Hey folks,

Last time, we talked about the current over-all state of the real estate market nationwide. Naturally, each region has its own market, and every one of them is different. However, for the majority of areas, it is clearly a buyer market.

Being a buyers/investors ourselves, this is a good thing.

I wanted to touch on some of the methods I am using now, in my business to make profit and show you that now is the time to employ creative real estate to the maximum.

First, we should define “Creative Real Estate”. For the purpose of this post, we’ll define it as “problem solving”, which essentially, all creative methods are. The main point, or problem that creative real estate addresses, is very simple really………it provides debt relief.

Let’s take a look at some strategies and methods that are working in TODAYS market.

Rather than say, “I’m buying using methods x,y, and z, sometimes combinations of them”, I’ll give you a sample deal……..one I finished up just this morning. I know I learn better by seeing things in action, or reading about them.

First, the background:

Seller calls from some of my marketing materials. This time, a business card the seller found on the counter at the local convenience store.

The seller, when he calls, let’s me know immediately, his level of motivation.
The call went something like this;

ring, ring, ring……….

Me: “Hello, how can I help you?”

Caller: “I found this card that says you buy houses and I want to sell mine right now!”

Me: Okay, well, you’ve called the right place. My name is Jim, what is yours?

Caller: Bob TwoBed

Me: Nice to meet you Bob. Can you tell me where your house is located?

Caller: Sure, its at 1234 Gats drive west, yourtown, fl. Its in good shape, I keep it clean, I just can’t afford it anymore and want to get out before they foreclose. I’m not looking for profit, just for someone to buy it out from under me.

Me: Well Bob, we can close quickly, if the property meets our buying criteria. Can you describe the house to me?

Okay, from this point, Bob describes a 2 bedroom, 1 bath house, smaller, in a rental community I know well. I own three rentals there myself already………therefore I am interested if we can get the numbers to work.

That becomes to next step. Checking the numbers. I determine that the mortgage the seller mentioned is indeed in place, but will still need to get a form signed by the seller, authorizing me to call the lender to verify interest rate, loan balance, arrears, terms, escrow accounts, etc.

The seller also tells me he is behind on payments, and cannot remember if its two of three months. Bottom line, it’s almost the first of the month, so either way, it will be one more behind in a couple days. Definitely need to call the lender to get some numbers.

One thing the seller failed to mention on the phone, that I did find, was the fact that the real estate taxes on the property had not been paid in 3 years.

Here in Florida, real estate taxes come due in November, and the tax payor has until March of the next year to pay them, with additional fees of course, before they are considered in default. After not being paid, a tax certificate is sold, which later can become a tax deed, thru county tax deed sales. This process takes, you guessed it, THREE YEARS……..So, because the seller’s house was three years behind, this meant that he had to pay at least the three year old tax bill, plus fees, in order to avoid losing his home to a county tax deed sale, by tomorrow, the 31st of March. (the sale really would not take place for at least a month, so there is a little time to play, but not much.)

Not a whole lot of options here. The taxes had to be paid one way or the other…….the question was, would I pay them, or not?

By the way, I don’t mind sending money to the county for taxes, I just prefer it not be my own. More on that in a bit………

So, after collecting info about the subject property, and armed with my experience in the same subdivision, I went to meet the seller.

He was right, the place was clean, not nice, just clean. A very neutral, rentable unit……..if the numbers make sense.

I left the meeting with a form authorizing me to speak with the lender, and a contract, contingent on verification of all information, and successful negotiations with the lender, to bring the loan current. Pretty much a purchase agreement, written up like an option really.

While meeting with the seller and going over his mortgage documents, late notices and tax bills, I discovered that the lender was a local portfolio lender I’d worked with before.

The loan balance made the deal, “okay”, as in, workable cashflow wise, IF we brought the loan current and paid the taxes.

Basically, just taking the deal as is, paying out my cash for taxes and back payments, would have required the deal to support itself for the first 18 months or so. After that, the cashflow would be profit.

The thing is, I am not patient, and with the abundance of deals out there now, taking on something that will pay later, just makes no sense.

So off to the local portfolio lender who holds this note I went.

I walked into the lenders office, spoke with the manager, we exchanged pleasantries, and then went to his office to talk about this potential deal.

I immediately told the lender what I had, and what I wanted to make happen. Of course I did ask him before getting too far into negotiations, “if we cannot work this out, do you REALLY want this place back?”

He said, “No, we did a drive by last week, and we don’t need any more small houses in our REO list, let’s get this taken care of”.

I brought the tax issue to the lenders attention, and was honestly kind of blown away they were unaware of it. I also determined that the loan was 4 months behind (including the payment due here in a couple days), and that the interest rate was a whopping 12.5%!!!
Holy COW!!!!!!!!!!!!!!! what on earth.

After talking with the lender, he agreed, if I showed up with a deed in my hand, from the seller, that the loan could be re-worked and the lender would pay the taxes.

Here is what we came out with………….

The lender paid all 3 years of back taxes, today.

ALL backpayments, forgiven, the loan is in good standing……very cool, first payment on new workout loan, is not until May 1st. (that gives me a month to fill it).

We reduced the principal amount of the loan by a small amount (not asa much as I wanted, but the over-all worout/negotiation makes sense).

Anyway, we reduced the amount owed by $8,000!

However, don’t forget the taxes………this amount was added to the principal AFTER the reduction…….which means we really only reduced the loan by about $5,000. Still pretty good.
And yes, it gets better……we also had that monster 12.5% rate reduced…….not as low as I wanted, but, it now stands at 8%.

So, essentially what happened here was this……..

I took title to the property from the seller (who moved this last weekend so the place is vacant)…..subject to the existing loan, and back taxes.

We then had the lender pretty much write a new loan, leaving it in the seller’s name, he signed some paperwork with the lender approving and agreeing to the workout.

I now have a nice little 2 bed, 1 bath house, that will rent for about $650/month, costing me a mere $278 per month in payments……..which now have the taxes escrowed in them. The lender insisted on this, and I’m cool with it.

I did manage to keep the insurance out there, because I have my own agent, and get deals with him…….easier and cheaper to just pay for the entire policy for a year. (especially since it’s only $600/year to insure the place)

So, I now have another rental in that subdivision, that makes 4 for that area. The marketing for tenants begings tomorrow, as soon as its cleaned up a bit. Grass will be mowed, signs placed out, directionals, and flyers.

I expect to fill this fast, as we have filled the others in this area rather quick. It’s a cheap, clean rental, in a non-crime area, with a fenced yard and nice neighbors.

Heck, we might even sell it, should a buyer come around.

By the way, for those watching the numbers, the total get in the door price for this one, was $28,978………..none of which came from my pocket……..it’s value, approximately $55k if sold retail to an owner occupied, or $45k to a landlord.

Folks, lenders are in pain now, just like MANY seller’s are. So, if you have a seller call, where they are behind and making up the arrears, or keeping the payments at the same amount monthly make the deal not work-able………..RE-WORK IT!

Remember, the only time the answer is ALWAYS NO……..is when you fail to ask.
I did not even propose most of the workout here, a frightened lender with a HEAVY REO list, panicked, saw a way out that worked for us both, and we got it done.

this post is long enough……..I’ll cover some other recent deals, with other methods used here in a future post.

Stay tuned!

Happy investing!
Keep the Rubber side down,
Jim
The Biker Who Buys Houses

P.S. If you missed the email announcement, I now have a couple of openings in my mentorship program. They won’t last long. I plan to take 5 more investors to the NEXT LEVEL in 2009! Are YOU Ready?
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Hey Folks,

As promised, I am writing today to talk about the current over all U.S. Housing market, and where creative real estate fits within that.

Some folks are now claiming that buying real estate right now is a mistake. I could not disagree more. For me, it’s always a good time to buy. The key of course is to buy RIGHT, meaning, BUY FOR WELL BELOW TODAYS VALUE!

Sounds simple right?
and yet, some seem to still get confused or ignore this concept.

The question I hear most often from newer investors, or those frozen in market fear is; “what IF the value goes down”?

Sure, this could happen and in many cases, very well might. However, remember, I said, you want to buy for BELOW todays value, considerably less in fact.

Imagine, you buy a single family house for $50,000 today, that has a value of $100,000 and rents for $950/month. What happens if the value of this unit goes down 20% more, and the market rent drops 20%. Your profit monthly will be less, and you will have less cashflow……..BUT, you will have value. A performing asset.

This market type (buyers market, with declining values), as well as any other type of market, (sellers, where appreciation is going up steady, or at even excessive rates as in previous years), are always the time to focus on cash flow. Cash flow is what builds wealth and freedom.

No matter what method you use to acquire investment real estate, cash, credit, combination of the two, or some creative method with no money down, or terms, the central focus needs to be to make the transaction support itself. I live in Florida, the land of the Gators, and around here, there are signs all over the place that say, “don’t feed the alligators”. This is very true, and a total waste of time. You cannot tame a gator. In real estate investing, we also have gators……..these are the transactions that cost you time, money, sometimes credit, and always aggravation……..all without profit, and most times, loss.

What I try to pass along to those who learn from me, is that creative terms, do not always mean a deal is in the works.

Let me give you an example. Someone local I am working with, just recently began marketing to find sellers in need. He’d been trying to invest for some time, and frankly, just needed a little boot in the rear and some guidance. As with anyone new, he still needs some guidance. (I did too back in a day, and will admit to seeking help here and there to this day). Anyway, this investor calls me all excited last week with what he described as his “first creative real estate deal”. He had a seller call who just wanted out, and was open to allowing him to buy for loan balance, and even take over payments.
The thing is, the seller owns a property where he owes more than the house is worth.
If anything, the sellers house is a good candidate for a short sale.
Had the investor gone ahead and purchased the subject property as he was wanting to, he’s have been ‘feeding a gator’.

Not something I encourage anyone to do, and TRY my darnest to make sure they don’t.

Unfortunately, the new investor, when talking to the seller, made it seem as though buying for what he owed was possible. This planted the idea firmly in the sellers head that he could sell, conventionally, and solve his problem.

So, when advised that taking the property as it sits, reinstating the mortgage and keeping it alive was not a deal, the new investor had lost the lead.

The new investors mistake, was to think that getting into a house creatively, with no money down, and no credit check equalled a deal. He missed the part in my teaching (actually chose to ignore it), where I STRESS to buy right.

So, while he’s not back to square one, he is rethinking his approach and attending some seller meetings with me this week to learn.

Now there might be some reading this who say, “But Jim, my marketing brings in calls from motivated sellers all the time who owe more than their house is worth, there are no deals in my area.”

You know what? They are wrong, and right at the same time. I’ll admit, last week alone, we had 34 calls from sellers, and in that batch, ONE was a deal worth going after. The others, either would have worked for a short sale, if the lenders agreed of course, or, were simply stuck losing their houses to foreclosure.
Most because the sellers simply do not realize that yes, a house they paid $250k for 2 years ago, is most likely worth $175k, perhaps less, in the current market.

There are ways to make money in this market, and using some of the tried and true creative investing methods will make investors wealthy, IF, they approach every investment correctly.

In the next installment, I’ll show you which methods of creative real estate investing I am using now, in this market, to make money and continue to create cashflow.

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Happy investing, and keep the rubber side down,
Jim
The Biker Who Buys Houses

Hey Folks,
How are you today?
Me? I’m doing GREAT, the weather finally came back to Florida. We are currently in the upper 70’s, with sun and blue sky.
About time!
Supposed to be back in the lower 80’s this weekend……….Sunny Florida is once again, the sunshine state.

I wanted to touch on something that has never been my strong point……….networking.
See, I don’t play well with others, and therefore, don’t really have a LARGE local network.
People get on my nerves, so I prefer to go it alone, when I can.
I know this is something I should work on, and do here and there.
However, whether I like it or not, in the course of business, I’ve managed to make some friends and contacts.
Thankfully, these folks put up with my obnoxious self.
Thing is, when I have something to offer, or come accross an opportunity that might not fit into my plans, I can call on these folks and pass it along.

Today, my phone was rather active, as I was either on it tracking down leads, working with lenders, etc, or, folks were calling me.
Thanks to some of my network of friends and associates, I had a few things handed to me today.
Some I cannot mention, because they are not done deals, yet.
The other, a couple of houses we will be looking to wholesale.
Thanks Dan.
A private lender has a couple he has gotten back from defaults, and he lives out of state. I know the area, have buyers, and really think we can move these for him.
The lesson learned here, again (for about the 100th time for me), is that networking does really have value.

I have, thanks to years in the business, basically have a team in place, but realized, once again today, there is always room for more.

So, todays post is about networking, and making friends in the investing world, whether they be other investors, or vendors/businesses that you may transact with, or refer to on occassion.
Not to mention, having like minded folks to talk to…….in this business, that’s a BIG Bonus.

Where to network is usually the first question my students ask. My answers are not always conventional. Most folks suggest attending a local REI club meeting, and that is a good idea.
Thing is, I prefer to have my own team of folks, special folks, who might think WAY outside the box, and actually be acting on it.
I’ve found, at some clubs, there are real investors, active ones, and they all work together to a degree. Then there is a slew of wannabes who hang out, study, talk, and never take action.
I don’t have time for that.
So, sure, attend club meetings.

Then, think about who else you need in your business. RE agents, brokers, title companies, mortgage/lender reps, repairs folks, etc.
Chamber of commerce lunches and charity events are GREAT places to meet folks and network.
I attended a lawyers luncheon here a few years ago, and met some title company folks, and two lawyers.
I use one for RE, the other for collections.

The best way I’ve discovered and developed relationships with important members of my team is simply by talking.
I tell everyone what I do, share business cards, buy drinks, coffee, lunches, etc, with anyone running any kind of business.
One of my private money lenders locally, I met while waiting for my car to be washed. He owns the car wash, and saw my biker vest with a patch on the back that reads, “I Buy Houses, www.BikerJim.com”
We talked, and he’s been on board for a couple deals where we needed cash fast.
He also has people who work for him that he has offered to me as cheap labor for cleanouts, etc.

Thing is, I would have never met this guy at an REIA club meeting, or the chamber of commerce.

My insurance agent, met him at a bar, we threw darts, played pool, talked a little shop………several beers later, we had exchanged numbers and set a time to meet the next day. He saved me a bunch on insurance for cars, rentals, and personal residence, etc.
Right as my kids began driving too…….All because I opened my mouth, then my ears.

Met some one the other day who inspects houses for lenders, and has a list of houses that his lender told him he could have first crack at. (a small local lender, it’s a part time gig for the guy).
I think he uses the inspection gig to get wholesale deals……..fine with me, he has some buyers, as do I…….surely we can work something out.

Bottom line, networking has value, and no matter how multi-talented an investor may think they are, or how much ability/skill they have to do things for themselves, time is money and networking can help you utilize your time more efficiently. Using the talent of others for mutual benefit, simply makes life a little nicer.
I’m at the point now, where I can get a lead in my office, and basically do the entire deal from here, with others doing all the footwork, etc. Due in large part to my begrudgingly networked associates and friends.

So, been kind busy here, and thanks to those folks, everything will get done……….and I won’t have to do it all.

I also have a couple of other things in the works.
Looks like a 3 house week so far………wonder what next week will bring.

Happy Investing, and keep the rubber side down,
Jim
The Biker Who Buys Houses