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Our clients who focus on real estate IRAs are encountering a more mature point in the investment cycle. We’ve had a nice run up over the last several years. Indeed, if you had some cash to play with in 2009 and 2010 and a bit of patience, it was tough to go wrong with real estate IRA strategies. The real estate market was attracting a boatload of institutional money and all the real estate investor had to do was step in front of it.
Now there’s still institutional money coming in, but investors have to pick their spots a little more, and getting your valuations right is going to have increasing importance going forward.
Meanwhile, the permabulls at the National Association of REALTORS® has also released their 2016 trends piece. Naturally, they think it’s always time to buy, so take their advice with a grain of salt.
Here are the NAR’s predictions for 2016, plus a few thoughts from us on how they may play out for our clients and those considering a real estate strategy in their retirement accounts. Read More >>
I almost didn’t write this article. What you’re about to discover is so profoundly - yet simply - powerful, that if you truly understand and apply these simple secrets, I can practically guarantee such phenomenal personal and financial growth over the next few months that you won’t even recognize the dynamic person you’re about to become!
Yes, these secrets are that powerful. But don’t just take my word for it. Read, learn, and apply. Then find out for yourself! Keep reading…
Now, before we get into “The Big Secret” and all that, we first have to understand something. And it all begins with you asking yourself a question. I’d like you to honestly ask yourself this: “Why don’t I have some of the things I desire from life yet?”
Why aren’t you in perfect shape? Why don’t you live in that awesome house yet? Why isn’t your bank account as big as you’d like it to be? Why do you still feel guilt? Stress? Anxiety? Why aren’t you driving the exact car you’d like to drive?
What answer did you come up with? What reasons did you give? Did you blame some outside circumstance or situation? Was it your parents’ fault? Was it Obama? Oh yeah - it was the market! Or maybe it was “The Man” keeping you down, right? Read More >>
I recently marketed to people who have second homes and are either close to being upside down on the mortgage or they are in foreclosure. So far, I’ve closed on 2 deals from this marketing. One of the leads owned a house in Sanford: 1,050 sq ft, 3 bedrooms, 1 ½ baths, living room, kitchen with dine-in area, separate laundry room and 1 carport. The house was in great shape. It was a block house and really only needed about $3,000 to $4,000 worth of work if I wanted to retail it.
I partnered with one of my Apprentice Students and we reviewed all the facts about the house. The A/C unit was only a couple years old, it still had a wall furnace that could be disconnected, it had newer vinyl windows and just needed a little TLC. There was an outstanding mortgage on the home for $29,000 and my offer was $27,500. The mortgage payment amount was $600.00 a month (PITI), principal, interest, taxes and insurance.
I really wanted to take this house subject to the underlying financing and keep it as a rental. I was dealing with an 80 year old Seller, via his children. They just wanted to be out from underneath the home and didn’t want to keep the mortgage on the property.
After several changes to the contract, we agreed to purchase the property CASH for the mortgage balance ($29,000) and pay all the closing costs. There was a family member living in the house and we couldn’t close until he vacated the property. We filed an Affidavit of Purchase and Sale on the Property and chose not to show the house during the time we had it under contract, and we waited until it closed. Read More >>
There are a few investment strategies you may want to take a look at if you are about to take the leap of investing in real estate. Especially since about forty percent of all homes in the first quarter of 2015 were sold to investors. 2016 is shaping up about the same. Truly, this is a huge portion of homes sold and having the right strategy can make a world of difference when it comes to the kind of profits you can earn.
First though, we have to take a valuation first approach to every transaction. Knowing the true value before you buy is huge. One of the most common investment strategies using real estate comps by REIAComps some investors are accustomed to is 'flipping'. This is a way you can make a very quick profit. If you see you can get a property rehabbed quickly and move on, flipping is ideal. Frankly, if quick profits are what you want, then flipping can be the way to go.
Another investment strategy many consider is renting property. Acquiring for long term hold can be a great way of making extra money. The income can be used to fund other projects and deals. This is because not only will you make some profit by being able to capture tax advantages and capital appreciation, but you will also gain profits from the monthly rent you are charging. However be sure you are very careful about the person or people you are renting to. Be certain to do your due diligence for all potential renters. Read More >>
When Kim and I were baby real estate investors, we were totally focused on buying our first investment property. Then one day it actually happened! I remember leaving the closing attorney’s office feeling pumped up. When we got in the car, Kim asked, “Now what?”
Now what, indeed! I hadn’t given that part of the equation much thought. This happens to a lot of new real estate investors. So once you buy a house, what do you do next?
To answer this question, let’s look at three properties we worked on recently.
The first is 337 Rail Drive in Adairsville, Georgia. Kim bought this house at the November 2015 foreclosure auction. From the start, it was a flip. In other words, we bought this property to resell quickly. We’re flipping this home because we need to replenish our cash reserves.
Shortly after purchase, Kim had the property trashed out. Because our contractors were tied up rehabbing Akin Drive, she elected to delay doing the extensive repair work Rail Drive needed. Instead, she offered it at a wholesale price, which was well-below market.
In less than a week, Kim found a qualified buyer and accepted her purchase offer. Unfortunately, about a week later, the buyer changed her mind because she was scared about the amount of work the property needed. We refunded her earnest money, hugged, and parted friends. Read More >>
So how are we going to get ready to have a conversation with our motivated sellers? I believe that readiness is a state of mind, and I have put together some ideas for you designed to help you have meaningful and successful conversations with motivated sellers resulting in profitable deals.
First of all, expect to be anxious and know that it’s okay to be anxious. You probably wouldn’t be very good at what you do if you didn’t care about the outcome.
Next, while you are feeling anxious, get in front of a mirror and practice what you are going to say to the seller. Do this more than once. The more you practice what you are going to say, the more comfortable you will be and therefore less likely to forget what you were going to say. Practice controlling your voice and be mindful of how fast you are talking. Your speech should be at a moderate volume and speed when speaking to a seller.
Remember to breathe! Practice what you are going to say all the way through without making faces, gasping or throwing out any expletives. Your seller doesn’t care if you’re speech is perfect, they just want to know what you can do for them to help them solve their problem. You might even want to practice what you are going to say in front of a spouse or close friend. Read More >>
The One Thing the Gurus Never Tell You Is, Wealth Is Created Over Time, Not Over-Night.
I recently had a conversation with one of my students who made a statement to me that I found very disturbing. This person asked me why I continue to try to buy houses with seller financing terms when money is so easy to get today. He asked me; why not take the fast and easy road to success instead of thinking only about long-term investments. Believe me there are many reasons.
The minute those words came out of his mouth, I knew he was an inexperienced investor who apparently had been to a seminar recently and apparently believed the rhetoric the speaker was saying about doing deals with the latest way to get rich quickly.
I have personally lived through seven different economic cycles over my 36 year real estate career. Over that period of time I have seen with my own eyes, when the economy changed every few years the methods we were using at those times drastically changed, and not always for the better. Depending on what was being done at that time, every niche method of buying eventually changed and then someone else came up with another fool-proof way to get rich quickly. This is a never-ending fact of life that will always be occurring for eternity. Read More >>
So you did not win the 1.5 billion dollar lottery. Now what are you going to do to pay the bills, Christmas expenses, college tuition, medical expenses, health care insurance, car payment etc.?
Yes I played the lottery to the extent that if I lost I would not jeopardize my wealth. I would not experience a hardship even if I didn’t win the 1.5 billion dollar lottery. (You know that sounds great when you say it) I’m sure there is at least one reader of this article who spent $2,500 dollars on tickets for the lottery. I hope this wasn’t your rent money! I play a game of chance when I travel. Will the plane crash? This game of chance happens when I am riding in the tram to pick up my car. I count the number of people and calculate in my head, what is the percentage chance I will be the first person to get off the bus? I know that there is at least one person who will beat those odds just like the lottery. (You have to buy a ticket to win).
So we take risks everyday in life. However, too much risk can lead to failure or even death. SO let’s get a solid plan for your success in real estate. Let’s not gamble but manage risk! Let’s talk about your goals and what do you need. Do you need money short term or money long term? Happiness short term or happiness long term? Excellent health short term or excellent health long term? Being spiritual and doing the right thing every time? Being able to sleep at night comfortably? Read More >>
Remember being in elementary school? If it was anything like mine, sometimes a classmate would get in trouble and the teacher would make him write ‘sentences’ for punishment. Remember? Write such and such sentence 25 or 50 or eek! 100 times! It was like being sentenced to prison. It was very painful when one was young but we oftentimes got the message…don’t mess with the teacher.
So let’s bring that back for a moment. Repeat after me…
I shall always have more than one deal going…
I shall always have more than one deal going…
(Repeat as long as you need to until you never forget it…)
It’s such a simple lesson! But far, far too many times I see this happen with wholesalers, especially new ones. You work on this ONE DEAL so hard and do everything in your power to make it happen. And it is a sincere effort as well where there is rapport and legitimate effort being made to get it to the closing table. Then at the last second, the unthinkable happens…it falls apart. Seller suddenly changes their mind. Even worse, it’s for a legitimate reason such as a health issue arises. And the Seller is very apologetic and you know they aren’t making it up. Still the deal is dead, at least for the time being. Read More >>
Atlanta, Georgia was one of the big real estate stories of 2015 and is #5 of the top 10 markets to watch according to Realtor.com. Home prices in the metro area rose by double digits over the last couple of years, outpacing most of the nation and are finally above their 2007 high prices. Although home-prices and appreciation has leveled off to some degree, continued gains are expected in 2016. Let’s look at this growth by area (Figure 1). For the purposes of this article, we are talking about single family detached in these areas.
Figure 1: Atlanta Metro FMLS Areas Read More >>
I mentioned in the last article of this series that a master lease option (MLO) agreement is made of two separate documents. The two documents are the master lease and the option to purchase (also called an option memorandum). The separation is for many reasons, which I will cover in this article. Keeping them separated allows for more freedom and safety on your side of the deal.
The first half of the agreement is the master lease. The lease allows us to control the operations of the property. This means that if you find a deal that is distressed due to something the owner has done or not done then you can remedy those issues by controlling the daily operations with the lease. Note that I mentioned the distress coming from the owners operations. I make this remark because sometimes properties are in areas or neighborhoods that naturally have high vacancy or will be difficult to operate in general. A lease option is for fixing distressed deals not distressed neighborhoods. Make sure that a distressed asset is in a valuable area and has been mismanaged. These are the “MLO gold” that we are all looking for.
Once you have analyzed a deal and realize that better managers could do a better job… you are on the right path. The lease will allow you to hire a new management company or it will allow you to manage it better yourself. By keeping this document separate you are keeping the cash flow separated from the sale of the deal. Cash flow is a very valuable part of a lease option. The lease portion allows us to control and keep the cash generated by the asset. You will owe the seller a “rent” payment each month but anything above that is yours to keep! Read More >>
Accounting is about more than just numbers. QuickBooks lets you make documents available from within the program itself.
You could call QuickBooks a “green” computer program. It can conserve reams of paper by storing customer and vendor records, for example, emailing transaction forms, and accepting online payments.
Most small businesses are a long way from being “paperless offices,” despite the predictions so many people made when PCs became commonplace. Even though you’re making an effort to be as digital as possible with your accounting files, not everyone else is yet. So you still have to deal with paper.
And you’re probably still consulting paper documents or stored computer files or scanned images that relate to your accounting data. QuickBooks makes it possible to keep this information close at hand, easily accessible from the software itself.
The Doc Center
QuickBooks provides a centralized area for managing the documents you want to keep close at hand. The Doc Center contains tools you’ll need to work with your documents. From here, you can:
Figure 1: You’ll use the tools in the QuickBooks Doc Center to work with the documents you want to have available from within the program.
There are probably times when you have supporting documentation for invoices or tenant/vendor item records, for example. In these cases, you can attach those background documents to the related QuickBooks forms.
It’s not difficult to work with documents in QuickBooks. But if you don’t have much experience working with file attachments or scanning paper forms, we can walk you through the process.
To get started, click on the Docs tab in the left vertical pane or open the Company menu and select Documents Read More >>
I have written dozens of articles about the massive mortgage swindle the banks pulled over on us. The article that generated the most response was one I wrote in 2013 in which I detailed how Countrywide created 3.5 million fraudulent mortgages. They did it by creating a trade name (DBA) called America’s Wholesale Lender (AWL) that would write loans for them in all 50 states. Well, it took a little while, but we finally have a court ruling that could demolish the America’s Wholesale Lender scheme!
For those of you who don’t know the origins of this scheme, it all started with Countrywide trying to save some money. In order to avoid the licensing fees, corporate taxes, and regulatory costs that each state charges a company looking to operate within its borders, Countrywide created the trade name America’s Wholesale Lender, which they registered in each state. Then they got to work writing mortgages. The problem with this scheme is that a trade name is not a legal entity. It has no ability to own property, file lawsuits or hold security interests.
When a few state recorders noticed that AWL wasn’t an actual company, but a trade name, they refused to record the loans. Countrywide decided to go full throttle into the fraud and listed the lender on their mortgages as “America’s Wholesale Lender, a Corporation organized and existing under the laws of New York”. After that, their loans went through without a hitch. Read More >>
“Real estate sales was perfect training for the experience to go into public life because you learn to accept rejection, learn to meet new people, learn to work with people and find common ground.” ~ Johnny Isakson
When I invest in a property I do my research. Long ago that meant doing the fancy footwork or being active. Going to open houses, going to model homes and condos, making phone calls, and looking at advertisements in the area where I was planning to buy. Comparison shopping was a far greater task before we had smartphones and apps to help us organize all the information at a glance.
Zillow Renter’s App is ideal for those of us who invest in real estate on a regular basis. Flipping and selling is a rewarding experience but you need to do your homework. I use Zillow’s App to see what other homes are selling for, what other properties are renting for, compare that information to what my budget is for a flip.
Zillow offers a number of things in the app search that will let you be specific about your property. This way you can make the best speculative estimate about what your profit could be. Usually, in a typical real estate website search field you are limited to whatever their listings are. Zillow scans through a number of listings in your desired area. Usually the search amounts to more than 20 properties that could be a match for the property you purchased. Read More >>
Today, social media is the big thing many real estate professionals use to market for business, at least it should be. Everyone is Facebooking, Tweeting, Blogging, Vlogging, hash tagging, etc. but how many of you still make it a point to go out and do mass socializing face to face. When was the last time you went to a happy hour, a luncheon, and/or door knocking? Yes I said door knocking. In no way am I taking anything away from online social media but it works better when done in collaboration with face to face interactions.
Today everyone is focusing on online branding and marketing. Everyone claims to be the best in their field and some go as far as to make claims they cannot prove. So what do you do to stand out? Obviously, the number one thing to do is keep all those promises your marketing makes and collect testimonials. If you want to solidify your position in your marketing area or dominate your niche you want to get out there and let yourself be seen.
Many successful investors, real estate agents, title company reps, insurance agents, etc. have said to me they were too busy to attend a networking event. Sometimes I am caught by surprise because those same people were the ones I would see at every event in town. Admittedly, in the past, I too have gotten comfortable with socializing online and neglected the face to face interaction. When deals were a bit more difficult to locate I began attending the networking events I attended religiously in the past. And as you can imaging the number of potential investment properties I was sent increased and a few were actually worth looking into. The real investors here know what I’m talking about. I also had the opportunity to meet many newbies that were looking for assistance on how to wholesale. I was always more than happy to assist new wholesalers that are committed. I benefited by being the first person to see the deals they found. The best part is I taught them to identify real deals that I or any true investor would buy. Read More >>
The IRS is very interested in Self-Directed IRA’s (“SDIRA’s”). They are especially interested in IRA’s that invest in real estate or via trusts or via “Checkbook LLC’s”. How do I know that? Two reasons. First, several IRS employees have very directly told me so. Second, the IRS has recently changed its reporting requirements in search of this very data. Specifically, every IRA is required to file Form 5498 once per year. That form tells them the value of your IRA.
Starting in 2015, the IRS has required that new data be reported on Form 5498. Among other things, they want to know whether the IRA is investing in real estate, LLC’s or trusts. In other words, what IRS employees are telling me in audits is being reflected in regulatory changes. It all points to the same conclusion: The IRS is very interested in SDIRA’s. Which means your SDIRA needs to be up-to-snuff and reflect the latest developments in the law. Read More >>
As professionals we’ve heard it said that it is absolutely imperative that you have a really solid Power Team. A Power Team is composed of several individuals. Some of the most common in Real Estate are closing attorneys, loan officers, contractors, insurance agents and appraisers. These are all key people to any given transaction and any one of them can make or break a deal so it’s important to have ones that understand what you are doing, are on your side and have lots of quality experience.
We have had the privilege of working with many people along the way with varying levels of success. Some of these people have been nothing short of outstanding. On the flip side, let’s be honest, some are a bit of a nightmare to work with. As a result, we have learned to never underestimate what they can mean for your business. Let’s take attorneys for example.
A solid closing attorney is a critical part of your Power Team. We have literally had Sellers that were ‘on the edge’ about whether they should work with one of these ‘We Buy Houses’ people but were given an extra dose of comfort by our attorney. On the flip side, we thought we had an attorney that was on our side once literally talk down to a Seller. Sadly, it killed the deal. That particular deal was a renovation that was good for at least 50k…down the drain. Talk about a hard lesson in choosing your Power Team! Read More >>
Recently I read an article written by Michael Snyder, a graduate of the University of Florida law school. I found it very interesting. This article was titled “Sell Everything!”
His headline read, “Royal Bank of Scotland Tells Investors to Fear 2016 Financial Cataclysm.” The 20th largest bank in the world is predicting that 2016 will be a cataclysmic year and Investors should be afraid. This prediction of course is aimed at the stock market, but there is a connection between stocks and real estate many real estate investors aren’t thinking about.
As the stock market is currently going into a Bear Market and people fear losing all of the value in the stocks they own, many will panic and start to sell thinking they must get out NOW if they want to keep as much of their equity as possible. It is also important to realize that when the market goes down, the companies who issued the stock, many times must also lay off workers to stay profitable. This is the bad part that few real estate investors think about. Why is this important? It’s important because when this happens, many people won’t be able to pay their mortgage payments and slowly those people will start going into foreclosure and eventually lose their homes. For a period of time renting may be their only option. I believe owning rental property is a smart move for those who start buying income properties today. Read More >>
One of the concerns many of my students seem to run into is; once they find the deal, what do they say to the motivated sellers? How should that conversation go? On top of these concerns, many of my students say they are not really comfortable with having a conversation with a stranger, so how do they handle that conversation? How do you get over the “jitters”?
Okay, so you’ve practiced what you are going to say, you have a plan, you have your paperwork, you’ve probably procrastinated a little, then scheduled your appointment with the seller, so now what? You still feel those butterflies in your stomach and you’re still not comfortable with how the conversation with the seller is going to go. What should you say first? How should you make the offer? What if they ask you something you don’t know? What if they accept your offer? What if they don’t? Also remember that if you created your direct mail campaigns correctly in the first place you already have most of the information you need to have from the seller in order to create the deal. Read More >>
Welcome back! Last month I told you about the stigma behind the word “flipping” and how some are considering it to be illegal. Flipping houses is not illegal. Fraud is.
O.K., Back To Flipping.
What does lender fraud have to do with flipping and the stigma some of the media have placed on it? Some lenders have had so many loans default on lower priced properties sold by investors it’s opened their eyes and made them cautious, and justifiably so, if I were a lender making loans at 80%-100% of the purchase price, I’d be cautious too. In fact, I’d be paranoid, but then again I’d be neither because I’d never even consider doing it.
I have no way of proving this, but if I had to guess, I’d say 75% of all loans closed to fund low income home buyers contain some kind of false statement or fraud. Read More >>