Networks help out real estate investors a lot by plugging them into good property deals.  It’s very easy to build your own network when you are just starting out as an investor.
When you first start out in the real estate investment business you’ll find that having a network of other investors and buyers is a valuable source indeed.  In fact, it can help you in all areas of your business from finding good properties to buy to finding the investors to buy those properties from you.  It’s fairly easy to build up a network as you begin buying properties, even if you don’t know anyone when you start.

Network your way to profits
Naturally, you won’t pick up every property that you look at in the real estate investment business.  However, just looking at properties brings you into contact with other property investors and helps you to build your network.

As you begin to make more and more deals in the business, say with REO agents that hold bank properties are in post-foreclosure, you are also networking.  You’ll find that you get a lot of repeat business with those investors with whom you make successful deals. 

It’s not uncommon to only make a deal on one out of every 15 to 20 properties you look at in real estate.  However, you’ll find that as you buy those properties you’ll make connections with the REO agents and investors you deal with and they’ll keep you in mind.  So after a while, you begin to find that you are being handed deals that fit your criteria because the agents and investors know what you are looking for.  Eventually, it’s possible to start picking up one out of every four or five properties you look at, simply because your network will be handing you the perfect properties to invest in.  See how easy it is?

Record the Information of those you Meet!
One real estate investor claims that up to 65% of his properties come from repeat clients.  Networking is easy when you choose to work with these repeat clients.  To make the most of those repeat clients and past investors you’ve worked with, try to remember to take down their names and numbers or keep their business cards and add them to your address book.  Be sure to add all pertinent information about each person you meet, such as whether they are looking to invest or sell properties.

Networking is an essential part of the real estate investment business.  However, you don’t need to feel intimidated if you are starting out with little to no network.  As you make deals and look through properties in the local area you’ll also gradually be developing your very own network.

You’ve got a property available for lease, but aren’t sure how to find the tenants to get into the lease property.  It’s not too hard as long as you have the local newspaper!

Want the easiest way to bring in lease tenants when leasing a property? Put an ad in the paper!  Getting a lease tenant is just the same as getting a rental property tenant.  You can place an ad in the papers saying property for lease and giving your phone number.

A lot of real estate investors forget that the goal of an ad is to get a phone call.  You’ll notice this in the ads of investors with 6 or 7 lines of text that describe the property.  Those are trying to sell the property in the ad, when all you need to do is get the phone call.

What to Say in the Ad
Basically, just tell the readers that you’ve got a lease rental or rentals and provide a phone number for them to call in order to get information.  You may also wish to state whether this is a house, duplex or apartment and give the number of bedrooms to let the caller know what you have available.

It’s very important to keep your costs down as a buy and hold investor.  Many newspapers charge by the line for ads in their classifieds sections.  So the more detailed you get with your ads, the longer they’ll be and the more money you’ll end up paying each month in advertising.  If you can achieve the same number of calls that the other investor gets with his longer ads, you’ll be maximizing your results with less investment!

When to Show the Property
The phone number that you include in that advertisement for your lease property should ideally go to voice mail or have voice mail capabilities.  To save yourself further time fielding calls from people who see the ad, let all the calls go to voice mail.  Anyone who is interested will leave their name and information for you to call back. 

Pick a day when you’ll be showing the rental you have available.  For instance, Sunday is one of the best days to have a house showing.  People have a lot of free time and want to get out of the house. 

The day before your Sunday showing call all of the people who left a message on your voice mail and talk with them about the property.  Also let them know that you just happen to be having an open house the next day if they are interested in leasing the property they can just drop on by. 

Pick a certain set of hours that the lease property is going to be open and let your potential renters know.  You’ll save yourself time in getting all of those appointments to show the property out of the way and you’ll be creating competition for the property.  If people see that others are interested in the lease rental you have available they will be more likely to stay and fill out an application for approval.

There is a reason real estate investors can make money by picking up cheap defaulted property from the banks.  Banks need to get rid of those foreclosure properties.

You may think that negotiating with banks in order to get them to give you a discount on their property is practically impossible!  It is possible and real estate investment deals go through with the bank every day.  Here’s why.

Why You can Get Discounts on Default Properties
Banks are rated in their ability to work out deals with homeowner in default.  That means they are rated for how much cash they hold in reserve to cover each mortgage should it default and how well they work with the homeowner in order to keep a property from foreclosing.  Some banks may hold as much as 8 times the default mortgage in cash reserve, which for a standard $100,000 mortgage is as much as $800,000.  They are required by law to cover that mortgage in case it goes sour. The banks can’t use this money, invest this money and they certainly can’t use the property.  It just sits there tied up for as long as that mortgage is in their books.

So a bank will accept a short sale on a property or a mortgage note purchase primarily because of the reserves they are required to set aside.  They want that money freed up so they can invest that reserve money and make profits. 

Your best deals come from the bank right before the end of their fiscal year or right before their auditing. 

How eager the Banks are to get rid of Default Properties!
A particular real estate investor was interested in a small home in default.  The investor began discussions with the bank that held the homeowner’s mortgage to see if they could negotiate a deal.  He was holding out for a sale price of $37,500 on this property and he wanted to make the sale as a note purchase.  The bank was being difficult.  They didn’t want to sell the property that low and they wanted a short sale deal on this property.  The deal didn’t work out all three parties went their separate ways.

About 6 months later the bank calls the real estate investor back up to see if he is still interested in buying the property.  They were willing to let him have his previous price of $37,500 and let him have the property mortgage through a note purchase.  In fact the bank needed to do a note purchase. 

They had foreclosed on the homeowner during those 6 months, but neglected to show up at the sheriff’s sale.  This naturally messed up their foreclosure. 

The only way they could sell the property was by a note purchase.  There may have been a lot of investors interested in this property, but because the investor had been holding out for a note purchase six months prior the bank remembered him and called him up to see if he was still interested in investing that property.  Even better the investor saw what a pinch the bank was in and managed to negotiate an even lower sale price on the note purchase of $30,000.

Banks are not in the real estate business, they are in the money lending business.  The only use foreclosure as a last resort to recover some of their money.  This process takes a long time though and it’s messy.  Banks are much more willing to sell the property, work with the homeowner or take discounted short sales and note purchase deals to recover their loan.

When working with a bank on a short sale you may find that the bank is insisting on the right to file for a deficiency judgment against the homeowner for the write-off amount.  However, it is possible to stop the banks from filing a deficiency judgment!

The homeowner can end up in trouble even when you work with them to purchase that foreclosure property.  There are many steps to the arrangement of a real estate investment deal, so it’s easy to forget a few little details, such as the deficiency judgment!

Lots of times in a short sale, the bank will agree to your offer, saying, ‘alright, we’ll take your deal and sell you the property for $60,000, but we’re still going to get a judgment against the homeowner for the remaining mortgage debt.”  This debt on a mortgage of say $100,000 can be $40,000 that the homeowner will still be responsible for in the face of a court ordered deficiency judgment. 

A deficiency judgment basically says that the homeowner is still responsible for the remainder of a mortgage to the bank, when that bank sells the property for less than the mortgage.  Banks are required by law to either get a deficiency judgment on the property or send the homeowner a 1099 Form showing the bank’s write-off of $40,000 as income for the homeowner.  There are ways to deal with the 1099 Form so that the homeowners on the foreclosure property don’t have to pay taxes on that ‘income’.  However, a deficiency judgment can attach itself to the homeowner’s new property mortgage if they get another home and can remain with the homeowners for up to 2 years. 

It’s very important to negotiate with the banks to also keep them from filing that deficiency judgment when the property sale goes through.  Sometimes you’ll come across a bank that just insists on filing for that deficiency judgment.  They may have their reasons, but it is a big problem for your homeowners and your deal. 

Stop the Deficiency Judgment by Becoming the Bank
You can avoid this deficiency judgment for the homeowners by buying the mortgage note from the bank instead of the property.  This way you become the bank because you hold the mortgage.  Changing the short sale deal to a note purchase is a simple matter and all you need to do is get the bank’s agreement on the deal.

If you are the bank, you have the right to decide if you will be sending the homeowners a 1099 Form or if you will be getting a deficiency judgment against them.  Which way do you think you’ll go?

Of course, you’ll opt to send the homeowners a 1099 form instead of getting the deficiency judgment. A big part of foreclosure investing means working with the homeowners and helping them out of a problem mortgage.  Plus, it’s a lot less work to send the 1099 Form.

It’s easy to get lost in all the numbers when you are looking at a major real estate investment.  Simply follow a basic plan when calculating your discounts to find out how much money you are willing to invest in a property.

Property investment is a numbers business.  As a real estate investor you’ll need to pay close attention to your numbers when purchasing a property in order to make money.  Every investor develops their own basic plan for purchasing property to make a profit. 

Those just starting out can get confused with all the suggested rates of return that you need to aim for, but each property purchase needs its own specific discount for you to make a good profit. 

Start with the Minimum
A basic plan is to start by taking 10% off the asking price or the mortgage of a property you are working with the homeowner to purchase.  This can be called your profits or your basic earnings.

From there you’ll continue to lower the amount of money you are willing to pay for that property based on certain negative factors associated with the home.  This can be fact that the property doesn’t have a basement or it needs a new roof.  You can negotiate a discount for many different problem areas with the bank.  Just calculate the costs of these repairs or how much less a buyer would be willing to pay for it and you’ll get the additional discount you need to ask for on the sale price of this property.

Examples of negative issues associated with a property;

• Disrepair; needs new roof, new heater, etc.
• No appliances or old appliances
• No basement
• Only one bathroom for multi-bedroom house
• Economically depressed area
• Lot of other properties for sale around the home
• General shabby look, needs lawn care, new paint job, etc.

When you finish the calculations on discounts you’ll ask for, you’ll have your minimum discount, your additional discount and your total discount.  That determines what you’ll be willing to pay for a property.  As long as you approach the seller or the bank with proof of these negative issues, you stand a good chance of getting your discounted price.

This method of calculating will allow you to remain true to your financial plan for real estate investing, and also not end up getting into trouble by paying too much for a property. 

Have you heard of a simultaneous close, but aren’t sure what it involves?  You’ll find that it’s a surprisingly simple procedure and a great way to buy property with using your own money.

There are many ways to close a deal in real estate investing.  As a foreclosure investor you’ve probably heard of the famed, simultaneous closing, when purchasing a property from the homeowner.  It’s a great way to make a profit on your time and effort without using your own money to purchase a property.

A simultaneous close is when you buy the property from the homeowner and then immediately turn around and sell that property to an investor.  You very often are only on the title of the property for a few minutes at a time.  Plus, you can often arrange the deal so that you end up buying that house with your investor’s money!

How the Simultaneous Close is Initiated
You initiate a simultaneous close on a property sale by asking your investor to wire their money into the title company that you are using for escrow.  You have already given the title company prepares the two closing documents; one is where you buy the house for $70,000 and the other is where you sell the house to your investor for say $90,000.  That means you get a profit of $20,000 after both closings are complete.

When the title company prepares both of these documents at once, they’ll notice that your buyer has already wired their money into the company’s escrow account.  The title company will see that when you sell this property to your buyer you’ll be getting $90,000 and that the buyer has already transferred his or her money into the title company. 

So, rather than asking you to wire your own money into the title company so they can initiate the first sale (from the homeowner to you) they’ll just use $70,000 of the $90,000 that’s been transferred into the title company by your buyer.  Then, they’ll turn around and complete the second sale (from you to the buyer) and leave you with $20,000 profit without even using your own money!

Basically you’ve just ‘flipped’ a house, which in proper terminology is referred to as ‘Wholesaling’ a house and all without using your own money!  As you can imagine there is a little more to the process of making a simultaneous close, but this is the gist of the procedure.  It’s an excellent way to get involved in real estate investment and get profits with very little starting cash.

There are all kinds of deals to be made in the real estate business.  Three deals in particular on the least desirable properties can bring you profits.

We love the ugly and awful.
~Andy Heller

There are all kinds in real estate investment.  All kinds of real estate investors, all kinds of deals and all kinds of property to make a deal on.  You’ll definitely find that having all kinds in this business makes for a great amount of variety and plenty of opportunity for earning profits.

There are three basic ways to make a profitable deal in the real estate investment industry.

1. Pick up a Pre-Foreclosure
2. Pick up a Property at the Foreclosure Sale
3. Pick up a Post-Foreclosure

These are the three states of the defaulted property before it usually ends up back on the market as a classic home for sale with a real estate agent.  A pre-foreclosure involves finding homeowners who haven’t been keeping up with their payments and working with them to buy their home, while also getting them out of their defaulted mortgage.

The foreclosure sale is where you can go to pick up mortgages and properties that have already been foreclosed on by the bank.  A post-foreclosure is a property that didn’t sell at the foreclosure sale for whatever reason and has gone back to the bank.

These last properties are usually undesirable for many reasons.  They may look bad, need a lot of repairs, may have a very high mortgage to cover or even have an IRS lien placed on them.  The real estate investor must realize that banks are not in the business of real estate.  They are in the money business.  In fact those post-foreclosure properties in a bank’s portfolio are listed as non-performing assets.  The banks don’t want them!

Give Us your Poor, Your Tired, Your Huddled Masses…
In real estate investment you’ll come to love those properties that are in disrepair.  These properties are not attractive to the general public, or those people looking to buy a home to live in.  Once a home becomes ugly and awful, you’ll find that it’s pretty much only attractive to the post-foreclosure property investors. 

As a property grows more and more neglected, fewer and fewer investors will be interested in that property.  However, this ugly and awful property is also an excellent way to get a major discount from the bank or the homeowner.  You can ask for multiple discounts on the sale price of a property because of shabby appearance, neglected maintenance, problem placement of the home on a lot and more. 

Don’t turn down a property deal just because that home looks ugly and awful.  In a business with all kinds, the leftovers can really turn out to be diamonds in the rough.  If the safety inspection shows the home to be sound and termite free, then you can bet that a property that just looks bad is a great property investment.

The Simultaneous Close sounds like a perfect real estate investment deal.  However, there are a few drawbacks to this foreclosure investor’s dream deal.

It’s part of the dream, the possibility of being able to make thousands of dollars with out using any of your own cash as an initial investment.  Well, it has been done and can still be done with a variety of real estate sale practices.   One of these popular sales in real estate investment is the Simultaneous Closing, which basically involves you purchasing the property with your investor’s money and then selling that property to your investor all in a matter of moments.  It’s legal and requires paying close attention to the numbers on all sides of the deal.

One Minor Drawback with this Real Estate Sale
There is a small problem with using the simultaneous close in order to make a property sale.   A lot of title companies are hesitant to insure the title that’s been sold using this method.  In recent years there have been many problems with mortgage fraud and predatory lending.  Many of those fraud deals have involved a simultaneous close on a property title.  Plus, the business of foreclosure investing and real estate investing has a bad reputation.

So, to try and cut back on the incidents of mortgage fraud and predatory lending title companies have made a blanket rule stating that they just won’t insure a title in simultaneous close. 

This doesn’t sound like a big problem in wholesaling, but it basically means that the title company won’t perform a simultaneous close.  Hence, you can’t buy the property!  This is a bad deal for all the good real estate investors out there who are putting in their time and effort on wholesale deals, but who don’t have the money to invest on their own terms. 

Not all title companies have this rule, but it’s something to keep an eye out for.  This practice has just taken effect in certain areas.  So, it’s to your benefit to see if the title companies you will be working with are still performing simultaneous closings.  You’ll want to do this research before you make an offer on that next big real estate investment. Don’t cast aside the notion of a Simultaneous close entirely because this is still an excellent method for wholesaling property.

You’ve got your list of defaulted homeowners and defaulted mortgages, but don’t feel comfortable ringing them up.  Well, you can initiate contact with the homeowner through direct mail letters.

In the old days it used to take a lot of time to find and contact all of the default mortgages out there.  Now, it is way easier these days to find the names of homeowners in pre-foreclosure than it used to be and as a result contacting them is easier too. 

Looking for the Foreclosures
In the old days you used to have to go down to the courthouse and scroll through the lists of homes in foreclosure on microfiche in order to find pre-foreclosure deals that fit your needs and get the names of potential sellers that you could send letters to.  In fact, if you wanted you could still do this.

If you want to save yourself some time and stress on your neck, try buying into a mortgaging list that sends you all of the default mortgages.  There are all kinds of list providers out there today.  They’ll send you lists filled with pre-foreclosures and foreclosures in areas across the country.

How to Start Direct Mailing
You can now contact all of these wonderful foreclosures and pre-foreclosures available on the market by making use of direct mailing practices.  Direct mail involves sending a form letter to the homeowners you’ve selected as potential clients.

Once you get your list of homeowners in default or even a list of homeowners with their own mortgages you can start sending out direct mailing letters.

If you are uncomfortable with your own letter drafting skills, you can look up some pre-formatted sales letters that are available online, or just use a letter template from your word processing program (such as Microsoft Word) to create your own simple and direct letter to the homeowner. 

In your letters be sure to state your reasons for contacting the homeowner about his or her pre-foreclosure and provide your business information.

That includes:

• Your name and company name (if any)
• Telephone number
• Mailing address or office address (if any)
• Email
• Business card

Including a business card in each letter you send out may be a little costly at first, but in the long run those homeowners you contact about picking up their homeowner mortgages or pre-foreclosures are more likely to keep a business card than the letter.

Some suggest being prepared to send out your direct mailing letters to defaulted homeowners up to seven times before you’ll get a response.  That’s the average number of times someone needs to see a piece of information before they’ll act on it. 

Picking out the perfect lease tenant for your lease property is a cinch if you know what to look for.  Someone who is turning a corner financially is always best.

You’ve had your open house for that available lease rental property and you’ve gotten 3 or 4 good applications from people interested in leasing that property.  Now, how do you choose the right tenant for your property?

Know What Kind of Tenants You are Attracting
One thing to understand with lease purchases in real estate investment is that you are dealing with potential lessees who can’t quite get into a home mortgage.  Many will have bad credit, lost jobs or even lost a house in the past.  So, you’ll want to look out for people who have just turned a corner financially.  They’ll have a good rental period for say the last 6 months.  They have a regular job and even though they may have bad credit, you’ll be able to see that they are taking care of the important things like student loan payments and car payments.

It’s okay if they’ve had problems making mortgage payments in the past as long as it’s far enough in the past that you can see the potential lessee is making an effort to improve their financial position. 

Are They Going to Buy?
You may also wish to inquire with each applicant to see how certain they feel about purchasing the property eventually.  In leasing property, you can just lease out the property until it falls apart if that’s what the tenant wants to do, but every lease agreement includes the option for the tenant to buy the property whenever they wish.  So, if you have a potential tenant who really wants to own the property they are leasing from you, you’ll have a higher chance of selling that property for a nice profit in a few years.

The Gut Check
Another thing to keep in mind is the simple gut feeling.  You may just have a good feeling about a certain candidate for the lease property.  This person may not have as good a looking application as the next potential lessee, but you feel fairly certain that he or she will work harder to make sure payments are consistent and on time with the property.  Ask yourself if you want to risk the time and effort involved in working with each applicant for the lease rental.  A good old-fashioned gut check works wonders when deciding between two equally good candidates.