“How To Increase Your Net Worth By $20,000 to $100,000 On Every Real Estate Investing Deal You Do”

Consider these parameters for a real estate deal:

Consider these parameters for a real estate deal:

Property Value: $250,000
Purchase Price: $160,000
Repairs: $2,500

If you analyze the numbers, you see that the equity available in this deal is $87,500 (Property Value minus Purchase Price minus Repairs).

So here’s a hypothetical question for you: Assuming that the information above is accurate, and the property is located in an area that you view as acceptable and/or favorable, then:

If I offered to give you this deal in exchange for $10,000 in cash, would you do it?

Remember - this is hypothetical. The real question here is this:

Would you exchange $10,000 in cash for $87,500 in equity?

For most smart investors, the answer is: Absolutely YES!

And this is called “Wholesale Real Estate Investing” - the process of buying a lot of equity at a very significant discount from another real estate investor who has already done the hard work of finding a deal and getting it under contract.

Just think about that - consider how easy real estate investing would be for you if you had a network of real estate investors in your area (and maybe all over the country) who, several times each month, offered you the opportunity to purchase significant amounts of equity for a severe discount…

…It would be quite easy to become wealthy, wouldn’t it?

The answer is: Yes, it will.

You’ve got to admit - it will be a pretty wonderful thing when you know how to find great real estate deals in which you can trade a small amount of cash for a large amount of equity without even having to find the deal yourself…

…and that’s exactly what wholesale real estate investing is all about.

Wholesale real estate investing is conceptually very simple. Here’s how it works:

First, “Investor A” finds a great real estate deal with a lot of equity. Typically, Investor A will have spent a significant amount of time, money and expertise to find the deal, negotiate the term and get the property under contract. By putting the property under contract, Investor A now has control of the property, and the equity in the property.

(For this example, imagine that Investor A has found a property worth $200,000 and has set a purchase price of $115,000 and he also knows that there are $15,000 in repairs, which leaves an equity position of $70,000).

Second, “Investor A” finds another party, “Investor B”. Investor B recognizes that the contract that Investor A has established is worth $70,000 in equity, and so he strikes a deal with Investor A to turn the deal over to Investor B in exchange for some amount of cash (we’ll use the value of $12,000 in this example).

So Investor A is giving up $70,000 in “potential” profit in exchange for $12,000 in current profit. And Investor A is paying $12,000 because he believes he can make more than that on the deal, since there’s a full $70,000 of equity.

This deal between Investor A and Investor B is called an “Assignment”, because Investor A is assigning the contract to Investor B.

Third, Investor B does his “due diligence” to confirm that the deal is as good as he thinks it is.

Finally, Investor B closes the purchase of the property, and Investor “A” receives the assignment fee from Investor B.

This is, obviously, a simplification of the process. But this is essentially how it works - not so difficult, is it?

ABOUT THE AUTHOR

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!

Real Estate Investing - Simple Tips For Beginners

Investing in real estate can be a profitable business venture, but just like anything else in life, it requires you to know what you’re doing. There are so many unknown variables and countless things that could go wrong. This is the fear that prevents most people from even owning their first property.

Real estate can be a vehicle to financial opportunity, but you have to first define your goals.

But don’t give up hope yet, with the proper preparation and education, you can dive in and earn a living from the real estate industry that have created more self-made millionaires than any other industry.

Before you get started, the first thing you need to consider is what exactly do you want to accomplish. Be sure to keep in mind the various aspects of what being a real estate investor entails.

This will require some research on your part, but it can be an excellent opportunity for you to dig up new and exciting methods for budding real estate investors.

You’ll want to choose an area that you’re very familiar with. This way, you’ll get to know the market value. Once you’re familiar with your chosen area, you’re now the expert and you’ll be able to recognize when a property really is a bargain.

This research can be accomplished with the use of online information, or you can do it in person at city hall. You’ll be checking the city records for a list of recent sales in the county. Don’t overlook the use of your local realtor. They can provide you with detailed information just from a few clicks using the MLS services.

The next things to consider is whether you’re looking for short term profits or if you want to have ongoing monthly income.

If you opt for the short term profits, your choices can be wholesaling or retailing. Wholesaling is where you find properties and then assign them to another real estate investor. This method is a great way for beginners to test the waters, because it requires very little money and none of your own credit.

Another method is called flipping. Just turn on your TV any weekend or weeknight and you’ll be sure to see several programs in which investors purchase run-down property, rehab them and then resell, hopefully, for a profit.

The other option, which includes acquiring a property for ongoing income is another attractive choice for many. If you’re able to produce a monthly passive income, this can be easily become holy grail of real estate investing. To create the desired income, you would just start acquiring properties to meet the monthly income desired.

However, being a landlord may not be all fun and games. You have to know whether you have the temperament for dealing with tenants, and it’s usually when things are not at their best.

So by deciding what type of income you’re after, you can better define your real estate investing goals. Now that you’ve clearly define your expectations, you can set a course to begin your new venture as a real estate investor.

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.

How A Real Estate Investing Club Can Help You Make Your Fortune

Being a member of a real estate investment club definitely has its perks.

Since most people do real estate investing individually, the opportunity to interact with peers doesn?t present itself very often. When you are a member of a real estate investment club, you are given the opportunity to network with people who have been involved with real estate investing for years.

Here are some tips for how you can benefit from being a member of a real estate investment club.

Whenever you attend a real estate investment club meeting you should keep in mind that these events are usually not for profit and under funded. You may notice that many of the speakers seem to be trying to sell you something.

Remember that speakers at the real estate investment club meetings aren?t getting paid to present. So the speaker uses the opportunity to sell his or her services. These services might be in the form of a video, mentoring, or a tape set. Learn to look beyond these sales tactics to hear what the presenter is trying to teach you.

Listen to what each speaker has to say, regardless of what he is trying to sell, and try to learn something from the speech.

Make sure to have respect for the time of the veterans that you meet in your real estate investment club. Often investing newcomers think they can simply take a veteran out to lunch in exchange for some tips to use in real estate investing. As a new investor, it is important to understand that few people give away valuable knowledge for free.

This is especially true of veteran real estate investors. Unless you are bringing some deals to the table, you shouldn?t expect for a veteran to just hand over education.

You should also keep in mind that these veterans have spent years of money and time taking courses and going to seminars to learn the real estate business. It is very unlikely that they will pass along this knowledge for steak and potatoes. This doesn?t mean that you can?t ask a veteran for advice, but that you should make it worth his while to teach you the tricks of the trade.

Use the real estate investment club to network and meet other people. When you go to meetings don?t sit alone in the corner then quietly duck out minutes before the meeting has ended. Use these real estate investment club meetings to your advantage.

Let the other club members know who you are and why you are there. If the club doesn?t have name tags, bring flyers. If flyers are against the rules bring business cards.

The most important thing is to make sure the other real estate investment club members know who you are and what you can bring to the table. This let?s them know that you are serious about real estate investing and, in turn, makes them more willing to help you.

If you have some experience or can help other members they will be more likely to help you.

One of the most important things you can do to benefit from the real estate investment club is to become a member. Of course you will need to pay a fee upfront, but the fee will seem like pennies compared to the benefits you will receive from being a member of the real estate investment club. In your real estate investment endeavors you will need many resources along the way, what better way to get the help you need than from your fellow real estate investment club members.

About the Author:

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A Real Estate Investing Opportunity

Homes with extra lots may present a real estate investing opportunity. They may provide a way to reduce the cost of a rental home you want to buy, or just a way to make a profit buying and selling. Of course, this can be tricky if you don’t know the rules.

Typically when a city was platted, the residents proceeded to build a home on each lot. Of course, some built on two lots. This is why even in regularly spaced homes there will often be house or two that has a larger yard than the rest. If these homes, along with their garages and other out-buildings sit properly on one of the two lots - meaning they are set far enough from the lot line to comply with city regulations - the extra lot can be sold.

Usually, even if the property has been combined into one tax parcel, you can split off the other lot, get a new tax number for it and sell it. Why is this significant? Because the value of the home on one lot plus the value of the other lot sold separately is often much higher in total than the house will originally cost with both lots.

I first heard about this idea from a real estate agent who had done this in a small town in Northern Michigan. He had noticed that many homes in one area had two lots, but the houses were sitting squarely on just one of them. The lots in that area could be sold for $45,000, yet the homes with the extra lots only sold for about $20,000 more. People will only pay just so much extra for what appears to be just a large yard.

The obvious plan for an investor was to buy the home, sell the lot and then sell the home -which is what he did. Of course a big chunk of that potential $25,000 profit was eaten up by the transaction and holding costs. Ideally, then, you want to combine this strategy with a low offer so you get the home for a little under market as well.

There is another way to use this strategy. If you were looking for a rental home as an investment, and homes with extra lots are similarly under-valued in your area, take a look! You might pay $20,000 more, but if you sell the lot for $45,000 and have just $5,000 in costs associated with doing that, you net $20,000.

This might be tough if you financed the deal, but the bank may allow you to sell the lot if the proceeds are applied to the mortgage loan. In that case, you lowered your cost for that rental home by $20,000 when compared to other homes. Refinance, and that could be enough to turn a negative cash flow rental into a positive one.

Apart from being a real estate investing opportunity, you could do this when you buy your own home as well. If you really don’t want to mow a large lawn, buy a home with an extra lot and sell that lot. If you can get the seller to agree to selling it as two pieces of property, you could pay cash for the lot, and so be free to sell it without getting approval from your lender.

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!

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.

The Psychology Of Real Estate Investing

In the 1980s, if you were going to go on a diet, magazines would tell you to ?think thin.? They never actually explained what that meant, but everyone knew they were supposed to do it. Adopt the psychology of the thin person, whatever that was. It follows that, in order to become rich, you should be able to accomplish that by adopting the psychology of the rich, right? Actually, it does. Specifically, you should adopt the mindset of the successful real estate investor.

Successful real estate investors are opportunists. They always have their antennae up and ready. They put themselves in the way of information. They ?live the life? of the real estate investor, so to speak. And because of all this, they notice things.

Ken McElroy, author of ?The ABCs of Real Estate Investing,? which is part of the Rich Dad series, says it’s all about patterns. If you look at enough properties, study enough areas, talk to enough people, he said, you will start to see these patterns. Then things will start to happen. You may start to seem lucky. And, McElroy says, it may be luck, but it is a sort of luck, that comes from being prepared.

Remember: ?Fortune favors the prepared mind.? Opportunity is all around us, but if we are blind to it, it will be as though it doesn’t exist. The prepared mind recognizes opportunity.

McElroy emphasizes over and over again that being successful in real estate is a process. It isn’t just something that happens one day, as in one day we’re suddenly successful. It is something that you do every day. Eventually things begin to happen for you.

Someone who is successful focuses on doing a little at a time, on learning this or that thing, or making this particular deal. It’s a ?walk before you can crawl? proposition.

For instance, McElroy says, if you have found a good deal, you can get funding for it because other people will want a piece of the action. It isn’t about negotiation skills necessarily, he said. Of course, those skills can get you an even better deal at times, but you shouldn’t fret over whether you are good at the negotiation table. Just look for good deals.

Although they are always evaluating risk, always aware of it, successful investors are not frightened away by it. They determine whether the risk seems reasonable. If the numbers add up, McElroy says, then it is a good deal. If it is a good deal, the savvy investor goes for it.

Simple.

People who don’t know how to properly evaluate risk may think everything is too risky. They assume, for instance, that a larger deal may be too risky for a beginner to deal with. They assume that because they think the investor is sinking a lot of personal cash into it when, in truth, a larger deal stands to make a larger sum for the participants. Therefore you may be able to get more backers for a deal like that. In the end, you may put up less personal money than you would have on a smaller deal.

Real estate investment is just like anything else you want to learn how to do. Well, for one thing, you have to learn how to do it. And you learn by doing. Get out there and look at properties. Visit cities as though you were intending to buy. Go online and read about areas. See what other people have to say about the real estate in a particular area. Get to know people. Before long, you will know enough to begin thinking about actually making a move. You don’t have to have a wad of cash in hand before you start playing the game. Just get out there and enjoy yourself. The rest will come.

About the Author:

Alex Anderson is a Minneapolis Realtor Specializing In Minnesota Investment Properties and Buying Investment Property

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