Here’s a wholesale deal I did this month.  I did a walk through of the house on video (I’ll post that below) so you can see what the condition of the property can look like when dealing with “fixer-upper” houses.

The house is in a great area called Holland Park in Colorado Springs on the West Side of town.  I love this area, and tried to buy a house in the neighborhood when I first moved to Colorado Springs.  I got out bid on one house and ended up buying in another area, but I it’s a nice median priced area west of the interstate.  The only problem is there aren’t many deals in this area.  Most owners take very good care of the houses and the only “below market” houses are often on the busy streets on the edges of the neighborhood.  To date I’ve only bought 2 houses in Holland Park.  One we still own as a rental.  It’s too nice of an area to focus on for wholesale deals and fix and flips.  This was a mistake I made early on.  It’s close to where I used to work and I’d drive around all the time looking for distressed deals, and there just weren’t many.  Other areas have better ongoing opportunities if you are focusing on a specific area.

Here’s my video walk through:

Instead of fixing it up, I offered it (first) up to my wholesale buyers list and, sure enough, someone offered me $13,750 for the deal.  A bird-dog brought me the deal.  It was foreclosed on by a lender (I think this particular “lender” was more like an investor that bought bad debt, foreclosed and then sold inventory on terms) and they had been advertising it on craigslist and with a few bandit signs in the yard.

They wanted to use their contract (non-assignable) so I just created an LLC (could have done it with a trust too, but not all buyers understand trusts and not all hard money lenders lend on trusts in my area.  It’s easier (in my area) to use an LLC), went to contract with the lender with my new LLC, then after my buyer liked the deal and we agreed on a price (I offered originally at 92k and we settled at $88,750.  That was 13,750 to me and much better than what I’m making on MLS listed wholesale properties.  After more careful inspection (by my buyer) we both agreed it needed more rehab cost than I originally thought, hence we agreed on a better price.

I filled out an agreement to convey membership interest in the LLC, and took a 3,000 deposit at the time we agreed and then the final sale of the LLC would take place on the same day as the closing with the balance of 11,750 to paid in certified funds.  After a couple weeks, we closed and I showed up at the title company and collected a check…after drinking some free coffee.

We have a new HUD Foreclosure Listings website at:

https://hudhomestore.secureportalk.net/HUD/PropertySearchResult.aspx?sState=CO

The link above is for Colorado, but it will serve for 21 states total.

This is replacing the www.mcbreo.com site we’ve used in the past.

Now go buy some HUD foreclosures, or use my HUD Flipping Secrets to wholesale some!

Colorado Real Estate Investing Club

Are you looking to network with other real estate investors?  Join a local real estate investor club and surround yourself with other like-minded individuals.

It’s a great idea to bring plenty of business cards to network, but if you’re new…have a plan to maximize your time.  I suggest you always ask someone checking people in at the door to introduce you to someone there that you think will have the biggest impact on taking you to the next level.

Just getting started?  Ask to meet some of the ACTIVE buyers.  If you want to wholesale deals or find partners, this is a great way to go about it.

Looking for more funding sources?  Ask to see who the active lenders are for distressed properties.

Need a good contractor?  Ask!  I think you get the point…don’t go in without a plan.  Know what you want to accomplish and ask.

Are you in Colorado?  Check out the Colorado Springs Real Estate Investing Club

My wife, Lori, and I are being featured on a brand new “reality show” on investing on MSN.com Money called “The Invested Life”.

In fact the New York Times just did an article about it here: http://nyti.ms/9LkKpA

You can see the live website on MSN.com here: http://theinvestedlife.msn.com

Facebook Fan Page: http://bit.ly/9ZH4fa

Check it out and let me know what you think….post a comment or send me an email on the contact us link above.

Recently I was interviewed for a real life investing series on MSN.com Money.

I’ve been asked to keep up with some blog posts on their website and this topic came up from a question on the discussion board over there.  I answered it there, and I figured I’d share it with you here too.

Home Equity

When do you think it’s smart to pull equity out of your home, and how much is too much?

My question is why pull out your home equity at all?  If you want to pull out equity to buy toys or supplement your lifestyle, I say, NEVER is the best time!  [not in the msn.com reply but...I've seen a lot of situations where owners got WAY OVER THEIR HEADS tapping into home equity like it's an ATM for buying crap like ATV's, Jet Skis, or even paying off credit cards that have been racked up on similarly useless novelties that go down in value.  Many were short sales waiting to happen or already have been foreclosed on because the owner who should have been in a safe payment with a ton of equity from longer term ownership, but they blew it on lifestyle crap.  Read "The Richest Man In Babylon" and "The Millionaire Next Door" for real traits of the wealth.]   If you want to use some of your home equity to get you into another real estate investment, then I would say let’s talk…

First things first; I don’t think you should refinance your existing first mortgage which would start your amortization back to 30 years.  If you are going to refinance NOW to take advantage of super low interest rates, great, but I would try to shorten your amortization and keep the same payment you’ve been making.  For instance, if you have had your loan 5 years and you are currently at 6% but can drop it to 4.5% by refinancing, consider a shorter term mortgage – like a 15 or 20 year mortgage if available…sometimes rates are even better for shorter terms.

If you have equity on top of the existing loan balance, I would use home equity line of credit.  I would have a very specific plan on what you’ll do with the money.  My opinion on use of Home Equity Lines of Credit is to use it only on quick turn deals.  For instance, you purchase a bank foreclosure for 50% of the after repaired value and you can fund the purchase with a hard money loan, but you need say $20,000 to rehab it and cover your holding expenses.    Within 3-6 months the house is fixed, marketed and sold.  You get a profit on the resale, you pay off the hard money loan and you pay down the Home Equity Lines of Credit to repeat the process.  Let me state….get the right education before you do any real estate deal like that.  You need to know the conditions in your marketplace and go at it well educated and well thought out before you go risking your home equity.

A good plan might be to fix and flip 2-3 houses and use part of the profits toward buying a good long term investment property and use the rest to build cash reserves and pay down your 1^st mortgage.

Michael Jake

http://www.localmentor.com

http://www.michaeljake.com

Simple Steps on How To Wholesale an REO

by Michael Jake

Remember, this works for any bank owned property (or short sales) listed on the MLS (Multiple Listing Service).

Again,  We use the LLC method to AVOID double closing problems and to AVOID using flash cash lenders that eat up our profits.

I’m eliminating everything I’ve already covered up to this point, so I’m assuming you have REO leads (or MLS listed Short Sale Leads (cheap and ugly are best)), and you’re ready to put that offer on paper and you want to do it right.

1.      First off, YOU don’t write offers.  Your realtor does for you.  You only need to talk the talk and direct them (if they need it) on what goes in the blanks.

2.      These will all be CASH or Hard Money Offers with NO FINANCING CONTINGENCIES whatsoever.  I prefer to write them all as cash offers…even if I know my buyer will likely be using hard money. (more on that later).

3.      You tell the agent what ENTITY (your LLC you created to sell) and what price you want to offer based on the formula I gave you.  Then only other important information is:

• How much for Earnest Money
• When is the Earnest Money Delivered
• Inspection Deadline (date)
• Closing Date
• Other Dates

Earnest Money:  you have to at least put up the minimum but I usually offer more.  It makes my offer stand out from some others if there’s multiple offers.  It’s not uncommon for me to do $5,000 even if they are only asking for 500-1,000.

If you don’t have that much, that’s fine, use the minimum…you can even have the offer written to allow you to deliver earnest funds 1 or more days after the acceptance of the contract by the lender.  I do this all the time.  ESPECIALLY for short sales.  It might be 30 days to several months later before a bank accepts your offer.  No way I’m leaving thousands dollars laying around in escrow on a deal I might not even get.

You fill out your assignable contract with the seller.  (example below of one of my offers)

4.1. Price and Terms. The Purchase Price set forth below shall be payable in U. S. Dollars by Buyer as follows

Inspection Deadline:  I use this as my way out if something goes wrong.  10 days is a standard inspection period.  It’s even standard on the lead based paint disclosure required on any pre-1978 construction house purchases…this gives you 10 days to find a buyer with No Risk!  No buyer?  Ask anyone that looked at the deal what they would pay and counter your own offer on your “inspection findings”.  Never back out directly on inspection…counter your own offer…it will save you some “face” if you made a mistake, both in your realtor’s eyes and the listing agent (who probably gets many other REO listings)

Closing Date:  Keep it short but 2-3 weeks is about as fast as any lender can get to the closing table so that’s usually the time frame I give.

Other dates:  See below as an example:

2.3. Dates and Deadlines.

Keep in mind, when I’m dealing face to face with a seller (or someone’s doing this for me), I’ve already given them a verbal or written letter of intent (often with 3 or more ways I can buy their property (complete multi-offer system is HERE!) ) and I’ve let them decide which one is best…so, I’m just filling out on paper (the contract) what we’ve already agreed on.  This isn’t a “here’s my offer, take it or leave it” situation.  You just need your contract to be assignable.  You’ll also want some way out of the deal if something doesn’t go to plan. I usually use a simple inspection clause without a date limitation on it.  This gives me up to the closing to exit safely.

4.      When your offer is accepted, usually my agent calls me (or emails me) that we have a deal.  It might be a day or more later before I actually see a signed copy of the contract, but I immediately upon a “verbal” acceptance start marketing the deal to my buyers list.  I’m usually calling my “A” buyers as soon as I hang up the phone wth my realtor telling me I have the deal.   I’ll also blast it out to my e-mail list with a picture and the specifics on the after repaired value, repairs and the total price of the house (purchase + my assignment fee)

5.      Get buyers in to see it.  Usually REO properties are on a combo box, not an electronic box requiring a realtor “key” to unlock…so they are easy to show or have your buyers go by and see.

6.      Once your buyer says yes – you have them bring you a certified funds deposit (equal to or greater than your earnest deposit) and have them sign an agreement to purchase the LLC you have on the contract.  You’ll need a legal document for this.  I had my attorney draft one that covers all the important aspects of a real estate agreement, but as the purchase and sale of an an LLC.  Mine cost $1250 but you can get it, and my entire seminar on wholesaling for a fraction of that price HERE!

7.      You then coordinate with the title company who will be signing at the closing…it will be your buyer, because at closing they will be the owner of that LLC on the contract.

8.      Make sure your buyers and any hard money lenders involved are CC’d on any title work emails and all are aware of the closing date.  (if you wrote the deal as cash and your buyer is bringing in a hard money lender, you have to notify the title company and they may require you to sign an addendum to the contract.

9.      Go to closing and get a big check – your final payment, and make sure everything goes smoothly, and focus on your relationship with the agent and your buyer.

10.  Celebrate your victory.  Take a little of your profit and treat yourself for you accomplishment.  With the rest of it…what’s the best investment for your cash?  Invest in more marketing?  Invest in more real estate education to increase your cash getting skills?  Pay off bad debt?  A combination of a few of the above perhaps.  Either way, congratulate yourself…you did something awesome!

To Your Success,

Michael Jake

Your Local Mentor

www.localmentor.com

www.michaeljake.com

“I just closed my first wholesale deal and made an assignment fee totaling $22,200! I’ve already received a check for $11,000 and will receive the other $11,200 soon . . .I couldn’t have done it without the help of Michael Jake’s guidance and expertise. Michael taught me everything I needed to know such as marketing for wholesale deals, talking and negotiating with sellers, making the right offers, and how to quickly find a buyer for my deals. Michael’s system has given me the confidence to repeat this process and make these big paychecks over and over again!” – – Kevin Kudrna, Retired Air Force

P.S. Find out what Kevin already knows HERE! It’s the most up to date content out there on Wholesaling Houses and Wholesaling REO’s.

© 2010 Swift Results, Inc.
all rights reserved

Did all that “geek-speak” I told you about yesterday set in?

I know it took forever to cover all the bases so you know what and why we do what we do to make getting money easy.  Don’t worry about all the “why” just understand that’s what you need to do and follow today’s steps to “Git ‘R Done!”

Simple Steps to Assigning a Contract

Remember, this works for any lead you generate from sellers that are not listed on the MLS.

I’m eliminating everything I’ve already covered up to this point, so I’m assuming you have leads, and you’re ready to put that offer on paper and you want to do it right.

1.       You fill out your assignable contract with the seller.  Keep in mind, when I’m dealing face to face with a seller (or someone’s doing this for me), I’ve already given them a verbal or written letter of intent (often with 3 or more ways I can buy their property (complete multi-offer system is HERE!) ) and I’ve let them decide which one is best…so, I’m just filling out on paper (the contract) what we’ve already agreed on.  This isn’t a “here’s my offer, take it or leave it” situation.  You just need your contract to be assignable.  You’ll also want some way out of the deal if something doesn’t go to plan. I usually use a simple inspection clause without a date limitation on it.  This gives me up to the closing to exit safely.

2.      Fax the contract to your title company.

3.      Market your deal to your buyers list.  I’m usually calling my “A” buyers before the ink is dry on the contract on my way home after the deal is signed.  Once I get back to the office I’ll blast it out to my e-mail list with a picture and the specifics on the after repaired value, repairs and the total price of the house (purchase + my assignment fee)

4.      Get buyers in to see it.  Usually just by a lockbox on the property so I don’t have to go out.  They are almost always vacant and easy to show this way.

5.      Once your buyer says yes – you have them bring you a certified funds deposit and have them sign an assignment form.  You sign, then fax or email to your title company.

6.      Make sure buyers, sellers and any hard money lenders involved are CC’d on any title work emails and all are aware of the closing date.

7.      Go to closing and get a big check.

8.      Celebrate your victory.  I’m not telling you to go blow it on materialistic bull-crap, but take the time to treat yourself for taking action and hitting a milestone.  I saw Bill Barnett at a seminar once and he said something I really liked (and acted on).  He said after your first deal, go take your wife or significant other out for a nice dinner…someplace with a view of the city lights and look out at the millions of lights and realize it only takes 15 of those to say “Yes” to make you have an extraordinary year.

This is long enough.  I’ll give you the step by step on how to wholesale an REO tomorrow.

To Your Success,

Michael Jake

Your Local Mentor

www.localmentor.com

www.michaeljake.com

“Hi,

My name is Ben Legg.  While I was working at KRDO in Colorado Springs I met Mike Jake when he came into the station to do an interview.  I began going to his classes and soon discovered a passion for real estate.  I decided to leave TV and move back home to Virginia and pursue real estate.  With Mike’s help I have been able to put my first 2 deals together which I will make a little over 35,000 and I have another deal in the works.  Thanks Mike for all your help…you truly did help to change the path of my life.

Best Wishes,

Ben Legg

Blue Ridge Home Buyers LLC

P.S. Find out what Ben already knows HERE! It’s the most up to date content out there on Wholesaling Houses and Wholesaling REO’s.

© 2010 Swift Results, Inc.
all rights reserved

5 Ways To Wholesale Houses

by Michael Jake

I’m going to throw a bunch of “techie” real estate stuff your way, and it can get confusing, but I promise you at the end, you’ll understand exactly why we do what we do to extract the maximum amount of cash out of a deal and get the maximum amount of offers accepted.

Here we go…

Let’s start with a quick list of the “ways” to flip or wholesale REO’s and why ONE way is the best.

1.      Assign the contract. By far this is THE single easiest way to wholesale houses.  If you are following my lead generating systems I gave you earlier in this mini-course, then this applies for all those leads – in a nutshell – it works ANY time you can use a bullet-proof assignable contract (like mine available HERE), meaning something NOT found with your realtor/agent or in some cases if you find a deal on the MLS via your agent or search query I taught you how to do that is NOT (key word NOT) a Lender Owned property (REO).  If it’s a normal seller, and not a short sale you can still use an assignment provision in a state approved contract that your realtor would use.

2.      Double Close.  You have your contract to buy from the seller, you then have another contract to sell to your buyer (subject to your ability to purchase from your seller…VERY IMPORTANT clause for your contract).  Here’s why this won’t work for REO’s (and let’s face it, this is a fire hose of deals in most markets, like RIGHT NOW).  If a lender accepts your agreement, most (not all) will also have a separate addendum or contract that they use for all their properties and in that agreement (most) there is a clause that states that the buyer (YOU) need to have guaranteed funds to close this deal…and in not so many words…even if you have a buyer in the next room with enough funds in escrow to close the purchase with the bank and your profit, it cannot be used for your purchase transaction.  You literally have to have your own funds to close…Ok, so what you say…”Guru X told me all I need to do is use a “Flash Cash” lender to close my deal and I pay them a couple points….I still have none of my own money in the deal!”  Well, it costs you a big chunk of your profit on every deal you do.  Wouldn’t it be better to pocket all that money and cut the flash cash lenders profit out of your deal…I say yes…and I’ll show you how later.

3.      Deed after closing.  In this scenario, you simply have your buyer bring cash to close on your contract in exchange for a deed to the buyer at closing.  So you close with their cash, and they hold a deed already signed by you to them.  Here’s the problem.  The deed to you might not be recorded that day…or even for weeks in some cases, so your buyer may not know how long to wait till they can record your deed.  It’s also assuming there’s an enormous amount of trust between you and the buyer.  If it’s your first deal or just your first deal with that buyer, how much trust is established?  Tens of thousands of dollars worth? Probably not.  This works great for seasoned investors with good reputations dealing with buyers they have a track record with. For new investors…I think you need something more reliable.

4.      Trusts.  Go to contract with a trust and sell the beneficial interest of the trust (and file a bunch of trust paperwork firing one trustee and establishing a new trustee for your buyer).  Two problems with this method. First one (and a very important one)…a trust as a buyer on the contract is a big red flag for lenders AND listing agents.  It’s a totally legitimate way of doing business (and personally EVERY ONE of my rentals are titled in a trust name), HOWEVER, if your offer is automatically a red flag to the lender if there are other offers on the property you will likely NOT get the deal – even if yours is the highest and best.  Ask me how I know!

Second, often even seasoned investors are not comfortable with trusts.  In fact locally, even the HomeVestors franchise people will not purchase a trust from someone for a wholesale deal.  Some investor buyers simply never took “that seminar”.

5.      LLC’s.  This is THE way I do MLS transactions involving a listed short sale or REO property I intend to wholesale.  I can create an LLC to use as a buyer on the contract and then sell that LLC to my buyer.  It’s a personal property transaction that happens outside the closing.  Works like a charm every time I’m dealing with investor buyers.  I’ll get a deposit on the sale of the LLC once my buyer says “I’ll take it”, then we’ll complete the sale of the LLC at the closing when we both know the real estate transaction is closing.

You have to understand I’m a “processes” guy.  My degree was in business operations and I’m always looking for a “Standard Process” to accomplish a task in the easiest, least expensive manner and once the system is in place, I don’t even have to be there for it to work, I can have one of my team members fill in the blanks.

To Your Success,

Michael Jake

Your Local Mentor

www.localmentor.com

www.michaeljake.com

“Dear Mike:

Attached is the assignment fee for my first ever assignment deal…This was a classic “cat urine” house…I had 45 minutes to kill between appointments, so I “dropped in” on the renter (who hadn’t paid in 9 months). The house had a small pathway for walking and there were 7 (or so) cats. I couldn’t see most of the floors. It needed just about everything, holes in the ceiling from leaks, yadda yadda. A complete trash job.  I used a couple of the negotiating techniques I learned in class and got the seller down $20K from where he started.  He had to evict the tenant, so I had some time.  When it became available, I put a blast out to set up an open house on a Sunday, but got 3 lookers Friday, when I was putting a lock box on the house. 1 of them made an offer.  Both the buyer and I underestimated the repairs, but because I had gotten the seller to come down, I had room to give and still made $5K. Never did the open house. Thanks again.” Kevin ‘kooch’ Cuccinelli

P.S. Find out what Kevin already knows HERE! It’s the most up to date content out there on Wholesaling Houses and Wholesaling REO’s.

© 2010 Swift Results, Inc.
all rights reserved

Shortcuts to Getting Your Offers Accepted

by Michael Jake

Time to get to some killer shortcuts that will get you the deals ahead of the crowds.  It’s usually a few little differences that make one offer raise to the top of stack even if it’s not the highest price.

Let’s dig in and pull back the curtain so you can join the ranks of my wholesaling assassin’s cashing multiple checks, month in and month out.

First off…If you intend on wholesaling deals, you will be having your Realtor® or agent write ALL CASH or Hard Money Financed Offers.  Doesn’t mean you’ll be bringing in cash or getting hard money yourself, but that’s how your buyer will be financing them.

Hard money or not, you need to remove ALL financing contingencies.  Yes, I said ALL!  Don’t freak out, I know all these late night TV bozo’s will tell you, you need a bunch of contingencies in your offer so you can get out of deal.

QUIT thinking about the negative (getting out of a deal) and focus on the positive…They actually ACCEPT you offer.  You want them to accept because that means you are going to get PAID.

Most REO’s or lender owned inventory will need about 3 weeks to close – meaning the bank can’t get their act together to get to a closing table in less than that time, even if you find a buyer in a nano-second, who’s paying cash – doesn’t matter , most of your offers will be a 2-3 week close.  That’s plenty of time.

You’ll see a bunch of other dates and deadlines in a state approved contract, and the only one other than title is the inspection clause.  10 days is standard.  I suggest taking the full 10 days till you close a few deals and really get a feel for what your buyers will jump in the car to see immediately.  That inspection deadline is the only “contingency” or “weasel clause” you need.  If after 10 days of marketing this to your buyers list you have no-takers then you’ll have to back out of the contract.  Just inform your agent after inspection your numbers aren’t going to work…BUT…before you totally kill the deal….ask ALL the buyers that took a look at it (I actually do this as people ask to see it) ask for feedback.  If they think you are off on any numbers, most are willing to share what they think. If you are close, but “no cigar”, you can always go back and adjust your offer price based on inspection.  The seller can kill it at that point, but you bow out a little more gracefully than just saying “I can’t close”.  If you follow my system step by step you should never get to this point, but sometimes anyone can miss something.

Look out for my next e-mail where I’ll GIVE you the ONLY WAY to successfully wholesale Bank Owned Properties.  Sheesh, I know every other “guru” wanna be would package up one little morsel of information, pack up with 300 pages of fluff and sell it to you as the holly grail for $997…but only if you act now…whatever…Aren’t you sick of that crap?

In actuality there are several ways to “flip” bank owned houses, and I’ll tell you all of them, but I’ll give you what you REALLY want, which is the ONE WAY that works, EVERY SINGLE TIME.  So stay tuned campers…look in your e-mail box tomorrow.

To Your Success,

Michael Jake

Your Local Mentor

www.localmentor.com

www.michaeljake.com

“Following Mike’s system, within three weeks I was able to wholesale a house and made $5000…the whole transaction went smoothly. Thanks,” Dan Roeber

P.S. Find out how Dan did it so easy HERE! It’s the most up to date content out there on Wholesaling Houses and Wholesaling REO’s.

© 2010 Swift Results, Inc.
all rights reserved