Almost nobody gets rich quickly in the real estate business. You will probably get rich slowly like most of us. You will make $5,000 off a wholesale deal, $30,000 off the back-end of a lease option, $10,000 from another wholesale deal and $50,000 from a pre-foreclosure. Making this money takes time, but once you get good at this business the money slowly begins to add up.

Have You Caught Fire Yet?

However, there comes certain times throughout your real estate career where you “catch fire”. For one reason or another you will catch fire and you’ll get more deals than you can possibly handle. This happens in spurts and I’ve experienced it multiple times.

Perhaps it will be a call from a landlord who owns 25 houses and wants to dump them all. Or maybe you just sent out a direct mail letter that’s getting an awesome response rate and the leads just pour in.

Now, when this happens guess what? Many investors freeze up. They get so overwhelmed that they do nothing and just bury their heads in the sand. I know this for a fact because I’ve witnessed it with new investors and I’ve had to convince them to snap out of it.

You see, when the floodgates open, this is your chance to get-rich-quick. You never know when you will “cool down” so you need to take advantage of every deal that comes your way. I don’t care if you have to work 80 hours per week and seven days per week. While you have the magic touch you need to milk it for all it’s worth.

Do You Know When to Take a Vacation?

And when I say milk it for everything I mean it. These days I get the majority of my deals from referrals. Often I will get my referrals from people who are too overwhelmed or uneducated and they don’t know how to handle everything or they don’t want to work a little extra to make more money. Just the other day I got a call from an investor who was going on vacation and wanted me to handle some deals for him. Can you believe that? He is passing off thousands of dollars to me at a time when he is “hot” to go on vacation (I know this investor personally and he’s moving and shaking right now).

So what do you do when you “catch fire”? Well, take it one deal at a time and get organized. First, get a folder for each deal that you’re working on. Next, get out your calendar. There are seven days in a week, so that means you could have seven meetings with sellers each week (Yes, seven meetings. You have to temporarily sacrifice now, if you want the good life in the future). Also, if you don’t understand a deal don’t forget to call upon your network of more experienced investors to help you out (I wouldn’t try and involve them in the deals, just pick their brains for information).

Don’t Squander Opportunities

Listen: I don’t know how many other ways I can say it. But when you get in the groove, don’t let anything stop you. You might close 15 deals in two months and then it could be another three months until you get your next deal. And that’s when you take your vacation or relax…when things are slow.

I guess it just ticks me off to see people squander opportunities, or to be too lazy to take advantage of them. So, when your “hot period” happens just roll with it, with everything you got. And don’t be stupid and take a vacation, or cancel a meeting with a seller because it’s your bowling league night…

Welcome to Our Blog!
Welcome to the Real Estate Dispatch from BiggerPockets.com. Our blog brings together experts in various fields of real estate with the goal of keeping our readers informed and up to speed. Whether you're a real estate professional (lender, Realtor, banker, etc), investor (landlord, flipper, wholesaler, etc.), or simply a consumer, renter or homeowner interested in the world of real estate, this blog is the place for you to get involved!

You can subscribe to our RSS feed, get blog updates by email, join our free mailing list, or best of all, join our social network along with 35,000 others interested in real estate education, dealmaking, networking, and marketing.

Tags: real estate, real estate investing, Real Estate Investing, Response rate

Even the most bearish economist is predicting that commercial real estate prices will fall up to 40 percent from peak to trough. However, the data released yesterday from Moody’s Investor Service shows that in April commercial property prices plummeted a record 8.6 percent. According to Moody’s data, commercial property prices fell a total of 29.5 percent from their highs in 2007. This leaves another 10 percent drop in prices if the most bearish economists are correct. In my opinion, much of this drop was due to a speculative credit bubble that caused commercial property buyers to purchase properties that would never produce a positive cash flow, even assuming a strong economy and strong demand for commercial real estate.

I believe that most of the declines in commercial property prices that can be attributed to the credit bubble have mostly taken their toll on prices. But, I surmise that we could experience an even greater decline in commercial property prices due the fact that the economy is fundamentally unsound. If one closely examines the fundamentals of supply and demand for the commercial property sector, the prospects for continued price declines becomes readily apparent, especially in the retail and office building sectors of commercial real estate.

Background to a Crisis

During the speculative credit bubble, developers built many more office buildings and retail stores than could possibly be sustained. Now that unemployment is in the double digits and major economic sectors like the automotive industries are going bankrupt there is less demand for commercial property. There have been many large, well known, retail brands either going bankrupt or severely cutting back growth projections. In a small city, near where I live, there are at least fifteen Starbucks. How many Starbucks stores can one small city support? Circuit city is out of business, Brandsmart may be next. Car dealerships are closing their doors around the country. These are all commercial real estate tenants whose absence can’t easily be filled. The list goes on and on. If so many large retailers are going out of business or curtailing operations then there will be even less demand for all of the vacant commercial retail space.

Commercial Real Estate Breakdown & Predictions

As local, state and federal governments go deeper into debt they will be increasing taxes even further on businesses and property owners. This means higher taxes for the owners of commercial real estate. If the costs to hold a property increase, then its intrinsic value must decrease.

I would challenge the 40 percent figure and would argue that prices could drop even more due to the dismal state of the economy at large. I would go the record to say that the commercial property sector could see real price declines of up to 70 percent from peak to trough. The worst might still be ahead of us.

Source: Reuters
Photo Credit: strangelv

Related articles by Zemanta

• ‘Wave of foreclosures’ to hit commercial sector, Insider Q&A; told (lansner.freedomblogging.com)

Tags: Commercial, commercial property, commercial real estate buying, commercial real estate prices, commerical property investing, Retailing

Remember those days when you had the first ideas for your real estate business? For some that seems like eons ago while others may just now be in the beginning stages of their business. For many those ideas never escape the confines of the cranium and some will scribble ideas on a napkin as they sit at their favorite watering hole. Hopefully those plans eventually made it to paper or, better yet, became a formal business plan.

Unfortunately for many, those plans that were so carefully crafted are soon forgotten. The mission statement, goals and objectives, strategy and such are collecting dust somewhere. Unless it is needed for some proposal or financing it is never looked at again. What happened?

Reality Strikes

People will often start out methodically following the steps in their business plan. They begin with the ultimate goal in mind and set off on the journey to realize their dreams. If they are committed to their goals they keep going while experiencing the ups and downs and challenges that come their way. Things move along as expected for a time but soon enough something happens. Reality enters the picture.

Somewhere along the line we seem to go from the relentless pursuit of our goals to putting out the little fires that pop up at every turn. Those fires are simply the reality of everyday life. They have always been there and will always be pulling you away from your intended path. In the recent real estate environment those fires have been roaring blazes. Foreclosures, falling prices, and difficult to obtain credit have wreaked havoc with business plans everywhere. What now batman?

Reevaluate & Revise

A good business plan is not a static document, it is a living, breathing organism. As such it needs to be nurtured, fed and cared for. If you have a written business plan, take it out and look at it. Have your goals and objectives changed? Odds are that your strategy has, have you adapted your strategy to fit today’s reality? If you haven’t put a plan to paper what are you waiting for?

A typical plan has the following elements:

• Mission Statement
• Executive Summary
• Goals & Objective
• Market Analysis
• Strategy
• Financials

Without a doubt the most important step is taking those elements and implementing them. If you don’t put the plan into action it’s just a bunch of wasted ink and dead trees.

You’ve got to be very careful if you don’t know where you’re going, because you might not get there. - Yogi Berra

Tags: business plan, real estate

Today you’re going to learn about my latest lease option deal that I just filled. This is similar to another deal I just did and I can’t remember if I wrote about that deal or not. I’m having deja vu but can’t remember. I don’t remember a lot which is why I always carry around a piece of paper and pen with me.

I’m old school so I hate fancy cell phones and don’t understand those nerds who sit around and type into them all day.

Guess what else? I’ve never sent a text message in my life. I’ve actually blocked text messages on my phone so people can’t send me them (I blocked them because too many people were text messaging me and wasting my time).

How I Keep Track Of My Thoughts

Anyway, my latest and greatest method of keeping track of my ideas and thoughts is by 3×5 index cards. I’ve got note cards all over my desk with property information, with sellers I need to call, etc. If you’re forgetful like me, head over to your office supply store and stack up on cards.

Now to the money making info on my latest deal: First, I filled the property in 22 days. It usually takes me between 45-60 days to find a quality candidate to fill a property so I was definitely happy about this (I found the tenant from craigslist.com). I ended up getting $3,500 up front in option money. In today’s current market we’re getting less money than three years ago. Also, the $3,500 is pure profit because the tenant also had to give me the first months rent on the property.

How I Added $100 a Month to My Cash Flow

Usually, I like to get $5,000 in option money (obviously) so how did I accomplish this on the property? Well, I added $100 a month on top of the current rent payment for the next 15 months which goes towards the option money–Now I’m getting an extra $100 per month added to my cash flow.

One of my favorite real estate books of all time is John Schaub’s “Making It Big On Little Deals”. This deal I just did is the perfect example. If you do just two lease options per month you’ll make $7,000. Also, remember $3,500 is the least you will take in option money and if you find someone with $5,000 or $10,000 even better.

The Best Type of Motivated Seller To Target

By the way, since I’m feeling scatterbrained today I almost forget to tell you how I ended up getting the deal. The deal came from a tired landlord who was sick of having vacancies (If you don’t market to tired landlords you’re nuts). Also, of course I put no money down on this deal. When doing lease options never, ever put money down on a property. If you ever have to put money down you want to do a subject-to deal (This means you want to own the house–be on the deed).

This is a dream lease option/sub-2 market so get out there, close deals and find creative ways to add more money to your bank account.

Tags: business, landlord, lease, Leasehold estate, real estate, Real Estate Investing, renting

I feel like I just stepped out of a time machine after travelling back to 2003. That was when I first moved to Las Vegas from New York. The real estate market hadn’t reached the bubble phase yet but the market was strong. Entry level new homes were selling for about $90 per square foot with premium homes in the $100-125 range. Resale homes were going for about the same price depending on age and location. The buyer’s choice was to purchase a resale home that was ready now or buy a new home that could be tailored to their individual taste but required a wait of six months or more before it would be completed.

I was one of those who opted for the new home. I purchased it in February of 2003 and it was completed in September of that year. In the time it took for the builder to complete the home, the prices of the same model had increased by about $30,000, or about 8%. That number pleased me because it indicated that the market was appreciating nicely. It turned out that I had bought my home just before the boom took hold.

The Heady Days

From that point on the market seemed to go straight up with no end in sight. Within two years the price of my home had gone up by about 125% based on model match comparable sales. Builders had jacked up the price of new homes to $200-250 per square foot. I was certain that this growth was not sustainable and actually looked to other areas for my real estate investing.

We all know what happened next. People were caught up in the frenzy and used newfangled mortgage loans to buy houses that they couldn’t afford with little or no money down. The bubble burst and Las Vegas became one of the nation’s leaders in foreclosure activity.

What Goes Up Must Come Down

Eventually the market stopped dead in its tracks and the law of supply and demand took hold. Banks were faced with an ever-growing inventory of foreclosed homes, or REOs, and were forced to slash prices in order to sell them. Builders initially held the line on prices but were forced to lower them to avoid holding costs associated with completed homes in their inventory. The local cost to build a basic home is about $100 per square foot and that was thought to be the absolute floor on prices for a new home.

The banks, however, are not concerned with profit. They are already facing huge losses and are just looking to get rid of these REOs. The average price of an REO is about $84 per square foot and that put the builders at a severe disadvantage. At those prices they are not able to compete, are they?

Builders Fight Back

Builders are not starting any new projects but have quite a few developments in progress. Some builders have pulled out of this market or shut projects down until conditions change in a way which would allow them to compete. Other builders have projects that are too far along to stop or close enough to being sold out that it makes little sense to stop now. What they have done is slash prices in order to compete (article). This is a calculated move on the part of the builders. They have done the math and come to the conclusion that taking a loss on these homes is preferable to the costs associated with keeping these projects open indefinitely.

The buyer is the main beneficiary of this situation. Your choice now is to buy a foreclosure for an average of $84 per square foot and deal with the associated problems. You’ll have repairs to deal with, possible evictions, dead lawns and a host of other problems. Or you can buy a brand new home without those problems at prices as low as $80 per square foot. Builders are offering a host of other incentives as well such as free upgrades, help with closing costs and other perks. Those who are considering a new home purchase should use a buyer’s agent prior to visiting these builders so that you take full advantage of the situation. For the buyer happy days are here again.

If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand. - Milton Friedman (Economist)

Tags: foreclosure, Las Vegas Nevada, real estate

 It seems that for the last two years I have heard one phrase uttered repeatedly. At real estate club meetings, by the spin-doctors of the Government or the spokespersons for various real estate groups it seems to be a constant refrain: “we are at the bottom of the market.” It has certainly been a long way down. How does anyone really now where the bottom is?

The reality is that a bottom can only be identified after it has been passed and a recovery has begun. Those prognosticators who seem to predict a bottom with every sentence they utter have a vested interest in the end of the real estate slide. The typical real estate agent is the biggest offender, who has a greater need to find the bottom than someone whose very existence depends on it? A real estate agent only gets paid if a transaction occurs, how many houses could be sold by someone stating that real estate prices have a long way to fall?

Data Manipulation

There is so much data available today that it is easy to cherry-pick the numbers that prove whatever point you wish to make. Want to prove the market is going to keep falling? There are statistics to support that theory. Need to show that the market has stabilized? We’ve got that number. Do you need to make a case that the market is on the way up and about to explode? Got that covered too.

The next time you hear an agent, pundit or some other talking head telling you that something is a certain way, look for their bias. What is their angle? Why do they believe, or need you to believe, that things are a certain way? Sometimes, as in the case of a salesperson, the answer is obvious. Other times it may not be as clear. Do not take anything at face value, instead try to see through the spin cycle (article).

Do A Self-Test

There is a saying in poker that states that if you’ve been sitting at the table for more than ten minutes and you haven’t been able to spot the mark or sucker, then you are the mark. Another way of saying that is the easiest person in the world for you to fool is yourself. People have a way of interpreting the facts to suit their own point of view. Be careful about falling into that trap.

I remember taking a Debate class in school. The professor would have students state their beliefs on a topic and then give them the assignment of defending the opposite view in a debate. This was a great learning experience for me because it made me look at the things that I believed differently. It is a great tool to use when making investment decisions. Take whatever it is you believe and make a case for the opposite view. So the next time you convince yourself that we are at the market bottom (or top) make a case for why it isn’t so.

Like dreams, statistics are a form of wish fulfillment. - Jean Baudrillard (sociologist)

Tags: Jean Baudrillard, manipulation of statistics, real estate, reale estate market bottom

We are constantly hearing about homeowners who are upside-down on their homes. The only hope that they seem to have is doing a short-sale, or getting the bank to agree to take less than the amount owed. Frequently no buyer can be found and the home winds up in foreclosure. That is especially true here in Las Vegas where we have been at or near the top of the foreclosure statistics for a long time.

With so many homes having negative equity it would seem to be enormously difficult for a real estate investor to have success here. At real estate club meetings I constantly hear investors talking about the difficulty of just finding a deal, let alone closing one. The strategy for most is to let the properties become bank-owned and them try to buy them. That’s the strategy for most, but not all.

A Different Approach

Brian is a Las Vegas real estate investor that I have come to know over the last couple of years. While many complain about the inability to find deals or raise funds when they do, Brian is absolutely thriving. He doesn’t complain about funding because he uses very little of his own money. Instead of complaining about the lack of equity he creates it. Huh?

Brian has been specializing in pre-foreclosures since the Las Vegas market was hotter than a two-dollar pistol. He had a much harder time then than he does now. Back then homes typically had equity and were easy to sell. Today when a homeowner winds up on a Notice of Default (NOD) list he will be inundated with calls offering various forms of assistance. However most of the callers will wind up telling the homeowner that they can’t help him because there is no equity. But that’s the kind of homeowner that Brian loves.

That’s not to say that every upside-down homeowner can be helped because many cannot be. However many people are in that situation because they have a second or even third mortgage in addition to the first. That is Brian’s bread and butter.

Pulling A Rabbit Out of the Hat

The first step is to find a property where the first mortgage is low enough that there would be plenty of equity if not for the second and/or third mortgage. At this point you work to strike a deal with the homeowner to purchase the home subject-to the first mortgage. (For more on subject-to investing search Jason Hanson’s posts) The key here is to make that deal contingent upon being able to purchase the second and/or third note on favorable terms. At this point the homeowner has generally resigned himself to the fact that he is going to lose the home and is willing to take any deal.

Once he has the home locked up, Brian contacts the junior lien holders (2^nd and/or 3^rd mortgage) and offers to buy the notes. The junior lien holders are aware of the fact that the home is in foreclosure and they know that when the sale takes place they will lose everything. When Brian calls to offer pennies on the dollar they are frequently willing to take the deal. After all, something is better than nothing. Are all lenders willing to settle? Surprisingly no, many will let the foreclosure happen and wind up with nothing.

The end result is that equity has been created in a property that once had none. The house can now be sold at a profit or held as a rental.

The Cat’s Out of the Bag

You might think that Brian would be upset with be for sharing his secret. The truth is that Brian shares his techniques willingly. He has created a real estate club in Las Vegas that holds a monthly meeting at his office. The club charges no membership fees, has no dues nor do they sell anything or promote gurus. By sharing his method he has created an army of bird dogs who are out hunting for deals. Quite often some the novice investors will bring a potential deal to him and they work out a split arrangement. It’s a case where everybody wins.

So the next time that you find yourself complaining about how tough things are or how it’s impossible to do a deal, ask yourself a question instead. What could I do differently or what is it that nobody else is doing? Get creative!

Tags: buying real estate notes, Foreclosures, subject-to investing