I discuss the 3 stages of foreclosure and talk about investing in each of those stages. Also discuss the relationship between short sales and foreclosure. I give some valuable advice on dealing with the pitfalls of foreclosure investing.
Describes 3 different approaches that are used to determine the value of a piece of real estate. Focuses on the most common methods used for single family residences and for commercial properties.
Lot of updates, remodeled kitchen, Newer roof, good paint and carpet, replaced hot water tank. Corner lot. Good investment property – Rent Range: $595 – $695.
This is a short sale flip – the short sale is approved, we will close on it before we sell it to you!
Nearby comparables sold for over $40,000. This is a great opportunity to invest in a great cash flow with equity.
The 3 things that every successful real estate investor must have to succeed. I talk about the importance of each and how they together make it possible to succeed as a real estate investor.
In this video, I give an overview of what a lease option is and for what types of properties it is useful. Please leave a comment – or a question that you would like answered in a future video!
Enjoy the comfort and affordability of this home with casual living room, inside laundry, inviting kitchen with refrigerator, breakfast area, electric range, new carpet and interior paint, updated bathroom, and new roof in April 2009. Single car garage with nice deck on back. Good sized fenced yard.
There once was a kindly seller who wanted to sell his nice printing press. The printing press was chrome plated and everything, so it must be worth a LOT – let’s say $1,000,000 (why am I picking my teeth with my pinky :>).
One day, a cold hearted buyer came around and offered the kindly seller a measly $500,000. Oh, the insult! The outrage! The seller stomped his foot and rejected the offer. He even refused to talk to that buyer ever again.
When the buyer walked away, he was asked by the seller’s neighbor why he would insult the seller so. The buyer replied that although the printing press was very pretty, if he was going to spend $1M, he would rather buy the printing press in the next town. After all, that printing press could print twice as fast.
Okay, as a parable, it stinks. As a lesson in real estate, it is spot on. Let me explain in two arenas.
1. Residential real estate. Many agents can tell you that they have lived with this parable when they try to get a listing (or a price reduction). The market is loudly saying that the price of the house is X, but the seller wants more. Often for the reasons that they just spent $30K on new furniture, or their bold paint colors were the height of fashion 5 years ago, or they need $50K in profit so that they can buy a new car. None of these things matter to a buyer who can find another similar house for less. So what that it is ‘chrome plated’ – why is that a benefit to the buyer and why would they pay more for that?
2. Commercial real estate. In many ways, commercial real estate is just like a printing press. The buyer is looking to buy a cash flow that will take no more work than a similar investment. Sellers in the commercial arena often talk about potential rents or ability to expand as reasons to pay them more for their properties. Why is the buyer going to pay the seller for work that the buyer will need to perform? If the buyer needs to raise the rents, and suffer the turnover that may happen, then why should the seller get more money? Likewise, if the buyer is going to have to build new buildings to expand, or change the zoning to allow expansion, then why should the seller receive more money? This would only make sense if this property is unique in its ability to expand or receive more rent. How often is that the case?
Say you have the ability to pay up to $1M for a commercial property. You look around and find 2 that appeal to you. One of these properties has a cash flow of $10,000 per month and the other property has a cash flow of $5000. Which one would you buy? If the second property owner told you that you could increase the rents or that there is room to expand the buildings (you will need to spend more money to do this) and that you should be able to get the cash flow up to the $10,000/month range, then would you change your mind about which one to buy?
Have you seen the show Pawn Stars on the History Channel? I have watched several episodes because I have enjoyed watching the negotiations.
Some of what I do is wholesale real estate – this means that I contact a seller, negotiate a price, and get the property under contract. Then I sell the same piece of real estate property to somebody else before I close on the first part of the transaction. In some cases, I assign my position to the new buyer. In other cases, I setup the closings to be on the same day (or within a couple of days).
If you watch the show, this is the same thing that the pawn shop owner is doing. He is buying something for a wholesale price and then selling it to somebody else for a retail price. People bring in their ‘treasure’ and often have a price in mind. Rick, the pawn shop owner, asks them a series of questions that both determines the details about the treasure and establishes rapport. He asks them what it is worth and then what they want for it. He is very up front with them that he needs to make a profit and pay for his overhead. He can’t pay the retail price for something or he won’t make money. It turns out that about 75% of the time, they can’t come to an agreement on price.
This is a lot like dealing with a seller of real estate. Almost every seller I have encountered has an idea of the value of their property. Sometimes it is based on what they paid (originally or the amount of money they have spent on maintenance / upgrades / rehabs), sometime it is based on what their neighbors got when they sold (or what the neighbors said they got). None of that matters to me – I have to look at what I can sell it for and back out what costs I will have and what profit I must have to keep my business going. And, often, the seller and I will not come to an agreement.
That means that, as a wholesaler, I will need to talk to a lot of sellers and make a lot of offers to find those that can meet my price.
Negotiating happens all around us. Are you watching for it so that you can pick out ways to improve your own negotiating skills? Please comment if you have an example!
Here is a tip for those of you that use WordPress for your blog. When you post an article, you can let the software inform the search engines and update services that you have updated your content. This will increase your backlinks and bring your site more traffic.
To set this up, log into your site’s administration area and go to the Settings section. Under ‘Writing’, there is a section called ‘Update Services’. Copy the following list into the text box in that section and save your changes. That’s it. Now, when you publish a new article, WordPress will ‘ping’ each of these update services and search engines for you automatically.
