The Pawn Shop of Real Estate

Consistent & Persistent Action!

2011-11-29T12:49:00.003-08:00

A coach/mentor cannot force people to get a return on their investment. That is what the cost of entering a coaching program is, an investment. Most of them truly enjoying teaching others how to make money investing in real estate, but if they offered their expertise for free, they know nobody would ever use the information. They'd show up, be entertained, and go home and do just what they did yesterday; The actions that made them no money. By charging a reasonable amount, but enough so that it creates some pain, it should inspire the heck out of those students to get their money back plus a return.

In my program, we are telling everyone exactly what we do to get deals. We are not keeping any secrets. Mike is consistently buying houses month after month and so are Ryan and I from a variety of sources. I share with our students all my exact MLS searches. The same searches I look at every day. Not just once a day M~F. I looked at them multiple times every day, holidays included. I never stop looking for an opportunity. I even took a seller call on Thanksgiving day.

We make offers on the properties that come up in those farms I share with my students. If my offers are getting accepted and other investors' are not, then they need to relook at their numbers and figure out why they are offering what they are. Maybe they are over budget on their rehab expenses. Maybe they under estimate ARV so their offer comes in lower? However, just looking and thinking about what one should offer won't put any deals in your pipeline. The deals are out there. Looking at the MLS doesn't get agents banging on your door begging you to sign an offer. Agents are notoriously lazy people. Some of the laziest I have ever met. I'm a licensed Broker and 99% of the agents out there make the rest of us look bad! They don't work until noon, then they immediately go to lunch. They don't ever answer their phones. As an investor, we need to be hounding them. We need to force them to look at and submit our offers.

The one thing every student should learn from a coaching/mentoring program is that this business is not easy. If you believe the late night info gurus who tell you it is while they are sitting next to the ocean front pool (that they rented for the infomercial shoot) with some other person's yacht in the background, then maybe real estate is not for you. It is simple, but it isn't easy. It takes work. Lots and lots of work. That is why I have a constant reminder on my daily planner 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 wife! My mom doesn't care. My neighbor doesn't care. The people I run into at the local monthly meetings don't care. The agents certainly don't care. It will only be reflected in MY bank account. (I guarantee you I start making a lot more offers when my checking account starts falling below 6 figures!)

If you want another great motivational blog to read, I invite you to check out my friend Steve's blog. www.buildbankroll.com. I think I'm his biggest fan! Steve is buying houses in many of the same neighborhoods I do business in, yet we never cross paths. (There truly are a lot of fish in the sea.) He shops straight out of the MLS. If you go back to his earliest posts, he said it took him 4 months of writing offers to get his first contract accepted. Now, just 3 years later, he has done over 100 houses and has somewhere around 40 or 50 rental properties. Hard to keep up with him as he moves so fast! All these deals were acquired locally in just the last 3 years and the majority of them bank owned listed properties.

Get your nose into the MLS. Search Craigslist. Post ads. Send mail. Put up bandit signs. Try running an ad in the classifieds. Wear a t-shirt that says "I Buy Houses!" DO SOMETHING!!! Then, take the incoming calls, screen out the losers and dump them. Don't get hung up on a lead just because they called. If there isn't any equity, on to the next one. Find the winners and keep writing those offers. Those who grind it out will have measurable results and see a return on that investment.

If you would like to sign up for my next mentoring group with Mike Cantu, myself, and my business partner and marketing genius Ryan Skalla, I encourage you to take the first step and apply at www.callwithaaron.com/apply

Good luck to you and Happy Investing!

Avoid These Top 5 Mistakes of Landlording

2011-11-27T12:06:00.001-08:00

Since the title is Top 5 mistakes of landlording, I am taking financing out of the equation. I will assume the property was purchased correctly and now we are dealing specifically with management (or lack thereof) issues:

1. Renting to family or friends.This is the biggest mistake I see in the business. I don't know how many properties I have purchased from people who didn't want to kick out Jr. because he hadn't paid rent in the last 10 years. (I have one in escrow now and sis hasn't paid her $250 rent, on a $1,200 rental in the last 15 years.) I once went to inspect a house where a nephew was living. It was lunchtime. He was drunk. After about 20 minutes in the house he pulled a handgun out of his surf shorts and pointed it at his pet goat.

2. Treating your tenants like friends and/or commingling tenants and relationships.This goes right along with #1. Being a landlord is being in the people management business. Being friends with your tenants shows them you are weak. They will attempt to take advantage of you. Our philosophy; Rule with an iron fist and a smile! Treat them fairly, but if the rent is late, it is time to start thinking about moving to another place. I know a few landlords who have started relationships with their tenants. Hands down, they all agree this is the biggest mistake they have made. A great motto you can use: Pay the rent or don't pay the rent. Just don't park the car with the oil leak in the driveway!

3. Not raising rents for fear of tenants contacting you.
When I contact a private seller of rental property I always ask three question;
1. How much is the rent?
2. How long have your tenants lived in the property?
3. When is the last time you have been inside?
When the rent is way under market, I bet you can already guess the answer to the next two question! The #1 reason landlords don't raise rents is because they don't want to deal with their tenants. They keep the rents low in hopes the tenant will not contact them about the property needing repairs. What ultimately happens however, is that the property slowly starts to fall apart. The landlord won't raise the rent for fear of the tenant complaining about things that need work or moving out. The tenant won't contact the landlord about things that need work for fear of having the rent raised. Don't be a part of this double edge sword. If the rents are going up in your area, raise them accordingly.

4. Not inspecting your properties annually.
Not inspecting your properties leads to them accumulating massive deferred maintenance or shabby repair work by the tenant. All the money the landlord thinks he is saving every year by not fixing things or having his handy tenant fix them compounds annually and the repair bill becomes so high they end up selling the property for pennies on the dollar to investors like me.

5. Unnecessarily paying utilities for your tenants. I don't pay any utility for any of my properties. I look at this as subsidizing my tenants lifestyle at the expense of my financial freedom. If they can't afford to pay their own utilities, they can't afford to rent from me. Even with our housing clients, they all pay their own utilities. If you are giving away free gas, electricity, trash pick up, or water, I highly encourage you to send out notices today, that your tenants will be required to switch service into their own name.

Flipping Properties for Maximum Profit

2011-11-15T14:31:00.001-08:00

Check out my new video on my Youtube Channel IEInvestor. In this video, I discuss the outcome from a condo I recently flipped only spent $135 cleaning out the trash. I also talk a little about my new mentoring program and mastermind group.

Tenant Screening Red Flags!

2011-10-11T17:06:00.001-07:00

Weget all kinds of wack-o applicants calling us about our properties. Here is alist of the some of the most common situations we come across and when you comeacross these situations, we hope you will scrutinize those applications alittle more!

1. If you hear "Can I plant flowers?" – Don’t fall forit. They are pigs!

2. I like to pay a few months’ rent inadvance. – If you accept this person, you’ll be getting to know your evictionlawyer’s new fee schedule real soon.

3. They keep saying how much they lovethe place. – You won’t ever see an application from these people.

4. They are willing to move in before ithas been cleaned. – That is because they are pigs and prefer to live in filth.

5. Can you work with us on the securitydeposit? – This is a job you don’t want.

6. Unmarried couples who want to livetogether. – Treat them like roommates. Qualify each individually because they may break up and the one with theincome will move out.

7. They tell you all their problems. –Escape! Escape! Escape!

8. They nit-pick everything when viewingthe place. – Tell them it is obviously not suited for them and ask them toleave.

9. The applicant leaves something blankon the application. – They don’t mind lying to you about it. They just don’twant their lies to be in writing. Abort!

10. They are self-employed and have noprevious tax records. – These people have no problem stealing and will gladlyadd you to the list of people they steal from.

Pay Attention to Where the Dollars Go

2011-10-11T17:04:00.001-07:00

Although we use real estate as the vehicle toproduce our income, regardless of which business you are in, it is always aboutpaying attention to the bottom line. Understanding where the dollars come from andhow they are paid out will help you maintain a clear picture of your currentfinancial position and provide you with a road map to your goals. If you planon doing your own bookkeeping, there are many unique situations you will haveto understand how to record in order to be sure you are paying the taxes youowe and not paying any you don't. If you decide to hire out your bookkeeping,hire someone with the experience related to recording transactions you will bedoing in your business. Does your bookkeeper know that a mortgage payment potentiallyhas three parts; principal, interest, and impounds? He might, but is he assigningeach to its own account and classing them all to the same property?

Buying a property subject to brings on a whole newset of challenges for an inexperienced bookkeeper. Payment statements need tobe obtained from the seller or the lender to be sure you are taking propercredit for payments you will make while you hold the property. A bookkeeperwith limited real estate accounting may not understand how to enter the numbersfrom the HUD when you purchase, how to record the repairs you make, or how tocorrectly enter your final HUD after you sell making sure your profits andexpenses are properly accounted for.

Get QuickBooks and take some classes. It is best ifyou understand how transactions should be recorded before you turn your booksover to someone else. If your CPA discovers errors when it is time to file yourtaxes it could be financially disastrous to your business and your free time whileyou attempt to remember deposits and withdrawals made weeks, or months before. Yourbill to her will also start to increase as she helps you try to figure out whatyou were doing back when you were doing it. There are many associations relatedto our industry who offer classes on bookkeeping. Other successful investor'srecommendations should also be sought out.

Follow the dollars and be sure they are properlyrecorded. Knowing where your money goes and comes from gives you a clearpicture of where you are financially and helps you plan your tax strategiesbefore your fiscal year ends. It could mean the difference of having somethingleft over for your pocket at the end of the year after taxes or scrambling tofigure out how you are going to come up with Uncle Sam's share of your profits.

Not Retail, Not Wholesale, but Right in the Middle: The Whole-tail

2011-09-20T22:57:00.001-07:00

Coaching, Mentoring, & Mastermind Groups

2011-09-18T00:08:00.000-07:00

I have been involved in no less than 8 mastermind groups thus far in my career. Some of these I facilitated. Others, I was a participant / member. Some were free. Others were very, very expensive. Each has given me an opportunity to surround myself with like-minded people willing to open up and share knowledge about their business, strategies they use, fresh new ideas they have picked up on their journey. The most important facets of these groups has been the 'how to implement' discussions. One can certainly discover new ideas everywhere; YouTube videos, Facebook posts, books, meetings, and social encounters. However, rarely will you get the hands on details of implementation like you get from being involved in mastermind groups. The members of my many mastermind groups have to gone to great lengths to SHOW me how to do things. They have mailed me information, given me books, paid my way into conferences, the list goes on and on.

I recently attended one of two annual meetings where I discovered that I should be teaching what I so easily do to those who struggle. I have struggles too. At that same conference, I learned a great saying, "Pay those who play at what you work at." After that conference, the thought of running a real estate investing mastermind/mentoring program constantly nagged me. How could I do it without feeling guilty? Would people sign up? At what price would it be worth it for me to take on such responsibility and still be fair?

Recently, I did launch my mastermind / mentoring program. It is not a coaching program. I think there is a significant difference. A coach sits on the sidelines and tweaks what you are already doing. A mentor takes you down into the mine, shows you where the gold is, teaches you how to dig it out, then shows you how to sell it for a profit. As for it being a mastermind group, I expect all students to help each other. We learn and grow as a group. I am very excited about this next evolution in my business. If you are interested in applying, please fill out our online application.

Good luck to you and I hope you are on track to exceed your 1 year goals for this year and more than 20% of the way toward accomplishing your 5 year goals. You do have written goals don't you?...

My Video Channel

2011-09-17T21:40:00.000-07:00

From time to time I upload videos to my YouTube Channel. Here is the latest one I uploaded where I go through a rental house we are currently rehabbing.

If you'd like to learn more about the types of deals we do out here in sunny Southern California, please subscribe to my channel. Also, I always appreciate any comments, questions, or requests!

Cash for Keys?

2011-09-15T18:50:00.000-07:00

Just finished one of 2 evictions I have going. Thanks to California's extremely liberal view of tenant's rights, it only took me a few months and about $800 in legal fees to get the tenant out of my property.

I had the Sheriff show up yesterday and the tenant was already moved out so I did not need his services. On a side note, if you know the tenant is gone and you let yourself in instead of waiting for the Sheriff to get you in, they will refund most of your money. I bet you didn't know that did you?

I got inside and the house was what I expected. The carpets are ruined, the walls need to be painted, and the house is generally filthy. No major damage at least. Of course, the tenant will not be getting a dime of his security deposit back. However, I think next time around, I am going to just pay them to move out. If I could have gotten him to take $1000 to move out and leave the place clean, I would have saved about $4,000 in lost rent and rehab. I will post a video at my YouTube Channel this weekend.

I have used this method very successfully in the past, but I stopped doing it for some reason. Have any of you tried this before?

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

2011-09-06T04:47:00.000-07:00

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?

Doing Deals When You Have No Money!

2011-09-02T00:14:00.000-07:00

The last thing I would do would be to drive around looking for properties. The first thing I would do is head out to my local print shop or craft store such as Michael’s (if they are still in business). Look for chloroplast stock. This is the material that bandit signs are made of. While you are there pick up a stack of Post Its if you don’t have some at home and a ½” wide construction style black magic market. You may need to run over to Home Depot to pick one of these up and that is OK because while you are there, grab a staple hammer and a box of staples.

While you are out, drive by any local liquor stores. I am not talking about the high end liquor stores. I mean the ones where the parking lot is more gum than asphalt and the creepy dude with the skull cap hangs out all night leaning against the front wall chain smoking cigarettes. Out front, there are typically lots of racks with free classified ad sheets. Grab all the ones that have ads for rental houses or houses for sale.

Once you have acquired all your materials, go to Google and sign up for a Google phone number. You may consider using a cell phone number, however, I don’t know if they are traceable or not. You want to avoid being harassed by the sign police so do not use your home phone number.

Using your black marker, write “I BUY HOUSES” or “SELL YOUR HOUSE THIS WEEKEND!” on the signs. Then put your phone number down below. Notice the flutes (holes) on the ends of the chloroplast. You want to make your signs so the flutes are horizontal. That way, the wind won’t wrap them around the telephone poles you put them up on.

If you need help learning how to hang bandit signs, go to Youtube and type in “how to hang bandit signs.” There are dozens of videos and you will get a great education on how to hang them up. You will see some guys use the roofing nails with the plastic washers on them. I don’t care much for those. The staple hammer is fast and very effective. Once it gets way past bedtime, head out and hang up those bandit signs.

Early the next morning, get out the all the classified ad sheets you picked up and start looking at the For Rent, For Sale, and definitely the For Sale By Owners, or what they call Fisbos (FSBO). One thing I specifically look for under the For Rent category is the rentals that are in one area and have a phone number with an area code to a different area. We already know those people live away from their rental and they may consider selling. It is especially painful when an out of town owner has a vacant property. Start calling these ads and inquire about their house for sale. If they say it isn’t for sale, tell them you must have misread the ad, but since they are on the phone, would they consider selling it. Any owner who is ready to receive monthly payments is primed for seller financing.

When you are done ripping through the print ads, head to the internet and start searching Craigs List . You can search Google for any online classified ad pages or FSBO websites as well. Start sending out emails to everybody. Pay particular attention to anyone with a listing stating the property is available now. That means the property is vacant and if they are losing money on the mortgage, they could be a perfect candidate for seller financing, lease options, sandwich leasing, or a straight sale at a discount. Even if they don’t want to sell today, ask if they might consider selling at some point in the future.

Once you have gone through the online ads, hop in the car and head out to do some good old fashioned door knocking. Hit up your favorite neighborhood and start at one end of the street and work your way down both sides. Knock on the door. Take a few steps back and hold your hands folded in front of you to give off a non-threatening appearance. Don’t wear articles of clothing that cover your face like a hat and sunglasses. Don’t carry a clip board or anything that would give the appearance of a sales person. When someone comes to the door, great them kindly and tell them you are very interested in buying a house in the neighborhood. Then ask if they know anyone that might be interested in selling. When they point out the listed house down the street, tell them you are not looking for that kind of seller. You would prefer to deal with someone directly, someone who tried to sell in the past and it didn’t work out or someone who has had a change in their living situation such as a new baby, a divorce, or someone with a job transfer or loss. You will be surprised how much people know about their neighbors.

If nobody is home, pull out the Post It and write “I am interested in buying a house in this neighborhood.” Put your name and your Google phone number on it. If you have more time, go online and find a printer that sells custom made Post Its and get yellow ones that say NOTICE on it bold black letters. Stick your Post It on the front door or somewhere it will be visible especially if they have a garage they use that allows them to get into the house without going through the front door.

Happy Investing!

Eviction Court

2011-08-29T23:12:00.000-07:00

I have been cruising along quite steadily without hitting any roadblocks in my landlording business. A few speed bumps along the way and 3 uncontested evictions, but no other major issues. The first eviction was for a guy who I had purchased the property from. Apparently, he wasn't all there so his brother settled up with me after he moved out.

The 2nd eviction was for a tenant who lost her job because her son was shot twice while walking down the street and she spent her time at the hospital instead of going to work. I can understand that, but at the same time, the doctors are much more qualified to deal with the patient than mom is and from my experience of driving by the house and seeing him and his buddies out there late into the evening, I am 100% positive his mouth was part of the reason he ended up with two bullet holes in him. Regardless, the person who shot him is a sissy and should have taken it up with him in the backyard the way neighborhood problems among the youth should be dealt with.

The 3rd eviction was a tenant who was just a total jerk. I believe he also lost his job, but he started harassing me and giving me a hard time. I have every intention of suing him as soon as I can track him down. I have my ways and I have found the last two locations he lived, but he had already moved before I discovered he lived there. I created a fake Facebook account and sent him a friend request which he accepted. I know he is still in town and working again. I just can't figure out exactly where yet.

This summer, I hit the roadblock; 2 evictions at the same time and so far one of them is getting a little nasty. The tenant sent me a text msg stating he will see me in court. I didn't actually expect him to file an answer, but he did. I then had to show up in court with my attorney which cost me $225. I say 'me' because this dirt bag tenant most likely not ever get a real job and therefore he will be totally uncollectible.

I showed up in court for our schedule appearance and of course he didn't show. My attorney told me that it is much better if they do show because you beat them fair and square in court and it is done. If they don't show, they can go back to the court later on and whine and complain that their cable went out on their big screen TV so they couldn't finish level 5 of their favorite Xbox game and therefore need a new court date. Believe it or not, they can and have gotten new court dates according to my attorney!

Today, I received an email from my attorney claiming the tenant requested an Ex-Parte. An Ex-Parte hearing is a hearing heard with 24 hour notice, it is usually done to delay a lockout, which this appears to be the case. My attorney informs me that I do not have to be there for the court appearance. I am thinking, "why wouldn't I want to be there for the court appearance?!" This scumbag answers my eviction costing me $225, doesn't have the ca-hones to show up wasting my money and the tax payers money, then requests more time to move out?!?!?! Talk about ridiculous.

Why can't I request they move out sooner because I have a mortgage to pay and will need extra time to get the place ready for my new tenant? I have every intention of going tomorrow. I hope I get a chance to speak with the judge. If he even thinks for one second that it is OK to allow these people to stay an extra hour, I am going to let him know what I think.

As far as I am concerned, when you decide that you will not be paying the rent on-time, start packing and looking for a new place to live because that is the moment when you have decided to move out.

I'll let you know how it goes.

5 Year Anniversary

2011-08-28T14:15:00.000-07:00

Five years ago today (08/28/2006) I purchased 2035 Western ave for $200,000. I purchased this property from a wholesaler. I don't remember what his wholesale fee was, but I believe it was $5,000. I used an equity line of credit and paid cash for the property. I spent about $5,000 on rehab (I had no idea what I was doing!). To find a rehabber, I asked one of the other investors I knew if he could refer me to someone. The guy did a great job on this property even though he turned out to be a total tool on the next deal.

Western ave is a 2 Bed 1 Bath in a not so great area of San Bernardino. It is hard to believe I paid $200K for a 2 bedroom house in a not so great neighborhood, but the numbers made perfect sense back then. I sold it on 11/16/2006 for $272,000 and made about $25,000. The funny thing about this deal is how little I knew what I was doing.

Even though I was a licensed real estate broker, I had no idea how to sell a property. (They don't actually teach you that when you are studying for your license.) I didn't know what disclosure were required or how to even negotiate a counter. I was totally clueless! I was able to list the property in the MLS. It took me a few tries to get all the required data in there. Once I got an offer, I called up a neighbor who has her license and asked her to handle the transaction for me. I think I paid her about $2,000. I got copies of all the disclosures and kept them in a file.

The point (moral?) of this story is I was determined to succeed as an investor. I might have jumped into the pool headfirst without checking to see if there was water in there first, but I knew the integrity of the wholesaler I was buying from and every thing worked out well.

I had a lot of problems (lessons?) dealing with that property from homeless people sleeping in the garage, disposing of an old RV and an extremely old rusty car, to someone breaking in, and having to evict the woman the wholesaler purchased the house from. It was a fantastic learning experience for me. Unfortunately, after this deal, I got into 2 or 3 even worse situations, but I am all the better for it now.

These days I own quite a few houses and several small apartment bldgs. The cash flow is doing very well and I mainly focus on wholesaling properties.

How long ago did you start, and where are you at today?

Haves & Wants

2010-06-28T00:24:00.001-07:00

We hear it at every meeting. "Come on up and tells us what you Have or what you Want!" Well, maybe some people 'have' something you don't 'want'! That something might be socially unacceptable and they don't necessarily find any urge or need to stand up in front of a crowd of strangers and tell their secrets Mr. Host!

Of course, we are not talking about the Haves & Wants of the skeletal nature. I am sure the internet can assist you with most of that stuff. We are discussing hopes and wishes, needs and desires usually from a business perspective.

"I am looking for fixer upper properties in the so and so area, "I have access to some ridiculous deal that needs some even more ridiculous amount of money," announce the attendees one by one. I once heard a white woman announce that she was looking for an investor with a very big million dollar bank roll for a casino deal on Indian land she was working on. I'm curious how that worked out for her. Not to be stereotypical (although we have them for a reason!), but I can see her putting a lot of work into that deal only to end up getting scalped!

I have yet to hear someone stand in front of the room and announce their goals. We all have them don't we? I think these qualify as a Have and certainly believe someone in the audience may be able to assist in some way. Possibly, some people refer to them as dreams. I think so, but only because they don't believe they can actually achieve those goals which in and of itself is sad and unfortunate.

Just once I would like to hear some young brave investor stand in front of the payees and announce their biggest dreams. "I want to make $50,000 a month in passive income. I want to drive an imported high end sports car. I want to fly to Vegas on a privately chartered jet for me and my friends on my birthday. I want to take a long vacation down to Mexico every year with just my family for some sport fishing."

I wonder how the audience would respond.

I have my goals written on a white board in my office;
- Own a single story house with a 3 car garage and a pool in Norco Hills.
- Make $100,000 in one month.
- Make $20,000 per month buying and selling at least one house.
- 43 1/2 more houses to go!

Well, to be frank, I haven't updated my goals for almost a year now and this is highly unsettling to me. I shan't let this daily practice get away from me again I assure you. As I look over my goals I realize I have grown in some areas and lost interest in others. I am not sure I want that house up in Norco Hills any longer. If I do it would be for no other reasons than to throw parties for my investor friends and have a shorter commute to work. I still would like to have a pool. Luckily for me, my request has been answered. Our beloved President Obama has provided the magic money to build an aquatic center just over the hill from my house. I asked for a pool and I got an Olympic sized pool with a small water park included. Much better! As for the house, I have set my goals higher.

I have generated more than $100,000 worth of wholesale fees in one month. Last month actually. However, I had to share it with 2 of my associates. Still not a bad haul for one month of sitting on my ass, playing on Facebook all day and making a few phone calls. I guess I need to be more specific in my goal writing. I bet this guy wishes he had read my blog first:
A man walks up to the bar with an ostrich behind him, and as he sits, the bartender asks for their order.

The man says, "I'll have a beer" and turns to the ostrich. "What's yours?" "I'll have a beer too" says the ostrich. The bartender pours the beer and says "That will be $3.40 please," and the man reaches into his pocket and pays with the exact change for payment.

The next day, the man and the ostrich come again, and the man says "I'll have a beer," and the ostrich says "I'll have the same." Once again the man reaches into his pocket and pays with exact change.

This became a routine until late one evening, the two entered again.

"The usual?" asks the bartender.

"Well, it's close to last call, so I'll have a large Scotch" says the man. "Same for me" says the ostrich.

"That will be $7.20" says the bartender.

Once again the man pulls exact change out of his pocket and places it on the bar. The bartender can't hold back his curiosity any longer.

"Excuse me, sir. How do you manage to always come up with the exact change out of your pocket every time?"

"Well," says the man, "several years ago I was cleaning the attic and I found this old lamp. When I rubbed it a genie appeared and offered me two wishes. My first wish was that if I ever needed to pay for anything, I just put my hand in my pocket and the right amount of money will be there."

"That's brilliant!" says the bartender. "Most people would wish for a million dollars or something, but you'll always be as rich as you want for as long as you live!""That's right! Whether it's a gallon of milk, or a Rolls Royce, the exact money is always there," says the man.

"That's fantastic!" says the bartender. "You are a genius! ... Oh, one other thing sir, what's with the ostrich?"

The man replies, "Oh, my second wish was for a chick with long legs."
*****

Ask and you shall receive. Just be careful of the message you are sending out to the Universe.

Making $20K per month buying and selling at least one house is too limited. Why should I care where the $20K comes from: Moral, ethical, and legal issues acknowledged. To continue being frank, I would rather not have to buy and sell one house every month. I'd much rather sleep late, go to the gym, watch a movie, walk my dogs, and then go to bed. If the $20K still showed up that would be fine with me. However, if you have been reading along, you will know we have now upped the ante a little bit on this one.

We are still working with the same starting number and if you clicked the link in the previous paragraph you will know what that number is. The reduced number is now at 39.25. I've boughten a few recently. (I have no idea how boughten and heigh-th made it into the vocabulary of some people, but I am trying to appeal to a wide audience here.)

Updated/Revised Goals;
- Own a house in Newport and one in Big Bear. Ocean and lake front of course.
- Generate $100,000 of income for my company in one month.
- Generate $1,000 per day, every day of net passive income.
- Buy 39.25 more houses (or enough real estate to produce the above $1,000/day of net income.)
- Read one book every week.

I think they are great goals and totally achievable. Now I need to put a time line on them. Not sure I am ready to publicly commit to that yet. My book reading is going well. I’m a little behind, but much better than I have done earlier this year. I was buying more than one book a week and now I need to get through them. I recently completed Cash in a Flash and am now working on Grow Rich! With Peace of Mind. I want to read some of these inner game books before I tackle some of the business books I have acquired. I am very excited to get to the negotiation stack.

My pile of properties and monthly income has slowly grown since I have started this blog. It all started with the decision to attend my first real estate investing meeting. The greatest marathon, longest journey, and fastest race all start with the decision to commit to taking the first step. At the end of each is a winner and/or a hero. I will achieve everything on my list and more. My goals will be shifted, reset, altered and upped, but never ignored or treated with indifference. What do you want and what will you do about it?

And The Winner Is...

2010-05-09T21:52:00.000-07:00

No matter how good your tenants are, one of them has to be the worst. Just like a race, only 1 person can be first and only 1 person can be last. While I would like to think of most of my tenants tied for 1st place, I definitely know who is in last place.

Late again for the month of May, I posted a 3-Day on his door on the 4th. I give my tenants 3 days to get the rent in. Actually, I give my tenants up to 33 days to get the rent in. The month they move in, the rent is due BEFORE they get keys. After that point, they can pay the next month's rent (30 days early), they can wait and pay it on the 1st every month like most of them, OR they can pay me any portion of future rent up to and including all of it up front for the whole term of the lease. The lease stipulates at what point it is late. I tell them at the lease signing they have 33 days to get the next rent check to me; on the 1st they are more than welcome to pay next month's rent at any time over the course of the month. They can pay it today, tomorrow, next week, two weeks from now, the 25th, 28th, or procrastinate until the very last possible moment on the 3rd. However, on the 4th it is late. I give them 3 days or as my partner likes to say "you have a 33 day grace period," because the 1st may occur on a Sunday and they might not get paid until the 2nd, they might not be able to make it on the 1st for a particular reason, or they might be excited for the weekend (if the 1st occurs then) and just forget. At any rate, they have a 3 day grace period to get the rent to me or at least notify me why it will be late.

My worst tenant again didn't pay his rent. It is ALWAYS a payroll excuse with him. No need to quote any here. I am sure you can make up your own that will be better than his lame attempts. I have another payroll excuse user, but I am informed well in advance of all her situations. She always tell me why she is going to be late, on what exact date the rent will be in, and then emails me to let me know she deposited it. She is very well trained.

I am now in the training wheel stage with this tenant, but diapers would be more appropriate of a description. I posted a 3-Day Notice on the 4th. Today, I followed up with a strongly worded text message; if that is even possible, and let him know, well, here is what I sent him: "Today is your last opportunity to pay the rent. The 3-Day expired on Friday at midnight and tomorrow I am filing at the court house. It is your choice, but if I have to file I am going for breach and possession."

I thought for sure my strongly worded text would elicit a response from him, but I didn't hear from my last place tenant all day. I pulled out my Eviction Book for California and started to get to work on my Summons and Complaint. Good stuff! Luckily, California has some great legal sites online and a very easy to use online document preparer through Turbo Court.

At about 9:30 tonight, I sent his roommate the following text: "Sorry, Tenant, but since you are listed on the lease as a guest and staying in the property I have no choice but to sue you as well when I file tomorrow AM." Within seconds, I received a text from my last placer stating the rent would be in tomorrow by noon. He followed this up with a very defeated sounding phone call with, you guess it, another excuse about payroll and how he would have to go to a check cashing place to get the money. Like I care?

Do I feel like the hours I spent studying my docs and preparing for my big legal battle was a waste of time? Hmmm, not really. I like being a landlord and I like opportunities to fine tune my craft. While I am both happy that he is now aware he will actually be dragged to court and then thrown out if he doesn't pay, I am also saddened that I cannot do the dragging. The punishment is the fun of the crime for the law abiders. I also planned on renting the unit for more than I am currently getting so I am missing an opportunity to create more income.

If you don't have a book like Leigh Robinson's pertaining to the eviction process in your locale, I highly recommend you obtain one. I have manuals for all the states I own properties. It just makes good sense to be aware of the laws where you are doing business.

As for the investing side, my partner started a challenge. He didn't really bother to tell me about it until we were a few days into it. He has set a goal to achieve a certain income over the next 90 days. It was a little shocking to hear the amount, but not unrealistic. I just know it won't be easy. We currently have 4 properties in escrow. We are wholesaling three and we bought those from the same seller of which 30% of the challenge goal will be produced. The fourth is one for our EPP. Still haven't found a tenant for the 1st property in our EPP, but we also don't have the electric meter back from SoCal Edison. Hopefully, we will have a resolution to this ongoing dilemma this week.

So far, May is turning into a very good month.

I'm Not Successful Because.... A Fisherman's Tale

2010-05-04T20:27:00.000-07:00

I'm not from here and I don't know the people you know.
- I'm not from here either. I have lived here less than ten years. I had to network and meet the people I needed to know which I didn't even start doing up until about five years ago.

I don't have the same professional contacts you have.
- I didn't have them at one time either. I asked other investors who they used.

You go to a lot more meetings than I do.
- Because meetings are where I meet (hence the name meeting!) the people I need to know and get in touch with or find out about the professional contacts I should be using.

You go to a lot more seminars than I do.
- This business cannot be learned any other way.

I can't afford to go to as many seminars as you.
- You can't afford NOT to go to as many if not more seminars than me. The problem might be the type of seminars you are going to and speakers you are listening to. There are plenty of good quality local club meetings you can start with that cost about the same as a night out to dinner. You will get so much more out of the meeting than eating another restaurant cooked dinner. Leave home early and bring a sandwich.

You have been doing this a lot longer than I have.
- Actually, I haven't been doing this that long at all. Less than 5 years. However, at one time I was just getting started too and there are plenty of investors who have been working less time than me and are way ahead of where I am at.

The lending rules and laws have changed since you started.
- Yes, but I also have to conform to them just like you. As for lending, I find it is best to avoid institutional lending all together. It will only get you in trouble.

I don't have the money to invest.
- I still don't have any money to invest. At least, I try to never us my own money. My money is not for investing in real estate. There are plenty of people out there with money who don't know how to invest in anything. Help them out and put their money to work.

There aren't any good deals in my area.
- Look in a different area or stop looking for deals. I have never found a deal in my area either. I have created a few though by getting out and talking to people. This is a people business so if you don't like talking to people you might want to take a public speaking class at the local community college and/or do some volunteer work to get more comfortable speaking to people you don't know.

Other investors are getting all the deals before I can get to them.
- No, they are creating deals out of the opportunities you are driving by and passing up every day while you are looking for deals. Look for something different than what you are currently looking for.

I don't have the crew to rehab a house even if I did get a great deal.
- I didn't have a crew either on my first rehab. I asked other investors who they were using and if they knew any body that might be free.

I hear all kinds of excuses every week from investors who are facing challenges in their chosen markets. The only people who say this business is easy are the ones on late night TV. The problem with most struggling investors is that they treat the business like a hobby or only work it part time and expect to have the same success as their full time peers. While they might land a nice deal once in a while, more often than not, they continue to wander blindly throughout the day confused and frustrated. One way to quickly solve this is to figure out exactly what type of property you want to buy and only look at those properties. Diluting your vision with "anything that makes sense" is a fool's business model or reserved for the few with enough money that it gives them the freedom to sit around doing nothing waiting for something to excite them enough to get back in the game.

When I head out in the morning, I know exactly what it is that I am fishing for. I use the appropriate gear, the right lure, the right pole, test line, I go to the right type of water at the right time of day, I fish at the correct depths and I only keep the fish I am hunting for. Everything else goes back in the water without a second thought. Sometimes, I catch the right species, but it is not the right size, it is unhealthy, or it is too big so I let it go. Again, without a second thought.

If you are struggling with your business, I challenge you to go out fishing for big mouth bass this weekend and try to catch one. Take a picture and send it to me if you do! Think about all the necessary steps you had to take to catch that particular fish. The next weekend go out and fish for something different. Maybe a trout using a fly pole or deep sea species and again, think about all the different steps involved in catching this different fish. How are the processes similar and how are they different?

Now, compare catching your target fish to your real estate business. Are you taking the necessary steps, in the right order, doing the things you are supposed to do in order to land your next deal or are you just casting any old thing at any old pool of water hoping something will bite? Then, on the rare occasion you do hook something, reeling like hell to see what it is only to end up disappointed again?

What a fantastic goal!

2010-04-30T22:53:00.000-07:00

Where are you going? What will you do once you arrive? Will you set your sights out past the horizon again and keep moving forward? Or, will you congratulate yourself, grab a bottle of your favorite bubbly, sit back and relish in your achievement?

This is a hypothetical question we frequently volley around our office in addition to the pile of cash Vs income stream question. What's the point in getting up everyday, heading out to the office, and working until dinner time if you don't have a goal insight? It might not be financial and that is fine. Any goal will do, but for this blog we are going to focus on financial goals.

I have a goal in sight which I posted about previously. I want to achieve $1,000 per day in net passive income. It's a long way off. Funny thing is I question what I will do when I achieve this dream. I do believe it is achievable no matter how far off it feels today. The reason I know it is achievable is because I have accomplished everything else I set my mind to do; service in the Navy, BS degree completed in 3 years, travelled all the way around the globe, move to California, bought my first house at 31 (which probably does not sound like a huge accomplishment to some, but I was only out of college and working 1 year at that point). So, $1,000 a day is just another goal and through consistent & persistent action it will be achieved.

I've only been in my current partnership for a few months, 8 to be exact. At first, we sat around and thought about buying a house. Then we actually bought one so we wondered if we could buy another. Suddenly, we were wholesaling a few a month. Now, it feels like normal operating procedure to come into the office and buy a property. I fully expect to buy one every day, but I can't imagine how it will feel to have a week go by without anything new on the board. I am always pushing the envelope and expecting a better month than the last. Why not, right? If I did it last month, why shouldn't I do it better the next? I'm always resetting our horizon.

I haven't netted $100,000 on a single deal yet though. But, I have come very close. I wrote this on my goals board over a year ago and am still working towards it. I believe once I do it, it will be much easier the 2nd time around. Kind of like the saying "The first million is the hardest to make." Once you achieve this accomplishment, it should be much easier to reproduce, as if you unlocked some secret code. The first deal is always the hardest right?

Upon achievement of my $100,000 deal goal, will I set my sights on a $150,000 deal? Of course! Eventually, I will expect to consistently do $100,000 every month. It is just the way I think and operate. Just like exercise, repetition is the key to (financial) fitness. I went from doing one deal, to a few deals, to consistently doing several deals every month. I have stepped up my game at every level. Makes me wonder if I will be able to break the addiction once I achieve my net passive income goal? I'd like to think so, but much better people have gone before me and haven't stopped yet. Maybe we need a 12-step program for RE investors?

Quick side note; I was at Best Buy picking up a new I-Phone today and saw a new Lamborghini in the parking lot. I'm just saying...

This Too Shall Pass...

2010-04-28T22:38:00.000-07:00

If you don't know the story behind this saying you can read up on it at Wikipedia. I think this is a much better version HERE. For the impatient, I will give you a synopsis; A king challenged one of his servants to find him a ring upon which any happy person looked, it would make him sad and any sad person happy, hence the saying; This Too Shall Pass. It is great to have this saying handy when things are not going your way. Unfortunately, it does have the appropriate effect if read when you are happy. I had this saying written on a Post-It note and stuck to the bookshelf on my desk. There were times when it haunted my thoughts particularly, sometimes for weeks on end in the early stages of my investing. I used it as a mantra to defeat the negative thoughts hounding me. Fortunately, through hard work, persistent and consistent action, times have changed.

While walking my dogs tonight the saying popped back into my head. Not able to comprehend how things could ever be like they were in the early stages, I pondered this thought for the remainder of my walk. Not that I was ever much of a consumer, but all my debt, except real estate debt, is retired due to committed action to eliminate this drag on my financial freedom. Every time I had the opportunity, I plowed more cash into short term debt and down payments on new acquisitions, sacrificing a false sense of security for monthly cash flow. I would rather have a steady income stream than a pile of money any day. At least with an income stream, I have a budget to work with. I can build operating capital with a steady income stream to reinvest. An income stream gives me a yardstick to measure growth. The elimination of debt is one of the keys to financial freedom. (The formula for financial freedom is: Passive Income - Outgo = Something Left Over.) A pile of cash has a time limit. It has an expiration date. An income stream has a micro expiration date. If it gets screwed up one month, you get a do-over the next, and the next, and the next, and the next. One can just go on screwing up every 30 days for the rest of one's life and there will always be the next opportunity 29 days away.

We wholesaled 2 more properties today and found an investor for our Equity Participation Program. Now in escrow: 4 houses & 1 lot (all closing tomorrow), 2 new condos, 1 EPP house. Everything is spoken for so if you are interested please let us know and we will put you on the list.

Tomorrow is a new day and there are more opportunities to dig up. Going to work reminds me of being a kid on the beaches of New England. We would go clamming in the summer. It is easy to do. Grab a bucket and slowly walk down the beach at low tide and watch for water to spout out of the sand about 12". Once you see the squirt, you dig! The pressure from your weight causes the clams to squirt water out of their foot. Every step is a surprise. It was always a lot of fun digging and seeing how big of a clam we would find. Every step is another day in the office and I never know what kind of deal we will create when the phone rings and we are focused on loading up the bucket with keepers.

OK, that is a pretty corny anology, but being in the office can be as much fun if not more fun than a day at the beach. Although I can't work on my paddle ball skills, I don't get sunburned and there aren't any seagulls to crap on me.

A Rolling Stone

2010-04-22T22:44:00.000-07:00

gathers no moss so the saying goes. It is my new personal goal to put a house a week into escrow. So far so good! The end always looks so easy to achieve from the starting point. Just closed on another wholesale deal and locked up an REO that we will be dropping into our Equipty Partnership Program. I created a nice tag line for that program: We Find It, You Fund It, We Collect The Rents, Deduct Expenses and Pass The Cash Flow On To You. It's That Easy! I wonder if I can modify the Staples' "That was easy!" botton to use as a marketing piece?

After my last post I realize how much work I have ahead. I am also thinking "if things are this good now, it is going to be awesome finding properties once interest rates start to rise". A nice long drawn out down cycle will be really great too! It certainly would put an end to the objection "I am going to wait for the market to turn around". Once the idea of owning investment real estate puts a scowl on the faces of the general public, as I have heard happened in the past, things will get even easier. Of course, past performance doesn't necessarily predict future results. I have heard from the investors who worked through the last down cycle that they generally cannot believe the government intervention happening today.

We currently have one property being rehabbed, one almost ready for it's first tenant, five houses and one piece of land in escrow. Four of the houses are already assigned to wholesale buyers. We're keeping the land and, as I mentioned above, dropping the other house into the EPP.

I am working a deal that is kind of interesting and affords an opportunity to practice creative finance strategies. The seller has a condo worth $135,000. She wants $140,000 with $30,000 down. She will carry the $110,000 at 4.5%, 30 years. The condo is currently rented below market for $1,000. Market rent is about $1,400. She needs the $30K because her roof is leaking on her primary residence and she has a lot of water damage down the walls and under the mohagany floor. She is liquidating this asset to repair her primary residence. She tried to sell the property to the tenants, but she said they coundn't come up with the down payment.

I know what I want to do. If you have an idea, email it to me and we are going to give away a few Happy Hour calls to the most feasible and creative idea. Maybe we will post them and let you vote on them?

Spinning the Flywheel

2010-04-22T00:48:00.000-07:00

If you haven't heard of Jim Collins of "Good To Great" fame then you don't really know what I am referring to. I will do my best to explain; Mr. Collins says that a company working towards greatness is like the spinning of a heavy flywheel. The first few turns are agonizing and difficult. Once momentum starts to build, it still takes effort to turn the fly wheel, but it spins faster and faster. Building a great company takes lots of work and sometimes it can be agonizing. My partner and I meet outside of the office, sometimes several times a week, and discuss our business model. While none of this is agonizing, it definitely is a lot of work just like those first few turns of the dormant flywheel. Even fun work is still work.

What we are doing in our business is working. It's just that sometimes, it is not always apparent what it is that we should be doing. Even in the short time we have been in business together, we have pondered different ideas on dozens of occasions. However, we have never taken our focus off of our main objective and the methods we use to achieve it.

I am always trying to understand the bigger picture of exactly what I am doing and working towards. I see many investors with much more success than me still doing deals and moving their goals out to bigger and further destinations. One has to ask; "How fast does the flywheel have to spin before one decides it is fast enough?" Yes, I am building a real estate investment company. One that I hope, will provide for me until the end. One that will continue to provide for those that come after me. The question I ask myself is "At what point is it enough?"

I have only known one investor who, from what it seems by posts on Facebook, has decided it is enough and started traveling extensively, continuing to do so. So much in fact, I eventually hid this person from my wall because I was growing tired of all the updates on different countries being visited.

I plan on growing my company. To what level I am not sure yet. I currently know in which direction, but not really sure where I'm going or will end up. As Mr. Collins would say, "I have the right people on the bus. We just don't know where the bus is going." I think it is better to set monthly passive income goals than # of door or house goals. I hear investors ask how many properties I own or the number of doors I control. Really? Do you actually care how many houses I own? What if I have 100 and they all lose money? Are you still interested? Probably not. I like the questions "How many houses can you take if they each produce $1 of real positive income every month? How many if they lose $1 every month?"

I currently have set my goal at $1,000 per day net income after taxes. However, I do not want this $1,000/day to be coming all from one property. I wouldn't want one mobile home park or apartment building to be the sole source of this income. Talk about all your chickens in one basket. A little off topic, but do you know what a tornado and a divorce in Texas have in common? Someone's losing a mobile home. I do like the idea of mobile home parks. Finding quality education is another story. Lots of info out there about doing Lonnie Deals, but I think my days of flipping mobile homes in other people's parks are over. Great cash flow, but I am tired of dealing with park managers.

If I want to produce $1,000/day from single family houses, I figure I will need 50 houses generating between $1,200~$1,500 per month in rent. This will produce $66,310 in gross monthly rent. Deduct 45% for expenses and I am left with $36,470 net. Deduct another 15% for taxes and I arrive at my $31,000 a month in after tax, net, passive income. This is why I really do not want to be in the single family house business. To much property producing to small an income. A geographic management headache. A mix of residential and commercial is the only conceivable way I believe I can achieve my goal. If 1/2 the income can be generated from an asset class such as mid to large sized mobile home parks and the rest from small apartment buildings and houses I think it will be a nice mix of investments to produce the sustainable income I seek.

I am on the right bus and it is moving. I'm just not sure where it is going to end up.

Strangle Hold

2010-04-14T02:18:00.000-07:00

Today was one of those days. You know, the kind where everything seems to be circling the drain. We had a deal accepted on Friday, found a wholesale buyer Tuesday morning, and the seller backed out Tuesday afternoon. $10,500 wholesale fee down the drain. I have been negotiating with this seller's agent. This of course, is mistake number 1. NEVER waste your time dealing with someone who cannot make the decision. This seller's house is occupied by non-paying former owners. The current owners sold the house and carried back the financing. When the buyers stopped paying, the sellers foreclosed, took the house back, but never kicked out the old owners. They have been living there for over a year rent free.

So, instead of selling this problem property to me after we had already reached an agreement, they decided to list the house and see what they can get on the open market. "What in the World are they thinking?" is all I can ask myself. They have been avoiding dealing with this property for over a year and now expect a buyer to come along and take care of the problem for them AND pay close to retail? They listed the house for $10,000 more than I had it sold for. For some reason, they expect a buyer to come along with agent representation, get access to the property, make an offer, all the while the former owners who have been foreclosed on are still living in the property. I guess they also expect the new buyers to evict the former owners before they can move in?

I would imagine they are in for a shock because after the property doesn't sell, which it won't, my new offer will be $10,000 less. Real estate is a gamble and they decided to play their chips on the open market and see what transpires. If it works out for them, and I truly hope it does, that would just be a nice ending to a long, unnecessarily, drawn out story. If it doesn't work out for them and they come back to me, I will have to explain that by listing the house and not selling it, they have established what the house is not worth. It is worth somewhere south of that number and I still need to make a reasonable profit. Whether I pay $30K, $50K, or $300K for a property, I want to make $5K~$10K, minimum. Since they will have established a value that the house won't sell for retail, I have to buy it for much less so I can make my profit and still sell it to a wholesale buyer with enough equity in it to get my buyer interested while still allowing them to make a minimum 10% profit on their side of the deal.

Because I have consist leads coming into my office I simply let my buyer know that this deal is sidelined for the next few weeks and moved on to the next lead in my pile. I quickly learned that having a consistent flow of leads is what keeps me from strangling this one to death trying to force a deal when there is obviously not one to be made. The sellers are just not that motivated. Time and circumstances changes all situations. By consistently following up and working the fresh leads that come into my office every day I don't have to maintain a strangle hold on this non-deal hoping for a payday that is not going to happen. I can simply set it aside, work the hot leads looking for new opportunities and deals to create and revisit this lead after a few weeks. I like to refer to this as putting it on the back burner and letting it cook a little more. Just like a cake in the oven, when I stick a toothpick in it, if it comes out wet, I know it isn't done yet and I need to let it cook a while longer. Time and circumstances changes all situations.

The Snowball Affect

2010-04-12T21:09:00.001-07:00

After every deal closes I tend to get a bit fidgety about dropping another property into escrow. Even now, I have 5 properties in escrow all with wholesale buyers lined up, I am jonesing for my next deal. I much prefer the long term holds to the quick flips especially this time of year! (Check the date and think Uncle Same.) When I lock up a long term hold property I know that that piece of real estate is going to continue to provide for me until the day I liquidate it. Closing a nice cash flowing rental is about the greatest feeling I get in this business. I like to see my monthly cash flow much more than I am interested in looking at the monthly wholesale income. It is the cash flow that will retire me and it gives me a very secure feeling rarely afforded in this business, but always sought after.

When I worked in construction sales, it took about 6~8 months after I had started to accumulate a nice monthly stream of commissions. It was usually a few weeks or even months after I sold a contract that the general contractor would even start construction on the project. Eventually, the project would need my product and the superintendent would place an order. As the job went along these orders would continue up until the end of the project. Payment came about 90 days after an order was placed. In the mean time I was still getting contracts signed and other jobs were starting. In the business, this was referred to as the Snowball Affect. Like pushing a snowball around a yard, it slowly starts to grow until it becomes monstrous.

I still try to replicate this process in my real estate business. In this world, I refer to it as the pipeline. On one end, deals are falling into the pipeline through a funnel, in the pipeline are my deals cooking in escrow, and out the back are wholesale checks, deeds, and rehab-for-retail projects. As long as the pipeline stays full I am a happy camper.

Where I get into problems is the week after a stellar week and the let down that comes with it when nothing seems to be popping. That is when the Jonesing starts. Where is the next deal going to come from? What will it be like? What kind of house? On and on. Of course, the phone keeps ringing and the next deal comes along. I typically don't even see the houses I am buying and selling. On average, I think I have about 10 leads a day to follow up on and 2 or 3 more new ones come in. I find that I still have a lot of time on my hands during the day. I would like to get the phone ringing 10 times a day and have 20-30 leads to follow up on and I am sure that day will come. I want to fill that pipeline up like Brim.

I like the saying "Do what you have to for as long as you need to so you can do what you want for as long as you like." I am getting up and going to work every day so why not make the most of it? If I bought two houses last week, why shouldn't I be able to buy at least two more this week?

Marketing is the key to my business. It is a constant process of coming up with marketing ideas and there is not much real help out there in the world for us real estate investors except for Dan Kennedy. We ran numbers at my office and found that we have closed 4 to 1 more seller lead deals than REOs. That probably is quite surprising to most investors and maybe slightly unbelievable in this market. I have never been much of a herding animal, always kind of doing my own thing, and when the pack all ran after trustee sales and REOs it just kind of made sense to me to go where nobody else was going. If I am able to fill my pipeline at my current level in this market, I am very excited to see the volume of leads when the market shifts again and it will be in our favor.

Working On Vs Working In the Business

2010-04-04T23:33:00.001-07:00

So I spent ALL weekend doing my books. 12+ hours on Saturday and more than 10 on Sunday. I had a lot to catch up, let's just leave it at that. I am now ready for the CPA and the tax man though so that is a good thing if you're into that kind of stuff. I had set a goal to have my corp books done by Sunday night and I finished at about 11PM. At least up through the date the tax man is concerned with. I am positive I will be more proactive in entering my transactions. Even a few weeks leaves me puzzled why I withdrew or deposited thousands of dollars??..

In the beginning I had hired a bookkeeper off of Craigs List and that was mistake #1. I should have asked around at one of the many RE investor meetings I used to attend. Which, by the way, is what I eventually did and I couldn't be happier. My books were so screwed up. Of course it is my own fault for not understanding what was being entered and how it was being assigned. I was implementing the "work on my business, not in my business" philosophy and it cost me many thousands of dollars and just as much wasted time. I understaning very well how to do my books now. I even made my own reference book with screen shots for tricky transactions. I will have better luck turning it over to someone else next time because I will be able to read the reports and actually know what I am looking at/for. Each mortage payment has potentially three parts; principal paydown, interest, and impounds and they each get assigned to their own special account and class. I learned this after taking a few Quickbooks classes and spending hours with my new wondeful bookkeeper.

I do have some interesting updates! We put 4 houses and a parcel of land into escrow last week for $300,000. We wholesaled the package for $315,000, but kept the parcel of land free & clear. If only we could do that with a remainder house! However, this opens up a great 1031 exchange strategy which I will talk about at another time.

On Friday we received a call from a former customer (repeat business!!). He sold me a condo in Rancho Cucamonga recently which I paid $210,000 for and wholesaled for $230,000. We hit a few small speed bumps in that escrow, but I did what I said I was going to do and closed when I said I would. This particular condo he wanted to sell me now had a much better view, he claimed. "You can see the whole city of Ontario" he told me. Well, I'm not much interested in a view. I told him I bet the view from an airplane is much better. If he kept pushing it as if it were worth something to me, I might have told him I am afraid of heights and that view has a negative value to me. What I realize is that it is my job to liquidate real estate fast and at a fair price for not just the seller, but the buyer as well. I do this by writing simple, contingency free contracts, not peforming any inspections, using cash to close, and funding quickly.

A view might be wondeful to a home owner, but it really means nothing to me. I have always thought that if you can see everybody, can't everybody see you too? I'm buying a house, not a view. I can't wholesale a view. He said the least he would take would be $240,000 for this special view condo. The other one of his I wholesaled is on the market for $299,000. He told me he has a tenant in the one he wants to sell me and the lease runs through the end of June. I told him I would get $210,000 cash in his hands in 2 weeks, I'd put down $10,000 earnest money and take it with his tenant in place. I told him I needed to buy this property fast because the guy selling the other one has no sentimental connection to the property he has on the market. It is inventory to him and we both know he has a lower number he can sell it for. If we wait until the end of June when the tenant moves out, my profit margin could get squeezed by the investor if he lowers his price. Before leaving the office on Friday, I asked my partner to email him a written offer under the terms 'we' discussed. I firmly believe in getting an offer into the seller's hands. Even if they tell me over the phone they will never sell the property to me for the price I mention I still want to shoot them over something hard in writing to look at and ponder. This was a hot lead and we needed to act fast.

He countered via email at $220,000. Just like that he knocked $20,000 cash off his bottom line sales price. He also mentioned in the email that he had room to 'wiggle'. I asked my parter to send him back an email clarifying that our offer was $210,000 cash in his hands in two weeks. He got back to us the next day and said he'd take it. We already have a buyer lined up and I think we can get him at $230,000. That is a nice wholesale. And why not? The property has this amazing view!

A New Kind of Thing & My First Burn Out

2010-03-26T03:02:00.000-07:00

So far this year I believe I have developed my first unique plan to achieve long term wealth and financial freedom. I am now buying rental properties in SoCal, but the best part is I am getting paid to buy and keep them! I am very excited about this new strategy that I developed. I heard a local wholesaler (who I am now in business with!) talk about not being able to profit in the future from the properties he sells. Once the house is sold, it is just another house on a street not doing anything for you. I took what he said very seriously and put a lot of thought into it. Then I didn't actually meet the guy, but Chris Carlson pointed out a fellow at a Jack Miller seminar up in Reno. He told me what he was doing and it stuck with me as well. Eventually, I combined the two and voila! I have done it twice already!

As for the burn out; I received a call about a property in Rialto that had caught on fire. The garage was in a bad way and it looks like the trusses are toast. I went out to see the property (something I don't do very often any more). The seller says there is about $19,000 in liens and she wants $20K. I don't think $20K is the right number even though it is worth $135,000. A challenge with this particular property is that just next door starts a row of 4-plexes. You can't solve a location problem. I called up the wholesaler and asked me what I am into it for. I told him worst case scenario is $40,000, but I am going to try to shave it down a bit. I'd like to pay $10,000 + the liens. I was comping it out while on the phone with him and told him what I thought the value is. He said with that kind of equity he could sell it.

Public Speaking

2010-01-31T21:25:00.001-08:00

I spoke with Shawn Watkins, Bill Tan, and Kaaren Hall at a creative financing seminar yesterday. We had about 100 people turn out and there wasn't an empty seat in the room. Public speaking is a very difficult skill to master. I used to DJ before and during my college years and I learned very quickly that the music I played was directly related to the mood I was in or the energy level I was feeling and in turn it really affected the crowd.

During my first lecture at the seminar, I was extremely tired due to my excitement the night before and the relentless concern that I would either have too much material to cover and run out of time or not enough and not be able to fill my time slot. I should know better by now since I can talk for hours about real estate so any amount of time is not really enough. However, standing in front of a room and wanting to provide quality information takes a lot of effort. Even doing a dry run in my office, timing my prepared lecture didn't help; Trains of thought get derailed, the tracks get switched, questions arise from the audience and ideas suddenly pop into my head.

My first presentation covered some basic skill sets I use in my business every day and the expenses associated with owning rental property. I am very passionate about property management. It is the path I have chosen to financial independence. During my second lecture, which was scheduled to occur after lunch, I decided to speak freely about a few deals I have done and some strategies I like to use. During lunch Bill Tan pointed out that I wasn't my normal self during my first lecture and that I might want to snap out of it and be a little more animated. He said before he speaks, he always says to himself "It's showtime." He reminded me that people are paying money to be there and although it is for the information, it is important to provide some entertainment as well. I knew exactly what he was talking about and I realized what affect my energy level had on the audience.

I did not chose to be a public speaker. It just kind of happened over time. When I was a kid I worked at Kmart and part of my job was doing the Blue Light Special announcements live from the front desk. I guess I did them well because it wasn't long before a few of the other employees asked me to do theirs too. After high school I joined the Navy and being stationed on a ship, periodically I was required to make announcements over the 1-MC which is the ship wide intercom. You don't want to mess up on that because it is not just every crew member on board listening in, the Captain is hearing it too! After the Navy I worked as a DJ doing weddings. Part of my job involved introducing the wedding party and making other announcements during the event. I never had any issues regarding speaking in front of crowds so it was very easy for me to adapt to these situations.

As a real estate investor and (I guess?) public speaker, my first goal every day is to find another house to buy. If, during the course of the day I am asked to speak, I will typically accept. I have only refused on two occasions that I can remember and that was because I wasn't very found of the speaking situations I was asked to be a part of.

I will continue to study and implement creative real estate investing strategies. I currently don't really have any plans on being the next public speaker on the topic. Mostly because, as I mentioned earlier, I am very passionate about what I do and my aversion for certain aspects of this business comes out when I open my mouth. I am also aware that I can be quite abrasive at times. It is not that I think I am right and others are wrong. It is because what I do works for me. If I am asked to speak, I am going to talk about what I do with the same passion I have for what it is that I do. Hopefully, my lecture will be received well at least for the information I provide.

When it comes to studying, as the saying goes, I have enough on my plate already. I must continue learning investing strategies from those more successful than myself. I have stacks of books that I haven't even cracked. My Amazon wish list has 58 books on it. As much as I want to be a better public speaker, I think it is much more important for my business to continue studying the masters and the strategies they use. I'll do my best the next time I am in front of a room, which by the way is Feb 16th at NSDREI in Oceanside (shameless plug). If I come off as too boring or abrasive, I apologize in advance. Remember, you are there for the information and I am not a professional speaker.

Good bye 2009, Hello 2010

2010-01-01T10:20:00.000-08:00

If I remember 2009 as anything it will most likely be as a year of challenges and learning. As I look toward the future I can’t help but reflect on the past. 2009 was the year I had my most expensive repair bill on a rental home and understood the meaning of repair expenses; $15,000 to legally hook a property to a sewer line and clean up the spilled sewage from the over flowing and failed septic system. It was the first time I lost money on a deal; approximately $10,000, but I was so happy to get it out of my life and off my books. It was a record breaker for my longest hold; 12 months to finally get a rehab sold to a buyer and when the dust settled I ended up with about $2,500 profit. I also learned why I should buy property within a reasonable driving distance of my office; the property I held for 12 months was out in Palm Springs. It was the year I lost two people I looked up to and relied on for knowledge; Chris Carlson was a local investor and even though we had only met less than a year ago, we spoke almost every day. He was my local go to guy for creative financing and difficult transactioneering. The creative investing community lost a great asset with his untimely passing. Jack Miller was the smartest person I had ever personally met and one of the most knowledgeable people in the industry. My sympathy goes out to all those who never had the honor to sit in one of his seminars and be overwhelmed or attend one of his box wine parties. I learned that Thomas Stanley and William Danko knew what they were writing about after I attended one of those millionaire’s club events.

2009 was full of challenges, but with these come experience and with experience comes knowledge. In 2009 I closed on some of my most creative deals thus far. Always attempting to use what I learn, I purchased several properties with seller financing, one of which has a very favorable interest rate somewhere south of 1%. I also signed my first note with both substitution of collateral and first right of refusal clauses.

As I look forward to 2010 I am grateful for the friendships and connections I have made in this business. It is these that carry me through the difficult times and provide me with the support and encouragement to open another escrow. I am excited about the never ending river of opportunity this business delivers to me each and every day. I wake up energized to answer the phone and check my email for seller leads. I am inspired by the vast creativity I can express using techniques and strategies to acquire, hold and sell real estate. I never thought I could have so much fun with numbers.

2010 looks to be very promising. I doubled my portfolio of rentals in 2009 and hope to continue to grow my rental business even more in 2010. I will continue to avoid the crowds and instead keep buying property from people sellers. While the other investors rush to the court house steps and chase down the REO brokers, I will be quietly perfecting my craft and ensuring that my steady stream of profits will not dry up as the market shifts. I will continue to focus on education and seek out the best speakers on topics I have yet to master. Above all, I will spend time with my wife, pets, and friends. I look forward to 2010, but I’m enjoying today very much.

Is Now The Time To Buy a Home?

2009-09-25T10:45:00.000-07:00

I am asked this question by renters many times in the course of a week. I would have to say hands down that the answer is YES almost every time. There are a few rare occurances when I would say no. If you currently own a home and are looking to move up it may be difficult to sell your primary residence. Also, if you have purchased in the last few years and did not put a significant amount of money down you are most likely upside down. In other words, you owe more than your home is currently worth. Not to fret. This is California and the market will come back. With prices as low as they are and unemployment raging it is going to take a while, but when it does it is going to be like a Santa Ana winds driven wild fire.

The first indicator of the market turning around in this state will be employment. When employment starts to rebound you should carefully watch migration. Once people start to move back to California demand will explode. The reason being is that there are almost no building lots being developed in the state right now. Once migration turns around and builders want to start building again it could take 1-2 years for the approval and permit process. That will drive demand higher and with it affordability will sink. If you can afford to hang on to your home and like it I suggest you grit your teeth and bear it. You made the commitment to purchase the property and signed your name. It is not the bank's fault the market fell out.

Now, why would I say YES! to buying today? Well, interest rates are rediculously low. Do you really think the price of 30 year money should be 5.5%? Would you loan your money out at that rate? With prices so low and interest rates falsely surpressed by the government it is much cheaper to own today than it is to rent. If you have a W-2 and can prove your income you would be crazy not to jump in. Who cares if the prices slide another 20%. I hear many people say they want to buy when it gets to the bottom. Like a roller coaster in the dark, you won't know you were at the bottom until it starts to climb back up again.

What about investing in real estate? Now is one of the best times in the history of California to purchase affordable rental properties that will CASH FLOW! I am purchasing properties myself. This also sets me apart from the many Agents & Brokers out there. I won't tell you it is a good deal just to sell it to you so I can collect a commission. I will tell you it is a good deal because I own many rentals here and know a good deal when it comes across my desk. I truly understand cash flow analysis and can explain what operating expenses are associated with rental property. There is a whole lot more to analyzing a property than mortgage payments and rents.

If you want quality service from an experience Broker, Investor, Buyer and Seller of residential California Real Estate get in touch with me.

I answer my phone and I return calls promptly. This alone puts me ahead of 95% of the pack. I look forward to doing business with you.

Quick Update

2009-08-07T00:18:00.000-07:00

I had a great time on that Ogden, Reno trip. I got to spend time with another very unique investor; Chris Carlson. We had a great time. Typically, after a few days with the same person I tend to get burnt out and need some time away from the situation, but I did not find that I felt that way with Chris. He was bright, intelligent, very creative and knew a hell of a lot about real estate. I am using the past tense, because my good friend Chris went to bed on Sunday night and did not wake up Monday morning.

Every time I speak I encourage people to get into the real estate game, but before I end, I encourage them to take care of their health. Even if you conquer 1000 houses and the cash flows in faster than you can hope to spend it, no amount of money you could ever dream of earning will prevent a heart attack, aneurysm, stroke, cancer, or whatever other evil disease is out there lurking from taking your precious life.

I spoke at Jack Fullerton's Commonwealth club last night. I had a blast. I think I may have gotten too technical for the amount of time I was allotted, but I can't help it. I like my real estate deals twisted, bent and wrapped around. The more we play with the numbers the funner it gets. I like creative real estate and that is what I want to teach people; how much fun it can be.

I am off to Vegas tomorrow to lecture at a 3 day seminar. I am, to say the least, disappointed that I am only getting 1 hour. I think I have a lot to offer, but I can understand that the promoters do not know me and therefore do not want to put me in front of a room full of people with no idea how things might go. It will be fun, that's for sure!

Quick update: Sold both the mobile home and the Oak Meadows properties. Did quite well on the later. The former...eh, not so good. Looks like I may get 1/2 a condo on Monday. I have a few other things I am working on... Will keep you posted.

Peter, Utah, & Extreme Exhaustion

2009-07-07T23:47:00.000-07:00

I got up at 3:30AM on Monday and drove to Ogden, UT in time to have dinner with Peter Fortunato. It was an extremely long drive with only a 2 hour stop in Vegas for steak & eggs breakfast at 8AM and a little black jack. I arrived in Ogden in time for the dinner which turned out to be kind of a bust. There were many other investors there and I didn't get any face time with Peter. Actually, I was too tired to even really try.

The next day (today) I attended his Transactioneering class. It was such a great experience. Peter is one of my favorite instructors. Nothing but solid useful information and he truly likes to help people. Afterwards, we went to a dinner, but I decided to take a side trip up into the mountains to see some trees, water, animals and just relax. I did see a rather large owl sleeping up in a telephone pole. I found a great BBQ joint two entrepreneurs from Texas opened up in Huntsville. It is right around the corner from the Shooting Star Saloon which I am told is the oldest bar in Utah. Just don't go on a Tuesday because it is closed!

Tomorrow is the local investors lunch. Thursday is a hang out day and Friday I am driving to Reno, NV hopefully to meet up with Jack Miller before the start of his 3 day options class. Tuesday is another day on the road as I head back to SoCal and home.

I did receive an email today that my next door neighbors have rented their place out to "friends from church". They claim these friends happen to come by just before they left and that they feel really good about it and have a verbal contract. We had an agreement and as far as I am concerned they reneg'ed on it. I guess that makes them liars in my book. My word is as good as a contract and I expect that this goes for the people I do business with as well. Also, my wholesale seller is still MIA so that is two deals that look like they are circling the drain. So it is being a real estate investor.

An Educational Saturday

2009-06-27T22:02:00.000-07:00

Nothing like spending a Saturday in a seminar learning real estate. Today was awesome! I attended the Title Research & Understanding the HUD-1 class taught be Shawn Watkins of Investors Workshops. There were close to 100 investors there and Shawn did an excellent job of explaining the material. It was a lot of work putting that together, but it is in the bag now and I think it was very successful. I really like the fact that many local club owners showed their support and helped us get the word out as well as showed up themselves. I think the information was very useful and it is not something that is presented anywhere else.

I learned a valuable piece of experience yesterday. If you are going to do a sandwhich lease, DO NOT bring your prospective tenants to the house while the owners are still there. I had a very nice family show up to see the house next door that I am sandwhich leasing. The owners are still moving out. I guess it was a little premature. The father was covered in tattoos, had a bandana around his head and a goatee that would make a billy goat envious. As soon as they left, the owners decided they in fact did NOT want to lease their house. I sat down with them and talked to them a while reassuring them that I was not going to rent to those people. I then told them not about the monthly cash flow they would be getting, but the yearly cash flow. $1,550 doesn't sound like much money, but $18,600 is quite a bit to pass up for anybody. They held a yard sale today so hopefully they will be out soon and I can get the place occupied and start collecting some nice rent.

Sandwich Lease and a Missing Seller

2009-06-22T22:32:00.001-07:00

My neighbor approached me in my driveway this afternoon. He recently purchased an REO over in AZ and has been living there all spring. He just came back into town and wanted to talk about why I let his grass die while he was gone. I told him that if I were taking care of the house the grass wouldn't have died, but I am not so it is his responsibility to take care of his own grass. He then asked if I wanted to lease his house from him. I asked what his payments are. (I already knew because I know what everyone of my neighbor's loans are.) He told me about $1,500. I asked if there weren't any reason he wouldn't lease it to me for about $1,500. He said he would. That was that. No paper work, no contracts, no agents. Just two men making a deal and it is as good as our word. Anybody that knows me, knows that as far as I am concerned the deal is as good as done. Of course, I will draw up all the paperwork to make it all legal and so that we each know what to expect from the other.

I immediately went inside and started getting together my for rent signs. I figure I can get about $1,800-$1,850 a month out of that house.

My wholesale deal is getting rotten by the minute. He we are in escrow with the seller about to collect $17,000 and she takes off to Pennsylvania! Can't be found nowhere. I emailed her and asked what her exact address is and for two phone numbers. I am going to track down a mobile notary and get those documents sign. Even if I have to fly to Pennsylvania to get it done I am going to close that escrow and collect my fee! Besides, I haven't been to Pennsylvania in quite a few years. Sure would love to get out to Lancaster and get some of that delicious shoo-fly pie.

Typical Real Estate Transaction

2009-06-19T01:11:00.000-07:00

So I did eventually kick the buyer out of escrow on my Murrieta deal. Well, I attempted to do so, but he refused. I put the property back on as active, found a new buyer for the same price, and put the property back into escrow somewhere else. Today, the old buyer sends me an email that says he is on track to fund by the end of the month. I just ignored his email. What a joke.

My wholesale deal is taking longer than the contract states as well. I have found that this is typical these days. Nothing moves as fast as it is supposed to and for some reason there is always less netted at the close of escrow than expected. Just the way the deals close. I will still make my $7,500 share on that deal. Just need the seller to get her act together and close.

I have been throwing around the idea of either starting a new Inland Empire real estate club or putting together a seminar I could teach 2x a year. I am leaning towards the later. I would like to do a 2 day class and I think I am going to start seriously focusing on that aspect of my real estate investing career.

The Government's Solution

2009-06-15T11:00:00.000-07:00

It is the month of June, on the shores of the Black Sea. It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town.

He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.

The Butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.

The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town prostitute that in these hard times, gave her services on credit.

The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.

At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.

And that, ladies and gentlemen, is how the United States Government is doing business today.

The Momentum Is Building

2009-06-11T01:03:00.000-07:00

I am currently in escrow with 3 properties. One I am wholesaling, one I am buying sub 2 and going to rehab and retail, and one I am selling. We are having difficulties on the last one and it looks like we may kick the buyer out of escrow. This is the Murrieta property. I put it active in the MLS on Friday and already have 2 solid back up offers so we will be putting it into a new escrow possibly tomorrow.

Now for new news:
It looks like we might be buying two more properties sub 2 and keeping them as rentals. I am also working on in MA. My goal is to purchase it sub 2 and keep it as a rental.

Now for new exciting news:
I have been invited by Jackie Lange of Cash Flow Depot to speak at a Take This Job and Shove It seminar in Las Vegas. I am very excited to be doing this. This is a great opportunity to get out and meet new investors as well as advanced myself as a real estate investing speaker. The seminar is at the Golden Nugget Hotel from Aug 8~10.

One Down

2009-06-06T19:09:00.000-07:00

I posted this ad to my private investing group;
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My partner and I are offering this contract for sale:

29180 Williams Ave, Moreno Valley
Buyer pays all sales costs
Escrow to be at Rancho Hills
Escrow 14 days from today

Repairs: Needs complete interior detrash & rehab. landscaping, tree fell in back yard needs to be removed. Roof looks good. Basically, if you think cat pee smells like money you're about to know what Fort Knox smells like. I would suggest bringing a bottle of Odorxit.

Price $45,000 Cash

Comps:
MLS # Status Address Price Bd/Ba Yr Blt Sq/Ft Comments
I08129442 A 13898 Redlands BL $119,000 3/2 1980 1,099 Busy St, S/S
S574101 A 28986 Campbell AV $129,900 3/2 1988 1,202 REO
I09048871 P 29235 Williams AV $130,000 3/2 1977 1,430 REO
I08166268 S 13910 Redlands BL $115,000 3/2 1980 1,099 REO, Busy St
I09019566 S 29190 Williams AV $117,500 3/2 1977 1,330 REO

For more info & pics:
http://www.advancedhomesales.com/williams.htm

Feel free to contact either of us if you are interested.
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I had 4 investors tell me they were interested. One went out to the house, crawled through a window and said "this is the worst house I have ever been in. There is a foot of trash and cat crap on the floor. I'll take it!"

I received the signed contract back on that house at 12:46PM. I went out and cleaned the trash up out of the yard, mowed the front yard, took some pics and posted the ad above. I just got paid $7,500 for mowing a lawn! Actually, we wholesaled it for $15,000 more than the contract purchase price of $30K, but I have to split that with my partner. Not a bad day's work. This is not the first property I have ever wholesaled, but it is the first that I found, negotiated and wholesaled. I celebrated by buying an ice cream sandwich. It was delicious! (And made of soy!)

1 Out of 4 Aint Bad - It's Still 25%!

2009-06-05T21:44:00.000-07:00

Quick update on the deals I am working on;

1. Short sale on a nice Orange County house.
- went and smelled her stinky dog pee house for an hour only to have her tell me she couldn't make any decisions without her son. Who is the adult here?

2. $120K free & clear property. Owner asking $40K
- Owned! In escrow at $30K and already advertising it as a wholesale deal at $45K.
Go to my website for more info: Williams.

3. Updated house with a $96K fixed rate loan.
- sat down at my computer and couldn't bring myself to drive 1.5 hours one way to go see it. Called my partner and said I just couldn't do it after what I went through on the Nicola deal. We talked about it thanks to Pete Fortunato's ideas we decided to bring in a local agent out there as a property manager for 40% of the deal. He is very excited about it. My partner and I did a 3-way with the seller and everything is looking good so far.

4. Offer from a successful REO buyer to do a deal together in my city of Riverside.
- Not sure on this one. I need to follow up. These are basically all cash deals and I don't believe I should have to use my cash to buy real estate.

I also have a short sale that is starting to look like it might pop here soon. The agent called me today and said they were going to open title.

We are also getting ready to close on our Anahiem house. I called a few pool companies today to get estimates for replastering the pool.

On another note; our Murrieta deal fell apart today. The buyer couldn't get financing because of his spotty work history so we are putting it back on the market. At least we get to keep his $5,000 deposit! I am very optimistic though because the market is hot right now and the other houses that are over 3,500 sq/ft are selling over $300K. We are asking only $285K. Since we now own this house I am going down there tomorrow to do some clean up and repairs (replace cabinet knobs & door knobs that were stolen).

Seller Financing

2009-05-31T03:19:00.001-07:00

My #1 favorite way to buy. If you haven't seen this interview with Donald Trump on Larry King you should check it out.

Tides are Changing

2009-05-31T02:43:00.000-07:00

I have been simultaneously running a small window sales company and using the income to sustain my lifestyle needs and invest the rest into real estate. As of Friday I am no longer in the window business and am 100% full time in real estate. I had a situation where some product was delivered to a job site and about $50,000 of it needs to be replaced. This will wipe out all of the commissions I have earned and still not been paid on this year. No point in continuing to work for free so I am done with it.

A very stressful week indeed, but I have always had the philosophy that things will work out. They always do. So far this weekend I have lined up some amazing deals;
1 - short sale on a nice Orange County house.
1 - a $120K free & clear property that the owner walked away from 8 years ago and is now asking $40K for, but said she will accept less.
1 - an updated house with a $96K 30 year 5.5% fixed loan that will rent for $1,100 and an owner who can no longer make the payments so she is moving in with mom. She has offered to sell the house to me with all the furniture included.
1 - an offer from a successful REO buyer to do a deal together in my city of Riverside. It is an REO that needs rehab. Looks like it should net between $30-$40K on a retail sale.

If everything works out I will get a nice spread on the short sale and pick up 1 or 2 more rentals & pocket some decent cash on the flip.

The Truth About Money

2009-05-29T14:52:00.000-07:00

Dancing with the Prom Queen

2009-05-29T00:30:00.000-07:00

I am sitting in my sun room contemplating the path I have chosen to follow. While in Orange County today I noticed one of my friends has a very expensive brand new Mercedes. A very nice car indeed. As much as I would like to drive such a vehicle, I can't really imagine myself ever driving a car that expensive even if I did have the burnable cash. So I have been thinking that maybe because I don't picture myself with such luxuries, does that affect my ability to afford them? Is it really true that we actually can think ourselves rich?

There have been many opportunities to purchase such frivolous items. Once, I closed a deal that netted me $40K so on the urgings of my wife, we went down and test drove a nice two-seater at Fletcher Jones. After I finished driving it around the block I handed the keys to my wife and told her to take it for a test drive. She didn't want to because she was afraid of damaging it. I told her she really should take it out because as long as she was with me, it was her last opportunity to ever drive one again. The salesman just looked at me with his jaw hanging open like a trout. I just couldn’t part with that much cash for a hunk of metal that I would drive around in to look at beat up old houses. My Gram trained me wisely. She used to say expensive cars are for every body else to enjoy and I believe she is right. I don’t need to stroke my ego with a car that is going to end up as a piece of junk some day. I would rather parlay that cash into another rental home.

I see my friends in other businesses far exceeding my current position. I know my assets will out live the income from their companies. The day they stop showing up and unlocking the door is the day the checks stop showing up in the mail box for them. I believe this is what drives me to keep rolling my snowball.

I try to live a frugal life. I scan over my credit card statement every month to see where I could have saved money. I don't eat out very often. I don't hardly ever carry cash on me and I am terrified of ATM machines. I give my dogs 1/2 a biscuit each instead of a whole one. I use old jars as cups. I recycle my dental floss. Just kinding. That is way too disgusting. I think I will post to my mastermind group about frugality and see just how cheap we are collectively. You want to talk green? Just hang out with a group of real estate investors. We recycle everything!

However, I am waiting for that Mike C day. Just when I think I have made yet another outrageous decision, the clarity hits me that I am no longer required to play the game. I can stop going in circles and sit on the sidelines if I choose. I can buy that pizza joint if I want or open that bar just for fun.

Real estate investing is an amazing...job?, profession?, life path? I don't know what to actually call it. A hobby that has the potential to pay well I guess. I have seen no other business that can provide you with such sweeping life changing moments the way putting together a fine tuned real estate deal can. I don't know if it is addicting or just the hard driven desire to achieve my goals that keeps me searching for the next deal. I noticed recently during a slow period, that I was actually depressed because I didn't have any deals lined up for escrow. I had a sort of fear about where and when the next deal would come. Sure enough though a deal comes along that is so amazing I can't even believe I am the one that did it! Trying to comprehend the sheer concept of such a great deal leaves me at pause. I have read books about buying such properties and to actually do it is such an awesome feeling. Of course, I have purchased properties sub2 in the past and I will even go so far as saying more than a few. I once bought a house sub2 $700K in loans so $178K is nothing scary. It is the terms that make this such a killer deal. A very good friend of mine said buying a rental property in Orange County is like dancing with the prom queen.

I would rather have 10 such properties in Orange County than 20 better ones in Riverside. Maybe even 30. I truly enjoy living in Riverside, but Orange County is one of those special places to live. There are few places on Earth that provide such an unmatched quality and opportunity in life.

Back to thinking yourself rich for a moment; I can see myself in a place where I will no longer need to raise the capital from private investors to do deals or be overly concerned if I don't have XX amount of income lined up. But I want to enjoy being here today. I don't want to wish my present away. Outside of all the crap that goes on in the World (I try not to watch the news, but can’t help to check out the Drudge Report every so often) just being here in California and having the people that I have surrounded myself with is an absolute paradise every day.

Memorial Weekend Update - To Have and To Hold

2009-05-26T10:23:00.000-07:00

Exciting weekend; I picked up a 3/1 in Anaheim for $5,000 cash sub2 the seller's 1st & 2nd totaling $174,000. The house needs about $45,000 to rehab it for retail and I think I could sell it somewhere between $300K~$320K. It has a big deep pool in the backyard that needs to be sand blasted and re-plastered. I am not a big fan of pools ever since the last one I rehabbed and I don't know if re-doing this one will net me a decent return on my money.

Here is the real problem: Sure I could use the $40K profit I will split with my partner ($20K each), but I just bought a house in Anaheim for under $200K!!! If I got the $20K in cash it would just get used up lubricating the corporate machine. This property will rent for $1,800 and if I redo the pool I could probably get closer to $2,000. On a rehab for rent I think I could get it done for under $25K. I would probably cave in the pool and that would save $7~8K alone. The house needs a ton of work, but the roof and water heater are new! I definitely have to gut the bathroom, but I might be able to salvage the kitchen. My retail strategy includes bringing in a private money person I have lined up for $50K. That means at the close of escrow my partner and I will each get checks for about $21K. This money of course is to be used for the rehab, but it is still nice to do a no money down deal AND get paid at the close of escrow. However, I do not believe in pulling out profit before I sell because profit is only realized when the property closes escrow. Everything else is speculation. I think this is a big mistake some investors make. I believe the old saying "you make your profit when you buy" is totally incorrect and actually just plain stupid. How do you make money buying something? The only thing you do when you buy something is spend money. I have reworded this statement and hope you will agree my way makes much more sense; "you establish your profit potential when you buy, you realize your profit when you sell."

If we do not take the private money and instead rehab for rent I think we will each be out of pocket about $15K. We have another deal that we haven't been able to sell yet, but if we get it sold soon we will take the money we recapture from that deal and use it to fund this long term hold. We will have a cash flowing rental in a great location. Decisions, decisions.....

Everything Stinks

2009-05-18T21:14:00.000-07:00

Man time goes by fast. The World is crazy these days; swine flu, high unemployment, a democrat President that spends money on every thing under the sun. Strange times to be alive that is for sure!
I have Oak Meadows in escrow and we are supposed to close on Wednesday. The buyer’s agent emails me and asks for an extension. Not good. We have already given him 1 extension and now he wants another 2 weeks. I think he is going to have to start paying per diem. My partner and I have $100,000 of private money in that deal plus $100K+ of our own. I don’t like being in this situation and can’t believe I am back here again. Now I have to minimum pay my dang credit card so I have money to pay my mortgage and bills. I hate doing that because I don’t like to pay interest.

My Wallace court property had some serious issues. The septic system failed and sewage started flowing down the street. The city has pulled my water meter because of the mouthy gangster tenants. Now they won’t have water until Wednesday (about 2 days). I could probably get it turned back on if I call which I will do later today. I have a company hooking me up to the public sewage system. The total cost will come in somewhere around $8,000. The permits are about $3,500 and I got a check in the mail today from the state for $3,200 (tax refund). Looks like the state is covering the cost to connect to the system! I have a few other deals going, but nothing amazing. I have a house in Anaheim that I hope to get under contract. Needs about $40K in work and the owner owes about $180K. It should sell somewhere in the range of $300-$320K.

Under the Weather

2009-04-27T21:20:00.000-07:00

I am suffering from lackofdealitis. It is a rare disease that affects real estate investors when they become too idle. It also may be pig flu. I haven’t been checked so I am not really sure. I need something in escrow that is going to make me more money. I have Oak Meadows in escrow and just put out a post on the google group looking for an investor willing to put up $200K for 1.5% per month. I should only need it for 2-3 weeks.

I am speaking Wednesday night at Investor’s Workshops. Seller financing is the topic. Man I love seller financing.

I have also been making offers on REOs. Not a lot of offers, but I have sent out about 5 already.

Think Before You Act

2009-04-21T21:28:00.000-07:00

Lunch today was awesome. We talked about the book 10 Commandments for Business Failure.

Those who read it really enjoyed it. Thinking was one of the most recognized parts of the books. Many people said they act, but fail to think. We then discussed the theoretical question “Would you rather have $1M cash or the income stream from $1M invested at 12%?” This is a real thinker. I went with the income stream. There is a lot of depth to the saying “Cash in my hand is like an ice cube in my pocket; Gone by the end of the day.” ~ Pete Fortunato.

It was a good meeting. Our next book is Crucial Conversations: Tools for Talking When the Stakes are High.

After lunch I went and looked at houses in Rialto. That is going to be my farm. I found a two that I liked, but one that I am going to make an offer on. I may offer on both, but the one house by the commercial building does not interest me as much as the other. Kids tagged the heck out of the second house, but I think a few security lights up around the outside will stop that. Besides, it is a nice house and I think I can sell it quickly.

Win Some, Win Less on Others

2009-04-19T21:29:00.000-07:00

Nicola closed. I think I netted about $2,800. Pretty funny! At least I didn’t lose any cash. I have a house in Los Angeles on 85th St. about to close. I am only handling the paperwork so my partner is paying me $1,000. I’ll take a $1,000 though. I also got NFCU to accept an offer on the Oak Meadows property. They are accepting $220K with me representing the seller and another agent representing the buyer. I have a back up escrow going with a retail buyer for $285K. I am expecting my partner and I to net about $25,000 each (conservatively), the other agent $2,000, and our two private money investors to get $1,000 each for helping to provide the wet close money. Great deal for all involved.

I am working with two mortgage brokers on securing a large pool of private money. It should be a very interesting ride if we get that going. I am also making offers on REO properties now; A minimum of 1 per day. I am shooting for 3.

I attending Financial Freedom taught by Gary Johnston and Clyde Wilson. An excellent seminar. I will definitely be putting some of that knowledge to use. I plan on taking my wife next time it is in town.

Well, not much else to report. State of the economy: BAD. President Obama is in office. Kind of cool to have him as a President. I hope he does a good job. I personally think the things that he is doing as far as bail-out money is a huge mistake. Better to let the free market prevail. But, who am I to make that kind of decision.

Good Deal, Bad Timing

2009-03-13T21:32:00.000-07:00

I am sitting in SLC airport. I missed my flight. I was stuck in inspection and then I decided to waste time getting a Starbucks. I don’t know why I did that. I could be on a plane sleeping, but instead I am sitting in an airport very tired. I will use this time to my advantage and get my credit card statements entered into Quick Books.

I had a great trip here. I am in escrow on a 4 unit building. It has a garage that is rented out @ $165 a month as well. The units are currently rented at $300-$395 each. I believe they should be about $600 each and will immediately implement my beliefs on the wills of the existing tenants. Based on my projections I should be able to get about $1000 a month cash flow out of this bldg. I am very excited about this. I purchased the property for $162,000 with 10% down. Seller to carry back financing at 6.5% amortized over 30 years due in 10. I have the option of extending for another 5 years if I pay 10% of remaining principal balance which is to be applied to principal balance. Essentially, I get 90% LTV for 10 years and 80% LTV for the last 5. I think this may be the best deal I have ever done as far as negotiating a purchase for long term hold.

Never Accept Defeat

2009-03-01T21:34:00.000-08:00

I just wanted to say that I was prepared to lose $10K on Nicola. I don’t know how my partner pulled it off, but he came up with a marketing idea that got us an amazing offer at $207K. That is going to get all our cash out of that deal. Yes, we don’t make any money, but I learned so many thing from that deal. It was information that I will use again and again to make money. I would also like to point out that it has been the most stressful 2 months probably of my life. I had moments when I wanted to crawl under a rock and hide. It is amazing how the tide has changed. I also took charge of my SEP IRA and put all $49K that is left to work. If you do not have a self directed IRA, please visit the previous link and see about setting one up ASAP. I will never trust someone else with my money again and neither should you.

Happy Anniversary

2009-03-01T09:00:00.000-08:00

So much time has passed. Time does march on endlessly doesn’t it. Well, lets see.. I just put the Palm Springs house into escrow. Selling price $207,000. Looks like I will net about $2,000. Unbelievable! I don’t know how this happened. When I did this deal I thought for sure this was going to put $20K in my pocket. At least I haven’t lost any capital. Lost lots of time and other opportunities, but I am pressing forward. Speaking of Press-Forward, I have just finished negotiating a deal with a seller on a 4 plex for $162K with 10% down. He is carrying back a first for the balance at 6.5% amortized over 30 due in 10 with an option to extend for 5 more years if I pay another 10% of the remaining balance. It is located in Ogden, UT and should rent for somewhere in the neighborhood of $2,000-$2,500 a month. Sounds like cash flow to me. For some reason I question if this is a good deal now that I have finished the negotiation. I have to fly back over there soon to inspect the inside. Maybe next Wed AM so I can catch their investor’s lunch. That would be sweet.
We are still sitting on the Brea mobile home. My partner referred to this as our Pro Bono work for the year. Not the business I was hoping to get into.

Lunch is going great. I think we have developed a great group of people. Everybody seems to be doing business and we have excellent discussions almost every week. I now have a gavel!!

I am speaking at the North San Diego Investment Club. I have been working on something, but not really sure where I am going to take it. So much to talk about. I was reading the earlier part of my notes and see that I started investing with a Mike C deal in Aug 06. This is my 2 ½ year anniversary!!

Oh, I also am in escrow to purchase a duplex in Syracuse, UT. Not much cash flow, but seller financing. It is in a great area and I think once the outside of the building is pimped out it will rent for much higher. I really like UT. Very nice over there. I have also been working on my books. I will try to get something done tonight. I am almost finished and I would like to get my taxes done.
Looking for the next deal!

Goals

2008-12-16T21:45:00.000-08:00

Tony Alvarez and Aaron Norris of The Norris Group showed up at lunch today. It was a great meeting. We did goals for 2009 and sealed them in an envelope. We will open them on 15 Dec 2009. I hope everybody exceeds their goals. It will be a great party! Aaron emailed me afterward and asked if it would be OK if he refers me out to other RE clubs that contact him looking for speakers. Very exciting!

I have an idea for a different kind of book about real estate investing that I haven't seen before. Could be very interesting.