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Wednesday, November 20, 2013

F.E.A.R.

False Evidence Appearing Real - That is what I was told the acronym F.E.A.R. stands for. I think fear drives people to do, or not to do, a lot more than the desire to achieve success. Let's look at a few examples;

I invest primarily in California. To the outside observer, one would think I either -
     A) have tons of liquid cash or
     B) I don't know what I'm doing and missing much better opportunities out of state.

I disagree on both points. The median home price in the county in California where I invest, at the time of this blog post, stands at $225,000. My average rental in this market comes in at about $1,200. On the numbers, at face value, I couldn't possibly get a decent return paying $225,000 for a $1,200 income stream.

As an investor, it is my job to seek out opportunity and what I am looking for is an undervalued property in a solid rental market. It takes time and energy, and I rarely 'find' a great deal. What I do find is a property owner who has both equity and motivation that I can work with to create a good deal. I also don't look at property priced around the median value. My typical rental property has a market value in the $125K~$200K range and if I have to pay all cash, I'm buying that property for $70K~$120K. I finance them through a local hard money lender using their long term rental program. Those loans have a 9.9% interest rate, but the APR comes in at closer to 18%. And they still cash flow. Right here in California.

Many of my associates are taking packages of those financed houses and refinancing them through local lenders using their LLC or C corp. They get 30 year amortization, due in 15, with interest rates around 5%.


Dealing with Squatters and the CA Courts

So, I had my day in court today for the MSJ (motion summary judgement). The tenant, who now suddenly needs a cane to walk, but didn't the 2 times I met with him before, and his wife showed up. The wife lied her ass off. Quite amazing. She said she has a rental agreement, but it is packed away in boxes somewhere. The only answer to the MSJ is a valid rental contract which she failed to produce. That should have been the end of it right there. And she claims she paid her rent on the 28th to her other landlord (her mom). I have an estoppel from her mom saying there is no rental agreement and that there is no rent being paid. She also told the judge that every time I talked to her it was only "Get out, get out, get out." I only spoke to her once and that was before I even opened escrow. The conversation was quite pleasant. She then said I never asked about a lease or requested any rent. I had my phone records showing I called several times, but the calls were only 1 min as I only got voice mail and never received a call back. I sent her an estoppel with a self addressed, stamped priority mail envelope, but on one of my two visits to the house, her husband told me she wasn't going to mail it back to me.

The judge made the mistake several times about the time line for notices which my attorney kept correcting him on. He said several times that the posting had to be 9 days: 3 days notice, plus 5 days for mail, and then some other random B.S. about notice procedures. The attorney asked him where he came up with 5 days for mail and the judge said that 5 days should be considered a reasonable time to expect mail to arrive. He added, "We can have a gentleman's disagreement on that one." He also kept stating that "As a foreclosure" and the attorney corrected him multiple times that it wasn't a foreclosure. It was obvious the judge was looking for any reason he could to side with the tenants.

After, I was talking with my attorney in the hall and this other attorney came over and was visibly upset that the judge made those comments. She was quite unhappy with the proceedings, very verbal about, and she wasn't even my attorney. Then she told me this judge hates MSJs and was fishing for any reason not to side with me. The only fun part was when my attorney told the judge they are squatters.

I think if I were to go this route again, I'd skip the MSJ. I can't imagine any CA judge siding with the plaintiff on an MSJ. And I did try cash for keys before we went down this road, but the wife made it clear they weren't leaving. Just thought I'd share the experience in case any of you were thinking of going this route if you have an eviction with scumbag squatters to deal with. So, what I've learned from this experience is that there are some advantages to living in a third world country. :)

Sunday, November 10, 2013

Creative Real Estate on a Sunday Morning

I received a call from a seller on Friday. She has a $150K 3/1.5 house in a decent area of town. I'd put it at a C+ neighborhood. She was asking $130K cash and told me it is turn key - claims she put a lot of money into it.

I ran my numbers and told her if it is really turn key and doesn't need anything for rehab, I was at $125K so we were close. I figured I could actually sell it for $160K and would try to buy it for $120K which would net me about $15K. I decided to meet her at the house because I had to be sure it doesn't need any work and I wanted to get a wet signature on the contract. I also was going out to check up on a rehab so I had to be in the area anyway.

I met her at the house yesterday. The house was nice, but absolutely dated. After looking it over and commenting on how nice it was (used to be her house so you have to respect it), I proposed a seller financed deal. I offered her $130K with 10% down, 30 year am, 5%. I told her if she wanted all cash now, I was somewhere closer to $100K-$110K. She liked the idea and said she had to think about it.

For you calculator heads, what is the payment?

Rents are $1,100. What will the cash flow be?

She called back this morning and countered with $140K, 20% down, 5%. I immediately declined stating that the return on my 20% down would be unacceptable.

My counter to her, which was accepted was $140K, 10% down, 5% int, $625 pmt.

What will the term be?

Would you do this deal if she says yes? Why?

What would you do, other than changing the terms I have offered, to make this 'more better?'

Thursday, October 24, 2013

Saturday, October 19, 2013

Success is Achieved through Simple & Redundant Work


I used to run a coaching program and I gave out assignments to the students on each call. I quickly learned that only about 1/2 participated in the 'homework.' I couldn't force people to get a return on their investment. That is what the cost of entering my program was. It was an investment. I'd love to have been able to do it for free, but I know if I did, lots of people would have joined, but few, if any, would ever use the information. They'd show up, be entertained and glamorize in their own mind the idea of being a successful investor, and then they'd go home and do just what they did the day before; the actions that made them no money. By charging a reasonable amount, but enough so that it created some pain, I thought it would inspire the heck out of the students to get their money back plus a return. And, I wouldn't just be wasting my weekends. If I were going to work on the weekends and not make offers, I still intended to be paid the same as if I worked in the office.

I was telling everyone exactly what I did to get deals. I didn't keep any secrets. During the training, I was consistently buying properties. I showed my exact MLS searches I had set up. I looked at those every day. Not just once a day Monday thru Friday. I looked at them on Saturday and Sunday. I even took a seller call on Thanksgiving day. I made offers on the properties that came up for sale in those farms. If my offers were getting accepted and the student's offers were not, I explained how they needed to re-look at their numbers and figure out why they were coming up with their maximum offer. Maybe they were over budget on their rehab expenses? Maybe they under estimated ARV? There was a particular property listed in the MLS that I showed them in class. One of the students said the most he would pay for that property was $81K, but I assure you, when he got home, he never wrote it up and sent it to the agent.

The deals are out there. Looking at the MLS doesn't get agents banging on your door begging you to sign an offer on them. Agents are lazy people. Some of the laziest I have ever met. They don't work until noon, then they immediately go to lunch. They don't ever answer their phones and rarely return calls. When times are tough, they just go out of business. If you want them to help you, you need to be hounding them.

The one thing you all should get from this blog is that this business is not easy. If you believe the late night info gurus who tell you it is while they are sitting in a chair, on the pool deck of a house (that they rented for the infomercial shoot), strategically positioned to have someone else' yacht in the background, then maybe real estate is not for you. It is not for everyone. We all can't be landlords. The business is not difficult, but it isn't easy. It takes work. Lots and lots of simple and redundant work. That is why I have a constant reminder on my daily list that says "Consistent and Persistent Action!" They are simple actions, but if I am not doing them, nobody else is going to care... Well, except maybe my creditors! My mom doesn't care. My neighbor doesn't care. The agents don't care. It will only be reflected in MY bank account. I guarantee you I start writing a lot more offers when my checking account starts falling below a comfortable level.

So what do you need to do? Get your nose into the MLS. Search Craigslist. Post ads. Send mail. Put up bandit signs. Try running an ad in the classifieds. Attend monthly REIA meetings and tell people you are looking for properties to buy. Take the calls and keep writing those offers. Do something! Those who grind it out will have measurable results.

Sunday, March 3, 2013

Motivation, Implementation, & Thought

We all need a plan. Don't you agree? We have to make small plans to get through each day. Plans for vacation, plans for events or parties. But we also need an investing plan. A big plan. I think the bigger the better for a big plan that is only partly completed will still accomplish more than a successful small plan.

But just having a plan isn't enough. We also need timing, motivation, implementation, and thought.

Timing is very important. You've all heard the saying "the right place at the right time." Haven't the last few years been about the best time to acquire properties? If you believe the market is changing, how will you adjust your plan? How will you put yourself in the right place at the right time?

We must be motivated. You people here in the audience have shown enough motivation to get to the meeting tonight. Some of you will take that same motivation and use it in your business tomorrow. Motivation is the drive that makes us implement.

Because implementation is the key. Actions speak louder than words, right?
I have a quote on my wall in my office that reads 'Tell the world what you intend to do. But show it first." Don't be all talk and no action.

And finally we come to thought. Peter Fortunato likes to say 'do things with intention.' I think that is a great quote. 
Do things. With intention. Think before you act. Think before you speak. Think about your plan. Create something that will motivate you to take action. Show the world what YOU CAN accomplish.

A good book to help you get your mind in the right place and create a plan is Millionaire Real Estate Investor by Gary Keller. I think it is one of the best books to help you learn about real estate investing fundamentals. It is sort of a modern day Think And Grow Rich specifically for real estate investors. I hope you will find it as useful as I do.