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Strategies To Win At Residential Real Estate Investing By: Ryan G. Wright – CEO DoHardMoney.com What does square footage has to do with the resale price of the property? This is a bit of a technical question and I would try my best to give you the right answer. I think it is something that you should consider but I don’t think it’s an overall guiding principle. As we have talked before, I would really like to have 3-4 actives and 3-4 solds in the similar area. I don’t really care about the style. I think cost per square footage is a good guide, meaning that you can look at it and it can help you know that if you are on-base or off-base. But I don’t think it’s the ultimatum. With the cost per square footage, you are not able to compare apples to apples. The reason for that is not every house has the same square footage or same number of bedrooms and bathrooms or same garage or carport. That’s going to be something you’ve got to take into consideration as well as you are trying to look at the cost per square footage type analysis because it’s not going to come out exactly what you may be thinking it is able to do. But it’s a good guide. It is a way to get you into a ballpark and it also might be able to help you in making some initial offers because you might be able to look at something and say, “Hey, you know what, cost per square footage typically in this area is going to run $89 a finished square foot on a resale price and I should be buying it around $76 square foot.” These things obviously could be helpful for you as well as you are trying to figure it out. But it’s not a final word because there would be some people who would be saying, “Based upon cost per square footage, this thing is going to sell for $76.” I think that’s unwise, The quick answer to the question is: You should use it as a guide if you are going to use it but you shouldn’t use it as a defining value. You really need 3-4 active and sold comparables all in the similar area and using those as your comparables. The problem with the square footage as we have talked before that it is all over the area and doesn’t necessarily reflect …..

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How do I find out about foreclosure information? Typically in most states, what they really do for foreclosures is that they require doing publications. When they published this, they typically have to publish this for a certain period of time in a commonly circulated newspaper. What these guys do is that they put it in the cheapest thing that they could possibly find. Therefore, you won’t be able to find these legal notices in expensive big papers like Tribune or Daily News. Sometimes you can find them in there but most of the times you won’t find the majority of foreclosure legal notices. In every state, it is going to be a little bit different. For example , in Arizona, its foreclosure listings of Arizona or in Colorado, it is Daily Default or Info Service. These aren’t like your normal newspapers. All they are is for publications and you will have to pay for it and they will mail it to you or you can get an online access. That will help you in finding the publications of any of the foreclosures that have been taking place within the state. There is a simpler way to do that. If you will go to our website and click and subscribe to the find a property service. This will provide you with the newest potential properties that are out there, which could be helpful to you.

What’s the difference between a mortgage and the deed of trust? I don’t want to get too geeky on you with verbiage here but if I have to say this, they are both security instruments. There are two different things. When you go and sign a loan, you are going to sign a mortgage, deed of trust and you are also going to sign a promissory note. The promissory note is your promise to pay whereas the m ortgage and deed of trust is called the security interest and that security gets recorded against the property. You cans sign a promissory note without having a deed of trust or mortgage because the promissory note is simply saying, “I will pay you back the money that I owe you.” ©2012 – DoHardMoney.com – All Rights Reserved http://www.dohardmoney.com


Now, what a deed of trust or a mortgage does is that it ties it to the property. It says, “I promise to pay you or else, you could take this property back from me.” Mortgage and deed of trust are a little bit different in a way that they have to be foreclosed. You have also got another element here, which is judicial and non-judicial foreclosure process. Judicial foreclosure process means that you have got to go in front of a judge to seek their permission while non -judicial foreclosure process means that you don’t have to go in front of a judge. Joint venture agreements For finding properties, you have to work with a bunch of different people, such as bird doggers or wholesalers as they are commonly known. They are the people who go out there and find properties but they don’t have the resources or money or they don’t know where to find the money and they end up getting rehab loans. You don’t work with those guys but lots of times, you run into a situation where those guys think t hat the value of the property once it’s repaired is worth more than you do. I find that quite common. So, my solution to that is to do joint venture agreement with them. What I commonly say is, “Hey, here is the deal. We will give you a couple of thousand dollars and we will close on the property. What we want is to get first $15,000 – $20,000 worth of profit and anything over that, we will give you a 10-20 % of profit over that. But you are a silent partner and you don’t have to say what should happen or any of that type of instructions.” I have done that several times and it has worked out really well. The other thing that I have done is that if I think that the property is going to sell for $150,000 and they say that it is going to sell for $170,000 once it’s fixed up. In that situation, I have often gone and said, “Hey, anything over $150,000, I will give you half of that as long as you get me the purchase price that I am wanting. In that way, you will have a lot of upside if I would have just bought it and paid you what you were wanting.” I think that could be helpful as well in making deals happen. That’s really what it all about. It’s about making the deals happen and finding good resources and finding properties. Basic joint venture agreements just establish your business relationship. You need to make sure how you are going to get paid. You want to make sure that you say that if there are profits or losses, who is go ing to get the

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profits and losses. You want to make sure how it comes apart if you have to and I think it is also important that you talk about how much involvement would be there. The problem with me in the joint ventures is that I don’t like anybody telling me what I’ll have to do; I want it to do my way. I don’t want a partner. I just want to get a better deal on a property and if I am wrong and it sells for more, then we are both happy but if I am right, I want to protect my interests. So, it’s just a way of negotiations, which I think is really helpful. Direct marketing! Direct marketing is going to people who don’t have their property listed. There are really 3 different types of properties: 1. Listed properties 2. Unlisted properties by direct owners or banks or credit unions 3. Foreclosures. They are technically aren’t listed properties in lots of cases but sometimes they are listed. How to do direct marketing? I think that you have got to hit the hot topic and you have got to find the right people. For ex ample, if I own a property and I live out of that state and I have got some tenants that are causing me some issues, it’s probably a good time for me to sell my property and get out of it. But what I want to know at that time is that you are going to pay cash, so I can get rid of the house and never have to deal with it ever again. Another thing that you may want to consider doing is going out to people that are in the middle of an eviction. You should know that the eviction is not by an owner because they are not going to evict themselves out of their own house. It’s obviously a rental property. During an eviction, people just hate dealing with the property. Evictions are matter of public record in most states and you can find out who is having an evictio n done. You could go to the tax records department and find out who the owner is. You can contact the owner and say, “You would probably be sick and tired of these stupid tenants and want someone to buy the property and pay cash. I will take over your problem of getting the tenants evicted.” That could be a

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great solution for you in finding properties, depending upon how long eviction takes. Then, you need to find an attorney who could finish up the eviction. That could work out really well for you. The other thing, when it comes to direct marketing is that you have got non-owner occupied, who are the people that live somewhere else other than where the property is located. You have got out of state owners, who live out of state. The way you may know all this is through tax notice. If the tax notice is mailed somewhere other than the property address i.e. out of the state, then it is considered as out of state owner. There is another funny thing, which is known as zoning violations. Just a few minutes ago, I have got a courtesy notice about the zoning violation because the city has an ordinance that says that the cars can’t be parked at the side of the house or something stupid like that. If that was more of a severe notice i.e. one which will cost me a significant amount of money or one that just mean that I have got problem tenants, it might be a great opportunity. There are particular cities and counties that record the zoning violations and you could check that in public records. You can visit their office and inquire about the zoning violation of that particular area. The other important thing that you can do is to send direct mail campaigns. If you are using direct mailing, I would recommend a three-step approach. You don’t mail them just once but you should do that for three consecutive times. I would recommend that you will mail them once a week for three weeks. Probably, you can start with a post card and after that, you can post a letter and after that, you can do a follow-up letter. You can also do that in reverse order. The other thing is doing classified ads i.e. throwing ads in the classifieds. You can either publish them in your major newspaper or Tribune or Daily Herald or whatever the case is. You also need to post them in your local Thrifty Nickel, which could turn out to be really helpful as well.

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How do I know if something’s a good deal, other than loan to value? First of all, I need to make sure that the property is located in an owner occupied neighborhood. If I get a report back, which shows that 90% of the people are renters, it means that’s not a good neighborhood to flip a house in. You have got to think who has the money to buy the house. If you are trying to flip a house to real estate investor, you are heading down the wrong path because real estate investors don’t get emotionally involved in properties. They can hold out forever. They are not in a hurry. They don’t have to move out of their lease or their landlord isn’t going to kick them out or whatever the case is. Real estate investors don’t get emotional and everybody else buys a property based upon emotions and not logic. Therefore, you need to get them emotionally tied to the property but you need to have a little bit of logic to get them through the door and emotions can take them to the rest of the way. It’s an important point that lots of people miss. But with that, when you are buying a property, you have got to make sure that you want to fix it up because you are going to sell it up and somebody is going to m ove into it. If you are planning to sell it to the investors, I think it is a tough strategy. I think it’s a bit difficult one and you need to be quite a bit more experienced to be able to do that. That being said, you want to be in a predominantly home owner neighborhood and not a rental neighborhood. That’s one question that you should ask yourself. Number 2 is what about the crime rates? Is it a high crime area? Would you feel safe there at night? Or you can revise that question to; would I feel safe sending my wife there at night all by herself unarmed? If the answer is yes, then it’s probably a decent neighborhood and you should be looking at it. Other important questions are; does the house looks like everything else in the neighborhood? Is it th e biggest in the entire neighborhood? If so, you are going to have a problem. Does it blend well or is it a dome house because the house needs to blend well with the entire neighborhood. You want the conform. There is a real estate term called, “functional obstacle absence” and you want to make sure that it doesn’t have stuff that just doesn’t make any sense. That’s another question that you should really ask yourself.

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You need to look at the businesses near you. You need to look at the apartments and com plexes near your area. You need to look at if it is in commercial area i.e. is there a commercial property right across the street from this or is it in close proximity to the commercial needs. If the property is located just across the street of a grocery store, that’s probably not the best fix and flip because nobody wants to live across a grocery store. Let me give you an example of a property, which was right across the Burger King. I don’t know if you know this but Burger King starts making burgers too early like 10 o’clock and from 10 o’clock, there is a freaking burger smoke start coming out of the billows and this house was pretty near to the Burger King. Eventually, we had to find someone who had a fast food addiction to sell the house. That’s why; you want to make sure that it really sits in there. Then, what you are really trying to do is to get the property to come under FHA standards. You want to look at the house and say, “Hey, I did all the work to this. Is it going to conform to the FHA standards?” You can Google FHA standards and get an idea about their different requirements. Along with finding out if it’s a good deal or not, other than loan to value, the question that I want to ask is, “Can I get the rehab done in 45 days or less?” If i t is going to take longer than 45 days to get the rehab done, I shouldn’t be there and actually my deal is 30 days i.e. I want to get the rehab done in 30 days or less. I give 45 for a little bit of extra time because you run into problems occasionally. If it’s a big rehab, we want to complete in 30 days or 45 days at most. If it’s not that big of a rehab, 2 weeks is really what we are trying to get done on these things, which is really important because you need marketing time. You are on a tight leash when get a hard money loan and you need to make sure that you get the property done, get it on the market and get it sold. You should know that you have 90-day sales price. Therefore, if you are looking at values or just looking at some properties, where they are in the market for 200-250 days and if you are planning to invest in those areas, you are going to make SIGNIFICANT price decrease in order to sell the property a lot faster than the average days on market. You may also want to walk away from a neigh borhood like that because you have to make a lot of price decrease; otherwise you want to make sure that you get out of the property within 90 days.

©2012 – DoHardMoney.com – All Rights Reserved http://www.dohardmoney.com


Another important question is: Is it a good family home or is it in a good family neighborhood? One thing we always wanted to know is how many boarded-up houses are in the neighborhood? There are a lot of people out there who don’t want to live in boarded up houses. Lots of people get emotional when it comes to real estate investing. That’s why; I think it is important to have some checklist. Run through your checklist. Type up all the stuff like this: 

Do you want the boarded-up homes? Yes or No.

Can I get the repairs done in 30-45 days or less? Yes or No.

Does the property able to meet FHA standards? Yes or No.

You really need to go through and make sure that its good investment before you get emotionally involved. I can tell you that people have broken their own rules and ended up having problems. I know there is a clichéd that “rules are meant to be broken.” But when it comes to real estate investing, I think “rules are mean to be kept!” The reason for that is they keep you out of harm and harm meaning to your money. How can I do real estate investing part time? It’s a GREAT question. I think it’s pretty easy. If you are only able to do part time real estate investing, which I am really an advocate of, that’s the best scenario. The worst thing that I have heard is that these guys are going around and saying, “Quit your job today if you are really committed. Q uit your job and start doing real estate investing. We will not believe that you are serious about it until you get full time into it.” I think it’s bogus. I think that real estate investing can be done full time or part time and you can get success in both. You need to keep in mind that there are a lot of benefits to a day job, such as insurance or a paycheck is nice sometimes because in investing, you never know when your paycheck is going to come. All those things are really nice. That’s why; I am not an advocate to tell you to quit your job today or you are a loser if you have a job. I don’t believe that. I actually think it’s great to have a job. I think even if you are a full time real estate investor, you still have two jobs. People usually forget about this. You have two jobs: Job #1 is to put food on the table. To pay your household and your family expenses. ©2012 – DoHardMoney.com – All Rights Reserved http://www.dohardmoney.com


Job #2 is for your retirement. So, you have to work on job number 2 to provide for your retirement. You have two jobs even if you are into real estate investing. I have seen a lot of real estate investors who have done fix and flip homes and they made enough money to pay for their family income. But they haven’t got enough money for their investment income. Therefore, if you have a day job, that can take care of your family needs and then you use your real estate investing to take care of your investment needs. So, you have got a great retirement and it makes a lot of sense to me. I think part time real estate investing can make sense. Now, how you can make it happen? You will have to have a good team behind you. A real estate agent can help you in evaluating property and you should have someone who could you trust. You should have a good contractor, so he can get the work done on the property. It is going to be a little harder for you to pick upon good deals if you are doing direct marketing. Therefore, if you want to do direct marketing, you should work with a call centre, so they can pick up the phone, answer the phone and ask different questions related to the prope rty. Then what they will do is the key, which most of the people screw up. The key is that they go to your Google online calendar and actually book an appointment for you to go look at the house and then, they will email you everything. So, when you get out of work, you can look at the house and all that type of stuff. You have got to utilize the technology and utilize what’s out there to make these things happen. That could be a great way of working part time or you can work directly with an agent who is making offers and looking at properties all day for you. At the end of the day, you can give your approval on that.

©2012 – DoHardMoney.com – All Rights Reserved http://www.dohardmoney.com


The Best Plan - Residential Real Estate Investing