Lou:
Hello everyone and welcome back to another session of our Street Smart Group Q&A. You sent me a ton of questions. Before we get started I Just wanted to say that this has been a fantastic year. I hope it’s been a great year for you. Taking a look at what is happening in our economy; a lot of people are running scared. It’s just truly amazing how many questions I get about today’s economy. So let’s talk about it for just a second and say, I hope you are looking for houses right now and I hope you are finding them. Because sellers are willing to do things that they haven’t been able, or willing to do for many, many years. Right now, there is a lot of them that are motivated having sat on their properties. Having waited for the market to come back, and now discovering that the market is not there, and it is not coming back for a while. Sellers are backing up. To give you a story, we just bought condo and many of you have heard me at jump-start, explain that I am not crazy about condoms and we are not interested in buying condos. The only way I will by a condo is if it’s very cheap.
Well in this case you tell me if this is a good deal. The seller had brought the property earlier this year. He’s a would be investor. He had bought the property using his own money so he owned it free and clear. He went into the condo having paid $63,000 for it. Felt like it was a really good deal because other condos in the complex selling for about $80,000. Not knowing how to really value or evaluate property properly he was making a bone headed decision somewhat. Because he really didn’t know what he was doing. This is the key, as I teach you in the Street Smart system there is a system to everything. There is a system to determine which properties to buy and the prices to pay. He didn’t do that. He purchased went in and did a total renovation. I talking new laminate floors, new kitchen, new cabinets, countertop, sink, new appliances, new windows, new paint, new flooring and so on. He’d really done a lot of work to the project, and it still wasn’t done.
He found himself with no money and somewhat in distress on his own house. Somehow he had used up all the cash he had. Maybe working on this property, I don’t know. But he was willing to go ahead and sell us the property, but we told him we had to have owner financing. We would not go to the bank. We would not qualify for loan. It had to be this way. He wasn’t too interested in that a few months ago. But now he came back and said yes he is interested we did buy the property last week for $40,000. Obviously that’s significantly below what he paid for it. But, better than that, he agreed to a $350 a month payment until paid, and he agree that the payment would not begin until March of next year, and he agreed to a $5000 down payment minus all the fees and cost that he owned. He owned homeowners association fees, hew owed back property taxes and other things. He netted about $3,200 out of all the expenses.
You can see folks that there’s real opportunity out there even in free and clear properties. I love free and clear. I really encourage you all to be marketing to free and clear. We teach you how to market to free and clear homes in our done for you program. Where we teach you how to do it yourself, or alternatively, you can have it done for you with our mail wiz. Either way start getting the right list in the right neighborhoods from the right types of sellers that are going to give you the right kind of deals. That’s my suggestion for our next two weeks, as you go forward moving into the New Year thinking about your plans for the New Year. Setting goals and getting your self lined up.
Another thing I want you to be thinking about over the next two weeks is how set up your estate. It really needs to be done and done right. The right and proper way is to move the property, each and every property that you own, out of your name into trust. I’m talking about the type of trust that I teach, which is called the land trust. That allows you to own property in various names of trust and control that property and have privacy of ownership yet have full control over the trustee of the trust that actually owns the property. It helps you to avoid probate, and so many more things.
We are going to be having a boot camp on this coming up in January. January 15th – 18th in Atlanta. It’s called Maximum Asset Shield. It is an absolute must for any of you that are interested in protecting yourself. I say that there are three aspects of this business that are so critical to you. You need to learn how to buy right, buy cheap, with the right financing, with the right methodologies and tactics to be able to set up the offer. You need to be able to sell right. Sell to customers that are ready, willing and, able to buy, giving you down payment money and even taking the property as is.
Third, you really need to know how to protect yourself. Your assets, your family, and your estate. I teach each aspect of this, usually once to twice per year. Definitely this one coming up may be the only time I teach this in 2009. It depends on demand. I definitely want you to demand to come to this. On January 15th, and I’m going to teach you all about land trust, personal property trust, living trust, LLC’s, corporation, limited partnerships, and everything you need to know about each one of those. They are absolutely critical to your future. Absolutely critical that you do this as you go. You don’t want to look back after having bought 20 properties, and now have to go through the process of setting up all these trust could when you could have done it as you go. Let’s go ahead and learn to do it right, and join me on the 15th and we will get you kick started into 2009 the right way.
We’ve got a short sale comment here from ____6.59 says, hi Lou from Dinuba California. I had a question about if we could short sale a house without the evicted owner’s signature and you told me what everyone else was telling me to wait for this sale at the courthouse steps, and hope for the best. I had foreclosed on the home and I was out about $27,000, had not made a payment since December 2007, when we evicted owner for nonpayment. Had a renter since April of 2008 and we postpone the foreclosure sale three times, September October and November. By speaking with the right people, managers, and supervisors, I was also able to get an escrow lady to help us. We had offered $45,000, and the bank countered with $60.000. Which we accept on condition that they paid all other fees, which they accepted. Now I am a firm believer in short sales. Just don’t get caught in this situation I was and make sure when negotiating, you talk to the right person or persons. Thank you, ____8.17 Cantu.
____8.18 that is such great advice to all of our Street Smart listeners, because it is so critical that when someone says send us a check, well first you make sure that you have total control over that situation and that they can’t back up on you and somehow change the deal on you later. I want you to make sure that you absolutely always have control over the situation and never write a check until you’ve verified all things. Many of you remember from volume 1, buying where I teach you to verify all assumptions. It is absolutely critical, because if you don’t do that, you can be in a situation ____9.00 was in. Not only that, he was very lucky that the lenders were willing to work with him, because had they foreclosed his $27,000 advance payment would have been wiped out and that would have been very bad news. Now he’s got control over good property in a good location with tenants in place and all the good stuff that you’re supposed to get from real estate.
Now we got a property tax question from Rodney and Tania Hatton, who say Lu, how do we go about reducing our property tax values? Rodney and Tania are from Jacksonville Florida and also are part of our mastermind group. They graduated from the apprentice program up to the pentacle program, and so it’s a exciting thing to include platinum questions in our group Q&A as well.
Rodney and Tania here is exactly what I want you to do. You have an opportunity ever year to re-evaluate what the property tax office thinks the value of your properties is. What we do is every January pull up a comp wiz report. That tells us at the end of the report what all the comparables are on the same street. I don’t mean comparables like recent sold comps. I mean a different kind of comparable. I mean, what the tax office has valued, every property on that street and neighboring streets at.
What that allows me to do is see if all properties are valued equally. Now what that means is that if I have a 1,500 ft.² home on a 20,000 ft.² lot it’s three-bedrooms and two baths, and a two car garage, and down the street there’s another 1,500 ft.² home, and it’s got three-bedrooms two baths, and two car garage, and it’s got a 20,000 ft.² lot. The difference is my house is valued at say $150,000, and they valued the one down the street at say $130,000. Everything is pretty much equivalent. Then right a way I know I’ve got some leverage about the evaluation of that property. What the tax office says is the property, is the value, it is on January 1st every year. If they want to change the value, they send you a notice that last year it was valued at $130,000, this year it’s valuated at $150,000, and it’s up to you to dispute that if you want to.
What we do in comparison, we asked to offer a value if they have lower values in that same neighborhood and they are clearly shown on my comp wiz report, then I just simply send in a revaluation request. They often ignored that request. They send back and say, no, we said its $150,000, and therefore its $150,000. Each taxing jurisdiction has its own guidelines as to how you can protest. They are pretty stringent. What happens is that you have to protest it out loud and say, I do not agree. Typically that has to be in writing. Typically it has to be within a certain timeframe after they send you back a response to your request for a revaluation. Maybe it’s 30 days, maybe its 45 days, maybe its 60 days, but within a period of time you have to get back to them. You send it back and say I disagree, I still say it’s $130,000 even though you say it’s $150,000, and my reasoning is because the sameness valuation.
All properties in the tax office were supposed to be valued equally under the same conditions as the neighborhood. If it’s not true, and you have evidence of that, then they are going to set up a property tax meeting. This is typically before a citizens review board. Where you go in and plead your case to real-life citizens of the county and you say, look here is my numbers, and here’s what I came up with. The county is there and they say well here is what we came up with. Then you show, why does the county then have this other property valued at $130,000 while they are asking me to pay based on a valuable $150,000. Then the citizen review boards looks back at the county and says, why are you doing that? And the county says, well, um, but, um, well… you know well that’s what we say. Then the citizens review board says, we disagree. It’s $130,000, and in Georgia once they have ruled and voted, hay, that is the rule, that is the number that the county is now stuck with for three years.
Because you came in and took the time and energy to protest and show that the county was wrong. Because you won, the county is actually penalized and cannot change the valuation for three years. It can work to your favorite to protest property taxes. You will have to learn what are the rules in your area. Many of you now have county tax offices that are online. You can simply go to your local municipal tax site. The tax collectors site, and it usually has information like this there. If not, call them up and ask them to mail it to you or fax it to you, or tell you where you can look it up online to get the answers to what’s common in your area. Great question.
Okay. Now we have a selling property question from ____15.22 who says, do I have to tell my buyer when selling the house after the short sale with double closing what I am doing and how is the closing process. I am just a little bit scared because the buyer has a realtor. Well ____15.41, I wouldn’t be afraid of the realtor what I would be afraid of is the lender. Because your new buyer’s lender is really the one that’s going to control whether or not you’re able to do a double closing. For everyone listening, if you don’t know what a double closing, or also known as simultaneous closing is, then listen carefully. What happens with a double closing is that your new buyer gets a loan on the property that you are selling. Your new buyer and presumably their lender come to the table with a brand new loan.
Let’s say… in my early example, I was saying $150,000 house… so let’s that they come to the table with a brand new $150,000 loan. But you are buying the house at short sale let’s say for $100,000. The only problem is you’ve gotten an approved short sale but you don’t have $100,000. What you’d love to do is use your new buyer’s new loan and $100,000 of that $150,000 to pay off the lender who is taking the short sale. That is what’s called a double closing. Money comes to the table it’s stripped off and the money that’s due the seller goes to them, and you get the difference. Good work when you can get it, but the challenge is that’s hard work to get. Because these days lenders aren’t allowing that. Lenders are onto what’s called the double closing and only certain lenders will even allow it.
The first player if you are able to do it, or were able to do it would be, guess who… your closing agent, your closing attorney. That’s the one that you have to run this by first, and say, how can we do this? Don’t say would you do this, or could you do this? Say, how can we do this? They may say, I’m not going to have any part of it, or they may say, I’m happy to do it if everything is disclosed to your buyer’s lender, and they signed off on it, then we are happy to close it. In other situations, they say, here is how we could do it. There’s really different closing agents that will do different things.
But there is one more way ____18.20 that you can do this. Everyone listen up. We call it dough-for-a-day. Which means that a lender… a third-party lender, also known as hard moneylender, comes to the table with brand new funding, or say your $100,000 loan. Let’s say that the lender is only going to put the money on the table for a day or two, and so now that there’s been an approved loan from your new buyer, and it’s all been verified and the funding number is approved. Then your other lenders come to the table with $100,000, and they get a couple points for the pain and suffering doing that. Also the profit to them of sourcing the funds, taking it out of the bank, putting it on a table and so on. They make a couple of points for doing that. Then you now, as the seller and buyer, you are going to have to pay that fee for having that money come to the table.
In other words, the deal with the short sale lender who you are buying it for $100,000 for gets paid off completely. The new buyer comes to the table with their lender at $150,000 and you as the owner of the property sign the deed over to your new buyer, and you sell the property for $150,000. Out of your processes you pay, your lender with the $100,000 on the table say, $2,000 to $3,000 for doing that and that is how you could still do a double closing. But it will cost you as opposed to the old days where you didn’t have to do it that way. Great question. ______20.15. I’m sure a lot of people learned from that.
Brian Moussa has several questions, hi Lou, I bought a house, subject to and have a buyer lined up to buy it. Congratulations. When I took over the house the owner gave me a lead paint certificate stating the house has, or had lead paint. Since the lead certificate the house has been painted two to three times. Additionally, I just replaced a heating system that required asbestos removal, which will also come with a certificate. I don’t want to scare my seller away. Is there a recommended way of disclosing these two issues. I want to do things right. What’s the best way to handle it? Well, Brian, the best way, and in fact the Street Smart way is for you to disclose, disclose, disclose. You see when you are disclosing in those lead paint certificates all you are disclosing is what you know.
If you know that the house formerly had lead paint, and it was disclosed to you then you disclosed it to them. It also has on that report, attached any reports you have. All I would do is merely attached that report that you got from the prior owner that says there was lead paint, and then also your proof that the house has been painted, and maybe your contractors estimates or a payment on that proving that that work has been done. The same is true with the heating system. Disclose that there was asbestos but now because of the replacement heating system and that certificate, that has been taken care of. Brian, I’m going to tell you that where you’re from in Massachusetts, it’s very common there.
Lots of houses have been there for a long time in Massachusetts. Realtor there are quite aware of all houses having some kind of past history of lead paint. They are quick to tell their buyers that and that way you’re not going to scare your buyer away. You said you don’t want to scare your seller way, but I think you meant your buyer. Then your new buyer having full information about it can make a decision. Now the thing to do is really not make a big deal about it. Oh here, Ms. Jones here’s the lead paint certificate. Here is the disclosure form, and here is the disclosures that were given me when we bought the property, and here’s the work that’s been done to it. We are required by law to give you disclosures about that. Here it is. That’s all I’d say. Let’s see if it creates any problems. It probably won’t
Then Brian goes on to say, if selling a house and taking back a second mortgage, will my second ruin the buyers debt to income ratio, if they were getting a conventional first? If so, how can I use this strategy without ruining the seller’s debt to income. That’s an interesting question Bryant. For everyone listening to explain what Brian’s saying is, he’s concerned that now, if he were to sell a house and carry back a second mortgage. The buyer has all this new debt, which could mess up their score. Which means that now it would be more difficult for them to finance or refinance the property. The answer is Brian, I wouldn’t worry about it too much. Basically, a mortgage means it’s recorded on public record and it’s secured by the property that you’re selling the people. A note is a requirement to pay. It’s more like an IOU. A note and a mortgage means, it’s an IOU secured by the property.
The interesting thing about that Brian is that you can take a note and a mortgage and never record the mortgage. If you don’t record the mortgage, then the question becomes does it show up as a lien against the person that made that debt. That answer is only if that person discloses that debt. In other words, if your buyer discloses the second mortgage to the lender or to the credit bureau, then yes. It will affect their score. If they don’t disclose it, then no, it’s not going to affect their score. That could be a way to get the loan approved and then later record the mortgage if you need to.
Brian goes on to say, I had a vacancy that I’m renting to own and I’m receiving four to seven daily calls with only two directional signs and one in my front yard. Is this a good activity or should I be doing more advertising. Brian, I’d say you are doing pretty great. Four to seven calls a day with only two signs. Two directional and one sign in the yard. That’s pretty great. Right now we’re receiving about anywhere from thirty to forty calls a day, but we are putting out a ton of signs… handwritten signs all over the neighborhoods that we are looking to sell properties in. Yes, that becomes a real strategy when you’re trying to move a property. One sign… I’d put out as many as you could. Because of course every day that the property is not moved is a cost to you. Vacancy is the highest cost we have in this business. Getting it moved quickly is great. Also, the more callers you have for that property who don’t buy means that you have built your buyer’s list even that much more. Buyers list are a very valuable thing for you to have. We encourage you to please put out as many signs as you can to help build your buyer’s list. Now you have buyers that then you can sell any property to not just that one. What a great question.
Another question we have from Ryan Gillespie, and he says, in wed wiz there is the following note; note US federal laws requires a valid postal mail contact address regardless of your location in the world. Does that mean that I am not supposed to ever e-mail prospects without having an address on my e-mail for a business address? First, let’s answer that one. No, that’s not what that means Ryan, and it’s a great question. What it does mean is that anyone using the mails and going across state lines are now involved with the federal government, not the state government. Of course e-mail goes across state lines. What you want to make sure of is that your ISP… your Internet Service Provider has a mailing address for you. Like Google, Yahoo and the post office, if you have a postal box has a physical address on you. That’s what they are talking about. A valid postal mail contact address. They want to not just have people with mass addresses on the e-mail… you know, running all over and saying things and doing things on the Internet that’s not traceable or track-able. They are saying you need to have an address. But no, that does not need to be included in your e-mail itself.
You go on to say, for a business address, do you recommend a P.O. Box or a private mailbox, and why? I recommend a private mailbox facility such as the UPS store. That gives you some privacy some anonymity and a place to have all your tenants mail the rent to, or clients as we call them. Clients mail the rent to and not coming to your house or mailing to your house. You go on to say, to use a sole proprietor ship with a name I have to file a fictitious business name statement (FBN) for which we have to publish our names and home address in a local paper. Okay, what they’re saying is, if you don’t have an LLC, or corporation and you want to use a company name, but you want to use it as your company, then they’re saying that you just have to run ad in the personals in the newspaper. The interesting thing about that is you only have to publish it once. That’s not very easily findable, unless somebody is keeping up with that information. But you do have to notify the public that this name over here, Chandelier Properties is one in the same as Brian Gillespie at your personal address.
You go on to say, this doesn’t seem good that we have to publish our name and home address. Is there any legal way to get around this? I’m not sure that starting an LLC is the best move right now, given our financial situation. You’re right, Brian because you live in California. California charges what’s called a franchise tax, and that means any entity that is a state creation or what we call a creation or creature of the state has to pay this franchise tax, which in your state is $800. Just imagine that gets pretty expensive. On top of that you also have to pay annual dues, annual fees, and file annual tax returns as well. That’s not very beneficial to you.
Instead it makes more sense for you to go ahead and get the private mailbox. Have that address set up and then worry about the rest of this stuff later when you have something to worry about. For example, once you have enough assets and there’s something there to protect that needs protection. Now it’s time to go ahead and get that LLC or corporation. The good news for you is, through the use of trusts, you can set up a trust any time you want to at absolutely no cost except for the cost of reporting the deed. That means that your trust can exist and for all intents and purposes it is the owner of the property and you are the manager of the property and all of the mail, anything related to this trust comes to your private mailbox facility.
That way you kind of close the whole loop there Ryan without having to be on public record as the owner of anything. You could be the manager of the property, but the trust then owns the property. You have something in California called a certificate of trust that has to be according along with the deed, and my affidavit of trust. This certificate of trust, basically, is saying, hay the trust exists. Here is to trust address. Of course you are going to use your private mailbox so that gives you still privacy and anonymity personally. It tells the world exactly where the trust resides, which is in your private mailbox. That should make a lot of sense to you Ryan, and you’ve got all kinds of privacy if you will do it that way. Everyone on this call can take advantage of this as well.
Next is Carol Holcomb, who says hi Lou, Merry Christmas. Well Merry Christmas to you too Carol. Thank you for saying so. Please talk about making presentations for private money. I am most interested in a couple of things. Any tips for presenting long distance using this lender website, while talking on the phone, what are the typical kinds of objections and the magic words to overcome these objections. Let’s first start with your first question. Talk about making presentations for private money. What a great topic and this is a great plan for your new year as well. Because raising money to capitalize your business is absolutely critical. All of you need to make this as part of your daily business plan to seek and find private money. That means calling, writing, speaking to people. Anyone who potentially has an IRA, 401(k), or personal funds, or business funds that they can use for investment purposes. Step one is to make a list. Hopefully, Carol long list of people that you already know, that might be candidates for private money. Then your next step is to call them up and ask for an appointment.
When you call them up say, hi, this is Carol. I’m touching base with you. We’ve talked in the past, and I just wanted to let you know a couple of things possible. First of all, I’ve gone into the real estate business, and we are finding so many opportunities, and so much great opportunity in today’s market, that I’d like to expand my business and be able to buy more properties and do more in this economy. Folks just like you are the type of lenders that I am looking for. Because we found that it takes a long time to get loans done and you never know until the last minute if you actually got the loan in the first place. What we’re trying to do is go ahead and set up some relationships with people just like you who will fund our deals and give us an opportunity to really get set up the right way. Let me ask you a question. Are you disappointed in what you’re IRA has earned over last year’s? If you’re like most people you’re going to say yes.
Let me ask you the next question. How much are you currently earning on your un-invested funds? If you’re like most people, you’re earning anyone anywhere from zero or even negative to maybe one or one half percent. Here’s the good news. Our company can offer you significantly more than that. In fact, we can offer you bank rates. What the bank is charging for mortgages we can offer you that as well. How does that sound? Each time Carol that I’m asking these questions, you stop and wait for an answer. Because you definitely want them to be connected with what you’re saying and involved in giving you the answer. If there is a pregnant pause, you just keep waiting and whatever they say, they say, but you can always go back and reiterate what you already said and say it again in a different way so that they can get it that you really have something great to offer.
____35.55 You go on to say. I’m most interested in a couple of things, any tips for presenting long distance using the vendor website. While talking on the phone, exactly, Carol. Once you talk to them on the phone say, let me tell you a few things about our company… in fact, are you web active? You are good okay, great. Why don’t you go to my website that actually is set up to talk to you and give you some more details about our company. Its www.mylenderwebsite.com. Those of you who are on the call that aren’t aware Street Smart does provide that. We provide both a buyer website, a seller website, and a lender website, which is really your borrowing website. You have your own domain name where you can send lenders to find you and actually find out more about your company.
What I would do, Carol, is just click through the left navigational bar and stop to tell them more about your company. Essentially read the screen to them. Tell them this is who you are. This is what you do. This is how you operate. This is an example of a deal that private money did. Here is another one. You really got a couple choices. You can stay in the stock market, guess at the next wave, hope for the best, gamble on the future, or have safe reasonable returns with real estate. That’s exactly what you are offering is basically a piece of the action. That you are going to promise them some returns in exchange for use of that money that allows you to grow your business. How does that sound? All the way through say… How does that sound? What do you think? How does that make you feel? Isn’t that great. Isn’t that exciting… you know, just keep asking questions to make sure that they are still connected with you.
Then you go on to say, what are the typical kinds of objections and the magic words to overcome these objections? For example, if the prospect ask, what if I need the money before the term is up? How do you determine the interest rates? … and anything else. Thanks for everything and Happy New Year. Okay, Carol, let’s talk about that for just a second. Let’s go into the one, what if I need the money before the term was up? What I would say it is, well Mr. Jones, have you heard of a thing called a CD at the bank. The bank allows people to go in and with 90 days notice actually be able to cash in their CD’s. That’s all he would ask for as well Mr. Jones. All we are looking for is time to replace your money. Where I can go to another lender and show them the very thing I showed you, and have them get excited and see that this makes perfect sense for their IRA or 401(k). Then raise the money that way and we will use their money to pay you off.
Also from time to time maybe you will need some money. Let’s say that you had $100,000 to lend and then you say, hay I need my money. Maybe you only need $10,000 of the $100,000. We would go ahead and give you the $10,000, and then allow the 90,000 to continue to make interest. How does that sound to you Mr. Jones? Boom. Just wait for them to say what they are going to can say. Your other objection was, how do you determine the interest rates? Well, Mr. Jones what we look at is what the banks are paying. Excuse me, not the banks are paying, actually, we do you much better than that. You and I both know that for passbook savings accounts, the banks paying one, one and half percent, sometimes better than that. Basically they are paying a very low rate. What we are willing to offer you… and let me make sure you understand this, what we are willing to offer you is what the bank charges borrowers for the money. Isn’t that great. In fact, you become a bank and you get bank rates. Right now, the banks are only charging five and three-quarter percent or whatever the number is Carol.
Just get it out of the newspaper. In fact, I can fax you over an article or you can open up your own newspaper where you are right now and you’ll see what banks charging. I’m willing to pay you banks rates. Isn’t that wonderful. You don’t have to be FDIC insured and you don’t have to have columns, and marble floors, and drive through windows, and tellers and anything else. You get exactly the same rate that the banks are charging. Isn’t that wonderful. You save all the overhead cost, and yet you make the same money that the bank does. Do you like that program? Wonderful. We can put your money to work right away.
Carol you ask, is there anything else that they might bring up. I would say Carol, everything else they might bring up. One of their concerns is going to be how to I know that I’m going to get my money back… and you say, well, basically it’s because of my training. Mr. and Mrs. Jones I’ve been through an entire certification program through the Street Smart system. I am a CTS. I’m an MBA. I’m a CIS, and I’m a certified deals specialist as well, CDS. I’ve earned designation and certifications through this program. Not only that, I have all the tools necessary. I have all the forms. I have all the web technology. I’m able to manage my entire business online, in fact, if you have a few minutes I’d like to show you my websites.
I’ve got my buying website my selling website all set up and I’d like to take you through those. That’s what the public sees when they come and see all about me. You show them the public buying sites. You show them the public selling site, or you say later when you have time, you are welcome to just sit and go through my entire sites and you’ll see exactly what the public sees. Bit not only that, I’ve got end that allows me to manage all my leads, sift and sort. I can do my comps online. I can do everything so that I’m able to quickly respond to sellers and buyers and be able to close a deal.
How you like that program? Carol I’m going to say that the less said the better. In other words, don’t overwhelm them with too much information. Let them ask for more information. Just continue to deliver information as its asked for. Don’t overwhelm them. Why do you think you are going to get your money back? Because I’ve been certified. I’ve been and trained. I’ve got all the technology. I’ve got the coaching and mentoring. I’ve got the support. I’ve got everything necessary to make me a success in this business. Period… stop and wait for them to ask any more questions. Great question for the new year Carol.
I am very happy to help all of you with that one, because that needs to be a primary goal and resolution for the next year. Is to raise capital for your business so that you have no financial constraints to taking advantage of this new market that we are in.
Becky Sharon says, I am working with Saxon Mortgage to modify a loan. The woman who has been assigned the modification will only modify a 10.99% yearly adjustable loan to five years fixed at 9% with a $2,109.50 payment. They will create stipulation agreement, and expect the mortgagee to refinance after five years. How would you suggest that I continue to negotiate this modification? The loan officer would not even entertain any other ideas. She said that’s it. I would go back and hopefully, Becky, you did not go as an investor. If you did, you need to go back as an entirely different person and say that you are a financial advisor working with the Jones. Another way that we are doing that these days is through our affiliation with 501(c)(3) that actually has the ability to negotiate these things.
In fact, you go when under the nonprofit banner. You’re actually able to do some other things. They’ve got a different telephone number, different negotiations, different everything for nonprofits than they have for everybody else in the world. I can teach you more about that, if you want to know more about that call in the office 1-800-578-8580 and we can give you more details on that. By the way those of you who heard me talking earlier about the lender presentation site should call into the office 1-800-578-8580 and take a tour of that site. Because that really does give you some insight into exactly what you need to have web presence and also be able to have your lenders look on and check you out without having to face to face with you. It also allows them to check you out before you meet with your meeting, where you’re going to meet with them face-to-face with my lender presentation Kit. That way you now got a double hit in that they saw it online and now they are seeing it in person with your lender presentation Kit as you show them. Again call the office. 1-800-578-8580 to get those tools.
Becky, let me just end by saying that Saxon is a company that invests mortgages. By that I mean that they are a company who actually buys mortgages at a discount. They may only have $.30 on the dollar may be even less in that mortgage that they are talking to you about. You can’t blame them for trying to retain as much profit as they possibly can out of that mortgage. After all, the borrower did agree to that much, but you just got to explain to them that that’s simply not going to work. Would they rather have another property that they’re going to take an enormous discount on or would they rather go ahead and modify this loan to a number that your client can actually afford. Tell them 9% is not going to work, and the $2,109 payment is not going to work. What you are asking for is a life of the loan modification, and that you know they can do it because other lenders are doing it. Who else do you need to talk to.
If they say that’s it, no way. Say, well I’m sure you have a supervisor, what is your supervisors’ name? I’d like to talk with them. I’m not going to let you talk to my supervisor. Okay well. Then I will call the chairman of the board and I’ll tell the chairman of the board that you were unwilling to let me talk with anyone else in the company about saving this person’s house. Channel 5 Action News always comes to mind as a person that we could call and let know about what’s going on out here in the world. That might get their attention. What do you think? Sometimes you have to resort to some strong arm tactics to get them to pay attention to you. Hanging up and saying that’s it, is not going to work for you either. You are just going to have to force the issue if they won’t cooperate the way they should.
Becky also has another question, I was wondering if you can talk to us about why you prefer to buy subject to and sell as a lease option. That’s a great question. It’s like this. I like to buy subject to for one simple reason. I don’t have to go to the bank. I don’t have to qualify for loan. But more importantly, I don’t have to pay the closing costs, and even better than that, I don’t have to use my credit, or my credit report to qualify for that loan. Even better than that, the loan may have been paid down over the last three, five, ten years into the principal. Now I’ve got the benefit of all that pay down where every month that I’m making a payment is well into the full term of the loan, which means more of my payment is going towards principal. But better than that, Becky, it’s my cost of funds. Because now I don’t have to go get hard money loan for say 5-points and 15% when I can merely take over someone’s existing loan. All I have to do is step in and take over their payment.
Doesn’t that make more sense? It does to me. Not only that its helping lenders these days too. Instead of them having to foreclose to take the property, we are able to just step in and take over that payment, even reinstate the loan, modify the loan, whatever the case may be and make the payments. Now isn’t that better for the lender for the seller and for you. That’s the reason that I love subject to. The second part of that was, sell as a lease option. The reason I like lease options Becky is because I get a better quality client. I get someone who is interested in someday owning a home. They are not thinking like a tenant. They are thinking like a potential or someday home owner. That’s our real plan. I got to tell you that that’s ultimately our strategy. That we want to have that exactly happen Becky. We want to have good customers that are going to take better care of the property than a tradition tenant would. Not only that Becky, I get a down payment from that tenant moving it and it’s nonrefundable.
I get nonrefundable option consideration and that to me makes all the sense in the world. Because it is them having some skin in the game that they can’t get back if they move out. That keeps them glued to the deal and hopefully lasting longer with our program. Ultimately, as I’ve said many times your vacancy is the highest cost you are going to have in this business. Isn’t it better if you were able to simply take that existing financing then put a customer in who pays you money to move in… nonrefundable and stays long-term. It ultimately sets you up for the ultimate strategy in our Street Smart plan is for you to be the bank. Not to send your customers, your clients to the bank to get financing, but for you to actually be the bank for them. I think that is the ultimate strategy that all of us should be working under.
We have a question from Selma Andrews who says, hi Lou, I’m new in the real estate business. I need help with finding buyers. Please give me a list of places to start, and I think I heard you say you have or sell a buyers list. Also sellers… where do I find them? Okay, Selma, the answer is, quite honestly, how much do you have to spend. Because the least amount of money you have to spend the more physical work you’re going to have to do. By that I mean, that you can put magnet on your car that says we buy houses, and you can do all kinds of things that expose you to the public, which is fine. The only problem is you have to wait for them to come find you the best way to find a seller is to market directly to them. We use direct mail marketing, and we use a whole variety of list. The question is how much do you have to spend? Because that can get very costly.
However, if you have done your homework and have capitalized the business the way I teach you to then that should not be a problem because there’s going to be plenty of capital to work with to fund your operation. As I said, if you’re marketing to those folks they are going to show. Believe me they are going to show up. How about, I think we had about 80 leads for sellers over the last month. That’s the kind of lead generation that you want to have in your business. Now you go on to say, how do I find a buyers list? Quite honestly, the answer is to same, how much do you have to spend? You can put out signs. That’s the cheapest form of advertising that say something like… why rent when you can own three to five bedroom under $900 per month your telephone number.
When they call in they say, I want to see some of those three to five bedrooms under $900 a month. Then you say, first we start with you. We determine exactly what you can afford so that neither one of us is wasting our time. I could show you a mansion but if all you can afford is a lien to, I need to be showing you a lien to. You can make a joke out of it. Then say lets start with where you work, how long have you been there, how much you earn, and your spouse, where do they work, how long have they been there, how much do they earn. Then we can go ahead and put you through our mortgage broker, and they can find out more about your credit score, and so on. They will tell you and I exactly what kind of houses you qualify for. Then I’ll set up some showings and show you the kind of houses that you have actually already told me you are already looking for. The number of bedrooms and bathrooms. But it’s going to be the mortgage broker that tells us what you can actually afford. How does that sound to you Mrs. Jones? Lets go ahead and get started now. Boom.
That’s how you can build you buyer list. Literally we are starting with no houses to sell. However, would you agree with me Selma, that you could quickly pick up the phone and call a realtor if you had a ready, willing, and able qualified buyer. That you could quickly find some bank REO’s or houses needing work, or first time home buyers type houses that the realtor could find for you on the MLS that we already know the sellers will accept some kind of discount up to a huge discount. Now you can set up showings for your buyers after having them under contract subject to your partner’s approval. Your partner’s actually your buyer. Because they are going to come in and say yes or no to that property… and we are off to the races. Because now you can set up a closing because you now have a buyer. You can do a double closing, similar to what I was explaining to on ____55.58 question earlier. Great question Selma.
You go on to say, how do I find wholesale houses, and the investors. Well, I would start a local REO. There’s many investors in your local REO who sell houses wholesale. You want to get on their list, but you also want to put them on your list. When you have an opportunity at a wholesale property, then you can offer it to you wholesale buyers list. That is a quick and easy way to be able to get a property to the market. But we don’t stop their Selma, because now you actually have the opportunity to put that property out to that list any time. Let’s say that you build a buyers list, on the buyers list includes your wholesalers.
Now let’s go back to the websites I was talking about earlier. Your Street Smart selling website allows you to do what is called bulk e-mail. Once you have already created this list we have your database online, and your website, and so you just go through and click, or it actually sorts all of your list and finds all the paths to this property. Click, click, click you are able to quickly bulk e-mail that link to that property to you entire list. They are able to click on a link, see the property, and actually view the property without having to get in a car and go look at it. That is the way I recommend you automate your business Selma. Because its automation, that really catapults people to success in our real estate game.
Then you go on to say, who are the private lenders? Is there a list of names? I look forward to hearing you. Selma, it is just as I answered Carol’s question. Your first step is to make a list of a hundred people that you know that potentially could be lenders, and then just start making calls. Private lenders do not grow on trees. They are your next-door neighbors. They work with you. They go to church with you. They are linked to you as relatives. There is all kinds of different people who are private lenders. Last week, a couple weeks ago at out MBA program (Mastering Business Advancement), one of our platinum’s was sharing that he had now borrow money from his pool guy $37,000 from his pool guys are IRA, and he was just about to borrow $20,000 from his yard man’s IRA as well. You see anyone could be a potentially lender to you. Anyone could be a potential. When you tell them, who you are and what you do and how you operate. I would absolutely starts with that lender presentation Kit as soon as you ask them do you have an IRA or a 401(k), and then you are off to the races. Great questions tonight folks. Great questions.
I had another one from Brian Moussa who says, when a tenant moves out, how much money should I be spending to clean up, paint, change lots, etc., assuming the house is a three bedroom one and a half bath. I am getting killed with painting and necessary capital improvements. Well Brian, I would start with your local paint store. There are folks that are in what is called the turnkey business. These are not your traditional painters. They are not what I call Mrs. Dunwitty type painters. That do this incredibly beautiful paint jobs. Of course, they charge accordingly. What you are looking for really in the rental business is a turnkey company. They come in, they paint, they clean, they mop, they haul, they do everything in one day. Wash the windows wash everything. They start and they are so used to construction cleaning and turn keying apartments and houses.
They have a system, so they are not busy doing what your high-end painters do. They get down and dirty with the property. Now you have to get quality with, so you definitely want to do your quality dance with them and say now listen… I don’t want paint on the woodwork, I don’t want paint on the door knob, I don’t want paint on the hinges, I want the paint to be clean, I want the lines to be straight, I want everything to be perfect. If it’s not I want you to understand that I’m not going to pay you. Do you understand? Okay. Good. Because I’m looking for a professional job at regular prices. In other words, I have to be priced at wholesale, because you are going to see over and over again. I’m not a one timer, and therefore I need wholesale pricing accordingly. That usually does the trick Brian.
But may be to give you a little bit more depth in to that answer. I look to spend about $100 per room for paint. Per bedroom… three-bedroom that is $300 there, then the living room, that is $400, another $100 that is, and then a dinning room and so on. So just add it up from there. If I can beat it fine, if I can’t beat it, that’s pretty much a going price that I can expect to pay. Brian, I would ask you, why are you not using my work for equity program. That works so absolutely beautiful. Those of you listening, if you are not familiar that I have a work for equity program, this works so great. Because what you do is instead of taking money out of your pocket Brian, you are leaving in your prospective buyer’s pocket, and they do the work. They do the painting, they do the cleaning of the windows and so on. They do the carpet replacements. They do the landscaping, and they get the benefit of that by you giving them a wholesale credit towards their down payment on the property and they do the work.
Felipe Victor says, I was talking with a mortgage broker yesterday and he told me about short refinances. Please tell me how I can utilize this as a tool for buying subject to deals? Well Felipe, I don’t think so. About the only way you could do a deal structured that way is to get the seller to refinanced the property and then take subject to that new refinance. That would be an easy way for it not to be your financing but in fact be the seller’s financing, and also them using their credit to get the financing in the first place and do the right. A short refinance means that they are using guidelines that are available from certain lenders and these guidelines don’t require the big heavy lifting that most mortgages require. That’s going to be on a lender-by-lender bases, and what really is available from those particular lenders. You would first ask your mortgage broker, what are the requirements of the short the finances, and then see if you can get your seller to agree to the refinance, then you taking over the existing new loan.
Felipe also has a question, what do you include on the realtors contract that allows you to nullify their contract and give your contract precedents. The answer… and the question that was taught at millionaire jumpstart the way you want to do this is to actually take their contract and in the special stipulations section usually there is a final section before the signatures. It’s call specialists stipulation, and it says anything printed or typed here overrides anything else written in the contract. What you will write there is as per attached exhibit (a) made a part hereof by reference. Then you attach the Street Smart contract as exhibit (a). That becomes the controlling contract overriding everything in the realtors agreement because that attachment rules. If you think their going to get irritated with that, well, they should just go check out what banks do when banks sell property. When banks sell property, they attached their own contracts to it.
I just looked at one the other day. If I didn’t want the property so bad, I would have turned it down. It had twenty-nine different stipulations from the selling lender about all the things they weren’t going to pay, and all the things they weren’t going to do, and all the things I wasn’t getting with this property if I were to buy it, and if they were to approve my contract. I went ahead and signed the contract anyway, why, because they are selling me the property so very cheap. That it makes sense for me to agree to all of their stipulations. You are merely doing the same thing. The seller is agreeing all of your stipulations.
Folks you’ve heard a number of things while we’ve been together on today’s call, and I just want to make sure that you do have the opportunity to follow up with the office at 1-800-578-8580. We’ve talked about your buying website you’re selling website you’re borrowing website. He talked about the MAS certification program coming up in January… that’s’ Maxim Asset Shield. We talked about your comp wiz, and how you can get that online. All of these things are available to you through Street Smarts by calling our office at 1-800-578-8580.
Folks, we’ve come to the end of another in-depth group Q&A that had all kinds of incredible questions running the gambit from buying to selling to borrowing to lending to everything in the realm of us being in the business. I just want to commend each and every one of you for being so Street Smart as being part of our group Q&A. Because we do have such a wide swing of questions that are answered on a twice monthly basis. Always be a participant in this group Q&A because you not only have a opportunity to get you questions answered, but you also get the benefit of hearing everyone else’s questions answered. I’m sure you would all agree that you are learning a ton from that. Well, I have more to report in the year. I want to wish all of you a very happy and safe and healthy, merry, happy holy days and let me just say to you that I’m looking forward to your year and my year to be a most fantastic new year. I will see you in the new year. Good luck, good health, good wealth, and may God bless. Good day.
