be tough to be happy and uplifting with the way the economy is today but I say we start a new tradition. They say: "Home is where the heart is.." but I want to revise that to "The Heart is where the home is". So with that theme I am starting a new tradition: Forget the flowers but a house.

Yes, don't waste your money on flowers that will die; buy something that your spouse, partner, significant other will remember forever: A House. With prices so low, now is the best time to be buying. You say you can't qualify for a loan for the house, that's OK I hear only the bank presidents can qualify. Don't let that stop you. When it is tough to sell houses sellers become motivated and will deal. Ask for owner finance; we do and you would be surprised how many people say yes. We offer owner financing on all our available properties with no bank qualifying. If you do not have the down payment, then do a Lease Purchase Option ( also known as Rent-To-Own) the house. You do not own the house but you lock in the price of the house in today's value and you can get credit towards a down payment to purchase the house in the future.

So don't wait go out today make that offer on a house and get it gifted wrapped for your loved one. You say you do not have a loved one well then buy it for the most important person in your life - YOU!! An additional benefit from National Buy A House Day (trademark pending) is it will give one hell of a boost to the economy. Way better than any bail out that will come and a lot cheaper in the long run.

Happy Valentine's Day: now go get that house and then buy the flowers. If you need one just visit www.JM2SellsHouses.com.

See Ya,
Mike

Working under the gun in real estate is stressful

Wow the days have gone by since the last time I posted on my blog. Monday I told you about our setback on our latest deal. Well today I still have that challenge. I have been talking to all kinds of people about private money. That is why I spent so much time on it in the 30 Day Action Plan (see previous blog posts). It is vital because once you have it and can keep a constant flow of it you can make real estate deals with confidence. If you have to find the money after you have a deal signed then you live in the land of stress and that is not fun.

We continue to talk to people about the possibility of earning 8 - 12% on their money secured by real estate. But what we are finding is while people like the interest rate they are fearful of the economy and do not want to make any changes until it settles out. So we keep talking and meeting until we have what we need.

So I will keep at it and let you know more tomorrow.

See Ya,
Mike

Real Estate - One Step Forward & Three Back

Wow what a weekend. I am glad to be back to work (like I take the weekend off). One of the many things I have learned in running our real estate company is that things change on a dime and you just have to be ready for them. Some days it is "One step forward and two or three steps back" That is what happen this past weekend.

We have a great property we have an offer in on that we are buying with private money cash. We have everything all set to close this coming week. Well I heard over the weekend from him that his money is not available for 2 to 3 months. Why? it really does not matter. That happens and you have to move quickly. All my plans last week for the property and what we were going to do to it are gone or at least in jeopardy. I did not get much sleep last night as I formulated what I would do this morning to resolve this challenge. That is how you need to look at it. It is a challenge that I need to over. You will get a lot of them in this business and you either fight or run. Well I have too much on the line to run so I am fighting as hard as I can. Do I need this challenge? - probably as much I need a hit in the head but I will learn from it.

So I have my plan for the day to fill this gap and I will be talking to a lot of people today to try and save this deal. This is the life of a real estate entrepreneur and I need to always be ready. This does show me that I do not have my business model completely set. If I had all the private money I needed then this would not be a big deal. That is why you need to talk to everyone you know more than once and then expand out form there.

Well I am off. I will let you know how I did tomorrow.

See Ya,
Mike

Real Estate Nightmares

You are sleeping soundly when it happens: you find yourself sitting straight up in bed, your heart beating fast and sweat breaking out all over your body. Congratulation you are officially a real estate investor with properties for sale or rent. It happens suddenly. One night the world is in order and peaceful and the next you are awake at 3:00am in the morning. I know because it happens often for me. Mike what does it mean?

It means you own more than the house you live in. It is that simple. You can't prevent it because once you own more than one house that asset now needs an occupied (preferably one that is paying a monthly rent), maintained, rehabbed and it will generate bills (electrical, water, gas, sewer, insurance & taxes). You start this business with big dreams about buying and selling houses and making big money but it is the details that will drag you down each and everyday. You can over come this - in fact if you are still reading this blog you probably already know this- with commitment and persistence. Because there are days that the crap hits the fans and usual ends up on you. You have to wipe yourself off and keep going. My motto is "Keep moving forward". It's like walking in mud if you stop it takes twice the effort to get moving again.

Another valuable asset for you will be your support team. This maybe a spouse, friends, family or employees. I am fortunate that I have all of these and I use them. I have a very supportive wife who listens and challenges me everyday. I work with my brother to bounce ideas or just dump on him if I need to and lastly I have a great staff. My staff take care of a lot of the details so I can focus on the big pictures items like private money and buying properties.

So when you wake up in the middle of the night - remember to be grateful for the challenge of the day to come and welcome to the club. Also I find it helps to have a pad by the bed to write down what is on my mind to get it out so I can go back to sleep. Have a god night sleep.

See Ya,
Mike

In Real Estate it's about Implementation

Implementation. A key word in real estate; actually in any business but very important in real estate. Why? Because there are so many great programs in the market to buy and sell real estate but it does not do any good if you do not implement. That is one thing no one really talks about. Sure you can watch the shows on TV - buy a house for $50,000 - fix it up for $15,000 and sell it for $125,000. That sounds fantastic, right? And it is possible to do, but what they do not say is that the real estate investors saw over 100 houses and made 15 offers and talked to countless people before they got the deal. Not to mention that it took four months of effort. Yes, you can get lucky and get a deal right off the bat, but that has never been my business model.

Typically my model is based on the longest time it takes to do something and that is after some dead ends on the bumpy road. Hey, don't get me wrong, I love real estate. It is fun to take something that no one wants and turn it into the pride of the neighborhood. Just be prepared to work like a business that is if you want to do more than one a month.

So dust off the program you have on your shelf (I have them also) and commit to implementing the strategy for a period of time longer than 7 days. You have to give it six months and see if you results are not better.

Hey drop me a comment and let me know what programs you have and what's working for you.

See Ya,
Mike

Real Estate Course: Day Twenty-Nine of 30 Day Action Plan

Day 29

1. Private Money
2. Next batch of mailing
3. Talk to sellers

Day Twenty-nine: Private money! I promise this will be the last time I bring it up. If you have done it over the past 29 days you should have had some successes. Go back to those that liked the idea. If they has lent to you thank them. They are helping your business grow. See if they have any additional funds they would like to lend. Ask them if they know anyone who they think would be interested in the same program. Above all, take care of this person.

If you purchased a large list last week (Day 5), you should be preparing a second mailing or a third if you did one earlier. Why do you want to break-up a large list into two mailings? Simple logistics is the answer. You or someone else has to answer the phone and if you sent a large mailing in one batch you could get a bunch of calls all at once (over several days). You may miss some calls. Dividing it over two mailings will make it easier to take the calls. You will repeat this mailing next month following the market rule of multiple mailings.

Go look at five property leads from the realtors you have met. You are evaluating them for equity (market value – repairs – loans = equity).

Real Estate Course: Day Twenty-Eight of 30 Day Action Plan

Day 28

1. Day of Rest
2. Make note of accomplishments
3. Enjoy your accomplishments
4. Read real estate section of the paper
5. Review action plan for coming week
6. Spend time with your family

Day Twenty-eight: Sunday, a day of rest for you. If you have followed the plan up until now you have established your business and talked to several people about your business and about your private money program. So look back and pat yourself on the back. You have taken the preliminary step to starting your career in real estate. Look at what has gone right and what has gone wrong. What can you change to make the next week better? What can you delegate to others (staff or virtual assistance)? You want to spend your time on items that make you money.

Spend some leisure time reading the paper. Look at the real estate section, read the articles and the real estate for sale ads. Review what you will do the coming week, and most important, spend time with your family because that is why you are doing all of this work.

Real Estate Course: Day Twenty-Seven of 30 Day Action Plan

Day 27

1. Talk to one person every day about your private money program
2. Lunch with an expert (realtor/title officer/mortgage broker)
3. Follow-up with everything

Day Twenty-seven: Private money! We have been talking about this for the past four weeks. That is how important this is to your business. It is absolutely vital. If you have not done this over the past weeks then you might as well quit now because you need the money to continue your business. Yes you can get some from a bank, if you have god credit and a large down payment but that will only take to two or three properties. I do not know about you but my business model involves many more properties than four. So go pull out your warm list and review how everyone on it responded to your offer. Compile a list of people who said no because you will go back to these people. We want to give them five opportunities to say no.

You have had some good lunches over the past four weeks. Though your lunches you have been talking and building your power team. Continue to talk and network with these people. They can help you in the success of your business so help them with theirs.

Remember to follow-up on all the properties you have written offers on. Follow-up is a key to the success. Check in with sellers you have talked to and made offers on. Things change over time and they maybe more receptive to your offer.

Real Estate Course: Day Twenty-Six of 30 Day Action Plan

Day 26

1. Talk to one person every day about your private money program
2. Lunch with an expert (realtor/title officer/mortgage broker)
3. REOs – Talk to realtors
4. Talk to Title Company
5. Make more offers

Day Twenty-six: Private money! Review your warm list and how they responded to your offer. You may have to modify your presentation. You are selling an opportunity. You are not asking the person to buy anything. They are lending their money and getting an interest payment.

Have lunch with an expert. Make sure you rotate your list of experts so you grow your list of real estate experts and contacts. Remember you can also talk to them about your private money program. That will help with the action item above.

You should be constantly talking to your realtor network about REOs (Foreclosed homes) in your farm area, researching them and making offers. Any offers that were rejected should go in a file to be resubmitted in 30 days if it is still on the market. Do not go chasing deals; let them come to you.

You should also be talking to your Title Officer about deals you have in escrow. Reviewing preliminary title reports, checking documentation and removing any roadblocks and challenges that come up during the escrow. Do not assume that no news is good news.

Continue to make offers on properties that meet your criteria. It is a numbers game. Look at 100 properties for 10 offers to get one deal. That is why you tell house finders, realtors, etc. what you are looking for to cut down the time needed to find the leads. The numbers do compress, as more people know what you do and begin to refer properties and people to you.

Real Estate Course: Day Twenty-Five of 30 Day Action Plan

Day 25

1. Talk to one person every day about your private money program
2. Review all offers made so far (follow-up)

Day Twenty-Five: More private money. By now you have had some success that will build up your confidence to go out and get more. After you have a private lender or two, give them your information packet. Yes they have seen it before, but have them look at it with the eye to explain things more clearly. What questions did the booklet answer and what did it leave out. This is valuable feedback. The information they give you will make the booklet better for the next person you give it to. Remember you can make no guarantees about rates of return. Check with you attorney to verify that you are complying with the local, state & federal laws for private money. You may have to register with the SEC. Your attorney can help you there. OK, enough with the disclaimer and warnings.

Remember to follow-up on all your offers you sent out. There is a deal in that pile.

Real Estate Course: Day Twenty-Four of 30 Day Action Plan

Day 24

1. Recruit bird dogs
2. Talk to one person everyday about your private money program

Day Twenty-four: Now that you have relationships with other professionals, you want to start building relationships with other people who will look for properties. They are called bird dogs. I like to call them House Finders. They are your eyes and ears in the community. They can be places where you cannot because of time or money. They stake out a particular area and look for houses based on your criteria. The key to using House Finders effectively is giving them good and clear information about what you are looking for. Where do you find them? Everywhere you go. The mail carrier, the UPS driver, the newspaper person can be a house finder or anyone who is working in the neighborhood as part of his or her job. The landscaper who goes from neighborhood to neighborhood could see houses that are falling in disrepair that may be a sign the seller needs to sell. They make contact with the seller and collect the information and pass it on to you. You finish the research and negotiation and close the deal. You pay the house finder. There are many programs to help you with this part of the job. I recommend Andy Poper’s TeamWork Lead System. He has a system set-up to help you find and manage House Finders. Because once you have a network of House Finders you need to manage and keep in contact with to help them learn and grow.

Next you need private money and you get that by talking to everyone you know. So go and spread the word on your program and collect the money.

Real Estate Course: Day Twenty-Three of 30 Day Action Plan

Day 23

1. Answer calls from sellers based on direct marketing
2. Talk to one person every day about your private money program
3. Lunch with an expert (realtor/title officer/mortgage broker)

Day Twenty-three: You should still be getting calls on your direct mail piece you sent out. Start talking to sellers! Have a property information sheet and just go down the sheet. Now remember, this is an opportunity to build rapport with the seller. They may have to sell their property, but they do not have to sell it to you. People want to do business with someone they know and like. So be friendly and upbeat. Be confident that you can help them out of their problem. Don’t forget to stand when you talk to someone on the phone. You will have more energy and that will come through the line. Most of all do not worry about failing. Do not expect to be prefect in fact I have found that helps when people realize that you are human. If you have never talked to a seller about their home you will blow it big time. Just know that now. You will be nervous. You will worry that the seller will know that you never purchased a home before or closed a deal on investment property or that you wear different colored socks or shorts all the time. So just make the call.


Private money! Repeat after me-“Private money is the life blood of my business.” Now go get it.

Then have a good lunch and pick the brain of someone in the field. This is another item that will repeat over and over. This helps spread the news of what business you are working in and helps you establish relationships with other professionals.

Real Estate Course: Day Twenty-Two of 30 Day Action Plan

Day 22

1. Follow-up on all calls and property visits
2. Talk to one person everyday about your private money program
3. Lunch with an expert (realtor/title officer/mortgage broker)

Day Twenty-two: By now you have a list of properties you have looked at and made offers on. Take time to follow-up on those properties. In fact you should go back to those properties at least once a month. Follow-up will get you a lot of deals. Your offer may have been rejected the first time, but time can soften a seller who needs to sell. Your offer maybe the only offer they have received. Following up may give you an opportunity to buy the property. Check your comparables for the area again and rewrite your offer. We often find that the offer will be lower because property values have dropped. We always want to buy better that will make a Lease Purchase Option or a Rent to Own much easier to cash flow.

Private money! The same old story but vitally important.

Then have a good lunch and pick the brain of someone in the field. Pick someone you may have met but do not know. You can talk about the real estate environment and how their business is being impacted. How do they see it changing in the future? You are building relationships with these people that will pay off in the future. Refer work to them or use them. If you run out of people to talk to ask people you have already met who you should be talking to about your business.

Real Estate Course: Day Twelve of 30 Day Action Plan

Day 12

1. Talk to one person every day about your private money program
2. Lunch with an expert (Realtor/title officer/mortgage broker)
3. Visit properties from calls
4. Looking for equity

Day Twelve: Private money! Review your warm list and how they responded to your offer. Compile a list of people who said no because you will go back to these people. We want to give them five opportunities to say no.

Lunch with an expert! Make sure you rotate your list of experts so you grow your list of real estate experts and contacts. Remember you can also talk to them about your private money program. That will help with the action item above.

Go look at properties that sellers called on yesterday. You are reviewing them for repairs required and assess how a buyer would feel about the property. Does it need a lot of repairs? What is the cost of the repairs? Does it have curb appeal? Do we want to spend the money for curb appeal? Is there equity?

You continue your property research to see if they have equity. Check comps with a realtor or on-line to verify property information and asking price. If the sellers’ asking price is more than the area comps then continue looking. If it is close, I will go look at the area and make an offer based on what the property can afford. I do not really care what the seller wants. It all comes down to what the property can afford and that is based on rental rates, repair costs, transaction fees and our profit in the deal.

Real Estate Course: Day Eleven of 30 Day Action Plan

Day 11

1. Talk to one person every day about your private money program
2. Answering calls
3. Talking to sellers

Day Eleven: Private money! Review your warm list and how they responded to your offer.

Your marketing through direct mail should be getting some calls from sellers. Take those calls live and talk to sellers. Get the information on the property and check for equity. How do you check for equity? Well let’s first define what equity is; equity is the difference between what the market value of the property and what the seller owes. It is not the difference between what the seller thinks its worth and what they owe. We have spent many an hour with sellers educating them on the changing market value. Sometimes it works and sometimes it does not. How do you obtain the market value? The best way is looking at comps from the MLS. That is why we are making contacts with Realtors they are a valuable asset so treat them well. (BTW a Starbucks gift card goes a long way) But if you can’t get a value from a Realtor in time there are several websites I use to get values. Be warned I use these sites as a check and I will frequently take the lowest one. They vary by a wide margin. Check back here on my Blog – I will post a video on the steps I go through for checking comps.

You should also be calling sellers who advertise on craigslist, rental signs in your farm area and properties that look neglected. You are collecting information for the property information sheet so you can check for equity. Work on structuring your deals and write offers. Writing offers is the name of the game and the game runs much smoother with private money.

See Ya,
Mike