Well, another month is down, so it is time to update the world on what we accomplished in February.

• We sold House #26 and House #29.
• We rented House #28 and House #31.
• We bought three properties, two retail flips (House #32, House #34) and one rental (House #33).
• One property is in sales escrow and should sell in March (House #16).
• One property is in purchase escrow (House #35).

So we are on track again for February.  Three more purchases, that makes 6 so far this year.  House #35 was supposed to close in February, but I just got HOA docs on Saturday, so it should be recording tomorrow.  I am little worried about how many purchases we are going to do in March, but we are making a ton of offers so I am confident we will get something.

Get to 20 rentals properties (not units)

We are now up to twelve rentals.  Nine are rented, one is for rent, one is getting repaired and one is just closing escrow.

Make 36 Purchases (Rentals, Retail or Wholesale)

Like I mentioned above we are on track, with six purchases so far this year.  Three a month.  I was hoping to be ahead of schedule in February, but that is not how things worked out.  On the sales side, we have pretty much everything sold and in-escrow so that is going really smooth.

Raise $250,000 in Private Money – Accomplished

We raised a 1st trust deed on a property, so consider this goal accomplished for right now.  I am thinking we might be able to double or triple this goal.

Now it’s time for you guys to give me an update on how your February was.  Mike Z, QkNic, BJ Fitzgerald, Stephen J. Moore, Jennifer how are you doing?

We’re out there shopping for property like crazy.  Today alone we sent in 6 offers, plus did verbals and follow up on 10 more properties.  Since we sold our big house we have some cash and are trying to buy 4 or 5 in March.

I do have one escrow that should close on Wednesday 3/3, so that leaves only 3 or 4 more, boy do I have the month cut out for me.  Any Southern California wholesalers feel free to hit me up.

The offers we are writing right now are really clean, huge earnest money deposits (50-100%), no contingencies and a 14-day closing.  So I am hoping we can get some of our offers.  The banks really seem to be raising prices right now and I am just not willing to participate in that.  The “shadow inventory” everyone talks about is there, I just don’t know when it is going to hit and how slowly the government is going to leak it out.

I’ll write a post tomorrow summarizing February.  We’re still on schedule but not inching ahead of our goals, like I was hoping too (maybe I should of set them higher, lol).

I have good news, and bad news.  The first buyer on House #26 fell out of escrow, although, they seemed very strongly qualified I think they could not qualify for the loan.  They never really gave a very clear answer, but I got the idea I should find another buyer quickly.

The good news, is we had a cash buyer as a Backup offer.  I was not real comfortable with their original offer, because of the way they wrote it (not the price), but after speaking with the agent and countering some of the things I didn’t like out of it, the Buyer agreed and we where in escrow again.

14 days later they closed and now own the house.  The escrow went really smooth, they removed contingencies and everything.

Purchase 53.8%
Repairs 12.1%
Purchase + Repairs 65.9%

Overall, that is a pretty great deal, especially considering we only owned the property about 3 months. We also sold the value 10% higher than our appraisal, 4 months ago, which is great too.

We are really out there looking for properties right now.  Not finding a lot of exciting stuff, but we are just starting to look aggressively again.  Have a good weekend.

House #33 closed last week.  We’ve gone really hard after the rehab on this one.  It had some City Code Violations, although the roof looked good from visual inspection, whoever put it on did a terrible job and it leaked substantially.   They also installed new windows and every one of them leaks, so whoever installed those did equally as bad of a job.

This is going to be a rental.  It is a 4/2 and a rental.

Sorry for my lack of posting lately, I have been pre-occupied and trying to get a bunch of work done without going crazy.  Just a short post for today.

Well, if you read my last post you probably know what I think about most real estate gurus.  I do believe in that a strong team can save you a lot of money, but it doesn’t happen overnight.

For House #16, we put it into escrow on Tuesday.  Last week I sent a informal counter-offer to 5 out of the 8 offers we received.  Basically, explaining how we do things, what we are expecting and what will help their offer stand out above the rest, since the 5 offers all netted us within $2,000.

The three things that would help their offer stand-out:

1. If the Buyer is willing to pay their own closing costs. Since we deal mostly towards an FHA clientele, this is always a tough one.

2. If the Buyer would work with my lender. This is pretty self explanatory, but important.

3.  Escrow must be Seller’s choice.  This is also pretty self explanatory and it is pretty common for the Seller to have their pick of services in this market.

Surprisingly, only two buyers responded.  One raised their offer by $5,000 and the other offered to raise their offer $5,000 and use my lender.  All other things pretty much being equal, you can probably assume which Buyer we choose to work with.

Now the fun parts, this is where things get easy:

1. I call the lender I use and ask him to schedule an appointment with the Buyer and pre-qualify them.

2. I call escrow and let them know the address and the details.

3. The next day the lender calls me back and lets me know the Buyer is easily qualified and he has ordered an FHA case number and had the appraiser give him a verible that she can get the property to come in at contract value.

4. The lender ordered a second appraisal from day 1, so we will not need a review appraisal.  Some banks allow this, since he is the branch manager with a direct lender, his bank rolls with this.

So now we have an escrow with many of my team-mates involved.  If anything goes wrong, I guarantee their loyalty lies with me and they will not delay things.

How did I build this team? Along the way…

1. My escrow lady did a couple purchase transactions early on and simply asked for my business.  I gave her a chance and have not looked back since  (probably 30+ escrows later).

2. Title Insurance I never really get to pick, since I buy Title Insurance Binders that the Seller pays for when I buy property.

3. I have had quite a few loan officers “ask for my business,” this is my second time referring this one a loan, so we will see how it works.  This is always the hardest part to push people on.  But, always, always, always call the loan officer before you do a transaction! You ask them many important questions: “are you a direct lender?;” “are you investor friendly;” “what is the time-frame for a typical transaction;” “how are appraisals ordered;” “how often do review appraisals get ordered, and how;” “what will be the major hurdle for this loan;” “when will you have desktop underwriter approval;” “can you send me a copy of doc and funding conditions when you receive them;” etc…  Can you tell I ask a lot of questions?

4. The appraisers used are usually part of the lenders team, but they often-times do lenders favors.  So, if the lender wants to impress you, they will help protect you from the bad appraiser.

I think it is very hard to build a lot of these team members before you actually start doing transactions.  Everyone wants business, but it is really hard to see how you work together until you do a couple transactions with a person.

Now just for fun, here is the final walk-through of House #16

So Steve, you’ve owned this property for almost 5 months and haven’t sold it or given us an update?  Yes, it’s true, we have owned this property a long time and we just listed it on the MLS 10 days ago.  Why, well a lot of reasons, but no great ones.  We had a lot of different projects that always moved ahead of this one.  Since this was a big rehab that needed permits, we used it as our “utility project.”  Whenever our workers had no other work we sent them here, not the fastest way to finish a project.

This property started out at 1060 sq ft and needed a lot of work.  We added a second bathroom and permitted the porch.  If we bought this property 2-3 months later it surely would have gone into our rental pool.

Now let’s get to the pictures!  PS: a video should be coming soon.

Outside

Before

After

Kitchen

Before

After

Enclosed Porch

Before

After

Bedroom

Before

After

Bathroom

Before

After

We have 5 or 6 offers and it should be flying into escrow on Tuesday (since Monday is a holiday).

Sorry, the pictures are not that great for this one, we have been slacking lately.

Things are going better on House #29.  As I posted earlier, the company that sold it to us is very un-organized and in charge with lining up the retail buyer.  We put some extraordinary pressure on them and they had their Buyer do some things that showed us a lot of confidence.

The Buyer removed all contingencies and agreed to make his $40k+ deposit non-refundable early on in the process (before appraisal or loan approval).  He also agreed to buy the property as-is and without a home inspection.  I felt kind of awkward asking for these things and expected a negotiation, but they send the signed docs back shortly after.

Since the Buyer has got loan approval and we should be getting loan docs by tomorrow.  So this house should close by the end of the week.

Here is a video tour I took of the house last month.

If real estate investing has a lot of anything, it is self proclaimed gurus who are trying to sell you something!  In general, I really believe in training and further education in your chosen field. Here is some advice I have and the research I would do before I would pay for any training.

How the Bad Real Estate Trainers Typically Make Money

Training is a business model in itself and usually more lucrative than doing deals for the most successful trainers.  Most setups, especially the scammy ones work like this:  they start you off in a free or low-cost training seminar (cost $0-100), this is very hype based, they usually have a power point and flash some big checks.  At the end they let you know at the back of the room you can sign up for a 1-day training event (cost $995 – with $8,000 value).  Most of the time they say they are only selling 39 spots or 99 spots.  If you are one of the lucky ones to pay the $995, you will get 8 hours with a little bit on information and lot of hype up-selling you to their gold level training (usually 10,000+).  So when everything is said and done, you can get sucked into spending a lot of money with very little value.

Before paying for training from anyone I would recommend the following:

Do Your Research

Before you pay for anything always Google the trainers name.  You can also check for their name with the word scam added to the end (e.g. “Armando Montelongo” scam).  Read the reviews carefully.  Obviously, people can publish anything they want on the internet, but if they have a lot of negative reviews from multiple sources I would steer clear of them.

Be Careful of Training Information Overload

If you are new to this business, it is overwhelming.  I would suggest you spend at least 20 hrs practicing the real estate business for every hour of training you pay for.  So many people I have talked too, come to the clubs and one day seminars.  My first question is almost always, how many properties/deals do you see in a typical week?  Too often the answer is, I am “building my team” or I am trying to get xyz accomplished first.  All the training in the world isn’t going to make a stellar deal fall onto your lap!  You must get out and practice this business.  If you find a great deal, the rest of the pieces of the puzzle will come together.  When I bought House #1, I didn’t have a lender, I didn’t have any repair crews, etc.  I have learned so much since then, but the deal still came together.

Get Training on Specific Topics

Rather than going for generalized training, I would suggest for going to specific topics that you want to learn more about. For example, I would be very inclined to go “Raising Private Money for Real Estate Investing” versus “All you need to know about Buying/Selling Real Estate.”  I do this same tactic with the real estate clubs.  If I am interested in the topic and the speaker I go to the club meeting, otherwise I typically take the month off.

Only Get Training from Active Investors in your Area

My favorite book is the “Richest Man in Babylon.”  In one of the early chapters it brings up a contest about who you trust with your money.  “Why invest in a chariot maker to go to a far-off land to buy rare jewels?”  The same concept applies to real estate, why would you trust a professional speaker to educate you on how to buy a house at a discount?

Look into Real Estate Clubs First

Oftentimes, gurus come and speak at real estate clubs for free.  They provide a condensed version of their typical training or a teaser.  You will get a feel for the speaker without paying very much.  Typical club entrance fees (at least in my area are $20-$30).

Never Stop Learning!

As much as I am giving the gurus a bad rap, I am a big believer in education.  One good concept can save or make you millions in this business.  So you better get out there and learn from the reputable educators!

Last week we put another property under-contract.  It is from an agent we have worked with in the past (notice a trend on my last couple buys?).  This agent is pretty big and we just trying to expand on our relationship.  I think this makes the 5th house they have sold us.

This is a condo we got extremely cheap, but the home owners association fees are quite high, so it’s not my favorite deal.  It is a 2 and 2 and about 1000 sq ft.  We almost bought another one in this complex, but apparently Habitat for Humanity bought it instead.

We are planning to put this in our rental pool.  The condo has a lower income tenant base so we are thinking this might be the first rental that we go Section 8 on.  We will see what happens…

The bank wants us to close in early March, but given it is only Feb 8th, I think we can close this month.  Sometimes Home Owners Association paperwork takes a little extra time to transfer, so that may delay things.  If things stay on track we should close on 4 purchases in February… ahead of the goal!

Our last two rental properties have been working like clockwork.  Before we started renting anything I was scared of it, how do I find a tenant?  How do I do all the paperwork correctly?  Now we are ten deep and have figured out how to get the properties full.

House #28

We closed our purchase escrow on 12/23/2009.  I still don’t have the numbers back, but I think we did about a $15,000 remodel on the property.  On 1/29/2010 we did the most form of rental property advertising, two signs in the yard and one in the front window.  And last Friday 2/5/2010 I moved highly qualified family in. That is a 44 day turn-around, from purchase to becoming tenant occupied, with a pretty big sized remodel!

House #31

We ended up rushing the repair of this one because we had someone we thought would want to move in real quick.  We closed escrow 1/12/2010, did a quick $12,000 remodel.  Signs went up the same time as House #28 on 1/29.  The original person I thought would move-in ended up passing, but we got tons of phone calls, we even took the signs down early.  We took the most qualified applicant and we signed lease paperwork yesterday.  Since we still have punch list of about 10 items left to finish, I started the lease on the 9th, but let them move-in yesterday.  This one is a 28 day turn-around!