Investing strategy...

General Real Estate Investing
41

Hi - just a quick update… Addressed one more item in my action list… Signed up for the local newspaper… I should start receiving it in 7 to 10 days… Not sure if I should have signed for 7 days, or should have focused only on Friday, Saturday, and Sunday… Decided to go for the 7 days for two reasons: (1) I believe people that are looking for properties don’t wait until the weekend to search the newspaper, so my expectation is that there will be ads all week; and (2) it will be good to go back to reading the newspaper in the morning. I used to do that until few years ago when I stopped. Don’t remember why… I guess I felt I could get all the relevant news through electronic media (Internet and TV)… It will be good to have the physical paper in my hands in the mornings again…

I also sent an email to my phone company asking how I can remove my home number for the list (“unlist” my home number). Anyone knows? A quick search in the Internet uncovered only how to remove the number from Google (did you know you can find people’s name by googling their phone numbers?).

Have a nice evening!

42

j1dias,
I recall you saying you’ll be working 50 - 60 hrs./wk at your job until you have the rental income to give it up. In the beginning you may be able to keep up the pace of working & property management etc… But working that many hrs./wk will take its toll. Propertymanager doesn’t have to work 60 hrs./wk. AND manage properties. I’m not saying he has it easy by any means, but your committments will take up most your time. I work 60 hrs./wk and I sleep 4-6 hrs/night. I don’t have a lot of time to spend with my family. Managing property will take more of that time away from your family and/or leisure time. It will eventually pay off so you can spend less time working and more with your family. I just want you be clear on the initial time investment that’s involved. You’re family has to be onboard with this or it’s going to be hard on everyone.
When it comes to maintenance, if you’re going to hire the maintenance out, what will your wife managing? Is she going to be the one who takes the calls from the tenants and then make callls to the maintenance service, repair contractors etc…?

43

Phlemboy - we understand. My wife is onboard and is actually excited about this. She was not so thrilled when I was planning to flip properties. She believes in property ownership as a means to building wealth. And now I agree with her.

The idea is that my wife will do all the Property management, which includes getting calls from the tenants, collecting rent, paying bills, buying supplies, and some of the bookeeping (I have a finance background and we will probably be sharing this responsibility).

We are planning to hire out most of the maintenance - I will still try to do some of it (if it is simple and not urgent). Otherwise, my wife will hire someone to do the job.

I do work 40-60 hours per week and I can’t dedicate much time to this during the day.

Thank you for your insight. Have a nice weekend!

44

Well - I did it… I am now a realtor! :O) I registered with the local association of realtors, got my access to the MLS, and my Supra key (this is the key that let agents access homes that have lockboxes). I was waiting for July so I could sign up with a big discount (the fees went down $130+ in July).

I will start doing some searches tonight and spend some of the weekend looking for houses with my family… :O) Our plan is to get very familiar with our target area. We want to be able to know the neighborhood so well that we will know the value of houses/rents.

Next week I will register my LLC and finish my loan package (this is a binder that I am planning to take to some local banks to share my business plan and ideas and see if they would be interested in financing my deals…

We are so excited… One more step… :O)

Have a great evening!

45

I have just came back from looking at houses with my family. It is a lot of work to look at houses with a wife, a 3-year old and a baby… :O) At some point in the middle of the afternoon, my daughter (the 3-year old) started to sleep and then I had to take turns with my wife. I went first and looked at the house, and she waited for me in the car. Then I waited in the car while she went see the property. It took double the time… :O)

Anyway, we picked 23 properties from the MLS with values below 100k in our target area. We looked at 10 in a little more than 4 hours. I felt overwhelmed. I don’t think I remember all the houses we saw… :O)

And I was amazed how some people are completely out of reality - I saw a couple of houses that need a lot of rehab and being sold at almost 100k, while better houses were being offered at 70 or 80k. I guess I will need to continue looking until I feel confident I understand the area and know the prices.

This weekend we will also start looking at rental units. We want to also understand how much we can get in rents in the area.

Furnishedowner - by the way, we also stopped at a Hampton Inn hotel close to one of the houses we saw. The house is across the street from a major hospital. We are targeting the area because there are 5 major hospitals in the area. We wanted to check the room prices - between $75 and $89/night. However it seems that the manager has some specials for people staying 1+ week. Depending on the unit and the competition around us, we may decide to try renting furnished units…

I hope everybody have a great 4th of July. Talk soon!

46

j1dias,
That was an exhausting schedule with 2 small kids. Maybe better you scoot around alone and look at homes, then cull them and only show your wife the “maybe” list. Personally I can’t look at more than maybe 10 in a day and I take a lot of notes. Eliminate the ones located badly (busy streets, next to derelict properties, etc.)

Your hospital location sounds ideal. Some suggestions:

  1. Have your wife call that Hampton (and several others nearby)“I’m considering coming to work at the Hospital for 3 months. What are your rates for a furnished 1-bedroom, 2-bedroom? Deposit? Pets?” She can always change her mind about working there. You can learn a ton by just making phone calls. Save the gas.

  2. Call the Hospital Human Resources (HR) and inquire about the need for furnished rental homes for doctors, nurses, and travellers.

  3. Work the numbers keeping just under the higher end hotels.

Let us know how it goes.

Furnishedowner

47

FurnishedOwner - thank you for the tips. I really appreciate you taking the time to provide advice. Thank you.

I want to provide an update on my action plan - I have just signed up with a company that provides follow me sevices for voice and fax (www.makejustonecall.com). I did some research online and most companies give you a limited number of minutes and then charge you a per minute fee. I liked the one I selected because all the income minutes are free (unlimited) and they give me 500 faxes per month free. I believe local outgoing calls are also free. They charge $18.95 (plus $10 activation fee). I didn’t want to use my current cell phone for my business. So I thought about getting another phone, but then I decided to look for a follow me service. I believe I made the right decision - now I can give one number to my contacts and they can reach me or send me a fax using the same number. I will see how I like the service and will let you know…

Now I can check another item from my action list… :O)

Have a good evening!

48

If you have VoIP service, usually you can add a line for less than $15 a month. I put my fax on that line.

49

BrianA06 - Thank you for the tip. I tried VoIP two years ago and didn’t like it. Sometimes the calls were great. Other times they were very bad. We call our family overseas a lot and sometimes it was very frustrating. We kept it for 1 year (length of our contract) and then cancelled the service. I don’t think we are ready to try it again…

The other thing is that now we have a new number that offers both voice and fax in the same number. So basically I am paying the $18.95 for a voice and fax service. If I was using VoIP I would be paying almost $30. I will try the new service tonight to see how it works. They have just sent me the new number and I will have to configure it. I will let you know.

Thank you and have a nice evening!

50

So today I went to the local REIA meeting… It felt good to take care of another task on my task list - I signed up and went to the meeting.

However I am not sure if I got the most of the meeting. I couldn’t really network much with other investors. I spent most of the time listening to the presentations and browsing through the boots. I guess I ended up networking more with companies that provide services to the investor than with actual investors.

I only realized that I didn’t spend much time talking with other investors until the end of the session. I felt a little bit intimidated - there were between 100 and 200 people there… How am I going to find the succesful ones? Any tips?

So it was good that I took this important step of joining my local REIA. But I felt I missed an opportunity to network more. Anyway I will be there again next month.

The two main presentations were ok. More generic than I was expecting.

The first guy talked about creative financing (sub-2, lease option, etc). He started well - sharing some definitions and giving some examples. He even said that he was going to share some ideas/strategies on how to find good deals… That got me excited. I kept waiting and 15 minutes before the end of the presentation I figured that he was not really going to share any useful strategies. What he did was share some of the deals he did… :O(

The second presentation was about rental properties/market. A topic that I am very interested on. I was expecting an in-depth discussion around the topic. It ended up being very generic and high-level. The person that presented did not really share much in terms of strategy. She focused more on generic stuff like that you need to screen your tenants, that this is a good market to buy, that you need to make your property desirable to reduce the time it sits vacant, that you need to understand the rental market before you buy it… So a lot of generic stuff but very little meat.

I did get a free course though - “Property Investor’s School” by Dr. Dolf de Roos. They were giving a set 12 K-7 tapes for all new members… :O) Now I need to find a Cassette player… :O)

Anyway - I went to the meeting… IUHUUU! Now I need to find a way to find the successful investors there… :O) Maybe next time I should ask everybody I meet - “Are you a successful investor?” :O)

Have a great evening!

51
I only realized that I didn't spend much time talking with other investors until the end of the session. I felt a little bit intimidated - there were between 100 and 200 people there... How am I going to find the succesful ones? Any tips?

Like everything else in business, that will require some effort. I would start by going early to the REIA meetings. Find out what time they open the doors and be there. Also, many times the successful investors will go somewhere after the meeting - find out where they are going and go (remember that your objective is to make friends with the successful investors). Many larger REIAs have weekly lunch meetings or other events. Go to these meetings. While you are at the REIA meetings, ask who the successful investors are. Don’t waste your time talking to other newbies. With 100 to 200 people at the meeting, probably 175 are newbies with little to no experience. You need to identify and talk to the 20 or 25 that are actually in business.

From reading your posts here, I believe that you already have a grasp of the basics of the business. Now, what you need are contacts. That’s what you will get by meeting the successful investors in your area.

I figured that he was not really going to share any useful strategies. What he did was share some of the deals he did... :O(

I think that you already know just about every pertinent strategy. EVERYTHING that is pertinent to real estate investing has been covered in this forum (over and over again). Real estate is just not that complicated.

The second presentation was about rental properties/market. A topic that I am very interested on. I was expecting an in-depth discussion around the topic. It ended up being very generic and high-level.

Again, I think you’re looking for something that you will not find. I’ve been to dozens of REIA meetings and REIA conferences, and have heard just about every major guru speak. I have never heard the big “secret” that they all promise (there is no secret). In fact, what I usually hear is just a bunch of overly-optimistic (I’m being polite) basic info that doesn’t even come close to the reality of the business. What I’m trying to say is that I don’t attend REIA meetings to learn new strategies. I go to REIA meetings to talk to the other successful investors and to get their take on the current rental market and any other issues that are coming up (such as government issues, etc).

Good Luck,

Mike

52

You better start spending a LOT more time marketing!!!

Buying houses off the MLS is like trying to get a really great deal on a used car by going to dealerships.

The KEY to your success, as Propertymanager and others have told you, is buying a BIG discounts. Those discounts will come only one way…By YOU getting to the seller BEFORE the realtors do. I’m not saying you can’t find deals on the MLS. what I AM saying is without exception EVERY SINGLE ONE of my best purchases came DIRECTLY FROM THE OWNERS!!!

One of THE BEST marketing tools for this is your local OBITS. I know it sounds depressing but those ads are GOLD!!! Think about the information a standard OBIT gives you…

The owners name
The address of the property, street, city and county.
And last but not least…THE HEIRS!!!
What I look for is OUT OF STATE CHILDREN!!! GOLD, GOLD, GOLD!!!
The typical obit will list the names and addresses of the owners kids. ie. Leaves a son Mr. Jim Smith and wife Jane from Branson, Ohio.

I check the obits everyday in my local paper, make a list of the names in the cities and towns I want to buy in, and send out a post card that says…

WE BUY HOUSES…FAST!!!
555-5555

We buy all homes AS IS.
You do NOTHING…NO CLEANING, NO REPAIRS, NO REALTORS,
NO HOME INSPECTORS…NO PROBLEMS.

We LOVE houses that need work!!

ALL HOMES purchased with CASH…that means FAST CLOSINGS,
and you don’t have to HOPE a buyer can get a mortgage!!

CALL TODAY…SELL TODAY!!!

There is TWO ways to make money buying and selling real estate (or buying and renting) You can buy a lot and make a little on each one, or you can buy a few and make a LOT on each. Buying LESS and making more is INFINITELY EASIER!!! MUCH, MUCH lower risk, much more time with the family, much less BS all around.

Homes listed on the MLS have been fully priced by REALTORS who’s best interest is getting that seller TOP DOLLAR.

I sell SPEED and CONVENIENCE to these people. How many of these do you need to buy in a year to make a TON of money.
I HATE renting houses, even in this ROTTEN market I am still buying and selling homes.

This is my pitch to the seller…

"I’m a BUYER for your house TODAY. If you decide to go with me, we sign a simple one page agreement that clearly states I am buying this home AS IS, WITH NO WARRANTY. My attorney will call you TODAY to schedule the closing, I will transfer the FULL purchase price to my attorney’s client account TODAY, the day of the closing you leave with FULL PAYMENT, this will all take place in no more than 5 days as long as the title is clear. The difference between myself and a REALTOR is they have VERY LITTLE financial commitment to this home. Think about this…if a pipe bursts in here while it’s for sale does the realtor pay for that repair or do YOU?? Does the realtor pay the heating, electric, insurance, and maintanance costs for you??? If the realtor can’t get you asking price THEY STILL GET A COMMISSION CHECK even if YOU have to take a SUBSTANTIAL price cut. I will clean this house out at NO CHARGE to you, you can take anything in the house that you want, LEAVE THE REST. You don’t have to clean, paint, repair, deal with Home Inspectors, or anything else. YOUR DONE TODAY!!! SOLD…all you have to do is sign here ____________________________________.

This is a very hard pitch for an out of state heir to agrue with. I buy them at a MINIMUM of 50% market value or I WALK.

The KEY to this is the “planting of the seeds” Always mention HOME INSPECTORS, potential disasters such as pipes busting, maintanance costs, utility costs, taxes…Your not playing games with these people, your EDUCATING them about the pitfalls of owning a property that NO ONE is living in, and owning it while you live OUT OF STATE!! Most people NEVER think of these things…On more than One occasion I have had a person who passed on my intial offer, listed the home with a realtor, had a pipe burst, and because NO ONE WAS LIVING IN THE HOME, the insurance refused the claim!!! Oh Yea…that happens…if the house is UNOCCUPIED the rates are TOTALLY different. If you don’t inform the insurance co. YOUR SCREWED if some thing happens. That owner ended up selling to me at a HUGE discount from my original offer and kicked himself for not just selling to me the first day we met.

YOU have to get them to come to YOU, not YOU going to them!!!

53
YOU have to get them to come to YOU, not YOU going to them!!!!

FDJake is right! THIS IS THE KEY!

Mike

54

Amazing thread, very inspiring to see someone lay down plans and groundwork then proactively follow up.
The advice given by Mike, FDJake, Brian and furnished is all gold!

I think I will do the same thing and open a thread for my own situation and options then I can use it as a motivator to keep posting my progress in the same way as j1dias and make sure I am completing tasks and reaching my goals.

Thank you!

55

Propertymanager - thank you for your insight on my experience at the REIA meeting last night. The more I think about the experience the more I realize that I was not prepared for it. I was expecting 10 or 20 people, not 100-200 people. Next time, I will be focused on finding those successful investors. Actually I believe they even have smaller groups of people focused on special areas of real estate. I will check that out.

Fdjake - I hear you and based on my recent searches on the MLS I agree with you.

I am using two different approaches with the MLS:

Approach 1 - I checked 30 different MLS areas and in only 3 I could find houses where the prices were close to the prices I need to cash flow. The analysis I did was:

a - searched for all rentals closed over the past 6 months and calculated an average for 2 and 3 bedrooms.

b - searched for all sales closed over the past 3 months and calculated the average selling prices for 2 and 3 bedrooms.

c - I used the 50% formula to identify the areas where the average selling price was close to the one I could cash flow. I identified only 3 areas.

I am planning to target those 3 areas first - I believe the likelihood of finding a good deal there are higher than in other areas where the average selling price is higher.

I know that this approach is flawed because I am using averages and if in one area there are expensive neighborhoods next to less expensive neighborhoods, the more expensive sales could squew my numbers. However I felt that this was a good enough starting point.

Approach 2: In addition, I am also looking for listings that have been on the market for more than 360 days and/or expired listings. I believe those could generate good deals.

I am not opposed to doing the leg work - actually one of the aspects of real estate investing that I like is the search for a good deal (and your idea about obits seem interesting. THANK YOU!). Actually few months ago when I first thought about investing in real estate my wife and I went out looking for distressed properties in a neighborhood that we liked. We found approximately 100 houses that I then searched the tax records for the owners and sent letters/postcards. I got one lead - an investor from California that called stating that he wanted to sell his property. I froze… I didn’t know what to do next… :O( I spent the time and money on the marketing and when I got a potential client, I didn’t know how to close… this is why I decided to rethink my whole approach, went to real estate school, got my license, came to this forum, read books, and now I am ready to go out there again. This time I will know what to do… :O)

Anyway - thank you for taking the time and sharing your thoughts/experience.

Myles - one last thought - I encourage you to create your own thread… Or join this one if you feel inclined… :O) Bottom line - put your thoughts/goals on paper and share them with whoever is willing to hear them. I am constantly amazed by how people take time from their busy lifes to answer questions and provide guidance to people they never saw or that they may never hear again. As I look back to some of the advice I was given in this forum I realize that I am getting much more than I am putting in, and that those folks are doing it for free. So I encourage you to also take advantage of this blessing.

Have a good evening everyone!

56

So tonight I went to a subgroup meeting from my local REIA. As I mentioned before I felt that my local REIA monthly meeting was overwhelming and I felt I lost an opportunity to network. So I decided to join two subgroups - one for new investors and another one for people who invests in rentals (buy and hold). I thought by joining those subgroups I would have more opportunities to network with other investors.

Tonight I went to the meeting of the new investors subgroup. It was a much smaller meeting - only 4 people including myself. We had 30 minutes of networking and 1h30m of presentation. The speaker was an insurance agent. It was a good meeting. Due to the size everybody were able to ask several questions. It was well worth my time.

Some of the information was pretty basic. But the insurance agent seemed very knowledgeable about insurance for investors. One thing that I didn’t know - if you provide your social security number to an insurance company, it doesn’t hurt your credit. Whenever I shop for insurance quotes I never give my social security number because I am afraid that the credit report they pull would eventually impact my credit score. Without the social security number, I get only general quotes, not specific to my situation. Good to know…

The other thing that he also told us is that investors don’t usually get discounts if they go to the same company for all their insurance needs. He pretty much said that discounts like the ones we have when we insure our home and cars together are not available for investors. So from a purely financial perspective, you don’t save money if you insure all your properties with the same company. I will check this information with my insurance agent… I find it hard to believe that none of the insurance companies offer discounts if you insure multiple investment properties with them… We will see…

Anyway, it was good to meet other investors in a small setting. I know that some of you may be thinking that I should be networking with more experienced investors, not with other newbies like me… :O) I guess I felt it worthwhile to meet with other people that are in a similar situation as I am.

I guess I will have the opportunity to meet with more experienced investors in the meeting for the Buy & Hold subgroup. I am looking forward to that meeting in the beginning of August.

I hope you all have a nice evening!

57

Today I went out with my wife and kids again to see houses. Last night I selected 18 houses from the MLS in the area we want to buy. This time I felt there were more houses closer to our price range than the last time I looked. My feeling is that the houses are going down in price. Or maybe I searched the system correctly this time… :O)

Anyway - we found 18 that might be good deals. We searched for 3 bedroom houses listed up to 80k. We are actually looking to buy houses between 40k and 50k. There were no houses listed for less than 50k. However we believe that houses up to 80k listing may be sold within our range.

From the 18 we found, there were 16 REOs and 2 short sales. We were able to see one of the short sales today. It was ackward to see the house with the current home owner. I couldn’t bring myself to ask questions about his situation - how quick he needs to sell. How much he owes. When he needs to move out. How late he is in payments. If the sheriff’s sale is already schedule, etc… All I could tell him is that he has a nice house. I kept complimmenting him on how nice his house looked. I felt I missed an opportunity to talk with him about his situation and get more information that would help me decide if I can help him out or not. I guess I will need to work on this if I want to be successful negotiating short sales. My wife told me afterwards that I should have told her what to ask and she would have asked… :O)

We were able to see 13 houses this afternoon in a little more than 5 hours. My wife and 2 kids were wonderful. I was pushing to see as many houses as I could. They went along nicely. At one point I thought they were not going to make it… But after stopping for an ice cream, my wife and daughter were cool again… :O)

The interesting thing is that my wife has much better memory than I. Tonight we are going to review the houses we saw to see which ones would make sense to make an offer on. My take is that we should make offers to all the houses we saw - for the right price any house could cash flow. Right?

Anyway I will keep you posted. We may be submitting our first offer this week… :O)

Have a nice evening! I hope you all have a great week!