Working with Real Estate Investors

OJ Simpson, the Real Estate Market and You

2007-09-15T15:41:00.000-07:00

What does OJ Simpson have to do with the real estate market?

Absolutely nothing, but I just wanted to get your attention.

In the current real estate market, it's all about getting the attention. Let me tell you a quick story. I had an investor friend of mine, who had purchased a home in Riverside, California around December of 2006.

His intention was to bring it up to code and then sell for a $40,000 net profit after costs. Due to unforeseen, circumstances, he took longer than his usual 2 month-turnaround and was not ready to put his investment up for sale until 4 months later.

As you all know, 2007 has not been kind to sellers of homes and in particular investors. His house just sat for months, without any offers.To an investor, an idle home can eat up your profit in a hurry. By the time he called me, he profit had been mostly eaten up by holding costs and he was on the verge of going into the negative. Over lunch he asked for my advice.

I looked a his numbers and suggested he do two things. The first thing I told him to do, was to contact several of the top agents in his area and offer them 4% commission if they brought a buyer to them. (His home was not listed in the MLS)

After I helped him get back on his chair, I explained to him that agents are motivated to show homes that will pay them more. I also advice him to list on the MLS even if he did not want to be represented by anyone. He has been in investing for 3 years now and rarely used an agent, unlike me.

In any event, I also told him to offer full owner financing with only 5% down. He could then season the note for 3-6 months and then sell the note at roughly 92% of the face value of the note.

So after I helped him unlodge the food stuck in his throat, I expalined to him that due to the current "credit crunch", the pool of buyers was somewhat limited. By offering owner financing, he could increase the pool.

The strategy was to offer good terms, but this time the sales price was to be on the upper side of what the market was supporting. Initially, he had offered his home for $425,000, but we then raised the price to $475,000. The terms of the note was to be 5% at 8% interest only. He also decided to carry a 2nd straight note @12%. No payments due until the end of the term of the 2nd note, which would be 5 years. He opted to give any agent 3.5% if they would bring him a buyer.

Here is how the deal went:

Sold home for $475,000 (Originally purchased for $337,000 plus $40,000 in renovations and holding costs)
Commission of $16,625
First TD of $400,000 sold institutional note buyer for $368,000.
Second TD of $51,250 sold to buyer of home three months later for $35,000
Total proceeds from sale $403,000Total costs of sale $393,625Total profit $9375

Granted he did not make the profit he had projected, he still managed to turn a loss into a profit and learned a good lesson.

Don't tell me you missed the lesson? Remember OJ Simpson? Remember I said in real estate it was all about getting your attention? Is it clear now? I hope so.

Happy selling.

How to Lower The Risk of Your Deal From Falling Apart

2007-06-09T07:42:00.000-07:00

The guys over at Lending Clarity have posted an informative five-part series on the what to do to minimize your deal from falling apart.

Part One

Part Two

Part Three

Part Four

Part Five

The Reality of Rehabbing

2007-06-07T20:30:00.000-07:00

Reality shows most often than not are not reality and that rings true for real estate reality shows like Flip This House from A&E.

By now you have probably heard about the trouble's A&E is having with one of it's flippers (or is it floppers?), Sam Mr. Leccima . It has been alleged that Mr. Leccima has not been as honest as he has been portrayed. According to Fox News Atlanta, Mr. Leccima and A&E have duped the public into thinking the homes that were featured were actually fixed and sold in less that 4 weeks. A&E has dropped Mr. Leccima from the show and now features one of his former team members, Angela Wilford. If memory serves me correctly Angela slapped some "sold signs" on some of the house, so she might not entirely be squeaky clean. Read more of this story here and here.

But enough of that. the purpose of this post is to show you a quick guide that your clients can read before they embark on a flip or as it used to be called a rehab. I'll use the acronym S.A.M.M.M.M. to show the different stages of reality flipping.

SEEK

The first thing your client or your self must do is find a property that is pretty much to the point of being uninhabitable. Why? Because your client needs to have enough room to make a decent profit. Your goal is to get your client to find a home that he can purchase for around 65% of the after rehab value or ARV. For the purposes of this quick guide let's assume you find a home whose ARV is $200,000. Please note that the ARV of the home can never be higher than the the highest comparable.

ACQUIRE

Based on what I said above, your client can acquire this home for around $130,000 right? Not quite. The offer needs to be around $110,000. You would think this is too small of an offer, but bear with me. The numbers will tell the story. Your client can acquire the property quickly by using sources such as a self-directed IRA or a hard money lender. If your client does use private financing or hard-money financing, be sure to add financing costs as part of the acquisition costs. Let's assume the acquisition costs are $5000.

For the purposes of this quick lesson, I won't go into much detail, but you can do the research yourself by going to websites like www.reiclub.com or www.creonline.com.

TOTAL ACQUISITION COSTS ARE $5,000

MEND

Before your client acquires the property he must have a good idea of what it would take to bring the property up to par. You need to advice him or her to use an experienced property inspector or contractor. Let's assume that he has received an estimate that the property will take $30,000 to fix. Add another $10,000 to this estimate, because trust me when I say to expect the unexpected.

TOTAL CONSTRUCTION COSTS ARE $40,000

MAINTAIN

In this stage you must take into consideration ALL holding costs. This includes taxes, interim mortgage payments, transaction costs, loan fees and whatever other holdings costs that may come up. Depending on the market plan on anywhere from 4 to 8 months of holding time. Let's assume this costs i $10,000

TOTAL HOLDING COSTS ARE $10,000

MARKET

You need to get paid don't you? And so does any other professional involved in the selling of this home. You client needs to move the property quickly, so I would offer up to 8% commission in this type of market to ensure you get as many agents as possible showing your home. You may also throw in the costs of a good staging company so that the home looks pristine. Assume you pay 7% in commission and $1000 to a staging company.

TOTAL MARKETING COSTS $15,000.

MOLLAH

This is where your client gets paid. Assume that he or she wants $20,000 out of this deal.

Now let's do the math.

$200,000-$20,000-$15,000-$10,000-$40,000-$5,000=$110,000.

The $110K is the maximum your client can offer. Heck, I would start even lower than that to give you a bit of room to negotiate.

Does this make sense? I hope so because this is reality and not a show like Flip This House. I am only giving you the basics here. There are things that I haven't covered here here like the tax ramifications in holding and selling a property less than a year, but I hope this post gives you a sense of what it really takes to "Flip a House"

Happy selling...

Fix This House? No. Fix This Show

2007-06-05T06:33:00.000-07:00

I'm sure by now you have heard about the recent troubles of Atlanta businessman Sam Leccima and A&E"s Flip This House. It seems that Mr. Leccima has been scamming the both the viewing public and allegedly A&E as well.

Some of the alleged hoaxes were that Mr. Leccima:

Did a poor job of fixing the properties
Did not sell the homes as advertised
Used his friends a stand-ins for potential buyers.

You can view the entire news story here at the Fox News-Atlanta website.

The truth is that this "reality show" does not show much reality at all. Tomorrow I'll spend a bit of time as to what the actual process of an actual rehab is. Is not a simple or as fast as some of these show make them out to be. It will be a quick lesson that you can pass on to your clients.

Beaten to the Punch-Again!!

2007-06-04T22:25:00.000-07:00

Those of you who read this blog, have heard me rant about how most real estate agents do not understand the differences of working with typical client and a real estate investor. I've tried to give advice here and there, but Chris Smith at Equity Scout has taken the words right out of my mouth.

In one post he pretty much summarized what I have been trying to do in three months.

Oh well...

I am not ashamed to give credit where credit is due.

Chris has done an excellent job in creating a table which shows the differences between a typical seller and a real estate investor. Go read his post and let me know if you don't agree.

Speculating Is Not Really Investing

2007-06-04T22:12:00.000-07:00

Chris Smith, at Equity Scout has written a wonderful piece comparing real estate investors to real estate speculators.

For those of you who have the experience, can you tell the difference when acquiring clients who are interested in investing? How about you newbies, can you tell who is headed for trouble and who will make money?

If you can't print out the table, Chris has created and keep it in front of you as sort of a cheat sheet.

Happy selling.....

It's Just Not the Sellers. It's the Real Estate Agents Too.

2007-06-03T12:39:00.000-07:00

May was a productive month for me. I took care of some lingering issues that had been going on with my multi-family property and I saw around 15 potential profitable deals go by the wayside.

Now don't feel sorry for me. In fact I am quite happy it happened this way because I am beginning to hone my skills in working with real estate agents. At first I thought the problem was the sellers. I thought they were expecting too much out of the current market.

But you know, some of the problems stemmed from real estate agents as well.

Here are few things I encountered:

Un-returned phone calls-Left messages stating nothing more than I was interested in the property, but had a few questions. Around 50% of agents never returned the call. Of the remaining, around 65% didn't return the phone call an average of 3 days later.
Did not want to work with investors-I had pre-approval letters and proof-of-fund letters too, but no dice. Some agents pretty much ignored me as soon as they found out I was buying real estate for profit.
Selling price was firm-Granted I did not know the selling situation of the seller, but one even mentioned that the seller had not even considered an offer that was 10K under asking price.

Here's A Niche That Is Helping Some Realtors Build Their Business

2007-05-06T10:14:00.000-07:00

Gay buying power has led to the creation of a substantial niche real estate market, which has helped turn Puna into something of a boom town.

Witeck-Combs Communications and Packaged Facts, a division of MarketResearch.com, projected the total buying power of the U.S. gay, lesbian, bisexual and transgender adult population at $660 billion in 2007. That number, which represents a 19 percent increase over 2006, has surpassed the buying power of the Asian and Native American communities and is on par with the African-American and Hispanic markets, the survey said.

"In today's competitive marketplace, it is no longer prudent for a leading corporation to ignore the buying power of the gay market," said Wesley Combs, president of Witeck-Combs "Marketers that do risk leaving market share on the table for others to capture."

Read more....

I Wonder If This Is The New Zillow?

2007-05-02T06:20:00.000-07:00

Berg Properties a Chicago, Illinois real estate company now offers interactive market trends graphs for homebuyers in the Chicago area. Like Zillow, I am sure there may be inherent errors in the system, but it's still a good tool for anyone who wants to better determine current real estate market conditions.

The trends that are tracked are:

average days on market
median price
median inventory
mediaan price per square foot.

The data is provided by a third-party service that scours the Internet for the data and updates once a week. Though it's not a replacement for the valuable services that agents provide, it's a good tool that your clients can use before they take the leap into real estate. Take a look at it here and tell me what you think.

Realty Times-NAR's Second Homes Report Shows Investors, Others Still Buying

2007-05-01T16:50:00.000-07:00

Editor's Note-While I'm pleasantly surprised to read the results of the NAR report, I still believe there will be a bumpy road ahead in real estate.

Not surprisingly, the National Association of Realtors' annual Investment and Vacation Home Buyers Survey showed that homes purchased for investment or perhaps speculation slowed in 2006, but eyebrows may bolt upwards upon hearing that second home purchases set a new record -- up from 2005, what many call the end of the so-called housing bubble.

Thirty Traffic Generation Tips

2007-05-01T16:24:00.000-07:00

Since blogs are big in the real estate world, I decided to post useful tips from the guys over at Daily Blog tips. Now, without further delay, the Thirty Traffic Generation Tips

Keep track of blogs and leave comments on them. A good way to keep the conversation going is to install a MyBlogLog widget and visit the blog of people visiting your site.
Nothing creates long-term traffic more than value. Consider writing posts with resources or explaining how things work. Useful things get linked to and they get onto del.icio.us, which is far better long-term than a digg front page.
Inform search engines and aggregators like Technorati (using the ping functionality) when your blog is updated, this should ensure maximum traffic coming from those sources.
Simplify. Pay attention to complex issues in your field of work. It may be a big long publication that is hard to wade through or a concept that is hard to grasp. Reference it and make a shorter “for dummies” version with your own lessons learned and relevant tips. When doing this, I have been surprised to find that the simplified post will appear before the more complex version in search results. Perhaps this is why it results in increased traffic; people looking for more help or clarification on the subject will land on your blog.

Loan Fraud, Lease-Options and a Lawsuit

2007-05-01T09:20:00.000-07:00

A three-month long investigation by television station KCRA 3 out of Sacramento, California has uncovered millions of dollars of fraud.

A retired Sacramento woman, along with seven others is accusing VFM Investing Group, Freedom Capital Mortgage and real estate agent Jennifer Huang into duping them into buying home, which they could in turn lease options.

The plaintiffs were to purchase homes and the defendants would then provide the "pre-screened and pre-qualified" tenants. The plaintiffs were told that the tenants would give them a deposit of up to $10,000 and in addition they could take advantage of a 20% appreciation of the home once the tenant would exercise the option.

The defendants allegedly failed to provide tenants and the plaintiffs eventually went onto foreclosure. I won't go into all the sordid details, but there was mortgage fraud involved. You can read the entire story here.

Assuming all the allegations are true, I still cannot put the blame entirely on the defendants. The real estate speculators are also responsible for their fate.

First and foremost they must have not paid attention to their market and assumed that a 10% appreciation per year was still happening. Second, they signed loan documents whose monthly payments would in the $3000 per month range. They must have been greedy in order to miss the fact that if their tenant/buyers could not qualify for a home purchase themselves, how in the world would they make a lease payment of $3000? They obviously did not do their homework.

What gets me is that they are putting lease-options in a bad light. Granted though lease-options are not always appropriate, they do work in the right situation. If the situation is appropriate, lease-options could mean the difference between you losing your listing or earning your commission.

Do You Email New Listings To Fellow Realtors?

2007-04-29T13:05:00.000-07:00

Editor's Note-Good marketing tip from Jim Mazziotti of Exit Realty in Bend, Oregon

Fellow Realtors....I need your help. You see, I am a Principal Broker and Owner of a real estate company in Bend, Oregon. I am constantly working for my clients to make sure that their listing with me receives the very best EXPOSURE possible. I use the traditional methods to "get the word out" on every one of my listings....and the one I value the most is the very one who is actually working hard to STOP ME from informing more than 1000 local Realtors directly by email that I have a new listing!

Let me set this up for you. I am a member of our local Board of Realtors and a part of the MLS. Our MLS, like yours, has a website ( http://www.centraloregonrealtors.com/) that provides services for each member Realtor (ours uses Rappatoni). So, when I list a property it appears on the MLS.... and for the Realtors each new listing shows up in a new listing section of the MLS site and on a hotsheets section as well.

Get the picture?

Read more...

Do You Work With Real Estate Investors or Real Estate Speculators?

2007-04-29T10:46:00.000-07:00

I was reading the Active Rain Real Estate Network, like I often do and happened to read the Marketing REO Properties... Why Bother?! post from an agent out of Wichita, Kansas. The author basically stated that she marketed REO properties the same way as a regular listing and had found success. It was generally a good post.

The comments though were another story.

Phyllis Mathouser out of Exterer, New Hampshire wrote:

I have my first REO listing and although I treat it just like my other listings, I find the attitude of other agents and buyers is different. They look "down" at it and one buyer actually hit the bank with an offer more than $100,000 under asking price. The listing price was where it should be for the location, condition etc. I am sure they wouldn't have done this to the "regular" seller.

and Rudy Baker out of Burlington, North Carolina replied:

It is perfectly proper to laugh at the other agent when they present offers like that. All I can say is welcome to our world. I don't get a lot of that....anymore. I flat out ask the other agent if they really think that that offer should be taken seriously and thank them for wasting my time. I have found out that cuts a whole lot of it. There really is a lack of education for and by buyers agents and the new buyers to foreclosures. Shows like flip this house and all really have hurt our industry and I think they will continue to feed the foreclosure rate... I have been seeing a rash of foreclosed homes that have come back on again as foreclosures....with remodel work started, obviously a flip gone wrong. People hear foreclosure and they assume steal. I have found the prices actually going up and the margin (read market value discount) going down. The bottom line is there are so many the lenders are not willing to take as much of a loss. Please let me know if I am wrong here.... This is a trend that I have seen in my market and I am interested to know if there are other regions affected as mine is. We are at 25% here (1 out of 4...scary)

So you have one agent saying that buyers "look down" on REO's and low offer the banks which she is sure they would not do to "regular" sellers. But the icing on the cake comes from Rudy Baker who says its "perfectly proper to laugh" at the other agent when the offer comes in too low. Way to build up your network there Rudy!

I'm sorry for sounding a bit angry, but in my nearly ten years of working as a real estate investor, I have not found many agents who truly understand how to work with real estate investors. A real estate investor needs to take many variables into consideration when making an offer.

How many months am I going to have to hold this property before I sell it?
What will my return on my investmentgoing to be?
How can I guard against any downturn in the market?
What will my selling costs be?
Will the buyer ask for any concessions?
What are my financing costs going to be?
Do I have to remodel the property and if so how much is that going to cost me?

This list grows depending on the investment criteria of the investor. Real estate agents must realize that an investor is taking a risk. There are countless of speculators who take the leap without looking and fail miserably.

People who invest in stocks and mutual funds get a myriad of prospectuses and disclosures to help them make a wise decision. What do real estate investors get?

Oh wait, I know. Real estate investors and their agents get laughed at and "thanked for wasting" the listing agent's time.

And by the way, Rudy Baker states in his Active Rain profile that he likes to "work with first time homebuyers, investors etc."

Sorry to break the news to you Rudy, but you like to work with speculators not investors. I'm sure one of your "investors" is in here somewhere.

Why Every Agent Should Be Like Mike

2007-04-27T16:51:00.000-07:00

The true measure of a great real estate agent comes not from how many sales he closes, but from how many he doesn't. Now before the you-know-what hits the proverbial fan let me explain.

I have been contemplating investing in my backyard for sometime now. The area is fairly new and there is an abundance of inventory. As a matter of fact there are plenty of homes that have been listed for more than 100 days. Though I have been investing since 1998, I have never invested in a down market and I figured this would be a great opportunity to get my feet wet.

After browsing through several MLS's, I found a great property that had been taken back by the lender. It needed minor cosmetic work and I ran the numbers and called my agent to discuss. Being an investor himself, he asked me what my goal was for this particular property.

So I told him.

(Insert Benny Hill theme music here)

My goal was to buy using a hard money loan. There would be no payments for the first 6 months, so if purchased correctly, all holding costs and selling costs would be absorbed by the loan. My offer was to be nearly 37% below asking price. I would then do the minor cosmetic work and put it back on the market at a bargain price.

I was already counting the money, when my plan was stopped in its tracks. My agent Mike, who has specialized in REO, since the 1980's, uttered two simple words,

"Be patient."

He shared with me information on the market forecast for my particular area, which is predicted to be hit hard. (Heck, I've already seen evidence of that right next door.) He adviced to hold off on flipping for now and concentrate on cash-flow whether it be from lease-options or buying under market.He had seen this type of market in Texas before and now was not the time to make quick decisions.

Great advice from a great agent.

This is the type of agent you should strive to become. Don't look for the quick commission. Become a trusted advisor and as your investor clients flourish, so will you.

(Insert Benny Hill theme music again and this time turn it up loud)

And by the way, I forgot to mention that Mike called the listing agent on the property anyway and was informed that the bank had turned down an offer that came in $10,000 under listing price. In this market, that's crazy.

Happy selling.

Take A Ride on The Real Estate Roller Coaster

2007-04-26T21:01:00.000-07:00

The guys over at Speculative Bubble have created a virtual roller coaster of the road we have taken in house prices. The prices are adjusted for inflation.

It's worth hanging on until the end to realize just how big a drop the market can take. This graph here is even more telling.

Good Work!

Marketing Tip-Do You Know What Your Prospect to Customer Ratio Is?

2007-04-26T20:06:00.000-07:00

How Many Prospects Does It Take To Generate One New Client?

Every real estate agent or any business for that matter has a conversion ratio. The conversion ratio refers to the percentage of prospects who become your customers.

If your marketing skills are astronomical you may have a 2:1 ratio. (In other words it takes two prospects to generate one new customer) Or you may have a 50:1 or even a 500:1 ratio.

It's hard to predict what your specific ratio will be, since the ratio depends on many variables such as:

The number of competitors
Your local housing market
Your experience
Your marketing budget

This list could be as long as you want it to be really.

Even though it's difficult to predict what your prospect to customer ratio should be, that doesn’t mean that you should be in the dark as to what your ratio is.

Why is this important?

Well once you know what your ratio is, you can pretty much predict how much business you are going to bring in. Once you are able to forecast your sales then only one question remains.

“Can you improve your prospect to customer ratio?”

If the answer is yes, then what are you waiting for?

Happy selling.

After Spending Big to Strike It Rich, Some Speculators Coming Up Broke as Market Cools

2007-04-25T18:35:00.000-07:00

Editor's Note: I wrote about Casey Serin a few weeks ago. His story is not uncommon among real estate speculators. Learn from it and steer your clients away from making the wrong decision.

Sacramento, Calif., not far from where prospectors sought quick riches in the gold rush more than a century ago, another speculative boom is going bust. This time, however, it's not the lure of precious metals — it's real estate.

"The market was hot, and I decided to give it a shot," said Casey Serin, a modern-day speculator who hoped to strike it rich quick by buying homes, fixing them up and then flipping them for a profit.

Read more...

Targeting 100 Plus Market-Part 2

2007-04-25T14:55:00.000-07:00

Editor's Note-I promised this article on Sunday, but things have been a bit hectic.

According to Zip Realty, there are over 668 homes for sale in my zip code. Out of those 688, Redfin says there are roughly 100 that have been listed for over 100 days. Things aren't moving as fast as they used to. My next door neighbor who has listed his home for over 100 days, has just dropped the price from $599,000 to $500,000. They want to move out of state and they are desperate to sell.

Things are getting bad around here.

Some of the bubble guys are claiming that all hell is going to break loose. They claim that home prices are going to drop nearly 40% in some areas. And they may be right. Making money in real estate when home prices are going up is easy. I did it for nearly ten years now. In those ten years, I think I learned a thing or two.

The real test starts now.

Targeting the REO's

The key here is positioning. My offers are going to be substantially lower that what the listing price may show. The reasons are many, but my offer will have to take into consideration, holding costs,selling costs, days-on-market, price-to-rent ratios, plus my profit. Granted some will get turned down, but the bank's loss can not become my loss as well.

Targeting the Lease Option Market

Among the "100 Club" listings there are some with low loan-to-value. I don't want to market to those with large loans, because I will be certain to fail if I do. Currently homes are leasing anywhere from $2000-$2400 per month. It would be asinine of me to think that I can option a home for $4000 a month and then turn around go a lease it for more than that.

The median income in my area is roughly $70,000 and $2000 is just about the range that the rental market will support. I also need to guard against a severe market reduction in home prices. If I option a property for $500,000 and then a year later when I choose to exercise the option, the home is only worth $450,000, then what have I accomplished?

Nothing.

Not only do I set up my buyer for failure, but I also ruin a potential great relationship with real estate agent.

Targeting the Realtors

Though my goal is to keep investing in this down market, my ultimate goal is to build a network of real estate agents who will feed me quality leads. About 95% of all real estate transactions go through real estate agents, so it makes sense to go where the big fish are. The biggest hurdle I have to overcome is to train them to think like I do. They will have to understand that most transactions will not meet my investment criteria. That will be the easy part. The hard part will be to find quality real estate agents who know how to position my offers and have strong negotiation skill. Unlike most sellers, I have no problem paying 6% to 7% commission, but the only way I could do that is to get a great deal on the buying end.

The Dow Jones Breaks All Records and It's Time For Real Estate Agents to Celebrate

2007-04-25T14:02:00.000-07:00

Today the Dow Jones industrial average rose past 13,000 for the first time in its history and now its time to celebrate.

Why?

Think about it. All the real estate speculators who migrated to real estate after the last bear market are now going to begin to speculate on stocks rather than real estate. The herd has just thinned itself out.

I know you may lose some clients, but you would have lost them anyway. If they were speculators rather than investors, then they are more than likely losing their shirts right about now.

Now you will have more time to cultivate a quality investor client list that will keep your income steady in this "down" market.

Happy selling.

Targeting the 100 Plus Market

2007-04-22T17:17:00.000-07:00

I've never invested in a down market. I was lucky enough to began my real estate ventures nearly 10 years ago. I was in my late 20's and I purchased a 2 bedroom with 2 full bathrooms in Long Beach California. The condo was a REO property and I picked it up for a measly $60,000. Long Beach was just starting to come out of the real estate crash of the early 90's and I was a naive young investor. That same condo would be listed for nearly $300,000 today.

Little did I know that within a year the market was going to explode. I took advantage of the appreciating marketplace and made a killing. Any mistakes that I made were covered by the market. Come to think of it, I never really lost any money.

Well that was then and this is now. A day doesn't seem to go by where there is an article written about the how bad things are getting in the real estate market. There are even blogs written about the struggles of real estate speculators and even the agents themselves. I'm not sure if the authors of these types of blogs are investors or agents, but they get a kick out the mistakes that these people have made.

I refuse to add fuel to their fire.

I know that in this type of market I cannot afford to speculate. I cannot afford to even consider that any home that I purchase will even appreciate. I have to purchase "correctly", so any potential down-shift in the market will be absorbed. There is even talk on some of these bubble blogs that the bottom will not be hit until 2009!

I can't afford to wait that long. I have been sitting in the sidelines being a landlord for almost two years and it's time to make a move. I have two goals this year. The first one is to double my real estate cashflow to $3000 per month. The second one is to pay off my home equity line of credit. (The line of credit is not a large amount, I just hate owing it.)

So what does that have to do with targeting the 100 plus market? Well alot and it's not targeting people over the age of 100 if that's what you think. Get real, how many of them are out there any way?

There are agents out there who have listings in my area that have been sitting on the market for over 100 days. There are 98 of them to be accurate. They are competing with 300 other homes who have in on the market less that 100 days and they are competing with the countless of new developments as well.

Don't you think that among those 98 there could be a potential deal perhaps?

Tune in tommorrow and I'll tell you my plan of attack.

The Housing Bubble Blog-We Have To Pay The Price For The Great Gains

2007-04-22T17:08:00.000-07:00

The Press Enterprise reports from California. “Inland home foreclosures this year have increased more than ninefold over the same period a year ago, driven by flat appreciation and sagging home sales. Ana Ibarra and her husband, Guillermo Macias, adore their five-bedroom house in a new tract of executive-style homes in north Fontana.”

“But Ibarra said the couple doesn’t have enough money to furnish the house. Ibarra said she and Macias, a 30-year-old commercial plumber, together earn about $5,400 a month after taxes. Since moving into their new house in December, they have spent $4,000 a month of that on the house’s interest-only mortgage, property taxes and homeowner insurance.”

“They have wiped out their savings. What’s more, they are responsible for a $2,000-a-month mortgage payment on another house they own in south Fontana. They rent that three-bedroom house.”

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Broker Agent News-The Sub-Prime Crisis and How it Affects You - Part One

2007-04-21T14:22:00.000-07:00

Have you seen the headlines? Top national news story a few week's ago:
New Century Financial Corp., the second largest sub-prime mortgage lender, is broke. They can't pay the creditors who are demanding money and rumor is that we'll be hearing about bankruptcy soon. Even the New York Stock Exchange has suspended trading for the company, once a giant among lenders.

It finally happened.

The sub-prime market was being pushed to its edge for months - by lenders with unethical predatory tactics - and now it's getting ready to collapse in on itself. These predatory tactics included ridiculous mortgage programs being offered to consumers who literally cannot afford them.

Read more...

Branding is for McDonald's Not For Agents

2007-04-21T07:51:00.000-07:00

Branding is for McDonald's Not For Agents

Most agents have a limited marketing budget and must maximize every marketing dollar to ensure that every dollar you spent will bring back more money in return.

The "What is Your Brand" article over at Realty Times seems to think differently. The author states that "we must spend our time and money developing and maintaining" your brand just like the masters Nike and McDonald's.

This is just plain wrong.

Nike and McDonald's have millions of dollars set aside for marketing and most real estate agents don't. While making people aware of your name is nice, you have to expect more from your marketing efforts. You want your phone to ring. You want to get e-mails from prospects. You want get listings.

Branding alone is not enough.

If you are skeptical about this point, just ask yourself how many real estate ads you can remember. What about the agent's name, do you remember that? I can't remember a single one. Sure I can remember the company names such as Century 21 and Coldwell Banker, but what good does that do you as an agent?

It is possible to build "awareness", but at a much smaller and much profitable scale. You simply have to focus your marketing on people that can actually help you grow your business. Your goal is not get every man, woman, and child in your farm area to know your name. Frankly you can't afford it. Instead focus on niches as I've stated before here, here, and here.

How do you do this? Ok here is a quick and dirty marketing plan.

Identify your prospects-These prospects must have a problem that you can solve. There must be enough of these people who can afford your service in order for you to be successful
Have an Offer-Must be specifically targeted at your prospects so they know it's for them and must be an offer "they can't refuse".
Call to action- Tell them what they need to do to contact you. Make it easy and give them more than one way to get a hold of you.
Have A Consistent Message-Whether you decide to hold a presentation, or direct mail or build a website. Each method of delivery or "vehicle" must clearly focus on your offer.

Don't Let Your Clients Fall Prey to the Gurus

2007-04-20T18:11:00.000-07:00

You just never know what you find on the Internet. And in the case of this article by Dominate Preforeclosures , the stuff you find is basically worthless.

For instance the author claims that he made over $50,000 dollars in five weeks by buying a home from a couple who was in financial trouble. After negotiating to buy the home for $145,000, the author was able to secure a loan from a private lender for $175,000. After rehabbing the property, he was able to sell it in two days for $230,000 without a real estate agent. According to the author, he received a check for $51,515.69 at closing.

Is a deal like this possible? Perhaps. Did it actually happen? Not likely.

Here are the clues I found which have convinced me this story is a false one. And agents take down notes so you know what to tell your clients who may fall for stories like the one above.

Clue # 1- The Math is All Wrong

Before he "flipped" the home, the author claims he obtained a loan from a private lender for $175,000 based on the home's "real market value". The private lender will more than likely have been a hard money lender, unless this guy has a rich uncle. So if the home was worth $230,000 after he rehabbed and he obtained a loan for $175,000, he is looking at a loan to value of 76%. I hate to break it to this guy, but most hard money lenders only lend up to 65% of the after rehab value. And to top it all of the points they charge can be anywhere from 7% to 12% of the loan.

Let's give him the benefit of the doubt that he does get a hard money loan at 76% LTV. That means he would have to pay up to $21,000 on points alone. Did I forget to add the 14% interest rate most hard money lenders charge? How about the six months in pre-paid taxes to the county? How about the mortgage payments? How about any transaction costs?
If this guy is leaving all those costs out, who know what else he is leaving out. Without knowing most of the details of this supposed transaction his "profit" is already slashed nearly in half.

Clue # 2- The Time line is Too Short

The author states that "he went to bat for the couple" and negotiated with the bank to release the lien on the house for less than what the couple owed. This is what's known as a short sale. This process typically takes weeks from beginning to end. So the author is expecting to believe that he was able to negotiate the short sale with the bank, rehab the house and then sell the house all in a matter of five weeks? A short sale is a difficult transaction for even experienced investors, not too mention for newbie investors. For all you agents that specialize in short sales, you know what I am talking about.

Clue # 3- Too Good To Be True

I visited the website of the author and found the the sales pitch was just to good to be true. There were no real pitfalls mentioned. He is pitching investing in pre-foreclosures by the use of short sales. As I mentioned above, short sales are not for the faint-of-heart and should really be left to seasoned professional. I also noticed that the author posts a copy of a check from a title company in Helena, Montana. I did a quick search on Realty Times and found that the market in Helena is still a seller's market, so ask yourself why the sellers gave up over $80,000 worth of equity if the market was on their side. In addition why would the bank discount so much as well if the market was on their side as well? It doesn't make sense.

Advice your clients to use common sense whenever they read anything on real estate investing. Sometimes it's easy to catch a B.S. artist, but sometimes it's not. Help guide them in their investing ventures which not only helps them, but also helps you build a steady income.

Happy selling.