One of the biggest things I am learning right now is to change my mindset from being “just a” real estate investor (who does a deal at a time) to being a Full-time Real Estate Investing Business and Company.

What does this mean?

Well, for so many of us, we seem to be in the mindset of ”I’m a real estate investor” without keeping our focus on our entire business as a whole.  Better put;  we get our leads piddling in (because we do not have a serious marketing campaign working full time-all the time), we get a lead or two (but we act like they are deals) - we work and focus only on these “deals”, then when they either come through - or probably more like it, fall through, we go back to kicking up our marketing, get a couple of leads… and the cycle begins again.  Can anyone say feast or famine? Or more like famine, since deals need to close in order to receive money.  And even then  - we might be waiting months before we receive any money.

Now don’t go jumping off a bridge with no hope.  I don’t mean to sound like a big buzz kill.  Really I don’t!  What I am getting at it that there is a better way!   And it begins with a mind-shift.  We need to stop thinking of ourselves as “A” real estate investor and rather think like a Business.   Do you have a full blown marketing campaign?  Do you have an Aquistions team - that is, many sources feeding you leads?  Do you have private money lined up?  Are you getting paid on every deal at least 3-4 different ways?  Do we know our exit on each deal and are prepared for it?  All of these things need to be in motion and working everyday.  Just like any business!  Maybe we should think like a store front business!  Would a clothing store, a bagel shop or an accounting firm just be sitting around hoping that a customer walks in the door, and only then decide to put their merchandise out, or price it, or wait till it sells out before they order more, or not do any advertising, or make plans now for their future inventory or sales?   Heck no!  At least not the successful ones!   Hhhmm… could this be why many small businesses go out of business…because they are not run like a business? (Say that ten times fast!)

Some of the few things that are the most important aspects of running my Distressed Property Investing Business every day are:

1. Marketing, Marketing, Marketing and then More Marketing. This is one of the most important aspects of being a successful real estate investor.   There are many ways to get our information out to the public.  Buying Lists, sending direct marketing pieces to farm areas, ads in local papers, bandit signs, telling every single person you know and meet on the street that your an investor, handing out biz cards, ads on bus benches, and on and on.   Most important - get your marketing out everyday in some form or another. 

2.  AQUISTIONS TEAM.   Simply put, have many people working to bring leads into you.  Bird dogs, wholesalers, real estate agents, mortgage brokers (are there any left?).  These folks can be trained to learn what your criteria is for the homes you like to buy.  They bring you good solid deals - they get paid, you buy - everyone happy!

3.  Getting paid on every deal 3-4 times.  Huh?  Now this sounds delicious doesn’t it?  What this means is that we real estate investors need to structure every deal so that we can paid at least 2,3,4 times per deal.  This resolves the age old problem of feast or famine!  Why are you waiting for deals to close before you get paid?  Some of the best things I have learned in the last several months is that I need to wholesale every deal (even if I wholesale it to myself) and I need to get paid for construction mangement .  This already has paid us twice before we have even cashed out of the house!  Yippie!

4.  Have a business plan. This simply means - what is your investing strategy?  Do you know what it is?  Decide what it is and stick to it and become the best at it.  Stop jumping from strategy to strategy every time a new guru blows into town!  What’s my strategy?   I’m in the Distressed Property Investing Business.  I wholesale, retail and hold SFR.   My sources right now are wholesales, foreclosures, REO’s and taking house over subject to’s.

5.  Raise Private Money - This is a whole workshop in itself.  However raising private money continually is one of the most important things we need to do as investors.  Without it, I can forget about being any kind of investor.   I have a Private Money marketing campaign going on, however we can also just tell everyone we know that we are in the Distressed Property Investing Business and are always looking for money to do our deals!

6.  Everyday do it over and over again…

Photo Credit: ajagendorf25

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Tags: business structure, marketing, real estate, real estate business, real estate investing, real estate investor

Today is my 28th birthday, so Happy Birthday Jason. I’m in a good mood for several reasons. Most importantly, I’m alive and in good health. Also, I get to spend my time these days how I want, where I want, when I want and with whom I want. Lastly, right now is a golden opportunity for me (and you) to make so much money during this financial meltdown (I know that when things turn around I’m going to regret not buying more).

Success is so easy to predict. When I talk to my successful real estate friends they’re thrilled at the money they’re making now and all of the houses they’re scooping up at huge discounts. When I talk to my friends with J-O-B’s they’re whining and complaining that the world is ending (it’s scary how mentally fragile some people are and how the media can sway them). Anyways, not only am I picking up houses now, I’m also getting ready to dump a lot of money into the stock market. If it goes down a little more, what do I care? I’m not touching the money for another 20 years, so I’m fine.

Alright, now to tell you how I can predict your success.

Drum roll please…I can tell how successful you’re going to become by spending a week with you. And, after that week, it would be obvious you’re going to be a success because I would say “look at everything she does, of course she is going to become (or already is) a kick butt real estate investor.” Or, I would say, “no wonder he still hasn’t done a deal yet, he didn’t do a darn thing all week.” It’s that easy. Do you drive for dollars weekly? Do you make sure your letters and postcards get mailed? Do you make dozens of offers on properties? Do you spend time networking on BiggerPockets and at your local REIA’s? Or, do you sit on your butt all week watching five hours of TV every night complaining about your job and the economy?

I think it was real estate tycoon Sam Zell who purchased millions of square feet of office space in Texas during the crash of ’87 (or some time in the 80’s). He knew it would come back up, just like it always does. And, that’s why I’m not only picking up houses but also putting money in the stock market because it’s always your choice whether the glass is half full or half empty.

So, in today’s market prepare to buy and hold for a while. Trying to flip (wholesale) is not smart in this market and many wholesalers are getting killed which is why you need to be a well rounded investor. One last thing…pretend that I’m spending all next week with you. What would you do differently? I sure hope you wouldn’t watch TV and waste my time while I was there (alright, now I’m off to reflect on my 28 years, and what I need to do to become a better person and real estate investor). Oh, by the way, next week I’m going to tell you my favorite website for mailing postcards, the size of the postcards to use, the color to use and the headline of the postcard for getting awesome responses in today’s market!

Photo Credit: soylentgreen23

Tags: real estate, real estate investing, real estate investor, rehab, success, wholesale

So I see one of my friends that I haven’t seen in a while when I was in Florida, and she tells me I look disgustingly skinny (basically, she calls me a hideous freak). Well, I tell her that I’m training for a marathon, so I’m sure that has something to do with it. And here’s the other reason: I HATE cooking. I have the worst eating habits. If it’s not in the frozen food section, can’t be cooked in a microwave, or made by my personal chef (Mr. Boyardee), then I don’t eat it. Anyways. About two months ago I’m at Giant staring at the TV dinners and Healthy Choice TV dinners are 50% off (yes, you know where this is going). I pretty much bought out the store and now have a lifetime supply of Healthy Choice meals. The problem is, that these meals have about .003 calories. So over the next few months I will probably wither away and die (how come they couldn’t have Hungry Man dinners on sale….gosh!)

Before I start to look like Nicole Richie back in the day, let me go over the paperwork needed when you have found a tenant/buyer. Here are the 9 necessary docs.

1. Property Condition Move-In Form - Walk through the property with the tenants and note any problems, blemishes, etc….
2. Renter’s Insurance Form - The tenants have 7 days to fax back the form with proof of renters insurance (I also staple the card to the form of the agent I work with).
3. New Tenant Information Form - A welcome letter for your new tenants. This letter should list the names and phone numbers of all utility companies, the day the trash is collected and anything else they need to know about the property.
4. Property Maintenance Agreement - This form states that the tenants are responsible for the first $300.00 in repairs and they must also get a home warranty. (I have my tenants use American Home Shield).
5. Option Agreement - States that the tenants have a one year option to buy the house at x amount of dollars. And that if they violate the terms of the rental agreement or any other agreements, the option becomes null and void. (This does NOT get recorded at the courthouse. You only record the option agreement between you and the seller).
6. Payment Policy - This form only has a few sentences in huge font that state: Your company has a zero tolerance policy for non-payment of rent, that evictions start on the 5th and there are no exceptions. (and that you can murder them for non-payment of rent…..I wish).
7. Property Disclaimer Form - This is the same form you signed with the seller. Each state has their own disclaimer/disclosures about the property.
8. Lease Option Disclosure - This form says that the tenants understand they have an option to purchase this property. And that you might not be the owner of the property and may only have an interest in the property (this is important….in a sandwich lease option you only control the property and you need to disclose this).
9. Rental Agreement - This should be iron clad and cover everything. My current lease is 7 pages. Make sure you have your lawyer review it. (Maybe in another post I’ll go over the key paragraphs of my lease).

Well, this week I’m headed to Florida again. I’m driving down, because I’m going to leave a car there….so I’m looking forward to a good ole’ 12 hour road trip. And in my car will be all of my real estate and marketing CD’s so it can be a productive 12 hours. By the way, right now in my microwave is my Healthy Choice mash potatoes (I think that’s how you spell potatoes, but I’d better ask Dan Quayle) and broccoli meal…..de-lic-ious! Til next week.

Tags: buyer, lease option, real estate investor, real-estate-deals, tenant

One of the 6,127 reasons that I’m single is because I can’t stand high maintenance women (this one’s voluntary, so two out of 6,127 ain’t bad…I’ll get to the second voluntary reason in a minute). Anyways, right now I’m working on a pretty house wholesale deal (wholesaling a house subject-to) and the seller is crazy high maintenance. This guy calls me multiple times a day… “Hi Jason, this is Mr. Seller, its 5:00, just wondering if you’ve found a buyer…Hi Jason it’s 5:05, just wondering, Hi, Jason it’s 5:07…” This guy is also a talker which is why I have my assistant return the calls and handle almost everything. If you don’t have an assistant I would get one ASAP. I got my first assistant before I could even afford one and it was well worth it. And when I say assistant, I mean virtual assistant. My latest assistant lives in Wisconsin and has been with me for almost two years. I have her make all my calls and she handles almost everything for me. Remember, us investors need to focus on high dollar activities, not making phone calls. (By the way, I found a buyer for this wholesale sub-2, and at closing I will be getting a nice $9,997 pay day).

Okay, the second reason I’m single is because I’m cheap. I just got back from a week in Florida. As I was packing for my trip, I stuffed all of my clothes in my old suitcase and I destroyed the zipper trying to get everything to fit (but I did get it closed). Then when I tried to unpack, I couldn’t get the zipper open. Being that I’m such a patient guy, I ended up “teaching the bag a lesson”, which means it ended up in a dumpster after I tore the zipper off and it was totally unusable. So, I needed a new piece of luggage and asked my friend to show me the closest Goodwill store. I ended up getting a beauty of a suitcase for $2.13. It’s a Samsonite hard shell. I’ve always wanted one of those hard shell pieces and $2.13 is right up my alley. I love Goodwill and the Salvation Army stores.

Alright folks, if you’ve been reading my posts you know that I’m going through a lease option deal from A-Z. Last week was the paperwork needed between you and the seller and this week I am going over the checklist you need to follow after you have the paperwork signed. Here it is:

1. Make copies of all of the paperwork and either mail it to the seller or scan and email a copy to the seller.
2. Make copies of all keys (so you have a key and so you can also put a key in the lock box on the house).
3. Fax or mail the lender notification to the mortgage company so they send all of the coupons and mortgage info to your address.
4. Run a credit check on the seller. Since lease options are more risky, you need to make sure the seller is not in a dangerous financial situation (if they are, do a subject-to).
5. Fax the authorization to release form to the mortgage company and check the mortgage balance and the monthly payment amounts.
6. Send a thank you gift and card to the seller. (I usually send a gift certificate to a restaurant).
7. Go to the courthouse and record the option agreement. This should cost between $20.00-$50.00.
8. Start marketing the property to find a tenant buyer. Place a sign in the front yard, run classified ads in the local paper and post ads on Craigslist.
9. Set up your Excel spreadsheets, Word documents and folders for this property.

There you have it, my million dollar checklist. Next week, I will go over the paperwork for a tenant/buyer. I certainly hope that you are writing down all this information on lease options, because you are getting no B.S. info that took me thousands of dollars to perfect. Have a great week and remember to do at least one marketing activity every single day!

Tags: creative real estate, crei, lease, lease option, real estate investing, real estate investor

Is it worth $300-$500 to have a professional home inspection prior to making a purchase? This is a question that I ask myself frequently. For most people the answer is absolutely! The average homebuyer does not have the experience or the knowledge to effectively evaluate a home prior to purchase. Experienced real estate investors, and especially rehabbers, probably have enough of a background to make a decent evaluation. However, that doesn’t mean that they shouldn’t have an inspection done.

That First Rehab

My first rehab project was a bank REO that I purchased in New York about 15 years ago. The price seemed right, but it was an as-is purchase. I had some construction experience but I was not an experienced rehabber. The house was in a great area but needed to be completely redone, I naively assumed that it would be a piece of cake. (see article: That First Rehab )

Since the house needed everything I thought that an inspection wouldn’t be necessary. If I had done one I would have learned about many problems that I had missed. I didn’t see the termite damage to many parts of the house; I missed the carpenter ants that had devoured a large part of the roof deck. I also didn’t find the pipes that had frozen and burst and I certainly would have liked to know that the furnace needed to be replaced. Had I spent the $300 for an inspection I would have known about the unexpected repairs that cost almost $10,000.

I probably would have gone ahead with the purchase anyway, but I would have done so with a better understanding of the problems that I faced.

A Negotiating Tool

Today I have a much better idea of what to look for prior to making a purchase. And while a home inspector may not find anything that I can’t find myself, the inspection report can be used as a negotiating tool. If the inspection uncovers anything significant I can seek a price reduction or additional concessions from the seller. If you use a home inspection contingency (and you always should) in your purchase contract you will have the option of walking away without a penalty should something significant turn up.

One thing to remember is that a home inspection is only as good as the home inspector. If you are using a knowledgeable and experienced inspector it almost certainly pays to have it done. If the inspector is not thorough it is probably going to be a waste of money. Seek referrals from experienced investors when choosing an inspector and you should be able to find a good one. The bottom line is that a home inspection will either save you from making a huge mistake or give you peace of mind when making a purchase.

A man who carries a cat by the tail learns something he can learn in no other way.
-Mark Twain

Tags: certified inspector, home inspection, house inspector, inspector, real estate, real estate investing, real estate investor

The new housing rescue bill signed into law by the President last week includes some ugly tax changes especially for vacation home and investment property owners.

The new law changes capital gains treatment of these properties eliminating the some of the prior rules which savvy investors used to avoid these taxes.

Under the old rules one could use the $250,000 ($500,000 for married couples) exemption of tax on home sales if they use the property as their principal residence for 2 out of the last five years.

Here’s how a savvy investor would use the old law to execute a tax free sale of an investment property.

Let’s say I own my home in June of 1995 in Denver and I own 2 nice rentals in Denver as well. All three homes over the next 5 years gain $150,000 in value. As a smart investor I’m watching the market and I estimate the top for the market will be the summer of 2006 and I have decided to dump all properties by that date to retire. I want to do it without being required by a 1031 exchange to reinvest in real estate and , most importantly, I want to give the tax man nothing on the capital gains.

I sell my current primary residence in 2000 pocketing tax free the first $150,000. I move into one of the rentals making it my primary residence and live there for 2 years. I sell the second home and pocket the second $150,000 tax free as well. I then move into the 3rd home and repeat the process.

I started liquidating in 2000 and I’m done sometime between the end of 2004 and the beginning of 2006. This process allows me to bank $450,000 ($150,000 x 3) tax free, pay no capital gains tax, avoid a 1031 exchange, just by planning ahead. I can now retire and buy my retirement home for cash with money Uncle Sam normally would have put his grubby hands on.

If I was married filing a joint return and each house gained the maximum, $500,000, I would pocket $1,500,000 completely tax free!

Sounds beautiful, right?

Well that was then, this is now…

Sadly, this option in now gone due to the new housing rescue law. Under the new law, the capital gains on the second and third home in my scenario are taxed based on the number of days the house was not a qualified personal residence. The gain resulting from appreciation on the property after May 6, 1997 will be taxed as ordinary income.

Folks we just got one of the best tax avoidance tools in our arsenal pulled right out from under our feet.

There’s no other way to put it…this just sucks!

Tags: housing rescue bill, real estae, real estate investing, real estate investor

I’m on week three of my marathon training, but it might as well be week 123. I still think running is a terrible idea. Every time I see someone running now, I actually get angry and wonder why in the world are they doing it and I want to run them over (I guess it’s my inner O.J. coming out, however if someone does get run over, I will be the first one to search for the “real” killer.) Anyway, now that you know that deep down I have serial killer tendencies (and what entrepreneur doesn’t? We’re all crazy) let me give you some information that will fatten your bank account and make you filthy stinking rich…because I love the smell of capitalism in the morning!

When you are talking with a seller, whether it’s on the phone or in person, there is one single question which can make the difference between millionaire status and non-millionaire status (or as I like to say being a “player” or a “tire kicker”). Write these words down and send my royalty checks to 123 Main St… Alright, here is the question “Mr. Seller, what do you need?” Not, “Mr. Seller, how much are you asking for the house, or how much are you looking to get for the house or how much do you want for the house.” Everyone wants $50,000 in cash, but what do they need? Usually this question will quickly drop that $50,000 to a much lower number. So if it drops from $50,000 to $25,000, then ask why they need $25,000. They will usually tell me it’s for moving expenses or to rent an apartment, and together we realize they actually only need about $5,000 or so. The beauty of this question is that it helps sellers come back to reality and realize that they only need $5,000 to move to Florida to be with their grandkids or $5,000 to get an apartment in another state to be closer to their relatives.

When you are meeting with a seller in person, the best way to “show” the seller what they need is using the pen and pad approach. When the seller wants $50,000, take our your yellow legal pad and show them what they need…$1,500 for a moving truck, $2,000 for the first months rent and security deposit on a new apartment, $500 to pay off some utility bills, etc.

Make sure you remember to ask this every time you talk with a seller and when they tell you some ridiculous number, make sure you question them and ask why they need that much money. So, I thought I would end this week with a very important scientific discovery that was passed onto me by a friend: Scientists have discovered that there is one food that drastically reduces a woman’s sex drive…………………WEDDING CAKE!

Tags: Buying real estate, negotiation, real estate investing, real estate investor