1. Owner occupied home – you the investor pay the PITI, maintain the property and pay commissions when you exit. The only way to achieve a return is to buy at a discount, add value, pay down on the principal and realize appreciation. Your own home that you reside in is an expense, however you can use some real estate investing strategies to make the most of the situation. For instance, consider a multi unit where you live in one and rent out the others to potentially live for free or better. For most however, there is minimal to negative returns and very high risk.

2. Flips – Expert flippers can make large chunks upon successful flips. Flips are desirable to many as they are sexy, exciting and more appealing. Beginning investors run to flips often with reckless abandon. Flips are usually in nicer areas with high demand, hard to find, lots of rehab, no cash flow, usually one exit strategy and expose you to a lot of risk that is out of your control such as market values, financing and escrows falling out. These are high risk, high reward and take considerable effort to do over and over unless you are very skilled and well connected.

3. Rentals – Rentals are a more long term strategy that build monthly income and net worth. Compared to flips, there is less demand, more available rentals, less rehab required, more exit strategies and usually much less risk. Market values, financing, government regulations and other items out of your control do not have as much of an impact since you do have multiple exit strategies at your disposal. Overall, the returns can be just as high as flips, with considerably less risk. It is also a long term strategy that can be duplicated over and over. Some do not find it as exiting, but the best investments are often the most boring investments.

To summarize, many people think their home will be their greatest investment of their lifetime. I do not agree that it is an investment at all, rather an expense. Flips are very appealing and the best of the best can make strong returns, however the risks are very large. Rentals provide very strong returns and when done properly risk can be minimal. When you are considering investing as a beginner or experienced investor, consider this risk vs return analysis when creating your next set of goals, plan and strategy.

While speculation for appreciation in real estate is a commonly used approach, appreciation is an extra bonus in my investing strategies. However, I absolutely research markets and trends including values, predictions, demographics and everything under the sun. Many investors seek to get in at the bottom. Many wait for the market to go up and jump on the bandwagon to ride the wave. Unfortunately many do not time this right, buy at the height and ride the plummet down. Such is life with speculation.

A few things to consider. First of all, understand that the future cannot be predicted and market values are out of our control. Local factors as well as lending, government and economic factors all impact values. The first time home buyer 8K credit is a great example of a government factor that propped values up and when it expired many markets took a sudden dip. The point is to do your research but also recognize that markets and the future are out of our control.

So where do you go to find good market value forecasts and predictions?

Home Value Forecast from Pro Teck Services - Here is a great resource for market prediction and appreciation over the next 5 years. It takes into account many important factors such as Number of Active Listings, Average Listing Price, Number of Sales, Average Active Market Time, Average Sold Price, Number of Foreclosure Sales, Number of New Listings, etc. There are 14 helpful graphs for savvy investors to use in their decision making.

HousingPredictor.com by State - Along the left hand side you will see write ups for each state. As I write this in April of 2013, not all states have write ups for 2013 but many do and hopefully the states you the reader are interested in.

Other resources:
101 Stats about all US Cities - City-Data.com
http://www.city-data.com/

Unemployment - Dept of Labor -
http://www.bls.gov/web/metro/laummtrk.htm
http://www.bls.gov/lau/#tables

Vacancy & Population - Census -
http://www.census.gov/hhes/www/housing/hvs/rates/index.html

Below is a list of the Top 20 Rental Markets from Realty Trac.  I am not surprised at all to see Memphis, Atlanta, Kansas City, Detroit and Ohio up there.  I expected Cleveland, Columbus or Cincinnati to join them and Indianapolis as well.  MidWest and the South had very strong showings in the list.  CA being absent is not a surprise for top rental markets, Phoenix and Las Vegas I did not expect in the top 20.

For more information on rental properties and to view available properties in some of the best rental markets in the US, Click Here.

1. The Classic 30 year fixed mortgage loan: Yes, it was for a long time that most borrowers opted for a 30 year term mortgage loan and this clearly meant that the principal payments and the interest rates were set at a time when the borrower bought the house. When the borrower pays off the amount as agreed, he will require paying off the entire amount within 30 years. This is often considered as a safe and smart mortgage option for most people.

2. The 15 year term mortgage loan: A 15 year term mortgage loan is almost similar to that of a 30 year term mortgage loan but the only difference is that you have to repay the entire loan in half the time. Since you’re paying back the loan in less time, the monthly payments will be higher. If you’ve got a stable income, this is perhaps the best mortgage option for you as you can easily help yourself save money by repaying faster.

3. The adjustable rate mortgage loan: The adjustable rate mortgage loan allows you to take out a loan where the initial low rates will be locked for some period of time and this rate is initially too low. However, as soon as the introductory period comes to an end, you might be subject to higher interest rates in the long run. Adjustable rate mortgage plays a major role in the economic collapse in the year 2008. However, this doesn’t mean that the adjustable rate mortgage loans aren’t good enough for your financial state.

4. Interest only mortgage loans: Such mortgage loans allow you to pay the interest rate only on the total money that you borrowed to buy your home. Such loans are used during the construction phase of a new home as the money might be utilized to pay the builder. However, over the long term, this kind of loan doesn’t make much sense.

Therefore, when you’re in the market to take out a home mortgage loan for the first time, you should not fret. Consider the options mentioned above and choose the one that best suits your needs and affordability.

This post was provided by Gloria Agnello, contact Gloria directly at gloria.agnello@gmail.com.

CNN Money recently published an article highlighting just how undervalued real estate is in many areas of the US. While there are certainly deals to be found in almost every neighborhood across the country, those serious about real estate investing will find that these areas offer some of the best deals for the future. Each may have their own individual reasons for being undervalued right now, though you can be sure in the long run that they will definitely offer real estate investing professionals some handsome profits in the near future.

15 most undervalued US cities according to Local Market Monitor:

* Las Vegas, NV – 27%

* Akron, OH – 22%

* Cleveland, OH – 21%

* Warren, MI – 21%

* McAllen, TX - 20%

* Stockton, CA - 19%

* Gary, IN – 16%

* Bakersfield, CA – 16%

* Dayton, OH – 16%

* Omaha, NE - 16%

* Rochester, NY – 16%

* Memphis, TN – 16%

* Columbus, OH – 16%

* Detroit, MI – 16%

* Cincinnati, OH – 15%

Besides the foreclosure crisis each of these cities has it’s own reason for being undervalued and extra attractive for real estate investing at the moment. Las Vegas has been one of the hardest hit by foreclosures but also suffers because of the employment situation. Michigan has seen seen prices driven down to rock bottom from foreclosures and crime and McAllen, Texas is among the border cities suffering from the sensational news headlines about Mexican gang violence.

Of course there are also many other areas of the country that hold amazing real estate investing deals that are drowned out by all the doom and gloom in the news. Did you know that Worcester, MA saw home values rise over $80,000 in just one moth last year? So do not get discouraged, there is plenty of money and big profits to be made by flipping real estate today.

If you find this helpful, you will love this FREE BONUS VIDEO on how to double your annual income and fire your boss in 30 days from Than Merrill, Paul and JD Esajian, stars from the hit tv show “FLIP THIS HOUSE”.  CLICK HERE to access this incredible bonus video.  Enjoy and best of luck!

Firstly, it is normally a good idea to begin life as a landlord as a property developer. That is to say buying a property at a lower price than usual with the intention of upgraded it in your own time and at your own cost. This is normally a great way to save a lot of money; however, you must absolutely avoid cutting corners when developing your property as safety is of paramount concern.

Whether you choose the property development route or whether you just buy a property that is already safe to live in, the next step will be to make sure you have all your legal documents in place, along with insurance! Hunt around for good insurance quotes and make sure you take out well detailed insurance policies. These will cover you against a whole range of difficulties you may face.

These difficulties can include tenants refusing to pay rent due to their own financial woes. In this case it will be important for you to make sure you are covered by Rent Guarantee Insurance as you will then be protected. Tenants dodging rent payments is the most common concern landlords face, however with the right insurance policy, you will never need to worry about such a thing!

Other concerns landlords face is that of attempted theft. In this case it will be important again to ensure you are insured. But there are also other things you can do yourself. Make sure your property is water tight. That is to say, make sure it is well secured and properly alarmed and that it is not an easy target for burglars.

Furthermore, many landlords have to deal with their property becoming damaged at some point. This is of course not uncommon and so you may be able to solve such issues by coming to some form of agreement with your tenants in order to fix the damage.

As a landlord it will also be important to set out rules and regulations in terms of keeping the property clean and tidy. Maybe you will choose to hire a cleaner once a week, or maybe you will leave it up to your tenants to look after themselves; if this is the case then make sure you set out rules and regulations straight away so that you can keep your property presentable to future tenants when it comes to them having a look round.

This is of course not a definitive list of concerns a landlord may face, but as long as you follow the correct procedures, make sure you are covered by good insurance policies, and maintain a respectful relationship with your tenants, then life as a landlord will likely be a pleasure!

1. 80/20 Principle – The 80/20 principle states that 80% of results come from 20% of X, X being a variable such as clients, efforts, tasks, employees, etc. For example, 80% of your profits come from 20% of your clients. This principle can be implemented in many ways. Use it to find out what 20% of your efforts result in 80% of your results. Also, focus on the 20% of your clients that result in 80% of your profits. You can even use the principle to find out what 20% of causes result in 80% of your challenges, 20% of the areas that result in 80% of your deals and 20% of your marketing that result in 80% of your results. Implement the 80/20 principle and you can realize huge positive results.

2. Parkinson’s law – Pareto’s law states that if you have a lot of time to do something, you will make a mountain out of a molehill. For instance, if you have 2 months to do a paper for school, it will take you 30 hours, 24 of hours barely add value to the paper. Now if you have 1 day, you will finish in 6 hours because you will focus only on the items that add the most value. So when you have a task, give yourself a short deadline in order to be efficient. I have found it useful to reward myself when I complete a task such as I get to do something fun like go to a concert or sporting event only if I finish. You can use consequences as well, such as no showers until a task is complete. Just kidding, but you get the idea. When Pareto’s law is used with the 80/20 principle you can be effective and efficient, a true double threat!

3. Do value added tasks that you do not have to do today – This idea comes from Rich Dad Poor Dads Cash Flow Quadrants. The most successful people are not stuck handling daily processes or things that add value and they have to do today. They create systems, delegate and automate those daily processes. Of course we must eliminate items that do not add value. But the people who are the most successful spend their time on tasks to grow the business, improve the business and entrepreneurial tasks. Work hard to separate yourself from the daily processes then do tasks that add value but do not have to be done immediately. Use the 80/20 principle and Pareto’s law to do these tasks effectively and efficiently.

4. Obtain more funding – Funding deals is the biggest challenge for most investors. Work hard to generate funding through private investors, hard money lenders, partnerships, PPMs, business credit lines, money pools and other creative financing methods. Money does not vanish it simply changes hands so it is out there sitting on the sidelines waiting for your tremendous deals.

5. Give the majority of profit to your money partners – My friends called me crazy for giving more than 50% profit to my money partners. But they are sitting on the sidelines while we should be able to shatter our goal of 20 deals in the next year. Give 60, 70 even 80% of the profit for high volume to money partners. You can start at 50% if you want but tell them you will up it if they fund 100% of the deals, more if they do multiple deals, and more for other favorable terms. Do this, and you can profit while building a successful track record and watch the people who call you crazy sit on the sidelines.

6. Dust off that Business Plan – Revisit your business plan. Update it with all your new ideas. Focus your strategies and markets. Not having a plan is planning to fail, your business plan is at the heart of what will keep you profiting for years to come. Have professionals and others look at it and keep your business plan up to date.

7. Learn to evaluate deals in 10 minutes – Create a system to evaluate deals in a maximum of 10 minutes. Figure out the important items such as ARV, rent estimate, rehab amount, good area, etc and how to quickly evaluate a deal. Quickly weed out the duds, write a lot of offers and save the thorough due diligence for escrow.

8. Find deals with no competition – This is no secret, negotiating without competition results in some of the best deals. Properties that are listed often have way too much competition. Consider doing direct mail to distressed sellers such as foreclosure, tax lien, probate and other lists. Learn how to buy at auctions before a foreclosure becomes bank owned, there are tons of great deals and often low competition. Contact out of state and absentee owners, owners with a lot of equity, vacant properties, expired listings, etc. You can even contact rental ads to see if they would entertain an offer. Negotiate directly with sellers. There are a lot of deals out there, if you minimize the competition and find lots of prospects you will get much better deals.

9. Write down your goals and to do list – This is a must for everyone. And it is so simple. Get a small notebook and rip off one sheet of paper. Fold it 3 times vertically and once horizontally. Now you have 6 sections on each side. Use it for 3 days, one side is your to do list and the other is your goals. Write down your to do list and goals and keep it in your pocket with a pen. When you have ideas, write it down. Use the back for big time brainstorming and ideas. This is a very simple idea that is tremendously effective. You become an effective and efficient machine. You can take breaks and start your day right where you left off. You don’t forget. You can achieve business and personal goals that are often neglected, forgotten or fall by the waste side.

10. Join a mastermind group – Mastermind groups are incredible. A mastermind groups is like having free business coaches. You have other experienced experts dissecting your business plan, offering advice, support, networking, contacts and tremendous help. They can even provide accountability as they will not be happy if you do not meet your deadlines and goals that you set. I recommend it to everyone. You can build your own or join an existing one.

11. Educate yourself – Real estate is an ever changing industry. The market, laws, strategies, lending practices, etc are constantly changing. Business and technology are constantly evolving too. Education is the best investment, you can spend 5 hours to learn better negotiating and it can have a tremendous effect on your bottom line. Write down skills that will improve your business then learn them. Read books on business, self improvement, real estate, investing, etc. Some books I recommend are 4 Hour Work Week, Emyth Revisited, Goals by Brain Tracy, The Secret of Success by William Walker Atkinson and Rich Dad Poor Dad.

The idea is to strive for continuous improvement. It is sometimes hard to step away and look at your business from an outsider’s perspective. The New Year is a great time to reflect and look at ways to improve yourself and your business. I hope these ideas are helpful, how are you going to improve your business in 2011?

1. High end blue collar areas – High end blue collar areas are ideal for finding prospects to flip. Warzones will not work and the nicer suburbs will have too much competition from owner occupants who are willing to outbid you and pay retail. These areas represent the largest portion of the population, thus you have the most houses to choose from and the most buyers.
2. Big discount for distressed sales vs retail sales prices – Identify areas with a big difference between retail sales and distressed sales like REOs. You will find in suburbs that the discount for a foreclosure is not too high and the numbers usually don’t work. Certain areas though there is a huge gap in price between REOs and retail sales, this is your goldmine. For example, we have located 3 flips in a neighborhood where purchase is in the 30s and retail sold comps are 80-120K. That leaves plenty of room for big profits after rehab.
3. Number of sold comps vs for sale comps are close to even – This is very important, you may be getting a big discount but you may have 20 for sale properties in the neighborhood and only 5 sold comps. This means way more supply then demand, your flip could take forever and you may have to drop your price a lot to sell. Make sure there are close to as many sold comps and for sale comps. If more sold comps, even better.
4. Mostly home owners – Make sure the area is mostly home owners. Some renters are fine, but too many renters and the area could take a turn for the worse. Buyers will sense this and may not pull the trigger on an offer.
5. Pride of ownership – The owners in the neighborhood must take care of their property. Beat up houses scare people away, nice houses and recent improvement show pride and attract buyers.

These keys are very important to finding flips. It is highly recommended to do some research and find these areas to target then take massive action. You can easily set up a mailer campaign to foreclosures and other lists in these zip codes, use bandit signs, buy REOs, buy at the auctions, etc. This is all very targeted marketing, which will lead to much better results than doing this everywhere.

Now, good real estate agents can help you identify these areas. You can also research yourself by analyzing sales from public records, use zillow and drive the neighborhoods yourself. The deals are out there. Identify these flip goldmines and you may be the next expert flipper in your city.

If you find this helpful, you will love this FREE BONUS VIDEO on how to double your annual income and fire your boss in 30 days from Than Merrill, Paul and JD Esajian, stars from the hit tv show “FLIP THIS HOUSE”.  CLICK HERE to access this incredible bonus video.  Enjoy and best of luck!

1. All Comps For Sale, Active and Pending Sales – Get Comps for the last 3-6 months within .5 to 1 mile. Also do it for the last 3, 5, even 10 years to see trends and the full story.

2. CMA, Comparative Market Analysis – Get a CMA so you can see how everything stacks up, average listing price, for sale price, property size, beds, bath and even average time on market.

3. # of foreclosures – Too many foreclosures can put downward pressure on an areas value, but you do want opportunities.

4. # of rentals vs home owners – This will be important to determine if it is a flip or rental.

5. # of for sale vs sold comps – This is also crucial to determine if it is a flip or rental as you can see your competition and the areas pride of ownership.

6. Crime, Unemployment, Population, other trends – Warzones and declining areas are to be avoided. Upside potential is what you want.

7. Schools, shopping, entertainment, parks, transportation, desirability – People want to live in desirable areas with these amenities.

8. Do things in 3s – Get 3 rehab bids, 3 agents opinions, 3 property managers feedback and consult 3 other investors/experts.

9. Exit strategies – Thoroughly analyze your exit strategies, create backup plans and ensure you have strong multiple exit strategies.

10. Worst/Best/Expected Case Scenarios – Analyze worst case scenarios, best case scenarios and the expected scenarios. Be realistic, conservative and understand the risk.

Stories of a double dip can be found everywhere, is it true?  Inventory is adding up as banks are holding back foreclosures and government intervention is further slowing the recovery.  I saw an email recently with and asterisk by half of the 30 listings which means they are on hold due to the Foreclosure Moratorium.  Everything has to work its way through the system.  Some markets could be in trouble, others are prime for the picking.

Foreclosures will not just disappear.  Each one has to run its course through the system, the longer it takes for these to hit the market the longer it will be before a recovery.  What if banks let everything hit the market and the government doesn’t intervene?  Massive supply with low demand will definitely cause a double dip, some areas more than others.

What is more likely is banks will slowly release REOs to the market and the government will further intervene to avoid another big drop.  This will prolong things, basically a plateau near the bottom.  Also, shadow inventory or people who have been waiting out the market to sell will grow causing more supply.  It will just take time.

Now, let’s look at a few things.  Where are the foreclosure rates, unemployment rates and vacancy rates the highest?  Where are the homes over valued and where do rentals have very low cash flow?  All of the markets that where overhyped dominate the wrong end of these factors that impact value.  CA, FL, Vegas, Phoenix are the main markets that could be in trouble.  If you are a speculator, you could be in trouble.  If you are a flipper, the market goes down and you have negative cash flow then you are also in trouble.  Still people flock to these areas as they are desirable.  But from an investing standpoint, only the savviest investors can make it work, the rest are about the make foolish decisions for all the wrong reasons.

So where are the opportunities?  Everyone seems to follow to the overhyped markets when in fact the market outlook is very poor.  The under the radar, very affordable markets are ripe for tremendous deals.  Not only are unemployment and vacancy rates low but there are huge discounts for foreclosures and the cash flow is at or near the highest in the nation.  The stars have almost aligned in these markets.  Huge discounts, tremendous cash flow, low chance of depreciation, low unemployment, low vacancy rates, etc.  I have researched all of these factors to find these are just some of best markets to invest in:  Cleveland, Columbus, Memphis, Indianapolis, Pittsburgh, Cincinnati and many smaller, more affordable and less hyped markets.  They may not have a sparkling image, but image is a perception of reality.  Reality is that these are the best performing markets for minimizing risk and maximizing return.

Are all deals in these markets great deals?  No, of course not, there are good deals and bad deals everywhere.  Understand the risk and justify all your decisions with due diligence.  Always have strong, multiple exit strategies which can be achieved with huge discounts and good cash flow.  This is how savvy investors become successful.

So with the market staying near the bottom for a few more years, where are you going to invest?  How are you going to take advantage of the opportunities of a lifetime?

1. Avoid the wrong market – This is very important. Tons of investors flock to the hyped markets without doing any due diligence. Everyone is doing it so they follow the herd. Well, everyone is wrong. The popular markets right now are the worst markets in terms of returns and risk. Let everyone else take high risks for low returns. Simply do your research to find markets where you can minimize risk and maximize return. You will find the under the radar markets are the best markets to invest in.

2. Never Speculate for appreciation – Plan and simple, speculation is foolish. Can you make money? Sure. Can you lose money? Sure. Will you lose money? More often than not. The market is out of our control, find deals with tremendous cash flow and tremendous equity and control your success. Appreciation is an extra bonus, do not gamble.

3. Never Decide without justification – Always do your due diligence and justify your decisions. Savvy investors do not make uninformed decisions, fall for sales tricks or become a follower. They gather information and make the best informed business decisions. They are investors who are accountable for their decisions so they understand the risk.

4. Don’t be a sucker – Like any business, there are good services and bad services. There are shady, unethical services that use slimy sales techniques to trick suckers into poor decisions. These services usually do not last but the fact that they exist makes me sick. If it sounds too good to be true, do some due diligence and avoid being a sucker.

5. Don’t make it complicated – Avoid over doing it by trying to invest everywhere, with every strategy and as fast as possible. Keep it simple. Focus on 1 market, 1 strategy, build a team of experts, systems and duplicate over and over.

Also, Learn what is a great cash flow deal and read our guide on foreign and out of state investing in the US.

1. 70% max LTV – Make sure you have plenty of room for surprises, overages, etc. The higher the discount, the lower the risk and higher the profit. Use sales comps from the last 3-6 months and within .5 to 1 mile.
2. Cash flow positive – The property must cash flow to provide multiple exit strategies. Flips require more expertise, have more risk and multiple exit strategies are a must.
3. Do things in 3s – During due diligence, get 3 rehab bids, talk to 3 property managers, 3 listing agents, 3 opinions from fellow flippers, etc. One is not enough, to be thorough these items must be done in 3s.
4. Align your goals – This is very important. You are building a team and systems so you can do the best job and duplicate deals over and over. Conflicting goals can destroy a deal, make sure your contractors, agent, teams, etc all have aligned goals.
5. Reserves & Backup Plan – Do not ignore the inevitable. There are surprises, delays, over budget items, extended market times, etc related to rehab flips. Always have reserves and backup plans that you can execute when appropriate.

First, there is a very important thing to understand, risk. There is risk in investing and as investors our goals must not be to just maximize expected return, but to minimize risk as well. This is done by doing due diligence and making smart informed decisions. Multiple exit strategies are key and can be achieved by buying at 30%+ discount and also ensure tremendous cash flow. Understanding worst case scenarios and eliminating surprises will also help eliminate risk.

Now, back to returns and what seems to excite investors. Here are 4 ways to skyrocket your return.

1. Target high return areas – Are you in an overpriced area with little to no cash flow? Do some research and find areas with improved returns. We did this and the result was incredible. Our first 2 markets where among the lowest returns and the highest risk, now the opposite is true and the returns are near the highest and risk near the lowest. That rarely happens but all the research and justification supports our markets as the best markets to invest in the US. Our research shows that the returns are low and risk is high in the high priced over hyped markets such as CA, FL, Vegas, AZ. The smaller, less hyped markets with less competition are much more desirable as the returns are great and risk is minimal. Find these great markets as we did and become experts.

2. Fast Flips – Annualized return is where it’s at. If you can make 10% in 4 months that is a 30% annualized return. What if you can do even better and faster? I have seen annualized returns over 100%. Be careful though, flips require more expertise, are harder to find, have more competition and have more risk.

3. Use leverage – Using leverage is one of the biggest benefits of real estate investing. Bank loans are hard to find these days but if you can get financing then you can turn a 10% return into a 30% annualized cash on cash return on your rentals. That is just fantastic!

4. Take calculated risks – Cash flow is usually not as high in the nice suburbs. Expected cash flow is really high in the warzones but that is a bunch of problems waiting to happen. Same is true with rent condition properties that are not distressed as the returns are lower. Distressed properties that require repairs have more upside potential. So find distressed properties that need repairs and in areas that are great for rentals and also have very high returns. Do your due diligence and justify your decisions so you are taking calculated risks. Savvy investors become experts and master taking calculated risks in there markets.

A lot of factors impact property values, some of the key factors are foreclosures, unemployment, population, vacancy, etc. Basically it comes down to supply and demand. More demand and property values rise. Right now however there is significantly more supply than demand and there is a ton of supply that still needs to hit the market. Values dropped off the side of a cliff and now in many places we have hit bottom. FACT: The supply created from the real estate bust has created the opportunity of a lifetime! Opportunities like this have not occurred since the Great Depression. Additionally, the most self made millionaires made it by investing in real estate. Savvy investors realize this and are running to the US from all over the work.

That is not everything though. The fallout has crippled the value of the US dollar. Currencies exchange rates from other countries are significantly higher than historical averages. So not only can you buy low with tremendous returns, but foreign investors have a much much higher buying power due to the strength of their currency compared to the US dollar.

This is almost too good to be true for foreign investors. They are running to the US to invest in real estate at record pace. There is still an absolute ton of supply that needs to work its way through the system ensuring opportunities for the next 3 maybe even 5 more years. Is everything a good deal in the US? Absolutely not!

There are good deals and bad deals everywhere. I’ve heard good stories and horror stories in every market and every strategy. Savvy investors will crush it, if they invest right. Stay away from warzones, stick to your criteria, do your due diligence and make the best informed business decisions. For many, the best way to invest in the US is to seek local experts who often offer full service, turnkey, hassle free solutions. So find these experts with a solid track record and ethical business practices. Then continue to do your due diligence. Every decision must be justified by facts and due diligence. Feel free to contact us with any questions regarding the US market, we are here to help!

Also, Learn what is a great cash flow deal and read our guide on foreign and out of state investing in the US.

5 Tips for Where to Flip:

1. Target high end blue collar areas – These areas are perfect for flips and without the competition of the nicer suburbs. Often called transitional areas and they are often just outside the rental areas and just outside the nicer suburbs.

2. Large difference in REO vs retail sales prices – REO sales have to be a fraction of retail sales. In our case, REO sales are in the 30s and retail sales 80-130K which is great.

3. Sold comps vs For Sale comps – Too many for sale comps is not good. There must be close to as many or more sold comps as for sale comps or you are looking at a rental area not an area to flip.

4. Pride of ownership – Make sure there are not too many rentals and there is pride of ownership. If this is not the case then the area is likely better for rentals instead of flips as long as it is not a warzone.

5. Focus has to be on annualized return – It is very important to focus on volume and annualized return. A 5% return in 1 month is a 60% annualized return where a 15% return in 6 months is only a 30% return. If you can flip it quick then do it and move onto the next deal. You will improve your annualized return by quick flips and volume.

Now, we have 2 more properties under contract in the same neighborhood but one we project to be in 10K less and it is bigger and has 1 more bath then the other property. It could be the first flip plus 20K profit. Again there is only 1 for sale property and now 5 sold comps (tip #3) and the pride of ownership still exists with few rentals (tip #4). The 2^nd deal has a huge lot and 5 car garage and we will be in 15K less with the same value. Both home run deals, but we want to sell quick in order to focus on annualized return then do more flips for volume (tip #5). So here is what we plan to do.

3 Tips for Quick Sales:

1. Weekly price reductions – We want activity all the time. So to keep our property in front of buyers agents we do a small $250 weekly price reduction. This works brilliantly as we had 4 times the traffic and go our offer after only 2 reductions.

2. Give free stuff – Offer a free flat screen TV for a sale by X date, 1-2 weeks out and see what happens. It will cost up to $1000 but that is fine with us if we get that quick sale at or near our asking price. You may sell in half the time which could double your annualized return for only $1000.

3. “List High Rehab Drop” – List the property at the highest for sale comp during rehab then when rehab is done you drop it to your initial asking price and market a huge price reduction. It can produce a really fast sale which is incredible for annualized return.

For this deal a realistic salesprice is 90K. We are only going to be in around 50K so 90K would be a tremendous profit especially if we can sell it fast. So our initial list price is 90K but during rehab we wish to list it for the highest for sale comp.

If I go back another month to 7 months, there are sold comps for 114K and 127.5K. WOW, that is awesome. In addition, you could throw a baseball and hit the roof of both houses. One is across the street and 2 down, the other directly behind the house across the street. Even more good news though, our property compares favorably. We have an extra bath compared to the 114K comp and we are bigger and with an extra bath then the 127.5K one.

So we don’t have to use a for sale comp, rather we can use a sold comp, 2 to be precise. Now our high list price during rehab actually may get some activity as the price points in the neighborhood can support it. But we are not expecting activity. We plan to complete rehab in 1 month and drop the price to around 100K. Then we will market this huge 27.5K price reduction, will go fast, bring all offers, free flat screen tv if sold within 10 days from now, fully remodeled, etc etc etc. We think this will work. If no we are 10K above our initial listing price and can start with the weekly $250 price reductions as normal. So no disadvantages and we may be looking at a huge profit really fast. I can’t wait to calculate the annualized return on this one.

I hope these tips are helpful. So what quick sale strategies do you guys use? And how to you target areas prime for flips?

Investing out of state has become very lucrative for savvy investors. Many foreigners are even running to US to invest in real estate as not only are the deals incredible but the dollar is very weak in comparison so it is another huge opportunity. Investing in the US however is not without it’s pitfalls. There are still good deals and bad deals. Investors must be smart, here are some vital tips and pitfalls to avoid.

Vital Tips:

1. Partner and work with the experts – Find the experts and build a team. Partner with experienced investors and create win-win relationships where your goals are aligned. You can make tremendous properties hassle free by working with the best.

2. Understand the risk and returns - We are investors, we are in it to make a return. Investments have risk that can get in the way of your returns. You must understand the deal in order to minimize risk and maximize annual return. Some markets good deals are hard to come by, others there are tons of tremendous deals. Find these markets and the strategies that work. The experts will be able to assist you with this.

3. Do your due diligence - Due diligence must justify that it is a worthy investment. This includes evaluating comps, cash flow, the neighborhood, rehab, exit strategies, backup plans, worst case scenarios, risk, returns, etc. This is the same due diligence you do in your local market, you just need to do more because you are not an expert in this new market.

4. Get multiple opinions - Do the important things in 3s. For instance, get 3 rehab bids, talk to 3 property managers, have 3 local experts analyze your findings, etc.

5. Overcome challenges – There are challenges such as getting funds to do deals. Don’t let challenges hold you back. Face them head on and overcome. If this were easy then everybody would be doing it

Pitfalls to avoid:

1. Avoid the duds - There are good deals and bad deals. I see people fighting over deals we would not touch with a 10 foot pole. I see warzone properties sold for 2-3 times what they were purchased for. You must confirm the property has equity, cash flows, has strong and multiple exit strategies and is in a solid area.

2. Don’t follow the herd - Fact is 95% of people do what everyone else is doing. But what if everyone is wrong? That is often the case with over hyped markets and strategies. Make sure your due diligence justifies your decisions. Never make a decision because everyone is doing it.

3. Do not speculate - The market is out of your control. Never bank on appreciation as it is an extra bonus. There are so many incredible deals, find a market ripe with discounted properties that cash flow. It is in those markets that you can minimize risk and maximize your annual return.

4. Watch out for the slimy salesmen - Do your research on the salesman and so called expert. They may be using sales tactics such as “Everyone is doing it” or “If you don’t buy now it will be gone in an hour”. These people pray on others and have the attitude that there is another sucker out there. They often buy in bulk and sell unworthy properties in bad areas, in disrepair and on inflated values and cash flow. Always do your due diligence on these people and the property.

5. Don’t be a victim - I have seen this one many times. People run into a surprise or challenge and they freeze and do nothing. Become a problem solver, take control of the situation and fight back. I bet many wish they had some kind of control when the stock market was plummeting. Instead they just sat and watched helplessly as their portfolio shrank. With real estate investing, you can take control. You don’t have to be a victim, you can improve and salvage the situation.

These tips and pitfalls come from hours and years of research and investing experience. We started out doing deals out of state. Then we did local deals. After doing tons of research on where to invest and what strategies, we now have mastered our strategies and markets. We invest in 2 markets in what we believe have the most opportunity and with strategies that minimize risk and maximize our annual return. We still follow these tips and avoid these pitfalls even though we are experts and have it all dialed in. Investing from another state or country can be very lucrative, but be smart and follow these tips and avoid these pitfalls. We encourage you to share your experience and ask any questions that you have.

Also, Learn what is a great cash flow deal and read our guide on foreign and out of state investing in the US.

In doing continued research, I pulled the last 10 years of population statistics from Census. This is very interesting data and can be useful, it took days to work my magic on this data to come up with the tables below and I hope you find it helpful. Population is not everything, I urge you to consider other factors such as competition, availability of great deals, unemployment, returns, vacancy rate, depreciation, etc. In fact, many of the fastest growing markets also have the highest depreciation, unemployment and vacancy rates. A lot of these markets became very speculative, over hyped, over built and have too much competition. Population increase still never hurts as it is demand for housing, just make sure when choosing a market to consider more important factors. Check out my other blog post on Unemployment recap, Where to Invest as well as my guides on Market Stability, Where to Invest, Markets with Highest Returns etc. The will provide very useful info on a lot of the other factors to consider when choosing where to invest.

Top 50 Markets by 1 year change

Top 50 markets by 10 year change

Other helpful items: Coaching, Guides, Webinars, Past Deals, For Sale.]]> http://www.realreturnrealestate.com/index.php?option=com_wordpress&feed=rss2&p=605&Itemid=87 http://www.realreturnrealestate.com/index.php?option=com_wordpress&p=602&Itemid=87 http://www.realreturnrealestate.com/index.php?option=com_wordpress&p=602&Itemid=87#comments Tue, 21 Sep 2010 15:03:03 +0000 Ryan Moeller http://www.realreturnrealestate.com/index.php?option=com_wordpress&p=602&Itemid=87

This is great data straight from the Department of Labor that I found to be extremely useful. Not surprising is that the fall of the auto industry has left Detroit near the bottom. What will surprise many is that the hot markets of Vegas, California and Florida dominate the areas with highest unemployment. These are the same markets that saw the highest peak and largest fall and cannot bode well for these markets until job stability returns. Other smaller, less hyped markets have less unemployment, far less than the national average of 9.5%. Washington DC is number one at 6%, well below the national average. A few Texas markets have low unemployment as well as some MidWest cities like Cleveland, Columbus, Pittsburgh and Milwaukee.

Unemployment is very important when choosing a market to invest in. Low unemployment is usually correlated with appreciation, low vacancy rates, demand for housing, increased population and other positive market factors. I urge you to consider other factors as well such as competition, availability of great deals, returns, vacancy rate, depreciation, etc. For further information, check out my other blog posts on Population recap, Where to Invest as well as my helpful guides on Market Stability, Where to Invest, Markets with Highest Returns, etc. They will provide very useful info on a lot of the other factors to consider when choosing where to invest and include recommendations. I hope this helps.

Top Markets by Unemployment Percent

Unemployment by Largest Decrease in Last Year

http://cashflowinstitute.com/quickturn/

I hear people all the time passing blame for the housing meltdown.  Is it the banks, home owners, mortgage brokers, policy makers, other?  Let’s take a closer look.

Policy makers – These are the people that set the rules for the banks.  They allowed the banks to offer the subprime and risky loans.  They are experts in finance, lending and the economy.  They are supposed to be protecting the country from self inflicted meltdowns.  Well they failed.  When the market is up, they should be tightening lending.  When the market is down, they should be loosening lending.  They did the opposite.  They are at the top of the food chain and stand at the bottom of the hill.

Banks – Also experts in finance, lending and the economy.  They became greedy and should never have loosened lending so much when the market was so overinflated.  They are 2^nd in line and should have known better.  They made the decision to make risky loans such as the zero down and subprime loans and must also be accountable.

Mortgage Brokers – Many slimy and greedy salespeople made as much money as they could.  Why?  They were permitted to do so by the banks above them and the policy makers above the banks.  That doesn’t make it ok though as many did not know the first thing about what was right for the homebuyers.  They marketed heavily the dream of owning a home to many, even those who had no business owning.  They marketed refinances, with money out and many refinanced and went on a spending spree.  Business was good and anyone with a pulse was approved.  They took full advantage, even if the buyers had no business owning.

Home Buyers – They made the decision to take on the loans.  No one expected the market to take such a huge drop and as fast as it did.  You can call them victims or you can call them accountable for their loans.  Either way they cannot make the payments.

So who is to blame?  Well it all starts at the top.  The housing market became so overvalued because of the policies allowed by the policy makers and it rolled down the hill to the greedy banks, mortgage brokers and to the home buyers.  All deserve blame, but the top of the food chain need to protect our country and the world economy with better decisions in the future.

1. Buy at deep discounts – Buy at a 70% LTV.   A worth 100K you want to purchase for 70K max which includes repairs and any other fees/costs.
2. Buy with strong cash flow – If rents are $1500, the max you should pay is $100,000 or rents are 1.5% of purchase.  In the best markets you can even find deals where rents are 3%+ of purchase.  For example, $1300 rents and total in of $40,000.  Rents are over 3% of total purchase.
3. Buy in a good area with strong demand from renters and/or homebuyers – Avoid warzone properties.  The numbers may look great but they are disasters waiting to happen.  Target 1^st time home buyer areas and areas that are transitioning in a positive direction.  The largest percent of the population fits this demographic so you have the most homes to choose from and the most buyers/renters.  Both very good things!
4. Have strong and multiple exit strategies – Tremendous equity and cash flow results in the ability to flip, wholesale, sell to an investor, refinance, lease option, buy and hold, etc.  Multiple exit strategies afford you the ability to withstand mistakes, surprises and worst case scenarios.
5. Buy as an informed decision based on numbers not emotions – Too many investors fall in love with the deal and make their decision because of excitement and emotions.  This is a business, not the home you are going to live in.  The numbers have to make sense or it is not worth the risk.  Make only the best informed business decision based on the numbers.

Most beginners start out confused and uncomfortable. They do not know what to do, are pulled in way too many directions and are lost in an information world often called analysis paralysis. They struggle bridging the gap between learning and doing. Here are the best 3 pieces of advice for beginners to become successful investors fast.

1.  Focused Strategy – Pick one strategy, focus all your efforts on this strategy and become a master. There will be no more spinning your wheels, confusion and uncomfortable feelings. Commit to this strategy and only this strategy until you are an absolute expert and master.

2.  Specific Target Market – Choose 1-3 specific areas as your target market. Any more than that and you are spreading yourself too thin and taking unneeded risks. Learn these areas inside out. Meet the agents, investors and professionals that work in the area.

3.  Simple Plan – Document a simple business plan. This does not have to be a full professional business plan, but it must be documented. Keep it simple and implement your plan to achieve your goals.

Many beginners will continue to spin their wheels. Some however will focus on one strategy, choose specific target markets and document a simple plan. The later almost always become more successful. When are you going to take this advice and achieve success?

The answer comes from 4 vital mistakes.

1. Follow – People in general follow and do what everyone else is doing. The problem is that it is often too late when it comes to investing. From now on when you hear that an investment is hot, that should be a red flag for investors to do thorough due diligence. Otherwise, investors may be getting in too late and buying high. Markets are cyclical, they always have and always will go up and down. Some of the most successful investors do the exact opposite of the masses. It is highly recommended for investors to do their research and do what makes sense, what everyone else is doing should have no bearing on their decision.
2. Emotional Decisions – Emotions are often why people make investments. Excitement, fear and other emotions drive their decision to invest. Sales tactics often invoke these emotions like the excitement of a success story or the fear when an opportunity will not be available if not jumped on this second. This can turn into a disaster. All investing decision must be informed business decisions.
3. Greed – Greed can lead investors to do deals they shouldn’t and get in way over their head. Know your risk tolerance and capacity. Always stick to your criteria.
4. Lack of Control – This can also be referred to as speculating. Real estate speculation is when an investor buys a property in hopes that the market will go up. I don’t know an investor who can control the market. Investors can better control their success by doing deals at max 70% LTV, that cash flow and have multiple exit strategies. Success can be realized even in a bad market by investors control success by doing only deals where the numbers make sense.

1. Mitigate Risk – It’s not exciting, but investors must do their due diligence, eliminate and minimize every risk they can to ensure success. Quick high risk investments almost always are out performed by lower risk longer term strategies. Investing is not a sprint, mitigate risk and great things will happen.
2. Maximize Return without increasing Risk – This is an important concept. A huge expected return does not warrant comfort with a huge risk. Risk has to first be mitigated, then maximize return without increasing risk. If you can increase return and decrease risk than double win!
3. Cash Flow First – Many investors get excited about the big pay checks of flips. The most successful long term investors however take care of Cash Flow First. Take care of your cash flow first and the big checks will come.
4. Duplicate Long Term – Find a strategy that works, improve and further mitigate risk, maximize return without increasing risk, then duplicate over and over. Focus on a long term strategy not a get rich quick emotional strategy.

Not exciting but business should be done based on numbers and informed decisions, not excitement and emotions. Focus on these 4 items and you will create long term cash flow, wealth and achieve success.

The best deals have one or more of these characteristics:

1. Motivated – The seller is motivated and has a problem that must be solved. Could be operational, financial, health, loan, personal, property condition, etc.
2. You can solve their problem – Investors must find out the problem and source of motivation then resolve the issue.
3. No competition – With no competition investors have tons of leverage to negotiate low purchase price and favorable terms.

How to find these deals? Unfortunately these deals do not grow on trees. How about listings? It is possible to find great deals on the MLS but they are rare and with a lot of competition. Here are some ways to find great deals with some or all 3 of the characteristics above.

1. Direct response mailers – Use direct response mailers to get motivated sellers to contact you. This is one of the most effective ways to find great deals and usually comes down to a numbers game. One set of mailers will not result in a ton of great deals. Consistent mailers and testing to find the right mailers formula and strategy is necessary.
2. Word of mouth – You would be surprised, it could be a friend, someone at the gym, a friend of a friend, etc that gives you a lead that turns out to be a great deal. Let people know what you do.
3. Bird dogs & Wholesalers – Bird dogs and wholesalers find deals for a fee. They may wholesale a property under contract to you or be a mail man or landscaper giving you a lead for a fee.
4. Respond to ads – Motivated sellers put up ads for buyers. Sometimes you can stumble upon a great deal advertised on Craigslist, newspaper, online or other publications.

LLCs are one of the most popular investments I see self-directed IRA account holders participating in. An LLC is a legal company that limits liability for its members, while providing some tax advantages. Typically, LLCs are used as a vehicle for participants, or investors who have a specific set of investment objectives. A necessary element of the LLC is an operating agreement, which characterizes how the LLC is to conduct is affairs and investment goals.  Some clients create their own LLC for the sole purpose of investing their IRA funds, while some pool their monies with others in an LLC to make investments. Further, there are others who are looking to invest in a private company that has been previously set up as an LLC. You should definitely meet with and discuss this option with your accountant, CPA, or other financial professionals to decide if this strategy is right for you.

How do you use funds from your Entrust self-directed IRA account to invest in an LLC? The answer to that question is simple: We need the LLC’s operating agreement, with the IRA being listed as the member; and the IRA holder’s signature with a written “read and approved,” to signify that the IRA holder has an understanding of their IRA’s investment. Entrust also requires a “Buy Direction Letter,” or BDL, to be filled out by the client. Once we have the signed operating agreement and BDL, Entrust can fund the investment within two business days.

Entrust makes it easy to use your self-directed retirement plan for alternative investments, like LLCs. We’re available to discuss you’re individual investment scenarios, and provide information on a variety of alternative investments. Please feel free to e-mail, call, or drop by our office.

By Brian Davis, Business Development Manager
bdavis@theentrustgroup.com

What is BiggerPockets.com
BiggerPockets.com is a network for real estate investors to learn and share knowledge, network, do deals, etc. You have a profile, friends, you can follow people, create niche groups, post articles and blog posts, comment and discuss, post and find events, sell and inquire about deals, find partners and find just about whatever it is you need to succeed in real estate. The beauty is that the members are such a high concentration of investors.

Groups
Wholesaling, cash flow, flipping, location specific, mobile homes or specific types of deals, creative and specific types of financing, services, etc. there are all kinds of niche groups. You can join others, create your own and participate in discussions.

Forums/Blogs/Articles
You can find just about every topic out there. If you like what you see, befriend and follow an author and network away. Also write your own articles and blogs and comment and discuss.

Resources
BiggerPockets.com has the most helpful and comprehensive resources section I have seen on the web. They obviously care about the members success and must really enjoy the reward because the resource section is amazing. Check it out and see for yourself.

Events/Properties
Find events to attend in person, webinars, etc. and post your own. You can also find deals, market your properties and create relationships with fellow investors.

Above is a quick overview of the features on BiggerPockets.com which are tremendous. What makes the site great is the members and those members using the great features. No site out there have I found a higher concentration of investors more willing to help each other succeed. So if you are networking to learn, partner, do deals, share knowledge, etc, BiggerPockets.com is a great site for real estate investors!

My last phone had web browsing, gps, email, games, video, touch screen, text messaging, every app you can think of and great reception. Awesome right!? I threw it in the toilet. I was at an airport recently, looked around and was astonished. Roughly half of the people were buried in their phones like it was the most interesting experience of their life. Fast forward 1 hour, they were still buried in their phone. I did the same at the mall, a restaurant, grocery store, even driving. People are addicted to their phones like it is the most wonderful thing on the planet! What were they doing that is so awesome?

Wasting time in a complete trance is what they were doing. Email, Facebook, Twitter, constantly checking news, scores, weather, playing games, apps, etc. I like a lot of the functionality of these technologically advanced phones. I do not like 117 interruptions a day. Who needs to check their email, the weather, sports, the stock market, etc more than a few times a day? Most check them 10-20 times a day which is completely unproductive. Have you ever added up how much time you are buried in your phone per day? I bet you would be amazed. Most spend more than 2 hours a day. These are the same people who claim to not have time for their family, exercise, to get important tasks done, etc. What could you do with an extra 2 hours per day?

Exercise: Take out a piece of paper and write 3 goals that you must achieve today. Begin to complete these goals. Tally up every time you are interrupted by your phone. You may tally up the total time you are on your phone or multiply the number of interruptions by 10 and that is approximately how much time you have wasted by submitting to the irresistible euphoria of the Crackberry! Every interruption you have to refocus on your task not to mention the time for all the additional things you do on your phone.

Email is meant for communication that is usually not an emergency and ability to communicate to multiple recipients. In case of emergency, CALL! Try limiting email and text messaging to 10 minutes per day. You may have to ignore many emails but I bet you will not lose any sleep over removing those time wasters which makes up roughly 80% of your emails per day.

Here is what I recommend: Turn off all notifications for email and text messages. Remove yourself from 80% of the periodic emails by opting out. Every time you pick up your phone or are on email/text ask the following question “Is what I am about to do so important that it is helping me achieve the 3 daily goals I have set?” After about 3-5 days, you will have kicked the nasty addiction of the Crackberry. You will have more time, better focus, increased productivity and a sense of freedom to achieve much bigger goals. Or you can spend it doing what you want with whom you want.

Additional recommendations: Do not answer calls were you do not know the caller or that is not an emergency. Schedule a daily block of time for email and phone. You will communicate that you check and respond to email and voicemail during this block of time daily. If an emergency, call your cell phone. Put this in your email signature, an auto response email and on your voicemail. It works best when you have 2 phone lines, one that goes to voicemail and one cell phone that is for emergencies.

You will be amazed at the positive result and increased productivity. And a side note, I got so much satisfaction from throwing my Crackberry in the toilet! I now have a phone that has excellent reception and when I absolutely have to use email I can.

1. The 4-Hour WorkWeek by Timothy Ferriss - I have read so many business books that I thought it would all overlap and my cup would be full. Not so fast. What I learned from the first half of this book will have a bigger positive impact on my life than every other business book combined.
2. Goals by Brian Tracy - If there is one thing I could recommend to every person in this world it would be to write down your goals and what it will take to achieve them every day and complete your daily goals. The progress I have made since implementing the knowledge obtained from this must read is mind boggling. My organization, time management, performance and ability to get things done is amazing. Everybody should read this book, those of you spinning your wheels, changing careers and can never decide on a path should immediately read.
3. EMyth Revisited by Michael Gerber - We read this book in my MBA program and I think every light bulb possible in my head went off. Michael Gerber is the author and breaks down why most small businesses fail, details the 3 types of people in business and discusses systems, franchises and separating yourself from the daily processes and becoming a true entrepreneur. Absolute must read, it completely changed my thinking and I can’t even imagine my career without this knowledge. I felt smarter than 90% of business professionals after reading this book, go read it.
4. Rich Dad Poor Dad by Robert Kiyosaki - The original Rich Dad Poor Dad book really opened my eyes to a different way of thinking. The rest of their books are tremendous, too. Cash Flow Quadrants, Real Estate Riches, ABCs of Real Estate Investing, etc. Most have heard of them, they are tremendous books I recommend every real estate professional read.
5. The Secret of Success by William Walker Atkinson - Don’t confuse this with the current movie where the premise is what you think will become reality. This is an old book that explains how 95% of people are followers. If they are making their own decisions they do what everyone else thinks they should do. It is the 5% that think outside the box, gather factual data and make the best informed decisions that become the most successful. These people control their own destiny and can achieve tremendous success. An eye opening read.

There is so much knowledge out there and so many great books to read. I encourage you to share with us your favorite books by leaving a comment.

1. Charge fee to connect buyer and seller - Find sellers who will lease option their home, then market the property and bring in a lease option buyer. Charge a fee for creating this win-win situation.
2. Sandwich lease option - Lease option a home from a seller, then lease option it with better terms to someone else and you keep the difference. You can get more down payment, higher option price, higher purchase price, etc.
3. Lease Option assignment - Lease option a home from a seller, then assign the lease option contract to another buyer for a fee.
4. Lease Option properties currently owned - Lease option homes you currently own to buyers.
5. Lease option home as buyer, rehab and flip - Lease option a home from a seller, complete rehab then flip.
6. Referral fees - You can even get fees referring people to credit repair agencies, agents, lenders, property managers, etc.

For more information on Lease Options, check out this helpful guide.

1. Down payment - sellers can negotiate high down payments and buyers can negotiate low. This amount will go towards the purchase of the home upon executing the purchase contract or is non refundable if the purchase contract is not executed.
2. Option price - sellers can negotiate a high monthly option price that goes towards the purchase of the home. Buyers can negotiate low option prices. Again, this amount is non refundable if the purchase contract is not executed.
3. Term - Negotiate a term that is convenient.
4. Extensions - If it makes sense, negotiate extensions.
5. Trash and leave - If a buyer gets turned down for a loan or for whatever reason cannot execute the purchase contract they may be soured. It is important to negotiate a clause that protects the seller in case the buyer trashes the home and leaves. Consult an attorney to make this legal and enforceable.
6. Make buyers responsible for maintenance - Absolutely without a doubt make the buyers responsible for maintenance.
7. Get a home warranty - Get a home warranty, always a smart idea.
8. Have insurance - Always have home insurance, buyers are recommended to have renters insurance during the lease term as well.

For more information on Lease Options, check out this helpful guide.

1. Higher rents with option payments - You get monthly rent and a monthly option payment that is non refundable if the buyer doesn’t execute the purchase contract. If the buyer does execute the purchase contract the option payments go towards the purchase.
2. Down Payment - You also get a down payment that is non refundable if the buyer doesn’t execute the purchase contract. If the buyer does execute the purchase contract the amount goes towards the purchase.
3. No agent fees - If the investor finds the lease option buyer then there are no agent fees involved. There are agents that do lease options but the fees will not be 6%.
4. Higher sales price - Lease option buyers do not have as many options as qualified buyers or cash buyers. Therefore they do not have as much bargaining power and the seller can negotiate a strong sales price.
5. No vacancy issues - Lease option buyers do not move as much as renters, it is very rare for them to move out in fact.
6. No maintenance responsibility - Sellers can make the lease option buyers responsible for maintenance, make sure to have home insurance and a home warranty to further mitigate maintenance risk.
7. Different ways to make money - Lease optioning a home you own is not the only way investors can make money with lease options. Consider a lease option service that brings together buyers and sellers for a fee, lease option sandwich, lease option assignment, find sellers that will lease options their home to you then rehab and flip, etc. You can even get fees referring people to credit repair agencies, agents, lenders, property managers, etc.

For more information on Lease Options, check out this helpful guide.

1. Fullfill their dream - Lease options allows many who cannot currently get approved for a loan to have a home of their own.
2. Lock in purchase price - In a down market like today, home values are eventually expected to go up. You can lock in your purchase price today with a lease option.
3. Time to come up with down payment - You can add to the down payment with monthly option payments over the lease term.
4. Get qualified - Buyers can improve their credit strength in order to get approved for a loan during the lease term.
5. Buyers can walk away - Buyers can walk away and not execute the purchase contract. It is almost like test driving the property.

For more information on Lease Options, check out this helpful guide.

1. Higher sales price – Buyers for lease options do not have the options as qualified buyers therefore a higher sales price can be obtained.
2. Down payment – A non refundable down payment can be negotiated into the contract that goes towards down payment.
3. Rent + option payment – In addition to rent, a non refundable monthly option payment can be negotiated into the contract that goes towards down payment.
4. No vacancy worry – Renters sometimes leave, lease option tenants almost never move out and create vacancy.
5. No maintenance – The buyers are responsible for property maintenance per the contract.
6. No agent fees – Sellers do not have to pay 6% agent fees when the purchase contract is executed.
7. Keep down payment & option money – If the buyers do not execute the purchase contract, the sellers keep the non refundable down payment and option payments. They have the option to renegotiate and are in a very good bargaining position.

For more information on Lease Options, check out this helpful guide.

1. Happens fast – Selling a property can take months even years.  Once the lease option contract is signed, the buyers can move in.
2. Avoid or minimize agent fees – Sellers do not have to pay 6% fees to agents, there are sometimes fees involved but not 6% of the purchase.
3. Win-win for Buyers and Sellers – Lease Options benefit both buyers and sellers in many ways.
4. Vacancy and Maintenance are no longer issues for sellers – Buyers move in and are responsible for maintenance.  If they leave they lose their option payments and down payment.
5. Investor benefits – Many advantages exist for investors, they can make a great deal of money doing lease options.
6. Buyers have time to qualify - Buyers can build their credit strength during the lease term in order to qualify a loan and execute the purchase contract.

For more information on Lease Options, check out this helpful guide.

Despite Obama’s Best Efforts, Housing Prices Have Further to Fall, Says Glenn Tongue

Posted Mar 10, 2010 01:23pm EST

by Peter Gorenstein

What a difference a year makes. This times last year, the Federal Reserve, Treasury Department and White House were scrambling to do whatever they could to prevent home prices from falling off a cliff and thereby dragging the banking system down with it.

Now the Obama administration is set to launch a program on April 5 to encourage short sales. The plan will give homeowners and banks money if they sell the house for less than the mortgage is worth. The homeowner gets $1,500 to leave the house quickly and the bank gets $1,000 for going through with the transaction.

Time will tell whether or not it will be more successful than the struggling $75 billion mortgage modification program. Regardless there are still fundamentals in the marketplace the government can’t solve. “The inventory is too high, prices are slightly too high and unemployment is really quite high,” say Glenn Tongue, Managing Partner of T2 Partners and co-author of More Mortgage Meltdown.

Tongue tells Aaron, in the accompanying clip, home prices still have another 5-10% to drop before hitting bottom. And, though he admits “a year ago the situation was a lot worse” he’s still wary of investing in housing and financial stocks related to housing. In fact, his hedge fund is still shorting several companies in that business, though he would not name names, citing compliance rules.

Unlike last year, Tongue no longer finds the big banks attractive and instead focused on only a few specialty financial companies including Fairfax Financial and Resource America.

Again for more information, check out our Market Stability Reports for info on your market and our Guide on Where to Invest (Helpful Guides List).

I don’t know about you, but I am always skeptical of a news story. Their stories often lack justification and are a dramatization or use fear to get ratings rather than give information that investors can use to make informed business decisions. One source that does do a ton of research is PMI or Private Mortgage Insurance. They analyze all kinds of factors and indicators that affect values of properties and do this in all kinds of markets across the US. Their PMI Risk Index report has amazing data all justified with their findings and they give a volatility score and percent chance a market will depreciate in the 2 years. This information is extremely interesting and valuable for your market and deciding where to invest. Click here to obtain this amazing report via email:

Market Stability

1. Buy Right – Buy something on craigslist for 50% of its value. Find a motivated seller, negotiate down and play the numbers game until you find that diamond in the rough. This is exactly how you need to buy investment real estate.
2. Sell Right – Sell something on craigslist for more than its value, fast. Write a great ad, with good pictures, invoke a response, create competition and bid up the price for a fast sale. Do not sell until you get over your asking price and negotiate so they come pick it up fast. This is exactly how you need to sell property, get people emotional and fighting for it.
3. Automate your marketing plan – Get lists of motivated sellers such as foreclosure/default, probate, absentee owners, expired listings, etc. If you can’t find these take to your real estate club members, local investors, agents, title, escrow, county recorder’s office, etc. Create a postcard with Problem-Agitate-Solution message on click2mail or another service. Automate your plan to get motivated seller to contact you.
4. Tasks, Teams and Systems – Write down every task needed for you to be successful in your business. Next to each one, put a Yes or No on whether you absolutely 100% positively have to do this task yourself. If you do not have around 80% NOs, be more entrepreneurial and go back through and figure out how to delegate more tasks. Delegate these tasks to team members, good team members. Sometimes in business team members do not perform so make sure you have backups and can replace them. Create systems to automate and make your business effective and efficient.
5. Create a Business Plan – Focus on one strategy and become a master. Document a business plan. This is crucial for your success as not having a plan is planning to fail.
6. Network – Create an elevator speech and go to networking meetings. Invoke curiousity and get them salivating over more info on what you do. Raise private money and create strong win-win relationships at these meetings.

1. Buy Right – Stick to your criteria. Sending 10 offers is not enough. It is a numbers game and often takes 100-500 offers just to land one deal. You should be doing only the best deals. It is recommended to implement a solid plan to get a ton of prospects into your pipeline, filter out the duds and write a ton of offers of the worthy prospects.
2. Focus on one strategy – Become a master in one strategy and focus 100% of your time in this strategy. Let everyone else try 5 or more strategies and put 20% of the needed focus to become successful in a strategy.
3. Have multiple exits – One exit strategy is not enough. Always have backup plans and multiple exit strategies. It is recommended to never go over 70% LTV and also have positive cash flow. Having both significantly mitigates risk and you have many exits that will result in a strong return.
4. Have good teams and systems – Don’t try to do everything yourself. The most successful real estate investors are entrepreneurs and delegate as much as they can. Create win-win situations with your team members, create automated systems and delegate. You will then have time to do the things that will significantly improve your profits which are the entrepreneurial tasks.
5. Make informed business decisions – 95% of people are followers. They believe all media and everything they hear. Is this information accurate? Not always, so be careful and do you due diligence. You wake up, put on pants and make decisions every day. Make sure to gather accurate information, justify sources and their information and you will be able mitigate a lot of risk and avoid unpleasant surprises by making informed business decisions.

Where do you find these meetings? Try meetup.com, your real estate club meetings, facebook, linkedin, web search, real estate and business contacts.

What are you trying to accomplish – Get them salivating for more info.  Get them interested and get referrals all without actually asking them if they would like to invest.  And once they start salivating, ask if they know anyone interested in a great return secured by prime cash flow real estate.  If they say themselves, set up a meeting with he and spouse.  If they ask questions, tell them it won’t make sense without giving them all the info.  If they make excuses, tell them to contact you when they are ready and ask if they know anyone who would be interested.

What is in your elevator speech – Keep it simple and quick.
1. What are you – I am a real estate investor.
2. What is your product or service – We buy extremely discounted properties with tremendous cash flow and countless ways to obtain great returns.
3. What do you offer investors – We are able to offer great returns to investors secured by these tremendous properties.
4. Why you can offer this – Our experience and expertise has made us the best at what we do
5. It is a win-win because – Investors love us because we are able to provide such a high return while mitigating risk.  A win-win, what more can you ask for?
6. Close - Do you know anyone who would be interested in a great return secured by prime cash flow real estate?

Additional task:  Online marketing plan

1. Create an informational page on how investors can benefit from investing as a private investor.  Include information about Self Directed IRAs if possible or even create a 2nd information page for this.
2. Capture visitors information and create auto response emails.  Aweber can provide this solution.
3. Create a follow up plan and try to get a face to face, phone or web based meeting.
4. Create your online marketing plan using social media, your website, search engines and your existing list.
5. Create relationships with 3 Self Directed IRA professionals and discuss doing a live event and how you can help each other.

Finally, FOLLOW UP!!  Send an email and/or call.  Offer to help them and ask if they know anyone interested in a great return secured by prime cash flow real estate.

So far, you have bought right, sold right and have experience in negotiating, marketing to motivated seller lists with a good message, marketing to buyers, auctions, backup plans, etc.  There is a 3^rd area where many investors make mistakes and that is they do not have a plan.  Not having a plan is planning to fail.  In this exercise you will begin to focus on one strategy and become a master.  The result will be a business plan.

Create a business plan with at minimum answers to these items.  Details, pictures, charts and graphs are very helpful as most people are visual.  Also, investors will likely just skim it and read the mission and strategy at the beginning which should be a captivating summary.

1. Mission Statement – When people ask you what you do, what do you tell them?  This is your purpose for existence and includes the benefit you provide.  Research and come up with a solid mission statement. 
2. Strategy – Pick one strategy and become a master.  Focus all of you efforts on perfection and automate a system that runs your strategy whether you are there or not. 
3. Market – Define your market.  Many are only comfortable with their local market.  Me on the other hand, I did tons of research to identify markets with great returns and ability to mitigate risk.  Now I focus on one state where I can cherry pick from incredible LTVs and rent to purchase ratios. 
4. Criteria – Define your LTV, cash flow, max purchase amount, max rehab amount, max timeframe, etc.  Stick to your criteria, walk away from any deal that does not meet your criteria.  If you are not finding enough deals to cherry pick from, change your market and/or strategy. 
5. How to find deals, marketing plan – How are you going to automate a system so motivated sellers come to you?  MLS, agents, online searches, direct mail to lists, other?  This is the 2^nd biggest mistake, investors do not find good enough deals and it all comes down to marketing and persistence with their marketing plan. 
6. How to finance deals – Are you using conventional, hard money, private money, equity or JV partners, seller financing, lease options, other?  This is often a challenge in today’s market and private money is a tremendous solution.  Learn to generate private money! 
7. How to do deals – How are you going to turn a purchase of a property into profit?  Clearly define the steps.  Repairs, rent, management, implementation of exit strategies, etc. 
8. Exit strategies, Backup Plans – One of the most important sections, especially to investors.  How are you going to exit the deal?  What are your backup plans as it is wise to have multiple exit strategies?  Do you flip, lease option, wholesale, bird dog, sell the note, sell the entity holding title, rent and hold, other? 
9. Team & Systems – Clearly define your team and systems used to delegate and automate tasks.  A true entrepreneur will step away from the daily processes and the business will run whether you are there or not. 
10. Illustrate example deals – Illustrate LTV, cash flow numbers and cash on cash return for example deals.  Include images of properties and show your successful track record here if possible. 
11. Financials – Include financials for the timeframe of your strategy.

1. Obtain motivated sellers lists – Get foreclosure/default, probate, absentee owners, expired listing and other lists.  If you do not know where to get these, contact local investors, real estate agents, title, escrow, county recorder’s office, etc.  Keep looking until you find these lists as they are out there and most people do not know about them.  Other lists are for sale by owners, rehabs, for rent lists, etc.  This step is necessary as the best deals you will find are by getting sellers from these lists to contact you.  You will negotiate directly with the seller usually with no competition.
2. Create a direct mail postcard – This step can be easily completed using any of the online services that send out direct mail.  Many of the mass email services such as Vertical Response, Constant Contact, Infusion and even Click2Mail provide the functionality to create and send mailers online.  Go through the steps to create a postcard that you would send out.  You want to invoke a response, use a P.A.S. message or Problem-Agitate-Solution.  I recommend researching this type of message.
3. Phone – Even if you are comfortable on the phone this exercise is great.  I want you to call 3 complete strangers and get them to give you advice.  Use your phone number but with the last 4 numbers different.  Ask for the wrong name and explain to them you accidently dialed the wrong number but maybe they can help you.  Get them to recommend somewhere to eat, get coffee, a good movie, place to get some specific item.  Make up a story like you are heading to a date and meant to call your friend to recommend a restaurant and maybe they can help by telling you the best sushi restaurant in an area.  This will get you comfortable talking to complete strangers and asking them to do something for you, such as sell you an item for 50% of its value.

Additional Tasks for Sell Right:

1.  Research auctions – Research and learn about silent and round robin auctions.  These are a great way to sell a property fast and if done right for a great price.
2. Create a marketing campaign – Create a marketing campaign using $500 to get as many people as possible to a one day auction where they submit a bid and later you conduct a round robin to bid up the price.  You should include, signs all over the neighborhood, mailers to the neighborhood, craigslist, MLS, newspaper ads and everywhere you can.
3. Backup Plans – You must always have backup exit strategies and the ability to rent and hold properties.  Write up a plan for all exit strategies using the strategy you are focused on.
4. Property Management – Locate 5 property management companies and evaluate 3 of these companies.  Give them 1-3 property addresses and get their feedback on the home, vacancy in the area, rents they would charge, if they recommend the area, etc.

Sell an item on Craigslist – The goal here is to get people to fight over your item and bid up the price and get better terms.  Just like when you sell an investment property.  Market this property to maximize exposure, leads and offers then negotiate up the price, close quick and get favorable terms.  There are a few tips I want you to try to create competition and achieve the goals.  Find out how much the item is worth and post ads on Craigslist along with pictures and why this is the one the buyers should buy.

Try these tips:

1. Advertise for a really low price like an auction – If the item is worth $200, advertise it for half or $100 OBO.  In this exercise you should get a ton of offers.  The response should be so overwhelming.  Explaing that $100 is the starting bid and the best offer will take it.  Continue to bid up the price until you get an offer(s) for what it is worth or in this case $200.  If they are willing to pay more and pick it up now, it is their item.  You will not only get more than it is worth, but good terms and a quick sale.
2. Write a good ad – Include nice pictures as most buyers will be able to visualize it as there item.  Tell them why it is the item they must buy such as: Perfect condition, barely used, like new, best item for the money, worth $X but selling for less.  Put in false time constraints and create competition such as:  Will go fast, yours if you can pick up within 2 days, if not bought in the next couple days I have a family member who wants it, was going to sell it for more to someone but did not want to drive an hour to them to drop it off, etc.
3. Ask for more than it is worth and negotiate – This will work best on hot items with lots of demand.  If the item is worth $300, list it for $400 and you are really motivated to sell this hot item.  Write a good ad using what you learned from #2 above.  If the best offer is $280, tell them you want $360.  But tell them if they pick it up now you will sell it to them for $320 which is meeting in the middle.  If they except, then you just sold it really fast for more than it is worth.  They may try to negotiate you down, so let them negotiate you down to $300.  Worst case, you still sell fast for what it is worth.
4. Use the midpoint in negotiations – When negotiating put the amount you want as the midpoint in your negotiations.  If they offer $200 and you want $250, ask them if they will pay $300.  If they say no, either the buyer or you can ask to meet in the middle.  Definitely ask them to come immediately.  That way you get your price and terms fast.

My results:

1. Sold my Jeep in one afternoon – I bought a Jeep for $6K and drove it for 4.5 years.  At 144,000 miles it was overheating, needed new tires, a new catalytic convertor to pass e-check and many additional items where close to going wrong.  Jeeps hold their value well and it was summer so everyone wants a convertible Wrangler for cheap.  I used tip #1 and #2 and listed it low at $1500 and wrote a great ad with a good looking picture.  I would have accepted anything around $1500.  I received approximately 20 calls in an hour and had about 5 people coming to take a look.  I do not advise this but I actually took the ad down because I was only able to answer about half of the calls, the other half went to voicemail.  They were all bidding over my asking and I told a guy if he comes with $2000 cash now it is his.  It was sold, as is in about 3 hours for $2K cash.  Looking back on it now, I would have told the buyers due to the overwhelming demand and some research that I am going to list it for $3500.  If they would go up to $3000 and come now it is there Jeep.  They likely would refuse but would give me the max they would pay and maybe I could have gotten $2500.  I was happy with $2K, but I learned from this experience.
2. Surfboards – I upgraded my surfboard and sold my old ones.  Both where nicked up but usable and perfect for beginners.  I used tip #2 and #3.  I wrote good ads and provided pictures.  “Perfect surfboard for beginner for cheap”.  I asked $100 for both and would have taken $40 for each which is all they were worth.  I negotiated one guy up from $50 to $75 which is halfway and he came immediately.  The other one I got an offer for $60 and took it since he came the same day.
3. Still to come – An out of town friend wants me to sell his surfboard and what better way to keep my skills sharp.  I also have some old bikes that are now expendable.  I will post my results.

What you will learn

1. Marketing techniques – Exposure is vital, you must market often, to the right target and with a message that will get them to inquire and make an offer.  Maximize potential buyer leads.
2. Negotiations and closing techniques – Create competition and use false time constraints to increase the sale price, get favorable terms and a quick sale.  Use the midpoint when negotiating.
3. How to write ads – Write compelling ads that make your ad stand out.  The ad cannot blend in with the rest of the ads, it must stick out like a sore thumb.  A well written ad will sell for more and faster than other ads for the same item.  Tell them why it is the best and most important have an extremely engaging Ad Title to get them to read more.  Finally, get them to contact you so you can engage negotiations.  Leave a little teaser that will require them to contact, then engage in negotiations.
4. Play the numbers game – The more interest and offers, the higher you can bid the price.  Get exposure and as much interest and offers as possible.  Then use that competition to negotiate a higher sales price, better terms and faster sale.

Final Step:

Comment and tell us about your results.  Feel free to ask any questions before, during and after.  This is an incredible exercise that will pay huge dividends to your business.  Best of luck!

Your exercise is to Buy and Sell something on Craigslist and post your results in the comments of this post.  Not just Buy and Sell, but to do it right.  You are looking to buy the diamond in the rough and get people to fight over the item you are selling.  In this article we will be looking at buying an item for 50% of its value.

Buy – Select a normal item that will have some demand such as a TV, bike, laptop, electronic, etc.  I did it with a TV, laptops and even bought a car.  We are trying to simulate buying an investment property at an extreme discount so pick an item that people want not an obscure item that has little to no demand.  If you can’t think of anything pick an item in your home you want to upgrade for a discount.  Buy something at around 50% or less of what it is worth and do not buy unless it meets your criteria.  If you do not know what it is worth, look at similar for sale items.  Call and find out what they sold for so you have comparable sales.

What do you have to do? 

1. Play the numbers game – the more prospects that meet your criteria the better the deal.  Get as many motivated seller leads as possible into your pipeline and cherry pick the best one until you find that diamond in a rough.
2. Find out if they are motivated and what that motivation is - If they are not motivated, pass and move on to the next one.  Motivated sellers will sell at a discount.  Always find out why they are selling as they will give you a great reason why they should discount the price such as they need the money today.
3. Do not deviate from the criteria of 50% of value – Never ever pay more than your criteria dictates.  Pass and find another.  Remember, this is a numbers game so the solution is to get more leads not compromise and overpay and take on too much risk with lower return.  By doing this, you will avoid huge mistakes that investors make all the time.
4. Do your due diligence - Make sure if it is a larger item like a car to do your due diligence and get an inspection.  Investment properties always require an inspection and thorough due diligence to mitigate risk and likelihood of unpleasant surprises.
5. Negotiate down every chance until you get a no – Give reasons why it is not the best fit or point out flaws without offending them.  Tell them you are still interested but want to reflect it in the price and ask for a reduction.  Do this until they say no.  Then you have found their bottom line lowest they will take.  Do this every chance you get.  Don’t forget to negotiate terms.  If they say no, maybe they will drop it off to you to make it easier for you.

 Here are my results:

1. TV - 1 year old 52 inch HD tv for $500 selling for $1000 and $3500 brand new.  The seller had it playing Gladiator when I showed up so that was just an extra bonus.  3 years of use and zero issues.
2. Laptops - 2 laptops and a nice laptop bag for $50 worth $200+.  Used one for a year then gave both away but still use the amazing laptop bag.
3. Car - A 2001 car that will last 5 years bought for $1K worth $3K.  There are some dents which is OK, when fixed the car is worth $5K.  Just like buying a rehab.  I first negotiated it down from $2700 to $1800.  Then got an inspection and negotiated it down to $1400.  Then after test driving it negotiated down to $1200.  Then got it down to $1000 at the purchase meeting.  This is where I got the ‘No’ that told me it was the absolute mimimum sales price.  This is a larger item so I made sure I got a full diagnostic inspection.  I passed on 3 other cars that I had inspected.  It has already been driven for 2 years with zero issues just routine maintenance.

What will you learn:

1. Find motivated sellers – They will sell at a discount and you can often negotiate terms like get them to drop it off at your location.
2. This is a numbers game – Maximize your leads then lowball enough sellers and you will find your diamond in the rough.
3. Learn to talk directly with motivated sellers without any competition - They are likely more motivated and will give you a better price.
4. Negotiation skills - It never hurts to ask.  Find their motivation.  If they need to sell quick, say you can only do $X if you buy that fast.  Negotiate the price down first before seeing the property and at every meeting or conversation negotiate down more until they say ‘No’.  If they are asking $300, it is worth $400 then you will only pay $200.  The $200 you will pay should be exactly in the middle of the current asking price and what you will pay.  First ask what the lowest they will take and maybe they will drop to $250, then ask for $150 since $200 is in the middle.  It is a psychological thing that the seller thinks he is also winning by getting you to come up and meet in the middle.
5. Ask for reductions without offending the seller - Anytime you see the item, have it inspected or talk to the seller mention a flaw or something that makes it not the best fit.  Then say you are still interested but you want to reflect it in the price and ask for a reduction.  Again worst case is they say no.
6. Learn to get comps – Look at comparable for sale items and call if necessary to find out the sales price.

Post your results as comments so we can all learn from your experience.  Also post any questions before, during and after.  Happy Buying!

 6 Points to Know:

 1.    Waiver takes effect February 1st, 2010 for a period of one year unless extended.

 2.    Investors are now exempt from the 90-day seasoning rule.

 3.    All transactions must be arms-length.

 4.    No identity of interest can exist between buyer and seller.

5.    If sale price is 20% or more of the seller’s acquisition cost, the lender must:

             a. provide supporting documentation and/or a second appraisal and

             b. order an inspection of the property and provide it to the buyer.

 6.  The waiver is limited to forward mortgages only.

 To read the text of this waiver and specific details: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

What it means to investors?

Definitely a step in the right direction.  Many investors do not want to hold property for 90+ days and incur holding cost, risk of vandalism, etc.  This could increase investor demand and primary residence buyers.  Many of the properties flipped especially rehabbed will sell for 20% more than acquisition cost so the inspection and 2nd appraisal or documentation will be necessary.  Starting Feb 1st for at least a year this will go into effect.  Hopefully more loosening will occur in lending as financing seems to be investors and primary residence buyers biggest challenge.

1. Strategy – Pick one strategy and become a master.  Focus all of you efforts on perfection and you can have an automated system that runs with you there or not.

1. Market – Define your market.  Many are only comfortable with their local market.  Me on the other hand, I did tons of research to identify markets with great returns and ability to mitigate risk.  Now I focus on one state where I can cherry pick from incredible LTVs and rent to purchase ratios.

1. Criteria – Define your LTV, cash flow, max purchase amount, max rehab amount, max timeframe, etc.

1. How to find deals, marketing plan – How are you going to automate a system so motivated sellers come to you.  MLS, agents, online searches, direct mail to lists, other?

1. How to finance deals – Are you using conventional, hard money, private money, equity or JV partners, seller financing, lease options, other?

1. How to do deals – How are you going to turn a purchase of a property into profit?  Clearly define the steps.

1. Exit strategies, Backup Plans – One of the most important sections.  How are you going to exit the deal.  What are your backup plans as it is wise to have multiple exit strategies?  Do you flip, lease option, wholesale, bird dog, sell the note, sell the entity holding title, rent and hold, other?

1. Team & Systems – Clearly define your team and systems used to delegate and automate tasks.

1. Ilustrate example deals – Illustrate LTV, cash flow numbers and cash on cash return for example deals.  Include images of properties and show your successful track record here if possible.

1. Financials – Include financials for the timeframe of your strategy.

Once you have completed the first version of your business plan, get feedback from your peers.  Have other investors and even consult a professional business plan writer.  Your business plan is the backbone of your business success and always your first step.

3 must to find motivated sellers without competition

1.  Find lists of motivated sellers - foreclosure, out of state owners, expired listings, divorce, probate, rentals, lease options, for sale by owner, rehabs, etc
2. Create a direct mail campaign - automate a direct mail campaign to your lists
3. Direct response marketing – use direct response marketing to get motivated sellers to contact you
4. Be committed –It is a numbers gam, the more marketing the more leads.  Be committed and consistent with your direct mail.

To find the motivated sellers list talk to title, escrow, county recorders office, your local REI club, fellow investors, web searches, etc.  It is useful to delegate list creation to assistants even virtual such as rental lists, for sale by owner, rehabs, etc from craigslist, newspapers, etc.

A final tip -  It is possible your market is very saturated and there may be other markets that offer plenty of deals that meet your criteria.  Do some thorough research.  Many markets have tremendous rent to purchase ratios and great LTVs that result in multiple exit strategies and ability to realize good returns while you mitigate risk.

Are you learning and reading everything you can about real estate?  Have you educated yourself on 20 different strategies and you now know how to do all sorts of creative real estate deals?  That knowledge will certainly not hurt, but let’s focus on one thing that will be the key to consistent long term success in good times and bad.  Find Motivated Sellers!

Not just find motivated sellers, find a ton of them.  Have them beating down your door begging you to buy there homes and get to the point where you don’t need to do a deal with them even if it is a great deal.  I see it all the time, beginners or those in a rut have only a few deals they are looking at and the take the best one when it isn’t even a good deal.  They need the deal to continue to eat, but this often ends in disaster.

Now, you are probably agreeing with me that success will be achieved by having tons of motivated sellers flooding your pipeline consistently whether you are there or not.  But how do you do this?  Here are some tips to have a consistent flow of motivated sellers coming to you.

1.  Direct Mail – While you can find deals door knocking and scouring listings, websites, and newspapers this could be very time consuming.  Send out direct mail to motivated lists such as foreclosure, out of state owners, expired listings, divorce, probate, etc.
2. Learn Direct Response Marketing – educate yourself on direct response marketing and have motivated sellers responding by contacting you.
3. Automate – create a system and delegate your direct mail campaign so it happens whether you are there or not.
4. Filter – create a system to weed out the duds and only evaluate the prospects that could meet your criteria.
5. Pass – it ends up a numbers game, get enough deals and some will be worthy of doing.  If you are not getting enough deals, pass and improve your direct mail and marketing strategy.

1.  Find the best deals – with so many available deals, savvy investors should get a ton of prospects into their pipeline, weed out the duds and cherry pick only the best ones.  Stick to your criteria and walk away if the deal is not good enough because there are 10 more like it and many will be good enough.
2. Generate private money and financing solutions – Financing is a challenge and cash is king.  Generate private money and have financing solutions in place.
3. Show a successful track record in good times and bad – Investors that defy the odds and have success in good times and bad are in a great position to have continued success.
4. Mitigate risk by having multiple exits – One exit strategy is not enough.  Always have backup plans, be ready for worst case scenarios and mitigate risk with multiple exit strategies.  Tremendous equity and tremendous cash flow is a must.
5. Do not take unneeded risks – Never ever do a deal that is not a smoking deal during tough times.  Do not ask questions, just do not do it!
6. Do your due diligence – Always be thorough in your due diligence.  You can avoid many unpleasant surprises when buying.  When selling, always qualify buyers with your lender so you do not waste months in escrow and have the buyer’s financing fall through.

During this recent recession, real estate values have plummeted.  Many owners have lost their homes.  Many are under water and owe more than the value of the home.  Additionally, many could not sell or have decided to wait to sell until the market recovers.  By the time this recession is over, there could be 5 years of homes that have not been put on the market and have accumulated into a very large amount of homes.  These homes make up what is called Shadow Inventory and will add a significant amount of supply of for sale homes once the real estate market recovers.

What happens when supply increases more than demand and inventory of homes on the market increases to well over average amounts?  Property values go down.  Once the market recovers, Shadow Inventory will hit the market and add to the supply.  We have been through the first storm of foreclosures.  Storm #2 is on the way in the form of a 2^nd wave of foreclosures.  Interest rates will eventually rise to fend off inflation and then there is Shadow Inventory.  This is just one more storm coming in this economic recession.

Savvy investors should see this as an opportunity to cherry pick from the oversupply of for sale real estate.  This may be unfortunate to home owners as their home values may decline, but it adds to the opportunities for us investors.  The next 5 years will be the best buying opportunities of our lives.  Be prepared and set yourself up for the rest of your life.  Best of luck!

Time and time again, beginners make the most common real estate investing mistake.  They have goals and aspirations to change their lifestyle and become financially free through real estate.  They are so excited they can barely sleep.  They read, learn, attend and listen to every bit of real estate material they can find.Weeks, months, even years pass by.  What is the result?  They are still doing the same thing.  Still have the same goals and aspirations.  Still learn everything they can, but have yet to do anything in real estate.  Is it fear?  Lack of knowledge?  What is the mistake that is holding them back?

I have seen this way too many times.  The most common real estate investing mistake is they do not have a plan.  There is no focus, no systems, no tasks that if done will lead to success.  Not having a plan is planning to fail!

Solution:  Focus on one strategy and become a master at that strategy.  Document your strategy in a business plan.  This plan is the key to your success. 

 So what are you waiting for?  Get your pen and paper and start with an outline.  Define your strategy, criteria, market, exit strategies, team, systems, how to do the deals, how to finance deals, etc.  Get feedback from other investors, especially ones that are successful in that strategy, even hire a professional business plan writer.  If you have a great plan that is carried out, success is within your grasps.  Happy Investing! 

Real estate is an Other People’s Money business. Plain and simple, you do not need your own money to do deals. Let’s look at this example deal.

100K Value
80K Purchase
250 Positive Cash Flow
15K Down Payment
65% LTV after down payment

To do this deal, the lender requires 15K down as they will only go to 65% LTV. A down payment investor will lend in 2nd position, but only up to 65%. So your lending falls through. What is the problem here?

Is it the lender? I think not. The problem here is that the deal is not good enough to get 100% financing. This deal cannot be done unless you have money. But if you do have money, you are doing a deal that is 80% LTV. What if holding, rehab costs and/or selling costs increase? What if the market goes down and/or you cannot sell for enough to break even? You lose.

If a deal is not good enough to do it without any of your own money, then it is not a good enough deal. Savvy investors should walk away from the deal above. That deal should be purchased for 65K using none of your own money not 80K using your own money.

What needs to happen is investors need to master finding the best deals. If you cannot do a deal using 100% of other people’s money then you have not mastered finding great deals. Therefore, if you can’t make it without money, you can’t make it with money.

Having money and credit can certainly make it easier to do deals.  It is crucial however to make sure the deal still meets your criteria.  At no point in time should you bend your criteria and make the deal work by putting in your own money.  For instance, if you are considering putting in 10% of your own money to make it meet your 70% LTV criteria, you should lower your offer or pass on the deal.  The risk has to be warranted, in fact, all deals should be good enough where you do not have to use any of your own money.  Using your own money should just sweatin the deal and improve the return without unneeded risks.

Here are some ways you can do deals with No Money and No Credit.

1. Use Private Money – Cash is king and having private money backing can allow you to do deals without any of your own money
2. Partner – If you have a strong business plan with solid exit strategies and a successful track record there is a ton of money out there to fund 100% of your deals.  Make it a win-win for your partners and make it happen.
3. Find deals with incredible numbers – If you are an expert at finding incredible deals, doing and exiting the deals then people will fight over funding your deals.
4. Wholesale, Bird Dog – There is no risk, money or credit needed in getting a deal under contract or locating deals for investors.
5. Subject To, Seller Financing, Lease Options – Taking title to a property subject to the seller’s existing mortgage, getting the seller to carry financing or lease optioning a property are ways to do no money no credit deals.

Let’s do a quick exercise.  Compose the following 2 lists:

1. List all of the tasks you do for your real estate biz and how much time that takes
2. List all tasks that would help improve your biz and how much time they will take

Example Tasks: Total 40 hours

Write 5 blog entries – 3 hours

Maintain participation in forums, social media – 5 hours

Send out newsletter – 4 hours

Answer my emails and phone calls – 10 hours

Market to find 25 prospects and evaluate – 10 hours

Write 5 offers – 5 hours

Face to face meetings – 3 hours

Tasks to improve my biz:

Market to find and evaluate 25 more deals per week – 10 hours

Write 5 more offers per week – 5 hours

Network, social media, buyers lists, private money generation, build relationships – 10 hours

Now I would like you to look at these lists and ask yourself, “Could someone else help me with these tasks?”  “Do I HAVE to do this?”  I look at the example lists above and realize that all of them can be delegated to some degree.  Some I need to make the final say, but that would only require about 20% of the allotted time to each task.

The key is to define a system and delegate every process and task in that system that you do not absolutely positively HAVE to be you.  Of course I want to make the final decision on whether to write an offer.  But I can delegate as much of the marketing and evaluation as possible so I can quickly be presented with the all the information and make a quick decision.  An assistant can easily maintain social media, email and phone calls.  Anything an assistant cannot handle is passed on to me/you. 

After a few months, you can really improve these systems and delegate many tasks to an assistant.  It is amazing how much time can be saved, business can grow, performance improves, etc.  I highly recommend getting an assistant, even Virtual Assistants are a great resource in your success.

It is easy to get excited and learn as much about real estate theory as you can.  Now applying that knowledge is the tricky part.  Have you heard that only 4% of seminar attendees actually do something with their new knowledge?  Why are 24/25 people paying thousands of dollars and getting nothing out of it?  The answers may surprise you, but best of all this can be overcome so the majority become successful implementing the material.

Do something - First off, some attendees are there because they got excited.  They made an emotional purchase and think that deals and money will be thrown at them with zero effort and zero commitment.  So the number one thing to bridge the gap between learning and doing is DO SOMETHING and COMMIT!

Have a plan – Take what you have learned and create a very focused strategy and become a master at that strategy.  If you only have 10 hours a week, avoid spending 2 hours on 5 strategies and spend all 10 on one killer strategy.  You will become an expert.

Find a mentor or partner – Find an expert in your strategy that will partner, coach, mentor and guide you towards success.

Have goals – It is easy to push this off until next year, or until the kids are not in school or until your big project at work is done.  That is not commitment.  Write down what it will take to achieve your goals as daily tasks and complete them every day.  You will be amazed by what you will accomplish by staying committed to your goals and to do list.

Pick the right strategy – Pick a strategy that you can successfully master, mitigate risk and duplicate over and over.  Delegate and create a system so you can really duplicate.

Delegate – Time a problem, get an assistant or virtual assistant.  Have them generate leads and do all the work you do not have time for.  If a task does not absolutely positively need your expertise to do it, then delegate.

1. Online ads – Search Craigslist, newspaper and Social Media sites such as BiggerPockets, LinkedIn, Facebook and Forums like REIClub. Anyone with We Buy Houses or are investors in your market or strategy could be potential buyers.
2. Real Estate Clubs – Great place to find a large concentration of buyers in your market. Promote your deals and your services with flyers, networking and even speaking if possible.
3. Title Search – Contact title and get a list of buyers information for all homes that sold in your market for homes similar to what you are targeting. You may have to research these people to get their contact info, but that is an easy thing to delegate to an assistant or even a virtual assistant.
4. Wholesalers & Bird Dogs – There are likely wholesalers and bird dogs in your area marketing and promoting their deals and services. They could be buyers or you can team up with them and share their buyers lists. I’m sure they would promote your deals if you give them a win-win.
5. Signs, construction projects – Any ‘We Buy Houses’ signs or investor signs are potential buyers. Also, when driving around you may notice construction projects which could be investors doing a rehab deal.
6. Agents, mortgage brokers and other real estate professionals – Agents have retail buyers lists as do mortgage brokers, appraisers, contractors, attorneys, cpas, etc. Even communicate with your personal contacts as they may be able to give you some potential buyers.

1. Use cash or get pre-approval from the lender you are buying from – Cash is king.  Many banks will take a cash offer before they even consider a financed offer.  If you are getting a loan, get pre-approved from the lender you are buying from.
2.  Don’t get caught up in bidding wars – Competition will bid up the price, do not get caught paying too much in a bidding war.  Stick to your criteria.
3. Evaluate lots of deals – Some fall in love with one deal and do whatever they can to make it work.  It is highly recommended to fall in love with having tons of great deals to evaluate and purchasing the best ones.  Make sure to always have great deals in your pipeline.
4. Contact the lender directly – Creating relationships with asset managers can give you an inside track on short sales or if the bank takes the property back it can result is a deal without other bidders.
5. Target fixers – Move in ready homes will have more competition, targeting fixers will allow you to buy at large discounts and add value through rehab.  Make sure you have a contractor look at it, do your inspections and due diligence.
6. Talk to the listing agent – Build relationships with REO listing agents who can feed you many deals.

1. Have a plan – Most beginners so excited over the possibilities of real estate that they jump into any deal no matter what the numbers, risk and strategy and do whatever they can to make it work.  This can result in disaster.  Not having a plan is planning to fail.  Choose one strategy and focus on nothing but that.  Document that strategy in a business plan and you will significantly increase your chance of success.

1. Don’t close on your first deal until you have 5 deals to cherry pick from – Finding deals where the numbers make sense is one of the most important processes in real estate investing.  Do not fall in love with your first deal, become a master at finding deal where the numbers make sense and cherry pick from the best ones.  Your first deal is the most important deal, make sure it is a home run deal.

1. Always have multiple exits – Make sure you are at a max of 70% LTV and your property cash flows.  Do not get stuck with one exit strategy that could fail due to things out of your control.  Be prepared for the worst case scenarios and you will mitigate risk.

1. Don’t be a follower and do what everyone else is doing – If everyone is doing it, it is probably too late, too saturated and too risky.  The best deals have no competition.

1. Stay away from hot, over hyped, over competitive markets – Have you ever heard of buy low sell high?  Hot markets you could be buying high, target markets you can buy low and get great LTVs and extremely high rent to purchase ratios.

1. Generate private money and reserves – Banks are not the only way to finance deals.  Private money opens up tons of opportunities and is the best way to fund deals in today’s market.  Cash is King!  Having reserves is mandatory as there are always surprises.

If you are a beginner, do you have a strategy?  No matter what the strategy, there has been someone who has done it before so you are not inventing the wheel.  You need to get to 10 and you are at 2, find a mentor who has mastered your strategy and join them at 10.  This could be your shortcut to success and a start in building tremendous win-win relationships that can help you achieve a long term successful career.

1. Help create your strategy and business plan – No plan is planning to fail.  A business plan is mandatory before you start investing.  You must master one strategy.
2. Handle challenges such as financing, finding and doing – Financing is a huge challenge.  There are also many challenges and inexperienced investor can encounter in finding and doing deals.
3. Confirm a deal is a deal – Sometimes even experienced investors have doubts and reservations about a deal.  Have a mentor evaluate the deal and provide feedback.
4. Building teams and systems – Mentors can recommend professionals to join your team and help improve your systems.
5. Exiting deals – Good mentors can help you implement your exit strategy and help you achieve success.

Choosing the right mentor is not as easy as finding the first person to help you.  They have to be a master at your strategy and willing to create a win-win relationship.  A wholesale expert is not going to be the right fit able to help you develop raw land into a shopping center or mobile home park.  Find out who is the best in your area at your strategy and invite them to talk over lunch.

The right mentor will take you under their wing.  They will be an open book, share all the tips and expert strategies you can use in your own business and open up their entire contacts list.  It is important to make it a win-win.  In a sense, a mentor is training their competition.  You must make it worth while for them to be a mentor by partnering, helping them, becoming allies.

It is important to respect your mentor’s time.  Listen to them and apply their teachings.  A good mentor is one of the best ways to turbo charge your business and achieve success.

We have been offering free mentoring using our network, to sign up click the free mentoring link, create your profile, join the groups and we will start with your goals and strategy.  Be sure to check out our forum & social network.  Best of luck!

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1. Can buy fast and at extreme discounts
2. Credit and financial strength not required
3. You make the rules
4. Create win-win situations with your investors and help them meet their goals
5. Cheaper than sharing profits with a partner
6. Can do all kinds of deals that cannot be financed conventionally or by other means
7. Reserves and can get some profit when you buy
8. Unlimited funds, they will not cut you off and it will not show on your credit report

Generating private money opens a whole new avenue of funding possibilities.  To learn more on how to raise funds through private investors, download the guides from the link on the right hand site of our site.

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1.  Start with goals – Write down your goals daily, what it takes to achieve them and start completing those tasks.  Do this everyday and you will be amazed how organized, efficient and effective you become.

2.  Pick one strategy and master – I see it all the time, beginning investors put a half hearted effort into 10 different strategies and end up doing nothing.  Instead pick one and become a master.  I cannot stress this enough.  You will hear about all these other great strategies but do not stray from your goals using your strategy.

3.  Document your strategy in a business plan – When investors tell me their strategy, I am always intrigued and ask how they are going to do it and if they have a business plan.  Almost none.  Even if it is a 1 page business plan, at least you have some kind of documented strategy.  In this business plan you need to have goals, strategy, criteria, exit strategies, market, how to find deals, marketing plan, how you are going to do deals, your team and your systems.  My first plan was a page and a half.  I revised it to 3 pages, then 13 pages, now it is almost 40 pages.

4.  Build your team and systems – Build your team and systems so you can duplicate deals over and over.

5.  Get a mentor and expert in your strategy – Have a mentor and expert in your strategy advise you on your business plan and deals.  You can even partner with them until you overcome your fear.

6.  Do – At this point you have no excuse but to Do and achieve success.  If you have not found success at this point, start over at #1.

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If something takes 5 minutes a day, but saves hours and drastically improve your success would you do it?  100% of you are saying yes right now, now I want you to commit 1 whole year to doing this.  You will be amazed by the results and you will continue to do it for the rest of your life.

Studies from an Ivy league school graduates have shown that there is a direct correlation between the highest earners and doing this one simple thing daily.  It can actually apply to just about every part of your life whether it is family, relationships, career/financial, health, hobbies, etc.  You will be amazed by the results and what you can achieve.

The 1 thing I recommend to everyone is to write down goals everyday.  I cannot stress enough how much of a positive impact it will have on your life.  Challenges are no longer stressful, they become a goal and just something you work towards everyday in your life.  Here is a bit more detail.

1.  Write down your goals everyday

2.  Write what it will take to achieve them

3.  Begin completing these tasks

4.  Start over at 1 everyday

Do this everyday and you will be amazed how productive, efficient and effective you become.  Whether it is career and financial goals, or family and relationship goals, or fitness and hobby goals, you will become organized and unstoppable if you truly commit.

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1. Goals – Write down your goals, what it will take to achieve them and start doing these tasks.  Update this daily, you will be amazed how you can pick up right from where you left off the previous day and how much more you get done after only a week.
2. Document your strategy – This is basically a very high level business plan.  Write it down and continue to improve your strategy.  Many investors wing it and spread themselves too thin by spending a couple hours on 10 different strategies.  Spend 20 hours mastering one documented strategy instead.
3. Critique your current systems – Are you effective, efficient, overloaded, without this or that?  Look at ways to improve your systems and write down these tasks in your daily goals.  Always look for ways to delegate.
4. Build your team – You can’t do everything yourself, build a team, delegate and focus on what you are best at.  Savvy investors become entrepreneurs and build a team and systems so they have no part in the daily processes, they just handle the high level decisions while on travel in exotic locations.
5. Marketing Plan – Document a marketing plan and see it through.  The best deals are usually without competition, market to your lists and implement your marketing plan consistently so you have a steady flow of home run deals in your pipeline to cherry pick from.

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One of the biggest reasons small businesses fail is because the owners cannot separate themselves from the daily processes to focus on improving, growing and making their business a success.  They are stuck working 12 hours a day handling the daily processes and burn out.  Real estate is similar in many ways.  Here are 5 reasons most real estate investors fail.

1.       Lack of business plan – Many investors try every strategy possible with 10% the focus they need to have success with one strategy.  Pick one strategy, document it in a business plan and master it before moving on to a 2^nd strategy.

2.       Poor or lack of a mentor and support group – It is always good to get advice from a mentor and other experts.  They will point out unnecessary risks, provide solutions and even save deals or save you from a failure

3.       Wrong strategy – Many investors are followers and do what everyone else is doing or they choose a strategy that just does not work in their market.  Some of the most successful investors do exactly what everyone else is not doing.  Do your homework and choose the right strategy.

4.       Lack of effort and time – This one is obvious, many investors get excited and work hard for 2 days then do nothing for 2 months.  You have to write down goals, what it will take to achieve them, have daily tasks and complete them on a consistent basis.

5.       Lack of knowledge – I have seen my share of messy deals.  From do-it-yourselfers who do everything poorly, to inexperienced investors in way over their head.  You should master your strategy and have the knowledge, systems and team in place.  And always be thorough in your due diligence.

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Don’ts

1.       Asking price means nothing

2.       Never pay over what your criteria deems it is worth to you

3.       Do not get overpay due to competition and a bidding war

4.       No emotions, it is numbers.  It either meets your criteria or it does not

Do’s

1.       Define your exit strategies – You should have multiple exit strategies such as flip for retail, flip to an investor, rent and hold, lease option, offer seller financing then sell the note, sell the entity holding title, etc.

2.       Define your criteria - LTV and Cash Flow criteria.  70% LTV max and the deal must cash flow.  I take 70% of rent and subtract PITI.  70% is because I take off 10% each for property management, vacancy and maintenance.

3.       Find current and After repair value – Do a CMA, Comparative Market Analysis, appraisal and/or BPO, Broker Price Opinion, on the property for current and ARV.

4.       Conservative repair estimate – Most deals need some repairs and savvy investors can add tremendous value with these repairs.  Be conservative though as there are almost always surprises when doing rehab.

5.       Soft costs – Holding cost, inspections, tax, insurance, utilities, agents commissions, etc.  If it is a hold then figure in property management, vacancy and maintenance

6.       Create a formula – Create a formula to calculate an offer range based on LTV and cash flow.

Example Formula

            LTV formula:      Take ARV X 50% - rehab and ARV X 70% - rehab

                                    100K ARV X 50% - 20K rehab = 30K

                                    100K ARV X 70% - 20K rehab = 50K

                                    Offer range is 30-50K

            Cash Flow formula:       

                    For the cash flow formula, I deduct 30% of the rent or 10% for each of the following:  Property Management, Vacancy, Maintenance.Do you calculate offer price on cash on cash return?  LTV?  Cap Rate?  Other?  Please share your formula.

                   Rents X 70% - PITI for low LTV amount in of 50K

                   Rents X 70% - PITI for high LTV amount in of 70K

         1000 Rents X 70% - 450 PITI = $250

         1000 Rents X 70% - 600 PITI = $100

 

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1.       Negative Equity – Many homeowners are underwater or they owe more than the property is worth.  This problem could get worse when the 2^nd wave of foreclosures hits, interest rates increase and banks continue to be tight with lending.  Loan modifications are helping, but very few qualify.

2.       Unemployment – Unemployment and the economy have caused many to lose or take substantial income reductions making it hard for people to pay there mortgages and bills.

3.       Subprime FICO – It not only takes excellent credit but high income, plenty of cash and assets and strong debt to equity ratios to get a loan.  People without one of these have a really hard time getting a loan, refinancing and often lose their home.

4.       Mortgage Reset – Interest only resets and ARMs are raising mortgage payments when homeowners often cannot pay their mortgage at the existing rate and payment.  More mortgages will become delinquent and foreclose due to this reason.

5.       Shadow Inventory – How many people do you know that want to sell but cannot or will not because they will not get what they owe or what they want?  Once the real estate market stabilizes, homeowners will flood the market with their homes that they wanted to sell for years.  This inventory has been building up for a few years and may continue for 3-5 more years vastly increases supply of for sale properties.

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1.       Are you a people person – Networking, sales, relationships – Real estate is a relationship business.  Investors network, build relationships and are constantly selling themselves.  The best investors often seem to be the ones who are well liked and good with people.

2.       Negotiations – Negotiations is a huge in real estate and a skill you must have.  You cannot be a push over, cannot step on everyone in your way, rather create win-win situations.

3.       Willing to put in time and hard work – It amazes me how many people get excited after hearing a speaker and jump into real estate head first.  They spend 10 hours then think they are magically going to be handed hassle free deal and all their dreams will come true.  It takes time, hard work, persistence, ability to improve and learn from mistakes.

4.       Willing to take risks and overcome comfort barriers – We cannot control the market and many things in real estate.  It is an investment because there is risk of lose and also big returns when successful.  Real estate investors must do thorough due diligence and acquire comfort taking risks and overcoming barriers of comfort.  Many investors follow the herd, but the most successful investors do exactly the opposite of the herd.

5.       Make it business not personal and emotional – Countless investors fall in love with a deal and act like it is going to be their home.  Real estate investing is a business, stick to the numbers and leave the emotions for your personal life.

6.       Problem solver – You will be faced with challenges, become a problem solver and face the challenges head on.  Most home run deals have big time problems that need to be solved like vacancy, needed repairs, etc.

7.       Entrepreneur or Do-it-yourselfer – The most successful investors are or become entrepreneurs.  They build systems, teams, delegate tasks and separate themselves from the daily processes in order to make high level decisions and grow the business.