Lou:

Hell, everyone, and welcome to another Street Smart Group Q and A.  Tonight, I’ve got a very special treat for you.  We have a Mastermind meeting going on right now in Atlanta, Georgia.  Many of you have heard about our Mastermind Program and now you have an opportunity to actually hear the Masterminds at work.  What I’ve asked them to do is actually be the questions this week and come up with questions that I haven’t seen and I don’t know the questions.  They can present them to me and I can give you the answer.  You’re going to get the benefit of hearing exactly what’s on their mind and the answers to those things tonight.

Before we get started, I wanted to, as I usually do on Group Q and A, talk about the economy and talk about currently what’s happening in the marketplace.  Currently, what we’re seeing is there’s a lot of excitement in the market.  There’re lots of buyers.  Now, I know that’s going to surprise you as probably not what you think is true in your area but it’s absolutely true where we are, and we’re testing some new programs and finding that we’re able to get 40 leads a day on buyers who want to buy our houses.  Now, how many of you would love to get 40 leads a day?  That’s exactly what’s happening to us right now.  Say it:

Group:

Yeah, baby!

Lou:

Yeah, baby!  Everybody wants that don’t you?  Now, we’ve actually been Masterminding a new way to take advantage of these 40 leads and I want you to just watch your e-mail because I’m going to send you more information about this.  It’s very, very exciting and it’s another way to look at your business.  The way that most of us have been doing our business in the past is to focus on getting leads to buy property, and then once we get the property, once we get it fixed up, once we get it ready for sale, we finally then begin marketing to sell it.  Hopefully, we can find a buyer in a short period of time.  But, the truth is, it can actually take a long period of time and I think many of us have already experienced that little seminar.  So, what if instead you were already well endowed with plenty of buyers and you already knew that they could qualify for loans; you knew what size loan they could qualify for, you knew how much they could pay per month and you knew exactly what type of property you could put them into.  Now, you have a different kind of business where you actually go find the properties that fit the buyers that you already have that are already qualified.  How many of you like that program?

Yeah, baby, that’s a good thing.  Alright, so that’s one of the things I want you to be thinking about as we go through tonight how to create a customer-driven company.  That’s the new format for how to take advantage of today’s economy.  Many of the programs that are available right now, for example, the new Housing Rescue Act actually granted a $7500 tax credit to buyers of properties over the next few months.  In other words, they have to purchase the property from you by June 30 and receive a $7500 tax credit.  Notice I didn’t say deduction.  I said the word credit.  That means if they owe taxes, they get a credit against the taxes that they owe.  Better yet, if they don’t owe any taxes or some taxes, the government actually writes a check back to them for the balance of that $7500.  Now, how many of you think you can sell houses?

Group:

Yeah, baby!

Lou:

Yeah, baby, that’s a good thing.  So, that gives you another opportunity to look at things and as we progress, twice a month doing the Group Q and A, I’m going to add more elements of what’s available in these new bills.  It’s remarkable how many things the government has provided to really restart and energize our housing market.  We have deeply looked at all of these opportunities and we’re going to be bringing them to you on a case by case basis after we test it and see how it works.  Then, share with you the way that you can apply it in your market.  Is that a good thing?

Group:

Yeah, baby!

Lou:

That’s a good thing.  Alright, let’s get started, Bill.

Ron:

I’m Ron Copeland ______ 4.32 from the Atlanta area.  I’ve got like a four-part question about the use of bandit signs, and what do you say to the sign police when they catch you off guard and they call that number?

Lou:

Ooooh, you’re saying, Ron, that what they’re doing is they’re calling your number to say you’re in violation, and you are in violation of municipal codes and therefore, you’re going to have to stop doing this. Is that right?

Ron:

That’s it.

Lou:

Alright, so, the answer is we do what works until it doesn’t work anymore.  The challenge is that they got you.  They caught you.  The only other solution you really have is to now go to another number and perhaps even a different website, and perhaps even a different business name and so on.  That is the only other way you can really restart in the same market.  Now, what’s good is most of us live in areas where there’re multiple towns, townships, counties and so on.  So, what doesn’t work in one particular jurisdiction will work fine in the other jurisdiction until they stop us there.  That has happened to us in fact and we did it for well over a year in this one area, worked beautifully, worked fantastic, and then, somebody turned us in one day.  They came and said you can’t do that no more, and guess what, we stopped doing that.  We ask them what the rules are.  Oh, my goodness, we don’t want to be in violation.  Tell me, what are the rules?  We want to be in compliance.  They told us exactly what the rules are and now we’re compliant.

That doesn’t mean you can’t do it.  You can do it in certain ways.  So, another idea for you, Ron, would be to take all of your rental properties, properties that you own, and you’re actually allowed to put signs in those yards.  So, why not put the signs not in the right-of-ways where they get upset or on telephone poles where they get upset.  Why not put them in the signs of the properties you already own?  In fact, you can make a deal with your tenant and say look, I’m going to put my signs in your yard and guess what, I will even pay you a rent credit for allowing me to put the signs in the yard and get leads off these signs.  Will that work for you?

Ron:

Yes.

Lou:

There you go.  So, now, you’ve got at least a place in that same jurisdiction that you can get some exposure.  What’s your next question?

Ron:

I think you answered part of it.  What is the best way to avoid the sign police and still use the bandit sites?

Lou:

Well, you know, pray is one way.  Basically, unless someone turns you in or, the sign Nazis we call them who ride around and enforce municipal codes, come around and see your signs, they really aren’t going to know about it.  So, I say it works as long as it works.

Another thought on that is also be friendly.  There are some folks out there that don’t have much to do after they get home at night and so they have very, let’s say, non-challenging jobs.  It doesn’t really take a lot of their energy, so they have left over energy.  What they do is attack good, capitalist citizens who are just trying to get ahead in life.  What they’re looking to do is make your life miserable, to be along with theirs which is also miserable.  So, one of the things you’ve got to do is you’ll get some, you’ll get calls from some, you’ll get calls from time to time from people that say this is not okay.  You say well, explain to me what the problem is and they say we don’t like your ugly signs cluttering up our beautiful neighborhood.  You say I’m so sorry.  By the way, what we do is we buy houses and we sell houses, too.  We’re happy to pay a referral fee to you if you know anyone that has a house for sale or is looking for a house to buy.  We pay a $250 cash referral fee.  Since you’ve already got my telephone number, please do keep it so that you can share with me and call me as soon as you know someone.  I’m more than happy to pay you a referral fee.

Now, what did we just do, folks?

Group:

Made a friend.  Enrolled them.

Lou:

Exactly.  We took lemons and made it into lemonade.  So, when someone else is angry on the other end of the phone, you’re not, and that’ the answer.

Ron:

As far as the phone number that you put on there, what type of phone number would you put one like an answering machine or a 1-800 number, or your personal number, your cell phone?  What would you start with?

Lou:

Well, that’s a great question.  As part of our system, what we recommend is that you have an automated telephone answering system.  What I recommend is that you have a buying telephone number and a selling telephone number.  What that allows you to do then is channel the business and channel the leads as they come.  If you have leads coming in off of your selling marketing, then, those are potential buyers.  They should go down a path that you want to take them down.  When our buyers call in, they hear our automated scripts.  We’ve already got prerecorded scripts and what we do is take them down a path to explain exactly what their questions might be and give them answers on an automated basis.  Then, what happens is they’re able to press zero, we prompt them, they can press zero and talk to a live operator at any time.  The good news is that can come to your cell phone, you can route it to a live operator, you can route it to your office, you can route it anywhere you want to at any time of the day.  This is what’s important.  Your leads come in literally 24 hours a day.  You want to have a system that can take that call 24 hours a day.

What I also recommend is, and we’ve got this all as part of our Street Smart System, a live answering service.  Those folks, when they press zero to talk to a live operator, guess what.  Right there comes up a script for that live operator to read and ask the questions, give the answers and actually put it into your automated system which is your website.  So, they’re actually pulling up your questionnaire on your website, they fill it out, they get all those answers, press submit, it auto loads your back end database, you get an e-mail off that lead and you didn’t even have to touch that lead.  How does that sound?  Good?

Ron:

I’ve got one more question about the website that you’re going to put on that site, or URL that you’re going to put on that site.  Would that be a bandit site or a regular site?

Lou:

It can be.  So, what Ron is asking is that the URL is your address on the Internet, and that’s your company URL.  So, let’s say that your company name is Race Fast Properties and your URL can be RaceFastProperties.com.  That’s your corporate image.  That’s your company, but that doesn’t mean that you can’t get other URLs.  You can get URLs that don’t match that one so if anyone finds out about your signs, you could actually have signs out with a different URL.  Then, if they find you through those signs, you can explain that you are part of a national lead generation service and that must be signs for that company that is generating leads for us, and aren’t you?

Group:

Yes.

Lou:

Exactly right.  So, that can be another way that you can generate those leads.  What we provide as part of Street Smart is if you choose, you can have a mirror site, a mirror website that actually has that other URL under your company name.

Suzanne:

Hi Lou, this is Suzanne and I have questions about short sale.

Lou:

Where are you from, Suzanne?

Suzanne:

From Fort Mohave, Arizona.

Lou:

Wonderful.

Suzanne:

Yes, it’s pretty cool here in Atlanta compared to Fort Mohave.

Lou:

That’s a good thing.

Suzanne:

Okay, so, I wanted to know how come we use the trust with the short sale.  For a short sale to go through I would need to find a cash buyer.  If this were money from a private lender, how long might I be borrowing it?

Lou:

Okay, well, let’s answer question number one first.  Why do we use a trust with a short sale?  I think what you’re asking is if we’re about to purchase the property, why do we have the seller place their property into trust.  Is that what you’re asking?

Suzanne:

Yes,

Lou:

Okay, good.  One of the reasons is because we need to control that deed.  We’re about to do a lot of work, and when we put that property or when we…

Suzanne:

No kidding a lot of work.

Lou:

Exactly right.  So, when we’re going to go through all the pain and suffering of a short sale, we better make darn sure that we control that deed.  If we don’t, we are putting ourselves in a position to have the seller back out on us or worse yet, we negotiate the deal and they sell it to somebody else.  Or, worse yet, have us negotiate a loan modification and then don’t get anything for it, don’t get a paid a dime for all of our work and effort unless you choose to.  You see, you can do this as a charity if you went into it knowing that you were doing it as a gift to the people, that’s fine, you can do that.  If instead you went into this expecting to make a profit, then we have to what I call prevent the problem before it occurs.  The way you do that is to always get control of the deed.  We have the seller deed their property into trust and that is a trust that we control.

Suzanne:

Okay, so now it’s like you have a lot more control than if you just use an option when you use a trust.

Lou:

We could take title to the property in trust, then, we wouldn’t really need an option, would we?

Suzanne:

No.

Lou:

Exactly right.  We just need a purchase and sale agreement that now gives us the opportunity to work with the lender to get the discount.

Suzanne:

Okay, so, for a short sale to go through I would need to find a cash buyer.  If this were money coming from a private lender, how long might I be borrowing it?  I mean like, when could we sell it to our end buyer?

Lou:

How long would you be borrowing the money?

Suzanne:

Yes.

Lou:

Okay, that really depends on your lender.  What we are now teaching as part of our Mastermind Program, is we’re now teaching that the first offer I want you to make to a potential private lender is that you’re borrowing the money for ten years.  In fact, some of our Pinnacle Masterminds have actually gone so far as to tell the lender that they’re going to borrow their IRA money until they’re 59 ½.  That means until the…

Suzanne:

Until they hit mandatory have to take it out at that time, yes.

Lou:

Well, they begin taking it out at that time.  Aha, so, let’s say that the lender had $300,000 in their IRA.  Wouldn’t it be wonderful if you could borrow that money at 6%, interest accruing, and no payments, and actually you are the bank essentially, building up their accrued interest on that loan?  What happens is then when they get to 59 ½, they start drawing down a certain percentage of that retirement account which means that’s when you begin paying.

So, Suzanne, the answer is it can be as long as your lender is 59 ½ and starts drawing down on their IRA, but even better, I just had lunch yesterday with one of my lenders who is 78 years old, and I borrowed money from him maybe 12 years ago.  All these years we’ve met once a year because he wanted a one-year loan 12 years ago.  Every year we meet for lunch and every year he rolls that baby over.  So, then, we’re ready for another year and next year he’ll b e 79 and he might be ready for his money then.  The good news is he’s been very diligent and a safe conservative investor all these years so he has plenty of money and he doesn’t really need the money that I’ve got.  So, I’m the bank, essentially, for his heirs.

If anything happens to him, it goes to his wife.  The payments can go to his wife and it’s at her option that this loan can be converted from an interest-accruing loan to an amortizing loan.  The wife then says now that my husband’s dead, I now want to get payments on that loan as income.  Because that’s an option that we put into the paperwork because that was his request, now, we can convert that loan at any time to an amortizing loan.  That doesn’t mean I’ll write him a check to pay the thing off.  That means that it begins paying out over time whatever the agreement is.  So, Suzanne, the answer is I want you to borrow money for as long as you possibly can, but it could be short term as well.  It just really depends on your situation and the lender’s situation and their comfort level at working with you.

Suzanne:

Okay, and then I also wanted to know what is “Dough for a Day,” and how is it used?  I’ve heard about that.

Lou:

Great question.  What is “Dough for a Day?”  Have you heard those terms before?  See, we’re sitting here with a whole roomful of Masterminds, and they haven’t heard that term before.  So, it’s important for everybody to listen up and learn what this is all about.  So, let’s take your first question, Suzanne, which was about short sale.  What is the problem with short sales, Masterminds?

Group:

Cash.

Lou:

Cash, got to have cash to buy the thing, to do the deal.  So, one thing that is necessary in today’s environment is that when your buyer comes to the table with a new loan, your buyer’s lender wants to see that you own that property.  The only problem is you don’t have the cash to buy that property.

Suzanne:

That’s right.

Lou:

Now, on the other side, we’ve got the seller which may be a bank of course, because it’s the bank that’s taking the discount.  So, now, we have to pay that bank off.  What you can do is borrow the money from a private money lender for a day or two.  Pay them a fee for landing their cash on the table for a day or two and actually allowing the first closing to occur paying off that first lender, you actually receiving the deed and getting it in your name so now you can now resell to the new buyer.  That’s what “Dough for a Day” is all about and you pay points for that.  You pay points to that nice lender who was willing to put that cash on the table for a day.

Suzanne:

Then, you just sort of roll that into what your buyer is going to pay from you so I could pay it back to them.

Lou:

No, I would say it really comes out of your cost to sell.  It’s one of your costs.  Your buyer is going to be paying their costs on their loan, so there’s actually their loan coming to the table to cash out your “Dough for a Day” lender who put their money on the table so that you could get the deed to the property.  Does that make sense?

Suzanne:

Yes, so then, can we possibly do owner financing with these deals, then after that or not?

Lou:

Well, the problem is cash.  If you have cash at the table, that cash has to be returned to the lender because they only agreed to lend it for a day or two.

Suzanne:

If you found somebody that had enough cash to cover it, then the rest could be owner financing.

Lou:

Now, we’re back to your private lender question.  Whereas, if you were able to get a private lender who would put their money on the table long term, now, and even interest accruing, now of course your new buyer who comes in, you become the bank for your new buyer.  You finance the loan to your new buyer.  Meanwhile, you owe your private money lender.

Suzanne:

I think you have regenerated some brain cells for me.  Thank you so much.

Lou:

Yeah!  That’s a good thing.

Dorothy:

Hi, Lou, I’m Dorothy Belcher _______ 22.0 from Indiana and I have a question.  How do you componentize items on properties you have under your control but you don’t have your name on the deed or the mortgage or anything?

Lou:

Wow, okay, componentization, this is a big conversation and one that is very valuable to you as a real estate investor because most investors purchase a property.  They take off a percentage for land and then the balance of it they depreciate over say 27 ½ years if it’s a residential property under current tax code.  So, what happens is all of the quickly depreciating things in that home now are actually being depreciated over 27 ½ years.  Actually, there’re provisions in the tax code that allow you to componentize parts of the house.  For example today, we’re in a hotel and this hotel has this lovely carpet on the floor.  This carpet can be depreciated over five years.  So, when you are buying a house and it has carpet, you can actually now take the law and use that to segment out the carpet from that house.  Let’s say the carpet had a value of $2000 on the $100,000 house, now we deduct the $2000 and we put that into a five-year schedule and write that down over five years.  Let’s say that your house had a roof.  Of course it has a roof.  Roofs can be depreciated over 15 years.  Let’s say your roof today at the purchase had a value of $2500.  We deduct that from the $100,000 as well, we put that over into the 15-year column and now we get to write that off over 15 years.

Good news, Dorothy, is there’re lots of different parts of a house that you can componentize.  So, when we buy a house, we don’t buy a house, we buy parts, component parts.  We buy carpet, we buy countertops, we buy cabinets, and we buy sinks and plumbing fixtures.  We buy roofs and heating and air conditioning systems, water heaters and so on.  Each one of these component parts can be depreciated much quicker than the overall house.  When we get done taking out all the component parts, the leftovers are what gets depreciated over 27 ½ years.  How do you like that program?

Dorothy:

That’s sweet.

Lou:

Oh yeah, baby, that’s good stuff.  Now, where are you going to get help with that?  Well, part of your Street Smart support system is our Whizzes, and one of our Whizzes is the CPA Whiz.  The CPA Whiz can actually and knows exactly how to do this, take your houses that you purchased this year and then componentize them.  Here’s another good piece of news.  We actually sent them to the drawing board to research the IRS code, and deep within the code we found that not only could you depreciate the houses that you bought this year, you could depreciate the houses that you bought last year and the year before, and five years ago, and ten years ago, and fifteen years ago that you never did componentize.

Then, you can take all of that componentization that you never took, and you can bring it all forward to this year’s tax return.  Hello?

Dorothy:

Hello!

Lou:

You like that program?

Dorothy:

I love that program.

Lou:

Yeah, baby.  We even found the form for that.  The IRS has a form for that.  Of course, they don’t want you to know about it, but we’re Street Smart.  We delve into things that can create cash flow for you or would you agree with me that saving money is the same as making money?

Dorothy:

Definitely.

Lou:

Absolutely.  So, saving taxes right in the tax code.  Nothing illegal here; it’s all right out in the open if you only knew where to look.  We found it and that’s what we share with our Street Smart clients.

Dorothy:

Fantastic.

Lou:

Awesome.

Dorothy:

Thank you.

Janice:

Hi, this is Janice from Suffield, Connecticut.  My question is concerning ways to automate the accounting side of your business.  Is there a way that you can automate your tenant payments?  I know there was some talk about some debit cards with B of A, but is there another way through PayPal or anything like that, and with those debit cards, how does that work?

Lou:

Great question, Janice.  It really depends on your customer base first.  So, let’s go there.  If your customer client base doesn’t have credit card, then, that’s not going to work so well.  If they have credit cards or debit card, then, yes, you could set up an account.  Now, instead of going to PayPal which costs in some cases serious money, I’d rather at first go to your bank and see what they can do for you.  There are different methods that can work very well.  One example that you’ve mentioned briefly is one that we’ve talked about where your bank can actually issue ATM cards, but they’re deposit only ATM cards.  These deposit only ATM cards are issued to your tenants, and what they do each one of these ATM cards has a different account number but that account number relates back to your collection account, your rental account.  What happens is as soon as the bank reads that ATM card and receives that payment, it automatedly puts it into your account.  Your tenant doesn’t know what your account number is, all they know is that’s the account number on that deposit card but they still don’t have access to your account because the bank essentially sets up a separate account that the tenant doesn’t have the number for.

Janice:

So, they use those just as if they’re going to the bank or the ATM machine in the middle of the night to make a deposit?

Lou:

That is correct.

Janice:

They swipe their card and then key in the deposit amount which would be a rent amount.

Lou:

Yes, you like that program?

Janice:

Yeah, I do, thank you.

Lou:

Yes, now, there’s another service that we have access to who will set up an account for you.  What they do, and I’ll have to get you the answer on this as part of your Q and A to remember what the name of the company is, but what they do is set up an account and get permission from your tenant.  It is a document that your tenant signs and basically given permission for this company to draft off of their bank account.  This company drafts off their bank account, deposits to your bank account and takes out some dollars for themselves for the trouble.  So, you don’t have to do the depositing of the money.  You can actually have this third party, who does it all day every day, take it right out of that tenant’s bank account.

Janice:

Have you ever used…a lot of companies now when you do direct deposit you can deposit to multiple accounts.  Have you ever used anything like that where it’s a direct deposit of part of their paycheck?

Lou:

Yes, we have.  It’s usually been when the tenant was so bad for their last landlord.  You know, it’s amazing, there’re a lot of folks that earn good money and they actually have the money, they just don’t get around to paying it out.  How stupid is that?  It happened.  So, if that’s the type of client that you found them to be in your research when you actually screened their application, then, what you can do is say okay, you know what, I would like to work with you, and based on your income you actually qualify for our home.  The only problem is you have such a poor history.  So, what we want you to do is that we want you to go back to your employer and ask for permission to actually, they are already drafting off your account anyway.  They’re paying FICA, FUTA and all these other things, they’re just going to pay one more and that’s us.  How often do you get paid?  Every two weeks.  No kidding, so every two weeks we’re going to take out one half of your rental payment.  What happens is that actually equals 13 months worth of rent that’s paid in.  Now, that extra month we’re going to make as an additional credit towards your purchase of the home.  It’s essentially; it’s a forced savings account.  Will that work for you?

Janice:

Good idea.

Lou:

Yay!

Janice:

I was wondering if you told them about the thirteenth month.

Lou:

Well, you choose.  Your accounting mind went right there, didn’t it?  It says wait a minute, there’s 13 months involved in this.  That really makes it a very…I had one on this plan for five years.  It worked great, just great, great, great, great, great because every two weeks like clockwork, we knew we had a deposit coming in.  It’s really going to depend on their employer and the employer’s willingness to do this.

Janice:

Now, do you have to set up a separate account, though, that has your name and their name?

Lou:

No.

Janice:

They can actually deposit to something that’s not their name?

Lou:

Absolutely, just like the employer does now when they take out of the paycheck.  They actually take out and pay to the government, they pay to the state; they pay all these other things, maybe insurance.  All these other bills that are paid out of the paycheck, well, you’re just another bill that comes out of the paycheck, and they just deposit it almost like a direct deposit right to your bank account.

Janice:

Have you ever done anything with automating the billings with the like electric if you have a lot of houses in one area or something?  Or, actually, I guess that wouldn’t make sense because the tenants are paying that, so, never mind.

Lou:

Right.  That’s not a good program.  We want to reduce expenses, not encourage them.

Janice:

Finally, do you have a system that you use for collecting non-sufficient rent checks?

Lou:

Absolutely.  In fact, Janice, I’m glad you asked.  Most of the folks listening today don’t know about our new Collections and Evictions Kit that we actually came out with.  It is a step by step process that actually takes you through the entire process of starting with “they were late, now what,” then, going through the process of a work out.  If it’s possible to do the work out, then taking them down the path of actually having a list of all the different charities in the area so that they can go down that list and do their own outbound calls, dialing for dollars.  They’re just dialing for your dollars today.

Remember what I teach is that you don’t make your business your charity.  You can give to anybody anywhere.  I’m just saying you don’t give direct because if you give direct to your tenants, they now become a dependent and now they move in.  Sort of like kids.  Have you ever rented to a kid?  Have you ever gotten a rent check from a kid?  No, they don’t’ pay.  So, now, as soon as you allow your tenants to not pay you, guess what, you just changed your whole deal and you messed up your relationship with those folks.  You’ve got to keep it on a business basis.  So, we actually give them an entire checklist in our Collections and Evictions Kit to do that work.

Let’s say that doesn’t work.  Then, the next step in the process is to actually go the legal route.  We file an eviction.  Well, if we file an eviction and as soon as we start the eviction, the next step is to go visit with them and try to cut a deal, a payment plan.  We actually enter into what’s called a Consent Judgment and that’s in our Collections and Evictions Kit, and a Consent Judgment is the two parties that are involved in the lawsuit have now agreed to the terms of the work out.  Now, all you need is the signature of the judge, you don’t even have to show up in court.  How’s that?

Janice:

That’s a great idea, and we can get that system where?

Lou:

From Street Smart.  What you do is call 1-800-578-8580 and in fact, we’re running a special right now regular price $299.95, we’re giving the whole system including the templates, the forms, the forms disk, everything, the step by step process all written up for you literally don’t do anything but exactly what it says and that’s $199.95.  How’s that for a deal?

Group:

Yeah, baby!

Lou:

Yean, baby!  Awesome, awesome.  I’m glad you asked.  I didn’t even plan to bring that up on this call but that’s exactly what we’ve done to create the solution.  You might ask why, Lou, have you had to do this?  Because we had problems even in our own office and we said we have got to systematize the collections process.  In that kit, by the way, is even our Collect Wiz.  So, when all else fails and you get a judgment, now you’ve got someone else that can collect it for you.  Another element of it is to tell you how to collect your judgments, but if you can’t do it yourself, now you pass it on to Collect Wiz and let them do the job for you.

As Bruce is reminding me, we also have Check Wiz.  Now, what Check Wiz does is you set up an account with them and any bad check you ever get you can actually submit it to them and they essentially ding your client’s account on a daily basis until they get that check paid.  Because law has already provided for a fee for them, you pay absolutely nothing for that service.  Is that a good plan?

Janice:

That’s a great plan.

Lou:

Yeah, baby!  So, when they draft off your good check, when they actually hit the checking account and get it, and cash it, they also draw out their fee as well, legally.

Janice:

Very cool.

Lou:

Very cool.  So, we’ve got all those problems handled for you, even non-sufficient funds checks.

Janice:

Thank you.

Lou:

You’re welcome.

Roger:

Hi, Lou, Roger Allen, Acton, Mass.  Quick question, how many different trusts can we use the same trustee for?

Lou:

Ah, great question.  What I look at is where the trusts located are and where is the trustee located.  So, for example, today you’re in our Mastermind meeting and so we’ve got all the Masterminds together and as you’re hearing, from all over the country.  Wouldn’t it be great if you actually acted as trustee for one of them, and they act as trustee for you?  Now, you’ve got a trustee in a far off land which can make that very handy when it comes to serving a lawsuit because one of the elements of the law for a lawsuit to be valid is the person who’s being sued has to be served that lawsuit.  If the trustee of the trust is actually in a whole other state, it could really make it expensive for somebody to go down that path with you.  You like that program?

Roger:

I do.

Lou:

Now, to answer the rest of your question, how many do we use that person on?  Well, maybe lots of them.  Maybe what I recommend though is that you do not set up an MO, a method of operations.  I think it best and wise to use multiple trustees and you can use local trustees.  You could have a local trustee as your primary trustee and have your successor trustee be someone from a far off land.  That means that if anything ever happens, you can fire your local trustee and then have the automatically under our program, have the trustee from the far off land assume the position of the primary trustee because the primary trustee is no longer there.  It’s almost like they’re not there except they’re there.  They’re right there on public record except they’re not there because they’ve been fired, but they’re there.

Then, if for example you might automatically have it in your agreement that if they ever get served a lawsuit, they’re automatically fired at that time, automatic termination.  Now, all of a sudden, and we can also reverse that.  You can have your far off trustee, your far away trustee as the one that’s on public record locally and you have your local trustee as the successor trustee.  What you can do is fire your far off trustee when it’s time to close and actually use your successor trustee, the one who’s local, to go to the closing or sign all the closing documents, that’s close by.  Does that work for you?

Roger:

Absolutely.

Lou:

Now, one more answer to that question is we use trustee for about five trusts.  Then, you switch to another and so on.

Roger:

Thank you.

Lou:

You got it.

Debbie:

Lou, Debbie Miller, Reno, Nevada.  I have a question.  When we do seller financing or lender financing on a private lender, I’ve noticed that many of the interest payments, if we can’t get a no-interest loan, are amortized.  How can I set up my interest that we have to pay them to reduce the amount on these deals?  There’s so much interest right up front.  Would it be better to have a different kind of interest like simple interest or something like that to pay less?

Lou:

Well, that’s one of the beautiful things, Deb, about borrowing from other is that each deal does not have to match each deal.  One lender, they might require a mortgage, collateral, and so on, and they might only lend for six months.  Another lender will lend for 50 years.  You want to take each on a case by case basis.  The answer is you want to pay as little interest as possible as much later as possible as you possibly can.

So, I like our Interest Accruing Program because that actually benefits our lender.  It benefits them in earning interest on interest and it benefits us in not writing a check.  Those of you who are here today are part of our apprentice Mastermind Program just getting started.  So, one of the most important things for you is preservation of capital and cash flow.  The focus needs to be in setting these loans up is if at all possible you want to do interest accruing because now you get to use up all of the cash flow.

Let’s take an example where someone loaned you say $100,000 and you used that to buy property worth say $150,000.  Now, you’ve got $100,000 on that property and you know you’ve got a good long-term loan, say ten years interest accruing.  Now, what happens is that property goes to work.  We put a customer in there, that customer’s paying you let’s say $1500 a month.  Guess what?  You get all $1500 a month less taxes and insurance on that property.  Now, wouldn’t that help your business?  That’d be great, wouldn’t it?

Debbie:

Yes, that’d be wonderful.

Lou:

So, what we really want to do is as much of that as you possibly can do in the early stages because the payback on that $100,000 loan, and we’re actually going to talk about this tomorrow in your Mastermind meeting, is a ten-year loan at 6% on $100,000 is going to accrue to $191,000.  That means ten years from now, 120 months from now, you’re going to have to write a check for $191,000.  Well, let’s make darn sure that it was a good property in a good neighborhood, that’s going to appreciate and make a lot of money.  It was your cash machine for all of those ten years while it was out there.  Or, it could happen one of your customers comes along, qualifies for a new loan, pays you off and now all that money can be paid to your lender or it can be used on another property.

Debbie:

Wow, that’s wonderful, very powerful.  Thank you very much.

Lou:

Fantastic, Deb.  Thank you for asking.  Where you from?

Debbie:

Reno, Nevada.

Lou:

Yeah, baby!

Dan:

Morning, Lou.  Daniel Miller here from Reno, Nevada also.  I’ve got a question.  I’m trying to help somebody with a short sale that has a high-end house.  They have $50,000 cash that they just got from a sale of a home.  They also have $45,000 cash in a 401(k), and he lost his job and so he can no longer make the payments on this million-dollar home.  So, what we need to do is to figure out first of all, how will this huge chunk of change affect the short sale, and second, what can we do with that money so that they don’t have to give it all to the bank?

Lou:

Interesting question.  First of all, can’t make the payments on the home doesn’t match with have $50,000 cash in the bank; nor does it match with have $45,000 in an IRA account.  So, maybe the right statement is doesn’t want to make the payments on the home any longer.  Is that it?

Dan:

No, he just lost his job.

Lou:

I understand.

Dan:

And, he just sold a house in Florida, so they got $75,000.  They paid off a few bills but they can’t afford the house that they’re living in anymore.

Lou:

Except for the $50,000 they have in hand.

Dan:

And, the $45,000.  So, I guess my question is they don’t want to just sit there and pay the bank all that money and not be able to afford this house.  They can’t afford it because they don’t have any work, and they’re just going to just write a check to the bank and say here’s my money, take it?

Lou:

Well, no.  That’s a great question, though, and what we’re really seeing here is how people get stopped.  What we’re really seeing is they don’t see a future for themselves.  They’ve already decided that there’s no way they can pay any more, like there’re no jobs on the planet anymore, there’s no way they can afford or create an income to now resume payments on that house.  They’ve essentially given up which happens to be something that’s very common among sellers.  That’s one of the ways we buy properties is because people just simply can’t see past exactly where they’re at.  It sounds like that’s the situation you’ve got here.  They’ve thrown up their hands, they’ve given up, and they say we’re going to go a different route.  We’re going to get an easy-to-afford home, we’re going to downsize, we’re going to get ourselves out of this big hole we’ve dug for ourselves.

Okay, that’s fine.  We can help.  First of all, what they want is they want to use this $50,000 in buying another property.  Is that right?

Dan:

No, what they want to do is they want to try and start a business buying properties and repairing them.

Lou:

Fascinating.  Well, I know how they can use that $50,000.  They need training.  That’s a wonderful thing.  I thank you so much for bringing me a customer, Dan.  That’s a good idea.  No, if they want to start a business, that’s fine but you’re right that the lender is going to have to hear that they can’t pay any longer.  The lender doesn’t know about this house that’s been sold in Florida.  The lender doesn’t know that they had a windfall profit of $75,000.  If they were to know that, they don’t know that they have any of that left.  So, what is best in this scenario is for you to become their financial advisor and you call the lender as their financial advisor and explain that your client can no longer afford the payment on the property.  They have lost their jobs, they have no income, and no monthly income you can say, and be still truthful.  They have no monthly income and so your recommendation is that they get rid of this property and downsize.

What you’re looking to do is first of all ask the lender will they consider a short sale and get that commitment first.  If they say yes, you say great.  Okay, if you’ll consider a short sale, we’ll go find a buyer.  We’ll be back in touch.  Now, you could quickly be a buyer.  For example, what would you pay for this property?

Dan:

I haven’t seen it.  He says that properties there now are going about, because it’s in Connecticut and I’m in Nevada, he says properties there are going for about, that property’s probably worth about $750,000.  If that’s the case, then $450,000 would probably be something that we could buy it for and sell it and resell it.

Lou:

Now, what did you mean by million-dollar property before?

Dan:

That’s what it was when they bought it.

Lou:

What do they owe?

Dan:

They owe $850,000 or something.

Lou:

They owe $850,000 and what you’re telling me is right now it’s worth how much?

Dan:

About $750,000.

Lou:

It’s worth $750,000.  So, it’s already, the bank is upside down $100,000 and you still haven’t made a profit.  What is a key here is that you first don’t take the risk on some big, ugly thing like this because as far as I’m concerned one of these big houses is a big, ugly mortgage and a big, ugly commitment on your side.  I wouldn’t do it.  I would first put yourself in a position to find a buyer.  That’s when I say put yourself in a position, get control of the property and then begin marketing to find a buyer.  You want to, at the same time, work the short sale and look to see how low you can go using comps to justify a lower number than $750,000.  If you say it’s worth $750,000 now, we’ve got to show the bank it’s worth $500,000, and if you can get the bank going in the right direction.

You say Lou, they’re never going to take a discount like this.  Only every day and they’re doing it all over the country; Tampa, Florida, all over Florida, California.  A lot of the market, Connecticut is a good example.  Markets that went way up and now they’re on their way down to what I call the real numbers.  The numbers that they should’ve been all along but speculation drove the price up.  Now, you’ve got an opportunity to be able to get inside this deal, control the deal, not have any obligation on your part to make a payment and be able to move on with the transaction.

Now, there’s another key right here, Dan, that I don’t want you to miss is our magic of Street Smart is that Cost to Sell Worksheet.  You work through your clients with that Cost to Sell Worksheet.  You already know they have cash.  Translated that means they can pay you to buy.  They can pay you some amount to buy their house.  You say the combination of the discount from the lender and your payment to us will make this deal work.  Will that work for you Mr. and Mrs. Jones?  Boom!  You could easily pick up $30,000 cash from your seller.

Dan:

Wow, never looked at it like that.  What happens when the bank wants to see their financials?

Lou:

Well, we’re in the short sale mode right now, and what you want to do is be very anxious with the bank.  Say look, I’ve either got to take my clients and encourage them to go the bankruptcy route, or, I’ve got to encourage them to go the get out of town route and we find a new buyer for the property.  In fact, we’ve got somebody who’s already agreed to pay $500,000 for the property.  In fact, if that will work for you, we can go ahead and get this done right away.  Will that work for you?  So, now we get a commitment from the bank for the $500,000.  Now, let me ask you could you raise the money, Dan, if you had a lender who had $500,000 but you could show them clearly that the property’s worth $750,000?  Do you think there’s anybody that would lend on it?

Dan:

Absolutely.

Lou:

Absolutely; plenty of equity, plenty of comfort for the lender.  Keep in mind that today you might not have the $500,000, but also, you have the opportunity to raise the $500,000 if you just had the right offer on the table.

Dan:

Incredible.  That’s why we come to Mastermind, Lou.

Lou:

Thank you, that’s great.  Now, I’m not done with you because there’s one more element that we’ve added to our Street Smart System and I haven’t even had a chance to talk to you guys about it.  It’s something that we tested at the Pinnacle Level, the Mastermind Pinnacle, with such terrific results I want to share it with you.

What we’ve done is affiliated with an organization called 5000Families.org and what happens is that 5000Families.org is a 501(c) 3 charity.  They are a 501(c) 3 organization that is designed and has its mission to go visit with folks that are in foreclosure and to offer them solutions.  If the folks won’t answer the door, that’s no problem.  They just put this nifty bag on their doorknob, and in this bag is a book that actually talks about all the solutions that that client has for their problem.  It’s called the Mortgage Survival Guide. “Don’t roll the dice with your mortgage; fix it today in seven simple steps.”  So, what happens is this now is out there in the marketplace.  This has been viewed and seen on over 250,000 exposures; it has its own website, etcetera.

When you become a volunteer under 5000Families.org, they actually set up a special website with your picture on it, your contact information, and all your personal data.  What happens is that when you are now dealing with a lender, and this example is absolutely perfect, when you deal with them, you send in your authorization to release information on letterhead that’s provided by this organization.  This letterhead says 5000Families.org. That you’re a volunteer under there and all your contact information is right there on that letterhead.  Now, what happens is the lender who wants to check you out and find out if you’re legit actually types in that web address and guess what, up pops you.  A picture of you and your wife and now this is who you are and this is what you do.  Now, suddenly, we get to put on the good guys hat.  Many times people look at investors as bad guys, but now we get to put on the white hat and we get to say okay, I’m here to rescue you.

Why I believe this is going to be so incredibly powerful for us as Street Smart licensees is because there is legislation coming down on a daily basis that is changing the rules for us.  One of the things they’re saying is that investors cannot even approach people who are in default on their loan, much less in the foreclosure process.  If they’re behind in their payment, you can’t approach them.  These are laws that are in existence today.  Florida is an example, already passed the law, and already went into effect October 1.  Maryland, New Jersey and in fact, it is sweeping America.  These laws are coming our way.  What we’re doing is preventing the problem before it occurs.

Guess what these laws exempt?  Tell me; 501(c) 3 charities.  Organizations designed to help people.  So, you ride in on your pony and your white hat and look to rescue the people, you try.  In fact, if you can rescue them, exactly what you’re going to get is a testimonial from those folks.  If you can help those folks modify their loan if they want to stay in their home, help them do it and get a testimonial.  Then, let’s build up some incredible credibility for you.  Now, you can approach people that are in foreclosure now, and you can actually give them and talk to them about their solutions.

You’re going to have many folks as you well know, just say you know what, just like your vote, they’re going to say I’m out of here.  I’m done, I don’t want to deal with it anymore, and I’ve made my decision.  So, you take off your volunteer hat with 5000Families, and you put on your own for-profit organization hat, and now you have the right to solve those folks’ problem because they turned down all other solutions.  In fact, one of their solutions is to sell to an investor, and you can do that very, and they can do that very thing today.  You can assist with the short sale process just as we just described a few minutes ago and give you the opportunity to solve their problem.  Like that program?

Dan:

Love that program.

Lou:

Yeah, baby!  Now, we’re talking.  Now, let me tell you one result of the test.  As I said, one thing we do in our Mastermind is we test things.  When we test it and see if it works within our Mastermind group, then we share it with the rest of Street Smart, and we hope to encourage them to become testers as well and grow up to the Mastermind Level so that they get the experience of being able to enjoy and test things first hand, out of the box, first on the block to be able to do these things.

Well, here’s the magic that I haven’t even told you.  You think magic so far?  When our Pinnacle Masterminds began using this just a few weeks ago, they called on properties that they were working on that were in foreclosure and working on short sales.  Called into the bank and said hi, I am so-and-so, let’s say it’s you, I’m Daniel Miller.  I’m a volunteer for 5000Families.org.  It is a nonprofit volunteer organization designed to help people with the mortgage crisis.  I need to talk with someone about the clients that I’m working with today.  Guess what happens?  They give you a different telephone number, a different contact number, and an e-mail address.  They’ve already set up a special private secret office only available to guess what, nonprofit organizations that are designed to help people solve their problem.  Aha, aha.

Check around, you’re going to find that many non profits do business every day with for-profits.  There’s nothing wrong with you having an involvement with a nonprofit and being a for-profit as well.  Is that a good thing?

Dan:

That’s fantastic.

Lou:

Yeah, baby!  So, you can get involved in this program, too, just call our office 1-800-578-8580 and we’ll give you more details.

Dan:

Thank you very much, I appreciate it.

Lou:

Yes sir.  Alright, folks, we have come to the end of another incredible Group Q and A.  Imagine that we’ve answered this many questions in such a short period of time, and I’m looking forward to seeing you in the next few weeks.  Be sure to watch your e-mails; we do communicate with you by e-mail.  If we don’t have a good e-mail address, be sure to get back in touch with us and let us update our record because we want to always give you the latest information as quickly as we possibly can.

Folks, it is our real pleasure to give you information that I doubt you had before you got this call.  So, in fact, folks right here in this room at our Mastermind Level had never heard this information before.  Just understand that this is what we do on an ongoing basis as part of our Group Q and A. This is an informational call that you absolutely do not want to miss.  Be sure you calendar it; be sure that you expect an e-mail from us so that we can give you this downloadable information when it’s available to you.  Remember that one thing we do with our Group Q and A is always update you with the latest things that are happening in the market so you can update your methods and take advantage of what’s available today to make the most profits in the least amount of time.  Have we had a good session?

Group:

Yeah, baby!

Lou:

Yeah, baby!  Excellent, alright, we’ll talk to you soon.