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Buy and Hold: Spotting Gold and Avoiding Woe Part 1: Introduction

 

IMG_3151You are probably seeking to make real estate a successful side business, or a way to add a few extra dollars to your retirement. After all, it can be a fairly safe, long-term, and a generally appreciating strategy to invest in land and property. You are most definitely not alone in realizing this. But what strategy do you utilize? How do you maximize your profits? Do you buy and hold (a favorite among investors in an area that’s already booming)? Do you buy 3 of the ugly houses in an area that is just beginning to see investor activity and fix them? Do you know how to spot investor activity? Do you want to position your buy and holds so that you purchase them before the area is widely known as hot (meaning you buy for cheaper and sell for more) before the market bubble, that may only be 6 square blocks, pops?

 

These are the questions I will answer in this series of posts entitled Buy and Hold: Spotting Gold and Avoiding Woe.

 

The first thing you need to know is whether or not you have an investing strategy. You will never make any serious money if your approach to Real Estate Investing is like walking around your house with a shotgun looking to kill a housefly.

 

Do you have a strategy? Good. Let’s move on.

 

Your strategy was most likely pulled from a list including choices like buy and hold, fix and flip, land-lording, development, condos/apartments, and or working with a broker/agent to help you find the best deals. Brokers are typically hardworking folks that really put time and effort into finding deals. I have nothing against them, except when it comes to one thing.

 

Broker/Agents really only have one place to find deals. That’s it. Full Stop. Period. One place. This majestic wonderland of all-encompassing information called the MLS or Multiple Listing Service.

 

“What’s so wrong with that?” I hear you asking. “If the information in the MLS is all encompassing, why is that a bad thing?” Well, I am not going to tell you that you cannot make a profit or find a decent deal on MLS. But the deals you dream about are not on MLS. Brokers set deals up to sell, based on their BPO or Broker Price Opinion. Then taking into account any and all expenses like taxes, utilities, and interest for the longer spectrum of the how long they think the property may sit on the on the market (MLS) counted in DOM or days on market. They take all of these expenses and predict (based again on the conservative principle of overestimating cost to themselves) their Break-Even point. They typically love this number to be around 60-65% of market value. Then they add in profit for their clients and charge their clients for their services in the form of commissions. That means the deals on MLS are routinely going to land in the mid 80th percentile. This means if you spend $100,000 on a deal they have, and after you pay fees, commissions, closing and title costs, taxes, and utilities you may only make 5 or 7 thousand dollars, where you started with $20,000 built into your deal. Now, my deals are available to investors at around a 30% acquisition cost rate. After you factor in all expenses adding to your costs, a deal worth $100,000 is sold for $70,000 with other 40% of the rehabilitation, taxes, fees, commissions (if you have an agent represent you), and all other costs are built into the deal. So now you own a deal truly and wholly at 70%. So selling this deal at $100,000 will net you $30,000 because all of the other expenses were planned for and built into the structure. You’re welcome.

 

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If there is a good deal on MLS believe me, you are not going to be the first person to see it, and you certainly won’t be the only person looking to snag it. What does that mean for the seller of this deal you want really, really bad? A bidding war, and more money for them.; for you it means, to win the deal you have to outbid all other contenders. You are in essence buying a deal, and paying for it, with what could have been and should have been your profit. You are taking your potential profit and moving it from the back of the deal (where your pockets are), to the front of the deal and into someone else’s pockets. The reason this happens is because MLS is like a fishing hole. Only this isn’t a secluded fishing hole off the bank of a small creek on your private property. No, it’s on the largest public lake in the country and every other angler is there. They are crossing your line with theirs, they are loud, they have better rods and tackle, and some are so inexperienced they do the unthinkable… they try to and sometimes succeed in stealing your fish because they don’t know how to catch their own.

 

What are you going to do? All of your deals are most likely coming from one source. One source that is highly trafficked and highly competitive. No offense, but that will not work on scale to meet your dreams.

 

If you are getting your deals from Broker/Agents, I understand your pain. I have met more brokers offering false hopes and making empty promises than you will ever see in your nightmares. And don’t forget, brokers collect fees and commissions on top of causing you heartaches. I understand your struggle. Which is why I am willing to share with you my secret so you can go around everything that is eating your profits up.

 

That secret is www.noneedtobrag.com. At noneedtobrag.com all of my deals are 35-50% lower than market prices on MLS (true market rate with all additional costs carefully calculated and built into that price). And I never charge you any of my commissions or fees. How? Well, I use a variety of techniques and a proprietary method to source deals that are not on MLS. I find sellers that are so motivated to sell to me they strike deals on the spot. These deals that I have an equitable interest in, are then sent out to my list of highly valued friends (let’s make our friendship Facebook official, like my page at www.facebook.com/noneedtobrag you will thank me later). I know you want to be us to be friends because at the end of the day, I have your profit in mind and I will prove it.

 

I will show you over the next couple of posts in this series; exactly how buying property deals from me will increase your profit 10-30%. And if you’re thinking I am just a wholesaler…well, you’re right. I am the most honest, forthcoming, hardworking, and highest earning wholesaler you have ever met or thought to know that might exist. I am a machine when it comes to finding deals, and here is my dirty little secret. I do MASSIVE volume in all 50 states and the District of Columbia. Your deals that you get from me have the most profit built into them for you to take because honestly, I need to sell deals as fast as I can so that I can keep moving. And how do I sell individual deals so fast all over? I sell them, dirt cheap, with barely anything in them for myself. I only look to pay for my marketing and to feed my family. There is more than enough to go around. I am not looking to make $60k or $100K on a wholesale like those others guys you have met. A friend of mine always says something that has really stuck with me, “I’m not greedy, just needy.” Meaning, I’d rather do 10 deals for a little profit than 1 deal for a lot of profit. I am not into making commissions on deals from MLS. I never charge people for deals. I do what I do, really and truly, because it benefits me to be of benefit to everyone I do business with. When you buy one of my deals, you will soon realize that when I say you could make “$XX,XXX” on a deal, it was probably a low estimate of what you are able to realize.

 

Next time we meet, I wanna touch on How To Spot Investor Activity. It doesn’t matter what your strategy is. If you are not investing in the right areas at the earliest time, you will never earn a high income from real estate.

 

Please remember, I will teach you how to earn a high income in Real Estate, for free! All you have to do is all the work to make it a reality. Or you can let me do all the hard work and simply buy the best turnkey solutions available at http://www.hinersmithandsons.com.

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Rehabbing Houses: A Recipe for Success Part 2

Wanna Become a Successful Rehabber? Follow This Recipe (Part 2) From Paul Angelino, The Fix & Flip BOSS … In my last post, I detailed steps 1 through 3 for the rehab recipe for victory. If you didn’t get an opportunity to notice that post or you have to have a refresher, take a look now. I know you hungry rehabbers are searching for your second installment – so here goes! Okay, so seeing that the framing is 99% complete, your town will in all likelihood call for a building inspection. After the go-ahead from the inspector, your framing contractor is going to be wanting to get paid – so here’s an ENORMOUS TIP (are you ready?): Do NOT pay your framing guy 100% of what you still owe him. Why? Your plumber and HVAC contractors will undoubtedly add large main drainpipes, and large gnarly metal air supply and return ducts in their rough-ins. Those rough materials will need to go behind the walls, (unless you’re trying to get that New York “industrial-loft look,” that went out of fashion in 1985) and those items must be framed in. So, your framing crew has to return for your final framing work. Which my friend is why you don’t ever pay them off 100% of what you owe them following your framing inspection! Yeah…you can thank me now, but I’m just gettin’ started here! Following the finalization on the framing, and before you actually pay the framing contractor – you’ll desire a site meeting with your drywall contractor. “Why Paul?” Well, I’m glad you asked…. Just like each properly laid brick creates a solid foundation, properly framed walls allow for a simple, fast, and clean drywall install. And who better to check out the workmanship of your framing crew than your drywall contractor who’s produced a living nailing drywall to framing studs? Can you understand how these people will help keep one another honest, thereby helping you save a great deal of time and cash? In addition to signing off on your framing, your drywall contractor should take advantage of this meeting to draw up a comprehensive list of materials that he’ll really need to get the job done. Step 4: Mechanical Rough-Ins I mentioned the plumber and HVAC contractors above. The 3rd portion of any residential mechanical system is the electrical. During stage 4, these people do their thing. The HVAC installation is easily the most intrusive, so you’ll need to schedule that first. He’ll install all of your ductwork and maybe even the furnace. The plumber will install all the water-supply lines for your kitchen and baths, in addition to vent pipes and drains. Just prior to being done, call your electrician to have him engaged. The electrical rough-in includes wiring all of the switches, lights, outlets, smoke detectors, and various other circuits in the electrical panel. The electrical rough-in might also incorporate a new breaker panel (if necessary) along with main electrical lines on the outside of of your house. As with all your contractors, your mechanical sub-contractors should be insured and licensed – plus they should come with several pristine references. These people can kill a rehab, so make sure you hire only reputable firms. Upon completion of the work they do, each will plan a rough-in inspection. When they’re each green-lighted by way of the inspectors, each is going to be wanting to get paid. Be sure you don’t pay each sub over 1/2 – 2/3’s of your contracted price. You need to be sure you keep enough money to ensure that they’ll be highly motivated to come back to complete the mechanical trim work. Step 5: Insulation & Windows It does not matter where you reside in America, you’ll need insulation. And because of our government, building codes are changing rapidly to put down the law for precisely how much insulation you’ll need – so make sure you look at your local building code. As rehabbers, we earn a living finding smaller, leaner, hungrier contractors. I break this rule only if trying to find insulation contractors. I use a company called DeVere Insulation. It will cost less for labor and materials than I’m able to even purchase the materials for cost. Upon completing insulation, in most all cases, you’ll need another inspection. That’s right – another day awaiting the inspector to arrive and wave his magic hand to state, “You’re nothing but good here.” If your own job requires new windows, now is going to be the time in the rehab process for the window install. This assumes needless to say that you’ve already measured and pre-ordered your windows (that ought to have taken place in the demo stage or right after framing. Rehab Tip: With each inspection, you’ll get yourself a sticker. If all goes well, the sticker should be green and signed, initialed or stamped by the inspector. If you fail, the inspector will usually post a red sticker, or he will write FAIL on the green sticker. These stickers should be posted in conspicuous places on the job site. In most municipalities, you’ll get a sticker for the HVAC and plumbing, a sticker for the electric, and a sticker for the building. We post our stickers on the electrical panel. See if you can guess what comes after insulation… Next time I’ll answer that question for you – and I’ll cover the next few steps! Until then…I welcome your comments and questions.

Queer Eye for the Investor Guy

It occurs once in awhile, but when it occurs, the outcome is usually the same… I just got received one of my rentals back from a gay couple I was renting to. I went more than towards the home following they left and I knew what to expect… As I opened up the front door and looked inside, I let out a “Hallelujah, YES!” Clean up, clean up, everyone do your share Each time I rent to gay individuals, I get the home back so immaculately clean, that it is prepared to show and rent with small to no “punch-out list.” My encounter with gay individuals is they’re generally “neat” and “tidy.” Two male earnings earners towards the household generally assures the rent gets paid on time. For all those of you students who might be new to landlording, a “punch-out” is whenever you need to go in and paint, carpet, mulch, plant sod, scrub, alter counter tops, throw away appliances, haul pets off towards the pound, scrub the white physique trace lines off the floor, and so on., and so on. (You believed I was kidding around the final two? I’m NOT!) Sometimes we really need to “punch out” the tenant, but I bring the sheriff together with me for all those circumstances. Discover great homes, discover great tenants All humor aside, occasionally, I get homes back in much less than desirable situation, but for probably the most component, getting great tenants, begins with purchasing the proper home within the correct neighborhood. Run down dumpy homes attract run down dumpy tenants. A great tenant merely just desires a home that they are able to have some pride of ownership in (although they do not personal it) along with a landlord which will have repairs produced inside a timely manner. So when choosing a home to help keep as a rental, make sure it is in an region of town that individuals wish to reside in. Play by the guidelines No matter who you rent to, let me provide you with a few by no means break guidelines and “must do” suggestions: #1 – By no means let a tenant possess a important to occupy the home unless you’ve a signed agreement to rent the premises. #2 – By no means give a tenant the important unless you’ve the 1st month’s rent along with a deposit equal to a minimum of two month’s rent IN Money (cashier’s verify or PayPal will do), however it must be the equivalent of money. #3 – The much more the safety deposit you get up front, the cleaner you’ll get the home back. #4 – When reviewing a potential tenant’s application for rental, it is useless to speak towards the tenant’s Present landlord to ask for their opinion about your potential tenant. Most present landlords searching to obtain rid of a poor tenant will let you know something you would like to hear! Consequently, it is crucial that in your rental application you ask for the name and telephone quantity of the prior landlord. That landlord will definitely let you know the truth about that potential tenant. #5 – Anytime feasible attempt to take a ride by the home the tenant is leaving. If they’re standing in the front door whenever you go by, ask in the event you can are available in. You’ll see what your home will appear like inside a year. #6 – Take a glance and appear in their vehicle via the glass. How individuals maintain their vehicles is generally a sign of how they’ll maintain their home. #7 – Beware of individuals who include all money, but need to begin their tenancy THAT Exact same DAY! My instance of why you need to by no means break these guidelines I sat down having a possible tenant final month who attempted to place the rush on me. I usually meet the tenant to sign the contract at a public location like a McDonalds. They filled out the application at 9:00 am and wanted to become within the home that evening. They stated around the application they had by no means been evicted from a tenancy… They had been shocked when I logged on towards the County Civil Court Records web site with my laptop whilst sitting with them in the McDonalds and showed them they’ve a Present eviction in procedure exactly where they’re living now. BUSTED! It is apparent they had been around the run for some purpose. When I confronted them about it, they had mixed stories; they knew I caught them in their lie. They slid the $4,000 in money toward me across the table (and via the dried ketchup), but I pushed the cash back to them. I closed my laptop, got up and left prior to we signed something. Get to understand the web sites you have to know to appear up court records and ownership records so you are able to verify individuals out inside a hurry. Yes, it was difficult to NOT take their cash. I truly wanted to rent the home. But waiting for the proper tenant whenever you possess a poor feeling is really a intelligent factor. Certain sufficient, I rented the home three days later to a good family members which will most likely remain there for many years. Function out the payment more than time to get a portion from the rent rather I know when the economy gets tight you occasionally need to bend around the deposit quantity to remain full… But, in the event you function out an agreement to spend a deposit more than time, for say the very first six months, that is a NO, NO. In numerous states you can’t evict for non-payment of a safety deposit, but you are able to evict for NON-payment from the rent. Usually keep in mind, you are able to select To not rent to a tenant simply because they don’t make sufficient earnings, or they’ve a prior history of tenant eviction, or you discover that they lied on their rental application as soon as you do a background verify. Nevertheless, you can’t deny their tenancy due to race, religion, sexual preference or gender. So when you have rental properties, that is your genuine estate tip for this month! Be sure you verify out my other posts, like this fantastic 1.

Rehabbing Houses: A Recipe for Success Part 1

Wanna Be considered a Successful Rehabber? Follow This Recipe … From Paul Angelino, The Fix & Flip BOSS … I’m Italian, so there’s almost nothing more essential to me and my friends than the usual massive pot of “Sunday Gravy,” or spaghetti with meat sauce as you non-Paisan’s call it. When its my turn to cook for the family members, I fully understand there’s a process. From pulling out the perfect pots, to adding just the perfect amount of bread crumbs to the meatballs, to locating the very greatest ingredients, to carefully turning (never stirring) the sauce precisely as it slowly simmers. Its a time-tested recipe that I’ve been trained to follow. And like my 92year-old Sicilian Nanna, I For no reason deviate from the plan. Get this: it’s the same with rehabbing houses.

 

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Fortunately there is a rehab recipe that you will need to follow if you want to be a successful fix-n-flipper. I’m shocked at the variety of real estate rehabbers, and even more shocked by the quantity of contractors, who don’t recognize the absolute critical significance of what you’re going to learn. I may well have saved so a great deal time and cash if I’d known this “rehab recipe” when I very first started – so learn now from my mistakes. Men and women have paid me a large amount to learn this 1 skill, and there’s a lot of meat here, so I’m planning to break it down for you personally into a few posts. The “Rehabbing For Success” Formula…Steps 1 Through 3 You just walked out of settlement; your palms all sweaty from signing a lot of papers, your heart pounding somewhat faster as you have just spent more cash in Forty-five minutes than you’ve spent in a long time. You’re justifiably nervous, but you have big hopes for starting immediately and getting the rehab done quickly so you can collect that fat payday. Well, where do you really start? Here, my pals is your recipe guaranteed success: STEP 1. Permits: You will have to have a building permit in almost virtually every town in the united states to do even the smallest amount of improvements on any house. I’m always asked, “Should I have permits?” The truth is; “YUP! Always!” Regardless of whether you plan to just do cosmetics including new kitchen showcases or even just a small bath…all you need is one angry neighbor to drop a dime, and BAM….you’ve got a big red STOP WORK ORDER (SWO) plastered to your front door. That SWO usually comes with a pretty hefty fine too! Have your existing contractor pull a building permit, and ensure that your mechanical contractors pull their permits as well. Step Two. Demolition: On the afternoon of closing, the the very first thing I do (just after buying the permit) is head over to Home Depot. I make a bee-line towards spray-paint department. I pick up Several cans of bright fluorescent orange spray paint, then as I’m driving back to the crappy house, I call my dumpster guy. I like to be sure the dumpster will be delivered either the day of the settlement or the morning after. Then, with paint in hand, I have an old fashioned tagging party. Go through each room marking every unwanted item; floors, carpet, walls to be removed, cabinets, lighting fixtures, plumbing fixtures, and exterior items like shudders, doors, windows, and even tree limbs. Just mark everything you want demoed with the orange spray paint. I don’t like to be in the house when demolition and dust is flying – so the spray painted items coupled with a easy walk-through with my demo guy prior to the hammers start swinging are more than enough description for his crew to do their job perfectly. The Third Step. Framing: Before you pay your demo crew, be sure that your framing contractor has already a possiblity to inspect the demo. Framing guys will not be cheap, so the last thing you want is for them to have to remove walls that should have been removed by your lower-cost demo crew. During that inspection, your prospective framing contractor should also be tasked with writing up a full material list including all wood, plywood, nails, etc. Take that list to your local building supply store and have them construct a material quote for you. Rehab tip: You’ll save money if you buy the materials and have them shipped directly to the jobsite, rather than paying contractor to do it for you. Now that you have the material quote from your local Home Depot, Lowe’s or Menards…you effectively have solved a Important section of the negotiation puzzle. If you intend to get several bids for the work, ask each contractor to bid the entire job, including the materials. Then, when you receive all the quotes – ask each contractor to remove materials from his number. Tell him, you want him to quote labor only. Now you’ve got ’em! The quotes you receive may vary significantly, but the negotiation is now MUCH easier because you already KNOW precisely what the materials cost. When each contractor returns with his labor number, your negotiation will go just like this… (The following is probably the key to this post….so take notes…) “ You: “Thanks for quoting the job…let me ask you a few questions. First, how much time do you think the job normally takes? Exactly how many days?” Contractor: “We will be done in 3 days.” You: “Wow, are you sure…just three days? I want you to be fast, but I really need to be sure if you say three days, you really mean three days.” Contractor: “Yeah, it’s not that much work. Me and my helper can finish the job, for sure in 3 days.” You: “Oh, so its you and a helper? Just the two of you?” Contractor: “Yup….that’s all we need.” You: “Well I want to give you the job and I see here that your quote is $2500. I’ve got lower bids from other guys, and I want to give you what you’re worth, but I have to ask, is $2500 your best price, because you don’t have to go to Home Depot, and you don’t have to buy materials….all you have to do is show up and everything will be here for you. $830 bucks a day seems like a lot of money, doesn’t it? Are you sure that’s your best price? You said, Mr. Contractor that, “Its not that much work.” Contractor: “Well, $2500 could be a little high. I could decrease a little.” You: “Look, I don’t wish to tell you what to pay your guys, but I’m going to guess that you pay your helper $20 per hour. Is that right?” Contractor: “Yeah…that’s pretty close.” You: “Well as I see it, that would be $160 bucks per day assuming you guys work 8 full hours. How about you, I bet you like to get paid $40 per hour.” (Most are lucky to get $25/hour.) Contractor: “That’s right. Nothing less than $40 per hour!” You: “Well, I tell ya what…I’ll pay you $45 per hour! That’s $360 per day.” Contractor: “Great!” You: “Ok, so let’s see that quote again. You said, three days…for sure! I’ll pay you $1560 for the job. Get it done in three days, and I’ll be here with a check.” ” Then shut up….and wait for your contractor to speak. 99 times out of 100 you will win the conversation! I’m just getting’ started here. Stay tuned for my next post where I’ll go through more steps of the rehab recipe!

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