Monday, December 30, 2013

Calling all deadbeats, Scum, bottom feeders, wankers and Real Estate Investors. Low Balling time.

By reading the title above you might think I'm calling all Real Estate Investors Scum bags.  On the contrary. I'm referring to what some fear sellers might say to you when you're making low ball offers.  Personally I've never been called anything more than a bottom feeder and it was indirectly. The seller politely stated "I'm not taking any bottom feeders offers. I want my asking price."

It is exaggerated that all sellers get angry at low offers.
I have heard from other Investors that they have received calls from angry agents and sellers after making a #LowballOffer.  Some of the sellers are incensed that somebody would disrespect them by making such a ridiculous offer on their pride and joy.  In some cases they have a point, but when making low ball offers you don't have the time to research every property, so you just make blind offers. Its a numbers game and eventually you'll get the call you've been waiting for. What are some of the typical scenarios when making low ball offers?  How do you handle the objections to your low ball offers?  How can we turn a angry call into a new real estate deal?

Typical Scenarios that take place when making Real Estate Low Ball offers and how to handle them:

Scenario 1)  We discussed this above.  You may on some occasions get an angry call from a seller or agent.  Be polite and never lose your cool.  Simply state that you thought the place needed work or was a fixer upper.  You can even say you buy houses for cash site unseen and you thought this one needed major fixing. Turn the situation into a lead and ask the agent or seller if they have anything else.  If you're talking to the seller directly ask him if he's buying any other real estate or looking to invest in the future.  Ask if he has others for sale. Follow the advice in my other blog about using your personal network of power and turn this into a lead. 

Scenario 2)  When the agent or seller calls you and isn't angry but is happy you made an offer.  The problem in this scenario is the offer is to low but the bright side is that the seller wants to make the deal work.  He or she needs to sell or you may have a hungry agent who really needs the commission, or maybe the seller just want to close this chapter and move on. The problem is they would never sell for such a low price. Might as well give the property to Uncle Jack or rent it out for a few more years until it sells. This is a great position to be in.  Don't focus on the why and try to work out a scenario that will benefit all parties.  You may still have to come up with some money but in this scenario the likelihood of getting a deal done is very high.  If you don't have the money try wholesaling or bird dog the deal to an Investor.  Here is a recommended Investor that will give up to $2000 per deal or take over your contract.

Scenario 3)  They take the offer or counter with minor terms. What?  You mean this actually happens?  Why yes it does.  In my opinion it is much more rare to get a house that is in perfect condition for Cents on the dollar but it can happen.  Often in this scenario you'll get a discount because the house is dilapidated or needs major work.  Do you care? NO! This is what you're looking for.  The beauty of getting a house like this is that not only will you get a discount but you'll also be able to get past all the problems and see a diamond in the rough.  That's really the only real trick to #RealEstateInvesting.  See what others can't see and create what other couldn't create.

For some the pressure or even the time that it takes to send out low ball offers is too great. Low balling for profit can be a win win situation for those of us that are dedicated and willing to put in the work. The best transaction are those that benefit all parties so never take advantage of a seller.  Remember the RE investment world is a small one and it only take one bad deal to ruin your rep.  Be courteous and never give up. Hard work always pays off and you'll find the perfect deal.

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Friday, December 27, 2013

Why Online Marketing is Oxygen for your Real Estate Business?

If sales is the life blood of a business then what does that make marketing? Oxygen.
Sales is the fuel that feeds your blood. With out marketing even seasoned sales executives will struggle. Since the Internet is changing the way we do business, we have to change the way we find leads. Everybody wants make money today, not tomorrow.  So how does a traditional Investor transition and leverage the power of the Internet to drive traffic to his or her business?

By utilizing SEO technologies, Email campaigns, and animated websites, a business can create a whole new segment of leads. Some Internet Savvy Investors have been able to transform their businesses overnight. The bottom line is that Internet Marketing can take your Investment career from no deals; to hundreds of closed deals in a very short time.

Internet Marketing can be costly:

You need to do Internet Marketing right or it could end up costing you a fortune. Be careful not to get carried away. Paying Google to bring up your site with high priced key words like "Foreclosure" or "Private Money" is a bad marketing campaign waiting to happen and can cost you tens of thousands of dollars. If managed correctly a couple of hundred dollars can transform you into a multi million dollar Investor.

Build Leads Organically; We all have social networks and we should start with those first. See my post about using MLM techniques to build networks. Scroll down to using your personal network of power.  Most of us have at least 300+ social media friends but have you ever asked your FB friends how they are doing in a direct message? Have you introduced yourself and told them what you do?  Most likely you haven't.  Simply giving them a hello and signing your name with your website is enough to get them curious.  Most of the time you don't even need to mention what you do until much later.

Update webpages, fan pages and social media groups often; Keeping your site updated with your current deals and having a sign up form is huge lead generation tool.  It lets people know what your doing and gives them a way to stay connected to you.  Keep your FB fan page up to date with new events and connect directly with people that have liked your page.  Post to forums and look for other RE related website to network with other Investors.  

There are many sales channels on the World Wide Web.  You just need to start to channel those leads and create an end less supply of BIG leads.

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Monday, December 23, 2013

How to find Private Money Lenders because Banks are useless.

While going to make a deposit today I remembered an important point about banks. They take zero risk on any deal and typically are pretty much useless when it comes to investing in real estate.  The issue I had at the bank today was that I had a check in the name of an old business. In comparison to my monthly deposit volume the check wasn't for allot of money. I explained to the banker and even the branch manager that if I did not deposit the check in the name of the old business, I would have to go back to the client and tell them about the name change.  My motto is if it ain't broke then don't fix it so I really didn't want to have that conversation with a smaller client.

The point is if a bank won't even risk a small check deposit for a client who has deposited a lot of funds in their bank, imagine the sleepless nights that they would face if they ever invested in one of our Major Fixer upper deals. I remember back in the beginning of my investing career I went to a prominent loan broker and created a great presentation on how I would purchase 10 properties in one year. I showed him with intricate graphs how I would fix them up and sell them for a profit.  I spent a lot of time and money creating the presentation. I even offered to give him a personal guarantee.  I still remember how angry I was when after two weeks I heard nothing. This was during the heyday when all you had to do to get a loan was fog a mirror and yet I still did not get a call.  Later I learned that most bankers and brokers only really care about how much money you bring to the table. If you have no money then they are not going to waste their time with you.  I understand why, this is their livelihood and they are trying to make a living but this still does not help your cause.

Yet a lot of us that are starting our real estate investment careers automatically want to try to use banks to fund our deals. In the real estate investing game we can pretty much evaluate and identify that banks are completely useless for most rehab projects.  Even most Hard money lenders in this tough lending environment have become so strict that its almost worthless to use hard money. Hard money lenders will require a down payment even if you're getting the property at $.60 or $.70 on the dollar.  With a proven track record and strong financials some Hard money lenders will lend 100% of the purchase price on a property at the right LTV. I am not saying it's impossible to use Hard money or even banks but what I am saying is there is a better way. I am a huge fan of private money for a couple of reasons:

Number One: Anytime you can bypass the big institutions and go direct, I am always for that,  but private money allows us to do something even better. Be the first to the deal and be the fastest.  In short, SPEED AND PROFITS!!

Number Two: The second reason I am a big fan of Private lenders is cost. Most private lenders are much better with their terms and much more lenient with their requirements. The best private lenders are those that are seeking a stable return in exchange for a promise to pay with a guaranteed outcome.  And there is no better guarantee then under market hard real estate. 

Which brings us to the question: how do you find private moneylenders? Are they like the Lock-Ness Monster and only to be found once every 100 years? Are they like Santa Claus and only appear to those that believe?  They do exist, yes they do lend money and yes they are fast. A good private lender can lend money and close within 7 to 10 days.

Using your personal network of Power.

Finding Private money lenders can be tricky but it is possible to find them in your area.  Talk to all the people around you and use your personal network of power, including social networks. Tell them what you do. Tell anybody that will listen. Even if you think the person is not in a position to invest, tell them anyways.  Explain to them that you find real estate at under market value and fix up properties and resell them on the market.  Explain to them that you are looking for private money lenders and you are wondering if they would ever be interested in investing. Once you finish your pitch always end with the following:

"Thank you for listening to my pitch, I really appreciate it. Even if you're not in a position to invest, I wanted to let you know what I was doing in case you know anybody else that might be interested. I'm going to leave you my business card and if you ever find anybody that's interested I would be more than happy to give you a referral fee." 

In a few weeks follow up with them and find out if they have thought of anybody else that they could refer you to.  If they can't think of anybody then help them brainstorm. Everybody knows somebody with money. It could be the local gas station owner, the owner of the local grocery store, a favorite insurance salesman, a retired executive, or even family and friends. Those of you that have ever done MLM will recognize this technique.  It is a powerful technique that the major MLM's have been using for decades and has proven to be very powerful. In this particular case you are not trying to sell them a product but merely trying to expand your network. I will elaborate on this even further and say never leave a network at a end point. That is to say that you will never accept a dead end.  Never leave that contact until they give you a name. It's kind of like an old detective trick where they sit you down and don't let you go until you give them a name. This may sound like a very aggressive sales technique but it depends on the delivery. Never make it seem like you're being pushy or aggressive but merely asking them to really help you expand your business. It doesn't even matter if at the end of the day all they give you is the name of the water delivery man. 

The harsh truth is that finding real private money sources takes dedication and hard core salesmanship. If you are really trying to find true private money that is endless and fast it will take some time for you to dig and find the right contacts. Be dedicated to your business and never give up a lead. Eventually you'll turn up a source that is too hot to handle.  When you're starting from zero you have no choice but to build your network and expanded until one day your network of private money lenders is so big that you are funding all the deals that you can find.  

Good Luck and Happy Investing.

Friday, December 20, 2013

What's the difference between a major real estate fixer upper and lightfixer upper?

When looking at houses we always have to ask ourselves what is our comfort level? What is the difference between a major fixer and a light rehab project?  For example a major rehab would be a project that has foundation issues or where all electrical needs to be replaced.  A light fixer maybe something where we only have to replace kitchens cabinets, minor carpet and paint.  The real struggle comes from actually being able to inspect the property properly and not getting stuck with a major real estate fixer when we are expecting to only buy a light fixer. 

This was a light fixer near El Monte, Ca

The first step is obvious; bring your contractor.  As we know contractors can be flaky and sometimes when you set an appointment to view a property and the contractor doesn't show up, you don't always have another chance to view the property.  Setting another appointment may end up having you lose the deal to another Investor who is more prepared.  So as real estate investors we must become good at being able to inspect our own properties. 

Here are some tips on how to prevent yourself from buying a house that you think is a light real estate fixer and ends up being a major fixer: 

1.)  Most houses that you visit that are light fixers may not have electricity or water running at the time and this can cause a problem during the inspection.  Electrical and Plumbing should be one of your biggest concerns because this could end up being one of your biggest costs in the project.  To make sure that the electricity is working if no power is available look for signs that the wiring has not been torn out or vandalized.  The house that has been secured is most likely to have working Electricity.  Electricity and wiring typically do not break down except by normal wear and tear.  So it's typical to expect that some electricity may be bad with normal wear and tear but it should not be a complete rebuild of the entire electrical system.  The only time this is the case is when we are dealing with a rehab that has gone bad or vandalism. 

2.) Another big factor in inspecting the property is checking for water damage. Some homesellers will try to cover up water damage with paint.  It is still possible for you to see the water damage below the new paint by looking very carefully and looking for dark spots.  Try to pound on the walls and see if they feel soft, look for spots where the paint job may have been sloppy.  In these sloppy spots try to look for water spots or dark patches. A bad roof will also tell you that it's possible that there is water damage somewhere in the house. Check under sinks and see if there's any noticeable water damage under the sink.  A wet sink underneath me tell you that there has been water leaking in the past.

The Front of this house looked perfect but when we got inside it had no roof or guts.

3.) Look for foundation issues. Walk in the house and see if any part of the house feels like it's sinking on one side.  If one side of the house or the corner of the house feels like it is sinking or as you walk that part it feels like you are going lower, this may be a sign of a foundation issue.  Some investors will panic at the word "foundation issue" but obviously it is a very easy thing to fix and all it takes is money depending on how bad the foundation issue is.  There are times when a foundation issue can be fixed very easily and there are times where you don't need to fix the foundation issue at all.  You can contact an inspector and have them come look at the property.  If you are still fearful that it could be a bad foundation issue then have a foundation expert look at the problem spot.

4.) In California mold has been a scary topic when it comes to purchasing a house. The scariest part about mold is that it cannot be seen with the naked eye.  But you can still check for mold when doing a house inspection. One great indicator is water damage; if you find water damage than most likely you probably have mold.  Although mold cannot be seen you can smell mold and it will have a pungent and musky smell. If you can, while inspecting the house try to lift up carpets, look behind cabinets & refrigerators and go to places were its dark and damp. Look at exposed pipes and see if you see any mold laying on the pipe.  Try to pull back any drywall or check inside the ducks of the house.  If you think you have mold then you have no choice but to hire an inspector and have him run a mold test before closing escrow.

There are many other things that you need to check out as well, but this is a quick reference guide on how to tell whether something is a major real estate fixer or a light fixer.  I hope this helps you and as I mentioned at the beginning the article one of the best tips I can give you is to bring a licensed contractor to your inspection.  Once you have the contractor with you drain his brain and try to find out all you can about what to look for in the future. 

Happy Investing.

FHA Foreclosure are probably the next big thing.

Thursday, December 19, 2013

How to stop it? The infamous chain link or daisy chain tape deal run around.

Those of us that have been in the Real Estate Investing world for a long time have all had to deal with getting our time wasted by daisy chain deal runaround. It's very frustrating. These so-called bird-dogs or wholesalers will come to you saying that they have a list and when you spend lots of time researching you only find out at the end that this list has been passed around the country over and over. Most of the time the deals come from websites that are on the MLS or from the forums. So how do we prevent this from happening to us and how do we start making it so we don’t waste our time? 

What I've learned in the past is a simple Internet search on the address is usually the easiest way to find out if this property is already listed with another wholesaler or agent. Most of these deal lists come from Linkedin groups so I typically visit my Linkedin group Real Estate Bird Dog Networks first or other wholesaler groups.  Usually you’ll see the list already being marketed by somebody else or you will actually find the address on another website.  Most wholesalers don’t even take the time to check they just copy and paste hoping something sticks.

The truth of the matter is that bank tapes and bank REO lists typically only come directly from banks.  Bank of America and the major banks have been running auctions for years now and do them weekly and monthly and usually the minimum bid is between $500 million and $1 billion. People have to spend a lot of time, money and marketing trying to get inside the bank to get access to smaller lists or single REO’s. Once Broker gets inside the bank and directly works with the bank, the broker will be very cautious to be working with anybody who isn’t serious.  

It’s in the bank interest to work with the reps that get deals sold at market value. Banks will stop working with people that are playing games or trying to get low ball offers accepted for less than market value. Having said that it is possible to find these tapes but typically you have to go directly to the bank rep or to the representative that is holding the tape. It is my opinion that these tapes although they are sold are not as common as people think compared to the amount of REO’s that are sold.

Getting direct to rep can be difficult since most the time the people that are dealing with the daisy chains will tell you that they are direct to the bank.  Sometimes the easiest way to figure out if the person is really direct to the tape is to ask him a random question about one of the properties. It would make sense that a direct rep would have much knowledge on all the properties on the tape even if it were just minuet knowledge. If the person sounds uninformed or even says let me talk to my partner about that you know you may have an issue. Keep in mind that if they throw lots of hurdles your way such as making you sign an LOI up front or making you provide proof of funds before you even see a list then those are red flags. 

The best wholesalers to work with are the ones that are actually on the ground. The Wholesaler all the way in New York might not really know what’s going on in the market in Long Beach, CA and vis-versa.  So if a Wholesaler brings me a deal and he is in Florida and the deal is somewhere in Burbank California then I know I probably have somebody who’s just passing along the list.  It’s not always the case and it’s tough to stereotype but most the time it’s true. What we try to look for in our wholesalers and bird dogs is what we call “ boots on the ground.” These people know the areas they invest in and wholesale in.

Tuesday, December 17, 2013

Where has all the Inventory gone? Lots of money chasing very few deals.

While driving to a few auctions this weekend I started wondering to myself where is all the inventory? I know the banks are holding back a lot of inventory but what about regular home sellers?  People move, get new jobs, get divorced and even pass away.  Values have come back for many people who couldn’t sell before.  Maybe not all, but many. So why aren’t sellers putting houses on the market? The answer basically comes from this: Stubborn sellers.  We may be transitioning to a period where sellers are realizing that they CAN’T get what they think there home is worth anymore. As values started to go up people got excited and then they started realizing that maybe I can get my 2006 value back. Fast forward to today and the seller thinks his house is worth $300,000 and then goes to an agent and the agent tells them that they can’t get $300,000, but maybe only $250,000.  The stubborn seller will then decide to wait.   

Frustrated Investors may find comfort in seeing lots of price reductions. This tells us that if we stick to our guns and continue to find deals we should be rewarded. A house that is worth $300,000, but has a market value of $250,000 must be purchased by an Investor at close to $180,000, not including repairs. What’s frustrating to most Investors and bird dogs is that people are telling us that this is probably impossible. The truth is not anywhere close to the fact.  The fact still remains the deals are out there but they’re farther and fewer in between. 

How can we benefit from this current little trend? Right now you should be helping yourself to a buffet of capital connections that are so frustrated about not finding deals that they’re asking anybody where they can find them. Personally I am still looking for properties in this market but right now what I am doing is spending time carefully building Investors contacts and cash money private lenders. We have built a giant list now and have had more private lenders come to us in the last few months then we have in the last few years combined. Investors are so frustrated that they are begging for deals.  When an Investor has his guard down it easier for new contacts to approach them. Say “hello I’m a bird-dog or I’m Wholesaler and I have deals for you. Can I put you in my contact database.”  As a bird dog you should not stop looking for deals but you should spend the time looking for Investors for future deals.  Springtime and the summer is around the corner and at some point seller will break down and begin to sell again.

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