This will be my personal journal to document my failures and successes during my real estate experiences in Arizona. All stories, thoughts, and successes will be documented..
Friday, April 29, 2005
Reminder - Surround yourself w/ successful people..
Have you guys ever watched the movie , "office space"
? Its reminds me a lot of my JOB, the sea of cubes with people starring at computer screens trying to get something accomplished between the meetings, time cards, and email (I'm not a full time investor).
Anyway, I found a guy at my job that is doing what I'm doing (REI), and he's doing it very well. I had lunch with him today to pick his brain on the latest market conditions and REI strategies. He's making good money building houses and selling them. This will be another strategy that is going under my belt (write more later).
Not only is it motivating talking to these guys , but you always learn something..
Hanging around losers only makes you feel like sitting on a couch and drinking beer all day, you know what I mean? If your reading this blog, chances are you not a loser and you want financial freedom because your searching for it.. You guys have the chance to do it, so find people that are successful in REI and become a leech. Seriously, take them out to dinner or lunch and talk REI.
Here's a secret. The successful people are one that have mentors to guide them to their first deals quickly. IMHO, knowledge is the second most important factor in REI, use someone's knowledge to get you started.
It can be a guru that you pay for them to mentor you, a realtor that works w/ investors, it can be a contractor that is a millionaire, etc...
I'll be honest, I'm trying to find my mentor that will take me under his wing.. However, if I have any question on short sales, wholesales, subto, fix & flip,rentals, l/o, O/f, conventional , loans, private money, I have a cell number that I can call right now and get an answer. Thats power of networking.
Now, if I can only get the phone ringing off the hook and gets some deals rolling!!!!
Bginvestor, 5:34 PM
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Going to get injected w/ another REI course..
I'm going to drive up to Phoenix tomorrow to attend a seminar on "buying property in bankruptcy". After I take this course, I will implement any new ideas to a new marketing campaign. Than its hitting the streets to get some deals going.
Buying notes and dealing w/ bankruptcy attoneys will be my focus for the seminar. This seminar is through my local REI club. http://www.azreia.org/
I'll summarize the notes after I take the course.
Bginvestor, 5:26 PM
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Thursday, April 28, 2005
The "new" strategy
Ok folks, so I mentioned in a previous post that we are now taking the path of least resistance to real estate investing.
In our local paper, they mentioned that the average sales price went from 169k to 190k in 3 months! Looks like California's wave finally hit the old pueblo.. In this type of market conditions, are my systems still going to work? (You should be asking yourself this as well)
The answer is no. I'm real big on "buy and hold", my goals are to own 15 properties free and clear and take in the cash flow every month when I'm staying at my hunting cabin miles away from anybody!! If you have to offer 3 times that amount of offers that you did last year to get one accepted, is it worth it? Probably not..
Unfortunately, the market conditions are interrupting that type of strategy. Bottomline, rent market is horrible , resell market is strong.. So, its tough to buy a house and make it cash flow. I WILL NOT TAKE A PROPERTY WITH NEGATIVE CASHFLOW.
That strategy right now has the highest resistance.
I think I'll post my personal opinions on what type of techniques would work in this hot real estate market..
Now, everybody knows I like preforeclosures, so here's my new strategy..
In the preforeclosure market, we are going to add a new buying program that I think will help increase the number of houses we buy. What if I say to a seller, " How about I pay off your debts, eliminate the risk of foreclosure, build your credit, STAY IN YOUR HOUSE ( keep your kids in the same schools), and keep most of YOUR EQUITY that you've worked so hard for, do you think you would be interested in me helping you??"
You betcha! I would be taking the property over with the option for the seller to buy it back via a lease option. Essentially, I would be getting the future appreciation (maybe a little of the existing equity) as profit. And as always, I'll be in control.
It's a little complicated for those who don't have a solid understanding of subto and l/o's, but it's a solid plan that can work if the seller is willing to work at it. I am not going to get into details on this strategy, but I will log the amount of interest and deals that I make from it.
Bginvestor, 11:51 AM
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Tuesday, April 26, 2005
5 day vacation..
I just got back from a 5 day vacation hunting and fishing in the pine's of the Arizona mountains. What can I say, it was awesome...
I already have my lot picked out. ;-)
I talked real estate a lot with my friend. We talked strategies, market conditions, and making money with REI. He is alot like me two years ago, wants to learn/know EVERYTHING before getting started.
My recommendation to him was just do it, buy real estate and get started. Don't have grass growing under your feet..
The biggest factor of not doing real estate is fear. Get over it, and do it. The second biggest factor of not doing real estate is knowledge.
Solution.. Go to a freakin real estate club and learn two or three techniques, and buy real estate! Make sure you know your enter and exit strategies and you will do fine..
I couldn't get through to my buddy.. He needs to have everything lined up , huge amounts of reserves, and needs to understand the market completely. Will he ever buy anything? He will not be leaving his day job any time soon. :-(
Bginvestor, 12:22 PM
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Thursday, April 21, 2005
Offer #6 Rejected!
In today's hot market (at least in Arizona) its been difficult to go on the MLS and pick up a property 70 cents on the dollar.
Thats what I tried to do and the realtor told me that there were several other offers sunstantially higher. I think thats crazy!!
I've been rethinking REI lately. I've read a lot of books and talked to many successful investors. I've read techniques that I like and have tried them. They work, but I've found that I've worked REAL hard to make them work.
How about taking the path of least resistance? Actually, I never really thought about that til last week. So, I'm thinking of REI as a chess game, and I will critically think about the best approach in this market
As everybody here knows, I like preforeclosures, and I'm in preforeclosures for several reasons. I talked with a investor that is doing something that I think is going to sky rocket my business.
I will write about that later.
Bginvestor, 7:41 AM
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Sunday, April 17, 2005
Offer #6 The complete break down
I made an offer on a property today that is listed on the MLS.
Details: Asking: $87,ooo
After Repair Value (ARV): $95k
Repairs: $7.5 k
Listed w/ realtor: Yes
The seller inherited the property and currently lives there. They want to upgrade. I don't blame them because its not in a great neighborhood, and needs quite a bit of work.
Strategy: Use private money to purchase and fix up. Afterwards, re-fi and have a long term rental w/ 20% equity and postive cash flow. Now, the cash flow is not impressive, but the rental market here is real soft so I need to be a little flexible (see below). Basically, I'm offering a MLS property at 70 cents on the dollar.... I'm surprised that the realtor didn't flinch when I told her ;-) I couldn't belief that it took 1.25 hours to sign the paperwork for the offer! I've attached the spreadsheet to show the break down..
The cash flow was calculated from another spreadsheet that estimated the Net Operating Income (NOI). If your monthly payment is below the NOI, you have positive cash flow.
Bginvestor, 5:51 PM
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Thursday, April 14, 2005
My paper work is a mess!!
I've just realized that all of my paperwork is just a mess.. I could spend two solid days organizing stuff and rewriting REI material..
I won't do it yet, I need to focus on making some offers!
Bginvestor, 11:11 AM
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Wednesday, April 13, 2005
Note taken from REI Meeting - Vena-Jones-Cox
Vena is a national speaker and one of the best. She talks about my favorite subject, preforeclosures. She talked last night at the REI club meeting. After I heard her talk, I realized that I did not learn any new concepts and understood 100% of what she was saying. Thats interesting...
However, I did learn a few details on marketing.. Anyway, I thought that I would share my notes so you guys can benefit as well.
- The next 3-4 years will be good for preforeclosure investing. As everyone knows, foreclosures are at a all time high..
- She feels the Phoenix real estate bubble will burst in the next 18 months
- When a seller gets behind in payments by 3 months, there's a 12-15% chance that he will be foreclosed on
- She's a fan on VA auctions because they will offer good financing to investors
- Doing short sales is not the only thing you can do to discount notes, you can "buy" the note at a discount and sometimes is easiest.
- Don't forget, you can work with preforeclosures and get paid to help them get a forbearance agreement w/ the banks. The commission should be $500-$700.
- Tucson is one year behind in the national trend of foreclosures
- Best way to buy foreclosures
- Private Lenders (12%)
- Hardmoney (14%-16%)
- Partners using retirement funds to get the profits tax free
- She gets good buys through REO's because she pays cash and she can close in 10 days. I told you guys!!!
- When marketing to preforeclosurers, make sure your letters show value to the seller. not just I want to buy your house..
- 9 out of 10 sellers cannot complete a bk
- #1 reason to sell the house - Divorce
- #1 reason to go into bk - medical
- Best reasons to convince banks to agree to a short sale 1) seller going into bk 2) seller has predatory loan
She was selling a 4 1/2 day seminar w/ food and lodging for $1300. Tempting, but I'll pass.
Bginvestor, 6:38 AM
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Monday, April 11, 2005
Arizona's hot market makes deals harder..
Bottomline: Savvy investors buy properties at 60-70 cents on the dollar in any type of market. Period! I've actually tracked some the top investors in my community and its amazing some fof the deals they pull!
To an investor newbie, this may sound extremely difficult or impossible. Just talk to local investors and hear some of their stories. It happens all the time , even in hot markets.
Case in point, the hardmoney lender I talked to last week said one of his clients bought a property at 70 LTV.
Now, Arizona is a real hot market right now and it basically sucks because its makes finding deals hard! Some gurus will say that finding deals are easy! With enough marketing and networking , that may be true, but it takes time/effort to get to that level. I've noticed my incoming calls are a lot less than lazy year. I need to step up the advertising!
The REO market here is extremely hot! The realtor says that most of the deals are active contingent in 1-2 days and offers are usually asking price. Full price for REOs!! If you read Mark's blog , he is a huge fan of buying and fixing REOs http://www.markijlal.com/
He's one of the guru's that thinks REO deals are relatively easy. My market has just a few REOs and most are mobile homes? He says there's hundreds on deals in Michigan that you can go after. I don't know if his definition of a deal is a "listing of a REO" or not, but he's very successful. Can this work in Arizona? I'm going to find out.. Remember my post of magic phrases? There's magic phrases that can be used on the lenders to convince them to sell to you. Hopefully, one of them will be: "I can take this off your hands and pay you CASH in 10 days!"
The overall market is sky rocketing here. The appreciation rates are not nearly as high as in Reno or Las Vegas, but I can see the appreciation everyday! Shoot, I bought a condo last year and after fixing up , I thought it was worth 78k. There's two active contignent on the market right now for $94.5k.
At leat theres one good thing about this market. Foreclosures, are at all time highs! I'm betting that some of my best deals will be from sellers in preforeclosure.
My strategies are in place, let's see what happens!
Bginvestor, 6:51 PM
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Sunday, April 10, 2005
The importance of knowing the magic phrases!!
REI is a people business and communication is critical. That is why I'm in the preforeclosure business. Person to person establishes repoir, and open doors that in some circumstances would not have open.
During negotiations, there's magic words or phrases that can be said that makes the deals so much easier. I can't stress this enough, you can say things in a way that is so effortless, that you will know if you have a deal or not. Ok, some examples, so you understand what I'm saying.
Powerful phrases used for screening sellers:"Seller, this sounds like an interesting property, why would you ever consider selling it?"
You need to quantify motivation on a scale from 1 to 10"What's more important to you, making a quick sale or getting top price?"
I love this one.. Typically people are honest on their intentions and will let you know if need out quickly or can hold on for top dollar."What's more important to you, getting a cash sale or getting debt relief from your current mortgage payments"
Another motivation question.. If the pain is high, the seller will say they just want out of their payments..
Powerful phrases used for presenting offers:O/F: What if I could give you small down payment and pay the balance of your equity in monthly installments, is that something you would consider or probably not?"
Use general language so the seller doesn't get confused...Deed: "What if I could take over your payments and get that house off your back with a quick sale, is that something you would consider or probably not?""Of course, if I took over the payments, you would need to convey the property to me, so I can sell it as the seller."
The concept of subto is not that straight forwarf because its not conventional, using general terms makes it easier to present...L/O: What if I could make your payments and guarantee maintenance and repairs until I got the house sold for cash, is that something you would consider or probably not?"
If the seller can hold on to their equity for a while, this is a great option!
These are just a few. In whatever way you invest, think about the magic phrases that allow you to easily structure a deal that will allow you to become more successful.
Bginvestor, 7:04 PM
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Friday, April 08, 2005
Didn't post goals, not much got done..
Well, I did go on that fishing trip last weekend, and boy was it refreshing. The trout fishing was a little slow, but we brought in 3 nice trout. I love the outdoors and it was great to be there with my wife just hanging out and waiting the rod to tug!
This weekend, I will be concentrating on REI.. Next week's goals:
- Now, that hard money is in place, I am anxious to get things moving. Find 5 REO properties to bid on.
- Door knock preforeclosures.
- Provide my sign guy materials and route info.
- Order more bandit signs (get horizontal corrugated)
- Revise my script to maximize results
- Refresh investing strategies
Ok, that's enough! Good investing!
Bginvestor, 6:55 PM
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Hard money is in place.
I was surprised when my broker called me to say that a lender was able to satisfy my criteria.
I met with him, the lender and discussed a hard money loan for 11-12% interest. This is not bad since interest rates go from 10%-18%.
Imagine telling the seller, " I will pay CASH for your house and will close in 7 days!" That's power baby!!
There's no down payment, and because I am cross-colateralizing with one of my rentals, I can easily get 100% loans (including fixup and holding costs) for deals.
Because of my good credit and financial, they are very relaxed, so there won't be any issues with lending.
Its all setup, all I have to do start making offers. Unfortunately, one of the REO's that I looked at is off the market, or else I would have made an offer today.
Bginvestor, 6:40 PM
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Friday, April 01, 2005
People's lives can be screwed up!
I talk to a lot of pre-foreclosure sellers, and there lives can be very interesting.
Case in point, I've been persistent on contacting this particular seller because she owns a condo just a couple of houses down from mine. She called me originally from one of my bandit signs. She called me right after she heard that her daughter attempted suicide the day before! I told her maybe she should wait to talk about the house, but she insisted that talking about the house would keep her mind off the tragedy. So she wasn't in the best mood.
After the initial conversation, we scheduled a time to meet. She needed to reschedule and we've spent about a week doing phone tag. I finally got ahold of her today. She tells me that her ex-husband has some type of lien on the property and says he doesn't deserve anything since he beat her all the time. So, not only is she in pre-foreclosure, she just got divorced and her husband wants to jack with her.
This one is going to be difficult!
Bginvestor, 8:12 PM
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End of the Month Status..
Its been a tough month! I had some close calls (no pun intended) and some leads that had potential, but just fell through! Even other investors said its been a slow month for them as well.
I made some progress in advertising though, and I expect to get the business kick started.
Here's a summary of my incoming calls for the month of March:
Bandit Signs: 13
Response from drivers wanted ad: 9
I try and maximize all incoming calls because these calls are already pre-screened and they are sellers that WANT to seriously sell their houses. I do get some tire kickers from time to time, but for the most part they are motivated.
Unfortunately, a lot of calls were double wides 10-20 miles outside the city! I try and keep away from manufactured housing since they don't appreciate like single family residences. In addition, its harder to sell these types of properties. Do you want to live in a mobile home 20 miles from anything?? However, I need to make sure these leads don't get wasted and I will do more research to make sure I not missing out on any opportunities.Offers:
Only offer #5 - This was a close one and would have closed if the house did not have termite problems. There just wasn't enough profit to take on the termite issues.
When I make offers, I usually get a house signed within 10 offers. If I was making offers from unscreened sellers, I would need to make at least 30 to maybe buy one.Milestones of this Month:
1) I hired a college kid to distribute bandits signs. He was trained last week, and is ready to kick ass. I am going to paint the city yellow with signs.. Bandit signs will be over 50% of my marketing. I am a big fan on bandit signs right now.
2) Looking for birddogs. In the effort to look for birddogs, I wrote to appraisers and attorneys. I sent a sent a total of 50 letters that were sent by mail or fax. How many professionals responded to me? NONE!
I'm real surprised. I would thought a few people would call me. I guess getting an extra $500 -$1000 is not worth their time for delivering leads?? I didn't go crazy with this campaign, I tested the waters and the results are I did something wrong. I need to mix this up and present birddogging in another way. The most powerful way will be to talk to people personally. I just received free business cards from www.vistaprint.com
that promote birddogging. I am distributing these everywhere.
3) Tried to line up private money for fix and flips. I was hoping to have this done by now, but its just beginning.. Any millionaires out there that want to use their self -directed IRA funds to create notes secured by real estate?? I'll give you %10-%12 interest. ;-)Plan for next Month:
I will focus on the following:
2) Door Knocking
3) Incoming calls from advertising
This is a good plan and will keep me busy. I have to admit, after the last three weeks of doors slamming in my face, brokers jacking w/ me, and deals falling threw, I am burned out on REI. I don't have any motivation this weekend. I think I will work around the house on Saturday and take the family fishing on Sunday. That should recharge my batteries!
Bginvestor, 7:21 PM
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