Posted By: Sean Terry | January 5, 2009
How To Make Huge Money in Real Estate in 2009 | Part II
Make sure you read Part I so you will understand Part II
Has the fix and flip model gone away? Absolutely not! There is huge money to be made from buying distressed houses, fixing them up and selling them to investors or end users.
I’m going to share with you the 2 best methods to make huge money fixing and flipping properties.
When buying a house for a fix and flip you have to determine which exit plan you’re going to take prior to acquisition:
1. Fix and Flip to a Investor
2. Fix and Flip to a Owner Occupied
Fix and Flip to a Investor
1. You must understand how to “Value a Property”, reading this post will help you understand how to do this.
2. You must understand how to “Buy at the Right Price”, reading this post will help you understand how to do this.
3. Now that you have the basics down and you own a property the fun begins, I love the renovation process because you have the ability to make a big difference in a neighborhood by making the worst house on the block into the best house on the block. The ugliest of houses can be revived into a beautiful living environment for a new family. Check out this ugly house we renovated several months ago: Case Study.
There are 6 keys to successfully renovating a property and keeping it within budget and on time. Make sure the contractor is licensed and be sure to check references.
1. Always get a hard bid, with the understanding that all changes will be handled through a change order.
2. Always get at least 2 bids, you really want to make sure you’re getting the best deal you can.
3. When getting a bid, ask the contractors to give you a written time-line. Most of the time the contractor will over estimate on time needed.
4. Establish a penalty for exceeding the time-line, i.e. build in a $50–$100 a day penalty.
5. Establish a bonus if they complete early, i.e. give them an extra $500–$1000 for early completion and let them know you might have other houses.
6. Always do a complete a walk through of the house and DO NOT pay the contractor until ALL work is complete.
4. Find a tenant on a 12 month lease, to do this place a sign in front of the house and at the closest major intersection also post an ad on CraigsList.
Result
5. You now have a renovated investment property with a tenant in place that you bought at a great price. I would suggest selling this property to an investor with some built in equity. You can decide how much but we sell all of our properties to investors with guaranteed 25% equity. If you would like to learn how to find investors please read Part I.
For this property on Redfield we bought it from the bank for roughly $76,000 and spent ~$18,000 on the renovation. The home appraised 3 weeks ago for $176,000. We sold it to an investor out of California for $139,500. The investor gets $36,500 of instant equity, tenant in place with no risk and we make the spread. Win-Win!
What’s next? I will show you how to Fix and Flip to an Owner Occupied Buyer. Much different… Stay tuned…..
Lean more on How To Buy Cash Flow Properties for Only $7,500 Total Out of Pocket
Happy Investing!
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Posted By: Sean Terry | Janauary 3, 2009
Mark Cuban on How to Get Rich
“The nature of our country’s business infrastructure is that it is destined to be boom and bust. Booms are when the smart people sell. Busts are when rich people start on their path to wealth”.
—-Mark Cuban | October 4, 2008
Blog Maverick
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Posted By: Sean Terry | December 31, 2008
How To Adapt to The Never Ending Guideline Changes
The Lending Markets are changing every day, so how does a full time real estate investor adapt to the mania. Well I can tell you it’s not a walk in the park. Back in 2003 and 2004 we built a ~$36,000,000 rental property portfolio and managed to sell the entire portfolio in 2005. Times were easy and the money was flowing. We sat on the sidelines until early 2008 when we saw home prices at levels that would allow for cash flow. We currently own ~$12,000,000 worth of rental properties here in Phoenix and are adding to the portfolio every month. Our business model outside of building our own property portfolio has always been delivering fully renovated cash flow properties to investors at below market prices. With this model, we’ve been affected by the every changing lending market. Here are several methods we use to improvise and adapt through this fluid market.
1. We accept the fact that change WILL happen and it’s out of our control. To focus on something you can’t control produces unnecessary stress. Focus on things that you can control, like what price you buy a property for, how much the renovation will cost, the amount of qualified investors you have in your data base. etc..
2. When a change does happen that makes an impact on your business, don’t go into a depression. Validate that the change is true and look at every positive aspect you can about the change. I’ll give you an example, our current business model is to purchase distressed properties, renovate them and sell them to investors for $7,500 total out of pocket. They get a property that has 25% built in equity, a tenant in place that cash flows and we get the spread from our “all in” cost vs. what we sell it for. It’s a win-win. Now Fannie and Freddie recently changed their guidelines that limits investors to only 4 properties on their credit, completely wiped out stated income loans and reduced the LTV to 75%. So how did we adapt? Well, we didn’t freak out, we were bummed for all of 30 seconds and then we dove in to find a positive solution. The result was to develop an Owner Occupied model where we offer a home buyer the ability to pick out a bank owned property in a neighborhood they like. Our design team working with our renovation crews will renovate the property to the clients specifications, basically a semi custom remodel. We then sell them the property for only 1% out of pocket which beats FHA’s 3% down. The result for us is the owner occupied refinance will be at 90% vs. 75% which is a big difference in profit. We would have never considered this without the guideline change.
3. Have several lenders/brokers that are good and can get deals done. We are always looking for new lenders that can offer solutions to the current lending market. We try to spread the business around the best we can but the bottom line is results, I hate excuses. You need someone with an attitude that will not take NO for an answer. If someone tells us it can’t be done we won’t sleep until we find a plausible solution. Again, BE RELENTLESS…..It pays
Lean more on how to Buy Cash Flow Properties For Only $7,500 Out of Pocket
Happy Investing
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Posted By: Sean Terry | December 27, 2008
3 Sure-Fire Methods to Make 2009 Your Best Year Ever!
Part I
2009 will be the greatest time in our history to amass a fortune that can set up our families for years to come. I believe this, do you?
Your attitude about the current market condition is the cornerstone of your success. You can’t build wealth with a mind full of fear that is influenced by every negative news article that is read. It’s paralyzing and unproductive! You must convince yourself that now is the time!
Once you have yourself convinced, it’s now time to take massive action. There are 2 ways I use to really go after something I want.
1. By reading everything I can get my hands on about the specific subject, I will buy every book I can on the subject, search every article online and ask as many successful people in the field as I can. I download every audio book I can find and listen to them constantly in my car. I rarely listen to music.
2. Dive in by just doing it, make offers on houses, look for properties, talk to realtors, talk to appraisers, get pre qualified for a loan. Just Do It, don’t hesitate or wait for #1 to be complete. You will learn the most by getting in the game, not sitting on the sidelines.
So here are my 3 sure-fire methods to making 2009 your best year ever
I’ve done or am doing each and every method I am about to share with you, this is not easy or a get rich quick scheme, this takes hard work and focus and a never give up attitude. If you have any questions please email me at: SeanTerry@cox.net.
Every investor is in a different position in there lives or careers, some investor have experience and others are just beginners. Some investor have good credit and cash and others do not. I was one of those investors that was a beginner and had terrible credit and no cash. There is a huge opportunity for an investor regardless of their situation. Every obstacle can be overcome, if you want it bad enough. Believe me, I’ve seen them all.
Lets get started, Here are the 3 Methods:
1. Flipping Distress Properties (even in this market)
2. Fix and Flip
3. Buy Cash Flow Properties and Hold
Flipping Distressed Properties
Here are the 2 best sources of properties to flip, of courses there are many more, but I prefer these.
1. Pre-Forclosure
2. Bank Owned Properties
Pre-Forclosure
This was how I got started in my full time real estate investing career. My credit was shot and I had little to no cash. (I will share my story in a later post, make sure you subscribe for free updates). Because of the current market, a lot of the distressed properties owe more on the mortgage than the property is worth. I don’t suggest the short sale route, it’s to much of a pain.
The fist step is to find buy and hold or fix and flip investors to sell the properties to, you do this by joining your local real estate investing club and network with local investors in your area. There are a lot of people looking for good wholesale deals. Also you can look in the local newspaper for investors that are buying houses. Just ask them what their criteria is for buying homes and they will tell you.
Now you need to determine the value after the property is fixed up. Learn how by reading this post – How To Value A Property. Make sure you know the investors criteria that your going to sell the property to, or just offer 50% of the projected value of the subject property.
1. Get a list of Pre-Forclosure/Notice of Trustee Sales in your area, you would be better off finding a local data company that delivers this type of information. I don’t like using the bigger online companies because the data is not fresh enough. We use Information Market here in Phoenix. Make sure the data comes in excel format.
2. Do a sort in excel using these criterias:
A. Column A: Deed Date 2000 and Below
B. Column B: Trustee Sale Date
3. Now, pull all the deed dates form 2000 and below. This will reduce the amount of data you have to work with and will also give you properties with potential equity. The sale dates will let you know what properties will be coming to sale in the next 30 days, these are the best deals because the clock is ticking and a solution hasn’t been found yet.
4. There hundreds of ways to market to these properties but I found that I like these two the best
A. Send a post card: Make sure you tell them what’s in it for them and list your benefits. Mail to the list 3 times per month.
B. Knock on Doors: This is by far the hardest, but extremely effective way to get great deals. I have made hundreds of thousands of dollars knocking on doors.
5. Once you have someone ready to go, you then want to write up a contract.
6. When you write your contract make sure you add in “subject to investors approval” this will allow you to cancel escrow if you can’t line up a buyer.
7. Now call or email your investors that you met at the real estate club and offer them the property at $15k+ higher than your contract price. Make sure you have a lot of pictures and details about the property.
8. Now that you have an interested investor in your property you need to execute purchase contract with the buyer and open escrow at the same title company or attorney that is handling the 1st escrow. Make sure you put in the contract “subject to marketable title”. This will allow you to back away from the contract if something goes wrong with the 1st escrow. Also ask for a $5K non-refund able earnest money deposit.
9. The title company or attorney will close your transaction and then your investors minutes after resulting in a nice profit. This is called a “Double Escrow”
Here is a check from a flip I did from on a house I knock on several years back.
Bank Owned Homes
Flipping bank owned homes is a little more difficult these days, the banks have stop allowing a “Double Escrow”. Now before you get started you need to line up a hard money lender, you can easily find several at the local real estate investment clubs, they are asset based lenders that don’t check credit, they strictly lend off the property. The terms are roughly 18% interest no points with a 6 month term. They most likely require 10%-15% down payment.
Flipping Bank Owned Homes
1. Search banks owned properties using MLS or have a realtor assist you. Look for the cheapest homes in the area you are focusing on.
2. Now you need to determine the value after the property is fixed up. Learn how by reading this post – How To Value A Property. Make sure you know the investors criteria that your going to sell the property to, or just bid 50% of the projected value.
3. Submit at lease 10 offers on 10 different homes. Using these terms:
A. $1K Earnest Money
B. Cash Offer
C. 10 Day inspection Period.
4. Once your offer is accepted, call or email your investors that you met at the real estate club and offer them the property at $15k+ higher than your accepted offer. Make sure you have a lot of pictures and details about the property. Most listing agents are using the lock boxes with the codes, ask the listing realtor for the code so you can have it available for an investor that would like to view the property.
5. Now that you have an interested investor in your property you need to execute purchase contract with the buyer and open escrow at the same title company or attorney that is handling the 1st escrow. Make sure you put on the contract “subject to marketable title”. This will allow you to back away from the contract if something goes wrong with your contract with the bank. Also ask for a $5K non-refund able earnest money deposit.
6. Since the banks will not allow a double escrow anymore, you will have to close on the property using your hard money contact. I know this is a little scary because you are banking on your investor buying the property, but if you get a $5k earnest money deposit that is non refundable it reduces that risk of him canceling escrow. Talk to your hard money lender and he will guide you through his process of closing the 1st escrow.
7. The title company or attorney will close your transaction and then your investors several hours later resulting in a nice profit.
I know this sounds complex but it’s really not, once you have successfully completed your first transaction than you will realize it’s not rocket science.
Remember this, Never Never Give Up!!! I hate when wimpy people come to me and say, “I tried this and it’s doesn’t work” That’s bull pucky, as my father in-law would say, of course it works. The questions is did THEY work. I have made allot of money using these methods and so can you. Just be relentless and don’t let excuses stop you from reaching your dreams!
Part II will be released shortly, stay tuned
Learn how to Buy Cash Flow Properties for Only $7,500 Total Out of Pocket!
Happy Investing
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Posted By: Sean Terry| December 22, 2008
Arizona is ranked the 2nd fastest growing state in the nation today posting a year over year increase of 2.3% from 2007 to 2008 according to the Phoenix Business Journal. The article also stated that 147,000 people moved to Arizona last year.
So what does this mean for you? Well, with the inventory levels and foreclosures decreasing and home builders not building and 146,000+ people moving here a year, it sounds like the supply is decreasing and the demand is growing. When the demand out paces supply we all know what happens, prices go UP! So for those investors who own properties here in Arizona or have purchased cash flow properties from Fortress Investments than you will be very very happy in the next 18–24 months when you have the opportunity to liquidate for a large profit.
So how do I get in the game you ask? Go to Fortress Investor and learn how you can buy renovated cash flow properties with 25% guaranteed equity and a tenant in place for only $7,500 total out of pocket. “This is the most innovative program I have every seen” a seasoned investor told me today. Now is the time to get started! Make a decision today to start building you wealth for tomorrow. You will be kicking yourself if you don’t….
**Sign Up For FREE DealMaker Updates** And Receive a 22 Page Report on how you can build roughly $150,000 to $300,000 in instant equity and keep ten’s of thousands of dollars in your pocket. You will find a Arizona Market Report and learn why Phoenix is one of the best cities in the nation to buy real estate. We will also give you a step by step breakdown of a sample transaction in detail!
CLICK HERE
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Posted By: Sean Terry | December 21, 2008
Here are Several Inspirational Quotes To Get You Focused For the Week Ahead…
“I like thinking big. If you’re going to be thinking anything, you might as well think big”.
—-Donald Trump
“Every day, you’ll have opportunities to take chances and to work outside your safety net. Sure, it’s a lot easier to stay in your comfort zone.. in my case, business suits and real estate.. but sometimes you have to take risks. When the risks pay off, that’s when you reap the biggest rewards”.
——Donald Trump
Just Do It! Nike - So simply stated and yet infinitely powerful. Should I invest in real estate or not? Just do it. Should I invest out of state? Just do it. Should I get pre qualified for the Fortress Investor Program? Just do it. Should I wait until the real estate market is better? Just do it. No matter what the task, if it feels onerous and is pushing all your procrastination buttons, but you know it has to get done, stop making excuses. JUST DO IT!
Here’s my quote: “The size of the person is determined by the size of the obstacle they can overcome” Be Relentless….
Learn how to buy Cash Flow Properties for Only $7,500 Total Out of Pocket
Happy Investing
Tags: Real+Estate+Quotes
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Posted By: Sean Terry| December 19, 2008
3 Reasons Why Investors Should Be Confident About Investing Out of State
I have been talking to investors all over the map recently and some investor have no problem investing out of state and are confident in doing so and some investors are just afraid. So what’s the difference? Is it fear of the unknown or a beginning investor vs. a seasoned investor or maybe just a false perception of control.
The biggest questions I hear is, “What if something goes wrong and I can’t be there to fix it” or “I don’t know the market”.
Well, these are valid concerns but no reason not to consider it. Here are my 3 reasons “Why Out of State Investing Can Make You Rich” and why you shouldn’t be afraid of it.
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1. Only $7,500 Out of Pocket vs. 25% Down Payment.
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2. Full Property Management Firm.
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3. Population Growth & Job Growth.
1. Only $7,500 Out of Pocket vs. 25% Down Payment
If you don’t know already our company Fortress Investments offers a unique opportunity here in Phoenix Arizona that allows investors to purchase fully renovated, cash flow properties with tenants in place with 25% guaranteed equity for only $7,500 total out of pocket. If you live in another city and want to purchase an investment property in your home town you would have to purchase it under the traditional methods of putting 20%-25% as a down payment. Now lets use a $200,000 property as an example. Following the traditional method of putting a 25% down payment, your total out of pocket will be $50K. The home will be in your own city, BUT you just shelled out $50K!!! With the Fortress Investor model your total and only out of pocket is $7,500. This one reason alone is enough to consider investing out of state.
2. Full Property Management Firm
Let’s say you purchased a property in your own home town and choose to manage it yourself, YOU would be the sole point of contact. If anything goes wrong with the property your phone is going to ring. This is why allot of investors dread owning rental properties. I can tell you managing your own property is not as easy as it sounds. Eventually you might hire a Professional Property Management Firm to handle your property/properties. So let’s say you do decide to purchase here in Arizona and you hire a property management firm we recommend. Well, THEY will be the main point of contact for the tenant and will handle ALL the property related issues. You will be able to check you account online and see in real time what is going on. You will have complete control with a point an click without any hassles.
They will handle:
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All the tenant calls.
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All the collection of rents.
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All the repair issues.
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All the paperwork.
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The eviction process.
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Signing up of new tenants.
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Turning the property when it becomes vacant.
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Depositing money into your account.
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Account updates in real time.
There are investors that are reading this post right now that own mutual funds or stocks that have never visited the the corporate headquarters or even read the prospectus in detail. These same investor have invested tens of thousands of dollars into these securities and are exposed to massive risk. Companies that were here yesterday are gone today. The great thing about our program is that you only have $7,500 at risk! YOU own the house with 25% instant guaranteed equity with a tenant paying your mortgage. Houses can’t go to zero or go bankrupt.
One investor asked the other day “What if the tenant moves out, then what?” Well, the property management firm would find another tenant, you will get to keep the security deposit which will cover the rent for 1 month. The property manager will clean up the property and lease it out again. Lets say it takes 1 month, your downside risk is a few hundred dollars.
3. Population Growth & Job Growth
Historically Phoenix has dominated the country for population and job growth, currently with this economic downturn all the statistics are skewed but the fundamentals are the same. Please read my post on Real Estate Market Timing. This is the greatest opportunity we will see in our lifetime to become extremely wealthy. Investors make huge money in BIG market swings not in stagnet sideways markets. I know, it’s hard to disregard all the negative press but remember Warren Buffets famous quote, “When the market gets greedy I get nervous and when the market gets nervous I get greedy”. Now is the time to overcome your fear and get greedy, the window of opportunity is closing quickly!!!
**Sign Up For FREE DealMaker Updates** And Receive a 22 Page Report on how you can build roughly $150,000 to $300,000 in instant equity and keep ten’s of thousands of dollars in your pocket. You will find a Arizona Market Report and learn why Phoenix is one of the best cities in the nation to buy real estate. We will also give you a step by step breakdown of a sample transaction in detail!
CLICK HERE
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Posted By: Sean Terry | December 18, 2008
Do You Have More Than 4 Properties on Your Credit?
If so you do not qualify for traditional conventional financing through Fannie Mae and Freddie Mac. The “Guideline Change” took effect December 1, 2008. I know, this is absolutely ridiculous!!! I have spoke with seasoned investors that have 800+ credit scores and good income BUT they have 4 or more properties on their credit report and can’t qualify for a conventional loan. Stupid!!!!
I could rant and rave about this change for hours, but I like to focus on solutions. We have searched high and low to find a portfolio lender that will do loans for our clients that have the “4 property rule” issue. Well, we have finally found a lender that will do loans just for Fortress clients.
Just for clarification purposes so their is no confusion:
**This Is Only For Investors That Have 4 or More Properties on His or Her Credit**
This program offered is “out of the box” and only for seasoned investors that want to “get in the game” but can’t because of this new rule. The idea is for an investor to purchase a property from Fortress Investments and hold it for a short period (1–4 years) and then sell or refinance the property down the road when the lending laws loosen. So here is the limited time offer from
Gmc Financial Corporation (Gold Mortgage Center).
Right now they will only do 10 loans for Fortress Investors on a first come first serve basis.
Loan Terms
Loan to Value: 65%
Down Payment: 15%
Term: 4 Years
Interest: 11% Interest Only
Investor Qualifications
650 Credit Score or better
15% Down Payment
Example
Property Value: $150,000
Loan To Value: 65% – $97,500 (New Loan From Gmc Financial)
Down Payment: 15% – $22,500
Monthly Payment: $1,050 (includes Taxes and Insurance)
Rate: 11% Interest Only
Term: 4 Years
Projected Monthly Rental Amount: $1,100
Cash Flow: $50
What’s the Result? You now own a fully renovated property with a tenant in place with 35% equity for only $22,500 down. This is still better than the traditional purchase which requires a 25% down payment.
If you would like to learn more about this program please give Mike Lima a call at 888–643–0194 ext 2. To learn more about the Fortress Investor Program please visit us at: Fortress Investor.
Happy Investing
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Posted By: Sean Terry | December 16, 2008
What does the Fed Rate Cut Do For You?
Sure mortgage rates will drop, but the banks are essentially saying that .25% is a great rate and banks should be happy to have money that is stagnant but not losing is a good investment.
The Federal Reserve has cut its target for a key interest rate to the lowest level on record and pledged to use “all available tools” to combat a severe financial crisis and prolonged recession.
The central bank says it reduced the federal funds rate, the interest that banks charge each other, to a range of zero to 0.25 percent. That is down from the 1 percent target rate in effect since the last meeting in October. I get the feeling this is not what Bernanke signed up for when he took the job as Federal Reserve Chairman.
I just spoke to Ari Schiff from US Capital Mortgage and he said that the rate for an Investor Loan at 75% loan to value is 6.75%. And if they would like to “Buy Down The Rate” for 1 point the rate will be 5.75%.
So what does this do for you? Well, it will impact your cash flow dramatically for sure. Also your HELOC payments will decrease which will free up more cash.
If you would like more info, please call Ari Schiff at 480-688-5620
Happy Investing
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Posted By Sean Terry | December 16, 2008
One Mistake………..and Your Done!
So you want to buy a investment home and you want a smokin deal right….…Well, in theory it’s very easy but execution is the nail biter. I remember the first house I signed a contract on and committed to purchase. I had every doubt you could think of, I remember I rehearsed in my mind of ways I could back out of the deal. I had no clue what I was getting into, all I knew was I “thought” the house was worth $130,000 and I had a contract on it for $86,000. My intent was to quick flip the property to an investor doing a “double escrow” technique. What happened? Read on……
When buying a property there are several things you can do to prevent a huge mistake that could cost you thousands of dollars. Here are my top 3 tips on buying investment properties at the right price:
Step #1
Determine the “Value of the Property”, click the link to read how this is done. This is absolutely crucial, if you screw up this one step than the other 2 steps are worthless. (Please post a question if you don’t understand this).
Step # 2
Determine the amount of work that needs to be done. If you are buying properties from the Court House, which require 24 hour cash closing, you don’t have allot of time to really nail down the cost of repairs. Check out this post “Case Study”, you will see that the house was a reck!!! If you are buying a bank owned home you will have an inspection period and are able to walk the property to get a good grasp of what it will cost to refurbish it to meet or exceed market value. I suggest you have several a licensed contractors walk the property with you and write up a work order of everything you would like to have done. Make sure before you go non-refundable with any monies that you have at least 2 quotes from your chosen contractors.
Step #3
Now that you have completed steps #1 and #2, it’s time to determine the offer price. We use a spreadsheet to determine the amount we should bid or offer. As you can see we bid roughly 55% of the projected value of the property:
In this property example the repairs were only projected at roughly $3000 to $5000. If you look at the bid sheet we did for Villa Maria, we estimated $15,000 but actually paid $38,000! I know, big difference, but that’s what happens when we don’t have time to inspect.
If you bid 50% to 55% of the projected value for the property, assuming you have a grasp on the renovation cost than I believe you will be in good shape to take the risk of buying and renovating. Now i’m sure you are asking “Where Do I Find Deals Like This?” I will do another post on how and where to find these deals…so stay tuned.
So what happened to my first deal? Well I found an investor who bought the property from me for $97,500 and I did a “double escrow” and I netted $11,008.61. See proof below.
Real estate investing takes allot of guts and the willingness to take risk, what we offer at Fortress Investments is a program where the risk is reduced by 99%. There is no value risk, no repair risk no financing risk, no large cash risk. We take care of that for you…If you would like to learn more, check us out at: www.FortressInvestor.com.
Stay tuned for more posts on “How to do a double escrow” and “How to find great deals”
Happy Investing
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