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Saturday, July 19, 2014

Let There Be Mistakes!!! (But Not Failure!)

I closed my first rehab / flip house Aug 22, 2006. In honor of my fast approaching 8 year anniversary as a real estate investor, I thought I'd explore some, just a few, of the many mistakes I've made over the years.

I bought a mobile home in a senior park with $800 space rent during the collapsing economy. I was told not to do the deal by my good friend Chris Carlson, a much more experienced investor who just got out of a horrible mobile home deal. I did it anyway thinking "I'll show him." All I showed him was how me and my partner each paid $10,000 to get rid of the mobile home.

Then me and that same partner bought another house out in Palm Springs. Didn't understand the market out there. Six months later we netted a whopping $2,500 each... on paper. That doesn't account that Palm Springs is 1.5 hours one-way from my house and I spent a lot of days out at that job. If I recall correctly, we didn't work together too much longer after that deal.

I used my IRA to buy a second mortgage on a mobile home. After a year, the borrower stopped paying on the first loan. The first foreclosed, but failed to notify me. I called them up and notified them they now owe me as I'm in first position. I should have shut my mouth because they hadn't yet recorded their deed so they just did the foreclosure all over again and wiped me off. Luckily I salvaged the note out of my IRA with another deal, but that is $5K plus interest I'll never see again.

I refinanced one of my high equity rentals to a 10 year I/O just before the economy collapsed and used the money to pay way too much for two rehab/flip houses from wholesalers. The economy stalled and started collapsing before I could sell them for a profit. Should have just gotten rid of them and been done with the loss. I still own both of them today and they once again have some equity in them, but that refi'ed rental house is still upside down! LOL

I put $18,000 into an out of state apartment deal. Never saw a dime returned. The guy who put the deal together disappeared along with $2.7M in other investor's money, I'm told the woman involved is claiming mental illness and I've also been told the building went to foreclosure. You can't make that one up!

I once bought a house subject to another investor's hard money loan. I then sold the house to yet another investor, but I gave him the deed before he gave me my money or paid off the first investor's hard money loan. (I don't recall exactly how I was ever that dumb, but it happened.) I found out he wasn't paying on the loan so I had to make the payments and every week I begged him to deed me the house back even emailing him grant deeds. Although, I did eventually come out whole on that deal and with a very good profit when he finally got his refinance through, there were MANY months of waiting that didn't feel too good in my tummy while writing checks to cover one investor's loan on another investor's house.

I've got so many more... It's only money! Let the education continue....

Thursday, July 17, 2014

What's the Secret to Getting a Seller to Say 'Yes'

The secret is that there is no secret. The whole concept of there being a 'secret' is the psychological game gurus use to trick people into thinking the guru knows something nobody else knows and without that information, success is unobtainable. So, the guru convinces these people they must pay up in order to get those secrets or risk failure.

I talk to sellers every day; Monday thru Sunday. I like to talk to responders of my marketing on the phone. It's about the only aspect of this business I truly enjoy. At this point, getting a ‘Yes’ is more thrilling than cashing the check! (I get to keep the whole 'Yes.' The government gets a good portion of the check.) Just the idea that I got someone to read my copywriting, pick up the phone and potentially pass huge amounts of equity over to me is an amazing thing. Therefore, I want to talk to a lot of people. I ask simple questions and try to get them to talk as much as possible. Like one of my favorite instructors says "You have two ears, one mouth. You should be listening twice as much as you are talking."

A lot of new investors get overwhelmed with all the questions they think they don't know to ask. To get a great deal on a property, I only need to ask one question; "Would you take $XXX for your property?" If I get a ‘yes,’ the only other question I need an answer for is, "Is this the correct mailing address for you?" (I want to make sure escrow can mail them docs.)
I'm not worried about the paint color, leaking roof, bad tenant, filthy floors, running toilet, broken this and outdated that. Get the address and a few good comps, then crunch your numbers and make an offer. Lots of respondents say ‘no.’ A few yell. Some just hang up. I don't care about those people. They are not my customers. Imagine if you own a burger stand. Would you get depressed about all the people driving by and not stopping for a burger? No! You only focus on those that come through the door hungry, and have money to buy. If I mail to a list of 2,500 people, I'm only looking for the one or two people who are ready to say 'Yes!' I'm not focused on the 2,498 others. They are not my customer today. Maybe at some point in the future they will become my customer, but today, I'm only looking for the one or two who need my services now.

Private consulting available and read about my deal of the month: