Creative R E A L E S TAT E
Hometown Overhaul Read Brenda Derickson's Success Story PAGE 2
Deal of the Month PAGE 2 Success Story PAGE 2 March Meeting Recap PAGE 4 Market Update PAGE 5 How Do I Overcome Paralysis of Analysis? PAGE 6 MnREIA Trivia PAGE 7 Wholesaling FAQs for the Educated but Scared PAGE 8 Saturday Workshop with Vena Jones-Cox PAGE 9
New Members PAGE 10 Message from Mike PAGE 11 April Meeting PAGE 12
Minnesota Real Estate Investors Association | www.MnREIA.com
April 2019 | 1
DEAL of the
MONTH Submit you’re before and after pictures and a description of the project. All valid entries will receive $50 REIA Bucks and one lucky winner every month will win a $50 Home Depot Gift Card. Entries can be of current deals or past projects. Submit your entries to amckinnon@ therealestatehouse.net.
Hometown Overhaul
BEFORE
Brenda Derickson Fixing up a house can often be a daunting task. Even more so if you are living in it! However, to buy a house to fix up and sell can be risky, rewarding and maybe even profitable. Presently, fixing and flipping a house is a common theme among investors and watched on television by millions. Usually it is done in large cities where there is a large pool of buyers, but occasionally in the small town. One day while driving the streets of Lamberton, I noticed several houses that needed some love and decided maybe we should try a house in Lamberton. We had bought a couple of houses to fix up and rent out for our kids while they were in college and we were trying a fix and flip in Marshall at the time we bought the house in Lamberton. My family said, “You did what?” But I felt we needed to start with our hometown before continuing investing in larger cities. Nick, our second son, and I started taking lathe and plaster down in the kitchen so we could take out windows that looked into the garage. Our original intent was to fix the cracked plaster walls, paint, put in new flooring, new kitchen and a new bathroom, but that plan got changed. Shortly after purchasing the home in April of 2017, we went into the fields planting, rock picking and other farming duties. The opportunity to do a house in Marshall arose just a week after buying the Lamberton house so we chose to wait
2 | April 2019
on the house in Lamberton until we were done in Marshall. We also had a house in Rapid City that we had rented to college students while our children were attending school there that we decided to finish remodeling so we could sell it. To accomplish this, Kaylee and I worked in Rapid City while Ethan and J.D. (John) worked in Marshall putting up drywall. We then switched locations to finish other parts of the work. It was a very busy summer! We weren’t able to get back to working on the house in Lamberton until Christmas break when we had a little more grunt labor to help us. It was at this time that we decided to take out
BEFORE
Minnesota Real Estate Investors Association | www.MnREIA.com
BEFORE
AFTER
AFTER AFTER
the wall between the kitchen and the dining room. This was the first step in a complete makeover that we hadn’t planned. Picturing the finished product is often difficult for many people. I’m very lucky that my husband and several of my children can look at a room and see what it can become before it has ever had anything done to it. We hadn’t originally planned on taking out the wall, but it just seemed like the house was calling for it to come down. It needed a beam to span the space that the wall spanned, so it was more time and money than we had originally budgeted. However, once opened up, it really brightened up the two rooms. From there, it only made sense to completely open up the main floor so there could be great flow. Open concept at its finest! Gutting the whole house from the beginning (taking off the lathe and plaster) would have been easier, but we were trying to keep costs down by keeping the walls intact. Eventually, nearly all the lathe and plaster got removed so we could insulate, remove
wallpaper (it was easier and faster to tear down the wall that to remove the wallpaper) and move walls. This is much easier to do when no one is living in the house. It also made it easier to see a different layout for some of the rooms. We ended up switching a small bedroom and a bathroom (we had to make sure it worked for the plumbing) so we could have a larger bedroom, put a stackable laundry in the old bedroom closet, put in a small bathroom on the main floor by slanting a wall and taking out a chimney, opening up the existing closets so one could access the whole closet (it originally had a 24 in. door that opened in), refinishing the wood floors, replacing windows, siding, put steel on the roof and refinished the woodwork. Now that was a job! It would have been easier to replace trim, especially since we had made the windows larger. But the house seemed like it needed to have the old trim put back in place. The main floor had stained woodwork while the upstairs was painted. I knew the upstairs
Minnesota Real Estate Investors Association | www.MnREIA.com
would be painted white but I just couldn’t shake the feeling that the main level trim should be refinished if possible. Polls were taken, the vote was split, but the quest to refinish the main floor trim was started. Old was meeting the new. The project overall was a very large undertaking as it was often just three of us doing the work, sometimes only one. We were very fortunate to have the help of a couple of local crews when we needed it and some very key individuals that helped us when the going got a little tough. Opinions were often gathered via pictures, Snapchat and texting when we got stuck on various choices, usually involving paint color. It made for some great discussions! Fixing up a house to sell is tough because you don’t know what the seller is going to like. Doing this project was dirty, tiring, frustrating, risky, but also rewarding and exciting. It is rewarding to see a house that many would have started by tearing down, come back to life. It was fun to come up with solutions to puzzles (getting a main floor bathroom) and pushing ourselves to find the full potential of the house. Not every house is worth the effort of renovating, but many are worth it. We feel this house was worth it.
April 2019 | 3
Remember when you pose in front of the MnREIA banner at our meetings and post it on social media with #MnREIArocks, you have a chance to win $25 in reia bucks!
MnREIA volunteers Ma Vang and Julia Erle with sta Heather Lindahl enjoying registering people to the meeting!
MARCH MEETING RECAP Thank you to everyone who came to our last Main Monthly Meeting with President and founder of MnREIA Mike Jacka! Learning the foreclosure process of Minnesota is very important in this business! We love seeing everyone make their dreams become a reality with their Real Estate Investing business(es)!
President and Founder of MnREIA Mike Jacka ready to kick start the meeting!
Yummy pasta dinner!
Vendor and volunteer Steve Farrell posting for the camera!
Vendor Sean Blomquist!
MnREIA sta Darryl Frieburg holding down the fort at registration!
Vendor Ben Hanf with Keller Williams with his girls selling Girl Scout cookies!
A smile can go a long way!
4 | April 2019
Minnesota Real Estate Investors Association | www.MnREIA.com
Sales Price Market Update
Median Sales Price
Median Sales Price: Pending S ▲ Median Sales Price: Pending S ▲ Increased from $258,900 in January to $258,000 in Increased Median Sales Price: ▲
January
Increased from $258,900 in January to $258,000 in December Increased Median Sales Price: ▲ Pending S Increased from $258, December Increased from $258,900 in January to $258,000 in December Closed Sal Increased New Listings: ▲ Closed Sal Decreased December Decreased New Listings: ▲ Increased from 4,359 in January to 2,406 in December New Listings: Closed Sal ▲ Decreased Increased from 4,359 in January to 2,406 in December New Listings: ▲ Increased from 4,359 Month’s Supply of Inventory: ▼ Increased from 4,359 in January to 2,406 in December Month’s Supply of Inventory: ▼ Decreased from 1.6 months in January to 1.7 months in December Month’s Supply of In Pending Sales: ▲ Decreased from 1.6 months in January to 1.7 months in December Month’s Supply of Inventory: ▼ Decreased from 1.6 m Pending Sales: ▲ Increased from 3,248 in January to 2,945 in December Decreased from 1.6 months in January to 1.7 months in December Increased from 3,248 in January to 2,945 in December Closed Sales: ▼ Closed Sales: ▼ Decreased from 2,681 in January to 3,740 in December Decreased from 2,681 in January to 3,740 in December
Median Sales Price: Median Sales Price: ▲ ▲ Increased from $258,900 in January to $258,000 in Increased from $258,900 in January to $258,000 in December December New Listings: New Listings: ▲ ▲ Increased from 4,359 in January to 2,406 in December Increased from 4,359 in January to 2,406 in December Month’s Supply of Inventory: Month’s Supply of Inventory: ▼ ▼ Decreased from 1.6 months in January to 1.7 months in December Decreased from 1.6 months in January to 1.7 months in December
in January to $258,000 in
anuary to 2,406 in December
Pending Sales: ▲ Increased from 3,248 in January to 2,945 in December Closed Sales: ▼ Decreased from 2,681 in January to 3,740 in December
tory: ▼ ths in January to 1.7 months in December
Minnesota Real Estate Investors Association | www.MnREIA.com
April 2019 | 5
How Do I Overcome Paralysis of Analysis? By Vena Jones-Cox
Q:
I’ve recently started going to meetings of my local Real Estate Association, and I think they’re great. The problem is, there’s SO much information that I don’t know what to pay attention to! Every month, there’s another speaker with another opinion on the “best” strategy for this or that. I’m overwhelmed and can’t seem to get out and actually do anything. Please recommend a course of study that will help a new investor make a nice, simple deal. ©A.G, St. Louis
A:
I’ll go you one better than that; I’ll tell you the ABSOLUTE BEST strategy for buying and selling property...or would that be less than helpful? New investors who attend real estate association meetings often come away with the same “paralysis of analysis” that you describe. There’s SO MUCH information available, and so much of it appears to be contradictory (buy foreclosures...don’t bother with foreclosures...buy to hold...buy and sell) that one wonders how anyone ever figures it all out. And adding to the problem, every successful investor is willing to defend to the death THEIR strategy as the BEST strategy. Although they’re trying to be helpful, they often add to the confusion experienced by newbies trying to make sense of it all. In my experience, new investors that don’t start making offers in the first 2-3 months never get around to doing it at all. The fear of doing deals only fades with the actual doing of deals; no amount of “book-learnin' ” will ever give you the confidence you want. So, stop trying to learn everything, and focus on what you need to make the first offers. Those things are: 1) What do you want real estate to do for you? In other words, in the short term, do you need quick cash? More retirement income? More passive cash flow? Pinpoint this, and your exit strategy will become clear; know your exit strategy, and the type, condition, areas, and price range of properties you should be looking for will pretty much define themselves. People who need quick cash generally need to wholesale or retail; people who need to wholesale need single family junker properties in rental or bread and butter areas with motivated sellers. See how easy that was? 2) A working knowledge of how your ONE exit strategy works. Building on the last example, once you know that wholesale deals are sold to cash buyers for 60%-70% of as-is value, you know a) how to calculate an offer and b) that you need to start finding buyers NOW. 3) Two or three strategies for finding the types of properties you want. Whatever your chosen strategy, finding the good 6 | April 2019
deals is the “work” of the real estate business right now. It takes 20 suspects (sellers you THINK might be motivated) to find an actual prospect; a lead isn’t even a SUSPECT until they’ve contacted you; thus, you’ll have to reach out to a lot of possible leads to get a deal. So, try 2-3 methods (direct mail, bandit signs, driving for dollars etc.) all at once for a few weeks. Discard those that fail and amplify those that work, but always use more than one way at a time. 4) The ability to evaluate the properties you’re viewing. In the case of junkers, you’ll need to know how to find the after-repaired value and the cost of the repairs. Don’t worry about figuring out what the property will rent for; it’s not important to your plan. Conversely, if your plan is to right price to pay based on income and expenses. Any basic course on these exit strategies will teach you in detail how to decide on a “maximum allowable offer;” without that information, you just don’t know enough to make smart offers, period. See Q&A, Page 10
All Aspects of Home Remodeling and Repairs Call your local Experienced Handyman Jim McKinnon (612) 590-0830 Jim.McKinnon@hotmail.com
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Minnesota Real Estate Investors Association | www.MnREIA.com
March
Trivia
Answers on page 11
1. Where and when do foreclosure sales take place in Minnesota? A) At the sheriff ’s office between sunrise and noon B) The courthouse steps between 9pm and midnight C) The time, date, and location specified in the “Notice of Sale” D) None of the Above
principal amount D) All of the Above 3. How long must the creditor publish the foreclosure advertisement? A) 6 months B) 6 weeks C) 6 days D) None of the Above
2. How long is the redemption period in Minnesota? A) 5 weeks if the property is abandoned B) 1 year if the borrower owes less than 2/3 of the original principal amount C) 6 months if the borrower owes more than 2/3 of the original
4. What is a “Sheriff Sale”? A) The lender selling the property through the sheriff B) The sheriff confiscating a property and selling it C) The borrower “selling” their story to the sheriff D) None of the Above 5. Where must the “foreclosure
advertisement” be published? A) Modern Foreclosure Magazine B) A qualified newspaper in the state where the property is located C) A qualified newspaper in the county where the property is located D) All of the Above 6. Can the Sheriff Sale be postponed? A) Yes, for 5 months B) Yes, for 5 weeks C) Yes, for 5 days D) Yes, for 5 minutes Congrats to this month's WINNER Yekaterina Harnois
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Minnesota Real Estate Investors Association | www.MnREIA.com
April 2019 | 7
Wholesaling FAQs for the Educated but Scared By Vena Jones-Cox
If you’re like most people, you’ve been wondering all along when we were going to discuss all the awful things, you’re imagining might happen to you as a wholesaler. And I have no desire to sugar-coat things for you, but the truth is most of the things you’re imagining are extremely rare, and easily overcome. Here are some of the most frequently asked questions about such fears:
What happens if I can’t find a buyer for a property I have under contract?
If you can’t find a buyer, one of three things, has happened: You’ve made a bad deal, in which case your buyers have certainly made you aware of this or; you haven’t marketed the deal hard enough to get the right buyer or; you didn’t give yourself enough time to get your buyers into the property before your inspection or partner approval clause runs out. Any of these 3 failures is unlikely to harm YOU, if you exercised the recommended inspection clause. You’ll simply void the contract under that clause, or renegotiate for a lower price or more time, or in a worst-case scenario, let the seller keep any earnest money as per the liquidated damages clause. In the first case, you might try renegotiating the contract price or option price. You’ll know what to re-offer after you’ve shown the property to 4-5 people. In the other two cases, if you’re certain that you’ve created a good deal, you might consider paying the seller an additional, non-refundable option fee or deposit to extend the period of the contingency and closing. A third possibility is to buy the property yourself, although that is outside the scope of this course. Remember, as 8 | April 2019
long as you have a liquidated damages clause, you’ll lose only your earnest money; if the property is controlled via an option to buy, you’ll only lose your option fee for not closing. But don’t make it a habit. In any case, it’s important, as an ethical wholesaler, that you let the seller know as soon as possible that something has gone awry, and that you won’t be closing as promised.
What if the buyer backs out before closing?
This is rarer than you might imagine. In my decade plus long wholesaling career, I have had “lookers” (those are the guys who tell you they’re interested, but they have to line up money or bring their father-in-law by to take a look or come up with the assignment fee or whatever) back out dozens of times. I’ve had actual buyers—those who had actually paid the wholesale fee—back out exactly twice. Even if your buyer walks away on the day of closing, the only thing you have at risk (assuming you used the recommended clauses in your original purchase contract) is the amount of your earnest money. Until a buyer actually puts money up front and signs a contract to buy the property, it is not sold. Never stop marketing a deal just because a buyer SAYS he wants it. Assuming you did the right thing and collected the wholesale fee up front, you have a powerful way of negotiating an extension with your seller for the purpose of finding another buyer. Offer the seller additional, non-refundable earnest money in return for an extra 30 days to close. In the rare instance in which an actual buyer backs out, try to get him to sign a release saying that he does not intend to close. Whether or not he’ll do so, begin to market to your secondary buyers and, if necessary, let your seller know that there
may be a snag in the closing.
What if my SELLER backs out?
This is, believe it or not, the slightly more common scenario in my experience (It’s happened to me 4 times vs. 2 for the buyer backing out). If the seller tries to back out (or renegotiate after he’s already signed the contract, which also happens from time to time), you and your buyer have two choices. The first is, let him. This is often the wisest choice when the seller wants out because of a death, illness or other tragedy. It’s not worth it to pursue a seller who’s grieving or otherwise involved in some major life change. The other is, refuse to let him. By virtue of the signed purchase contract, you have the right to force the seller to honor his side of the contract. When the seller just “decides” not to fulfill his contract, usually the threat of a “specific performance” suit, where you sue the seller to force him to honor the contract, is enough to make a seller sit down at the table.
What happens if I make a mistake in the value or cost of repairs of a property? Everyone does this from time to time, especially when trying to estimate a repair you’ve never seen before. Assuming that you used an inspection or partner approval contingency, you’ll exercise it and get out of the contract. Or better yet, try renegotiating the price. In either case, if you inform the seller before your contingency time runs out, you’ll be able to set things back to rights without even losing your deposit. Learn all about the realities of the wholesaling process and how to do it RIGHT when Vena Jones-Cox presents at our May 7 meeting!
Minnesota Real Estate Investors Association | www.MnREIA.com
SATURDAY WORKSHOP WHOLESALING REAL ESTATE GODDESS with the
VENA JONES-COX
How to Build a 6-Figure Wholesale Business & Find More Great Deals than You Can Handle with Vena Jones-Cox 9 a.m. to 5 p.m. Saturday, May 18, 2019 Best Western Plus - North Metro Event Center • 1000 Gramsie Rd., Shoreview, MN 55126
AM
PM
To truly get out of the “rat race”, you need a plan that goes beyond the basics of “find a deal, sell a deal” and allows you to expand and systemize your business so that you can work with more buyers and sellers, and delegate some of your work to others.
The days of “too many deals, not enough buyers” are over for the moment, which means that whether you’re a wholesaler, a retailer, or looking for some good income properties, you’d better understand how to find off-market deals.
IN THIS MORNING WORKSHOP, YOU’LL DISCOVER:
JOIN US IN THE AFTERNOON AND FIND OUT:
• Why wholesalers who systemize make 10 times the money of those who don’t • Why working with more kinds of sellers makes you more money, and how to wholesale properties from banks and other sellers who want to make your contract “non-assignable” • Which tasks you can probably delegate right now, cheaply, to virtual assistants • How to create a plan to grow from no deals or a few deals to a deal every week within 12-24 months • How to Find Great Deals in a Seller’s Market
• Exactly what makes marketing “work” and gets you the highest profit for the lowest outlay of money • How to develop strong marketing messages that make sellers want to call you (when you see how Vena creates her messages, you’ll understand why yours aren’t working as well as they should) • Why a lot of what you “know” about marketing in the real estate business is wrong • How to get 5-10% response rates for your letters, postcards, and other direct mail
EARLY BIRD SPECIAL PRICING Up To 5/7/2019 Members: $39, Non-Members: $59 5/8/2018 to 5/13/2018 Members: $49, Non-Members: $69 5/14/2018 to 5/17/2018 Members: $59, Non-Members: $79 Regular Price Members: $79, Non-Members: $99
VISIT WWW.MnREIA.COM TO REGISTER. Minnesota Real Estate Investors Association | www.MnREIA.com
April 2019 | 9
to the
FEBruary 2019 Karen Bryan Marcus Jarvis Laquadra Neal Kristin James
Amycar Thammavongsa Rikk Labere Greg Schuricht Tonya Whitehead Gelane Firisa
Michelle Kerrison
Paul Solsrud
Adam Frey
David Hopp
Don Archibeque
Susan Brown
Taylor Matzoll Kelly Galbreth Ben Walsh
JD Greenberg Gus Muller Brenon Smith
Eaone Moua
Gemechu Urgessa
Diane Dohnalik
Eddy Taslakian
Kejyana Clark
Ken Wagner
Stefan Georgiev
David Augustine
Matthew Fronda
Sandra Marroquin
Angela Jimenez
Anthony Perone
Chuan Xiang
Paul Halvorson
Kristie Shafer
Pang Vue
Kyle Ambrasas
Abdinur Adeed
Melinda Vue
Andrew Mickelson
Edward Austin
Joseph Tramonte
Adam Gess
Nhia Vang Kyle Schmitz Vaughn Thammavongsa
restore.tchabitat.org
William Schultz Ryan Alvarez Brian Caldwell
Avery Neisen Abigail Gonzalez Joe Walters Tanya Walters John Gonzalez
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10 | April 2019
MEME OF THE MONTH
CONGRATULATIONS NEWEST MnREIA MEMBERS!
Store Hours Tue to Fri: 10 – 6 p.m., Sat: 10 – 4 p.m. Donations until one hour before close
Q&A, Continued from Page 6 5) A team and a contract that will keep you out of trouble. Why do you need to know how to do a title search when there are folks who do it for a living? Sure, it might be good to know later, but it isn’t crucial for you to know right now. And if you have a well-written purchase contract that allows you to get out of a bad deal before it closes and an experienced mentor that will help you through your first few deals, how can you lose? You mentioned that you attend your local Real Estate Association meetings; if it’s a good group, you can largely build your team from recommendations of other members, association vendors, and the experts they bring in to teach you. Just take it one step at a time. Learn the basics, then go do. Learn more, then do more. Both are crucial to your ultimate success; you get the knowledge you need in the classroom, and the experience you need by applying that knowledge in the real world. Your mentors and community are your safety net, so lean on them as needed. Remember, many people have trodden this path before you. Follow what’s worked for others, and you’ll be fine. Vena is the featured speaker at our May 7 meeting. She’ll be talking about her favorite exit strategy — wholesaling for a quick cash profit. Don’t miss it!
Minnesota Real Estate Investors Association | www.MnREIA.com
MESSAGE from
MIKE JACKA Look for the Opportunities Where No One Else IS
Deals are out there. I am getting a few with what limited time I have for marketing and the full timers are tell me that they have good leads coming in. Not as many as in the past, but still enough to keep them busy. Where are they finding their leads? Not the same places that most people are looking. They do look at the MLS and you can find deals there, but admittedly it is not easy on the MLS. They are looking at niche markets. They would probably be upset if I told you what they are doing, trade secrets I guess. But I can give you some ideas for yourself. Probate, bankruptcies, vacant buildings, delinquent taxes, out of town owners and free and clear properties just for a few.
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TRIVIA ANSWERS
1﹒ C 2﹒ D
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Minnesota Real Estate Investors Association | www.MnREIA.com
(651) 800-1501 KimBurke@Leader1.com mymortgagewithKim.com
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April 2019 | 11
Minnesota Real Estate Investors Association, Inc. 7040 Lakeland Ave. N #200 Brooklyn Park MN 55428 (763) 432 2809
N E T WO R K I N G ~ T R A I N I N G ~ E D U CAT I O N
How I'd Make $1 Million in 5 Years if I Had to Start Over with Multiple Speakers We know just how important it is to get your real estate business off on the right foot, so our next meeting aims to do just that. Our most experienced members share how they'd make a mill in 5 years if they had to start all over; plus how to set goals for the coming "down" market.
6-9 p.m. Tuesday, April 2 Banquets of Minnesota 6310 Highway 65 NE Fridley, MN 55432
CALENDAR OF EVENTS: APRIL