Lou Brown:
Hello everyone and welcome back to another installment of our Street Smart Group Q&A. Here we are going to cover all of the questions that have come in over the last couple of weeks. Some of them have been pretty in-depth. I know some of you are pretty concerned about the existing market, but I can tell you that it is nothing to be concerned with at all. We have a lot of opportunity happening right now out in the market place. I want you to not look at it from a fear standpoint, but more from an opportunity standpoint. There is so much available to us if we just step out and take advantage of it. So, definitely continue to look hard at the opportunities that are coming your way.
The thing that I want you to focus on in today’s market is building yourself a buyer’s list, so that you do have customers for those properties and you are not going to be faced with the same holding time that everyone else is because you have already gotten customers. Now, why would customers be attracted to our strategy? Because, we are the new subprime lenders. We are the ones that will give people with questionable and deplorable credit, an opportunity to restore themselves and actually own a property. We give them an opportunity to rent-to-own and grow up to owner financing that we provide, or we provide the owner financing up front if they have enough money down. You definitely have folks out there that are looking for this.
One of my Platinum students was sharing with me that over the last two month’s; he has been able to collect 434 leads in his buyer’s list. Now, these are folks that took the time to fill out the questionnaire on his selling website. These are the Street Smart selling websites that has the buyer’s questionnaire on it. They actually drove the traffic to the website. The folks filled out the questionnaire there, and as many of you know, that loads into the back-end of your database and now you have the database of potential buyers that you can sift and sort and find exactly what how much money they have to work with. Exactly how much down payment. How much they can afford on a monthly basis. What type of property they are looking for? The number of bedrooms and bathrooms, and the location. Everything is beautifully laid out right in your database. He was showing me that he had 434 leads there of potential buyers. Now, just think about that folks. If you have buyers, do you think that gives you some comfort in moving forward and looking for properties to buy? Absolutely. In fact, you need to capitalize your business at this time and take that capitol and use it to generate leads. You can literally cherry pick leads in today’s market and that gives you a real opportunity.
I am going to start off the call today with a question from Wendy Donahue, Wendy, and Stephen Donahue. They say, “I know that you must get this question all the time, but I am in such a desperate situation at this point that I am not sure what else to do. Currently, we have eleven properties with only four of them occupied. Outside of the basics that you have taught us, do you have any other ideas on how to get these properties filled? Banners? Flyers? Newspapers and signs are what we are using now, but these properties have been empty or people move out in the middle of the night for at least two months. Another challenge that we are facing is that the insurance is up on quite a few of these properties and with not having tenants in them, we have not been able to renew.” Okay.
Well, let me get to the insurance question in just a moment. Let us start with the vacancy. What else can we do? This is so important folks. I have already mentioned the buyer’s list, and unfortunately, Wendy, you did not have a buyer’s list before all these vacancies occurred. Let us step back just a second and look at you picture from a broader view and say congratulations, you do have eleven properties. Congratulations because that is a real opportunity for you. You have multiple exit strategies on those properties. One is rental, the second is rent-to-own, the third is owner-financing, and the fourth is auction. With that in mind, you can run at least two ads.
Now, here is what I would suggest. I want you to run an ad in the newspaper and this one should say your credit is approved, no bank qualifying, 3 houses to choose from, and $0 down possible, www. and your Street Smart website, your selling website and your phone number. That phone should be your Voice Whiz number. If you have been to our event, you understand what Voice Whiz is. It is basically a system that captures any caller that calls in, it captures their telephone number and if it is blocked, it unblocks it and allows you to capture that number so that you can recall people if they hang up the phone. What it also does, is allow you to sift and sort the customer where you are not having to waste a lot time saying the same thing, over, and over, and over again. The way we do that is through our Voice Whiz system of prerecorded scripts.
I recommend that you operate your business as two separate businesses. One, a buying business and the second is your selling business. They are different businesses. You should advertise and market differently. Therefore, you should have two different websites. Your buying website and your selling website, as we have done for you with your Street Smart Web Whiz. The third thing is the communication with that potential client. Whether they are a seller or buyer, you should have two different telephone numbers, one for buying, and one for selling. Also, you should have two completely separate scripts, one for buying, and one for selling. We have already prerecorded all of these scripts and have them available for delivery through your Voice Whiz program. I highly recommend that all of you do these steps.
This is the only way to truly automate your business. That is, you have the voicemail system, which really only requires one telephone number. One telephone number that you can use. You do not even have to have a line in your house. This is totally outlined for you. We can give you more details if you can call the office at 1-800-578-8580. The cost is only $49.95 a month. I highly recommend it. You do have to purchase the Visa software and also the scripts, but once those are setup and done, you literally do not have to worry about it any more. All of our Platinum students that have set themselves up this way have had such success. These Platinum licenses are using their time wisely and that is exactly what all of you should be doing. Value your time, have automation, and handle as much of your business as you possibly can. This is the only real solution. What we have designed is something that is completely integrated. So, the look, the feel, what they hear, everything matches all the way through the system. It is exactly what I recommend for you. Now, I want you to post all of your properties to your websites, you selling website. I want you to drive the traffic there, and then, have your people filter themselves. If they fill out the questionnaire, great. If they do not fill out the questionnaire, you have already captured their telephone number to call them back and nurse them through. You can actually fill it out online while you are chatting with them and then that auto loads into your back-end database. This is something that can happen very quickly Wendy.
That is exactly the way I want you to handle this, very quickly. There are buyers out there; you just have to find them. Now in addition to automating your process, and getting the exposure, the next step in the process is to call every realtor and every mortgage broker in the phonebook. I want you to gather their fax numbers and also, while you are on the phone chatting with them, I want you to ask them this question, “Do you have someone you are working with now, or have worked with who cannot qualify for a loan?” Then, you shut up. When they say, well, yes, or no I do not have anybody currently, then it really does not matter which one they answer, you say, “Well, here is what we do. We work with those very people and if they cannot qualify for a loan right now, that is just fine, you refer those folks to us. You could not work with them any way. We will find them a home.
We already have a number of homes in inventory right now. What we will do for you, is pay you a referral fee on that client. You can continue to work with them and clean up their credit, or help the clean up their credit. Then, when they get to the point of qualifying, you can help them through a new loan and they can go ahead and purchase the property we have already placed them in.” Is not that wonderful? You are actually going to make two profits off someone you could not make any money off of. Will that work for you? Boom. Then, you plant that seed. Now also, you are going to follow that up with my attention broker’s flyer from the Massive-Passive Income Seminar Manual. That seminar manual is designed to take you through this entire process that I just laid out for you. We are going to fax that to them, as a reminder of what we have just said. Then, you are going to put them on a follow up list. If they have someone right now, good, let us go. Let us get to work.
If they do not have someone, then I want you to put it on your follow up to call them three weeks from now and follow up again. Do the same thing with the realtors. Believe me, these people run into people every single day that cannot qualify for loans. The other one I want you to go to is your local banks. These folks who are on the carpet there, behind the desks, meet people on a daily basis that have come in looking for money to buy a home or to keep the home they are already in. They need to borrow money. Either way, they become a lead source for you to either buy properties or sell properties to, because the very folks that they turned down are your customers. Again, it is not a conflict of interest for the bank officer or the bank clerk to give you those names, because they could not work with them. They were not able to do any business with them, so they ought to be able to pass them onto you.
Now Wendy, to complete that thought, I want you to make sure that you have your property listed on Craig’s List.org, rehablist.com, uslister.com, buyownernation.com, house.8list.com, housejockey.com, rent.com and rentclicks.com. Make sure that you are listed on all of those sites. I want you to make sure that your property is ready. Have you posted it to your website? Have you prepared your flyer? Have you printed out those flyers? Do you have them at the property? Have you posted them around the neighborhood at the community bulletin boards? Have you sent an E-blast to your website buyers list if you have one? Have you called your website buyers list and talked with those folks, if you have one. Have you setup your Voice Whiz box and used those recorded messages. Have you placed an ad in the newspaper? When you do, I have already given you the ad to run. Have you done your neighborhood reward program, obtaining the neighbors names and addresses. You can do that through zipzkinny.com. Okay?
Once you get the neighbors addresses, you can prepare your reward flyer, and again, I have that in the MPI book along with the coupon that you are going to send to the neighbors to pay them for referral. Basically, the flyer begins with help us find your new neighbor. You mail that or deliver it to the neighborhood. The other, as I just mentioned, is your attention broker’s flyer. You are going to obtain the mortgage brokers list and the realtor’s list. You are going to fax that list. You are going to mail that list. You are going to follow up with that list. Then, possibly, even list several of these properties with a realtor. I would recommend a flat fee listing. However, there is another service that is free and that is iggyslist.com. It does not work in all areas, but in some areas, it allows you to list on the MLS absolutely free of charge. That allows other selling brokers to find your property on the MLS and bring a buyer for it. They know that their commission is going to be protected.
The next thing is on-site marketing. What are you going to do at the property? Have you checked out the property? Have you used my vacant property check list to make sure that the property is clean, neat and curb ready, viable, and attractive to a potential client. Have you posted your buyer presentation kit on the storm window, or the garage door, or the window of the property. Have you placed your rent-to-own or your rental applications in the kitchen drawer in the house? Have you placed flyers in the flyer box in the front of the house? Have you staged the property? Is it attractive? You do not have to spend a fortune here. You can go to Family Dollar to get enough things to at least make it look a little bit homey and not quite as cold as a vacant house. Have you placed your signage? How many directional signs have you placed? Is it easy to find you property? Have you placed signs outside of the subdivision leading people to your property? Have you put a sign in front of the house? Your _____15:29 and your selling houses signs as well. Have you placed a sign in the window, as well? Have you placed your 3 x 8 banner that says special financing in front of the house? Have you set up an open house? Do you special open house signage. Have you asked the neighbors to watch the house? Have you given your neighbors your business card and your contact information? Have you given your neighbors your name and telephone number? Have you got your neighbors name and telephone number? Have you hand-delivered the reward flyer to the neighborhood. Have you placed a door hanger or post-it notes throughout the neighborhood? Have you set up your talking house feature on your PB Next system 16:20, which is our Voice Whiz? Have you recorded that message? Have you got sign toppers on top of your signs, arrows, owner financing, blank % owner financing, maybe 95% owner financing, no banks needed, that is a sign topper, lease option or rent-to-own, _____16:50 social.
That is very poor Spanish for no social security number required and _____ _____17:00 meaning that the house is available on rent-to-own. These are various sign toppers you can use to drive some traffic. You see, we have got many different exit strategies. I have spent some time on this call, because I think some people are struggling with filling properties. I want to make sure that you get the benefit of this. So, you have got exit strategies of rental, lease option, agreement for deed, which s owner financing and then sale of the property and auctioning of the property. Lots of different opportunities to be able to move the property.
Now, your second question Wendy is insurance. You say, “Another challenge that we are facing is that the insurance is up on quite a few of these properties and with not having tenants in them, we have not been able to renew.” Okay. Let us answer that one. You go on to say, “To make matters worse, 10 of the properties are in Tennessee where they had those severe tornadoes last week. Fortunately, we only lost a 6 inch piece of fencing. We are on the edge and sinking quickly. Any ideas would be greatly appreciated.” Absolutely. That is what we are here for.
That is why you are so smart to be part of this coaching program, because we do not allow people to sink if you take action when we tell you to and do what we tell you to do. So, the next step is to contact our Insure Whiz, which is renovators insurance. You can call our office at 1-800-578-8580 to get the telephone number and it will help you get coverage on all of those properties. They have a wonderful thing called a Builders Risk Policy and you do not even have to pay for it in advance. It covers vacant property. In fact, most of what they work with and most of the people they work with are people just like us that have vacancies from time to time, rehabs, and so on. So, they got and corralled the best kind of insurance at the best prices. Now, you being Street Smart, also get an additional discount and we definitely encourage you to use them. Check them out, as we always tell you to do. Anybody might turn from good to bad, might have great things yesterday, and might have terrible things today.
So, ask all the questions that you would normally ask of anyone and make sure it is right for you, but it would definitely solve your insurance problems. They cover all kinds of different things. Wind coverage, flood coverage, theft of material, even loose materials on site, things like that. So, that can solve your problem there. The other thing I like about them is that they bill you a month later. Essentially, if a property moves within a month, you are not going to be billed for that. That is a real handy thing to have. Wow! Hopefully, that helped you a lot Wendy. We definitely appreciate your support and we definitely want to be here for you as you go through the process.
There is one more solution for all of you on this call. There is a service called listeverywhere.com. For $39.95 a month, they will list on 26 different sites in addition to the ones I gave you, or including the ones I gave you maybe, they have other levels, as well. They have a Silver package, a Gold package, and a Platinum package. These are just extensive lists of dot coms and you just choose which one that you are interested in or that you can afford. They will get it out there to the internet for you, which is a very handy thing to do, depending on the budget that you have to work with. So, you have two options. One is do it yourself and the other is let them do it for you. Wonderful. Okay.
Now, we have from Red River Home Buyers, Marty, and Natasha Miller. They asked, “Dear Lou: I got the deed on two houses over the weekend, both pre-foreclosures. I need your help with how to proceed with each of these. Questions: First house is worth $145,000.00 after repair. The realtor told them that the seller owes the bank $94,000.00 on a first to GMAC and a second of $25,000 to United Mortgage. Each has an adjustable interest rate that kept going up, seller said. Does not know what it is now. They are four to five payments behind, bank has filed suit, and the house is vacant for three months. It has a couple of couches left in it they bought in 2005. They will sell for what they owe on it. They have not asked for any money. They have already moved in with mother. The house is 1900 square foot, 3/2, 2-car garage, just needs around $10,000.00 to update, nice brick house on 1 and ½ acre, fenced, parquet wood floors, formal dining rooms, some new appliances, oven in kitchen, nice fireplace, central heating and air, good roof, nice neighborhood. How should I proceed and negotiate with the lenders to get a discount?”
Well, Natasha and Marty, you need a lot more information is the answer. Before I can help, I really need more info. There are so many directions I could take this deal in. I really need to know all about the existing financing. Now how are you going to find that out? Well, you are going to us your script, your seller questionnaire. There is a box there on that seller questionnaire. That is what I call the money is in the box. Therefore, I want you to go to that box and make sure that you fill out everything on there before you asked these questions. Because it is so vital that the existing financing will absolutely direct what the solution is for this.
For example, let us say that the first mortgage, we can modify from an adjustable rate to a fixed rate and a number that you like. Let us say that the second mortgage we can get reduced to say a $1,000.00. Would that make sense for you? These are all opportunities that you need to look at on these particular deals. Then, you can get back to me with those answers and we can go from there. It may even presence itself once you have that information. You go on to say my exit strategy is to rehab and sell at retail or at least on a lease/option. Well, let me say that your exit strategy will be determined by the financing. If the financing is good and we can modify that adjustable rate loan to a fixed rate loan, then it will absolutely make sense for you to keep that property on a lease/option, get some cash now and some cash a little later.
You go on to say I believe I can get some private money, plus I have credit cards I can use to buy it, then get a mortgage on it if I lease/option it. That is absolutely right Marty. You can, but I do not want you to go out and get a mortgage on it if you can possibly help it. Why go out and qualify for a loan when you can avoid that. I would rather you use the existing financing and let us make that financing look like something we want it to look like. Is there anything I am missing, or is there a better exit strategy?
Well, I think your exit strategy again will be determined by the existing financing and what we do to purchase the property in the first place. Then, you go on to say, “Any cautions I should be aware of?” Yes. Not having the right information is a big caution for me. So, in fact, I will not even proceed on a deal until I have verified those pieces of information. I am glad that you got the deed on the property. You have taken the right first step. I like that you followed our entire system, so you have got all of the other paperwork done. Now, all we have to do is confirm what you got. Then, we can create a wonderful deal out of it. “Number two: The next house I got the deed on is in pre-foreclosure also. The seller signed everything in subject 2 packet without question. The seller wants what is owed to be paid off, $333,000.00, probably around $347,000.00 with arrears and attorneys fees, plus, he wants some equity, plus moving money, $50,000.00. The market value is $430,000.00. The seller says he has had an offer one year ago for $430,000.00. It is listed with a realtor now for $475,000.00 for around five months. The monthly payment is $2,195.00. It is five months behind. He does not know the interest rate. He just faxed authorization to the bank. The mortgage company is Ocwen Financial.”
I believe what you are saying here Marty is Ocwen instead of Oakwen. “Sale date is March 11th. He is considering filing bankruptcy or working with the mortgage company to catch up the payments and roll it into a loan with higher monthly payments. He says he has talked with the bank and thinks the bank will give a discount for minor repairs, maybe $2,000.00. At first, he was firm on selling for $400,000.00. I talked him down to $475,000.00.” I think you mean $375,000.00 here. “Then asked how much he needed, and he said $50,000.00. Seller and family live in the house now. He is fine with me getting a short sale and auctioning the property. I found two auctioneers who are willing, a third said the local market would not buy it and recommended getting it added to the National Lending Institution’s Repossessions Sales List. The seller built the house and has lived there 13 years, now disabled, due to injury. The house is beautiful, 4,000 square feet, 4 bedroom, 2 bath with moth-in-law house in back, 3-1/2 acres, and lakefront, with enclosed boat dock. Oh, my goodness! How should I proceed?”
Well, Marty, I am tempted to say, move in. This sounds like a very nice house. If you could get the financing, where you need it, you would definitely have what you are looking for. Now, everyone on the call, I want you to pay close attention to what I am about to say to Marty. Marty, you have got a lot of facts here. You have a myriad of facts, but asking the seller what they want, is not where we need to go. We need to show the seller what you can pay. The way we do that is to take the cost to sell worksheet, and you are going to put at the top of the cost to sell that, perhaps, $430,000.00. However, before you put $430,000.00 at the top as the asking price, I want you to first confirm all of your comparables. Now, in today’s market, you not only look at past comparables, through your Comp Whiz, you also want to look at current market listings, through a realtor, MLS, and local neighborhood. What is comparable to that house in that neighborhood or that area and that location, that we can determine exactly what this property is worth. Who knows, this $430,000.00 may be way off the bat. Maybe $375,000.00 is the right number to begin with. Whatever the number is to begin with will be determined by both past sold comparables, plus current market conditions. That is going to require some leg work on your part.
Then, you are going to use that as your beginning number and your cost to sell worksheet, which is contained in your seller presentation kit, at the end. In fact, the worksheet is also in your Volume 1 Buying Book. It should be on your buying disk, as well. Your buying forms disk. Once you print out that cost to sell worksheet, put that number at the top. Then, begin deducting all of the expenses, listen to me carefully, it would cost you to sell that home. Not them, but you to sell that home. Then you are going to come up with a final number. That is the highest number you have to work with, because you are also going to deduct existing mortgages from it. It may end up even that he would have to pay you to buy that house. I do not mean that silly, as a silly comment. It happens on me all the time with our trained Street Smart people. I am going to say that it sounds like you need some additional training Marty.
All of these things are carefully laid out in our Millionaire Deal Maker, 4-day event. It is coming up March 27-30. We are actually going to work deals just like this in class and we are going to take them all apart and put them back together. You are going to have exactly your offer, exactly how to present it, and exactly the words to speak. Everything is done for you. You literally only have to step into my shoes, be me for a minute, go and do what I tell you to do and you will have some incredible opportunities here. I absolutely love this house. It sounds like it is terrific, 4,000 square feet, 4/2 with a mother-in-law house, 3-1/2 acres, lake with enclosed boat dock. Oh, my goodness! This would be an incredible owner-finance deal for you. You could get easily $50,000.00 dollars down from a potential buyer and you finance it for them. This is the kind of house people are looking for. I think it is a great opportunity for you.
You go on to say, “How should I negotiate with the bank? What leverage should I use?” Well, the leverage is that they are five months behind in payments and they are considering bankruptcy. When you go to the bank, I want you to act as their financial advisor, not as an investor. Work with the bank to try to solve your client’s problem. You have found a buyer for the property and you are solving your client’s problem, and you are solving the bank’s problem, as well, because they do not have to worry about your client filing bankruptcy. If your client files bankruptcy, the lender is going to have to hang out for a long time. You are actually presenting something that will solve their problem.
Now, you go on to say, “How can I get it listed nationally or along with the National Lending Institutions Repos?”
Well, Marty, I have no idea what this auctioneer told you, because it does not make any sense to me. The lenders only list properties that are repos, once they have been repo’d. That property is currently owned, really by you, now that your seller has signed a deed, but in the bank’s eyes, it is still owned by the seller. They really cannot list it anywhere. They do not have the right to list it anywhere. It is a private matter and it is still owned by that person until there is actually foreclosure. Maybe they have got an idea that I do not understand here, or maybe you misunderstood the auctioneer. You might want to do some follow up on that. “What cautions do you suggest?” I think I have outlined that here.
My biggest caution is you do not overpay for this and you do not commit yourself to something you cannot do. I would, if there is equity after you go through the cost to sell worksheet, I would offer to your seller a single payment note that would be payable when you sell the property. If that does not work, I would offer them at least some moving money, maybe $3,000.00 or $5,000.00. That is it. The balance would be in single payment note payable when you sell the property. That is it. That amount would only be the amount that makes sense after you have gone through the cost to sell worksheet. You go on to say, “The auctioneer will need around $2,000.00 and 30 to 45 days to advertise. How can I get the bank to postpone the sell?” Well, first of all, you do not necessarily need an auctioneer. Go to your Volume 13 Auction Profits, where we actually have all the templates, every detail, the timeline, and the calendar. Everything is done for you in Auction Profits. All you have to do is do what I tell you to do in that guidebook and do the auction yourself, and you can save all this money, and this delay.
Now, how do you get bank to postpone the sell. The answer is, you call them and tell them that you have found a buyer and that the buyer is going to close in 30 days. You need them to pull the sell and delay the sell. They will usually do that because you are going to use your credibility of being a financial advisor on behalf of the Jones’ and that is going to solve their problem. The bank, typically, will work with you on that.
You go on to say, “Is it worth investing time and $2,000.00?” My answer is, I want you to do it yourself first.
The answer is, it is worth the time. Absolutely. After you get the number where it needs to be.
You go on to say, and I think this will benefit everyone else on the call, as well, “We owe $38,000.00 on our _____35:46 for advertising, business, education, and living expenses, so I can devote my time to real estate. My wife wants to give up on real estate and cut our loses. I am getting discouraged, but I have never given up on anything. What do you think?”
Marty, I say do not. There are way too many opportunities to make big money. Look, you are one deal away from wiping out all of that debt. You are already presenting two marvelous opportunities right here in this detail sheet. I want you definitely to not give up. I want you to pay very close attention to my training. I want you to do exactly what I tell you to do. I am going to tell you that you do need more training, as theses deals could have been worked already. With the proper training, you would know exactly what to do. I want you to come to the Emersion Training, the in-depth training in March; definitely, because I can help you through all of this and get it laid out in your mind so it makes a lot of sense for you. I will also say that you need to invest in more leads. Good leads, in the right neighborhoods, with the right type of seller. That means free and clear properties. That means properties that are absentee owners. That means out of area. That means bankruptcies. You have so many different lead sources that we do lay out for you in our Lead Whiz program and I think just having the right kind of leads will help you immensely. With the right number of leads, you can do easily three to four deals per month. These are high profit, high cash flow deals that will make a lot of sense long term. You need adequate funding. This is one of the biggest mistakes most people make. They have undercapitalized their business to sustain for them long haul. You do not see people going into a retail store and going out of business two months later. They go into the retail store, and they stick at it, while they build their customer base and their traffic. The reason that they are able to stick at it is because they borrowed sufficiently in the beginning and they properly capitalized their business.
You need to do exactly the same thing. This is exactly what we teach you to do at the in-depth trainings. I want everyone to pay close attention to that. Definitely get to the training in March. By the way, you need to listen up on this one; we have got a special running right now until March 1st with a split payment, a possible free deal. You can attend for free. You call our office at 1-800-578-8580 to get the details. Get yourself signed up for that because that is so important for everyone of you on this call.
Next question is from Keith Wren. “Do you have a private money lender agreement in the books we can use with a lender?”
Keith, absolutely. See page 58 in Volume 6 Borrowing. That is a note and for those of you who have our website and the borrowing system, we turn that on for you on your website, so you can access this paperwork from any computer in the world and that form number is SSB6120. That may be what you are looking for Keith. Now, this is a note. If your lender does not require collateral, all you need is a note. If they do require collateral, then you will need a mortgage, as well, to record against a property. If you need the mortgage form, then see the one that we have on page 62 of your Borrowing Volume 6, to see if that fits with your needs. That is form number SSB61206 on your website. I know you are one of our website customers, so you could go right there and get that information.
Brenda Barrett has a question. “Although I have been a real estate investor for a little while, doing it the old traditional ways due to mortgage and market changes, I do not have much money to initially invest in marketing, coaching, etc., but I need to get started the Lou Brown way. I have bought the jumpstart course. How do I get started?”
Well, Brenda, I actually went and looked up your name in our computer and I saw that you are going to be attending our MJS event this weekend, February 16 and 17. You are going to get a tremendous amount of information there that is really going to kick you in your pants and get you started. I am going to tell you that that is going to be very important for you. Also, to give you more benefit on this call, it all begins with the leads. The newspaper is a good place to start. Right there are classified ads with people raising their hand and saying please come buy my house. That gives you an opportunity to come in and buy that house right away, chatting with the seller. You have our Book 1 Buying System, our Volume 1, so I want you to go there and get the seller questionnaire. The seller questionnaire lays it out for you and gives you all the questions that you need to be able to ask those people in the classified ads. Leads are worthless though, without knowing how to work them and how to structure them and what to say. So, I want you to pay close attention to how we do that using the cost to sell worksheet and we take you through the process.
Alright, now we have a purchasing property question from Irene Conowall who says, ” Hi Lou. Yesterday, a distressed seller called me after several letters I had sent her. She wants to get rid of her home. She is about to be foreclosed on May 9th. Her payments are in arrears since October 2006, as well as taxes. The value of her home is around $300,000.00 with $20,000.00 in repairs. The balance on the first and second mortgage is $80,000.00 dollars plus attorney’s fees. She is asking $300,000.00, which I told her is not what I would offer and wanted an amount immediately. She became very angry and hung up on me. My question to you Lou is, “What is the best approach and offer to her should she call me back. The seller does not seem to be motivated enough.”
Well, Irene, I am going to answer you like I did Marty. The proof is in the numbers and you need to go through the cost to sell worksheet and actually come up with real numbers, proving to your seller exactly what the numbers are, so they fully understand how you arrived at your number. You do not ask them what is the lowest you will take; you show them the most you can offer according to the cost to sell worksheet. This is again, part of indoctrinating yourself into a process and procedure of offering. Because it is not just a matter of asking someone what they want, or offering, or saying how much cash do you want. It is completely different from that. It is actually logically and methodically taking them through the process of understanding exactly how you came to your number. That is all in our training, Book 1 Buying and also at the MDM, Millionaire Deal Maker, in March, which you absolutely must be at if you are going to survive this business.
We have a deal structuring question here from Nathan and Kelly Wit who say, “We have new information on a deal we have already asked you about. ARV is $230,000.00. Debt relief and avoid foreclosure is what they are asking for. They are six months behind on payments. They owe $259,000.00. Their first is $180,000.00, which is the payoff amount and the actual loan amount was around $168,000.00. The second mortgage is $79,000.00 payoff amount. Actual loan amount was around $72,000.00 Repairs $10,000.00, paint, carpeting, and updating. We are going to short-sell, but not sure what our no-go number is to give to the short-sell service. “This is a home we would like for our own personal residence. We know, what a great way to ruin a check. Would you advise getting the balance of the loans discounted below MAO, which means maximum allowable offer, before we pay cash for the property?” What would your number be?” Thanks, Nate.
Well, Nate, I am going to tell you. You have heard several answers that I think are going to play into this. First of all, maybe we like this first mortgage. Let us look at this. The second mortgage you say is $79,000.00. We might be able to get that reduced down to say a $1,000.00. What if you could wipe out that $79,000.00 dollar loan for $1,000.00 bucks, and then take over the existing first mortgage. Now, when you take over that first mortgage, guess what? That also does not have to mean cash. You have got an arrearage there you say is somewhere in the neighborhood of $12,000.00 dollars. Why not try to modify that loan and take that arrearage and put it on the back end of the loan, or, alternatively, not only putting it on the back end of the loan, we actually have an opportunity to make payments on that if they say no to the back end and make payments at 0 interest. This is another thing I teach at MDM. These are the ways that you structure transactions that make sense and do not cost you dollars. This is absolutely critical to your future. I would like you to smoke this through the cost to sell worksheet as I have told others. I want you to work towards getting rid of that second mortgage and reinstating that first mortgage with a loan modification. That is a tremendous opportunity Nate. I do believe this is your next home. You could absolutely make this work.
Now Kahdri _____ 46:44 has a question for me. Hi Kahdri, I remember you from California. “Lou, I have a seller with mortgage monthly payments of $1900.00 dollars, not including taxes and insurance. The current neighborhood rent is also $1900.00 dollars. Interest rate is 7-1/2%, current on his payment, ready to sale for what he owes, but just wants to move quickly to Arizona and get out of the house. The new PITI for the mortgage is now 2180.00. My fear now is that I may not get a new tenant buyer who can pay at least $2400.00 dollars in order for me to have at least $220.00 dollars positive cash flow. How best can I structure this deal for my new tenant buyer to pay as much as $2400.00 dollars when the current rent is $1900.00 dollars?”
Well, let us first go to your seller Kahdri. I think we need to back into this number. Again, you are going to use cost to sell to prove to the seller what the real numbers are. It may be that your seller is going to pay you $300.00 dollars a month and indeed you are going to market it at $1900.00 dollars a month. It is going to be hard to get $2400.00 when the price is $1900.00. However, of course, as you might imagine from Lou Brown, we do have a solution for that. The way you are going to do it is market the house as an owner-finance deal. You can afford to market it even at 95% financing at a higher interest rate than 7-1/2%. Your underlying financing is 7-1/2%. Let us say that you put it out at 10.99% and I know that you are a graduate of our MPI class, so, you have all the calculators, and you have those available on the backside of your website. I would go to your calculators from MPI and just smoke through an agreement for deed possibility on a 40-year loan at 10.99%. Then, you can offer this property out with low down, owner-financing, even go so far as to say in your ad, take over my payments and the payments are not what you are paying, but what your new loan is based on the 10.99%. That is the payment they are going to be taking over. This is merely a marketing ploy that we are using here.
All of these are just great questions.
Irene has another question on entities. This one is on entities. She says, “Currently, I have an LLC. Do I need another one to buy and sale? Please clarify.”
Irene, the only thing you need is what you already have, which is our Volume 4 Land Trusts and Volume 5 Personal Property Trusts. What you will do is as you acquire properties, you will be putting each property in each own trust. You can make your LLC a beneficiary of those trusts. I teach you more about that at MAS and a lot of detail on how to layer your strategy for the best results. In the meantime, that is exactly how I want you to set this thing up. You just buy the property, write into a trust, you have the beneficiary be that one LLC that you already have and you are in fine shape Irene.
Now, Velva Peterson has a question. “Hi Lou. If I change the name of a trust on my residence Orlando area, do I dissolve it, quitclaim it, and start all over? It has an unusual name, should there be a consideration of 10?”
Okay, let us first start with that one. Every time you sell a property out of a trust, let us just get rid of that trust too. The only cost you have is when you purchase the new property. It is going to go into the new trust name. Well, that is not a cost at all, because that deed has to be recorded anyway. So, it literally costs you nothing to set up a new trust, other than the cost of paper and ink to set up a new trust using our system. I would rather let all the liability, contingent liability and anything that may go with the old trust, go with the old trust.
You go on to say, should there be a consideration of $10.00 dollars or $100.00 dollars or simply quitclaim it?
Well, that is really up to your buyer. You could literally transfer the beneficial interest in the trust that you have already got to a new buyer and not change it on public record at all. They could literally take over the trust and the trust owns the house. Get the trust and the house and you just step aside from the trust and have no further involvement as a beneficiary in it. They become the beneficiary using our assignment and quitclaim of beneficial interest in trust that you can find in Volume 4 Land Trusts.
You go on to say, “As far as what will be shown on public recording, what is best?”
Well, it really does not matter Velva whether it is warranty deeded out from the trust to a new buyer, or the entire trust goes to a new buyer, does not really matter. There will be a savings on transfer tax if it goes to a new buyer and all they do is take over the beneficial interest in the trust, because, magically, that does not have to be recorded anywhere. Hello. Is not that a wonderful thing.
Now Angie Florisk asks, “My name is Angie from Florida. I want to start a business along with my real estate investing in the music entertainment industry. Would I be able to create a personal property trust to hold the business name?”
Angie, I would not worry about that. Basically, if you are going to start a new business in the entertainment industry, I would say just go ahead and start it. You can be a dba when you get started. You do not even have to be an LLC or corporation. I would say, get it started. Try to hold your costs low in the beginning and then use the personal property trust for anything that is personal property. If there is an asset with that music entertainment industry business, then I would put that asset in the personal property trust and then lease it to the business itself.
Your next question, “Would the personal property trust hold the name of the business alone with no assets in it. I need to create a name to use for advertisement in order to find investors that help me sign people to represent them.”
Well, again, that name of the business can be just a dba so you do not have to worry about creating an entity for that. Another thought too, for that business, is you can set up a trust bank account and that trust bank account could be the place that you deposit all monies that come in. Then, the trust bank account can write it out to any beneficiaries. It would probably make sense, when this business is up and running, to go ahead and establish it as an LLC. You can do this yourself, online, with your state at very low cost. They usually give you most, if not all of the forms that you need to do it yourself. That is the reason I do not have a different system for that.
Alright, three. “Will the personal property trust give me more protection if it is created first to hold a business name instead of starting an LLC. When do you advise that I start the LLC?”
Again, when there is money coming in. That is when I would worry about creating your LLC. Be careful about creating costs too soon. “Do I need an addendum or any changes to the personal property trust forms to create this entertainment business trust or all the paperwork I should use, the same one in a personal property trust.”
Well, you have touched on something that is interesting here Angie. There is such a thing called a business trust. Our personal property trusts are really not established as business trusts. They are established as a place to store and hold things, not a place to operate things. I would suggest that you set up a separate entity for business purposes and it makes more sense to do it with a lower taxed LLC such as an S corporation. You can setup an LLC, which is taxed as an S corporation, or you can setup an S corporation that flows through to your personal tax return. It is taxed at your personal level, but it provides all the benefits of a corporation. It may make sense for you to do this as an S corporation. Our Entity Whiz, the arc, can help you set up all of these things and you learn about the arc at our MAS, Maximum Asset Shield, but we can also give you the connections to them and you do get a Street Smart discount whenever you use them for your entity setup and design.
Some of you on the call are very much in need of their services, because they can go very deep, with not only asset protection, but also estate planning, and more importantly, taxation planning to help you avoid taxes. It is a wonderful thing. “If my credit scores are not too good, should I still obtain a TIN number for the PPT under my social security number as a trustee of a bank account trust? Any suggestion?” Well, it is not an issue of credit scores. It is an issue of getting the bank account in the first place. Yes, you would need to use your social security number in order to obtain the TIN number to open the trust bank account. A wonderful list of questions Angie. I think that probably benefitted a lot of folks on the call.
Land Trusts: “When a property is sold that is in a land trust, will there be any problem with getting title insurance for the new owner, because of the chain of title.” The answer is absolutely no. There should be absolutely no problem with them getting title insurance. The trust is the one selling and title insurance companies only need rely upon what is recorded on public record. If the property appropriately went from the seller into the trust and that was appropriately recorded, then it will be the trust itself and the trustee that is on public record that will be transferring to the new buyer. Therefore, the title insurance company or the title agent should have absolutely no problem with the fact that the property was in trust. Jim, you will have absolutely no problem with that one whatsoever.
Well folks, we have come to the end of another exciting group Q&A and I tell you what, we covered an awful lot of ground here. I think all of you feel like you got a lot of meat and potatoes in this call.
Please do tell your friends about us. We do appreciate your referrals. Do call the office and get yourself registered for Millionaire Deal Maker. Do get yourself upgraded on our coaching levels, as well. This is our group Q&A. We also have direct Q&A. That means you can fax or e-mail questions anytime during the month and get answers back. If it can be answered by a staff member, that will come to you directly.
If it is what they call a Lou question, that will be held for me and I will get back to you as soon as I get back to my desk. The next group Q&A will be hosted by Bruce Beasley, because I am going to be on a cruise. Is not that a wonderful thing? We are going to be going through Panama, _____59:25 Costa Rica and we are going to have a great time. So, Bruce is going to be leading that call. In addition to that, we talked to you about our group Q&A and our direct Q&A; there is also the one-on-one level where I work with you on a monthly basis to direct your business. We look at what has happened over the last month and then we look at your marketing campaigns and we direct your business to be able to make the most profit to reach your goals. You do have to set goals. We work towards those goals on a monthly basis. The final level, which is the most sought after level, at Street Smart, is the Platinum level. That includes both our apprentice level and our pinnacle level. That is designed where we get together three times per year and actually work on one another’s businesses in a group setting. It is total immersion where we work together to get your business built.
I do highly recommend you to get involved in the Platinum program and you can get more information about that by calling 1-800-578-8580. We will select the level that is best suited for you, whether that be the apprentice or the Platinum level, and we will also include all of these other levels. So, imagine that on a monthly basis, you get me one-on-one, as well as direct Q&A anytime during the month, as well as the benefit of hearing all of these other questions twice a month for two hours on these group calls. You get a tremendous amount of support and that is what I want you to recognize. We are here to support you and we are here to be an integral part in the success of your business.
Well folks, it has been a real pleasure for me to be with you today. Good luck. Good health. Good profits and may God Bless. Good day.
