If I Were 22 Again… A Dad Explains Real Estate Investing to His Son

My twenty-two year old son asked me a question last night. He said, “Dad, if you were just starting out, like me, and you wanted to get going in real estate, what would you do?”

What a great question, and I really had to think about it before I answered him. What I told him isn’t original with me. These ideas have been expressed much better by other authors before now, but since the essence of creativity is selective borrowing, here’s the advice I gave him.

I said that the first thing I would do is become an expert in my target market.

“How long will that take?” he asked.

Ah, youth- always in such a hurry.

“Depends on how much time each week you can devote to it,” I answered, giving him another of the vague responses he has grown so used to.

Predictably, he groaned.

I went on to explain to him that, if he really committed himself to following my advice, and if he committed to a minimum of 15 hours each week, he should become both competent and confident in about 3 months, which doesn’t seem like such a long time. The key is looking at tons of houses, and asking tons of questions of the right people.

I told him, if I were just starting out, I would also find the right Realtor to work with. The right Realtor will be able to put you in touch with a boatload of opportunity you can’t find by yourself, and provide you a list of foreclosures and vacant properties to look at every day.”

“What would you do next?” he asked.

I said that I would work on building a buyer’s list at the same time I was learning my market.

“How would you do that?”

“I would find and join my local REIA (Real Estate Investors Association) group, and attend every meeting. If my area didn’t have a REIA group, I would start one. This is the place to start finding, meeting, and networking with the people in your area who invest in property. I would also read the newspaper classifieds for “Buy Houses” or “Buy Property” ads. These people are active buyers, and should be added to your buyer’s list. Your goal is to have as long a buyer’s list as possible, at least 50-100 names depending on the size of your area.”

“Why?” he asked me

“I’ll explain that in a minute.” I said

He rolled his eyes. Talking with your son is like chatting with a nuclear physicist- every time you try to impress them with your knowledge, they make you feel like they can’t believe how long it took you to come to your childish conclusions.

I pressed on, determined to give my son the advice he was seeking.

“Next,” I said, “Armed with an in-depth knowledge of my market area, and my active buyer’s list, I would start making low offers on every foreclosure and vacant property I looked at.”

“Every one?” I could see the doubt in his eyes.

“Well, close to every one. Every house that your confidence level allows you to make an offer on.” I could see the next question coming.

“What do you mean by that?” he asked. So predictable.

“What I mean,” I continued, “is that the market knowledge you gather during your market research will give you a certain level of confidence. The more knowledge you have, the more your confidence will increase. When you first start making offers there will be a lot of properties that will appear to be beyond your skill level, and if they seem to be, they probably are. You simply won’t have enough confidence to make offers on those properties.

“As time goes on, though, and your knowledge grows, so will your confidence. Then those properties that intimidated you at first will become less frightening. Instead of seeing hazards, you will see opportunity. Don’t stress about this, because it’s a natural progression. As long as you’re putting in the time learning your trade the knowledge will come, and so will the confidence. One follows the other like the summer follows the spring.”

Next, my son asked, “But how do you determine how much to offer?”

I went on to explain to him my method for determining the right amount to offer. See my article titled "Real Estate Investing- Is There One Magic Rule?"

“I get it,” my son said, head bobbing up and down knowingly. “What comes next?”

“OK,” I said. “What happens next is, most of your offers are rejected completely, a few might be countered, and one out of every twenty to fifty will be accepted.”

“Is that all?” he asked, perplexed.

“That’s all, but that’s alright,” I said. You can’t handle a whole bunch at once right at the beginning anyway. One or two is enough to get you started. What you do next is very important.”

“What’s that?” my son asked.

“Start marketing your fool head off.” I replied. “You know that list of buyer’s you’ve been developing? You call every one of them and tell them about the great deal you’ve got, and see who’s interested. Put ads in the paper, signs on the property, and signs anywhere in the neighborhood you can get away with. Create a flyer to pass around at your REIA meeting. Sell, sell, sell is the name of the game. Whatever it takes, find a buyer for that property BEFORE you close and take possession of it.”

“What about the title work and all the legal stuff you have to do when you buy a house?” he asked. He’s smarter than I give him credit for.

“That’s just mechanics, and I can teach you mechanics as you’re going through each deal. What we’re talking about here is strategy. If you get this strategy down, you can learn the mechanics.

“OK,” he said, “how do I make money?” A very astute question.

“Simple- the same way you make money on any product you sell. You sell it for more than you paid for it. For instance, let’s say you get a house under contract for $40,000 that you determined beforehand has an After Repaired Value (ARV) of $97,000 and needs repairs of about $12,000. If it were me, I would try to find a buyer in the $48,000 to $53,000 range. That way, your buyer would still have room to make his repairs and make a tidy profit, and you would walk away with somewhere around $5,000 to $8,000 after taxes and fees.”

“Fees and taxes?” my son asked. A rude awakening.

“Yes, paid to your attorney, the Realtor, the title company and the government. Of course you could do a simultaneous closing, and there are other ways to eliminate some or all of those fees, like making your offers in the name of an LLC and then selling the LLC instead of the property, but again we’re talking about mechanics, and that’s the subject for another discussion.” (And another article)

“How much would it be reasonable to earn doing this full-time?” he asked. A light going on.

“There’s no reason a full time wholesaler (wholesaling is really what we’re talking about here) couldn’t make $5,000 to $10,000 per month, or more. Not at first, of course, but after a few months or a year of consistent effort, the sky’s the limit.”

“Wow,” my son said, “I never though about it like that before. I never understood so clearly what wholesaling is all about. I think I could do that.”

I think he could, too. For that matter, so can you. In fact, what’s stopping you?

Now, go make more offers!

SECRETS TO SUCCESS IN NETWORK MARKETING?

this is by mark januszewski

The only secret you need to know is the one guru’s and generic tool peddlers know…….and don’t want you to know.

There are no secrets to network marketing or, for that matter to success.

See, if people can get you to believe there is a secret or two…..or a magic way to get prospects online that are ‘pre-qualified’…..they can sell you something.

These bottom feeders leverage your inexperience, impatient and fear to get at your credit card.

Before you know it you are spending more time on these ‘secrets’ and ‘shortcuts’ AND promoting this guru who has earned a dime for you…….than your own business.

So, let me repeat…..there are no secrets…….only people who want you to believe that so they can sell you stuff.

WE ARE ALL SCARED

I’m close to 20 years of succeeding and before I did, I failed for 5 years. That’s 25 years.

I’ve never met anyone who joined an MLM, mine or countless others from other deals who had all the time and money they wanted BEFORE they joined.

Most of us finally look at networking when we are in pain over time, money or both.

We are scared. Oh, we might not admit that but the situation that trigger our decision and trying something new is going to create some fear.

It’s normal.

It’s my story and probably yours too.

Deal with it as a successful person deals with things.

That is the key.

LIKE ATTRACTS LIKE

Success thinking attracts success…..fear thinking? Well….

Don’t kid yourself by comparing what you are feeling on the inside to what other people’s outsides.

Successful people, both in and out of MLM have some fear….most of it healthy they just do something different with it.

And no, this is not some new-age or Zen solution coming at you.

We’ve been blessed to be asked to speak all over the world. After we do, we get lots of kind words and always a few people who comment on how relaxed and comfortable we were and it made them relax about networking.

We always tell them the same thing, the thing that turned us into coveted speakers…..

“Show me a speaker who isn’t nervous or scared and I’ll show you a bad speaker.”

It’s true…we just know what to do with that fear, what all successful people so with fear.

KNOWLEDGE

Most fear is a lack of knowledge, certainly in business it is…..

Successful people

1.get the knowledge, reduced fear
2.create a written plan to put knowldge in play
3.practice, shrinking fear
4.put it in play, courage built on confindence from 1&3
Network marketing, truth be told, is easy once you realize you’ve been doing it since you were 6 years old…..you learned about stuff from some kids, told others and told your parents; about a baseball glove, a movie or a new ice cream stand.

All occupations are the same….they have a couple ‘traction’ points…..points that will ‘drive’ income.

We all talk to people everyday

It’s no mystry in network marketing…..it’s talking to people and learning a couple network marketing skills just means learning how to talk to people rejection free without pressuring them or ourselves.

When people enroll, we simply give them network marketing help by teaching them they already know how to talk to people.

I wouldn’t call it rocket science or a secret…..I’d just call it the truth…..

“If we are going to make some money, we need to talk to people.”

believe

.

If I Were 22 Again… A Dad Explains Real Estate Investing to His Son

My twenty-two year old son asked me a question last night. He said, “Dad, if you were just starting out, like me, and you wanted to get going in real estate, what would you do?”

What a great question, and I really had to think about it before I answered him. What I told him isn’t original with me. These ideas have been expressed much better by other authors before now, but since the essence of creativity is selective borrowing, here’s the advice I gave him.

I said that the first thing I would do is become an expert in my target market.

“How long will that take?” he asked.

Ah, youth- always in such a hurry.

“Depends on how much time each week you can devote to it,” I answered, giving him another of the vague responses he has grown so used to.

Predictably, he groaned.

I went on to explain to him that, if he really committed himself to following my advice, and if he committed to a minimum of 15 hours each week, he should become both competent and confident in about 3 months, which doesn’t seem like such a long time. The key is looking at tons of houses, and asking tons of questions of the right people.

I told him, if I were just starting out, I would also find the right Realtor to work with. The right Realtor will be able to put you in touch with a boatload of opportunity you can’t find by yourself, and provide you a list of foreclosures and vacant properties to look at every day.”

“What would you do next?” he asked.

I said that I would work on building a buyer’s list at the same time I was learning my market.

“How would you do that?”

“I would find and join my local REIA (Real Estate Investors Association) group, and attend every meeting. If my area didn’t have a REIA group, I would start one. This is the place to start finding, meeting, and networking with the people in your area who invest in property. I would also read the newspaper classifieds for “Buy Houses” or “Buy Property” ads. These people are active buyers, and should be added to your buyer’s list. Your goal is to have as long a buyer’s list as possible, at least 50-100 names depending on the size of your area.”

“Why?” he asked me

“I’ll explain that in a minute.” I said

He rolled his eyes. Talking with your son is like chatting with a nuclear physicist- every time you try to impress them with your knowledge, they make you feel like they can’t believe how long it took you to come to your childish conclusions.

I pressed on, determined to give my son the advice he was seeking.

“Next,” I said, “Armed with an in-depth knowledge of my market area, and my active buyer’s list, I would start making low offers on every foreclosure and vacant property I looked at.”

“Every one?” I could see the doubt in his eyes.

“Well, close to every one. Every house that your confidence level allows you to make an offer on.” I could see the next question coming.

“What do you mean by that?” he asked. So predictable.

“What I mean,” I continued, “is that the market knowledge you gather during your market research will give you a certain level of confidence. The more knowledge you have, the more your confidence will increase. When you first start making offers there will be a lot of properties that will appear to be beyond your skill level, and if they seem to be, they probably are. You simply won’t have enough confidence to make offers on those properties.

“As time goes on, though, and your knowledge grows, so will your confidence. Then those properties that intimidated you at first will become less frightening. Instead of seeing hazards, you will see opportunity. Don’t stress about this, because it’s a natural progression. As long as you’re putting in the time learning your trade the knowledge will come, and so will the confidence. One follows the other like the summer follows the spring.”

Next, my son asked, “But how do you determine how much to offer?”

I went on to explain to him my method for determining the right amount to offer. See my article titled "Real Estate Investing- Is There One Magic Rule?"

“I get it,” my son said, head bobbing up and down knowingly. “What comes next?”

“OK,” I said. “What happens next is, most of your offers are rejected completely, a few might be countered, and one out of every twenty to fifty will be accepted.”

“Is that all?” he asked, perplexed.

“That’s all, but that’s alright,” I said. You can’t handle a whole bunch at once right at the beginning anyway. One or two is enough to get you started. What you do next is very important.”

“What’s that?” my son asked.

“Start marketing your fool head off.” I replied. “You know that list of buyer’s you’ve been developing? You call every one of them and tell them about the great deal you’ve got, and see who’s interested. Put ads in the paper, signs on the property, and signs anywhere in the neighborhood you can get away with. Create a flyer to pass around at your REIA meeting. Sell, sell, sell is the name of the game. Whatever it takes, find a buyer for that property BEFORE you close and take possession of it.”

“What about the title work and all the legal stuff you have to do when you buy a house?” he asked. He’s smarter than I give him credit for.

“That’s just mechanics, and I can teach you mechanics as you’re going through each deal. What we’re talking about here is strategy. If you get this strategy down, you can learn the mechanics.

“OK,” he said, “how do I make money?” A very astute question.

“Simple- the same way you make money on any product you sell. You sell it for more than you paid for it. For instance, let’s say you get a house under contract for $40,000 that you determined beforehand has an After Repaired Value (ARV) of $97,000 and needs repairs of about $12,000. If it were me, I would try to find a buyer in the $48,000 to $53,000 range. That way, your buyer would still have room to make his repairs and make a tidy profit, and you would walk away with somewhere around $5,000 to $8,000 after taxes and fees.”

“Fees and taxes?” my son asked. A rude awakening.

“Yes, paid to your attorney, the Realtor, the title company and the government. Of course you could do a simultaneous closing, and there are other ways to eliminate some or all of those fees, like making your offers in the name of an LLC and then selling the LLC instead of the property, but again we’re talking about mechanics, and that’s the subject for another discussion.” (And another article)

“How much would it be reasonable to earn doing this full-time?” he asked. A light going on.

“There’s no reason a full time wholesaler (wholesaling is really what we’re talking about here) couldn’t make $5,000 to $10,000 per month, or more. Not at first, of course, but after a few months or a year of consistent effort, the sky’s the limit.”

“Wow,” my son said, “I never though about it like that before. I never understood so clearly what wholesaling is all about. I think I could do that.”

I think he could, too. For that matter, so can you. In fact, what’s stopping you?

Now, go make more offers!

Best Real Estate Investing Program - Four Easy Steps To Success

Here’s the simple four-step best real estate investing program you can start today! You could choose a more complicated path, but why would you do that?

Step one in your best real estate investing program is to find a group of local investors to join, and start attending their meetings right away. Usually this group will be called REIA (Real Estate Investors Association), but it may be called something different in your area. The best real estate investing program puts you in touch with other local people who do the kind of investing you want to do. Start networking for the purpose of finding a possible mentor.

Step two in the best real estate investing program is beginning and nurturing a mentor relationship with one of the investors you meet at the investor’s group. Build a relationship with someone you think you could work well with, and ask them to help you. Emphasize that, in return, you’ll be willing to do a lot of the leg work they don’t have time to do.

Step three in the best real estate investing program is getting your education online. We live in such amazing times… an absolute ton of information is available to you on the internet, most of it free or for very low cost. Read and research your favorite real estate investing topics, and locate the very best free sites the internet has to offer. Once you find them, be sure to bookmark them and visit often!

Step four in the best real estate investing program is doing your very first deal. Even if it takes you several months, you’ll get here, and when you do you’ll want your mentor to walk you through it. This will give you a confidence boost, and help ensure you learn as much as possible.

This four step best real estate investing program may seem simple, but it works every time it’s tried! Don’t make the mistake of trying move too fast, and becoming confused. Also don’t make the mistake of taking no action at all. Read about how to do it, understand how to do it, then go do it!

I know I’ve only given you a taste here… here’s a much more detailed article on the best real estate investing program.

If you put this four step best real estate investing program into practice starting today, you’ll be well on your way to achieving the kind of real estate investing success most people only dream about.

Now, go make more offers!

My First Real Estate Investing Deal And What You Can Learn From It

Every real estate investing deal is an opportunity for both profit and education. Well my first deal was a good combination of both. When I decided I wanted to get involved in real estate investing it took me eight months to decide to do my first deal.

This particular deal came as a result of networking in my local real estate investor group. A local Memphis investor found a deal on a 3 bedroom, 2 bathroom home in a moderate to lower income area where people still like to buy homes. This was a wholesale deal for the other investor and he assigned his contract to me to close on the deal. I was buying the property for $58,000 and $5,000 of that went to the investor for assigning the contract to me and $53,000 went to the seller of the property. I had the cash available so I paid all cash for this deal and for $4,000 in repairs this property needed. The after repaired value of the property was approximately 95k.

I had decided I wanted to do a rent to own or lease option deal with this property. I put a yard sign out with property flyers and had links to a website with inside pictures of the property. At the time I was doing this a more experienced investor told me I should try to retail the property and take the quick cash and go on to the next deal. Well as a new investor I wasn?t sure how long it would take for me to find my next good deal so I wanted to get the maximum out of this property. After about a month(and about $800 in ads) I found a tenant I considered suitable and agreed to take a $2500 option fee plus $875 per month and a sales price of $99,000. If the tenant pays the rent by the first of the month then $100 counts as pay down towards the purchase price. If I had sold the property quickly I may have sold for $89k and paid $5k in selling fees and netted about $20k and would have paid about $7k in taxes on that income. Instead by going after lease option it may take 2-6 years to sell and I should get a $99k or better selling price with much less selling costs and should net about $35k of which about $5k will be taxed as capital gains. The lease option method will net me about double what retailing would have done, however it would have been nice to have access to that cash for doing more deals. I think the $15,000 profit quickly would have been better than $30,000 in a couple of years plus the things I could have done with the $62,000 in cash I put into the property.

The tenant I chose has not once in the first nine months paid the rent on time so he hasn?t earned the $100 monthly rent credit, and has on average had to pay an extra $100 each month in late charges. I don?t expect this tenant will be able to refinance, however his job status and income have been going up while he has been in the property, and the current market value is now $105k. The tenants father is a mortgage broker and if I get to the point of evicting the son the father has told me to let him catch up the sons rent before filing for eviction so that part is really in my favor.

From a humanitarian perspective I like lease option deals as I am really helping someone who could not rent otherwise. I will only do a lease option to someone I believe is improving their credit and job situation and should be able to buy the house within 24 months. With 12 months of on time payments verified by copies of checks many mortgage brokers can get your tenant financed as a refinance type of deal.

In the event the tenant doesn?t buy the property within the first 2 years I can either lease option to another tenant or just try to outright sell the property. Even though the property provides great cash flow I would rather sell it and get a big check and use the cash to go after the next deal.

Some things I learned on this deal that you can use: 1. We had a yard sign with flyers in a flyer tube plus links to view pictures on a website. Before we would show the inside of the property we insisted any prospects should view the pictures online first. We ran ads in the major local newspaper and we got 20 times as many calls from the yard sign than we did from the newspaper. However this street had decent traffic, other properties I have are more secluded. Always use a yard sign and flyer box and have pics online with good descriptions and always highlight the kitchen and bathrooms. 2. If I had the deal to do all over again I would have retailed the house and tried to sell it quickly. I could have rolled this deals cash into more and more deals and made much more money. My opinion now is that every investor who isn?t already financially well off needs to go for the quick income first and progress to long term deals second. 3. I probably should have waited a little longer for a stronger tenant. 4. You can not do this type of lease option transaction in Texas now due to some strange laws that got passed in 2005. However I live in Tennessee and we don?t have any anti-investor state wide laws yet. We do have a bad local one related to trash left over from evictions but that is minor in comparison.

My First Real Estate Investing Deal And What You Can Learn From It

Every real estate investing deal is an opportunity for both profit and education. Well my first deal was a good combination of both. When I decided I wanted to get involved in real estate investing it took me eight months to decide to do my first deal.

This particular deal came as a result of networking in my local real estate investor group. A local Memphis investor found a deal on a 3 bedroom, 2 bathroom home in a moderate to lower income area where people still like to buy homes. This was a wholesale deal for the other investor and he assigned his contract to me to close on the deal. I was buying the property for $58,000 and $5,000 of that went to the investor for assigning the contract to me and $53,000 went to the seller of the property. I had the cash available so I paid all cash for this deal and for $4,000 in repairs this property needed. The after repaired value of the property was approximately 95k.

I had decided I wanted to do a rent to own or lease option deal with this property. I put a yard sign out with property flyers and had links to a website with inside pictures of the property. At the time I was doing this a more experienced investor told me I should try to retail the property and take the quick cash and go on to the next deal. Well as a new investor I wasn?t sure how long it would take for me to find my next good deal so I wanted to get the maximum out of this property. After about a month(and about $800 in ads) I found a tenant I considered suitable and agreed to take a $2500 option fee plus $875 per month and a sales price of $99,000. If the tenant pays the rent by the first of the month then $100 counts as pay down towards the purchase price. If I had sold the property quickly I may have sold for $89k and paid $5k in selling fees and netted about $20k and would have paid about $7k in taxes on that income. Instead by going after lease option it may take 2-6 years to sell and I should get a $99k or better selling price with much less selling costs and should net about $35k of which about $5k will be taxed as capital gains. The lease option method will net me about double what retailing would have done, however it would have been nice to have access to that cash for doing more deals. I think the $15,000 profit quickly would have been better than $30,000 in a couple of years plus the things I could have done with the $62,000 in cash I put into the property.

The tenant I chose has not once in the first nine months paid the rent on time so he hasn?t earned the $100 monthly rent credit, and has on average had to pay an extra $100 each month in late charges. I don?t expect this tenant will be able to refinance, however his job status and income have been going up while he has been in the property, and the current market value is now $105k. The tenants father is a mortgage broker and if I get to the point of evicting the son the father has told me to let him catch up the sons rent before filing for eviction so that part is really in my favor.

From a humanitarian perspective I like lease option deals as I am really helping someone who could not rent otherwise. I will only do a lease option to someone I believe is improving their credit and job situation and should be able to buy the house within 24 months. With 12 months of on time payments verified by copies of checks many mortgage brokers can get your tenant financed as a refinance type of deal.

In the event the tenant doesn?t buy the property within the first 2 years I can either lease option to another tenant or just try to outright sell the property. Even though the property provides great cash flow I would rather sell it and get a big check and use the cash to go after the next deal.

Some things I learned on this deal that you can use: 1. We had a yard sign with flyers in a flyer tube plus links to view pictures on a website. Before we would show the inside of the property we insisted any prospects should view the pictures online first. We ran ads in the major local newspaper and we got 20 times as many calls from the yard sign than we did from the newspaper. However this street had decent traffic, other properties I have are more secluded. Always use a yard sign and flyer box and have pics online with good descriptions and always highlight the kitchen and bathrooms. 2. If I had the deal to do all over again I would have retailed the house and tried to sell it quickly. I could have rolled this deals cash into more and more deals and made much more money. My opinion now is that every investor who isn?t already financially well off needs to go for the quick income first and progress to long term deals second. 3. I probably should have waited a little longer for a stronger tenant. 4. You can not do this type of lease option transaction in Texas now due to some strange laws that got passed in 2005. However I live in Tennessee and we don?t have any anti-investor state wide laws yet. We do have a bad local one related to trash left over from evictions but that is minor in comparison.

If I Were 22 Again… A Dad Explains Real Estate Investing to His Son

My twenty-two year old son asked me a question last night. He said, “Dad, if you were just starting out, like me, and you wanted to get going in real estate, what would you do?”

What a great question, and I really had to think about it before I answered him. What I told him isn’t original with me. These ideas have been expressed much better by other authors before now, but since the essence of creativity is selective borrowing, here’s the advice I gave him.

I said that the first thing I would do is become an expert in my target market.

“How long will that take?” he asked.

Ah, youth- always in such a hurry.

“Depends on how much time each week you can devote to it,” I answered, giving him another of the vague responses he has grown so used to.

Predictably, he groaned.

I went on to explain to him that, if he really committed himself to following my advice, and if he committed to a minimum of 15 hours each week, he should become both competent and confident in about 3 months, which doesn’t seem like such a long time. The key is looking at tons of houses, and asking tons of questions of the right people.

I told him, if I were just starting out, I would also find the right Realtor to work with. The right Realtor will be able to put you in touch with a boatload of opportunity you can’t find by yourself, and provide you a list of foreclosures and vacant properties to look at every day.”

“What would you do next?” he asked.

I said that I would work on building a buyer’s list at the same time I was learning my market.

“How would you do that?”

“I would find and join my local REIA (Real Estate Investors Association) group, and attend every meeting. If my area didn’t have a REIA group, I would start one. This is the place to start finding, meeting, and networking with the people in your area who invest in property. I would also read the newspaper classifieds for “Buy Houses” or “Buy Property” ads. These people are active buyers, and should be added to your buyer’s list. Your goal is to have as long a buyer’s list as possible, at least 50-100 names depending on the size of your area.”

“Why?” he asked me

“I’ll explain that in a minute.” I said

He rolled his eyes. Talking with your son is like chatting with a nuclear physicist- every time you try to impress them with your knowledge, they make you feel like they can’t believe how long it took you to come to your childish conclusions.

I pressed on, determined to give my son the advice he was seeking.

“Next,” I said, “Armed with an in-depth knowledge of my market area, and my active buyer’s list, I would start making low offers on every foreclosure and vacant property I looked at.”

“Every one?” I could see the doubt in his eyes.

“Well, close to every one. Every house that your confidence level allows you to make an offer on.” I could see the next question coming.

“What do you mean by that?” he asked. So predictable.

“What I mean,” I continued, “is that the market knowledge you gather during your market research will give you a certain level of confidence. The more knowledge you have, the more your confidence will increase. When you first start making offers there will be a lot of properties that will appear to be beyond your skill level, and if they seem to be, they probably are. You simply won’t have enough confidence to make offers on those properties.

“As time goes on, though, and your knowledge grows, so will your confidence. Then those properties that intimidated you at first will become less frightening. Instead of seeing hazards, you will see opportunity. Don’t stress about this, because it’s a natural progression. As long as you’re putting in the time learning your trade the knowledge will come, and so will the confidence. One follows the other like the summer follows the spring.”

Next, my son asked, “But how do you determine how much to offer?”

I went on to explain to him my method for determining the right amount to offer. See my article titled "Real Estate Investing- Is There One Magic Rule?"

“I get it,” my son said, head bobbing up and down knowingly. “What comes next?”

“OK,” I said. “What happens next is, most of your offers are rejected completely, a few might be countered, and one out of every twenty to fifty will be accepted.”

“Is that all?” he asked, perplexed.

“That’s all, but that’s alright,” I said. You can’t handle a whole bunch at once right at the beginning anyway. One or two is enough to get you started. What you do next is very important.”

“What’s that?” my son asked.

“Start marketing your fool head off.” I replied. “You know that list of buyer’s you’ve been developing? You call every one of them and tell them about the great deal you’ve got, and see who’s interested. Put ads in the paper, signs on the property, and signs anywhere in the neighborhood you can get away with. Create a flyer to pass around at your REIA meeting. Sell, sell, sell is the name of the game. Whatever it takes, find a buyer for that property BEFORE you close and take possession of it.”

“What about the title work and all the legal stuff you have to do when you buy a house?” he asked. He’s smarter than I give him credit for.

“That’s just mechanics, and I can teach you mechanics as you’re going through each deal. What we’re talking about here is strategy. If you get this strategy down, you can learn the mechanics.

“OK,” he said, “how do I make money?” A very astute question.

“Simple- the same way you make money on any product you sell. You sell it for more than you paid for it. For instance, let’s say you get a house under contract for $40,000 that you determined beforehand has an After Repaired Value (ARV) of $97,000 and needs repairs of about $12,000. If it were me, I would try to find a buyer in the $48,000 to $53,000 range. That way, your buyer would still have room to make his repairs and make a tidy profit, and you would walk away with somewhere around $5,000 to $8,000 after taxes and fees.”

“Fees and taxes?” my son asked. A rude awakening.

“Yes, paid to your attorney, the Realtor, the title company and the government. Of course you could do a simultaneous closing, and there are other ways to eliminate some or all of those fees, like making your offers in the name of an LLC and then selling the LLC instead of the property, but again we’re talking about mechanics, and that’s the subject for another discussion.” (And another article)

“How much would it be reasonable to earn doing this full-time?” he asked. A light going on.

“There’s no reason a full time wholesaler (wholesaling is really what we’re talking about here) couldn’t make $5,000 to $10,000 per month, or more. Not at first, of course, but after a few months or a year of consistent effort, the sky’s the limit.”

“Wow,” my son said, “I never though about it like that before. I never understood so clearly what wholesaling is all about. I think I could do that.”

I think he could, too. For that matter, so can you. In fact, what’s stopping you?

Now, go make more offers!

CA$HFLOW 101 in Sandy Wednesday Oct. 21st 6:30 PM

 

My First Real Estate Investing Deal And What You Can Learn From It

Every real estate investing deal is an opportunity for both profit and education. Well my first deal was a good combination of both. When I decided I wanted to get involved in real estate investing it took me eight months to decide to do my first deal.

This particular deal came as a result of networking in my local real estate investor group. A local Memphis investor found a deal on a 3 bedroom, 2 bathroom home in a moderate to lower income area where people still like to buy homes. This was a wholesale deal for the other investor and he assigned his contract to me to close on the deal. I was buying the property for $58,000 and $5,000 of that went to the investor for assigning the contract to me and $53,000 went to the seller of the property. I had the cash available so I paid all cash for this deal and for $4,000 in repairs this property needed. The after repaired value of the property was approximately 95k.

I had decided I wanted to do a rent to own or lease option deal with this property. I put a yard sign out with property flyers and had links to a website with inside pictures of the property. At the time I was doing this a more experienced investor told me I should try to retail the property and take the quick cash and go on to the next deal. Well as a new investor I wasn?t sure how long it would take for me to find my next good deal so I wanted to get the maximum out of this property. After about a month(and about $800 in ads) I found a tenant I considered suitable and agreed to take a $2500 option fee plus $875 per month and a sales price of $99,000. If the tenant pays the rent by the first of the month then $100 counts as pay down towards the purchase price. If I had sold the property quickly I may have sold for $89k and paid $5k in selling fees and netted about $20k and would have paid about $7k in taxes on that income. Instead by going after lease option it may take 2-6 years to sell and I should get a $99k or better selling price with much less selling costs and should net about $35k of which about $5k will be taxed as capital gains. The lease option method will net me about double what retailing would have done, however it would have been nice to have access to that cash for doing more deals. I think the $15,000 profit quickly would have been better than $30,000 in a couple of years plus the things I could have done with the $62,000 in cash I put into the property.

The tenant I chose has not once in the first nine months paid the rent on time so he hasn?t earned the $100 monthly rent credit, and has on average had to pay an extra $100 each month in late charges. I don?t expect this tenant will be able to refinance, however his job status and income have been going up while he has been in the property, and the current market value is now $105k. The tenants father is a mortgage broker and if I get to the point of evicting the son the father has told me to let him catch up the sons rent before filing for eviction so that part is really in my favor.

From a humanitarian perspective I like lease option deals as I am really helping someone who could not rent otherwise. I will only do a lease option to someone I believe is improving their credit and job situation and should be able to buy the house within 24 months. With 12 months of on time payments verified by copies of checks many mortgage brokers can get your tenant financed as a refinance type of deal.

In the event the tenant doesn?t buy the property within the first 2 years I can either lease option to another tenant or just try to outright sell the property. Even though the property provides great cash flow I would rather sell it and get a big check and use the cash to go after the next deal.

Some things I learned on this deal that you can use: 1. We had a yard sign with flyers in a flyer tube plus links to view pictures on a website. Before we would show the inside of the property we insisted any prospects should view the pictures online first. We ran ads in the major local newspaper and we got 20 times as many calls from the yard sign than we did from the newspaper. However this street had decent traffic, other properties I have are more secluded. Always use a yard sign and flyer box and have pics online with good descriptions and always highlight the kitchen and bathrooms. 2. If I had the deal to do all over again I would have retailed the house and tried to sell it quickly. I could have rolled this deals cash into more and more deals and made much more money. My opinion now is that every investor who isn?t already financially well off needs to go for the quick income first and progress to long term deals second. 3. I probably should have waited a little longer for a stronger tenant. 4. You can not do this type of lease option transaction in Texas now due to some strange laws that got passed in 2005. However I live in Tennessee and we don?t have any anti-investor state wide laws yet. We do have a bad local one related to trash left over from evictions but that is minor in comparison.