All Forum Posts by: Michael Evans

According to the situation, the earnest money check is held, but not deposited  into escrow, until you complete your inspection and appraisal within XX number of days (usually 10-14).  If you accept the inspection and appraisal, then you earnest money check is deposited into escrow to officially open escrow.  Some buyers will immediately deposit your earnest money check, but then if the house doesn't appraise for the purchase price or doesn't pass inspection and you have a clause in your purchase agreement that allows you cancel the escrow and receive a refund of your earnest money, now the escrow company has to issue a refund.

Remember, the earnest money check is written out to the escrow company with the escrow account # on it.  It is not written to the seller.

Hope this helps.

God Bless You!

Send me details and I will provide free public analysis of the deal on this thread.

God Bless You!

Calculate how much net equity you have (if you sold it, how much would you net). Then calculate your annual net rental income. Take your annual net rental income and divide it by your equity to get your return on equity. If it is less than 10%, I would recommend that you sell the property and get another one that will give you an ROI of greater than 10%.

I hope that helps.  God Bless You!

Those that do, do, and those that don't sell webinar programs.  it's easy to get someone who is under water to enter into an agreement to sell their house, as they don't have anything of value to give in exchange so they don't expect much in return, if anything.  But try that with a person who has $100k in equity.

In CA, 90% of residential home sales are now equity sales.  You will have a hard time finding someone with equity to enter into an agreement to sell their house to you with little or no earnest money, unless they are ignorant (they don't know any better).

God Bless You!

If real estate investing was easy, everyone would do it (think 2006, 2007).  These get rich strategies are just making the gurus rich quickly.  Those that can do, those that can't sell a seminar.  There are two sure ways to make money as a real estate investor:

Buy low and sell high

Buy and hold

It's that simple.  Doing anything else isn't being a real estate investor, it's being a person in the real estate business, such as a real estate agent, or loan officer, or escrow company or property management company.  These people make money based on the value they bring to the real estate deal.

So ask yourself, what value (to the seller and the buyer) do you bring to real estate doing lease assignments?  If you have to think too hard, then the answer is "none".  Pick a different "strategy" and move on.

God Bless You!

First things first, get your money management right.  Traditional money management rules state not to put more than 5% of your total investable money into a single investment, and probably more like 1%-2% based on your risk tolerance.

Next, develop an investment model that suites your risk tolerance and expected ROI. You model should take into account odds of winning (%), maximum loss ($), expected return (% & $). So for example, if you bet $1 flipping a coin and if it lands on heads you win $1, but if it lands on tails you lose $1, then your winning % = 50%, maximum loss is $1 and expected return is $1. Your win/loss ratio is (50% x $1) / (50% X $1) = 1.

If your numbers were different like winning % = 90%, maximum loss = $3,500 and expected return was $1,700, then your win/loss ratio is (90% x $1,700) / (10% X 3,500) = 4.37.  You want your win/loss ratio to be greater than 1.0.  The greater it is than 1.0, the better the model.

You determine your winning % by either actual experience (which can be expensive) or by back testing (putting historical data into your model and seeing the results).

As long as you employ investment models that produce win/loss ratios greater than 1.0 and don't put more than 5% into any single deal, you will always make money.

God Bless You!

I want to thank everyone for their comments. The intent of putting the investment model out was to receive some constructive criticism from real estate investors, which I did. I know the lending landscape has changed since I used this model n 2005 (and even since I purchased my father's house for him in Dec. 2009 via a Power of Attorney), and I wanted to get some idea from those of you are actively buying and selling houses. I will be buying a house via an FHA loan here within the next couple of weeks (still trying to decide where) so I can go through the experience myself. I have a couple of other deals under management, including an $875K rehab in Sierra Madre, CA to flip for $1.3M (5 bed, 4 bath, 3,324 sf.) as well as my father's house in Palmdale, CA, so the next few weeks will be fun.

I'll keep you posted on how this model works.

God Bless You!

@ J Scott: My wife and I are actually in the process of determining if we want to do the pre-construction flip or the pre-construction lease-purchase (another investment model I've developed, but I'll save that for another discussion) using our own money. I'll also be leveraging money I put into a self-directed IRA come October, and my wife has a house she owns free and clear that she is not using to its full potential.

Like I mentioned, I'm getting back into the real estate game, and I'm going big this time.  In 2005 I was going big when I took my eye off the ball.  I had completed 3 deals, had 9 under contract with initial purchase prices of $1.8M using less than $20K to control them.  In 3 months they had appreciated by over $250K.  I was also in the process of buying a $1.5M penthouse at the Mirage in Las Vegas ( secured a contract to purchase in the 2nd tower of their  3-tower condo development).  Unfortunately I was going through a divorce (married right of college to my college sweetheart) after being married 9 years, and I lost myself.  I spent $200K cash in 9 months because I was "promised" a $1M fee for being the middle-man in trading historical currency, as well as a $15M line of credit to finance my other businesses (I also had a music development company and traded stock options online).  This promise was made by a woman who helped put me through college.

Long story short, I lost everything:

•   My 4,400 sf. house in one of the most prestigious gated communities in Palmdale, CA.
• My 5 series BMW
• $200K in cash (I spent money like I had the $1M fee in hand)
• Owed Las Vegas casinos $12K in borrowed money (I was a semi-professional Black Jack gambler.  I would be in Las Vegas 2-3 days per week and gamble with a daily bankroll of $10K.  I've been comp'ed every type of suite at the Hard Rock Casino except for the one with bowling lane).

I got down to my last $100 and was about to be homeless.  Looking back, God took everything away from me to make me realize what's important:  His Unconditional Love.  When all was said and done, the only people around to help me were my father (I'm a preacher's kid and I lived the story of the prodigal son) and my girlfriend (now my wife).  I started back on the road to financial and spiritual recovery in 2006 and God has blessed me to be in the position I am in now, both financially and spiritually.  I am quitting my $100K+ cushy government job as of the end of September.  I am doing real estate investing and services, government and small business consulting services, and personal finance educational services.

I was told in 1999 by Ken Hiyashi (former Japanese billionaire who went bankrupt in the late 1980's when the Japanese were buying up American commercial real estate):

"One you have made money and lost it, it's easy to make it again.  The question is what are you going to do with it the next time you make it."

I wish I had listened to him, but in 1999 I wasn't in the right mindset (was just starting an Internet marketing company at the end of 1999 right before the Dotcom crash happened in 2000).  So now here I am, 42 years old, and now in the right mindset to make money and to know what to do with it.  Money and material things don't run my life and they don't dictate my behavior.  I have a very close personal relationship with God, and my unwavering belief in God's Unconditional Love governs my thoughts, my behavior, my actions and my words.  There is nothing on this earth than cause physical, emotional, financial or psychological pain and suffering to my Spirit.  And the only things that can cause pain and suffering to my soul is that which I give authority to.  Through my belief in God's Unconditional Love I embrace my Spiritual Authority, which I exercise through my actions and words.  God gives us all Spiritual Gifts, and when you are led by the Holy Spirit to use your Spiritual Gifts to provide solutions to other people's challenges, you and the person for whom you are providing the solution are rewarded (especially spiritually).

I give this testimony hoping that I can be a positive influence in another person's life and plant a seed that will bring them closer in their personal relationship with God, because in the end, that's all that matters.

God Bless You!

It is interesting the feedback I am getting.  Let me make some clarifications.

• @ J Scott , @Will Barnard and @Jay Hinrichs : I am not soliciting any investors.  I am simply pointing out one of several investment models I have developed to get constructive criticism from fellow real estate investors.  I would not expect (nor ask) a real estate investor to participate in this type of investment model.  This is geared toward a person who has $5K - $20K to invest, is looking for a passive investment where they can earn 25% cash-on-cash return on their money over the next 4-6 months.
• @Kathia L. and @Will Barnard: This type of investment would require a $5.4K investment for a return of $1.7K (32% ROI) with a risk of losing $3.5K (and the literal odds of losing the interest money is extremely low because of the types of homebuilders we are dealing with). With any investment, you gauge the risk/reward ratio, and each person's risk tolerance is different. Remember, the investor does nothing by complete a loan application, deposit money into escrow, and sign a special power of attorney for the deal. My company does everything else.
• @ J Scott: Let me clarify my experience.  The last time I did this specific investment model was in 2005.  I completed 3 transactions like this.  I have not been a real estate investor since then.  I have completed a purchase of property using power of attorney for a family member in Dec. 2009.  I also have 15 years of government operations management experience managing multi-million dollar budgets, including real estate transaction, and currently am the Chief Financial Officer for Santa Barbara County's Alcohol, Drug and Mental Health Department, where I am responsible for managing a $106 million annual budget for FY 14-15.  I am responsible for securing and establishing two new crisis system facilities in south Santa Barbra County using $1.95 million of State grant funds, as well as relocating the County's Lompoc Children's clinic ($300K project).  So I am involved in real estate transaction as part of my "day job" and have experience closing real estate deals (large and small).  I manage very risk well (over estimate expenses, under estimate revenues, and have multiple exit strategies) in order to maximize the return on any investment.  I also understand the power (and danger) of leverage.
• @ J Scott: I make money managing investments.  Most investors pay someone else to manage their investments who doesn't have any "skin in the game" related to their investment (real estate agent, stock broker, financial planner, property manager, etc.).  There are some investor (like most real estate investors on BP) who choose to manage their own investments, which is fine.  That's why BP isn't the site where I would market my company's services.  But it is where I have chosen to get some constructive criticism of this specific investment model.
• @David T: I'm definitely not throwing a hissy.  I am respectively and professional agreeing to disagree with some of the opinions expressed in this discussion.  I'm not putting anyone down for being ignorant:  we all are ignorant about something.  We don't know what we don't know.  I just don't speak negatively about an idea or concept when I don't know or fully understand it.  It's one thing to say you wouldn't participate in a certain type of investment versus calling the investment model horrible.
• @Jay Hinrichs :KB Homes does 100% of their home building based on presales. This is now their business model.  In the Antelope Valley, they won't pull permits until they have a singed purchase agreement and an earnest money deposit of $3,500.  The are doing 100% build to order.

I really appreciate the feedback from this group.  Like I state at the beginning, this specific investment model is not targeted towards traditional real estate investors, but I wanted to see what traditional real estate investors would say about this investment model.  The main thing I take away form it is that I don't have to worry about traditional real estate investors copying it, so I think I've found a good niche.

God Bless You!

Thanks for the feedback.  I don't agree with you, but we each have our own opinion.  And from the investor's viewpoint, there isn't nay work that they put it.  The put up the money, complete the loan application and sign a Special Power of Attorney that allows me to complete the transaction on their behalf.

It's good to hear what people who haven't encountered this type of transaction have to say about it.  It tells me where I need to work on better educating people.

God Bless You!