Emerson Update: Progress to Date

We are starting to get our pricing on Emerson. We have one more contractor we are getting pricing from and we will be ready to begin.

We will also be starting a series of videos that will have two purposes.

1. The first is to show exactly what work will be done to the property. This video is intended for the prospective buyer. We have found that a video showing the rehab progress creates excitement about the property but also shows the buyer exactly what work we have done. A lot of times a buyer comes into our property and they see the new paint & carpet, etc and it does not show the full story of what we went through to rehab the property. The video does that for us.
2. The second is a learning aid for those investors that have not done a rehab or those that want to compare notes on how we do it. There are many ways to do rehabs and we are constantly learning and refining our process. We will show the process we go through rehab a property. All the steps and missteps we take to get a property ready for sale or lease.

Today we will be going out to Emerson and begin filming our progress on the project. This first video will be a site survey and overview of the property. Please let us know if you have and questions or comment as we go through this process. We want to provide relevant information to you.

Why You Need a Realtor

If you have been an investor for any length of time and have gone to any real estate seminar you will hear how real estate agents are the scourge of the industry. I have been to dozens of bootcamps and workshops and everyone loves beating on the real estate agent. Like they caused all the problems the investor had on their last deal.

Yes, like in every profession, you have people who are not professionals and do not know what they are doing. Real estate is no different. But I am here to tell you that you need and want a professional Realtor on your power team. A professional is someone who understands how an investor thinks, knows to ask what they are looking for and not afaird to say when they do not kow something. They know their market and can bring deals to the investor. A good realtor will save you money and time.

I can relate a costly mistake we recently made. We were selling a house and it was a good house with a good profit margin on it. But we gave thousands of dollars based on a disclosure. A simple disclosure that we signed and left off limiting laungage about the max amount of the repairs we would agree to pay. A typical thing to do according to a realtor friend of mine. We missed it and we had to do the repairs that we could have split with the buyer. All to save 3% on the deal. By the way, the cost of repairs is more than the 3% we would have paid the realtor.

So have a real estate agent on your power team and tell them up front what are your expectations. If they do not meet those expectations then let them know ad find another one.

Real Estate: Emerson Update

So pricing for the rehab we will be doing in Tracy has started to come in and frankly I am a little surprised. The first price is landscaping.

The scope of work is as follows:

1. Clean front and back yard
2. Install sprinkler line and heads
3. New sod in front and back yard
4. New bushes
5. Repair fence in back yard

The rice we got for the scope of work was $11,550. WOW!! That seems very high. I am hoping the other numbers will come in more down to earth (pun intended).

I will keep you updated as we continue the rehab in Tracy. Visit our website, JM2 Sells Houses, to get more information on this property. We are offering it as a Lease Purchase Option.

Can You Still Make Money in Real Estate as an Investor?

I know I wrote about this last November but I realized that I did not answer that particular question. I was derailed into the real estate market. But the question asked here is "Can You Make Money in Real Estate?" especially in the economy we are in.

My answer is still YES! But how you make money has changed radically in the last six months. I will relate what changes we have gone through to illustrate. In May of 2008 we were running a good direct marketing campaign to a lot of different people (Out of area owners, high equity owners, distressed owners, etc..). We would get a good response from our mailings. But around August we started to see a change. The number of calls were decreasing. We compensated for this by increasing our mailings and the number of calls stabilized. But we kept having to increase our mailings to keep the number of calls coming in the same each month. Also the number of appointments to talk to sellers fell also. As the economy started to sour, people decided that change, any kind, was bad. Everyone wanted to stay in their homes instead of making a moving.

Meanwhile the number of closing we did each month was decreasing. Also the exit strategy changed very quickly. We discovered, fortunately for us, the exit strategy we were basing our business model on was not going to work. Any business model that relied on a retail buyer (average Joe in the market place - that needed a loan to buy) was not going to qualify for a conventional loan unless they had a sterling credit rating. Fewer and fewer were in this category everyday. We switched our buying & selling model to a buy and hold model. We buy, with private money, with the idea of cash flow each month. The big payoff will occur years down the road. We still pull a small amount out at closing, but the primary focus of the property is positive cash flow. We stiff offer our properties with owner financing (8% down payment) and Lease Purchase Option (3% Option Fee) which generates lots of calls.

The days of buying a property for 60% on the dollar, rehabbing it and selling it for 95% on the dollar to a retail buyer are gone for now. We need the credit market to stabilize first and then resume a reasonable practice of lending before we can think about that again. I do not know when that will be, but I will be watching for it and as soon as I see it I will let you know.

See Ya,
Mike

Saturday in the Real Estate World

Still working on the move today. I almost have it done. I actually unplug my computer network at my old office and reassembled it at the new location and it worked right out of the box. No technical tweaking needed. I think that is pretty good.

I have a URL I want to share with you. I found it very good in explaining the credit crisis.


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

It shows that our problems are very complicated and it will take some time to work itself out. We will need to be patient. But as real estate investors we can help the system by buy properties and offering to people who need housing. We offer houses with Owner Financing or Lease Purchase Option (Rent-To-Own). The people who defaulted on their loans will need a place to live. The number of people that need housing has not decreased. It is the pool of people who can qualify for a loan that has decrease. So this creates a niche for creative real estate investors to buy property and offer it to hard working people who need housing.

So research your market, see what is listed and at what price and look for value. Yes, even in this market you can find value. It maybe be a little beat up but we can look beyond that. What is the median price in the neighborhood. Microsoft's Streets and Maps can help you visual quantify your market. I will load property values and their address and see what trends show up. I may see a cluster of properties that have been reduced in an area that has stabilized. The values are out there; it just takes some work. A good realtor can be a tremendous asset. Make sure you include a realtor in your power team.

See Ya,
Mike

Stop Being a Landlord for Your Rentals

Who wants to be a landlord? Not many people enjoy those later night calls from their tenants letting them know that the roof is leaking right on their head. Especially on a Saturday night at 11:30pm when you can't get anyone to the property before Monday and the tenant wants to know what you are going to do about it.

Well I have a solution for you that does not require you to sell your house right away, a Lease Purchase Option otherwise known as Rent-To-Own. In my last blog post I described what a Lease Purchase Option was and how we use to sell houses but you can also use it to get tenants in your properties, paying a higher rent and avoid the late night calls. Will you have to sell the house? Yes if the tenant exercises their option but you will be getting a high rental rate and peace of mind. You also help someone attain home ownership.

How does a Lease Purchase Option help me get out of being a Landlord. When we lease one of our properties we impress on the tenant that they will be owners of this property and they need to start taking care of it. This is their home and the maintenance issues are things they would have to do if they owned the home. We have not had a tenant argue with us on this issue. So we collect an Option Deposit (non-refundable) that we use as the down payment for the purchase of the property if they exercise their option and a higher rent (we will credit a portion of the rent towards the deposit). The purchase price of the property is locked in with the agreement so your know what you will be getting for the property. The property will remains yours if the tenant decides not to exercise their option. Does that happen, yes more often than you would think.

So next time you need to rent your property, especially after you just evicted the last tenant, think about a Lease Purchase Option. You will find that the tenant is more committed to the property, will require less of your time and the tenant will be happier.

See Ya,
Mike
http://www.jm2buyshouses.com/
Follow me on Twitter: http://twitter.com/MDSArch

Lease Purchase Option

We just completed our latest house sale and it was not a conventional sale. We did a Lease Purchase Option. You may be asking yourself what that means and that is OK. We get a lot of questions about that and I have added a video about Lease Purchase Option or Rent-To-Own to answer those questions.

So please review the viseo and let me know what you think. What have I missed? What s not clear?



See Ya,
Mike

Hooray Orangeburg is Leased

You need a strong constitution for real estate because of the roller coaster rider. But I can definitely tell you today is an up day (see next paragraph). You buy a property and you do repairs on it and you assume (right or wrong) that you will move the property in one day. OK maybe that is mostly wrong. But I can dream. Realistically you need 60 days from the time you offer the property until it is sold or leased. Why? Because it is a big purchase and people need time to think and ponder on the purchase before they can say yes. Even if it is a great deal.

That brings us to Orangeburg. A property we purchased last December 08. We spent several weeks getting it repairs and in livable shape. We held an open house and very few people came. We offered the house at a great deal but the people were not ready. We continued to market the property in the newspaper as a Rent-To-Own in the rental section. The calls came in and in less than a week we have leased the property to a great family.

The woman is a single mother with three kids who is renting in a not so good part of town. One of her daughters commented when she entered the house "...that it was a castle". Maybe not a castle to me but that is why I love this business. We were able to take a property that was ripped up, rehab it and lease it to someone who would not have gotten a second look from a bank. Another person who feels more secure now that she has a home of her own. Truly the American dream even in this economy.

So lessons learned: 1)It takes more time than you thnk to move a propery; 2) Boy it is fun to help people; 3) We need to do more of this.

I have been getting questions about what is Rent-To-Own and how our program works. I am going to put together a video and post it here on the blog tomorrow explainig our program ad how you can use it to gain home ownership. Even if you can not buy a home today, you can lock in today's prices for a future purchase.

See Ya,
Mike

Follow-up, follow-up, follow-up!!!

Follow-up is the word when it comes to selling properties. In fact follow-up is the word in buying properties also. You must not rest on your leads. Even if you get tons and tons of leads (I actually don't know how many tons and tons of leads are but it sounds like a lot) you can not wait for them to call back. As my mother says "He who hesitates is lost" and that can not be more true. The buyer or renter has too many options for you to sit back and wait.

Do not count the property sold or rented until you have cash and a contract in hand. Otherwise the property is still available. Let me tell you a tough example on that note. Our first property we purchased, and I will admit we purchased it wrong. We paid too much and were optimistic about selling it quickly. We poured all kinds of money in the home. We took it from a REO nightmare to a beautiful home. We had our open house and we got a few people through it. We were priced to high for the market. We continued to market the property to avail. Then a woman came by and said the house was perfect for a program she was putting together. In fact she wanted buy it with owner financing and pay it off in 7 years. That worked out to $3300 per month. Well we got the agreement drawn up and she sign with a earnest money deposit. We found out later that the check she gave for the earnest money bounced. We asked her and she said that an investor pulled his money early but she would have the money in there soon. Meanwhile she paraded interior designers, furniture reps, etc through the house to begin to get the house ready. Well many months passed and no closing. Finally we told her to put up or shut up. We canceled the escrow and realized that we lost 3 months of marketing for the house. We lost all the momentum. We never recovered. We gave the house back to our private lender and learned a very expensive lesson.

The deal is not closed until we have the money and the contract in hand. Otherwise the property is always available.

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

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.

You Can Do More with Your IRA than You Think

Hi Everyone,
One of the many ways we fund our real estate deals in through private money. We have talked to a lot of our family and friends about lending so we can purchase income properties. We get the same first answer: "I don't have $50,000 laying around to lend or I would" We understand, we don't either. The vast majority of people in America today don't. Oh but they do they just don't know about it. The rich have been using this tax saving advantage for years. It is called the Self-directed IRA.

Now I hear you out there saying "I have a self directed IRA already and that is where I buy my stocks and bonds. I can't lend it to you to purchase real estate" That is where you are mistaken. They are right; the average IRA account at Schwab or Fidelity is not set-up for lending on real estate. Why would they? They make money on trading stocks that is what they know. But Americas are allowed by the IRS to set-up a truly self-direct IRA that will allow them to lend money on real estate. The one catch is the account has to be set-up at a firm that has an approved IRS plan for the IRA, like Equity Trust Company. Here how it works.

You contact a company with a Self-Directed IRA plan. Transfer the funds you want in the account. You contact a real estate investor, like us, and let them know that you have funds that you would like to invest in real estate. You lend the money to purchase the property that is secured by a Deed of Trust on the property for a fix rate and term. The investors either makes payments into your IRA account monthly or at the end of the term (deferred). This way your money is secured by a hard asset, the property, earning a fixed rate, that is usually higher than a bank's CD.

Now a few warnings: you want to work with a reputable company that has been around for many years. There a several companies (Equity Trust Company & The Entrust Group) that can service your needs. Also you want to make sure you are dealing with reputable real estate investor. Contrary to the newspaper articles there are reputable real estate investors. Check to see that they have done this kind of funding before. Ask for references and other private lenders they have worked with. Ask how they do on payments? Are they on time? What documentation to they give the private lender? The real estate investor should never take the money from you directly. It should always go to a Title Company. When we use this form of funding, we never receive the money until the private lender has a Promissory Note, a Deed of Trust, Title Insurance & property insurance (with the private lender listed as an additional insured).

This is a fantastic way to invest money buy you need to do your homework on it before you lend your money. To learn more about this form of Self-Directed IRA you can go to Equity Trust Company website and sign-up for a free webinar called The Purpose of a Self-Directed IRA or get a free report titled Self-Directed IRAs Growing in Popularity. You can always drop us a question or comment.

See Ya,
Mike

Hey where's Day 21

Hi All,
There is nothing wrong with your browser. I missed Day 21. Fortunately it was a day of rest and playing with the family. So I skipped the day. It would be similar to Day 14 if you want to read it.

I have been spending the weekend reviewing my business and its finances. We have purchased a lot of properties and the tendency is to get lazy with the finances of the property and the business. The Real Estate Bootcamp has really got me thinking about what we spend and where. As we continue to buy property we want to keep our cash flow in mind. In the past we have purchase property that had a small negative flow because property was appreciating. Well I do not know where you are, but in California I am still waiting for the bottom of the median price to appear. We have dropped 35 - 50% in 12 months and more to come in 2009. So now is the time to buy for the long term. We are holding our properties and looking to extend our owner financing as long as we can. Private Money is even more critical as banks are making it harder and harder for buyers to qualify. Our ext strategy is Rent to Own and Owner Financing and I can only do that with seller financing and private money. So keep your toolkit update and use all the tools in it.

Well I am getting back to work buying and financing properties. Let me know if you have any questions or comments.

See Ya,
Mike

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 Twenty of 30 Day Action Plan

Day 20

1. Ad for property
2. Talk to one person every day about your private money program
3. Lunch with an expert (realtor/title officer/mortgage broker)

Day Twenty: Now that you have a property tied up, review your exit strategy and implement your procedure for selling the property. Remember it is about price and terms. You attract buyers by price and/or terms. Your ad on craigslist should reflect this.

Private money! Enough said.

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.

End of the Real Estate Bootcamp

Hi Everyone,
Jeff and I are back from RoopDoran's Real Estate Bootcamp in Florida. What a week! We saw a lot great investors. We spent the week discussing how the old rules are gone. Flipping is almost entirely dead. We cannot rely on a retail buyer. We are now buying and holding for two to five years. While there is a lot of bad news to think about; we are focusing on the opportunity to help our communties by buying properties that are distressed and repairing them and reselling them with Owner Finaincing or Rent to Own to people who do not have the greatest credit and can't qualify for a loan.

We had a night when we got together with 10 investors from across the country and talked about our experiences and how we leverage our knowledge. That was a great session. I learned a lot about myself and how I should run my business. That was another theme during the bootcamp. Get your finance house in order. Streamline your operation and watch the bottom line. So the world of real estate has changed again. The fudamentals still work it is the buying and the selling that have to change. We are buying for the long term and we need to buy lower to account for the dropping prices in our market.

We will continue the 30 Day Action Plan because the it represents the fundamentals. We need to focus on the fundamental. Have a plan for each day and following it. Implementing everyday to reach our goals.

See Ya,
Mike