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Tuesday, September 6, 2011

If You Have Eight Hours to Cut Down a Tree...

Down at my gym, some of the guys don't care much to spar me. It is not because I am quicker, stronger, or a better fighter than them. It is because of my method of attack. To jab, one needs to get within striking range of the opponent which means you are also within their striking range. A cross requires a fighter to get in even closer. My Sensei actually took me aside one day during a sparring session with another gym and told me to get in there and jab more. I didn't take his advice because, quite frankly, I don't much care to get punched in the face. I prefer to attack the legs. One of them is always sticking out there, way in front of the rest of the body. It's an easy target. Why attack the head when a leg is such easy prey? With just a few well placed chops of my shin, your leg will suddenly start to feel amazingly just like Jello. Small muscle spasms will eat away at your ability to lunge forward stripping away the power behind your punches. If I see an opportunity to strike the head, I take it, but I like to end my combination with another solid strike to the leg. An opponent can be disarmed very quickly if he doesn't have legs to stand on. However, it takes a lot of strong or one very accurate punch to the head to render an opponent defenseless. I approach my investing the same way I fight.

If you are a lumber jack and you head out into the forest to harvest a tree do you start at the top? Trimming away the leaves, then the twigs, next the small branches, the larger branches, and finally leaving behind a single log jutting up from the Earth like a giant toothpick? Do you cut that toothpick into 8' sections so you have ready made 2 x 4s? No! You get as close to the ground as possible and chop the whole damn thing down in one go. Then you drag it out of there and harvest as much of it as you can.

Why wouldn't you approach investing in real estate any other way? Monday through Friday there are countless fools, yes, I called them all fools, standing around the courthouse steps, pockets loaded with cashier's checks, exposing themselves to the risk of skin cancer, wasting their day getting up early, comping dozens of houses, driving (or sending some other fool) around to see if the structure is still even standing, all for the privileged of competing with each other to see who can pay too much for a piece of crap property and do it in the riskiest and laziest possible way; paying all cash. I like going down there sometimes just to watch the circus! (To be fair, a few select individuals have the system figured out and they stay in their offices and send buyers to the auctions. Still not sustainable, but definitely smarter!)

The banks have these fools by the neck. They are totally collared! Why would you ever let a bank put the screws to you like that? The banks borrowed the money to make those horribly risky loans, then sold them off to some other schmuck for a profit, only to continue making more money servicing the notes, and finally made a sweet heart deal with the Fed to line their pockets with even more money! I hope this isn't new news to you?! You can learn more Here. And people are happy to go down to the court house steps and bid against each other to buy these houses? It just doesn't make any sense to me. I have heard horror stories of investors realizing anywhere from 6-15% returns for doing this kind of business. Wow! A whopping 15%! I can barely contain myself....

I prefer to deal with the MILLIONS of private sellers out there. While the fools are picking the leaves off the trees, I am sharping my ax. They can spend their days, weeks, months picking and picking those leaves. I spend mine at home, relaxing, reading books, training at the gym, and when I am ready, I take one solid whack at the private seller's equity and drop the whole tree.

I don't settle for 6%. I think 15% is a joke. It makes me laugh thinking about it. The deal I am working right now has a 54% return and that is not over a 12 month period. I prefer to do one of these a month over the 3, 4, do I hear a 5? 6 going once. Twice. 7 in the back corner! I don't know how many deals they have to do to match my one, but I am sure it is a few. I have been buying from private sellers since 2005. Even in 2006, 2007, 2008, and 2009 when the market was sliding and nobody new where it would end up. I ripped some serous equity back then.

I am the Pawn Shop of Real Estate. I have decided to rename my blog this. It is what I do. If you have a $150,000 house and there is $30,000 owed on it, I don't offer 70% - repairs - wholesale fee -, -, - whatever that lame formula is they teach at real estate investing principals. I offer $30,000. I tell sellers up front not to talk to me if they expect retail. I'm not that guy. There ain't none of that nonsense around here. If they want retail, go forth into the World and gamble with the market. When it doesn't work out, I'll be waiting, relaxing at home, training at the gym, or fly fishing on some pristine river. I've got time.

See, I have been the seller with that house that made me lose sleep. A house that infected my every waking thought. Oh, how I wished someone would have just made me an offer and made me even. I didn't care about the profit any longer. I didn't want the cheese. You can have the cheese. All of it. I just wanted out of the trap. Even though the banks should be feeling this way now, they are not. Have you ever wondered why? If so, you probably didn't click that link above.

When my ax swings, the seller's equity shall fall in my direction. I will get the cheese because I deserve it. But, Mr. & Mrs. Seller, you will be out of the trap. However, please don't ask me to pay your closing costs. I get all the cheese. You need to find Mr. 70% - repairs for that kind of nonsense offer.

I will be attending CRE Super Conference October 7~9. I will be surrounded by investors who know the meaning of building a sustainable investing business. These are the investors I have seen around through the last cycle and I expect to see them still making money when the circus has packed up and left town. This isn't a Short Sale Super Star or an REO Get Rich Quick seminar. You do know those are all a load of crap right?

This is an educational event taught by investors with DECADES of experience. And that experience all points back to dealing with real sellers who have real equity. If you are not at the event, I fully expect you not to be in business in the future. Don't take it personal. It is just the way it will be. I don't care how many deals you are doing now and how much money you have squirreled away in the bank. I've seen it before and those that didn't change with the market lost their houses (and even mansions) to foreclosure and have disappeared from my life. Mike Cantu wrote a whole course just to help those same investors out because he knew it would happen to them. He saw it happen before and he didn't want to have to go out and make new friends. He even makes a list of who he thinks will be out of business when the market changes. Very similar to Howard Stern and his dead celebrity list he makes every year.

If you are not at CRE Super Conference, there is a good chance you'll make that list someday. I know I'll never be on it. Do you, Mr. & Mrs. REO, Short Sale, Trustee Sale, my income depends on a bank providing me with inventory and providing my buyer with a loan?

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