Group Q & A January 13, 2009

Lou Brown:

Hello everyone and welcome back to another Street Smart Group Q&A where you’ve asked a lot of questions over the last few weeks and I have answers for you right now.

Before we get started, let’s talk about today’s economy as we like to do every couple of weeks and just say okay where do things stand now and what do things look like and what I’m seeing is that there is a great number of folks out there that really do want to buy property right now.

And so, what I’m advising is really that you look at your business and your business model in two ways. One is cash and the other is long term hold to the extent that you can afford to do long term holds.

Now could not be a better time to buy, because you’re able to buy at such low prices. And with motivated sellers who are willing to do just about anything to get rid of their properties, and we know this because we buy and sell and hold properties every day and our operations we’re able to see and keep a pulse on what owner’s are saying, and what they’re doing. And right now we’re seeing them being very flexible.

Now understand that free and clear properties and properties with equities, typically take a bit longer to nail down, but over time they eventually come around. That’s exactly what we see that whether it be two weeks, two months, four months, whatever it might be eventually, they tend to come back to us, with our follow-up program, and say, “Yes; we’re ready to work.” So that would qualify as a long term hold strategy.

The others are ones that you buy for cash. And anything I buy for cash, I’d like to be able to sell it, and recapture the cash, so that it can be reinvested and the profit too. The challenge that you have right now is finding that cash though of course, we’ve covered that in a number of calls about how to raise cash for your business.

But you really have to decide who you are and where you are, and one of the factors is how much time do you have to devote to your business.

If you intend to flip properties, buy them for cash, and sell them for cash, then you need to really be totally focused on your business. And this needs to be your full-time business, because it’s so difficult to put all the pieces together, and make it duplicatable if you’re constantly running back and forth, between a job and everything else.

For those of you with jobs it’s better to focus your strategy on the long term hold, in today’s market and finding deals that sellers are willing to carry back financing, or allow you take over the existing financing.

Today’s market offers a lot of opportunity I want you to recognize that. We just have seen so many great deals come through in the last few weeks so you continue to market, bring those leads in, and then work those leads. And remember that your goal is to find out what the sellers issues are, what their problems are, and then how you can go about fixing those problems. And of course, the solution should be that you’re able to buy the property right away without then having to carry it anymore.

I’ll give you a good example: we had a lead come in, the seller went online, after reading the postcard that we sent out, and so of course we did not send out the post card. I always teach you that you need to have an automated system for mailing the postcards, finding the lists, mailing the post cards, having the right copy on the post cards, the span of time between the follow-up on that and so on. You need to have a system for that, so what we’ve done is create that system. And the folks that we use through our mail whiz program, they’re able to set everything up automated so that the list is captured and the postcards go out on a select date every month, and we know to anticipate those calls or that influx of leads at that time. And it’s working very well. What we’re finding is that people with free and clear properties and out of town owners, are our greatest resource right now, and our greatest return on investment.

And the example I was going to use is someone who responded to the post card went to our website, filled out the questionnaire, and one of the questions there was, what is the condition of the property? And he said, “Tenants moved, left in poor condition.”

When we actually were able to reach him, and then go out and look at the property, what we found was a big pile of bundle of shingles on the ground and no roof. Well there was a roof there, but it is decayed so much that water is getting in multiple rooms; well of course, water getting into a house is not a good thing. And so, it caved in several ceilings, and then that water is now has gone to the floors, damaged the floors, made them weak, so there’s a lot of damage to this property, very significant damage. The property is worth about $150,000 dollars fixed up and he has a $46,000 dollar existing first mortgage at six percent.

Guess what we are planning to do? Just take over the existing financing, and pay the seller absolutely not one dime. Why? Because of the condition of the property, it’s going to need so much cash to be able to restore it, but those are the kind of things that you get when you just market out there.

We’re seeing sellers being willing to do things that they weren’t willing to do in the last market. So keep your eyes and ears open and keep your marketing going and follow-up with those leads, because there are indefinitely deals out there for you in this market.

Q: Now our first question here is from Deb Miller from Reno, Nevada. Who says, “We really enjoyed the last Master Mind meeting. We were able to see what we need to do and continue to move ahead. Thanks for being our mentor.”

Well Deb, thank you for saying that. I’m looking forward to seeing you again real soon.

Can you please refine the critique the following script for realtors and mortgage brokers?

A: Hi, my name is Deb Miller. Are you working with, or have you ever worked with someone who you could not get qualified for a loan?

Listen, listen, and listen. Then she goes on to say, we can help each other. We pay referral fees and you can get paid for referring to us, a customer that you otherwise cannot do business with. Let me give you my number and I can send you a few business cards. May I have your fax number, so I can send you more information? Thanks.

Okay Deb, let’s look at what we’re trying to accomplish. First of all, we want to get in relationship with a mortgage broker. And we want them to send us leads from people that they’re not able to get qualified, so you want to get right into that. And you do that by saying are you working with or have you ever worked with someone who just could not qualify for a loan?

First I would say, I think I could help you with some quick money, are you interested. Now you got their attention, see before, you didn’t really give them a chance to be interested in what you had to say. So, I think first, I think I can help you make some quick money, would you be interested is a good opening phrase. Then say, “I’ll bet you’ve been working with people, now or in the past, who could not qualify for a loan. Is that true?” And then, listen, listen, listen. And of course they are going to say yes, well I think I can help you because we are a company who takes folks in that very situation and we essentially grow them up. We give them an opportunity to move them into our property and then we give them rent credits towards the purchase of a home, while you work with them to get their credit cleaned up. How does that sound? Great, then what I’d like to is go ahead and get your fax number and your e-mail address and send you more information about our company and go ahead and give you my telephone number and e-mail address and any time you have a lead like this, guess what, we will pay you serious referral fees. How does $1000 dollars strike you? Great, okay well now remember, these are leads that you can’t work otherwise so why not make some extra money off of them, and we can both help each other. Not only that, you’ll be able to make money when they can qualify for a loan, because ultimately, we want them to be able to buy a home and you’ll be able to work with them through the process of getting their credit cleaned up. How does that sound? Boom and you got them. And what I want you to do is just build up a list of e-mail contacts like this and then send on a drip basis every 30 days a reminder of who you are; remember? Hi this is Deborah, remember me? We talked before about you having some leads from people who are not able to get qualified for a loan. Don’t forget about our program, we can take anyone and qualify them through our process, and then put them into the right deal. We can even work with people who have little or no money down on our work for equity program. Do you have anybody right now to send to me? And now you got your e-mail put together. And I would just do this on a once every 30 days basis and that will really help build your buyer’s list, and that’s the key factor of having a customer driven company is that buyer’s list tells us exactly what to go buy. And that’s our real goal, with building our business these days in this economy.

Q: Another question is from Brian Musa who says, “How does a seller filing Chapter Seven impact me if I buy the house subject to especially if they file after I closed on the property? Best wishes to the entire office.

A: Well, here’s good news Brian, they have already sold. You’re a third party; you’re not related to them in any way. And that’s really the bankruptcy court big concern is that you would be buying the property, and then holding it for the person to go through bankruptcy and then deed it back to them later, but that’s not who you are. You actually are a bona fide purchaser for consideration therefore; they look at you as that. You’re a third party in the transaction and they usually don’t do anything in fact, 99 percent of the cases the IRS has no interest in a property that the seller has already sold. The only time they get a little edgy is if there was a lot of equity in the property and of course you can prove that if you had to prove, that is how you arrived at the numbers, and how you structured the deal. In any case though, the IRS after a period of time cannot just reach across the table and take that deed back but if it happened within days of the seller filing bankruptcy, then the IRS is going to look at that transaction. And I said the IRS I mean the bankruptcy court, they’re going to look at that transaction and they’re going to see is there equity or should we just let this go? And I’m going to tell you, there is such a deluge of people filing bankruptcy right now, they don’t have time to deeply investigate any of these cases, so that is my recommendation and let’s see what we can do to make that work for you. Okay.

Q: Now we’ve got a purchasing property question from Ryan Gillespie, who says, “Hello Lou, thanks for all the answers last coaching call, they really helped. For this week can you explain all these different deed types that are specific to California? Specifically, what is an all inclusive trust deed versus deed of trust versus grant deed versus quit claim deed versus mortgage deed, and how do they interact with a land trust if at all? Not having done a sale before, I’m getting confused on all these types of deeds

A: Well let’s start with Ryan the least deed there is, and that is a quit claim deed. So what a quick claim means is if I had it, you go it, if I find that; so let me give you an example, let’s say that I gave you a quit claim deed from me to you for my interest in, and you’re in LA, California. Let’s say, the Hollywood Bowl, and let’s say that I deeded you the Hollywood Bowl, well it would be absolutely meaningless, because it’s only if I had an interest, did you get it? So, that’s pretty much what a quit claim deed is it just quits any claim I have in that particular property. But it doesn’t warranty that deed, and that’s of course what you’re really looking for in a real estate transaction is. You’re looking for some kind of warranty from the seller, that says hey, I not only say that I have the deed to this property but you’ve got re-course against me if I give you this type of deed, and then for some reason you have a problem, then you can come back to me. So that in the case of the California deed, is a grant deed, that means that person grant you their interest, they don’t quit claim it, they grant it to you in the form of a grant deed. Now those two types of deeds that we just covered transfer ownership interest, but these other deeds that you mentioned are actually mortgage interest that are granted.

So let’s take an all inclusive trust deed. An all inclusive trust deed is also known as AITD. Is when the owner of a property grants a deed to the lender in exchange for the money? However, the lender does not get occupancy of the possessions of the property unless you stop making the payments. So essentially the way it works is, once you have ownership of the property for a hot minute they actually give you the deed first, then for a hot minute, you own it free and clear.

Now the lender is sitting there at the table, at the closing table with a check, which means that you don’t really have the deed until they pay the money to the seller. So the lender says, “I’m going to give up this check for all of this money in return for a deed on your property. And if you don’t make the payments on this loan, I’m just going to evict you from the property and I’m going to go through a foreclosure process, and I’m actually going to get this deed that you’ve already issued to me. I know that you’re not going to give me the signature later after I have to foreclose on you, so you’re actually giving it to me now. And that’s what an all inclusive trust deed is, also known as deed of trust, which is what you have in here and another name for mortgage deed. So all three of those are essentially the same thing, and they are granting the lender an interest in that property which is separate from an ownership interest, which is what you control over the grant deeds or the quit claim deed, if the owner transfers that interest to you. Okay, hope that cleared it up for everybody, because that is an important thing to learn about deeds there.

Q: Now Neal Mohan asked, “I just accepted a refinance on a single family residence, four bedrooms, two baths with the new loan mortgage rates, and was shocked to learn that the companies wanted $23,000 dollars down to finance the same we have out. Can you share any wisdom on refinancing at this time in the market?”

A: Well Neal, yes I can. The lenders right now are wanting to see that you have true skin in the game either equity or cash in the deal. And the lenders now want to see at least an 80 percent loan to value at the highest. Anything above that either you’re going to have to get a second mortgage on, or mortgage insurance, which is hard to get these days. So really, they’re just not going to lend the money. Now, let me quickly say there are other programs out there. Remember that there are thousands of lenders, so don’t rely on just this one lender. Let’s go to some other lenders and see what they have to say. Once you hear it from one place, you tend to think that’s how it is, but it’s not, there are multiple situations out there, now when you go to other companies, they’re immediately going to want to pull your credit. Tell them absolutely not, let me describe to you my situation, I want to know for a fact that you have programs, that will work today in today’s market. Then if they say, oh yes, we have one just like it. Then say, when was the last loan closed under that program, if it was last week-fine, if it was last year, well, like early last year, you’ve got a real problem. You need someone who’s closed on a program, within the last say three months, and then you’ve really got someone who knows what they’re talking about in today’s market.

Q: Now we’ve got Felipe Victor who says, “Hello Lou, I have a probate deal that turned into a short sale deal. The probate attorney negotiated the short sale deal without my knowledge, and did not forward my paperwork to the lender so they would know I plan to sell it immediately, and so I have never filed a notice of option. How do I handle the seasoning issue so I can do a double closing?”

A: Very good question Felipe, it’s really going to depend on who the ultimate lender is. We’ve got to talk with their underwriter, and find out what is going to work and what’s not going to work. You can explain your situation to them and then say look you need to see on the HUD One to make this work. We got several options. One is the probate estate can sell the property to have me on the new buyer and have me on the closing statement as a payoff. As if I have loaned money on this property. Another way is to have me on the HUD One closing statement as an assignment fee. Whatever the lender, now this is the key, Felipe; the lender agrees to, is what you’re going to do. Because if you just understand that we can structure all kinds of things in our conversation right now, but if that lender gets wind of something that they didn’t approve of, the deal is dead. And what I’m trying to do is help you out here, we can sneak around and do some things, but the problem is that that can kill your entire transaction.

So, the best policy is to go to that lender and describe the issue. Now they want to see loans made too, remember nobody gets paid until something happens. So, you don’t get paid, the seller doesn’t get paid, the lender doesn’t get paid, and the buyer doesn’t get their property. The mortgage broker doesn’t get paid and so on, and so on, and so on. So, they want to see the loan go through, they just have to make their paperwork fit the program. So, that’s exactly what we’re going to help them do by understanding what they need, and then you’re going to you know send them back an e-mail or a memo that’s says here is my understanding if I misunderstood this, then please notify me now. Otherwise this is how we’re going to proceed, and then you set up the closing according to the work out that you’ve done with the mortgage lender. Now understand that you may be working at the mortgage broker level, but they have underwriters. And what they call field specialists that have some leeway into how that loan can be written, how that HUD One can be done. Because ultimately they’re looking at that package with an eye towards reselling that package with an ultimate lender, and so that package has to have certain things, but it can have some other things that don’t quite fit the criteria. That they’ll still approve so the field reps understand that and they’re the ones that are able to get you what you need. That’s my advice Felipe, I hope you’re able to get that deal done, let me know.

Q: Okay Terri Moore Miller says, “Hello Lou, hope your holidays were wonderful.”

Yes they were Terri Moore, thank you so much for asking.

Lately I have been getting some solicitations from bulk REO buyers who want to sell me their inventory. My question is do you know of any bulk REO bulk buyer who sells their inventory reasonably to other investors like me? What I am looking for is someone who sells the inventory at around 70 percent of market value after all the repairs to the property has been done. It would be nice if they can find a buyer and the management company as well. These properties would be ­­­wide and cash flowing. Hope it’s not too much to ask. Terry.

A: Well yes it is, in my opinion what happens is unless you really have an operation you have the risk of not being able to control of what is going on with the property and Indianapolis, Indiana. Which reminds me of a group of properties that I saw last week, and we took a look at these properties and really found that not only were they over priced, although it sounded like a good deal. Let me ask you, does a three bedroom two bathroom house that is out of buy for $20,000 dollars, does that sound like a good deal? Of course it does, what we found though surrounded the $1000 dollars, and not only that had been on the market for over a year, and not only that there is lots of them in that neighborhood. So, on the surface, the picture may look good, the price may look good, the location may look good, the value may look good. But it may not be good, and these are some of the things that you learn from your local market, where you’re able to determine what the schools are, the quality of schools, quality of neighborhoods. The risk and that really opens the door to be able to do something more, and more valuable, so take a look at really the risks that you’re taking on when you’re buying these bulk REO properties and know you have the ability no matter what to make a profit on that thing. Yes, I agree that there are property managers out there in these towns, but are they going to focus on your property? Probably not, if it’s a low income property and a low income neighborhood that’s even risky for them to drive in, you’re going to have a difficult time getting a true property manager that’s really going to show and sell your properties. I look at it more like the MLS. A realtor is really not attached to which property they sell to you. They will sell you any property this is true with property managers. When they get a lead in, they don’t really care whose property they fill, they care that they get a property filled so they can make their commission. So understand that’s the risk that you run. Unless you buy pretty houses in pretty neighborhoods as you’ve heard me say before that pretty people with pretty check books want to own. That’s exactly why you want to be careful about what you buy and where you buy it.

Make sure it’s a value, make sure you got a good property management company and yes I’ve seen these things Terri. And not only that they send you a wonderful, it just sounds great. Hey we’re going to fill the property for you. You’re going to buy it discounted; you’re going to know all these wonderful things happen in your life. And when you got to understand something Terri Moore, the deal is if he’s willing to sell it at $20,000 dollars that means they bought it at maybe watch this one $12,000, $8,000 and even $5,000 and there marketing it up. Because folks like yourself that don’t have time to build your own real estate business are looking for a deal and you’re looking for something that cash flows and makes sense. So, they bring you exactly what you’re looking for, the only problem is over the long haul, it’s not going to work. I hope everyone benefited from that discussion.

Q: All right we’ve got a question from Jake Knox who says, “Hello Lou, I’m considering purchasing a home with conventional FHA financing and in the future, I may sell to a buyer utilizing a wrap mortgage. Let’s say the terms of the FHA loan is a $130,000 dollars at 5.5 percent, 30 year term, $738 dollar a month payment and to my buyer I’m offering five percent down, $190,000 loan amount at 6.5 percent, 30 year term, $1200.00 dollars per month. One, is this scenario possible?

A: Well, yes it is. Now the mark up is interesting you know you’ve got to make sure that it is a $190,000 dollar house, and a $190,000 neighborhood and so on. But marking up the interest rate to 6.5 percent is a dream come true for most people. What I’d be looking at is really maybe a 10 percent, a 9.9 or 10.9 percent interest rate why? Because the folks you’re going to be working with little down payment then you want to be able to make it up on the differential on interest rate, not only that they’ve got to have sufficient income to be able to qualify for your program. Now you mentioned a wrap around mortgage, what I’m going to recommend is what we call an agreement for deeds, where you actually control or continue to control the deed to the property and you don’t deliver the deed to the buyer until you’re actually paid out. And so, what happens is that they get an agreement for deed, also known as contract for deed, land contract bond for deed it’s all the same thing, and the good news here is you may not even have to foreclose, if you have a problem with them paying sometime in the future. So, that’s one of the great controls that agreement for deed does for you that a wrap around mortgage does not do.

Why? Because on a wrap around mortgage you’ve delivered the deed to the buyer, and now the only way you can really get your property back is to go through foreclosure. And then even possibly eviction if they don’t give you back possession of the property so now you’ve got a real problem. What we try to do is be Street Smart about it and say what kind of problems can we prevent with the way that we set up the transaction in the first place? So that’s my recommendation is that you be really careful about how you set up the financing but yes your scenario worked, and having a spread between the interest rates you’re paying and the interest rates you’re receiving is exactly our plan. And some of you heard that we are not in the house business, we are in the financing business, and therefore your scenario of making the mark up on the price as well as the mark up on the interest rate is exactly what the game is.

Q: Now you go on to say number two. If possible, what are my steps to accomplish this transaction?

A: Well I’m not sure what you’re really asking here, obviously you’ve got to first purchase the property and get the loan in place before you can do anything beyond that. But of course, building your buyer’s list so that you have a customer for the property, would be one answer for that. And knowing and finding someone five percent down is another thing that you need to do prior to having a cost, prior to be market it and potentially having a negative cash flow, while you’re finding a buyer you’d like to avoid that if you possibly can.

Q: Three, to protect myself from buyer defaulting would you recommend getting a deed in lieu of foreclosure signed ahead of time, but not recorded unless buyer becomes delinquent.

A: I think I solved that one for you in your answer number one when I talked about agreement for deed. That would be the best case scenario of everything.

Q: Four, how does the tax situation work, do I still get the interest and appreciation write off for my original loan and purchase price? What tax benefits does my buyer get?

A: Well I look at an Agreement for Deed, as a sale. It’s actually an installment sale, so what happens is, that you do not have to pay on your gain until you actually receive it. If you spread that loan out for say 30 or even 40 years, which is my favorite. Then that means that you’re receiving your gain in small bite size pieces in over 40 years. Because the IRS says the way that you are receiving the money is not all profit that a portion of that is returned of your original principle and a portion of that of that is profit. So, when you file your taxes, there is a form that actually shows the formula, and the proportion that you’re going to be paying in capital gains is exactly what you’re going to be paying in taxed on in the sale of that property. In the meantime, you’re also getting interest income which is reportable as ordinary income and for the buyer; they are getting a write-off of the interest that they pay. They’re getting to write off their property taxes, and so on so that can be a real great way to be able to get a property moved, because you’re giving an incentive to the buyer, and an opportunity to the buyer.

Q: You go on to say lastly, what are your recommended sources for market indicators such as building permits, new jobs, and property appreciation.

A: Well Jake, there’s buyers in all markets as I was mentioning at the beginning of this recording, so understand all you have to do is find your buyer’s. I’m not overly market indicators or job growth or anything else. I am interested in finding a buyer, in the last call, I covered hand written signs and I talked about one of the ways that we’re getting leads today and we’re getting an amazing number of leads all because we’ve got these hand written signs that everybody reads. And we’re putting them at intersections where they are stopped at stop lights and so on. And they’re calling, they’re calling like crazy. And all I care about is at the bottom of say 100 calls is about ten that are qualified. That can really qualify for a loan. That has longevity on their jobs that have some down payment money to work with. That has all the good things. So all we’re doing is basically kissing a lot of frogs to find a prince or princess. Then ultimately we’re able to get somebody that can buy that property, why should I care about market indicators and all those other things. When that’s all I really need, and don’t believe the press there are buyers out there today.

Q: Now we’ve got a private lender question, from Carol Holcom, who says, “Hello Lou, thanks for all the great info on the last call about private lenders. Here is part two. I have been showing the letter presentation kit, here are a couple of questions that I’ve gotten they are about how many houses has this group bought in the past two months? How many deals have I done with and without private money, these are tough, because I only have a couple of properties and I am new with the search for private money. I can use the Street Smart credibility, but I hope you have some magic words for me.”

A: Well you say, “Mr. and Mrs. Jones…that is a great question. I am part of a national certification program, and the folks that have been training me, have been in the business for over 30 years, and done over 1,000 transactions, and buy properties each month, month end and month out.” Then put a period after it. This is one of the big mistakes that many of you make; when you’re negotiating with other folks you don’t know where to put a period, just put a period. Don’t keep talking. If they want to know more, they’ll ask more questions, but what you tend to do is just drawn on and on and on thinking you haven’t answered the question yet, maybe you already answered the question. If not they’ll keep asking, or they’ll just say, oh, okay. Now another thing quite frankly you can do is change the subject. So let me see if I’ve got this right. You’re asking how many deals we’ve done in the last couple of months. Well let me show you a couple of deals that we’ve done. And then you flip back to the credibility kit and actually show them those two deals that are in there, and this is how it works, blah, blah, blah. So, in your mind you know that you didn’t quite answer that question. But in their mind, maybe they are thinking you answered the question. And I know that sounds a little slight of hand, but it probably is, but the truth of the matter is, often people have little trains of thought that are meaningless in other words if they really care about the answer, they’ll come back to that question. If they didn’t really didn’t care any way and they just wanted to ask a question. They’ll forget the question, so that is a test also, to see if that was really an important issue for them or merely just something that they were asking because they thought of it at that moment of time, because it’s part of their train of thoughts.

So that’s part of their process of really qualifying your lender, and another thing you want to do is whenever someone asks you a question, you can ask them questions as well, so not only give them the answer that I gave you but also say well what difference would that make to you? In other words, if I provide to you say the next deal that I am working on and I give you all the details and show you the profit, and show you the proof of the profit and everything’s there, would that work for you? So, you just took out the element of numbers of property being an issue, and security being the real issue for the lender, and you can even make jokes about it. And say, “quite frankly at the prices we pay for properties, the worst thing that can ever happen for you is that I actually make the payment.” In other words the best thing that could happen is I don’t make the payments and you actually receive the property, because there is so much equity in it when we buy it how does that sound. That way, you’ve got them understanding that you’re really in the game for yourself to make a profit, not for you to lose deals. Hopefully that cleared it up for you Carol.

Q: Now we got we got Tracy Baglio who says, “I can’t seem to get lift off, even with 20 plus years as a real estate agent.”

A: Wow, that’s a great comment Tracy. Lift off occurs by stoking the furnace. And the best analogy I can come up with is if you’ve seen a locomotive, one of those steam engines, and you’ve seen how they operate. There is a person inside that locomotive, and basically there is a furnace inside that locomotive. And what they’re doing, is they’ve got a shovel, and their just shoveling coal into that furnace. And at the beginning, what they’re really trying to do is soak that furnace and get it full of coal so that there is a huge enormous fire inside that engine, and then it builds up with what it calls a head of steam and once that head of steam is there. There’s pressure and once there is pressure, it pushes against the pistons. Which then operates the wheel, which then starts momentum and when momentum occurs, then momentum tends to feed the operation. So in the beginning Tracy, you’re going to have to do a lot of stoking the furnace. And in our world, that means marketing, marketing, marketing, and marketing. And if you don’t have the cash to be able to do the marketing, then you need cash.

So, the first thing you need to do is work with private lenders, and raise cash. Now not only private lenders, maybe you have access to an equity line of credit that you can put on your own property. Maybe you have cash advances that you can get on your credit cards. Maybe you have cash in the bank; maybe you can borrow it from momma. Whatever the case may be, you’ve got to have the ability to stoke that furnace. And so, cash generates marketing, which generates leads. Without cash, you’re going to have to do a lot of that marketing yourself, which is outbound calls, knocking on doors, putting out signs, doing all kinds of things that can generate leads back to you which then can stoke the furnace. The more signs that are out, the more realtors that are working for you, the more mortgage brokers that are working for you to bring you leads, the more you run into and create these multiple incoming lead generators then you’re going to be able to stoke that furnace. More leads, means more deeds, so I encourage you to really follow our mail with program, and also some of the other strategies we’ve got built into your Buying Volume One, so that you get your marketing done. If you can get it out there, I promise you you’re going to get leads back in. And if you don’t get leads, we’re going to have to change the marketing.

For example, we’ve tested a number of different post cards, we test texts on those post cards, the copy that’s on the post cards, and it’s amazing how different words get different results. It’s also amazing that different lists get different types of sellers. For example right now I can have all the short sales I want, I don’t want them, because short sales are an awful lot of work, and you can end up after all that work without the deal. I would far prefer to work with an absentee owner or someone who owns the property free and clear, that’s somebody who excites me and makes me want to do business with them. So, I want to stoke the furnace to get those kind of leads in, because I know that we can make the most profit long term with those kind of leads. But if my goal is to just get discounted property, that’s not the place to shop for discounted property. You’re going to have to go for the jugular, people that are in trouble, foreclosures, bankruptcies, probate, places where you can really get the huge discounts. The only problem with many of those deals is there all cash. So, unless you’ve identified your cash sources, and resources, you’re going to create a problem for yourself. So, what I’m trying to say is here how you should spend your energy, here’s how you should spend your money and stoke that furnace. Hopefully that is a good training lesson for all of you on the call, because this, is a key story that I hear over and over, that people just don’t know what to do next. So they don’t do anything, or they try a few things but they don’t try them long enough. See you have to give things time to work, don’t give up to soon, because a lot of the marketing that you’re doing takes time to kick in. That’s part of the stoking the furnace process.

Q: Okay we’ve got Milan Chulupa with a short sale question, who says, “Hello Lou, all the best in 2009. My question is about the short sale. What is the maximum you are willing to pay for an approved short sale? How many cents on the dollar?

A: Well, that’s a hard answer right now and let me tell you why. It really depends on a number of things. For example, the location of the property, the ability for me to sell it, in other words, let me say it this way. If I already had a buyer, already qualified to buy that property, then actually the truth is, I’m willing to pay more. But if I really don’t have a buyer, and I don’t know how long I’m going to have to carry the property. And not only that, on a short sale I’m going to have to raise cash and then pay holding costs , and all the other elements that go with that type of deal. Then I’m going to have to get a lower price. So, it really depends on your exit strategy, and the time frame of your exit strategy. To determine what price you’re willing to pay. But I know what you’re really asking you’re asking me for a set point or a goal. And I’m going to say 50 cents on the dollar right now. I’m looking for 50 cents on the dollar and lower on a short sale deals. Why? Because I can get for one thing, and again, because of the cost of funds, carrying, holding, all those issues. I know I can do better if I’m just able to get it if I just get it at the right price and I know I got plenty of equity to pay for marketing and carrying costs, and everything else, because of the price that I paid. Hopefully that cleared that up for you Milan.

Q: We have Ed Gore who asks, “Where are good places to advertise a house to lease or a lease to own?”

A: Well Ed I would start, you’ve heard of Craigslist of course, that’s a great to list properties, and you get a lot of leads off Craigslist. But there is also a source called Postlet’s, And what they do is intake your information and automatically post it to multiple sites on the Internet. So, I would definitely use that and of course always use your Street Smart selling website. Where we’ve got a place for you to post 12 photos of the property, people can literally do a tour of the property. You can also post a link to a virtual tour that you post to You Tube and then on top of that, you’ve got a place to send people and all your marketing, you should have your web address on there so that they can go check out the property without going to check out the property. And you’re likely to get a buyer from another state somebody who’s moving to that area, that is looking for you and finding you on the internet rather than driving the neighborhoods. So, there is multiple different lead sources for selling properties too and I want you to be as open minded as possible to all the different ways you could possibly sell that property.

And so again the internet is a great place to market, also in the neighborhood is a great place to market. We have a neighborhood campaign where we deliver fliers to the neighborhood because often there is someone living right in that neighborhood who wants to find a house for a friend, someone at work, or a relative and so on. And so, just making that connection with the neighborhood that there is a house available, and you’re looking for someone and will pay referral fees can lead to a buyer as well. Then of course advertising in a newspaper, is always a fallback position, a lot of their newspapers have now got all their ads online which is another benefit to you. The idea here is that you want to have multiple marketing going on in your property. Sign in the yard is the old days that are only one of the touches you should be making to the market. You will sell a property with a sign in the yard. The only question becomes when? How long will it take? What we want to do is get you in and out of a property within 30 days. Our goal is to flip the turn to sell, to lease option, whatever the case maybe, that property within 30 days. So, you must have multiple touches, multiple things happening in the market place for that to happen.

Q: Now we got a business management question from Dorothy Belcher. Hello Lou I have done what you suggested about quitting the company I used to be involved with and quit claiming all my interests to the property and the company. I also took the funds, and put them in a different bank and a trust. I just got a call from the mortgagee from the lender, because she can’t get a hold of my old partner. She asked me about the money that we had and when I told her it was gone she said that would be fraud and she would have to sue my ex-partner for it. My question is when she finds out that the ex-partner did get it. Can she legally come after me? How would I justify keeping it?

A: Well as you had explained previously Dorothy, you have already sunk all of that money into the property. And the way you can justify it is merely that money belonged to the property. And you reimbursed yourself for the money that was already in the property when you reinstated that loan, when it was brought on a subject too. So you have replenished you have repaid yourself for that investment and not only that you handed over the property, handed over your quit claim deed and everything else related to that property. So therefore, all you’re doing is making yourself whole for money you have already sunk in the profit, now that you have given your deed over to their people. And they’re not any less off then they were before because that is the same cash that you had in it before and that should solve the problem for you. Dorothy good luck on that.

Q: Okay, we got a subject-to question. Is subject-to financing illegal? Yes or No? If yes, how can we put subject to in the contract and the contract be valid? If no, why is everyone so afraid of them? What happens if the seller doesn’t have all the paperwork you need?

A: Okay well let’s start with is it illegal? The answer is no it’s not. Basically in the law, the Federal Depositories Institutions Act of 1982, there is exceptions to the lender being allowed legally, to call the loan due. So we understand that the loan has a due upon sales clause in the mortgage, and that means when the property sales that loan is supposed to be paid off. But in the language there in that paragraph it says the lender may call the loan due. It doesn’t say that the lender will or shall call the loan due; it says they may call the loan due. Well I may go out to dinner tonight, then again, and I may not. May just means I’m alert to you that they may do that. In today’s market they would be very unwise wouldn’t they to do something like that. But we always like to plan for the future and if there is a problem that might happen in the future we should always be alert to it and try to design a plan to avoid that problem. So, the answer is no it’s not illegal, because there are exceptions under the law for people who have a due on their mortgage.

One of the exceptions is when you transfer your property to trust for estate planning purposes. So what do we do? We help and provide the paper work for the seller to transfer property to their trust for estate planning purposes and then while it’s in trust, while they have control over the trust, then they appoint us as the manager of the property, to put tenants in there and manage the whole process. But then also later they quit claim, their interest in that trust to another trust which happens to be controlled and owned by us. And that way we have essentially met the requirements of the law, we have prevented legally calling the loan due, and we have put ourselves in a position to win on the long term by making the payments.

Now every time I have a conversation about subject-to I always say, listen don’t do subject-to unless it’s a good deal, don’t do subject-to unless really makes sense for you too. Don’t do subject-to unless you can make the payments no matter what. Don’t do subject-to unless there is equity in the property. Don’t do subject-to unless you’ve got a backup plan and plenty of money in the bank to be able to make the payments in case you’re not able to sell the property right away. And one of back up plans too, is to refinance the property and put a brand new loan on there just in case the lender were to call the loan due. So these are the things I want you to think about before and when you do a subject-to transaction.

Q: All right Vickie Blako has a question, another short sell question. Hello Lou, I’ve been told by several real estate agents that there are several states that are not doing short sales anymore. What can you tell me what I am hearing? Mark and Vicky Blako.

A: Well I don’t know why they are doing short sales. I think what they’re really referring to is the foreclosure issues, some states have basically, stupidly, saying us guys, investors, who go and solve peoples problems and help them not have their property foreclose, and help them not go into bankruptcy are now stopped from going to see those people. When someone is in default or someone is in foreclosure that we cannot approach them. But interestingly realtors can, people who are in the business, licensed professionals under the state laws, can approach them, and guess who else can approach them? Non-profit organizations are not included in this they are exempt. So non-profits who have a responsible vent, to come in and help these people can.

Now one of the interesting things we’re going to be exposing is a strategy under a 501c(3) where you can go out as a legitimate foreclosure rescue expert, who under the 501c(3) non-profit helps people to save their homes, if you can. And that’s exactly the way I want you to approach them that you can solve their problems, if you can. Many people though are done with it, they cannot make the payments, no matter how much counseling they got because they don’t have a job, and it’s that simple, so staying in a home it’s not an option. What happens then you refer that lead to your for profit business, and that for profit business can then make the offer to solve all their problems and step in and take over that property. So this is the combination of non- profit and for-profit and let me tell you something folks this is our future. Ladies and gentleman, welcome to our future. Because so many of these new government programs have so much money available, we were just looking at an e-mail the day before yesterday. I received right here in the county I live in. $153 million dollars, just became available for housing bail outs and it’s so loosely written, it’s for neighborhood stabilization, which means they can spend the money anyway they want too. They can buy up foreclosed homes, and re-sell them they can put people into those homes; they can rescue people who are in foreclosure there is so much they can do. So that’s the other segment of what I want to teach you is grant writing and how you can go in and literally get money grants to go in and save people. So now imagine that you have your non-profit arm that is well funded with city money and you’re for-profit arm is well funded by deals that it buys, so you can help people and make money there, you can help people in your for-profit company and make money there. How much better could it get than that deal right there?

Wonderful questions this week folks. We’ve covered a whole ton of stuff. We have events coming up we’ve got maximum asset shield that is teaching you about trusts, land trusts, personal property, living trusts. We’ve got MDM coming up that’s going to teach you how to design and craft transactions and deals, the words to say to sellers, the words to say to get them to be motivated and want you to sell them the property, how to gather the information if necessary in order to make a deal work. We’ve got other things coming up in the summer. We’ve got massive, passive income where we teach you the holding and selling side of the business. All of the property management tricks that I’ve learned over 30 years of buying selling and holding property.

So get yourself into these programs, and understand you don’t have to pay for it all at once. Call our office and let’s put you on payment plan so that you have it all paid up before the event. Call 1-800-578-8580, and folks if you haven’t seen our websites, if you don’t have them, do call the office for a tour 1-800-578-8580. They are absolutely critical to your business, your business plan, and your business future. You can see the value of this coaching it is very important. The folks that have been with us that have grown their business dramatically in a very short period of time, have done so because of coaching. What I have provided to you right here is merely an example of what we provide. We have a direct Q&A, you don’t even have to wait two weeks to get an answer to your question, and you can fax or e-mail it in at any time and get your answers back. We want to make sure that you get supported if you are on our direct program, directly with the answer. You still get included in our group Q&A twice a month as well so that’s another two hours of coaching that you receive from us to support you in understanding, learning, and doing our system. But we don’t stop there we also have our one on one program where you are actually mentored by us here and we look at your business. How many leads you’ve got over the last month, what you did with those leads, how much those leads costs, where did you place those ads, what kind of responses did you get, what did you do with those leads, how did you craft and create the deals, what are your problems, how do you raise money? All those issues we do that on your once a month one on one call for half an hour. Now we don’t stop there we have our Platinum Program where we are able to get together three times a year and together as a master mind analyze and support one another in our businesses. Napoleon Hill said, “It is the most important thing in business to have a business master mind.” And this is absolutely critical, he is the one who wrote Think and Grow Rich and this is exactly what we’re helping you to do. Think and Grow Rich by being totally connected and supported in your business, allowing you to focus on it regularly and grow in it.

So call our office at 1-800-578-8580, and get enrolled into our coaching, let us help you, let us support you, let us make a difference in your life. Folks it’s been a real pleasure for me to teach you, train you, and coach you on this call and I look forward to seeing you very soon. Good luck, good health, good profits, and May God Bless, good day.