The Coast to Coast Investor

Wrapup on Financing Escapade

2009-08-21T15:59:00.002-05:00

If you've been following me on Twitter: http://twitter.com/wflood you probably already know the outcome. But, if not, here it is:

25 lenders
4 Government programs
2 private lenders
No financing commitments...I had to cancel the deal.

Actually, I went back to the sellers for the 3rd time and proposed owner financing. I noted that most lenders didn't want to touch their market because of the level of foreclosure. I reminded them that they'd already dropped the price from $115,000 to $95,000 to $84,500 and I was the only bite. I pointed out that first-time home-buyers were probably not going to be interested in a mid-century fixer-upper, and that non-owners like myself simply could not get reasonable financing. I noted to the agent that I was distressed in thinking that the property would probably only get sold for something like $50,000 to a wholesale investor with cash.

Still...and this always befuddles me...they would rather take half the original asking price to get cash than to get full price paying healthy interest. I'm not off, either; there's a house down the street in short sale for $49K, so the are clearly competing now with that.

So, I honestly failed in the quest to buy the house, by taking on this public creative financing excapade. What does that mean? Well, success literature abounds with commentary on failure just being a form of feedback and that one must get back in the saddle and learn from it. In this case, I hope my commentary will help you learn from it just as much.

With that in mind...here's my learning outcome:

This is just a reminder that investors must deal with sufficiently motivated sellers. This seller was simply not motivated enough to consider terms.
And a wakeup call to me -- I've been correct in my strategy for the last 18-24 months to simply ignore and bypass the traditional lending community and focus solely on owner financed deals. There's really nothing of use in the lending community (in my opinion) for long-term investors.
On the other hand, right now is one of those unique times when cash is king, and cash-paying investors are "cleaning up" by buying properties at 40%-50% of their realistic value. Lenders I talked to confirmed those figures - deep pocket, cash paying investors are buying portfolios of bank-foreclosed houses (10 to 20 at a time) for as little as 40 cents on the dollar (even at realistic appraisal).
There's always another property, and the deal of the century comes along about every two weeks (I think that's from Gary Keller's book). No sooner did I cancel the contract on this deal then I came across one equally good, and within a mile of it. That one had just gone under contract, but it had owner financing candidly mentioned (10% down, 7% rate) right in the advertisement. It was in turn-key shape, and while it was significantly more than the one I had pursued and was already under contract - it was a wonderful beakon to demonstrate to anyone reading this that no single deal, whether obtained or failed to be had is the end-all of one's investing. Just jump back in and start digging again.

(I do have to admit I am disappointed, though...it was a darned cool house!!) Put a smile there -- time to get this horse moving again.

Status Update on Financing

2009-07-24T07:42:00.003-05:00

So, sixty days into the financin search. Let's see where we stand...

FHA 203K is out. The main program is only for owner-occupants now. The loophole for a non-profit requires that the housing rehab entity be in the non-profit for two years before applying.

USDA financing...no window. Main program is for owner-occupants only. The provision for rental housing providers requires a multi-unit property, and appears to require the borrower to live in one unit.

Conventional - nearly every conventional lender I approached is still holding to the 4 properties/4 mortgages or less requirement even though Fannie Mae loosened up the requirements.

HomePath/Homesteps - referred to them as the holy grail or investor financing. Supposedly have a 10% down program. That's only for the first investment. With more than 4 properties, they want 25% down and --- get this --- 3 to 6 months reserve for payments for every property I own! In my book, they are the antithesis of a creative lender.

Found at least one portfolio lender that would lend even though I have more than 4 properties/mortgages, but they won't allow secondary borrowing of any kind. The down payment requirement was 25% to 30%, and it had to come from my cash. They would not even allow a partner to put up the funding unless they were on the loan and deed. The potential private lenders I've approached do not want to be on the 1st mortgage, nor on the deed.

Most every portfolio lender I've uncovered is really a hard money lender which I won't use. It appears that basically, banks aren't really lending on mortgages. If they can't sell the mortgage, they won't offer it. It may not help my financing situation, but it's certainly illuminating to see how our banking system is really doing business now. Once upon a time a bank took in your money as a deposit and lent it out in the form of loans. Apparently, that's not happening right now...perhaps on credit cards, but not on mortgages.

My recent foray was to look at Farmers Home Administration loans. They are clearly owner-occupant only. The loan must be for the primary residence and no other dwellings can be owned.

My plan is to keep digging into some more banks, but really need to turn my attention to private lenders. Anyone want to put $84,000 to work or know someone who does?

Views the Palm Springs Property and Chatted with the Agent About Financing

2009-07-02T09:31:00.001-05:00

Went to view the Palm Springs house yesterday and chatted with the Realtor about the financing situation. I clarified that with more than 4 properties, most conventional lenders won't touch me.

He confirmed that the real estate industry is really up in arms because the stimulous money (you remember...that nearly 1 trillions dollars given to the banks...) is not being used for what was required of it. Banks are doing everything but lending.

He's going to scan his network of contacts to see if he can find any creative lenders with portfolio loans. Better yet, I suggested, individuals who might be interested in getting a good return. Divide and conquer - 10 people willing to lend $10,000 will put the deal together, although that would be logistically messy!

My next stop is the Farmers Home Administration to see what their current state of lending affairs is for rural communities, but non-owner buyers.

Wheel Spinning Right Now

2009-06-17T08:47:00.002-05:00

I haven't uncovered anything under the rocks yet. It really is a tight lending market beyond belief. Here's what I've run across so far after talking to about a half dozen lenders:

While Fannie Mae and Freddie Mac loosened up their requirements as to the number of properties one can hold (to 10), lenders have not followed suit...at least not the ones the brokers I've contacted deal with. They are still restricting to a mere 4 properties owned and/or mortgages held. That disqualifies me from virtually all of the well-known lenders.

The loophole I was pursuing with FHA looks closed. Yes, a non-profit can apply for an FHA 203K rehab loan, but they must have at least 2-years of low-income redevelopment and rental provision experience. That's not in my history, and I would be just forming the non-profit.

I'm still trying to get word from USDA on the rural rental lending guidelines to see if there's any stipulation for a single-family unit. The instructions denote multi-family (4 or more units), but I'm trying to find out if there are exceptions.

I just got an offer in the mail from from a national lender for up to $15,000, unsecured for up to 60 months at a supposed 9.88% fixed. Not great, but could be useful for the rehab funds. I believe in divide and conquer, so this lead, while not all that great could go in the file earmarked as a credit line for the rehab....maybe down payment funds if I can find a lender who doesn't care about the source of down payment.

Anyone interested in lending $84,900?

First stop on the financing quest

2009-06-08T07:42:00.002-05:00

You utilize every resource available to you. I began with my circle of influence.

My first stop was a friend and business partner who indicated an interest in putting about $25,000 to work. If he's willing to do it, the amount would be sufficient for the 25% down payment if I could get a bank first mortgage. In fact, it would be enough for the down payment and a portion of the renovation costs. No commitment yet.

My second stop was the realtor who sold me my personal residence. He used to play professional football and is still connected to that industry. Like I said...you use every resource you have at your disposal! This contact is really promissing because of his connections. He had indicated on a number of occasions that he knew players who were interested in real estate but who didn't want to buy properties themselves. So, I candidly mentioned I would be interested in talking with them and that I would be interested in amounts anywhere from about $18,000 to approximately $100,000 secured by the property.

My job is to keep on top of him - apparently pro football players are exceedingly busy, even off-season, and he suspects it will take a while to connect with any of them.

I also contacted a mortgage broker in Palm Springs who was supposed to be a "creative" lender who could put deals together where others couldn't. When I explained my situation, he didn't skip a heartbeat in telling me he couldn't deliver. While he did have investor financing that required 25% down, the number of properties I hold disqualifies me for his financing sources. He doesn't do FHA 203K loans, so I need to look for another lender for that. He does do USDA loans, but knows nothing about what I believe is a rabbit in a hat I want to pull - namely utlizing a loophole in USDA loans set up for non-profit corporations. You see, many (not all) USDA loans are for first-time home buyers. But, there is a provision for non-profits who provide reasonable housing to apply for loans. Between this being a somewhat historic rehab, somewhat rural, and that I can rent it to seniors or modest-income folks, I think there's a chance for one of those loans if I form a non-profit corporation. Alas, he knows nothing about that avenue, so I have to do some groundwork there first.

So, out of the gate, I've planted two seeds for private money, but no commitments yet. One lender seems to have been a waste of time.

Week one ends with nothing solid.

A personal creative financing quest

2009-06-01T10:01:00.005-05:00

Does creative financing still work? Right now? In June of 2009, in the worst economic climate in 60 years?

I'm going to set out to prove that it does, and at the same time create for you an incredible learning experience on how to finance properties.

With that in mind, let's take journey together. I'm going to get away from the instruction for a while. Basically, for the next several weeks, I'm going to chronical my personal, real-world, nearly real-time experiences trying to put the financing for a deal together.

Those of you who know me personally, know that I am a big fan of Robert Allen's classic book from the 1980's, The Challenge. I'll go so far to say that, in my opinion, it's probably the single best beginner's real estate investing book ever written, because it takes away all the excuses people usually create for themselves. I won't ruin the book by telling you what it's about, but I will say, "get a copy!"

That said, I always wondered what it would be like to be part of such a challenge, and I've often toyed with the idea of creating one of my own. So... here I am...in a bassackwards way...challenging myself, publically. Tounge in cheek, I say, it's time to "put up" or "shut up", put a bit of my reputation on the line, and see if I can do what I know how to do. And, all the while providing you with a roadmap for how to do it yourself!

You see, I believe with every fiber of my being that knowledge of creative financing is the most vital tool a real estate investor can posess. I professed that - even during the crazy bubble of easy money...those days where you could get 110% financing for any purchase just by fogging up a mirror when you breathed on it. I knew that "easy" conventional money was fun, but that it wouldn't last. What's an investor to do now - when, even if an investor loan is available, you probably wouldn't want the terms? In my book, it's right back to what I've preached all along - the assertive use of creative financing.

The question is, does creative financing still work? In particular, can it work in this real estate climate? The skeptics - even lots of the supposed investing gurus - say that none of the old-school creative financing stuff is viable anymore. The worst skeptics say that the days of real estate, as a viable investment are over. Do you believe that drivel? What the skeptics don't understand, never did understand, is that mortgage bubbles aren't the secret to successful real estate investing. Our secret weapon is knowledge of creative ways to finance purchases.

I'm going to set out to prove that creative financing is still the investor's secret weapon. My objective is to show, once and for all, through personal experience and illustration that creative financing can still be done. My objective is to demonstrate - to you...through this deal - if I can creatively finance a purchase, in this lending climate, in this economy, in this housing market, then it can be done at any time, and by anyone. The excuses will be torn down once and for all.

So, here's what I'm up against;
the property is a single family home in the Palm Springs area. It's a keeper, about 2/3 rds of market value, with a purchase price of $84,500. It will need about $15,000 in rehab which I'm also trying to finance.

Here are my basic parameters:

The seller accepted my contract which cast a 120 day net to obtain financing suitable to me.
The seller does have the right to take backup offer which can accelerate the 120 days to 30.
I am commited to no more than 5% of my own money into the deal.
There is no avenue at the moment for seller financing. The seller and I have been down that road three times - no owner carry, no lease option, no land contract. He needs the cash proceeds. So, it appears the funds will have to come from the outside.
I won't utilize hard money because it's too expensive for a long-term hold. Can't stand hard money anyway!
I never, never, never look to my personal residence or retirement account to pledge as collateral for an investment. I've always been commited to the idea that your personal residence and your retirement (liquid) funds should remain sacred.
Beyond that, I will investigate any combination of financing that I can put together to make the deal work.
Did I mention that this is an out-of-state purchase, in one of those notoriously down markets in California? Salt on the wound there.

The clock is already ticking...........

Renting as a form of Investment Financing

2009-05-20T12:24:00.003-05:00

With last week's final notes in mind, let’s talk a bit about this idea of renting a person’s property as opposed to trying to buy it. I think too many investors shy away from renting or leasing because they don’t perceive any economic benefit. To them, if they don’t own it, it doesn’t count. Nothing could be further from the truth.

The Bundle Rights and Controlling a Property
In reality, ownership is just a social construction. What I mean by that is that man has invented the concept of ownership, which is nothing more than a system by which a huge bundle of rights is transferred from one person to another. But, renting or leasing is also a transfer of rights…just not as many. The important thing to the investor, is control – not necessarily ownership.

Here’s a bizarre way of thinking about this. If you were on your last day of living, it doesn’t matter whether you live in the Taj Majal or in a singlewide mobile home. You can’t take it with you. So, this supposed “ownership” is not permanent; ultimately, the benefits you enjoy last only as long as you do. There are many places on the planet (Hawaii is one of them) that recognize this transience, and never grant ownership of real estate, but rather convey it only on long-term (i.e 99 year) leaseholds.

There are also many times when the economics of renting something make far more sense than paying the full price to buy. MBA types with degrees in finance know this intrinsically. I’m going to assume you don’t, but let me prove the point.

An Extreme Case
Would you see the benefit in this:
A condo owner has a vacant two bedroom unit in a nice professional community; let's say it's worth about $125,000. He owes no money on a mortgage, but can't afford the carrying costs of utilities, condo fees, and property taxes. This owner agrees to rent it to you for just the amount to cover the condo fees and taxes, which are, let's say, $275 total. Can you see the benefit of being able to rent that nice property for a mere $275 a month as opposed to trying to buy it? The mortgage along would run $750! And, you'd have to add the $275 to it since you'd be responsible for the taxes and other costs anyway. Which would you rather pay?

A More Realistic Scenario
Right now, in Phoenix, it’s fully possible to lease a $199,000 house for about $850 a month. Even at a 2% interest rate, allowing for taxes and insurance, you can’t beat monthly cost. And, property isn’t really appreciating in Phoenix right now, so buying doesn’t get you much in they way of that benefit. At 7.25% interest, the carrying costs of a $199,000 mortgage, with taxes and insurance would be about $1500 a month. As a result, renting that property saves $650 a month, or $7,800 a year.

With a little bit of savvy marketing, you could probably sublet that property for $975 a month, for a $125 a month positive cash flow. If you tried to do the same under the mortgage I just mentioned, it would be a $525 a month loss! It doesn’t take a Harvard MBA to see the advantages!

What to Look For
Working this technique takes a couple of things. First, you must ensure the owner allows you to sublet the property. You also don’t want to pay any more getting into one of these deals than is customary for renting a property. In most markets, that’s a 1-month security deposit, and first month’s rent. If a seller wants double security deposit, or first and last months rent plus security, they are probably not motivated enough. You need to find the person who isn’t trying to profit, but has a pressing need that you can solve…and is glad for your help.

Coaching Slots Available for Summer!!
Right now, I am taking reservations for private training and coaching for folks during summer. Spaces are limited! If you are working on deals and need guidance, or trying to learn the world of real estate investing and want one-on-one help, give me a shout:

william@thecoasttocooastinvestor.com
614-886-8233

Financing (Part 8) - How to Think Like a Creative Financier

2009-05-13T13:52:00.002-05:00

Today, I’m continuing my multipart series on how to finance properties, but I want to take a bit of a different approach in this post. Let's take a step away from specific technique for a moment (in my next blog post, you'll clearly see why), and look at the backdrop of what makes creative financing possible.

During the heyday of low interest, everyone-qualifies for a mortgage conventional financing, nearly anyone who had a desire to buy a second home or investment could. But, times are different now, and the sub-prime mortgage game is over, probably dead and buried.

As I noted in the last postings, it’s difficult for even the best-qualified investor to get decent investor financing for a purchase right now, and when they can, they probably don't want it because of the terms. Just recently, I came across a supposedly "liberal" lender...a well known outfit in the forclosure financing game...who wanted 6 months of reserve for each owned property in order to finance through them!

And, sooner or later, no matter how qualified you are, you will run into a ceiling on what you can borrow conventionally. So, if you want to continue investing past your own qualification ceiling, you need to find additional ways than just banks and mortgages companies to finance your deal.

So, the successful national (or local) investor needs a repertoire of tools at their disposal for the financing of property purchases. These are the kinds of tools I've been discussing, and will continue to provide to you.

So, with this different approach for this blog entry, I want to begin today by introducing you to two concepts that I think are absolutely critical to your understanding of creative financing…and to investing in general.

Creative Thinking
Part of the process of financing properties is creative thinking – thinking outside of the box in terms of how you craft a deal.

The Don’t Wanter
If you’ve been around real estate investing for any time, you’ve no doubt heard about dealing with motivated sellers. In fact, the bottom line on buying a good investment is generally not in the property, but in the situation.

During the go-go buying frenzy in which people were literally tripping over each other to buy something, it was not uncommon for a property to sell within hours…no sign, no MLS listing, and for far more than it was worth. In fact, I was just reading in Kiplingers today that speculative buying in Bakersfield, CA caused the average price of a property to go from $99,000 in 2002 to over $280,000 in 2005. That, of course, was not sustainable, and you simply can’t win the investment game that way. And, as we know, many, many wanna-be investors have gone belly up after chasing those kinds of deals.

Instead, you need to listen to the age-old sage of investment buying, which is to make your money going into the deal. Or, to put it another way, an investor buys with the expectation that what they are buying will go up in value.

That kind of buying right inevitably involves working with a seller who is in need of selling, and helping them to solve their property-related problems.

Now, this is where I depart from the myriad of investors, who in my opinion, are more of the vulture mindset. So often investors are labeled disparingely because they have no qualms in taking advantage of people who are down on their luck. I’d go so far to say that vulture mentality among investors is more the norm than the exception…and quite frankly I don’t want listeners and students of mine going down that path.

But, you can build yourself a profit while helping other people --- it’s the age-old win-win. In fact, I believe that you will find your highest and best long-term profit within the solution to the problem that the seller needs.

Case in Point
A seller has moved out of state and is saddled with 2 house payments. It’s been 5 months with the property on the market, and no bites. The seller is facing another $950 house payment, their savings are depleted, and they don’t know what to do. As an investor, perhaps the best choice you could offer them is to rent their property for enough to cover their mortgage (combined with absolutely no rent hassles) as long as they allow you to sublet to your own tenant.

If this was a newer property, it’s a far better solution than trying to discount the price --- because they probably have no equity, and discounting is not a viable option. Most people could not sell at a loss and write a check to sell their property, particularly if a 6 or 7% real estate commission was involved. Under a rent/sublet arrangement, you get the property under immediate control, can make some monthly cash flow - - and they are immediately relieved of the burden of the house payments. Combine this with an option to buy (which I'll discuss in a later blog post) and you could have the benefit of control and cash-flow now and equity later. It's truly win-win!

Another Entrepreneurial Opportunity - the Import/Export Business

2009-04-01T12:57:00.004-05:00

Make Money in The Import Export Business
Today, I am going to take a sideroad off the real estate highway for just a while. This isn't real estate-related, but since we are all opportunity seekers, I'm promoting it just the same. Better than that, I have an online class coming up that can teach you how to do it!

Those who know me well know that I'm not just about real estate, but about empowering home-based entrepreneurs in a variety of fields. Perhaps you follow my other entrepreneurial blog The Entrepreneurial Highway (http://entrepreneurialhighway.blogspot.com/) about businesses other than real estate. Anyway, right now, a lot of people are leery of the economy and real estate isn't on their radar right now. That's OK...anyone can respect that. There's a world of opportunity out there; not just real estate....this is one of my pet businesses, and I want to make it available to you.

An Ideal Home-Based Business
How would you like to make thousands of dollars, get access to tax-deductible travel, interact with cultures all over the world, and do it all with little or no risk?

If you answered, yes, yes, and yes, the the Import/Export business is what you've been looking for.

Import/export, or International Trade as it's often referred to is one of those ideal businesses that so many people are searching for. Imagine a business where you can make hundreds - or even thousands of dollars a month - right from home and your computer.

Picture a business where you can involve yourself with amazing products and cultures from all over the world, make money, and even be able to travel (if you like) in a tax-deductible way! Envision being able to buy products that sell themselves and sell them for 10 or 20 times what you paid! World traders can do that.

Learn Import Export Online
At the request of a ton of people who missed out on a prior class, who've been begging me to teach this class for them, I'm going to offer it online starting on Wednesday April 22.

In the course, you will learn the how to import and export and will be introduced to how put trade deals together. Not only will you learn, but through hands-on real-world projects, you'll be able to actually identify an international trade opportunity and bring that opportunity to fruition. And, I'll personally counsel you on how to apply the skills you are learning to work your chosen trade deal. In other words, if you are willing to take on the challenge, you can put together your first trade deal right during the class...who knows there might be some nice dollar signs in that first deal!

And, if you follow the podcast or blog, you know that I don't skimp! The class runs a full 12 weeks - that's 12 lessons that will teach you the full A-Z of the import/export business....hands-on...with my private feedback when you need it.

It's fully online, so you can work on the lessons whenever and wherever you can access the Internet. That's the beauty of an online class.

The best part is that I'm keeping the cost way, way down. I'm beta-testing an online course platform, so if you are willing to be a bit of a "guinea pig" with the software, you can get into the class for only $179. That's more than most people pay for a one-day workshop, and this is going to run a full 12 weeks.

Please pass this message along. There are a lot of people out there right now who need ways of making extra income, replacing their income and so forth. This may be exactly what they are looking for.

Details
Course begins Wednesday, April 22, 2009
Course Tuition: $179 (can be paid by credit card)
To register, or if you'd like to reach me to ask questions, feel free to call or email me (614) 886-8233 and whflood@yahoo.com I'm happy to answer any questions you have.

If You Are Facing Foreclosure

2009-02-25T10:54:00.002-05:00

If you are facing foreclosure....READ THIS!
If you know anyone who is facing foreclosure...READ This!
If you can pass this along to everyone you know who might be effected by a foreclosure...GET IT IN THEIR HANDS

This is just a quick post - and I want to do my part to spread the word about a way to stall foreclosure that's getting a lot of press.

Those who know me pretty closely know that I have an axe to grind over what many are calling the "sins of Wallstreet" being paid for by mainstreet. You see, this foreclosure mess isn't really about lending as much as it is about Wallstreet wanting to get their hands on, and monetize the one sector of the economy they couldn't formerly touch....the real estate world. They found their way, though, and it was through the world of "mortgage backed securities" that took mortgage instruments and diced and sliced them up into lots of "servicable" pieces.

You see, most people think that a bank is holding the mortgage they obtained. In truth, all kinds of pieces of it were sold off to various investing entities. The interest stream was bought by one outfit, and principle stream by another. The origination put money in some hands, and other fees went somewhere else. To make matters worse, these slided and diced pieces were packaged with pieces from other loans into these "mortage backed securities". It takes a forensic accountant to figure out any of this.

And, don't get me started with the hundreds of billions that were given to...added like salt to a wound...to the Wall Street. They made money going and coming out while individual buyers are paying the price losing their properties.

But...in the morasse of slicing and dicing of the loans apprently rests one of the best foreclosure-stalling strategies available to a homeowner. It's in demanding that the lender "produce the note" or simply put....dig up the note that supposedly shows a particular person is the borrower on a particular property. Apparently, they can't! Producing that paperwork can take months of research, and a foreclosure can't take place if they can't prove that a person owed the money or is the borrower of record.

Here are a couple of video links to explain it. I'm trying to do my part to spread the word about this...put some power back in mainstreet!

http://cosmos.bcst.yahoo.com/up/player/popup/index.php?cl=12195482

http://www.youtube.com/watch?v=kswEb-iVsms

I am not a lawyer, and I am only reporting what I hear with this, but my jaw dropped when I did, and I knew others needed to hear about it. PASS IT ALONG!

Financing (part 7) Wrap Arounds Loans (also known as all inclusive deeds of trust)

2008-11-03T08:25:00.002-05:00

A wrap around loan, commonly referred to as a wrap envelopes an existing loan and any equity into one loan payment. This is sometimes rather difficult process to grasp, so if you would like to ask any questions or seek clarification on key points, email me at whflood@yahoo.com and I will be happy to answer your questions.

So...How Does a Wraparound Loan work?
Let’s say a seller owns a property worth $100,00 and has an existing loan of $60,000. That loan is at 6% and has 23 years remaining to pay. The payment is $400 a month. He is willing to finance the remaining $40,000. But, rather than setting it up where you take over the existing loan and he accepts a second mortgage, he wants to set it up as a wraparound loan. It would work like this:

He sets up the loan terms on $100,000 at 7.5% for 30 years, payable at $700 a month. You pay him the $700 each month. He pays out his original mortgage payment of $400 and keeps the remaining $300 for payment on his equity.

You may be asking, “what’s the difference between the wrap and him just accepting a 2nd mortgage?” Actually, there are several reasons. First, he is in a more secure position because he is ensuring the underlying first is getting paid. And, if you noticed an odd detail or two, it’s actually to his financial advantage – he pays out at 6%, but collects at 7.5%. Thus, he is getting 1.5% on money that isn’t even his! And, the existing loan is due to be paid off in 23 years, but you would be paying for 30 years, so he gets 7 years of money even when the underlying loan is paid off!

Now, wraps can be tricky and there are some pitfalls such as the original owner failing to pay the underlying loan. It’s a good idea to get a trust company or bank trust office involved to make sure everyone is doing what they say. You wouldn’t want to make your payments only to find out the seller isn’t paying the underlying loan! So, you’d set it up so your payment would be made to the trust office. That office would, in turn, pay the underlying loan and send the seller his proceeds every month. It will cost a few dollars a month to set that up, but it is well worth it!

Next time, we’ll be continuing the discussion on creative financing by looking at Land Contracts, Options, Lease options & lease purchases, Private money & partnerships (equity sharing), Hard money, Selling notes, and the use of unsecured credit lines.

Until next time, this is Bill Flood, your host for the Coast to Coast Real Estate Investor. Live your real estate dreams!

Financing (part 6) - Subject To's

2008-06-24T17:00:00.003-05:00

In the place of the non-qualifying (or qualifying) assumable loan is another – more complicated – strategy for taking over existing loan obligations. It is commonly referred to in real estate investing circles as taking the loan "subject to" the existing mortgage.

A purchase contract can be written to buy the property “subject to” the existing loan, which means taking over the obligation of the owner. While this may sound similar to an assumption, it has a clear difference. With an assumable loan, you are contractually taking over the obligation to pay. The loan, in essence, transfers to your name. When a loan is taken “subject to”, the original borrower is actually still on the note and obligated to pay if you don’t. You can see that would be a dicey situation, and it’s best for both parties in the transaction to have legal advice as to what’s involved.

The Due on Sale Clause Landmine

Commonsense legalities aside, there are a few landmines related to subject-to deals. Since most loans today have a due on sale clause, which means the loan balance is due and payable upon sale or transfer of the property, taking over a loan "subject to" can still cause that clause to be invoked which can lead to a big financial mess. Because of this, subject to strategies are best done with the advisement of your attorney.

There are a lot of investors today who use the subject-to approach to take over people's payments and avoid having to get new financing. Typically, these investors are targeting homeowners in the early stages of defaulting on their loan. Their idea is to either give the owner some cash and/or take over the payments without formally assuming the loan. Their general game plan is to either:

a) try to mask the transaction from the bank so the bank won't know the property has been transferred, which would potentially lead to the loan being called, or;

b) simply not worrying about the bank at all, doing the subject to deal, and operating from the premise that the bank won't call a loan that is being paid on time, etc.

Both of these approaches assume that a bank will ultimately be or feel better off with an investor who is keeping up the payments rather than a homeowner who is slipping into foreclosure. Along with that belief is that a bank won't call a loan when it's performing, so the due on sale clause is somewhat meaningless....that calling a loan never happens when the payments are being made, and certainly not in this market.

Banks Do Call Loans - Don't Let Anyone Tell You it Never Happens

Let me tell you -- banks can and do call loans due and payable all the time under subject-to and similar arrangements. I just came across one in Phoenix within the last month, with the investor faced with the foreclosure. More important - it's really the original home seller who is now faced with the foreclosure because his name is still on the loan! Again...lots of landmines, and this technique should be guided by some professional legal advice.

But it's Popular with Wholesalers

I'll also note that investors who utilize the subject-to approach regularly are principally short-term "flipping" types of investors. The reason why the due on sale clause doesn't worry them is that they don't plan on holding the house long enough for the bank or anyone else to uncover that it's been transferred. These types of investors are in, get their money, and get the property in the hands of someone else before any of this potentially matters. But, for the long-term investor who wants to build wealth, the chances are, the due on sale clause is likely to rear it's head at some point. Then, you either have to negotiate with the bank to put your name on the loan (assume it) or get refinanced real quickly.

The Bottom Line

So, the bottom line on subject-to deals: useful for the short term investor, not so good for the long-term holding-type investor, and always have a lawyer in your corner.

Financing (part 5) - Assumptions

2008-05-21T18:59:00.003-05:00

To assume a loan means you are legally taking over responsibility for its payment. In other words, you are agreeing to take on someone else's loan, transfer the obligation to you, and make the payments from that point forward. When available, assumable loans are just about an investor's best friend!

The Good Old Days!
There is an issue, however. Prior to the mid 1980’s all government loans were assumable, and many conventional ones were as well. At one time, there were even many "non-qualifying" assumable loans for which you only had to sign your name to take over.

Assumable Loans Today
By the end of the 1990’s most existing assumable loans were either paid off or refinanced away. And, nearly all new loans, conventional or government had clauses denying the ability for someone to assume the loan (these are called a due on sale clauses). So, you have the compound effect of most older assumables being gone one way or another, and new loans not allowing for assumption. Still, there are a few of the older assumables still around, and occasionally you'll find them.

What's On the Horizon
Today, however, we see a resurgence in assumable loans both government-backed and private. Essentially all of them are what are known as “qualifying assumables” which mean that the purchaser has to go through some semblance of qualification before taking over the loan. In that pre-1980 era there existed that non-qualifying variety, where all a person had to do was sign their name to take over the note. Those days, unfortunately, are gone. Today, even when you can find an assumable loan, you'll be scrutinized as to your income, debt, credit and so forth. The good new is that qualifying for an assumable loan is generally easier and less thorough than for getting a brand new loan.

What to Look For
Perhaps the best-known assumptions are available with Federal Housing Administation (FHA) loans and Veterans Administration (VA) loans. Currently, FHA loans can be assumed with modest lender approval, but only for owner occupants. Investors may not assume them - but my belief is that will eventually change. VA loans can be assumed by anyone as long as they go through the qualifying process and are approved by the lender. It's also important to note that many conventional lenders (not government-backed) are offering assumable loans once again...of course, expect qualification to be part of the process.

Understand the Benefits of Assumable Loans
The beauty of assuming a loan is that you don't have to pay points, loan origination fees, and junk lender fees to get the loan. Keep in mind that with a brand new loan origination, you could get hit with up to 3% of the loan amount just for various lender fees and requirements. That's a hefty amount to pay in addition to a down payment. With an assumable, you only pay a small (often only a few hundred dollars) assumption fee. You don't even typically pay for an appraisal unless you want one! The bottom line is, it's a relatively easy form of financing to access.

It's All in the Numbers!
What's even more valuable is related to the math behind an existing loan. You are probably aware that in the early days most of your payment goes towards interest, with very little contributing towards the principal payoff. That ratio starts to change around year 7 of a 30-year loan, and by year 15, the principal and interest portions are equal. Past year 15 and the principal portion is the larger amount.

Often people get all hung up on the interest rate of a new loan in the current climate - say, 6.75% versus what's usually a higher rate for an existing assumable loan. Let's say, 8.25%. The untrained eye will alway say the lower rate would be the better deal. That may be the furthest thing from the truth. What if the assumable only had 14 years remaining to pay? With the new loan nearly all of your payment is going to interest (makes the bank fat). With the assumable, more than half is going into your principal paydown (basically the same as putting it in the bank!). And, you don't have 30 years to wait to pay it off -- you only have 14. Run the numbers and you'll find tens of thousands of dollars saved because it was the old loan-holder who paid all of that interest.

So, keep your eyes and ears open for assumability of loans. If you find one, look at the numbers. In most cases you'll find you have stumbled onto a real treasure.

Financing (Part 4) Owner Firsts, Owner Seconds, and Balloon Notes

2008-04-14T07:08:00.003-05:00

Structuring Owner Finanancing With Owner First Mortgages and Owner Held Second Mortgages

You start to get real resourceful with owner financing when you consider the ways you can address first mortgages and/or second mortgages in creative fashion. For example, an owner might not be willing to hold 100% owner financing, but want 30% down and be willing to carry the rest as owner financing. You might seek out the 30% you need with a bank loan or a line of credit.

In reverse, perhaps you can get a conventional mortgage for 70% of the purchase price, but don’t have the 30% down payment. You might be able to work out owner financing with the seller for that 30%, in effect making it a no money down transaction. Many banks don't like to do this right now, but that's not universal, and I predict that once the credit crunch is over, it will be a technique back is common use.

Balloon Loans

Generally, with owner financing the seller doesn’t want to drag out the payments for 20 or 30 years. In many cases, they are willing to take the monthly payments but want to be cashed out sooner, and being sensitive to their needs will help you structure financing that works for both of you (win-win). You’ll do this through the use of a “balloon” loan which stipulates that the balance is due and payable at a certain point before the loan is actually paid off.

Let’s say our seller above is willing to do owner financing. But, she doesn’t want to carry the loan any more than 7 years. So, there would be a balloon clause in the seller financing that states the remaining balance is due to her at the seven year mark. We can still structure the payments on a 20 or 30 year schedule to keep the payments low, but at year 7 we have to pay it off.

The tougher the credit market, the more valuable owner financing becomes - learn these techniques because they can make the difference between being able to finance and property and not getting it at all.

Financing (part 3) - Owner Financing

2008-04-02T18:59:00.000-05:00

Knowledge of owner financing techniques is what separates professional real estate investors from the speculators who, while they could (emphasis on could in the 2008 mortgage market) qualify for traditional mortgages really don’t know much about the real estate investment game beyond the commonplace.

Owner financing is the original form of creative financing. Historically, owner financing was actually more common than financing through institutions, and its important to note that. It’s only over the last 3 or 4 decades that conventional financing has usurped the use of owner financing and I have full confidence that owner financing will come back into vogue more now that the mortgage world is in tumoil.

What do we mean by owner financing? Well, perhaps a corollary example would help you understand the principles. Let’s say you find a classic car for sale for $10,000. The owner owns it outright and you want to buy it. But, you don’t have $10,000. So, you make an offer to the owner to pay $800 a month for 14 months. That totals $11,200 - $10,000 for the car and $1,200 as “interest” for the privilege of paying over time.

This is a simplistic example, and requires that the owner’s car loan be paid off for it to work effectively. As well, the seller will more than likely requiring some kind of security instrument that states he has the right to repossess the car if you don’t complete payment. But, as simplistic as it is, it shows how the process works.

Now, on to a property purchase. The principle works the same way. Let’s say you have found a seller of a property you want to buy. She owns it free and clear and is selling it for $70,000. Rather than pay her $70,000 in cash, or get a loan from a bank for $70,000 you suggest paying her $542 a month for twenty years at 7% interest.

She would get a good return (7% in this case), secured by something she knows and understands – her property. If you default on the loan, she can foreclose and take the property back.

How can this benefit you as an investor? You can acquire a property without the cost, qualification, and scrutiny of a conventional loan. You can get a below market rate while at the same time providing a better than market return to the seller.

What’s more important is that, in a tough credit market like we have now, where investor mortgages are like pulling wisdom teeth to get, you can finance a transaction. That means you get to buy and the seller gets to sell – which is what keeps deals flowing. Moreover, there’s a degree of likelihood that you won’t even need to qualify for the financing because it’s a function of whether the seller has faith in you or not – and, they probably wouldn’t know how to qualify you efficiently anyway.

So, you have a wonderful potential package of benefits – financing when you couldn’t get it otherwise, a good rate, and little to no qualification issues. At the same time, the seller gets the property sold, and gets a good return on the equity the economy has given her through her property. It’s a good case of the win-win.

Financing Part 2 - Insitutional Financing

2008-03-12T11:15:00.002-05:00

Traditional Mortgage Instruments

Let’s begin by looking at the traditional mortgage marketplace. No investor would turn their back on conventional financing, particularly when the mortgage marketplace is good. The problem is, right now, it’s not, which is why I’ll be spending so much time on upcoming posts about alternative financing. Still, it only makes sense for investors to know as much as possible about traditional mortgages, particularly when it’s so tough to obtain conventional money. The more you know, the better off you’ll be when seeking out conventional money.

Traditional mortgages can be broken down into 2 categories:

Government-backed loans underwritten by either the Federal Housing Administration (the FHA) or by the Veteran’s Administration (the VA) and conventional mortgages that are, in essence underwritten by investors.

What’s important to note about FHA loans is that the organization opened it’s doors up more for second home/vacation home purchases over the last decade, and even developed more programs accessible by investors. It’s somewhat the same with VA – programs available for purchases other than one’s primary home are now available.

Conventional lending over the last ten years went absolutely crazy. Qualifications all but diminished, interest rates fell to a low of around 4%, and money was creatively offered by even the biggest lenders. As short as two years ago, it was common to see investor money for 100 to even as high as 125% of the purchase price being offered. But as quickly as those lenient doors opened, they closed within these last two years. Common terms for investor financing today is 10% down, with several months of reserves – and that’s if you are a good credit risk! I will note, however, that the credit markets are easing a bit and some more creative terms are beginning to pop up. I’ve recently seen multiple lenders offering a product based on 70% of the appraisal value as opposed to 70% of purchase price. Thus, if you can buy low enough (or are dealing with a rehab project) you can get virtually the entire thing financed.

To be effective with conventional lending, it’s important to understand and know how to work with first and second mortgages. Most people think that if they want to finance a property with 100% financing, they need a loan for 100% of the purchase price. In reality, the more likely scenario would be a first mortgage for, say, 80% of the purchase price, and a second mortgage for 20% of the purchase price. This is called a blended loan, and the rationale behind them is that in a case of default, the holder of the first mortgage is in a more secure position since the house is worth more than the loan balance. The holder of the second mortgage is in more jeopardy because their loan represent that top 20% that could get wiped out in a foreclosure auction with a low-ball price. That’s why the second mortgage has a much higher interest rate than the first – because it’s riskier.

It’s also important to note two additional things. First, is that the lower the first mortgage balance is to the property’s value, the more likely you will get qualified. In other words, an your chances of getting financed for a 70% first mortgage are higher than for a 90% first mortgage. If you had the 30% in cash to put down, most banks would be willing to talk with you regardless of a lot of negative financial factors you might have. If you don’t have the cash, that’s where the second loan comes in, and the qualification really takes place more on that loan. The next item is that a blended loan will help you avoid the payment of mortgage insurance, which is generally required on a first mortgage with a balance of higher than 80% of the properties value. That’s really an unnecessary expense to your monthly payment and you should look at ways to avoid it.

At any rate, being able to talk coherently and deal in combinations of loans is your route to securing traditional financing for higher loan amounts. You can think in terms of many combinations – here’s just one example: a 70/25/5, which means a combination of a 70% first loan, a 25% second loan, and 5% down.

It’s important to note that blended loans – at least those where both loans were offered by the same lender have virtually disappeared in this credit crunch, but I have faith they will return in short order.

Another piece of the traditional lending puzzle is that of home equity lines of credit and home equity loans. The difference between the two is fairly simple. Home equity lines of credit are much like credit cards. You are extended an open line of credit. You pull from that line as you need it. As you pay down your balance, the payment amount drops and your available balance goes up accordingly. With a home equity loan, it’s a fixed loan, you are loaned the money, and you have a fixed period of time to pay it back, generally with fixed payments.

Both home equity lines and loans are good options because they are relatively easy to qualify for, and in most cases can be had with little to no lender fees. Whereas a mortgage for $70,000 might cost you $1500 in appraisals, title insurance, underwriting and other “junk” fees, a $70,000 line of credit may cost you a mere $300 in underwriting.

The downside to both is that they require an equity cushion in the property – normally you will have difficulty getting a home equity line or loan for more than 90% of the property’s value if it’s a residence, and it’s common right now to see 80% for an investment property. It’s also important to note that they will be at higher interest rates than standard mortgages. Figure a full 1-3% in interest rates over the cost of a regular mortgage in most cases.

One of the great benefits of a home equity line for an investment purchase, is that when you pay down the loan and open up your available credit, that’s money you can access for another purchase.

And, both lines and loans are good ways to pull your own equity out of a property for purchases or other investment needs. One of the really amazing things about holding property over the long haul is that you don't have to sell a property to get cash from it. With sufficient equity, you can refinance and pull out cash and keep the property too! It's a clear case of having your cake and eating it too. Plus, money borrowed in this way is not taxable. If you sell a property, you pay hefty taxes on the profits. If you refinance, it's tax-free money!

Until next time....

Contact me at william@thecoasttocoastinvestor.com if you have any questions you'd like answered.

Financing Investments in the Current Climate

2008-03-03T06:18:00.002-05:00

Hello everyone, this is Bill Flood, and welcome to another edition of the Coast to Coast Real Estate Investor.

Today, I’m going to begin a multipart series on how to finance properties. Knowledge of creative financing techniques is a dying art, and given the current credit crunch is absolutely necessary to finance your acquisitions. I want to do a brain dump on how to finance deals whether it's with conventional finacing or with the dozens of other techniques that don't involve banks and mortgage companies!

Let's go back 5 or 6 years. With the advent of mortgages at 5%, interest only, and the only qualification being you needed to fog up a mirror when you breathed on it, other forms of financing really fell by the wayside.

But, times are different now, and the sub-prime game is all but over. It’s essentially difficult for even the best qualified investor to get 100% institutional financing for purchase right now. 95% financing is remotely available to those with good credit, income and assets, but even that is shrinking to the point of non-existance. Ten percent down is the norm for those with good credit, and often lenders want 6 to 12 months of payments in reserve. You can see that, right now, institutional financing is problemmatic at best - useless at worst.

Another problem, which is exacerbated by out of state buying is that sooner or later, no matter how qualified you are, you will run into a ceiling on what you can borrow conventionally. So, if you want to continue investing past your own qualification ceiling, you need to find ways other than banks and mortgages companies to finance your deal. Buying a second home with conventional funding is still pretty do-able, so if you haven't pursued a second or vacation home, that's something that should be on your radar. Getting into your first true investment property, on the other hand, will pose lots of new challenges related to financing.

So, the successful national (or local) investor needs a repertoire of tools at their disposal for the financing of property purchases.

Creative Thinking
I am always amazed at the current crop of supposed real estate gurus who are touting that the old-school real estate methods are dead. This self-proclaimed experts want to convince you to buy expensive websites, subscribe to high-dollar leads subscriptions and a myriad of other tools that you supposedly can't live without in the current real estate game. In fact, the reality is that the old school folks had it right all along! Go back to the early books on real estate investing and you will find all you need to be successful investing...over your lifetime. Sure, things change, but the underlying bedrock principles never change.

One of those bedrock skills is having a creative mindset when it comes to making deals - and in particular, to financing properties. Bank financing is not the only way to go, and you need to be open to many different avenues for how you can put a deal together. For example, over the next few editions, I'll be talking about lease options, least purchases, owner financing, credit lines...this list is quite long.

A creative mindset recognizes that there's more than one way to get a job done. It's the old adage of "looking outside of the box" for novel ways of solving a problem. By way of example, could you actually be better off renting a person's property as opposed to buying it? Could there be a way of making payments to the owner at zero percent interest? Could you control a property for several months without having to make payments? These are all the kinds of strategies I'll be discussing.

Win-Win
Another of the old school philosophies that I consider to be bedrock is that your deal making needs to be win-win...that is, to benefit both parties. I'll take that thinking one step further and suggest that your highest and best deal will be found when you uncover and try to solve the seller's problem.

Right now, there are thousands of people all over the country with their budgets strained due to escalating mortgage payments...losing their homes to foreclosure...who had to move out of state to pursue direly needed employment but who've now been saddled with two house payments. You can come in and solve those problems in a way that truly helps the other party while at the same time creates a winning opportunity for you.

This, again, is where I differ from the current crop of gurus who seem to be all about grabbing as much equity as possible so they can flip a property and take a Caribean cruise. I've seen vulture investors who think absolutely nothing about putting the proverbial "little old lady" out in the street through a one-sided deal that benefits them while taking advantage of the homeowner...and there are gurus out there who have no trouble in professing such tactics. That's unfortunate, because you don't have to be a vulture. Win-win always has been, and always will be the best strategy by which to operate your investing, and is the crux of nearly any kind of creative financing. I'll say it again...you don't need to take advantage of people. You will find your highest and best deal by solving the problems of the seller - that your best profit-making solution will be found in the solution of the owner's problem if you have a creative eye.

So come with me over the next couple of weeks and learn dozens of ways to put deals together with and without banks. From this point forward your investing need not be driven by what's going on in the mortgage market!

Get in touch if you have any questions:
william@thecoasttocoastinvestor.com

Until next time, this is Bill Flood, for the Coast to Coast Real Estate Investor. Live your real estate dreams!

A Summary of the Free Services Available to You Through the Coast-to-Coast Real Estate Investor

2008-02-04T17:47:00.000-05:00

I wanted to spend some time giving you a central description of all of the free services that The Coast-to-Coast Real Estate Investor offers. All of these I’ve mentioned at one point or another in my blog or Podcast, but I thought it would be prudent to give you all of them in one central place. It just seemed important to collect everything into one location where I can put it all out there to you.

Let me begin with the Coast-to-Coast Real Estate Investor website. The site is very much under construction, as I have concentrated most of my energies on the blog and Podcast. What you’ll soon find on the website is a central source to access all of the Coast to Coast Real Estate Investor resources instead of having to access each one separately.

The address for the website is: www.thecoasttocoastinvestor.com.

Of course, there’s this blog. The purpose of the blog is to provide continuous real estate investor information and training for those who want to learn how to invest in any marketplace. If you look back on some of the recent editions of the blog you’ll see articles such as a multi-part series on valuing property remotely, and how to find properties in which to invest. In coming editions I’ll be discussing financing, working with professionals like realtors and property managers, and will constantly discuss up-and-coming markets for your purchases.

The Coast-to-Coast Real Estate Investor Blog address is: http://www.coast2coastinvestor.blogspot.com/
(of course that’s in your browser window currently!)

My intention with both my blog and Podcast was to make them ad-sponsored and keep them free to the public. Each time you access the blog you’ll see useful real estate-related advertisers on the blog pages, so pay them a visit and learn what they have to offer.

Then, there’s my flagship, the audio Podcast available at http://www.talkshoe.com/talkshoe/web/talkCast.jsp?masterId=20058&cmd=tc

The Podcast is a weekly audio informational and training broadcast on how to invest in real estate; it’s indispensable whether you invest at home, or anywhere in the country. One of the beauties of the Podcast is that most of the time I run it in a “live” call-in format, similar to a radio call-in show. So, you can come on live, ask questions, and interact with me, or my guests directly. And, if you can’t be on live, you can listen to or download the episodes to your computer or MP3 player.

I’ve had episodes on subjects ranging from how to value property remotely to hiring property managers to creative financing, and am starting to bring in guest speakers – people to fill up your Rolodex as resources. There’s always more to come.

To be a live show, you'll need to make sure you've registered with my Podcast host www.talkshoe.com, and you've logged in for the evening.

The Coast-to-Coast Real Estate Investor audio Podcast link is:
http://www.talkshoe.com/talkshoe/web/talkCast.jsp?masterId=20058&cmd=tc

You can also go to www.talkshoe.com and search for "real estate investing" or "coast to coast". The show will display about halfway down the list.

To get on a live call-in show, you'll need the following information to access the show:

Phone Number: (724) 444-7444My Talkcast ID: 20058

Registration is free, and only takes a couple of seconds, but you'll want to do it in advance of the show. On the night of a show, to get on live just dial the number and you'll be prompted for the Talkcast ID# and the PIN you set up when you registered. You don't need a microphone on your PC because you'll use your phone, and if you are shy about speaking you can even use Talkshoe's chat window to type! It's a really simple program to use, and you'll feel like you are on a live call-in radio show.

If you just want to listen or download a broadcast, you can just go to Talkshoe and look for my broadcast. All the previous episodes are there for your benefit.

Keep in mind that you’ll want to get my weekly bulletin so you’ll know when the broadcast is running and what the subject will be. I’ll give you the information for getting my bulletin in just a moment.

One service I am really proud to offer is the set of audio discussion boards for the Coast-to-Coast Real Estate Investor. There are many text-based discussion boards for real estate investing available (including mine), but I’ve taken the concept to the next level – now you can have discussions with investors and professionals in audio rather than text. The idea came to me like an epiphany – that people miss out on a great deal of value in communication when it’s just typing. The subtleties of having a conversion – like inflection and volume communicate so much…not to mention that speaking is less time-consuming than typing! It's much more like a face-to-face…or at least a phone conversation then any text board can offer. So, now you have a place where you can actually talk to other real estate investing folks, ask questions, have discussions, listen to and learn from others’ conversations and so forth.

I use a wonderful service now in it’s second version called www.Vaestro.com.

The link to my real estate forum is: www.vaestro.com/viewforum-371

Keep the link handy – it’s easier to access all the boards if you have the link rather than trying to use Vaestro's searching tool.

You do not need to register to participate in the boards, but to make use of it, you will need a microphone and speakers. If you don't have one, a headset microphone runs as little as about $8 at places like Best Buy or Circuit City. Do yourself a favor and invest a couple of bucks for the opportunity to tap into this one-of-a-kind resource.

Finally – and something that I am really excited about - is my social networking platform for the Coast-to-Coast Real Estate Investor. In case you are not familiar with the term social networking, I’ll mention the Internet phenomena of Myspace.com and Facebook.com – those you may have heard of. If not, social networks are communities where like-minded people can get together to meet, interact, socialize around favorite topics (in this case real estate investing), network, learn, and access hosts of resources. They are the latest thing on the Internet, and are hot, hot, hot!

So, if you are a www.facebook.com or www.myspacecom user, you'll love this! It's the Facebook for real estate investing! If you aren’t a www.facebook.com or www.myspace.com user…you’ll love this!

I'm using a wonderful easy-to-use social networking site called www.Ning.com.

The web address for the Coast-to-Coast Real Estate Investor community is: http://coast2coastinvestor.ning.com/

One of my big objectives with the site is to develop a central resource of investor-friendly lenders and private money investors. If you grasp how difficult the credit market is right now, you’ll understand how valuable this resource is going to be. And, don’t be shy to contribute to it!

My Ning site is really in it’s infancy, so I’d like to encourage all of you to jump in there and get it off to an exciting start. Remember – like all these other resources, it’s free!

Finally, I want to affirm that you are welcome to get in touch with me directly. Every day, I have investors and newbies contact me with a variety of questions. Some have basic questions regarding investing concepts, and others have questions regarding specific deals. Sometimes, they are just making contact for networking, and that’s fantastic!

Whatever your motivation, feel free to contact me at william@thecoasttocoastinvestor.com

Additionally, please pass along all this information to your friends and associates. I welcome having new folks join the group. Send along their (or your) contact information and I’ll get it into my mailing list for my weekly bulletin that announces the Podcast topic and any upcoming news. As well, if you know of anyone who is interested in real estate investing, whether beginner or otherwise, please tell them about these resources. And, have them contact me at william@thecoasttocoastinvestor.com so I can include them in the mailings, and let them know of upcoming episodes and provide the other resources I have available.

Once again, you are your associates can contact me at william@thecoasttocoastinvestor.com

Have a great week,
William Flood

Valuing Property Remotely (part 4)

2008-01-22T18:36:00.000-05:00

Online Valuation Sites

I know my next piece will be at odds with what a lot of investors believe, but there are good, valuable resources on the internet to help you ascertain value. They are useful IF you put them in context of all that I’ve mentioned, and don’t try to use them as a substitute for something like a true appraisal. Sites like www.zillow.com can be inaccurate, and they have their limitations. But, don’t overlook their usefulness in giving you ballpark information…just don’t rely upon them for professional opinion. As of now there is nothing available online, free, paid, or otherwise that substitutes for a professionally-crafted appraisal where an individual is scrutinizing the property face-to-face. It just doesn’t exist.

With that caveat, I’ll recommend four valuation sites:

www.zillow.com is the most widely known, and probably the site that gets the most criticism. But, if you understand it’s an estimator, and doesn’t replace a true appraisal, it’s a very useful tool. One thing that’s really useful for the remote investor are the birds-eye views that allow you to look at the property from a satellite photo, and see the surrounding area. I’ve come across more than one property in Arizona that otherwise looked good, but ended up backing up to a highway – or worse, a junkyard, which I caught on the Zillow aerial view.

www.domania.com by lending tree is another good site. The free “solds” listing is really a good tool. And, for $30 you can get a reasonably complete property report that borders on being an appraisal, or can be automatically put with a realtor to get comps.

www.Cyberhomes.com by Fidelity is another really good tool. What’s particularly helpful with this site is the valuation map which gets pulled up automatically when you input data. So, not only do you see estimates for the property in question, but also for all the adjacent houses as well.

The national real estate firm of Coldwell Banker (www.coldwellbanker.com) has a good valuation tool, and a unique “Live Market Data” interactive map where you can zoom in to an area and it will pull up the listings for sale in that map coordinate. It’s a fantastic visual way of seeing what’s going on in an area and its surrounds. Trulia (www.trulia.com) is a similar service.

Also, if you are not using something like Zillow or Cyberhomes which provide a map, Google’s satellite map tool is really useful for getting arial views. That helps with locating the unit in its environs. For example, you can see where a house is located in proximity to a community lake or whether it backs up to a freeway.

All of these recent blog entries on valuation are a lot to consider - if you have any questions, email me at william@thecoasttocoastinvestor.com and I can help you with anything or answer any questions you have.

My next series of blog entries is going to be absolutely vital for you - they are about property financing, and given the current credit situation in the country, you need to learn how to finance properties using traditional and creative means. Financing is the one thing that is going to make or break deals over the next couple of years, so you'll want to get these postings.

So, until next time, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!

Valuing Property Remotely (Part 3)

2008-01-09T08:35:00.000-05:00

Local Auditor Sites

Local auditor sites are very helpful. In many counties and municipalities across the country the local property tax auditor’s information is online and available for public access. Now, you have to understand that what you see on an auditor’s site might require some interpretation. A tax assessment is different from an appraised value (assessments are typically lower), and auditor’s values have a reputation for being inaccurate. But, it’s still good data, and if you learn how assessed value is computed, it can provide you with at least a reasonable figure for comparison. What’s even more valuable, though, is if the auditor provides the prices at which units have sold. For example, here in Columbus, our auditor goes back the last 3 or 4 transactions, so we can accurately see what people paid for a property. That can be amazingly helpful when you are crafting an offer, particularly if a bank foreclosure is involved.

Another area where certain auditor’s software is tremendously helpful is when they’ll map values or sold prices. Again, here in Central Ohio, we’re blessed with a system that will do that. I can pull up a neighborhood map that will show each lot, what it’s assessed value it, what it last sold for and when. You can do your own comps that way, really easily!

Title Company Reports

Title Companies can often provide a property abstract free of charge that will provide you with information about assessed value (most of it will come right from the auditor’s site) as well as any liens on the property. How can this be useful? Let’s say you know a property is an estate sale, and is worth $150,000 with an existing loan that has only $40,000 remaining. That situation could be ripe for an aggressive price because there’s lots of equity, or potential owner financing. If you found out it had a loan of $149,000 it’s a different situation.

Now, title companies will not wantonly give out preliminary property reports for free. You have to be very much a two way street – start by meeting with them and finding the one that you’d do your business with. See if they can easily produce this kind of information for you and would be willing to do so if you committed to them being your title company. And, don’t overdo it. You don’t send 15 properties to a title company for their reporting. You check on the one or two that really interest you enough to put a contract on. Additionally, the more business you send their way in the form of closings and referrals, the more they will be willing to reciprocate by running quick reports for you!

Appraisals

Appraisals, of course, are the best option, but appraisals cost money. Nothing substitutes for a hand-crafted, professionally addressed appraisal. Those run anywhere from about $200 to about $400 for a residential property. So, if you are really serious about a property, you might want to consider ordering an appraisal (and will have to pay for one if a bank loan is involved). It’s money well-spent if you want to know what a property should really be worth and to utilize that data in your negotiations on price. Three hundred dollars invested in an appraisal is a bargain if you manage to get a $300,000 house for $240,000.

There are a handful of sites that will do "appraisals" online running in the area of approximately $50. I don't place a tremendous value in these, because they are primarily relying on the same kinds of data I'm describing to you in these blogs on property valuation. Sure, they will save you some time, and they may get you data you could not normally access. In that sense they provide a good service. But they are not, in fact, full appraisals, so don't get suckered into thinking they are. Nothing substitutes for a real person going to the property and inspecting it inside and out to see what's really going on. Keep in mind a simple issue -- a property's condition will blatently influence its value, and no online service can uncover that; it's something that a real person needs to do.

Until next time, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!

Valuing Property Remotely (Part 2)

2007-12-19T14:31:00.000-05:00

Real Estate Agent Comparables

The next piece I’ll talk about is working with real estate agents to get comparables, or “comps” on units which interest you. Remember in my previous post about working with real estate agents? If you didn’t read that one yet, go back and browse it. This is where a good agent in your corner is so valuable.

When getting comps, you want to look at the prices at which units sold, not what the listing prices are. Solds – particularly over the previous 4-6 months tell you what buyers are really paying for properties in that area. The problem with listing prices is that they often reflect more idealism than reality. Listing prices can help you see a relatively better deal, when you note that the asking price is lower than all the others’ asking prices, but ultimately, how does it compare with what people have truly paid?

Also look at how long the properties are sitting. If you are looking at a unit that has been on the market for 210 days, that can tell you a number of things. First, it likely tells you the property is for some reason overpriced. That’s not always the case, but it’s something you should take into consideration. Many times it means a property needs some kind of rehab or at least polishing compared to others in it's price class. Properties will sell when priced attractively.

Within that issue could be the potential for a deal. The seller might simply be relying on their agent’s advice, and that advice might be flawed. A seller might be willing to accept a lower price, but feels that the agent is in charge, and just operates from that vantage. Buyer’s also tend to think asking prices are somewhat written in stone, and might just be staying away. A property which has been on the market for a long time means there’s potential motivation there, so try an assertive offer.

Multiple List Data

Related to getting comps from agents is using the multiple listing service (MLS) and the auto mailings you are getting from your agent. While those are asking prices, in bulk they help you understand what’s going on in a community. You can see the overall range of asking prices, how long something is sitting on the market, how much inventory there is, and so forth.

I actually have my agents set me up a search to pull all units in my criteria that have been on the market for over 90 days, and that adds in a good factor in my searching. As I mentioned above, it helps illuminate what sells at what price and what does not, but it can also put a potential nugget on my plate if the seller becomes motivated and fearful that a property won't sell.

In my next posting, I'll be examining title company assistance, appraisals, assessments, and local government resources at your disposal. So, until next time, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!

Valuing Property Remotely (part 1)

2007-11-09T11:30:00.000-05:00

Hello everyone, this is Bill Flood, and welcome to another edition of the Coast to Coast Real Estate Investor. Thanks for joining me on the journey as we learn about real estate investing across the country

Today, I want to talk about a subject that is near and dear to most investor’s hearts. I probably get more questions about this subject of determining property values than nearly any other. It really is a vital, important subject, but at the same time, isn't really rocket science. There are a few well-utilized procedures that will make the process simple.

I’ll also note that while investors need to know value and make their purchases accordingly, accurately predicting a property’s value is much more important to a flipper than someone holding over the long term. It's much like a stock investor not needing to be as concerned with the "perfect" entry point as much as a day trader would need to be.

Make no bones about it – no investor should be buying at retail value…or worse, above retail value, but if you are flipping a property you are concerned about margins, and that makes a property’s value far more immediately important than the person who is controlling a real estate asset for 10 or 15 years or even more.

Value is Everything

With that in mind, your mantra should be that “value is everything.” I love Robert Allen’s statement from his book, The Challenge (my personal favorite by the way), “until you know value, everything is worthless….once you know value, everything is valuable”
What he is saying, in effect, is that until you know value, you stand to either overlook potential deals, or make big financial mistakes. Once you understand values, you are in a position to recognize deals, and to turn your back on those that aren’t worth pursuing – because you know value!!

Condition, of course, effects value, and you can’t overlook that. A $100,000 price in a $120,000 neighborhood is not a bargain if the house needs $25,000 worth of work. It’s always best to see a property face-to-face, but if you don’t do that, you need to invest some money in things like home inspections, appraisals, and contractor’s estimates for performing any rehab. Plus, you'd better have a lot of faith in your real estate agent's opinions about condition and appeal. Personally, this goes to the heart of what I was talking about in the last edition - how a good agent is worth their weight in gold, and you should take your time in finding the right one.

Working the Farm

With that in mind, let’s begin with the ultimate value-determining method, and that is called “farming.” Working a farm simply refers to becoming so familiar with an area, or neighborhood, that you are as much as expert in property values there as anyone. If you study a farm long enough, you will be as accurate as any appraiser....perhaps even more so because you know what things are really selling for as opposed to their potential value.

So, you can see, here lays the problem with hop-scotching all over the place chasing deals, and not having some kind of focused attention geographically. You never really get to know values. When you work a farm, you know what the inventory is, what sells, at what price, what’s sitting, what the condition of the various properties are, what’s sold and how quickly, and what’s coming on the market.

I began much of my investing career when I lived in a very large planned, golf course community near Richmond Virginia. I used to spend my weekends driving that community and a couple of neighboring ones. I knew, probably within about $2,000 what a house would be listed for, and what it would sell for. I knew what was for sale, what kind of shape it was in, if it was a foreclosure, or vacant, how long it had been on the market….in short, I was a local expert, and could ascertain the value as good as any real estate agent or appraiser. I just knew, and that came from studying the area.

So, let’s say your searching has led you to an area of condos in Florida that appeal to you. In that case, do your farming with those condos within that basic area. Be very systematic about it – get to know everything you can about pricing, value, market conditions, rental rates, etc. Become the resident expert, and don’t jump around looking in that Florida community one minute, another Florida city, the next, and then chasing after something in Atlanta the next day. You need to be more focused than that.

In the next addition I am going to introduce several more strategies and tools. As I move down the road, my objective is to give you a concise set of tools you can use to determine values to a very close degree, even if you've never been in the area. So, keep a watchful eye out for the coming segments.

Until next week, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!

Finding and Working With Agents for Out of State Purchases (Part 2)

2007-10-23T10:27:00.001-05:00

As I mentioned in my last posting, in my experiences you will probably contact between 25 and 50 agents in a given area in order to find from 1 to 3 agents who are really top-rate.
What you are looking for in an agent are the following:

They Must be Comfortable and Capable Dealing With Investors
They must understand and be comfortable with investor mentality. That means they must be comfortable making assertively-priced offers and/or asking for creative terms. Do they regularly work with investors? Are they an investor themselves? Ask them questions to that effect. Ask them pointed questions that would elicit investor-oriented knowledge (such as about owner financing). If they want to send you immediately to a mortgage officer to get you qualified, they just identified themselves as a non-candidate.

They Should be oriented towards buyers and not sellers.
A selling oriented agent will not fully grasp the needs of a complex investor-buyer. Investors seek either concessions on price and/or terms. A typical selling agent is focused on getting top retail dollar...in most cases to the exclusion of everything else. However, every once in a while, you come across an agent that understands what investors need. More important, they are comfortable with it and are willing to present and negotiate creative offers.

They do What They Say They Will Do
Do the agents you interact with do what they say they will do? If you give them criteria for emailed listings, do you get them…that day? Do they check on the deal which you inquired about?

They Scout Deals
A good agent will follow up with potential candidates beyond what is merely automatically filtered through the MLS. In other words, they seek out and scout deals for you. They initiate calls about properties instead of waiting for you to inquire about something.

They Are Customer-Oriented as Opposed to Sales-Oriented
Do they have a customer-serving mentality, or are they trying to sell you on something? If discussion about that agency agreement comes up before anything else, they are either inexperienced, brainwashed into the proscribed procedures, or more interested in themselves.

They Are Patient
Investors need to have the numbers work, either on price, terms, or both. Yes, we make nutty deals, but the right kind of agent will understand that. So, a good agent understands that you may need to filter through 100 deals to find one nugget worth pursuing. If they stop communicating with you after two weeks simply because you haven’t bought anything means they are not the kind of agent you need.

They Are Well Connected
Get a sense of who they know. See if they have contacts with investor-oriented mortgage brokers, title company, contractors and so forth.

They Are Not Legalistic
They shouldn’t be hung up on the letter of the law as far as the industry goes. Many are schooled to the point of no longer being able to think for themselves. I was licensed in two states at one time, and most agents really don’t know or understand their legal obligations. For example, a seller’s agent’s fiduciary responsibility to their client doesn’t mean they shouldn’t answer your candid questions. If they feel you are asking something that could hurt negotiations for their client, they should check with them to see if the client is willing to answer; not reject you question under licensure laws. Some agents seem to feel it’s their responsibility to play para-lawyer and be a roadblock to transactions. By way of another example, a war-zone is a war-zone, and an agent isn’t violating any fair housing laws by pointing that out – as opposed to keeping tight-mouthed and merely referring you to the police department for you to independently digging up that information. Guess what…if the police can disseminate that information it’s public knowledge and not a fair housing violation!

Additional Thoughts
Be wary of agents you find on sites like rehablist.com who appear to have dozens of investor-oriented listings. It may sound ideal, but generally isn’t. These are typically agents who farm the MLS for interesting looking deals – the listings are not theirs, they don’t know the properties, and most don’t want to expend any energy knowing them. They hope for a quick-flip speculator type who will buy without doing their due diligence, sight-unseen as if the house was no different than a stock or bond. Moreover, most, if not all, fail to do what they say they will do. They are all about marketing, and little about action.

Now, you as a potential buyer have some responsibilities.

Don't Be A User
Keep in mind that you don’t want to be a user of people. Agents, like anyone else, need to earn a living, and they do so on commission. While you need to be assertive and choosy as to who you work with, you don’t want to abuse your workings with people. With that in mind, you:

Don't Be a Lookie-Loo
Need to be a buyer. Nobody – not even the best agent – will work with you indefinitely. If you are a lookie-loo, don’t waste agent’s time. Use the Internet instead. You should have a clear criteria in mind that you can supply to the agent – price, number of bedrooms, style, situational indicators like foreclosures if that interests you, etc. Have them help you with locational issues if you don’t yet know the area. What you can’t do is say, “just dig me up anything that I can buy for 40% under value.” That’s the sign of an amateur investor and a red flag you are a waste of their time.

Do what you can on your end
Filter through listings to find what appears to be of value. Don’t ask the agent to drive to 25 properties if you are just curious. Prequalify deals, do your own drive-by’s if you can….in short, you put in as much legwork on your side before you ask an agent to spend time, gas, and energy viewing a property.

Be loyal
When you find a good agent, stick with them and send all your business their way. The more they sense your loyalty, the more they’ll work on your behalf.
Be appreciative – send a $10 Starbucks card every once in a while to that agent who’s spent 25 hours with you. It’s the least you can do! That goes a long way to building two-way loyalty.

Don’t be too quick to establish allegiance
Just because you know them and have had a few phone calls doesn’t mean you owe an agent anything. They have to live up on their end just as you do on yours. Even the process of sending listings is not enough – any agent can do that. They should be regularly contacting you, getting updates, checking to see if there’s anything they can do, etc.

When you find that worth-their-weight-in-gold agent, you use them exclusively. That’s the point when you switch from calling all the listings in town to telling your preferred agent what interests you and having them follow up. All you need is an MLS number and they can find out all you need. Make sure if you do talk to another agent, or a builder that you let them know you have an agent you work with. You don’t want to inadvertently cut your agent out of a deal – and believe me, the industry is such that they will try to cut them out in an instant because it means more money.

There are many rewards for building this kind of loyalty – and this is where it gets exciting.

When you build rapport with an agent they get to know your values – they are your eyes and ears when you are not located there. I’ve literally bought properties, that I didn’t personally visit, with full confidence, by relying on my agent and the tradespeople she/he used.

Real estate agencies often have what are called “pocket listings” that don’t appear on the MLS, and that means reduced competition - and they can send these your way.

They will hand-hold you through the transaction. That may seem like something only a newbie needs, but if you are newly investing in a geographic area, that kind of help can be invaluable in understanding local/state laws, customs and such. That means you can get great council on what vendors – like title companies or inspectors to use, how certain aspects of title work and taxes work, and what to be watchful of that might be unique to the area. Just recently, I had an agent in Arizona introduce me to roof rats and the hazards related to them when fruit trees are too close to a house.

They can hook you up with recommended vendors – title companies, mortgage companies, inspectors, manual tradespeople and so forth. If you are new to that market, getting first-hand testimonial can save you a lot of time, and help you avoid mistakes when selecting vendors. And, if the agency has clout, they can get often get you trade discounts.

That’s a lot to consider – if you have any questions or if you didn’t catch something, email me at
william@thecoasttocoastinvestor.com and I will be happy to clarify anything.

If you know of anyone who is interested in real estate investing, whether beginner or otherwise, please tell them about the blog. In addition, if you or an associate would like to access my audio podcast, just contact me at william@thecoasttocoastinvestor.com so I can include them in my mailing, and let them know of upcoming episodes and the other resources I have available.

I continue to assemble these resources for real estate investors. Not only do I have the weekly audio show, but I've put together an audio discussion board for investors. Recently, I also built two social networking communities which are gaining a lot of attention - for all of you who like Facebook or Myspace, you'll love these!

It will be a fantastic spot for networking, learning, and getting to know other investors. Give me a shout by email or phone if you want details (614-886-8233 or william@thecoasttocoastinvestor.com)

Do you want to learn real estate investing...learn the ropes? How about having someone actually guide you through the process? I am going to open registration for the first session starting in November. It will be a full 12 weeks of hands-on, real world training. There's nothing like it on the market, and the best part is, unlike all the guru's stuff, you can actually afford it! I'll keep you posted, but feel free to call (614-886-8233) or email if you have questions:
william@thecoasttocoastinvestor.com

Finally, many of you are asking about mentoring and coaching, and that is a great way I can serve you. I have limited slots available to do that, so if you are interested, please give me a shout so I can discuss it with you...beginners welcome! This is a great chance to have someone hand-hold you during your investing activities and have access to an expert at your disposal as easily as making a phone call or sending an email. If you'd like to know more, feel free to call (614-886-8233) or email me: william@thecoasttocoastinvestor.com

So, until next week, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!

Finding and Working With Good Agents for Out of State Purchases (Part 1)

2007-10-11T17:30:00.000-05:00

In this edition I am going to chat about how to locate and work with real estate agents. I am going to talk candidly about agents from an investor’s vantage…and I recognize that I run the risk of being a bit offensive to agents and brokers because of that. I’m certain to cross the line for many real estate agents, but I am dealing in matters of investor practicality. Investors and agents come from two different worlds, and they don’t necessarily agree with each other.

While I am a big fan of For Sale By Owner deals, there’s no doubt that the vast majority of real estate transactions take place through agents, so the agent angle is one you really must master.

Collectively, agents have made me about $250,000 over my last 4 deals – so, we’re not talking about small change. But, you are not going to access those kinds of deals if you simply try to grab properties & agents at random. If you just walk in the door and ask to speak to an agent you aren't going to succeed at much (except for perhaps getting frustrated!). It takes a certain amount of interpersonal skill, rapport, and instinct to pick an agent well.

Now, let me say that on whole, I really don’t have a lot of good to say about the real estate agent community. I’m not talking about specific agents, or even the industry as it wants to be. I’m talking about what I like to call the “nit whit factor” represented by the bulk of agents. I can say, with all sincerity, that some of the most repugnant and clueless people I’ve ever crossed paths with have been real estate agents. There’s just something in real estate sales that seems to attract a particularly poor crowd of people, and in many cases, people choose real estate for all the wrong reasons. I also think that certain factors within the real estate industry serve to propagate those problems.

Great agents are just that – fantastic professionals who are worth their weight in gold. The problem is, I think only about 1 out of 1,000 typical agents is any good, and only about 1 out of 100 solid agents is any good to an investor. Again, I am not trying to affront good, hardworking agents – it’s all the others that make up the bulk of the industry that I’m at odds with. It's almost comical how many agents just want to list a property, put it in the multiple listing service and wait for everyone else to do all the work...yet collect a commission check from that!

Buyer's Agents and Seller's Agents
Let’s begin by getting all you newcomers up to speed on the difference between a seller’s agent and a buyer’s agent. A seller’s agent works for the seller, and their duties and responsibilities are to the seller’s best interests. A buyer’s agent works for the buyer and their duty is to the buyer’s best interests. The problem is, when you call on a listing, by default you are dealing with a seller’s agent, and that leads to a lot of natural roadblocks and conflicts. Even when you have an agent who appears to be excitedly offering you listings and information, if you don’t have an agreement otherwise, seller’s agency is implied – so they are really still in the seller’s corner.

Unless you are fully comfortable with that arrangement, and representing yourself in negotiations, your best move is to get a buyer’s agent working for you, who can get you information on multiple listed properties, provide information on the comments in the MLS, etc.

But, buyer’s agency can have it’s problems as well. Do you remember what I said a moment ago about the real estate industry propagating certain problems? One of them is the notion of exclusive agency. That is, when you sign an agency agreement – buyer’s or seller’s, that person has an exclusive right to represent you. That works OK if you are a seller, because even though you only have one official agent, they are co-oping your listing to all the other agents through the multiple listing service. So, if your agent isn’t that productive you at least have all the agents seeing your property through the MLS.

With an exclusive buyer’s agent, however, if your agent isn’t productive, you are stuck. And, you’ll find that many agents want you to sign that agency agreement before they ever talk to you or supply leads. I've had agents on more than one occasion wanting me to sign an agency agreement before they ever even got to know me and my objectives!

The problem is, with exclusive agency even if YOU find the property, unless it was spelled out otherwise the agent would be entitled to a commission. So, if the agent doesn’t produce, and you end up scouring the area, they still expect to get a commission on the deal. In most cases, buyer’s agent commissions are paid by the seller and you don’t have to pay it, but if you were to find a for sale by owner (FSBO) deal, the seller might not be at all amenable to paying the commission, meaning you’d be stuck for the bill for a deal that this agent didn’t even find you!

I had this happen on one occasion in which an agent in Florida, who if I said did the most minimal work that would have been a compliment. It was a scenario in which I was doing all the looking, filtering and so forth. This agent wanted to sue me for a commission on a FSBO he didn’t even find! Fortunately, I did not have any kind of agreement in force with him, so there was no leg for him to stand on. But, it still illustrates what I am talking about - he did virtually no work for me in finding the deal, but he expected to get a piece of the pie just the same.

So, how do you avoid this? Sign agency agreements only for a single property at a time – one that you are transacting, and just deal with the realities of the implied seller’s agency until then. That is, until you find an agent you can trust and for whom you’d like to give exclusive business.

So, that leaves us with a strategic challenge. Do you call all over town to individual agents, talking to them about their listings, or do you engage just one agent and give them your exclusive attention? The answer is a bit of both.

Calling individual agents is more expedient in the beginning, and the perfect way to source agents. It takes time to find a good agent to work with, and you just aren’t going to have access to one when you first go into a marketplace. So, you start by calling agents on their particular listings, and as you chat with them about the property, you also take the time to interview them for your affairs. Your “interviewing” can take the form of candid questions, and subtle, stealthy interactions designed to gauge them as potential agents.

Certain agents will immediately disqualify themselves by being abrasive, discourteous (particularly when they hear you are an investor) or apparently inexperienced. A whole host of others will disqualify themselves by not doing what they will say they will do. I can’t tell you the number of times I’ve had lengthy, impressive conversations with agents who then never bother to send listings or call me back. Apparently many agents don't want to do the hard work and prefer to pursue the comfy process of dealing with the buyer who is sitting in their office with a check in their hand.

I even had a situation where, not realizing I had dealt with a particular agent previously, I even went through their "failure to follow-through" process twice….with the same agent! In other words, not only did they peter out the first time, when I mistakenly opened up a transaction with them a second time, they petered out again. You wouldn't have expected it from their conversation though.

A final round will disqualify themselves shortly down the road. Perhaps you’ll get an initial round or two of listings or a couple of phone calls, but then they move on to what they think are bigger fish to fry. We out of state investors look like a tough project, and many investors just choose to work the easy angles with local preapproved buyers waiting to go.

In my experiences you will probably contact between 25 and 50 agents in a given market in order to find from 1 to 3 agents who are really top-rate. So remember those statistics. It's a lot of hard work and communication on your part, but when you find that top-notch agent, they really are worth their weight in gold.

Next time I will discuss a series of criteria to look for when seeking and interviewing an agent.

Until then, keep seeking those investments, and live your real estate dreams!

Locating Real Estate Investments (part 5) - Private Real Estate Investor Sites

2007-10-07T17:23:00.000-05:00

Private Investor Sites

In every community and every city there are real estate investors who are selling properties. Often these are wholesale deals which the investor picked up at a substantial discount, who is marking it up to make a profit, but still leaving a good amount of equity on the table for another investor who wants to fix up the property.

In many cases today, these investors are getting pretty savvy and have websites and mailing lists publicizing their deals. They can be a great resource for you.

Here’s an example of one investor’s site in San Antonio:
http://www.buynowsa.com

I am not making any recommendation to them – I am merely listing them as an example of what’s available.

Here are a couple of other examples:

In Phoenix
http://www.invest-n-homes.com/

In Dallas
http://www.dfwinvestors.net/

Again, I am not making an referrals or recommendations - I am merely using these of examples of what you can find out there.

You can find these types of real estate investor sites by searching in Google for your city of preference and the words “real estate investor” or “we buy houses”

There are even national networks of investors that are either franchises or outfits that supply investors with websites for their businesses. http://www.Homevestors.com is a good franchise resource. InetUSA http://www.inetusa.com/ is one of the web-building companies for investors. Their organization has a national search feature to access all their clients’ listings.

If you are in a position to do so, join any local real estate investor’s associations (REIA’s) in areas where you want to invest – network and get to know investors that have property for sale there. Get on their mailing lists. You can access a list of local REIA's through the National Real Estate Investors Association http://www.nationalreia.com

So, until next week, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!