Lou Brown:

Hello everybody and welcome back to another installment of the Street Smart group Q and A.  Where you have sent me some really interesting questions over the last couple weeks and I’m including those in today’s recording.  I’d like to take this opportunity to always update you on my thoughts on today’s economy and how we fit into it.  It’s been very interesting over the last few days that the government gets it as far as I’m concerned.  They understand that today’s economy is so critical based on people’s psychologies.  If you think about it psychology is really such a big part of the fear factor.  What was the psychology of the big growth in real estate that oh I’ll go ahead and invest in real estate now and I’ll get some of this huge appreciation that’s going on.  If you recognize how I teach you, we do not buy on appreciation; we do not sell on appreciation.  Our whole game is based on a long term strategy and either making money today on a quick turn flip or long term on a hold.  So we don’t look so much at future appreciation and big swings in the market.  We just say slow and steady at the helm.  Because the helm is really where the risk is and it’s also where the rewards are long term.

Now you’ve got to look at your own self as a micro economy.  Basically you, yourself are your own economy.  So if we together think through what you really need.  What you really need is to have a good long term strategy, to have income in your old age.  To have the ability to have assets that are producing for you so you don’t have to produce for them.  You don’t have to push shopping carts at Wal-Mart.  You’ve got some kind of something that you can rely on for your future.  So today we look at the current economy and say that okay the government has stepped in and said these non-banks they are given an investment.  But in order to get that investment they have to sign on a treaty basically with the United States government that says we agree that this money you’re going to put into our bank will be for lending purposes and we will lend it.  So we’re not going to stand in the way of getting the money back out into the market.  The government gets that when they get that money back out into the market everything shifts.  First of all, psychology shifts.  People say oh I can buy a house and oh I can get a loan and oh these rates are very favorable.  Yes, I should take advantage of this.  Yes, I should do this now.  I’m going to miss the opportunity if I don’t do it now.  So the same should be true for you.

Given that the government has seen the light and I’ll tell you what light they’ve seen.  Most economists attribute the Great Depression to the fact that the banks failed.  Had the government stepped in then and not allowed the banks to fail, everything else would not have followed.  Yes, our economy was going into a recession, but what really happened was it was the impact of the failure of those banks that really drove the economy into a spiral, a downward spiral.  Its no different then everything else that happens in our lives.  When gas goes up that’s less dollars in our pocket to be able to spend on anything else.  When we don’t go buy that shirt then that manufacturer did not get a sale.  When that manufacturer did not get a sale they did not need the employees to produce the product in the first place.  When the employee was not hired then they themselves cannot go out and spend money and rent or buy properties or buy draperies or carpet or cars or anything else.  So the true nucleus of economies revolves around jobs.  Jobs are critical.  When we see a recession of jobs as is happening now, then that’s going to have a draw back in the entire economy.  So what I have found philosophically to be true over all of my years in watching how things work is really, truly when people the folks have money in their hands then they have the ability to influence our economy.  When money is not in their hands they cannot influence our entire economy.  All of them have their own micro economies as well.  We see this with our tenants.  We know that when they are employed they don’t have problems paying us.  It’s when they don’t have a job that they have problems.  When they have a problem we have a problem.  We know this to be true.  So the bottom line is how we get more money in the hands of the people.  The people will spend.  They will buy and they will influence the economy.

So for us we have a great opportunity.  First of all, in today’s economy to buy property.  Why?  Because the psychology is against that.  The psychology is to sell, sell, sell and bail now.  We saw that in the stock market.  The stock marketing dropped dramatically and who ever saw the stock market drop 70077 points in one day.  That was psychology, but more then that over a 7 day span it dropped everyday over those 7 days.  Then psychologically it hit a floor.  Why?  Because the government stepped in, introduced this new product this new offer of changing the positions of the banks, brought the money into the economy.  Brought the concept into the economy and all of sudden investors no longer were afraid of losing.  They now came into the market and said I’m about to win and the next day the stock market goes 90038 points up.  So you have to kind of watch how much psychology influences everything in everyday life.  For us if could create the psychology that we have an opportunity both in our buying business and in our selling business that is unparalleled.  Then we really have the psychology ourselves to go out there and make things happen.  We have the psychology to get the funds in order.  To borrow the necessary funds to capitalize our business.  To borrow the funds to buy deals.  To borrow the funds to do short sales and close on them and be in a position to keep them why because we were smarter enough to borrow the right kind of money.  Not short term money but long term money that made more sense.  That’s the kind of economy we need to create for ourselves.  We can do so right now in this economy.  My friends you’re making a mistake if you don’t pay attention to the deals that are available right now.  I understand the fear factor and I understand why you might want to hold back and just see what happens.  But money is made when people are not in fear.  Money is made when people are excited about the opportunities that are ahead of them.

Now you just look back at the Great Depression.  Huge, huge wealth was made by a precious few that were able to take advantage of it and saw that what a minute this is not going to last forever.  This is merrily a psychological issue that when the right psychology is back into the market place then businesses will begin hiring.  They will create jobs.  Jobs will create employees with cash in their pockets.  That will create the housing marketing getting a sale.  That will create the auto market getting a sale.  That will create that when these people move into these houses they will buy draperies, they will buy furniture, they will buy things.  All of a sudden folks go back to work because now there’s more orders.  The stores have more need for inventory.  Now the truckers get to haul goods and services.  The bankers get to lend money to fund people going into houses and cars and so on.  That creates the multiplicity of the micro economy.  That individual who did something that then created something else and then created something else times thousands and thousands and thousands of people.  That’s what creates an economy.  We are in a unique position and posed to be able to take advantage of that.  So I want you to keep this in mind.  When you see an opportunity, when you see a property remember your Street Smart.  Remember that Lou Brown is sitting here waiting for you to bring deals to him.  That we can partner on those deals or we can fund those deals.  So there is always an opportunity for you to not be stopped by the fear of this economy.  Why? Because we’re not stopped by the fear of this economy.  What we see is opportunity not a reason to run in the opposite direction.  You need to see that too and recognize because you’re Street Smart you have a backer.  You have someone who is on your team to make this happen.  Let’s keep that in mind as we go forward.

Now I’ve got a lot of questions here so I’m going to jump right in with Brian Musa who has a number of different questions in today’s queue on buying houses.  Brian is in Massachusetts.  There is a house on my street that is vacant.  Can’t find the owner.  Went to the tax office, the city has taken the property but the deed is still in the previous owners name.  Does city have to put in their name?

Well Brian typically the rolls the tax rolls do not change until the following year.  Some do, some don’t.  It really depends how updated that tax office is.  So initially the deed gets filed at the clerk of the superior courts office, but then those records go over to the tax office.  Well the tax office is not too gun ho on changing anything.  Why?  Because there is a period of time typically between January and March of the following year that the new homeowner would file for homestead exemption and file as the new owner of the property to obtain the tax break that the homestead exemption gives in most states.  So the tax commission just sits around and waits until that data is applied for, or that tax gain is applied for.  Once it’s applied for then they change their records.

So you’re asking but I can’t find the owner now and you say that the tax office doesn’t have anything.  Well there could be other ways.  First of all let’s start with the neighbors.  Often the neighbors do know how to get in touch with them, forwarding mail all these methodologies that most people know at least their next door neighbor or the one across the street.  So what we do is talk to each neighbor on each side the ones in the rear of the property, the ones in the front of the property and try to find out if we can find the owner.  Now we do this on a lot of vacant property stuff.  So this has been my strategy.  If I don’t find the owner that way, the next strategy is to go to Zaba search and there is also a whole plethora of them, No X, Phonebook.com, and literally look up their name and see of their address has changed in these services.  Because when new addresses as filed in other places these services pick them up.  Now you can pay a fee and get a deeper search which gives the mother, the brother, the uncle, the aunt and other associates of that person and their telephone numbers as well.  Those are usually paid searches.  Then you can call those folks and see if they know where the owner went.  One way to get to them is to say that you have something for them that they won a gift and you have to get in touch with them, so they can receive the gift.  That’s one way that you can use because otherwise they just think you’re a bill collector and you’re trying to find them.  So sometimes the family doesn’t give up names and numbers.

Another method you can use is to send a letter or a postcard to them.  If the post office has a new address then they’ll forward it on to their new address.  You can go to the post office and ask, fill out a little card and pay a fee and they will give you a new address if there has been a new addressed filed for that citizen who receiving mail.  So you can get it from the post office then and go ahead and contact them by mail.  Or if you can find an associated telephone number you can contact them that way.  Then probably now there is a service called Find the Seller.com and they also you can pay a fee there and they’ll do a search and see if they can find the seller.

Another one is to hire a private investigator.  Thing about private investigators is they have access to some other deeper data bases that are not readily available online.  Because they could easily be used for I.D. theft and that kind of thing.  So they don’t make those readily available.  But that’s another source you could use if it’s a really sweet deal.  How you’re going to find out if it’s a sweet deal.  Well you need to research the records.  What was it worth versus what is the recorded mortgage against that property?  Is there equity?  Why do you think there’s equity?  Is there a mortgage?  If not wow you’ve got a real opportunity there.  Could be free and clear that means you can get seller financing and all the other goodies that come with free and clear properties.  So I really love free and clear and love to teach you all the strategies that are available to make absolute fortunes on free and clear property.  So that’s another method that you want to use is to go to your comp whiz.  Now those of you who don’t know what comp whiz is that’s built into the back side of your Street Smart web sites and it allows you to be able to access the data about that property instantly from the court house.  Also what’s available online in terms of the mortgage.  It even gives the interest rate, the term all the details.  If there is a first mortgage, a second mortgage, any information if that would have been available at the courthouse you can usually find on the comp whiz for that particular property.  Now you’ve got some insight into whether there is any equity or not.  Once you have identified if there is equity now is the time to go after the seller’s and see if there is any opportunity there.  Also you can identify who the lender is.  That’s another handy thing to have once you do reach the people that control the deed at that point.

Now the next question you were asking is there is a house across that’s been vacant for several years.  There is a city lien and records shows that the city has taken the land for non payment of taxes, but there is no deed transfer.   The owner on record has been dead for several years.  I spoke to the tax assessor’s office and the property card doesn’t give anymore detail.  How do I find who owns the house?  Or how do I buy it if it’s owned by the city?

Well that’s a great question Brian.  First I would go to the tax assessor’s office and find out what they do with back taxes.  Typically throughout the country they sell these back taxes to be able to raise money for the community, for the municipality and then they take the sale of the tax deed or tax lien money and they operate city government.  So in place of actually getting the deed to the property what the investor gets who gave the money to the city they get a tax lien or a tax deed.  Now these are different for different states and in some cases even different counties within the states do different things.  So you have to talk to the tax assessor and find out what happens.  First of all find out if they did sell the taxes on this property to others.  Find out if they didn’t then the city owns it because they took it back and did not sell the taxes, therefore they have the access to the deed.  Now just because they don’t have the deed doesn’t mean they don’t have the right to the deed.  What happens is that if the owner is not available then they have to file what’s called a quiet titled action.  This is a lawsuit in superior court where they actually try to find the person and serve them the lawsuit.  If they cannot find the person you typically hire an attorney ad litem.  This attorney is to represent the interests of the deed holder and to do whatever due diligence they have to do in order to try and find those folks.  If they find them then they talk to them about the fact the property is now in the cities hands and they can pay the back taxes and own the property.  If they abandon the property then that attorney ad litem can go ahead and get a deed from them for the city.  Otherwise they report back that there’s nothing, they can’t find the people, through publication, through research.  They report back to the court as an officer of the court that this person is not findable.  Then the judge knows that hey they’re not stealing someone’s property.

So the next step then is to approve the quiet title action and deliver the deed to the city.  Now once the city has a clear deed to the property then they can do anything they want to do with the property.  They can sell it off to any third party or use it for city purposes, such as a park or another building.  So find out what the process is and I want to point out something Brian, it’s very good that you’re asking this question because most people don’t.  Most people see an opportunity like this and they see it as a brick wall.  Oh that too much work, that’s too much trouble, that’s too much to find out.  Well guess what the people who delve into these things are the ones who find the gems.  Now once you know this process Brian, you can become an expert in that area and even get to know and take chocolates to all the nice people at the city.  Because they know about other properties.  They know about other opportunities that you could be taking advantage of if you merrily had the relationship.  So this is very much what I call relationship marketing where you want to build those types of relationships downtown.  These folks can be your friends forever.  Why?  They don’t want to do the work.  If you’ll do the work that would be great for them.  If you would in fact by the tax liens and buy the tax deeds and take on that responsibility that would be fine with them and not be in competition with hardly anyone else.  Because nobody else goes through the pain and suffering of doing it.  Wow great question.

All right Neil Mesler says from Tennessee here working on buying a property from an elderly woman.  The children have a concern about a previous transaction they dealt with.  In the past elderly dad deeded house into all the children’s name.  It was in their name for two years.  Elderly dad then has to go to nursing home.  Medicaid reversed the transfer due to the three year rule.  Is there any way the sale of that mother’s property to me a third party can affect them in any way in their mother’s future years when dealing with Medicaid or Medicare?

The answer is Neil, yes there is the three year look back period and some states five years where they look at what were the assets of this person.  They look to several different issues.  One is did it go to a family member which means that they can reverse it.  Or did it go to a legitimate third party.  If it went to a legitimate third party for consideration then they typically will not undo that sale.  Why?  Because nothing was done in anticipation of receiving aid, so the sale of that property and the income that came from it and the later spending of that income, if any, then is no longer an issue.  The person is destitute at that point has no more money.  Regardless of the fact that they used to have money because they did sell a property.  That’s not the issue anymore.  So deed transfer within the family is a real problem.  They do look at the income so if the lady got $30,000.00 they’re going to want to look at what happened to that money.  Is there money still squirreled away in a bank somewhere?  Is there money under the mattress?  What happened to that money?  Where did she spend it?  They’re going to track checks and expenditures to try to found out if there’s any squirreled away money that the family has knowledge of or control over and get that spent before Medicaid or Medicare.  Another word for that is the taxpayers kick in and start paying for that person.  So they answer is it depends.  But third party is typically a very good move and you can justify all the process, show the contract, show the deed, show every detail, so there is really no question that it was a legitimate third party transaction.

Carol Holcomb asks I’m working with a seller who owns the property free and clear.  It has been a rental and she has found a renter who will move in November 1st.  She is willing to sell it with owner financing on agreement for deed for 10 year note.  We just have to agree on terms.  You teach us to talk about number of payments and have zero interest.  My main question is how do you present this to the seller who wants to know what is the current interest rate for this type of deal?  Thanks for all the great information.

Well Carol, what I would do is mention that the interest is included.  So what ever price you come up with is well of course the interest is included and we’re going to pay you at x dollars per year, per quarter, per month.  Whatever you can work out with that person.  So let’s use an example.  Lets say that the house is $100.000.00 you use your cost to sell worksheet.  You work backwards; you show them all your cost to sell.  By the time your done with it even if you bought it for $100,000.00 today you’d end up selling it for a net of you know $75,000.00 once you take into account all of the expenses.  So you’re showing that there’s really no profit in it for you to buy it at $100,000.00 and sell it at $100,000.00 you have to show that there’s a profit below that.  So you’re going to deduct all the things on the cost of sell, come up with a final number.  Then remember that when you do your cost to sell you’re going to include 5 points and 15 percent as short term financing on that deal in your cost to sell worksheet.  But if there’s push back on the price then you can always add that back into the price that you’re paying for the property.  So let’s say that you had calculated that it would take you six months to sell the property.  Let’s say that you had calculated 15 percent interest then that’s .0125 percent per month of interest on that.  All right so the loan amount then would be that net amount on your cost to sell worksheet times .0125 timed the number of months that you’re going to carry that property.  The total loan amount times 5 percent which is the 5 points.  You add those numbers together.  Add that number back to your bottom line.  Which in the example I’m using is say $75,000.00 and then let’s add all those other numbers up and say that that’s your cost of funds in the original scenario using a private money lender would have been say $8,000.  So now you take your $75,000.00 plus $8,000.00 and now that makes the loan amount $83,000.00 that you will pay the nice person.

Now you negotiate the payments.  How is that person going to receive those payments?  Well it really depends on the individual.  Do they need monthly income?  Is that how you’re going to sell them on your owner financing scenario?  If so then you’re going to have to come up with a number that meets their needs.  If monthly income is not an issue for that person, then I typically don’t even mention monthly income.  I mention annual income that comes around November 25th of every year towards Christmas.  So that they have this extra hunk of money come in for Christmas presents.  If annual income is not an issue then I’m not even going to mention that either and I’m going to go for paying it when I sell the property.  Paying the entire note when I sell the property or 10 years, whichever comes quicker.  Now you’ve got the opportunity to totally avoid any cost of funds during your ownership of the property, while you’re putting tenants in and carrying them.  This is a fantastic strategy.  It really depends on what your sellers needs are and then your going to craft your offer around their needs.  You’re going to use paragraph 14 of your purchase and sale agreement to spell that out.  As you know the structure of that paragraph is set up so that you first say the amount of the owner financing.  Then you say how it’s going to be paid.   So in this example let’s say that you settled on $83,000.   It would say $83,000.00 with one single payment of $83,000.00 due in payable October 2018.  Which would be of course no payments, no interest, nothing the entire amount due on or before 10 years from now.  The other way that that can be done is say $83,000.00 with 83 annual payments of $1,000.00 each.  Probably not going to sit still for 83 year mortgage so we can do that a little differently and say $83,000.00 with lets say 10 annual payments of $8,300.00 each.  Which would be of course a zero interest because it’s already built into the note.  Another way of phrasing that is $83,000.00 with 83 monthly payments of $1,000.00 each.  So that still gets you the $83,000.00 as the bottom line to this whole thing.  So use the paperwork the way it was designed, so that it does the negotiating for you.  It spells out the details of what you’re doing and you are the salesperson and what you are selling is the solution to their problem and how it benefits them in their life.  Because it solves a certain problem or provides a certain solution for them that otherwise they would not be getting traditionally on the sale of the property.  For one thing they sell their property today.  That’s something you want to use.

I’m going to go a lot deeper into these strategies October 23rd thru the 26th at our Millionaire Deal Maker in Atlanta.  Where this is exactly what we do.  We breakdown and take advantage of our opportunities and deals.  Design the deal and craft the deal.  Because there’s so many different ways we can structure the deals.  Now Carol, I want you to go after this deal.  I expect you to get it and I want you to be able to report back to me by next month, exactly what happened with this deal.  I hope to see you at Millionaire Deal Maker.

All right we’ve got Agnes Chifuta who says what do you do with multiple offers for REO listings?  Do you offer higher?  REO’s are great deals.  Have you been buying REO’s?

Well Agnes, great question in fact we bought about 14 properties over the last 6 weeks.  So the answer is absolutely.  We’ve been buying REO’s.   No question.  The only problem with REO’s is they are all cash deals.  So you do have to kind of get your cart and your horse in the right place.  You can make offers all day long on REO’s but how are you going to close them?  Where’s your money?  Have you accessed; have you sourced your funds?  That’s another thing that I’m going to be going into at Millionaire Deal Maker.  Where is the money and how are you going to get the money to be able to do the things.  I mentioned to you already on this recording that we offer that for you as well.  So this is another opportunity for you to step up to the plate and do deals just like this.  Do I offer higher prices then they’re listed for?  Agnes not by a long shot.  I offer a lot lower then the bank is asking for.  It may look like a great deal on the surface but let’s delve deeper.  Let’s look at that street that it’s on.  How many vacant properties are there on that street?  How many properties have been held long term on that street by banks?  How many properties are for sale on that street and how long have they been for sale.  I look at the days on market.  I look at how long that realtor’s had that listing.  I call them up and ask them how many showings they’ve had.  It’s very important to determine what your market is.  Now the good news for us is we have a different market.  Because of our exit strategies we’re not faced with buying a house one day for $100,000.00 and trying to sell it the next day for $100,000.  It’s not going to work.  We’ve got to be able to have a profit in there.  So I’m able to use all of these facts and factors when I make my offer to get a significantly lower acceptance price then even the listing price.  Agnes I hope that helped you.

Okay, we’ve got a question here on realtor license from Dick Rosen.  My son has been a realtor for several years.  He is having hard times due to the market conditions and has decided to come work with me on the investment side of real estate.  Yeah he is seeing the light.  That’s a good thing.  He is contemplating letting his license go.  I’ve encouraged him to maintain the license but I really can’t give him any good reasons why.  Would you recommend he keep his license and if so why?

Well Dick, the benefit could be that a lot of the properties you see just as in Agnes question those are listed properties.  Well you could use your son’s license to make the offer to the realtor.  By that I mean the listing realtor who has the relationship with the bank also has it on the MLS.  Any realtor can go on the MLS, search for these leads, and bring a contract.  When they do so and its accepted contract and there is a closing guess what?  That realtor gets paid too.  Now I’ll tell you another reason your son can take advantage of that realtor license.  Often when doing short sales when you submit your offer to the bank you can include a real estate commission in there.  Even if the property is not listed.  The realtor also can submit the offer for you to the bank and charge a fee for the short sale service.  So there’s a lot of different extra fees that banks are willing to pay that have absolutely nothing to do with the contract price.  In other words you can offer a $100,000.00 on the property that’s worth so much more then that.  But then when you get to the final HUD closing statement the bank’s had $14 to $20,000.00 worth of extra fees taken off of the $100,000.00 that was brought to the table.  That’s money that’s paid to the third parties.  Such as realtor’s and short sale specialists who negotiate the deal with the bank.  So these are great reasons for him to keep that license.  Not only that he has access to the MLS and can mine that MLS everyday for what we call hot sheets and these are specific words that you put into the MLS that are search words to find leads.  The good news there is he can turn around and make these offers very quickly the same day that the offer comes out.  Just as in Agnes example she was mentioning great buys from banks.  Well these things hit the market you want to be able to respond to them very, very quickly and offer a good price.  Because the banks are reactionary these days and they will pay good money for these kind of offers.  Good luck Dick.  I think that’s a great opportunity for you and your son.  I can’t wait to see you.  I heard that you’re coming to MDM and you’re bringing your son.  So I’m looking very forward to teaching him all the strategies we’ve got.  You know we’ve got over 35 different ways to buy properties.  So all these leads that he’s going to be bringing to the table, he’s going to be looking at them with a whole different view point when we get through on the 26th.  I can’t wait.

All right we’ve got a business management question from John who says how many months of expenses should you have as a reserve just in case of emergencies or temporary lack of income?

Well John, that’s a fantastic question and one that I think everybody needs to pay very close attention to.  Listen when you’re getting into this business you have to understand that all businesses have a rev up period.  Let’s use an example of opening a store in a shopping center.  Let’s say that you had a background in computers and you’re going to open a computer store.  Wonderful, okay we’ve first got to get our sign.  We’ve got to secure our location.  We’ve got to get the deposit made.  We’ve got to order our counters.  We’ve got to set up our operation, got the carpet laid, get everything set up.  The lighting, everything.  All right that’s going to take some time and some money.  You’re going to be writing checks.  Well were will that money come from?  You’ve got to capitalize your business.  Then when you capitalize your business included in that capitalize is a rev up period.  Because when you open your doors what kind of marketing have you done?  How many customers are going to be there that first day?  How much income are you going to have that first month?  Then the second month and the third month and why do you think so?  What kind of marketing are you going to do that’s going to get you x number of leads.  That’s going to get you x number of sales.  That’s going to get you x amount of profit.  Why do you think so?  What is your business plan?  This is exactly what we do at Millionaire Jump Start.  We design a business plan there and then lay out and back into what you’re trying to accomplish.  So first you need to have goals.

You need to understand how much money am I trying to achieve?  How much money am I trying to achieve annually in the first year?  How much am I trying to achieve monthly?  Now in order to achieve that what am I doing to achieve that?  How many ads am I going to have to run?  How much is that going to cost?  How many leads is that going to bring me?  What makes me think those people are going to buy?  All of this is part of building a business and a business plan John.  Yes, you should have 6 months worth of your cost of living and your cost of operating your business in the bank.  So that you have the reserve as you say just in case.  But you better make sure included in that is the cost of marketing.  Because if you don’t have enough funds to market my friend, your business is dead.  There is no reason anything should happen in your business.  Why?  Because you didn’t generate it.  What did you do to generate those leads?  Now another thing I talk about and teach is how you can generate free leads and very low cost leads.  But also on top of that is your paid leads from other sources that are very good sources that you know are going to produce on an ongoing basis.  Great question hope everybody took notes on that one.

Malan Chalupa hi Lou I would like to ask you what I need to do in order to go back to the lender Litten and ask them for a lower price on the short sale I’ve already submitted and realized that it is too much what I offered to them.   House is assessed at $120,000.00 pay off is $105,000.00 an offer was $73,000.00 and the BPO might be around $60K.

Well here’s what I would do Malan.  I would go back to the lender and say I know that you’ve accepted this.  You didn’t really say what they accepted the amount at.  But let’s say they accepted it at $73,000.00 if you come back to them and say I appreciate your accepting that offer unfortunately my client the buyer has not been able to obtain financing at that price.  The lenders have cost the appraisal way down.  The lenders are coming back with a much lower number.  I’m not going to be able to buy this property at the $73,000.00 fact the new offer is $40,000.00 and they’re going to able to fund $40,000.  What would you like to do?  So throw the ball back into the lenders court and see if you can get it lowered.  Now I was just with Hunter Pascal from Orlando yesterday.  He talked to the whole group I was in about something that happened some years ago.  Where he and I were at lunch one day, he took me to lunch and said Lou I just got this short sale accepted for $20,000.00 and he said I’m so excited.  I’m so pumped this is a great business.  I said wait a minute Hunter let’s talk about this.  Got more in to detail about the deal and I realized that the lender needed him worse then he needed this deal.  So I said he’s what I want you to do Hunter.  I want you to go back to that lender and offer him $5,000.

So he did that and he came back and he says Lou you know what happened?  He said they gave me the finger.  They told me to go away and they said we’re not interested in you at all.  He said I really thought you had let me down Lou.  I really thought you had cost me that deal.  He says you know funny thing the next Tuesday they called me back and they said Mr. Hunter he said we have looked at this deal and we have decided that we cannot accept $5,000.  But we can accept $7,500.00 and how quickly can you do this?  He said he fed-ex the check to him the next day.  So instead of buying that property for $20,000.00 he bought it for $7,500.  It’s the exact example you just asked.  I merrily had him go back and offer way less then had been already accepted in the first place.  So do the same thing Malan and let me know how that goes.  I’m very excited for you on that deal.

All right Vicki Blako has a question.  Another short sale question.  Hi Lou been told by several real estate agents that there are several states that are not doing short sales anymore.  What can you tell me about what I am hearing?  See you in a few weeks at MDM.  Mark and Vicki Blako.

Well I don’t know why there not doing short sales.  I think what they’re really referring to is the foreclosure issues.  Some states have passed laws.  Basically stupidly saying that us guys, investors, who go and solve people’s problems and help them not to have their properties foreclosed.  Help them not to go into bankruptcy are now stopped from going to see those people.  That when someone is in default or someone is in foreclosure that we cannot approach them.  But interestingly realtor’s can.  People who are in the business who are licensed professionals under the state laws can approach them.  Guess who else can approach them?  Non-profit organizations are not included in this.  They are exempted by this action.  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 exposing at Millionaire Deal Maker is a strategy under a 501C3 where you can go out as a legitimate foreclosure rescue expert.  Who under the 501C3 non-profit helps people to save their homes, if you can.  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.  It’s that simple.  So staying in the home is 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.  Let me tell you something folks this is our future.  Ladies and gentlemen welcome to our future.  Because some 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.  It so loosely written it’s for neighborhood stabilization.  Which means they can spend the money any way they want to.  They can buy up foreclosed homes and resell 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 your for-profit arm that is well funded by deals that it buys.  So you can help people and make money there.  You can in your for-profit company and make money there.  How much better could it get then that deal right there?  I’m going to teach you a lot more about that at MDM Vicki.  Great question.

All right John has a financing question.  Can you still obtain financing in this market if you have no tax returns for the past two years, but have excellent credit?  Every company seems to want documentation even if the property is less then 50 percent below ARV.

Well John, yes you can.  Now remember that there are many, many lenders out there in the world.  So let’s start with private money lenders.  Fascinating they don’t ask for tax returns.  They don’t ask for a lot of things.  In fact most of the time they don’t ask for credit.  So we’re going to start with your credibility.  Now one of the things Street Smart has is we have a borrowing web site that is totally designed for credibility purposes.  To have your investor go there and see exactly how you buy, exactly how you sell and how you can work with them to borrow from their personal funds, their IRA accounts, their 401K’s.  Be able to give them a solid return on an ongoing basis on real estate.  This is very important and it’s secured by real estate if they choose.  So you’ve got something that is the total solution really to folks that are out there.  Now I’m going to be talking more about that at MDM too.  But here is the rest of the story.  I want you to include in your calendar a way to definitely call people and make connections and sit down in front of people as private money lenders.

The rest of the story is traditional lenders.  So again, you’re going to have to make the connections of mortgage brokers all over.  You’re going to find out that there are programs available right now for folks just like yourself that do not have limitation on them.  The sad thing is they’re going to have pretty high interest rates.  The less documentation you provide the higher interest you pay.  It’s that simple.  You are seen as riskier to them then someone who provides full documentation.  So that’s going to be a way to do it.

So you’ve got private money lenders out of their own personal funds.  You’re got private money pros who also lend, but also again at high interest rates.  Then you’ve got traditional lenders.  I want you to go to volume 6 borrowing where we’ve got a whole breakdown of these various lenders and the way to approach them.  Even scripts on what to say and the lender presentation kit that is what you’ll use when you sit down with people personally to raise money for your deals.  All of that is done for you.  All of that has been created by Street Smart.  If you don’t have volume 6 borrowing, call the office 1-800-578-8580 and let’s get you started right away with that.  Because it is so loaded with everything you need.  Including every calculator you need to compare loans to see what’s the best for you.

The very best strategy for you all of that is laid out for you.  You can even compare loans side by side by side and it will tell you what is the best one for you, even based on your personal tax bracket, which is the best one for you.  Lots of other goodies in there too.  Be sure to get borrowing volume 6.  In fact that becomes a very critical thing for a lot of people in this business.  They totally get stopped not by learning how to do this business, but by asking themselves where is the money.  What will I do if somebody actually says yes?  What will I do if somebody actually is ready to sell me a house and I don’t have the financing lined up?  That’s what volume 6 is designed to do.

All right we’ve got a selling property question which says how do you find the best realtor’s to sell your properties in a particular market?  How can I find this information on the internet since the property is 1400 miles away?

Well that’s a good question.  First of all many realtors have figured out who have been in this business a long time that they want to find a farm and work the farm.  So they find a particular neighborhood and I can tell you the names of the ones that work the neighborhood that I live in.  Because they consistently have all of the listings in that neighborhood.  They know that neighborhood like the back of their hands.  They know the prices, the price points; they know who is moving in there, who’s moving from where.  They know how to go find those people all the good stuff.  Now the good news about your Street Smart web sites too is your selling web site is universal.  It’s your web site with your domain name on there, but you can market in that area where that house is even if its 1400 miles away using our phone system that has the 1-800 number in it.  The scripts that are already pre-recorded and pre-loaded to your system that then takes people through your whole buying program.  So you can get signs up immediately and marketing out immediately for that particular property and be able to drive your own traffic.

Now here’s what we found.  That when we drive people to the web site we actually get buyers from all over the place not in that local market.  So while you can use realtors that are there locally they’re going to bring you folks that are local and even national and international.  But your web site should also be working for you too.  In conjunction with your relationship with that realtor.  So when you sign the listing agreement with the realtor I want you to keep in mind that you keep an exclusion for yourself and your own marketing.  You can even cut their commission based on this.  You can say look I’m going to be you know what I know that you’ve got to come out of your pocket to do all the marketing for my property.  So tell you what I’ll do, I’ll do all the marketing for my property, you list it on the MLS.  You show it and if I find somebody you show it, you sell them, you write up the contract I’ll just pay you a lesser commission on the folks that I find.  Now if you find the buyer and you sell them, and you show them then I’ll pay you the full commission.  Or even a bonus.  So now your both working in tandem to get that property sold.

Now how do you find those people?  You are going to call the local real estate commission and your going to mention that area and your going to say who is a realtor in that area of town.  Then you call of the real estate offices that are located in that area and you find out who the specialist is in your particular market.  Then when you talk to those people you interview them.  How many listings have you had in this neighborhood over the last year?  How many have you sold?  How long did it take?  How much as a percentage of the list price did you sell those properties for?  Interview them.  Find out what they know.  Find out if they’re legitimate or if they’re a fair weather realtor that works on Wednesday afternoons once a week.  That’s not the kind of realtor you need.  You need an aggressive, hungry realtor who does this every single day.  They’ve got their total marketing act together and even better if they have a team that does it in the team approach.

All right what’s the best way to market a property that I’m evicting the current tenants in?  I plan to sell it on a lease option but want a buyer lined up when my current tenants are gone.

Oh yeah me too.  Okay, first of all you’re going to put it on the web sites that I was just talking about Brian, and I know you’ve got them.  That’s our selling web site so if you’ve had this property on there already you know that it’s already archived in there.  I want you to have at least a dozen pictures of that property front, back, all the interior shots, even picture of the school in the area.  A picture of a brand new shopping center.  Anything that would attract people to that area.  A new church, anything that’s new about the area.  Exciting, different shows that it’s improving and when those national and international people visit your site they’re also going to find that hey there’s something happening in this neighborhood.

So that all the photos that you post there don’t have to be about the property itself, let’s get a shot of each one of the rooms; let’s get a shot of the exciting parts of the house, the most interesting parts of the house.  Then let’s get some neighborhood shots too.  Now what’s the best way to market it and I know you’ve been to MPI which is our Massive Passive Income training.  That’s the holding and selling side of the business.  One of the things that we provide you in that manual is the selling, renting, marketing checklist.  I want you to take out that checklist Brian and do everything on there.  There is an onsite section that tells you what to do at the property.  There’s an offsite section which is everything you do at home basically when you’re getting this property marketed.  Now what there?  Well there is a whole list of a number of different web sites I want you to post this property to.  But we don’t stop there.

Also all the advertising that you’re going to do.  The neighborhood referral program is listed there and how to do that.  Then at the property you’re going to take my buyers presentation kit, print that out and post that inside the storm door.  Or inside the windows of the house, or on the garage that tells them about your program.  I want everyone to recognize that and this is a very important point.  The best thing you can ever do is not sell the house, sell the program.  Get them excited about your program.  Your web site does that.  Your Street Smart web site does that.  Also any posting that you do at the property that excites them about the program.  That’s what you want to do and then secondarily sell them the house that fits that program.  Get them excited about the fact that number one you provide owner financing.  They don’t need to go to banks.  You provide the financing, your company does.

Also they can get in with low down and even in some cases no down.  Why?  Because they take the property as is.  They will do the work for equity part of this and you’ll give them credit towards the purchase of the home for them doing the work that you would have spent money out of your pocket for.  That’s part of our work for equity program.

So all of these aspects are built into our system that allows you then to market that property.  I would do all you can possibly can do.  Here’s the picture I want you to have in your mind.  How do I put a spot light on this property so that everybody that goes there gets excited about it?  Now another aspect about it is our phone system.  Where we’ve got the pre-loaded scripts that guides people through the process of explaining what are program is all about.  Then they can push zero at anytime, talk to a live operated, which is you or what we’ve got set up is our live operator service.  Our voice whiz that then takes down the data loads it to your web site and then also e-mails it to you.  So that you can respond back to that customer ASAP.  Or a realtor or other professional you’ve hired to intake those leads.  They can call those people back and get that property sold for you very quickly.  You’ve got the right philosophy you definitely want to sell the property before it is ever on the market.  You want to get your buyer lined up before it’s ever available.

Now we’ve got a wholesaling property question.  Carol asks hi Lou give me some tips about how to evaluate a buyer who has cash.  I had a recent deal fall apart the day of the closing because the buyer had to find another private lender at the last minute.  It was too late for this deal.

Well Carol, first of all you didn’t call me, which was a mistake.  You probably could’ve kept that deal.  So that was lesson number one.  Lesson number two is how do you evaluate a buyer who has cash?  You get their lender to give you a letter.  You tell them in your contract with them that your acceptance of the contract is contingence upon them providing a proof of funds letter.  Either a lender acceptance not of a preliminary review of their credit but an actual loan approval.  Just tell them look you go ahead and get your loan approved but in the mean time I’m going to keep the property on the market.  If somebody else who really has cash shows up or really has a loan shows up I’m going to close with them.  So that means you’re going to go under contract with a kick out clause that says if someone else comes along with a contract I’m going to give you a 72 hour notice that you have to provide me with a proof that you absolutely, positively have been approved for a loan.  Otherwise I’m going to kick you out and replace you with this buyer.  Never, never, never, never, never stop your marketing until you know that you’ve got your buyer.  That’s where most of us fail and have the exact same experience that you had where the money dries up it was never there in the first place.  That’s the sad story.

Janice Labroad from Connecticut has a question.  Hello Lou myself and two others are looking to purchase properties to buy and hold in another state.  We all have separate LLC’s already in place.  What do you suggest would be the best structure to use to do this?  All interests would be divided equally.  Do you have any other insights to share?

I sure do.  You’ve been to the MAS training which is Maximum Asset Shield and everyone should go through that training.  Because that’s the protection side of the business.  We’ve basically divided up our certification program into three parts.  The buying certification, the selling certification and the protection certification.  So at Maximum Asset Shield one of the things we talk about is partnerships.  This is so important because what I want you to do is purchase the property in land trust.  All right now that means the property now has its own entity it’s the land trust.  But then there is the beneficial interest.  Who has the beneficial interest?  Well it could be each of your LLC’s.  Each with a 1/3 interest of that property.  Another option is to have three different personal property trusts.  Then those individual personal property trusts would each have its own beneficiary each one of your LLC’s.  So now you’ve brought the protection line down three levels.  Where the real estate is in the land trust, the beneficial interest is in the personal property trust and the beneficiary of that personal property trust is your own personal LLC.  Each personal property trust then has a relationship with the other personal property trusts by virtue of the beneficiary’s agreement.  That beneficiary’s agreement is in your land trust volume 4.  The land trust volume 4 is the keys to the kingdom in this concept.  Because I actually give you a lay out for how the details of doing the paperwork would be.  The beneficiary’s agreement is on page 47.  It tells you basically it’s a very loose partnership agreement.  I don’t like the word partnership.  So what I like is joint ventures.  We do a joint venture on this particular deal if we like that.  If it goes well.  If it’s everything we expected.  We can do another one.

Now separately there is a management agreement.  That management agreement then and that’s on page 88 the trustee of the trust who owns the property should hire management.  That person is going to be responsible for hiring the tenants.  We call them hiring tenants and putting them in place.  That’s going to be another solution for all of you in getting the right legal documents in place as your acquiring properties.  You can do extremely well with this strategy.  One of the issues is going to become who is suppose to do what and under what circumstances.  Who is suppose to do what and how is who suppose to be compensated in what they do.  What happens if who doesn’t do what they’re suppose to do?  What is the remedy?  What is the payback?  You must spell all these things out in that beneficiary’s agreement.  Or you’ve got a real problem.  That’s exactly what we’re about.  You know that my main Louism is prevent the problem before it occurs.  That’s exactly the way we want to structure our entire business practice is that you’ve already set these things in place in advance of any relationship that you’ve create with those third parties.  I should say that always make it a joint venture.

Is there a standard form for filing a LLC’s annual report?  If so where can I find one?

Well the LLC now if you’re a member of the ARC which is part of our strategy for helping you deal with your entities.  That’s LLC’s, corporations, limited partnerships, land trusts, personal property trusts and getting all those things done.  Your other issues become state issues.  What are the state requirements?  What are the state taxes and state taxation?  Since LLC’s are state entities then how you fill out the forms is going to be directed and dictated by the state and by the IRS.  So typically an LLC is a partnership, although it can elect to be taxed as a corporation.  So it really depends on how have you elected your LLC to be treated?  Now your state will have its own tax forms and those tax forms will be used for filing those things out.  If what you’re meaning by the annual report is something different then the tax return, I think maybe you’re talking about like minutes?  Like corporations have an annual meeting, an annual minutes, that doesn’t have to be so sophisticated.  You merrily do the minutes.  In fact many states have them on their secretary of state web site.  Where you fill out an LLC application, it also provides all the paperwork that’s required in that state.  So if you need anything further on that let me know.

All right Darlene has a question.  Do I need to have a lawyer prepare the deed and record the warranty deed for a trust in New Hampshire?  Or can I send a notification or declaration of trust to the state to record?  The difference is $150.00 here in New Hampshire.  I have put two properties in trust sort of.  The lawyer’s office took a full month to let me know that they were sending it in this week.  So I hope it’s been done.  For $300.00 if I need an attorney I’ll find one that will be a bit more timely.  Thank you so much.

Here’s the answer Darlene.  Some states require that deeds be prepared by an attorney.  Other states don’t require it.  Now what would be the first thing, if its not required that a lawyer prepare the deed guess what you can go to the existing deed you already have on those properties and I bet you can duplicate that pretty darn close.  Go to www.louisbrown.com go to the members only section and put in user name student and password your going to put in is the serial number on your Street Smart forms disk.  The one that says serial number on there.  It’s right on the outside of your disk.  That’s what you’re going to use to access it without the hyphen in between.  So it’s WEJ and then a series of numbers after that.  Put that in that will give you access to the backside of the web site.  So what’s there?

Well when you go to New Hampshire you can find out the details.  In fact find a copy of a deed for New Hampshire, copy of a mortgage for New Hampshire, the landlord tenant laws.  All kinds of great stuff.  Landlord tenant laws said the notarization requirements for your state, the foreclosure requirements for your state.  All kinds of goodies are already there right for you.  So that would be the key.  I would prepare the deed.  If you prepare it and the lawyer reviews it that should cost pennies.  Because all the work is done.  They don’t even have to turn the computer on.  So look at it yes, it’s all blessed cost $25.00 you’re done with it.  Lets face it all you’re doing is duplicating what already exists, what everybody else does so it should be pretty simple and easy to do.  You said now send in the declaration of trust.  The thing I don’t like about sending in the declaration of trust is now you’re information about the trust is recorded on public record.  Who the beneficiaries are, where to contact the beneficiaries, all kinds of details are there.  I would prefer never to record your trust itself.  That should be kept private.  Let’s not have anybody else know about the trust if you can possibly avoid it.

Okay Caudry has a question.  Hi Lou is it possible for me to open a trust checking account in the same name with two different banks with the same ID number?  For example Belfast Trust checking account with Bank of America and another Belfast checking account at Wells Fargo both with the same ID number?

Absolutely Caudry, you can do that.  I’ll give you an example.  Let’s say a corporation wants to open multiple bank accounts all over the city.  They’re going to use exactly that corporation’s name.  Let’s say Exxon for example and they’re going to use the tax ID number of Exxon to open those bank accounts.  Don’t big companies have lots of bank accounts?  Absolutely they do.  There is no need for them to obtain a separate ID numbers for each one of those bank accounts.

Wow have we covered a lot of ground today.  I hope you found this interesting.  I hope you found this valuable.  We’ve got a lot more for you when you come to Millionaire Deal Maker.  I hope you’re seeing the value of this group Q and A call.  We do this twice a month.  Absolutely loaded with information.  This is a great example of what we do every two weeks.  I’ll tell you its amazing all the questions are different.  Things that come up on an ongoing basis for all of our Street Smart licensees.