How A Homeless Bag Lady Can Jump Start Her Real Estate Investing Career

May 2, 2008

Upon looking at the Real Estate Investing message boards, I’ve come to find a very common question that seems to resurface over and over again. “I have No Money and I have horrible credit. Can I still invest In Real Estate?”

I want to answer this question once and for all, so I thought about it from the perspective of having absolutely nothing. What would I do if I was homeless and had zero resources?

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Well, life is much easier if you have one of the two, but it’s not a necessity. With great credit you could write a check against a credit line and buy houses immediately.

Obviously, you’d be in an even better situation with pure cash. Still yet, all is not lost if you lack both Cash and Credit. You will merely need to use the following strategies until you can increase either your cash supply or build up your credit:

1. Wholesale properties – Locate great deals, put them under contract and sell the contract to an investor with cash or great credit. If you do a few of these you’ll be buying houses for cash in no time. Expect to make from $10,000 – $20,000 per flip depending upon the equity spread. **THIS IS THE BEST SCENARIO FOR A NEWBIE WITH NO MONEY

2. Go through a Hard Money Lender (you can find them at a local real estate investing club) and rehab the property and sell retail. Hard money lenders will usually lend up to 70% of the After Repaired Value and base their decision on the property values not your credit. Hard Money Lenders are usually real estate investors that have amassed a ton of capital and need to make an easy return on their money. Keep in mind, you’ll pay for the nose for a hard money loan and I wouldn’t use them for anything that I was planning on holding for more than 3 – 4 months total. Like I said, they’re expensive but if lack of funds is what’s standing in the way of a nice profit, it’s well worth it. What’s the cost of NOT doing the deal?

3. Purchase the property Subject to the existing financing with a promise to pay the owner’s portion of the proceeds in 90 – 120 days.

Example: Owner owes $50,000 and you agree to purchase the house for $62,000. You have the owner deed their property to you and you continue to make their payments every month. In 90 – 120 days when you sell the property or can Refinance (it’s easier to refi then to obtain a new loan) the homeowner will get their lump sum check for $12,000.

OR….you could negotiate with the seller to receive that $12,000 over a five year period and you would just make the payment each month to them. REMEMBER— EVERYTHING IN LIFE IS NEGOTIABLE!! This would be the best bet if you plan on using the property as a rental.

4. Find an established investor in your area and arrange a partnership on a “Deal By Deal Basis”. If you locate the properties, manage everything and handle any needed work & the other investor puts up his money you’ll split the deal 50 / 50. Don’t be shy about contacting other investors with this proposition. BELIEVE ME, if you have a good enough deal they’ll want in on it. This is a great scenario because aside from having a financial backing, you’ll also be taking advantage of the years of experience that the established investor will be bringing to the table. Believe me, even though you’ll be managing everything, the other investor is going to be keeping you in the right direction. After all, he wants to make money on that deal…he’ll have a vested interest in it so you’ll be getting a free education to boot! You just want to make sure that you have everything in writing to ensure that there are no misunderstandings when it’s time to split the proceeds. Write out exactly what is expected of all parties involved and you shouldn’t have any problems.

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My New Real Estate Investing “Toy” Review

November 7, 2007

I just picked up a great new software program, and figured I’d let my readers in on it as well.

It’s called RealProspect, and I’ve found it to be the best Real Estate Investing software that I’ve tried so far…designed specifically for real estate investors to better manage our prospecting activities.
Read the rest of this entry »


Police: Westchester Couple, Unable To Sell House, Turn It Into A House Of Prostitution

October 29, 2007

The downturn in the housing market appears to have driven two New York homeowners to desperate, illegal measures when their house went unsold.

Police say the Westchester County couple, both mortgage brokers, turned their home into a brothel.

Robert Werner, 34, and Heather Mazzenga, 32, were arrested at the three-bedroom home Friday night and were charged with promoting prostitution. Four women, ranging in age from 21 to 30, are charged with misdemeanor counts of prostitution and practicing massage without a license.

All six are free on bail.

New Rochelle Police Lieutenant George Rosenbergen would not say how police learned of the alleged operation.

The house, they say, had been turned into a brothel complete with a red ribbon placed out by the sidewalk to indicate they were open for business.

Werner and Mazzenga moved out of the house roughly two years ago so they could begin renovating a home on Mountain Road in Pleasantville.

New Rochelle neighbors told CBS Station WCBS the house had originally been listed for $750,000 but didn’t sell even after the price had been dropped to $600,000. The house was rented to families who came and left, and then fell into neglect until new neighbors arrived about two weeks ago.

The lawn was mowed. Heavy windowshades were put up.

A neighbor, David Saperstein, told WCBS correspondent Lou Young that he never saw the new neighbors. “But at night there’s five, six, seven cars there,” he said.

Natalie Nanzo told Young she’d even considered buying the house when it was first put on the market. She couldn’t get over talk that the North Avenue home was allegedly a house of ill-repute.

“I’m in shock,” Nanzo said, “because these people were business people. I can’t believe they would be involved in prostitution.”

The alleged brothel sits across the street from a museum dedicated to Thomas Paine, the author of 1776 pamphlet “Common Sense,” that helped rouse the nation to war.

It’s the second alleged sex-for-sale bust in a premiere Westchester neighborhood this year. In February, Bedford police accused dominatrix Sandra Chemero of running a prostitution business out of her home – which she rented from a local yeshiva.

 


Phone Calls From Motivated Sellers

October 4, 2007

 

Eventually people will start calling YOU! Most won’t be motivated, but some will! You want the ones that are MOTIVATED! When they call YOU, that’s when you screen them over the phone first and determine their motivation. Then you go visit them and get face to face with them and build a relationship with them. You want them to get comfortable talking to you. They may want to talk about their dog for all you care. Let them! Get comfortable with them. Let them build some trust in talking with you.

Whenever they talk, you SHUT UP and just LISTEN!

Listen to everything they say. The more they talk, the more information they let out. The more information they let out, the more you learn about their PROBLEM. The more you learn about their problem, the more you will be able to find out what they really NEED! Once you got that information you can now figure out a SOLUTION that will SOLVE their PROBLEM by being able to give them what they NEED! Your solution to their problem gets them what they need and you make a profit for your problem solving skills!

You’re a PROBLEM SOLVER!

You are the DOCTOR OF SOLUTIONS!

DR. BUYER, the master of problem solving!


Real Estate Investing How To Find Motivated Sellers On A Tight Budget

October 4, 2007

You get a bunch of business cards printed up. Put them out everywhere you go. Hand them out to everyone you meet.

Get flyers made up. Post them everywhere you can. Put them in Laundromats, bowling alleys, advertising boards in supermarkets, car washes, etc. Put them anywhere and everywhere you can put them!

Then get some “bandit signs” made up for about a buck a piece. I use BanditSigns.Com they are quick and inexpensive. Just buy the cheapest signs that they have, and post them anywhere and everywhere you can. Expect some to get torn down or destroyed. That’s what happens to bandit signs..:) Put them on Telephone poles. Nail them to a stake and post them in the ground on every intersection in town. Let the world know that “YOU” buy houses for CASH! Just give you a call!!!

See The Next Post To See How To Handle The Phone Calls…


Choosing The Right Type Of Real Estate Investment Strategy

October 4, 2007

You need to focus on deals where you can get in and out of, with a quick profit where you have no further obligations or liability in the deal. Then you can use the profit you make and spend it on whatever you choose. You won�t have to worry about getting caught up in a mess that you cannot financially afford to be in.So what type of deals can you do that will allow you to do this? Well, the answer is pretty much any type of deal if you know how. So let�s look at some of the ways you can accomplish this using different types of deals.

The most common deal that everyone hears about getting started with is flipping properties. The first thing that comes to mind when hearing the term, “flipping properties”, is doing wholesale flips, where you find a run down property, get it under contract, and flip it to another investor, leaving the other investor with the lion share of the profit and making a quick profit for yourself. The truth of the matter is there is more ways to do flips than just looking for run down properties. You can flip just about any type of deal, whether it be a wholesale flip, a retail flip, whether it be making a cash offer, doing a L/O, or even a “subject to” deal.
This is where having the knowledge comes into play. The more knowledge you have, the more ways you will know how to structure the different types of deals and be able to make a fast profit without having to take on the risk by staying in the deal.

If you have done your research then you should already know by now that the deals to be had are from sellers that are motivated. You also know that the best way to find these motivated sellers is by making it easy for them to find you. You know that the way you make it easy for them to find you is by marketing yourself and letting the world know that you buy property.

Once you are set up with marketing yourself, this means you are going to run into many different types of sellers, with different types of properties, with different types of problems that you are going to need to know how to structure the deal in order to make it work. Not every deal is going to work by just trying to do a L/O on it. Not every deal is going to work by being able to just get the deed by doing a “subject to” deal. Not every deal is going to be a Junker, where you can do a wholesale flip. In order to take advantage of anything that comes your way, you�re going to have to know about as many ways as possible to do a deal in order to prevent from missing out on the opportunity of making a nice profit, just because you only knew about one way of doing things.

Based on my experience and knowing what I know now, if I were just starting out and I was cash poor, or had little cash to start with and I needed to make some money to pay other obligations first, these are some of the ways I would focus on putting fast cash in my pocket, without having to take on the risk of staying in the middle of a deal.

One way, would be the wholesale flip. If a ran into a property that was in need of a lot of repair I would get it under contract and flip it to another investor that was into doing rehabs. Depending on the amount of profit I was able to pencil in for myself would depend on how I would handle doing the flip with my Buyer. If I were just making a smaller profit, between $2k – $5k, I would just assign my contract over to my Buyer and be done with the deal. If I were to stand to make a larger profit on the deal, where I didn�t want my Buyer to know what I was making to prevent from losing that Buyer, I would set up a simultaneous closing and close the deal at a title company or at an attorney�s office if attorney�s were the ones that handled closings in my state, rather than title companies.

Whichever way I handle closing the deal, once it�s closed, I�m out of the deal with a quick profit in my pocket and I don�t have any further obligations or liability in the deal. I can use the profit for anything I choose without having to be concerned about something going wrong with the deal later since I�m not involved with it after that.

I might have a seller that calls with a nice property they need to get rid of. It could be a deal that might be had by getting it way below market value if it had a lot of equity in it. This may require a cash offer in order to get it tied up under contract. Once I have it under contract, I can then market it at a good price below market value in order to get a fast sale, and either assign my contract over to my Buyer, or set up a simultaneous closing between the Seller, myself and my Buyer. This is pretty much the same as flipping a wholesale property in need of a lot of repairs, only in this case, I�ll be marketing it for a retail Buyer instead of a wholesale Buyer. Just like the wholesale flip, once I close the deal with my Buyer I�m out of the deal with a fast profit in my pocket. Now I can use that profit towards anything I want without having to worry about any unforeseen circumstances that could arise since I�m no longer tied to the deal.

I might have a Seller that calls with a nice property to get rid of, but they have little to no equity. Well, we know trying to make some kind of a cash offer isn�t going to work because the Seller owes too much on it. So in order to make a deal out of this I�m going to have to be able to buy this one on some type of terms. If I can buy it with favorable terms then I can structure the deal in such a way that would allow me to use forced appreciation. I can do this by reselling the property and offering some type of terms to my Buyer. The problem is, I don’t want to have to remain in the middle of this deal because any cash I need I have to use for something else. Since I�m cash poor, and I don�t have an adequate reserve fund set aside, and I won�t be able to put any cash I get up front from this deal into a reserve fund, I�m going to have to do this deal in such a way that will allow me to get in and out of it, with no further liability on my part.

So what if I were to get this under a L/O arrangement? Usually under a L/O deal I would get a Tenant/Buyer to put into the property where I would make some up front cash from the option consideration my Tenant/Buyer pays me, plus some monthly cash flow while they lease the property from me, and some additional profit on the back end when they go to exercise their option, since their option price would be higher than my option price I have with the Seller. Since I�m going to be using any cash I get up front on this deal for other obligations I can�t afford to take any risk by staying in the middle of this deal.

What happens if my Tenant/Buyer turns out to be a deadbeat and stops paying? Or what if they lost their job and couldn�t pay? What if they refused to peacefully vacate the property and I had to hire an attorney to have them evicted? What if I got the property back and I had to go in and make $2k – $5k in repairs just to get the thing ready for another Tenant/Buyer?

Remember that I�m cash poor and I had to use any option money I got up front from the Tenant/Buyer to pay other obligations. I only made a couple hundred bucks per month while they lived in the property that they did pay on. I probably used that extra cash for other things also. So where do I get the money from to take care of this problem? I�m cash poor and I have no credit where I can borrow from anywhere. So now what? Let me tell you what. YOU�RE SCREWED!!!
OK, so how can I avoid that from ever becoming a problem? Easy! Don�t stay in the middle of the deal! Rather than getting all wrapped up in becoming greedy with wanting to risk everything just to get that extra monthly cash flow, and any back end profit, IF the Tenant/Buyer was to exercise their option, just get as much as you can up front and ASSIGN your contract over to your Tenant/Buyer. Just use that money they would normally pay you as the option consideration and take it as your assignment fee to let them just step into your position. Your Tenant/Buyer actually ends up with a much better contract because they will have more than one year to exercise their option that you would have given them under a new L/O contract with you. They will get your contract, which will be a lower monthly payment than what a new contract with you would have been. They end up with a much better deal by being able to take over your original contract you have with the Seller. ALWAYS make sure you get a signed release of liability from the Seller when you assign your contract over to someone else. That way if you�re Buyer should ever screw up; the Seller can�t come back to you and hold you liable for the contract.
All you need to do is continue to do deals like this until you have made enough money to take care of your other financial obligations that you needed the cash for. Once you have taken care of that you are ready to move on to the next step. The next step will be building your cash reserves. I would want a minimum of $25k in cash reserves built up before feeling safe enough to protect myself before using any of the profits from the deals I do, that I will remain involved with.

If you are already in a position to where you don�t need to make some fast cash to use towards other obligations, then you can start with this next step, which is building up your cash.

Now that you are ready to start building up your cash you can either continue to do deals, where you flip them to an end Buyer or assign your contracts over to them. You can then take the cash you make and put that away in your reserve fund until you get enough saved up before venturing into other things. Or you can jump-start your investing by doing more deals where you can take advantage of building up monthly cash flow and equity that will provide you with some nice paydays on the back end when you�re Buyers eventually cash you out. Your main goal here should be focused on getting your reserve fund built up before you touch any of the up front profits you make from your Buyers down payment money or option consideration money. Put all of that into your reserve fund until you have at least $25k in reserves. If you average $5k per deal in up front cash then you will only need to do 5 deals to get your reserves up to $25k.

Once you have built up your reserves you will have the cash on hand to deal with any unforeseen problems that may arise. Basically, you will be using your Buyer�s cash to cover any expenses you incur should one of them default on their agreement. Then when you get another Buyer to put into the property again you can replace the reserves you used with the cash you get up front from them. Meanwhile you can use any of the monthly cash flows coming in for other things, like replacing your income to live off of.

Once you�ve reach your minimum goal of getting $25k in reserves you can then start using some of the up front cash you get on future deals towards other things. Even though you have some reserves built up you should continue to take some of the up front cash you get on future deals and put that away towards building cash that will allow you to do other deals you normally couldn�t do without having cash on hand to invest. As your portfolio of properties continues to grow you should add a little more towards your reserve fund to allow you enough cash to carry you over, should you ever run into a problem where you end up with a handful of vacant properties at once. If the economy or something were to take a dive you will have enough cash to carry you over until things turn around again, hopefully!

As you continue to do deals and get more experience your knowledge base will grow with it. Then you can start looking into other things if that is something you choose to do and diversify your investments.
So if I were starting out today I would start with flipping property, L/O�s and doing “subject to” deals. With having a good understanding in each of these types of avenues of real estate investing, I could have more than enough to keep me busy with doing a lot of deals. The key is to educate yourself in everything you can that pertains to these types of deals and you should be way ahead of the game if you implement a good solid plan and take action!

If you could afford to, I would buy at least 3 courses. One on flipping properties, one on doing L/O�s and one on doing “subject to” deals. If you can�t afford to get all 3 right away then pick one on L/O�s or flipping properties and start with one of those. Then take action and get out there and just do it! Get that first deal under your belt by flipping or assigning it over to another Buyer and cash out with a quick profit. Take $300 – $400 of that profit and buy the next course. Then go out and do another deal and take enough out to buy yourself the 3rd course. Then crank out the marketing and get those Motivated Sellers finding you! Then close some deals and begin building your way to financial freedom!
The important thing is to implement a good plan and stick to it until you reach your minimum goals in order to give yourself a solid foundation to where you don�t get yourself into trouble and end up living in a financial nightmare!

I can get into a lot more detail on this but it would require writing an entire course on the subject and this is already getting way to long. These are just some basic ideas to help you with finding some direction on where to start after you have done your research and educated yourself with the basics.


Real Estate Investing Getting Started Part II Selling The Subject To Deal

October 4, 2007

What is the FASTEST way to sell a property?

Sell on TERMS!

So I run an ad in the paper.
NO BANK QUALIFYING!!!
RENT TO OWN
NICE! 4bd/2ba House
Call xxx-xxxx

The phone starts ringing off the hook!
I find a potential Buyer that has $5k to put down and says they can afford to pay $1700 per month. ($150k homes in the area would rent for $1200 – $1400 per month, so getting $1700 a month on a $1400 rental when offering an OPTION TO BUY, will bring a premium rent and people will gladly pay it, because no one else will even finance them because of one reason or another) I agree to give them an option to buy the home for $165k in one or two years. YOU get a premium on the sale price because you’re offering TERMS!
I collect the $5k up front as “Non-Refundable Option Consideration” and “IF” they exercise the OPTION, the $5k will be deducted from the purchase price of $165k, leaving my Tenant/Buyer with a balance owed of $160k. If they don’t exercise the option the option money paid is non-refundable and is lost by the Tenant/Buyer!

I get the $5k up front, plus first month’s rent of $1700. Since I was lucky and found this Tenant/Buyer in the first week, I get to keep 100% of the first two months rent since my payments won’t start for 60 days! So I collect $5k + $1700 first month rent up front, for a total of $6700. The following month I collect the full $1700 for rent and the 10 months after that I collect $300 per month positive cash flow. At the end of the year, IF the Tenant/Buyer exercises their option, they will pay $160k. After paying off the underlying mortgage of $145k remaining on the Seller’s mortgage, I’ll collect another $15k at closing.

So let’s see, that’s….
$5k option money up front
$1700 first months rent
$1700 second months rent
$300 x 10 months rent = $3k
$15k at closing ($160k – $145k = $15k)


That’s $26,400.00 over 12 months total PROFIT!


Now what happens if my Tenant/Buyer doesn’t exercise the option in a year???

WONDERFUL!!!!!!!

Now I get to start all over again! I get to collect another option fee, raise the rent after a year for inflation and get a higher selling price for the option the next time around!
I just keep repeating the process over and over again until someone eventually exercises their option!
Assuming every tenant was to exercise their option in the first year…. how many deals like this would you have to do each year to make $100k???
Just FOUR deals like this one and you’re making $105,600 per year!

How many hours would that work out to be to find and structure a deal like this and get a Tenant/Buyer in the property? Not very many!

How many hours per week would you have to put into working at your job to make $105,600.00 per year???

One thing to remember is that the typical homebuyer or seller does not understand any type of creative real estate buying or selling. They typically use a realtor to buy or sell. When that realtor doesn’t sell that home or when that buyer can’t get that loan…. that’s where motivation starts to set in.

The buyer starts getting motivated to to buy. In many cases the Buyer will gladly pay any price to just get in if you can solve their problem.

The Buyers just need someone that will sell to them. They can’t get a bank loan or some just “think” they can’t get a bank loan and they only care about two things! How much down and how much per month? If they can afford the payments and have enough to put down in order to allow them an opportunity of owning a home, price doesn’t matter to them as much. They just WANT to be able to buy a home!

Your job is to become the “PROBLEM SOLVER!” Instead of thinking in terms of, I’m looking to buy properties, or I want to be an investor, or how do I buy properties with no money, or how do I get financing, etc…

Start thinking in terms of being a “problem solver”. Your job is to find SOLUTIONS to fix someone else’s problems! Your job is to sit down with these people and find out what their problem is. Once you figure out what their real problem is, you now know what they NEED! They all WANT an all cash sale. They WANT full price and WANT someone to just waltz in and buy their home the traditional way. But your job is to find out what they really NEED! Once you find out what their PROBLEM is, then you can determine what their NEED is. Once you know what they really NEED, then your job to get the deal closed is to just come up with the SOLUTION that will get them what they NEED that will SOLVE their PROBLEM!

You are not a real estate investor, you�re a PROBLEM SOLVER! You find SOLUTIONS to solve anyone’s PROBLEM! That’s how you make the deals come together!
The best way to find the Motivated Sellers is to get them to find YOU! You get them to find you by getting the word out that you buy property! Any property, any condition, any price, any time! It doesn’t matter. Just present the property to you and you will figure out a solution to solve the Seller�s problem to get them what they NEED!