Lou Brown:

Hello everyone and welcome back to another Street Smart Investor Training.  This is our Group Q and A that we do twice per month and I welcome you to take a look at what’s happening in the marketplace this time.  Isn’t it amazing when you just look at the craziness of the stock market and you look at the craziness of the things that they’re doing to investors?  We just smile and wave when we know that our Street Smart System works beautifully in this market.  In fact, it works better in this market than it does in a buyer’s market.  We’re just so excited buying properties.  We have several Subject To’s that we’re closing this week.  We have several that are owner financing and probably by a week from now we’ll have five under contract.

It’s a very exciting time for you to take advantage of this market and move yourself forward because paralysis of analysis will definitely stop you and that’s where we don’t want to go.  In fact, the smart thing for you to do right now is to identify and source money because a lot of the deals that are also in the market are cash deals.  I mean things that you can buy for pennies on the dollar that banks are selling through realtors.  Imagine that you can call a realtor and say please include me the next time you get a REO deal, give me a chance to bid.  I promise I’ll give you an offer within 24 hours.  That way it doesn’t get exposed to the entire MLS and the realtor knows that you are legit and you can have a proof of funds letter from the bank proving that you have access to cash immediately.  These are the times to be able to take advantage of things that are cash deals as well as our traditional subject to an owner finance deals.  Definitely get yourself in a position to do that.

Next week at MBA, Mastering Business Advancement, December 2nd through 4th, I’m going to be spending a lot more time on this conversation because if we have a chance to be able to catapult you and capitalize your business then you’re going to be able to take advantage of these kinds of deals.  If you look at the money that’s on the table and the equity that you can buy in this market, it’s truly amazing and it won’t be duplicated in the future.  I promise you’re going to have a riding of this market over the next eighteen to twenty-four months and once the market straightens itself out, you won’t see these kinds of discounts again.  Now is the time to be able to take advantage of those things.  In the last call I did mention to you about some of the economic stimulus packages that the government has signed into law and I gave you some details on that one.  I’m going to be going into more detail at the MBA as well.

I’m also going to be talking about another thing that I want you guys to be keen to and that is operating a part of your business at least under the umbrella of a 501C3 Charity who is a housing counselor that can go knock on doors and talk to people.  But again I want to give you more details about that when we get together at MBA.  So do get yourself registered for that and that is 1-800-578-8580.  We’ll be more than happy to get you all the details about it.  It’s Tuesday through Thursday, December 2nd through 4th.  This class is designed to catapult your business to an entirely different level so definitely get yourself there.

Now we have a purchasing property question from Robert Johnson who says how do I purchase investment property if I don’t have the funds?  Well Robert, that’s exactly what I was referring to.  I want you to be sure that right now you access the funds.  That would be your next job.  Not buy properties but line up funds.  It’s important to make yourself a list of all the potential investors that you have, all the folks that you know and some that you don’t know.  Folks that you think have money.  Think about business people in town, doctors, lawyers, folks that you’ve worked with in the past.  They’ve never talked to you about things like this.  I want you take your business plan and your business model and go sit down with them.

A lot of our total package folks that have our websites, our total training package, our thirteen volumes of the whole enchilada and the coaching that we have that could support you all the way through.  When you take that business model and show it to a potential investor, it’s amazing how warm they are and receptive they are about how they could help you.  We do have ways that you can fund them and you do have ways that you can set up the operation.  I’ll teach that to you but the most important thing right now is to source those folks and take my Lender Presentation Kit and get yourself familiar with it.  Present to yourself; sit in front of a mirror and present that Lender Presentation Kit.  Sit with your spouse, significant other, business partner and go through that.  Have them ask you pointed questions.  Get yourself comfortable with the answers.  Create and answer all the objections that could possibly come up around borrowing money.  I want you to become a pro at borrowing money.  It’s very important.

In fact, last week we had our Platinum Group and our last meeting was in August and since August the Platinum Group has raised over $1.5 million in cash that was put in the bank.  Not promises of money, but actual money that came in.  It was by using this concept and using the Seller Presentation Kit that they were able to do that.  I definitely want you to get comfortable with that process.  I’m looking forward to working with you some more Robert about that but let’s make that your first step in the process.

Now we have Miguel Garcia who says Lou, I am helping out a friend with her mortgage.  She is struggling to make her $2,500 a month payment, PITI, on a 30 year mortgage.  It’s a fixed rate at 6.37% that was taken out in March 2006.  She and her husband are still current on the loan but are concerned that they will fall behind since this was a 100% financed loan with PMI.  I recently submitted the Authorization to Release Information to Chase and want to begin the loan modification process.  What should my first conversation with the lender include?  Can I expect to get any relief from the PMI or should I only focus on reducing the interest rate?  If so, what rate can I expect the bank to reduce the mortgage to and how long does the process typically take?  Thanks for your help, Miguel.

Okay.  This is a great question and in fact, everyone needs to become proficient in today’s market with loan modifications.  So the process I want you to take is to approach the lender as a financial advisor and you’re going to call and say I’ve got my folks over here, the Jones’, who have a problem.  They are current with their payments, however, that is soon to be a thing of the past.  They won’t be able to remain current on their loan any longer and I’m calling to see if we could prevent the problem before it occurs and go ahead and work something out with you.  Right now I could tell you that they will not be able to any longer pay the $2,500 a month.  However, we were looking at their interest rate and it’s 6.37%.  If  you were able to reduce that to say 1%, then they would be able to resume payments and at least make that payment.

Now Miguel, you will want to go ahead and calculate what that would be and then say okay, let’s say that it was $1,900 a month that it was reduced to.  Then you’d say okay, if we were just able to reduce their payment to this $1,900 month, everything would be fine.  That would get the lender at least to pay attention.  I want you to recognize that this loan will not be in Loss Mitigation Department, it will not be in the Foreclosure Department so you’ll be going through normal channels when you call in the regular number for the lender and you’ll have to talk with that person who answers and tell them who you are.

Under our non-profit strategy we found some very interesting things are happening.  If you call in as a non-profit, they give you a different telephone number, a different web address and different folks to work with.  If you’re not part of our Non-Profit Program, you definitely want to become part of it because not only are you given a letterhead to work with and a title to work with, but we also set up a website for you and that website then the lender can type in quickly and see your picture and see what your affiliated with and how the whole program works.  So it’s very powerful and it’s something you definitely want to take advantage of when you’re working with loan modifications.  In today’s environment non-profits are getting a different listening than an investor or even a business that’s calling in.  Again, they have a program for that so you want to definitely hook onto their program.

The answer to your question about PMI is yes, the PMI companies have authorized the loan servicers and that’s actually who you’re working with is the servicer of the loan.  They have authorized them to be able to do workouts.  To what degree, it really depends on the loan product that your customer has so that answer I can’t give you because I haven’t looked at the actual loan documents.  But the lender will know what loan product it is and they’ll also know what kind of leeway they have to be able to work something out with that particular loan.  That’s a great question Miguel.

You go on to say if so, what rate can I expect the bank to reduce the mortgage to.  Let’s answer that one that the rate is going to be let’s start at 1%.  Let’s just say that and the rate is really going to be determined by what the lender can do and also what you prove that your clients can pay.  That’s going to be part of the process as well is revealing your clients’ finances and being able to prove that they won’t be able to continue to make that payment any longer.

Then you go on to say how long does this process typically take?  The answer is well it could take a while.  We just had a client get their loan reduced from 9.75% down to 5% fixed for two years and then 6% fixed for the life of the loan.  That’s saying something because let me tell you that the initial loan was an adjustable rate loan.  It was getting ready to adjust.  Not only that, it had a six-month prepayment penalty in it.  Not only that but it was current so understand that you can work with the lender but the process took about five months to do.  It’s really going to depend again on the loan product and what the lender is able to do at that point.

New guidelines are due to kick in soon that are part of the Housing Rescue Act that was passed in July.  We’re expecting to see some regulations come in from HUD in December so a lot of lenders are going to open up other loan products to those particular guidelines that are being promulgated from the government.  You definitely want to be watching for that opportunity as well.  Stay connected with our Coaching Program because we’ll definitely teach you more about that as they occur.

We have a question from Dick Rosen who says Lou, I think I’m hearing you say that we can do a loan modification to reduce the balance of a loan and then take the property Subject To.  How do you make that request to the bank?  Do you submit a package just like a Short Sale or is loan modification all done verbally?

Well, initially Dick you’ll need to ask for their permission that they will consider a loan modification on the loan then you’ll need to submit a package.  And yes, a lot of the paperwork that we have in the Short Sale Package will work but more importantly, they’re going to want to see the finances of your customer and they’re going to want to see exactly what their earnings are and what proof you have that they can actually make the payments.  The question to ask the lender first is what are you looking for?  What kind of payments will allow our client to get approved for the loan modification?  I can get statements from their job, they can get a second job but I’m looking to know what the numbers are so that we can definitely see if we should proceed on this path.  Try to get some guide from the lender and then we can create from there.  Great question Dick.

Remember that you definitely don’t want to mention Subject To to the lender when you do this because they are likely to say no and that would be a real problem wouldn’t it?  It’s more important that they don’t say no, so you have to set this thing up right.

Now we have a question from Ann who says number one, no money.  Number two, how to get started.  Number three, how do I let go of the fear?  Alright Ann, first of all no money.  I mentioned that to Robert as well.  It’s so important that you capitalize your business.  It is a business.  I’m just amazed that folks look at this and they say well I’m just going to run out and buy some property.  Well good and yes, there are certain types of properties that we can buy and certain types of deals that we do that do not require any money.  In fact, the seller will even pay you to buy their home.

First, you have to have leads.  How are you going to get those leads?  What are you going to do get leads?  There are low costs and no costs ways to get leads too.  One is the newspaper; right there there are leads.  Another is to get leads from realtors.  Another is to get leads from mortgage brokers.  These are all low costs and no costs ways to get leads.  Signs, low cost way, to put signs up and down the road and get people to call in and talk with you.  However, the question becomes is there going to be cash needed to do the deal?  If you’ve done your job right and you’ve negotiated the Lou Brown way with the Cost to Sell Worksheet and proven the values to the customer and proven the discount to the customer, then yes there is money available for that deal because you’ve already built in your profit and your profit center in that particular transaction.  No money is not an issue.

I teach another thing, you’ll see this more at the Millionaire Jump Start where we go into detail about your business plan but one thing about your business plan is that your marketing is an energy money exchange.  The more money you have to work with, the less energy you have to spend.  Another way of saying that is money buys energy.  Another way of say that is energy buys money.  If you have no money but you do have energy, that means time then you can literally go to a neighborhood with my Seller Presentation Kit and knock on doors.  And here’s what I want you to say, do you know of any houses for sale in this neighborhood?  What you’re looking for is what about this one?  Or they may know about a vacant home or a divorce situation or probate situation close by and they could send you down the path or may even give you the contact information for the folks that no longer live in the property.

So there are lots of things that have benefited me by merely knocking on doors in neighborhoods.  Take that as an opportunity to go forth my child and knock on doors. Remember it’s not just any old doors either; it’s neighborhoods that you’ve identified that you some day want to own properties in.  That becomes a perfect target market to then go out and knock on doors.  That is how I would get started Ann.

You shouldn’t have fear because there’s nothing to fear but fear itself as Winston Churchill said.  If you recognize that fear is false evidence appearing real, that’s exactly what it is, then you know that there are other folks just like yourself that have done that very thing, gone out and knocked on doors, found opportunities, found deals, structured them and bought them all with no money out of their pocket and in fact, money in their pocket.

I like to use Jonathan, one of our recent licensees, as an example because he just went forth and did that very thing.  He’s only 22 years old, he has knocked on doors, he has talked to sellers, he has put together a marketing campaign, he has people calling him and he has the confidence in the system and therefore, the system has given him a way to be able to say the right things and present the right things to the seller so that now he has gotten I think up to six deals now in the last few months.  I think four of them at least are deals where the seller paid him to buy their home.  It’s important for you to know that that is absolutely an opportunity out there.  Just imagine that these people who pay you, pay you a combination of cash and payments.  Now you have an income stream coming from the seller of the home as well as an income stream from the buyer of the home.  That’s another confidence builder.

Now Paula says do you have a cookie cutter price range for houses purchased to lease purchase?  Some monthly loan payments do not translate into a reasonable lease payment market rent.  How do you determine whether to lease purchase or to sell?

Okay, first of all, do I have a cookie cutter price range.  Well you want to determine that Paula.  Let’s say that you have identified a market area.  What I teach is that you take a map and put a pin on the map, draw a circle five miles out and then start driving all the neighborhoods all around that pin.  Find a couple of neighborhoods that are middle of the market or where the most market is.  So you say well Lou how do I find that out?  Inside that circle that you drew there are some zip codes.  I want you to put those zip codes in zipskinney.com, that’s zipskinney.com and that way you can determine exactly what the prices are in that neighborhood and not only that, what the incomes are in that neighborhood.  Then you can determine what the median income is and that’s the kind of prices you want to go for and price points you want to go for.  There are certainly folks in that price range that would be interested in selling you properties.  Just use that cookie cutter approach to determine what price point you’re looking for.

That’s whether you are lease purchasing the property to buy or that you’re buying it for cash or you’re buying it Subject To, it really doesn’t matter.  You want to make sure that the price point that you’re going to offer the property for, now not buy it for, but the price that you’re going to offer it for is to the broadest range of the market.  I don’t want you buying bombed out houses and I don’t want you to buy too expensive houses because the pain and suffering that comes with doing those kinds of properties just isn’t worth it when you can go for middle of the market.

Then you say how do I determine whether to lease purchase or to sell the home?  Paula that answer is based on how much cash you put into the home.  If you put little or no money into buying that property, then it’s definitely available for lease option and owner finance.  However, if you put all cash into the property, then I want you to try to get your cash out as soon as you can unless you can afford to leave it in, in which case it’s fine to leave it in because I look at houses as banks.  I don’t mind leaving cash in houses.  That gives you an opportunity then to get a broader marketplace when the property can be purchased with existing financing in place.  But when you have to go out and raise money or pay cash for the home, then definitely you’re going to sell it for cash.  Hopefully that cleared it up for you.

Now I have Byron who asks if I’m buying a property but don’t want to trigger a ___22:39 sale clause, how do I do that to still set up and get all the tax benefits of owning the property?  Well Byron, that’s a great question.  First of all, when you purchase the property subject to the existing loan, there’s going to be a deed transfer.  The seller is going to set up a trust, in fact you’re going to help them do the paperwork and set up the trust and you’re going to make the seller the beneficiary of that trust.  Then they’re going to appoint you as the manager for the property and notify the lender that all future correspondence and anything related to this property is going to go to you.  After that the seller is going to sign the Assignment and Quit Claim of Beneficial Interest in Trust.  That’s going to come to your personal property trust.

Yes, you need Volume IV – Land Trust and Volume V – Personal Property Trust to be able to do that because

at the end of Land Trust is all of our Subject To paperwork and it’s very necessary that you follow all the steps and do what that requires because otherwise, there’s a real problem and the lender can call the loan due.  That’s exactly what we don’t want to have happen so I want to be very careful that you do this in a step by step format and do all the paperwork the way that I lay it out for you so that you can’t have that problem.

For the tax benefits I want to also answer that and say that you are entitled to all the depreciation on that property as soon as that deed comes into your trust.  You are entitled to all of the interest payments as soon as you make those interest payments, as soon you make the payment to the lender you’re entitled to the interest that goes with that loan.  As soon as you transfer that property to you, you’re also entitled to any property tax payments, you’re entitled to any insurance payments and anything else related to that property.  That means you can write off all of those costs on your 1040 Schedule E and that’s all related to that property.  Even though the loan is not in your name, yes you can write off the interest and we teach you how to do that as well.  Very good question.

Troy Kensal says you mentioned refinancing to get your cash back.  Banks right now are eliminating or limiting cash out refinances.  How are you able to get your money back out of these situations?  What are your creative techniques to do this?  Troy you’re absolutely right; that’s something that’s happening right now in the marketplace.  It’s very important that you know that banks are now limited HELOCK loans, that’s Home Equity Lines of Credit and they are also limited them on rental properties as well.  It will be necessary for you to talk with your lender prior to employing this technique.  If you’re going to sink a bunch of cash into a property, let’s make sure that the lender is going to give you a loan to get it back out on a line of credit or a refinance.  They are very difficult right now.

I think with all the money that Congress is pumping into these banks, hopefully all of that is going to free up again because the Federal Reserve is definitely supporting these lenders in getting the money to the marketplace.  I think we’re going to see some relaxing of these guidelines that have seized up and frozen up lately.  When that does it will be easy but in the meantime, don’t put yourself at risk.  Let’s make sure.

I will also go on to say Troy that I don’t really deal with lenders the traditional way.  Here again the Street Smart methods that I’ve employed for over thirty years are the ones that you should be using.  You see, I don’t worry about banks, I don’t worry credit, I don’t worry about my credit report, I don’t worry these lines of credit, I don’t worry about those things.  Why?  Because the first conversation we had on this call was raise your money privately.  Get with folks who have IRA’s, 401K’s and personal funds, corporate funds and borrow those funds to capitalize your business.  That becomes the fuel for your operation then we don’t have to worry about these things.  Hence, you’re setting yourself up right and you’re borrowing the money right at the beginning, therefore, these issues aren’t your issues; they’re other people’s issues.  That’s the Street Smart way is not make them your issues.

Troy also asked Tennessee has the toughest laws around trusts.  How is the paperwork done for Tennessee?  That’s a good question Troy and yes, we’ve definitely researched Tennessee’s laws.  In fact, there are trusts that I’m very familiar with that are in Tennessee.  What we’ve found is that Tennessee’s requirements are the toughest in the Nation so we built all of our paperwork around Tennessee’s requirements.  Therefore, in other states that don’t have as stringent requirements, we’ve already got those requirements covered in our paperwork.  We wanted to create paperwork that could be used in all 50 states and therefore, that’s what we modeled it after and that means, for example, in Tennessee that the trustee has to be responsible for management of the property so we put it in there.  That means that the trustee hires the manager.  I built in our paperwork in Volume IV that there is indeed a management agreement in there that then tells the trustee exactly what to do and so many other things.

We have definitely found what you need, not only for creating a trust to be able to avoid probate but also creating a trust to avoid the lender calling the loan due.  That’s the Subject To part of it.  Remember that there is about thirty Benefits of Trusts that you cannot find with any other entity, not a corporation, not a LLC, not a limited partnership so it’s definitely something that you want to learn about and take advantage of.  All of your properties should be transferred to individual trusts.  That’s my opinion because there is so much benefit from doing it.  Even if you have an LLC or corporation I still want you to employ the trust.  In my opinion that’s the best thing you can possibly do.  If you have the combination of both, you have a really powerful situation.

Justin says someone teaches that you cannot take a government and insured VA loan Subject To in the same way as a conventional loan without potentially committing fraud.  What technique does your system use to avoid defrauding the U.S. government?  Well it’s really, I think, a misunderstanding about the requirements here because if you look at what the situation is, is that the veteran has a certain amount of Open to Buy so to speak and that is their open guarantee, the amount that the government is saying it will guarantee for a VA.  Let’s say, for example, it’s $150,000.  I can’t remember at the moment what it is but there is a limit to the amount you can get on a VA loan.  Let’s say you bought a $100,000 house.  That’s still leaves a $50,000 Open to Buy.  If you sold that $100,000 with that loan in place, then that means the veteran is only able to get another $50,000 on a new house or a $50,000 guarantee on the next house.  That’s exactly how you’re able to do both.

Yes, you can do Subject To but you have to say to the veteran that it could affect their Open to Buy on their VA loan.  If they’re going to trot right out and buy another house that you might sell them, that next house, without even the need for a VA loan because you can buy it subject to yourself and then do owner financing for that customer and they could buy the new house from you with owner financing and we don’t even have to worry about them getting a VA loan.  Great question.

Karen asks why doesn’t your flip chart have the main points on the backside facing the presenter?  Does this work better than a laptop PowerPoint presentation?  Great question.  Okay, when you’re putting your flip chart together using my seller presentation, buyer presentation, or my lender presentation then you definitely can print out two of them.  One of them can have the sheet that the customer is looking at facing you and you can read that to them and makes points as well as understand the points that you wanted to make.  You can even make notes to yourself on your side and they can see what they see.  So just print twice is all you have to do Karen.

You also asked is that better than a laptop.  The thing is if you just make people feel comfortable, if you’re comfortable with doing it as a PowerPoint, do it that way.  If you’re comfortable with doing it as my flip chart, do it that way.  The thing about the flip chart is that it’s always handy, it’s always in your briefcase, it’s always in your car and computers aren’t always with us.  I always like to be ready, willing and able to do a presentation at any time so I always keep my flip chart with me.

Karen goes on to say how many people do you have doing the accounting, paying the bills, day to day operations and for how many properties?  Well that’s a great question.  We have a property manager and a property assistant.  The property manager is responsible for sales.  What she does is go out and meet with folks.  Hopefully they’ve already walked through the property or seen the property from the outside, they already know they want it and then she meets with them to deal with the details.

Now over the phone you could pretty much describe our entire program, that we offer three years to buy, we offer them a credit or a part of their rent towards purchase of the home, we offer their original option fee as a credit towards the purchase of the home, we offer them the backup owner financing and all the other goodies that we have built into our program.  You can do that by phone.

You can do that on your website.  Our Street Smart Investor websites are set up that way so it really tells the story of exactly who we are, what we do, how we operate, how we could help, how we differentiate ourselves.  All that good stuff; it’s on there.

We go on with the question of the accounting.  Our property assistant is the one who does the day to day, opening the envelopes, filling out the deposit slips, entering it into our program, accounting for that particular customer, calling the folks up, following up on collections, doing collections and all that sort of thing.  Depending on the number of properties you have, now that’s the real question because as you grow, you are going to need more help.  You can start off in the beginning by doing this yourself but soon I want you to get what’s called a virtual assistant and that virtual assistant can work from their home and they could take care of a lot of these details without having to be in your home or to do these things right in front of your nose.

The beautiful thing about our business is it can be done nights, weekends, holidays, it can be done lots of different times and you can pay a virtual assistant for doing that.  That’s another thing we teach you at Mastering Business Advancement is let’s take your business to the next level.  There is a growth path and we start with that virtual assistant then eventually, depending on the size of operation you want to have, we teach you to get an office, we teach you to get staff and how to get that staff.  In fact, we’re going to be talking about hiring, who to hire and what to do at MBA as well because another step that you really have to figure out is who you are and then figure out who you are not so that we can create a business plan for that particular part of your business.  That hey, you’re not everything to everybody and we do have a solution for that.  The first step is to do an online analysis and we have that available.  In fact, we even invited folks to take it themselves and actually find out who you are and then when you do your online analysis, then we’re going to in class find out who is missing from who you are.  That’s exactly the ad that we’re going to write to hire that missing person.  Isn’t that a good thing?  I hope to see you there Karen.  That could be really valuable for you.

William asks after negotiating a Short Sale for the seller, what stops them from backing out and doing it on their own?  That’s a good question.  William I want you to understand the Street Smart way is that I want you to take title to the property first.  In other words, we’re going to go ahead and do my entire Short Sale Package and if you don’t have the Short Sale Package, be sure to call the office at 1-800-578-8580 to get it because it has all the forms in there to be able to get the lender to do what you want them to do.

Step one is we have to get the deed from the seller and that process is, first of all, signing a contract with the seller, getting their authorization to release information, getting them to sign your hardship letter and then doing the entire trust process that you are going to take title to that property in trust.  However, you may not keep it.  In other words, if you’re not able to get the Short Sale, then you’re going to give it back to them.  I have a special contract in the Short Sale Package that basically says that if you don’t get the discount, you’re not going to take the property.  The worse that can happen from that whole thing is the seller gets their property in trust.  That’s the benefit they got out of it.  Or, you can just undo the trust and give back their deed.  The point is that you don’t want to spend the time, suffering and all the headache of putting together a Short Sale merely to have them back out later.  That would be an enormous mistake and definitely one a lot of people have learned their lesson on.  William great question.

Nancy Miller had a question.  Acquisitions managers, sales managers, how are they compensated in your business?  Do they train themselves with your system?  Nancy that’s a great question.  One thing we did with our property manager when she came in the first day is we said here is Volume VIII – Property Management.  We want you to listen to these six CD’s, that was about six hours worth of CD’s, then let me know what you think.  So she listened to all six hours and the next day she said what do you want me to do.  I said I want you to read this guide book and it’s approximately a 200 page guide book.  It has all the forms, the step by step process, the cover sheet that explains it, who gets the original, who gets a duplicate, it has a table of contents, it’s broken down into marketing for the client, screening the client, putting the whole process together, the signing ceremony, the collections process, everything.  It’s all broken down.  She read that and the next day she said what do you want me to do.  I said listen to the CD’s again.  The next day she says what do you want me to do and I said read this guide book again.  The fifth day she said what do you want me to do.  I said go manage property and leave me alone.  You have done been trained.

Understand that there is a process we’ve developed that really does do a lot of this work for you.  Your process, getting down to what form to fill out and everything, it’s really all there if you could just hand it to someone and have them go through it.  They can really understand how to put the whole business together.

As far as putting your office together, that’s in Business Management, Volume VII.  That’s putting together your files, your file folders, your layouts, your binders for each one of the segments of your business, such as the income, the expenses, the banking records and all the other details.  Those are all right there in your Business Management System.  So you can literally hand that to someone and have them put it together as well.  Really great, powerful information.

Then you asked how are they compensated.  That’s relating back to the virtual assistant concept and there are ways that you can compensate people.  Let’s start with someone who is going to come on board and show and quote unquote sell your property for you.  One thing you can do is compensate them with cash that’s brought to the table.  Let’s say that you embrace my rent to own strategy or my owner finance strategy and hopefully both.  When they’re marketed, folks come to the table, let’s say they bring $10,000 to the table, then we’ll give 20% of the cash that comes to the table to the manager.  That way they are incented to get more cash to the table.  The other way, you can pay them, of course, daily, weekly, monthly, even hourly; it just depends on what you work with them and what compensation plan they’re attracted to.  We all know that realtors work for commissions so wouldn’t a realtor be a good person to put on the team to act as a property manager since they’re already use to being paid by commission?  They’re already use to being production based or results based and that’s really what I am attracted to is folks who are results oriented.

Your next question is do you use realtors within your business and if so, how and when.  The answer is yes.  In fact, those deals that we need to sell for cash we always get those immediately on the MLS.  We do have an in-house realtor that does put them on the MLS and that really helps that process so we don’t have to pay a listing commission; we are happy to pay a selling commission.  If anything is found on the internet, then those could all be sold quickly because we have all the information right there on the MLS to expose it to everybody so that anybody could sell that property.

Joe asks can I do a Short Sale and Subject To with the existing financing in place?  It depends Joe.  Let me give you an example.  Let’s say the property has an $80,000 first mortgage on it and a $20,000 second mortgage.  Let’s say that your seller is quite happy, thank you very much, to cooperate with you if you can merely get this monkey off their back.  You say to yourself well the property is only worth $100,000 so really where is my equity?  The answer is you’re going to have to create your equity.  The way you’re going to create it is you’re going to discount the second mortgage down to say $500 or $1,000 and then we’re going to get rid of that second mortgage all together.  Now suddenly you’ve created for yourself about $19,000 to $20,000 worth of equity.  Then the first mortgage, let’s say it’s a pretty mortgage, $80,000, 6% interest, they’ve paid in say five years on a 30 year loan and you can take it over and make at least a $200 to $300 a month cash flow on that property then you have your money right there because you are going to be able to make cash flow on the property as well as buying equity at the beginning.

The third place that you’re going to create equity is actually my exit strategies.  My lease option, owner financing, work for equity strategy so we can actually sell the property for more than you would sell it for cash.  Therefore, if you said today it’s worth $100,000, we can probably sell that now for $109,900.  Marking it up merely because you’re offering financing on that property gives you now another $10,000 potentially of equity in that property.  Now I’ve got my magic number that I’m always looking for which is at least $30,000 worth of equity in that property going in.  That can be a great way Joe to take advantage of the Short Sale scenario as well as the Subject To scenario as well as the exit financing to your buyer.

Great questions everybody.  We have tons of them today.

Jennifer asks what is the cost of opening a trust.  There’s really very little cost Jennifer, that’s the good news.  With using our Land Trust and Personal Property Trust forms disk and the guide books that we provide step by step built in versions, blank versions, cover sheet that explains it, check list, all the details you really just have to follow and do it yourself and then the cost of recording the deed is the only real cost you have of quote unquote opening a trust.  Once you own the paperwork you can do this yourself and then in most places, recording a deed is very inexpensive.  In our state it’s only $10 for the first page and $2.00 for each additional page.  By the time you’re done with my paperwork which is to record the deed and an Affidavit of Trust then you’ve got $14 spent and that deed now is recorded on public record and I spent a grand total of $14 to get that done.  You are going to have to change the insurance but that shouldn’t have any cost because you’re going to convert it from one name to the trust name.

When we talk about opening a personal property trust, that can have some different costs involved.  For example, if I was opening a personal property trust bank account, it would be merely the cost of opening that bank account which in most cases is free to open.  If I’m opening a vehicle trust, then it’s going to be the cost of getting that vehicle retitled in the name of the trust.  Most of the time there is not a transfer tax if you are transferring from your name to your trust name.  So there’s a cost savings there but they may still charge you a nominal fee like a retitling fee or a retagging fee, things like that.  That’s about all the costs you’d have Jennifer in opening and setting up your trust.

Ben asks would you ever lease option back a property you purchased from them as a Short Sale?  Ben I think what you’re asking me here is would I lease option a property back to the seller once I have now purchased it on a Short Sale.  The answer is Ben no, I wouldn’t do that.  The reason is that there’s been so much case law around the country where a smart lawyer came in and said that what you did was a financing transaction instead of what you actually did was to invest and buy property and actually give the customer a great benefit of leasing the property back to them.  But that’s not how it’s seen out there in the real world Ben so I’m going to recommend very strongly against you doing any further business with that customer with that particular property.  If you move that customer out of that property into an entirely different property, I have no problem with that at all.  That’s very good training for you there Ben.

Anita asks if nobody knows or can trace your trust, what happens if you suddenly pass on?  Will you lose all the asset that’s supposed to pass it down to the heirs?  No Anita that’s not how it works.  There’s actually documentation that’s created between you and your trustee.  Let’s say that you’re the beneficiary, let’s say you’re the primary beneficiary and you’re heirs are your successor or secondary beneficiaries.  Your trustee is actually the deed holder to the property subject to that trust.  That’s what a trustee is, they hold the property based on an agreement.  The agreement is the trust itself and the agreement outlines in the trust what all the duties, powers and responsibilities are of the trustee.  One of those duties is if anything happens to the primary trustee, it passes to the successors or heirs right down.  That gives you an opportunity to get rid of this problem.  I say get rid of because there is no probate with a trust.  Once that property has been set up in trust, the estate does not have to be probated if every one of your assets are in individual trusts.  All that happens is at your death it instantly by law, by operation of law, goes to the beneficiary or beneficiaries and the deed is still retained by the trustee who then can deed it to those heirs or remain on as the trustee if the heirs choose and continue with the deed being in that trustee’s name.

So you see, even when the property is in trust, you don’t have to worry about death because it’s already set up that way.  Just think about your own parents and think about, if they’re living, if they were to have their property in their trust during their lifetime, they would be listed as the beneficiary but then at their death it would instantly come to you.  That would be a perfect plan wouldn’t it and not have to go through the pain and suffering, confusion and expense of probate.  I really love the concept and the idea of trusts and it handles a lot of different issues for a lot of different people.

Great questions guys.

Mark is asking on an equity payoff to the seller, is a lien put on the title to the property?  Well Mark that really depends.  If you are doing the closing yourself and the seller is quite happy with it, then you can give them a Promissory Note.  In fact, it’s built into my system in Volume I.  If they want a lien on the property, you could do that.  You could use Volume VI which is my borrowing paperwork to actually set up a mortgage and a note and do that.  Of course, you can always have an attorney do that, a closing attorney and it’s wise to use a closing attorney because they do the title search, they follow and comply with state laws and all the other requirements for a Purchase Money Note.  Understand that when a seller is being paid off their money, that is not a typical loan.  It is a Purchase Money Note and a Purchase Money Note is different than a traditional loan from a third party.  It’s actually the lender loaning equity rather than loaning cash and there are special rules that are very favorable for the seller on a Purchase Money Note.  That’s the type of loan that we do when we are financing our deal with equity rather than with cash from the seller.  There is different paperwork for that.

Helen Johnson is asking how do you keep track of all your properties, i.e. bookkeeping, insurance companies, mortgages, tenant payments, lease renewal dates, et cetera.  Helen, got you covered babe.  It’s all in the Business Management – Volume VII.  Every form, every document, every step by step process; we even give you a forms disk that has everything on there.  That coupled with our Accounting System, Street Smart Accounting, is an overlay of Quick Books and that actually guides you through step by step, screen by screen exactly how to fill out all the paperwork and do all the tasks necessary as an investor.  It’s a wonderful process and it really does deal with all your issues.  So Helen be sure that you get Volume VII – Business Management because it will surprise you how complete and comprehensive this system is and really does all point back to the Street Smart System because there’s even paperwork for lease options, owner financing, weekly rentals, monthly rentals, credits, all of that is built into the system as well.  All you have to do literally is just fill in the blanks; it’s all done for you.  Great question Helen, thank you.

Lou what would you do with this?  Fair market value $230,000, mortgages add up to $225,000, the monthly PITI is $1,400 a month, the maximum rent is $1,500 a month and the NROC or Nonrefundable Option Consideration is $3,000, the option price $245,000 two year option.  Oh, the question is would you take this?  Okay, I have an optionee buyer that will pay $245,000 with a two year option to buy.  They will give me $3,000 down.  They will give me a $1,500 a month rent.  The only problem is my profit is only $20,000 because the existing mortgage is $225,000 and I’m selling it for $245,000 and my PITI is $1,400 and my rent is $1,500.  On top of that I’m only getting $3,000 nonrefundable option consideration.  That’s a good question.

Probably not, I’d really have to see at least a minimum of $200 a month positive cash flow on any properties that we buy unless there’s extenuating circumstances, such as I’m getting a 0% interest loan from the seller and it’s paying down.  Let’s say that they’ve given me a 0% interest loan and $1,000 a month and I could rent it for $1,100 a month.  Yes, I would do that deal because I’m really getting $1,100 a month in profit on that because of the pay down of $1,000 a month.  That does attract me.  But in this case with the existing mortgage of $225,000 and the PITI of $1,400, that’s not too attractive.

I would look again at my buyer and see if there is some other way we could work the deal out.  Such as, maybe I’d take $3,000 down of nonrefundable option consideration but then maybe a $300 additional payment per month on their monthly payments.  Let’s say that I’m generally looking for about a 3% down payment so if we could work it out to have $6,000 down with $3,000 now and then $300 a month until paid on their other $3,000 then I’ve increased my monthly cash flow now to $400 a month but more importantly, I have more skin in the game from my buyer and then on top of that I have my guarantee.  Well, there are no guarantees; I want to make that very clear but I’ve got the possibility of making the other $20,000.  Likely though, the way I would have structured it is with the Cost to Sell worksheet.  I would have worked into the numbers by using that Cost to Sell; I would have probably gotten at least a $200 payment per month from my seller on top of what I’m getting from my buyer and then it would make a lot more sense and you would be buying it at significantly below that mortgage of $225,000.  Even if you took over the $225,000, you would be getting a subsidy from the seller of that $200, $300, $400 a month and that’s what would make this deal make sense.