Enhanced Diligence for Turnkey Investing

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By Bruce Kellogg

What About Enhanced Diligence?

In the beginning, commercial real estate brokers invented the term “due diligence”. Lacking a specific definition, it basically means, “Check it out”, when making a real estate purchase. Nowadays, the term has received wider use in home purchasing, turnkeys, syndications, and more, but its application still has no formula. This article aims to correct that for turnkey investing with what can be called Enhanced Diligence.

Initial Philosophy

When an investor purchases a turnkey property in a distant location from a rehabber who installs a tenant and arranges for property management, the investor is buying a property. The rehabber might move on, or go bust. The manager might prove ineffective. The tenant might move out. What is surely left is the property. The investor owns it. This is why Enhanced Diligence is so important. It has got to be done!

Exterior Issues

Common sense suggests purchasing a property with a hardy exterior, especially in areas with harsh winters or hot, dry temperatures. Basically, this means the less wood, the better. Think of tile or concrete roofs, brick/block/stone/vinyl exterior walls, and vinyl windows. Arrange these for your purchase as best you can.

Repairs “Done With Permits”

Most turnkey projects with substantial rehab work will involve the need for building permits. Common examples include roof replacement, gas line routing, electrical wiring and service upgrades, and moving “load-bearing” walls. So what? Turnkey operators will say that their repairs were “done with permits”, but this doesn’t say everything. A turnkey operator might “pull permits” for some repairs, but not others, usually in order to save costs. Or, they might purchase permits at the Building Department, but not call for the required inspections, and not have the permit “finaled” (i.e., all signed off). For example, paying a $22.00/hour “handyman” to reroute a gas line is much cheaper than paying a $60.00+/hour licensed plumber to do the job. This matters because people could get hurt by improper work, and insurance claims will be justifiably denied if this is discovered.

Enhanced Diligence by investors involves obtaining copies of all permits from the turnkey operator, then comparing them to the Building Department file for the property. Most departments have this online now or, if not, permits can be requested by mail and enclosing the required fee. This is public information.

If any of this does not go smoothly, or check out, take a hike.

Obtaining Inspections

In principle, the author recommends obtaining a “property inspection” report by a licensed contractor even if the turnkey operator discourages the idea. In fact, that might be even more reason to order one! The cost is usually $450-600, depending upon the size and complexity of the property being inspected. Look especially for two kinds of findings: 1) building code violations and, 2) health and safety hazards found. An example would be exposed electrical wiring. It is important to negotiate corrections to all of these and, if not satisfied, again, take a hike.

Now, some cities do inspections before rehab properties can be transferred. The investor needs to decide whether this is sufficient. One of the author’s consulting clients purchased a turnkey house where four city inspections were to be done. So, on a $62,000 house, the client felt he saved $450. It’s a business decision.

Property Manager

If the turnkey operator arranges for property management, or is providing it themselves, it is important to interview the manager. The “Property Management Interview” questionnaire in Attachment #1 can be used. It can also be used to hire a new manager in the event the present manager needs to be replaced. Enhanced Diligence also includes obtaining and checking licenses, professional certifications, and references for the property manager. Three references is probably enough.

Tenant Estoppel Certificate

If the property comes with a tenant, or several, rents will be pro-rated, and security deposits will be transferred in escrow. Just the same, the investor should insist that each tenant fill out and sign (all tenants) the Estoppel Certificate in Attachment #2. This avoids any possible disputes with the new owner over terms of the tenancy.

Evaluating the Numbers

Attachment #3 is a typical turnkey offering circular. How does an investor analyze it?

Start with “List Price”. Ask the turnkey operator for at least three closed sales in the past 3-4 months within ½ to one mile. See what you get. If this information is insufficient, order an outside “fee” appraisal. This will help if you are paying cash, but it might not be necessary if you have a lender who will be ordering an appraisal of their own. Then make the seller an offer! Why pay list price?

“Gross Rent”? Ask the property manager for “comparable” rents if the property is vacant and about to be rented for you. If there exists a tenant, then the rent amount is probably realistic.

Expenses is where dishonest turnkey operators are apt to take advantage. They underestimate expenses intentionally, or omit some altogether. This is how they jack up the cash flow, “cap rate”, and “ROI “ numbers. (More on these shortly.) Attachment#4 is a list of common expenses. Working with the turnkey operator and property manager, the investor needs to get an amount for each expense, or a reason why it is not applicable (e.g., no snow removal in San Diego.) Then compute your own cash flow. Don’t take the promoter’s numbers!

“Operating Expenses” per Attachment #4 often run 45-55% of gross rents, even on new or rehabbed properties. If you are given a lower number, dig in and find out why. It could be legitimate, or not, but you need to get the answer.

“Vacancy Factor” is a prime area for falsification. The example in Attachment #3 shows 8%, which equates to a bit less than one month. But what if the turnover crews are busy, or the market is slow, or the code inspector is in training for a week? The author’s experience is that 12% is more realistic, if not 15%!!!

“IRR”, Internal Rate of Return is a calculated figure used to compare alternative investments like bonds, rentals, annuities, and others. So is “ROI”, Return on Investment. Describing these exceeds the scope of this article, but the investor is warned that unscrupulous turnkey operators use expense and rent manipulations to enhance these figures to attract investors seeking an unrealistically high “yield” on their investment. Any IRR or ROI above 12% should be dissected to see how it was obtained. A real estate investment expert should be consulted, if necessary.

“Annual Appreciation” assumptions are often made and used by turnkey operators to project high future returns. A conservative investor would not assume anything. Or, even take into account the possibility of a decline in rents, or property values. We’ve seen these before, haven’t we?

Additional Diligence

Obtain and check at least three references of clients from the turnkey operator. Check any real estate and contractor licenses for current standing, bonding, insurance, any disciplinary actions, and complaints. If not satisfactory, take a hike. Go see the property, if possible!

Conclusion

Among other things, the author consults for prospective turnkey purchasers. Some have already lost five-, and six-figure sums investing with dishonest and/or incompetent turnkey operators. Please, please adopt Enhanced Diligence as presented here.

Investors are invited to hire the author to help them evaluate turnkey, syndication, joint-venture, and other investment opportunities.

 

Bruce Kellogg

Bruce Kellogg has been a Realtor® and investor for 36 years. He has transacted about 800 properties in 12 California counties. These include 1-4 units, 5+ apartments, offices, mixed-use buildings, land, lots, mobile homes, cabins, and churches.

Mr. Kellogg is a contributor and copy editor for two national real estate wealth-building magazines: Realty411, and REI Wealth Mag.

He is available for listing, selling, consulting, mentoring, and partnering. Reach him at [email protected], or (408) 489-0131.

The Best Inheritance You Can Leave Your Kids

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By Fuquan Bilal

What inheritance are you leaving your children?

I know you would probably expect me to say “mortgage notes,” or “passive income properties.” Those are great investments. They might be some of the best types of assets to pass on in an estate. Yet, there are some things which are far more important!

Financial Independence

We all know school has become all but worthless. With the exception of those schools and colleges the big funds and local governments which have turned into cash flow centers and real estate investments. You can do 13 years at school and walk out not even knowing how to use a debit card.

Savvy parents are working harder than ever to teach their kids about money. About how to budget, save, invest, make sure they understand the benefits of financial stability. Some are even teaching them about self-directed IRAs.

Those things are all important. I do all of those things.

Yet, I believe there is something even MORE important. That is teaching them how to be independent.

After all, that’s our one main job as parents. It is to teach them how to survive and thrive on their own.

Instilling Independence in the Next Generation

I rented some units to some college kids. It was amazing to see how they were still clinging to their parents for support at 19 and 20 years old. I don’t know about you, but I was far more independent and had to do a lot more for myself since I was 15. Maybe even 11.

I learned the value of work and hustle at a very young age. I did my own laundry and learned how to cook at 11, and handle personal hygiene.

My kids are now 10 and 16. We used to play mental math games on the way to school. I’ve had them plan meals, go to the grocery store and hunt for deals, and now figure out how to do it all online. I teach them real estate and how to get out in the field.

I’m pretty sure they can stand on their own two feet if they had to.

I want to be sure they won’t have to depend on others for the rest of their lives. Even on me. Knowing how to invest is a big part of that, but mindset is even more important.

Take the Lead

As I reveal in my new book, you can, and should pump positivity into them as possible. Build their minds and spirit. Let them know they can do anything they want. BUT – you’ve got to live it too. Practice what you preach. You can rock their world and shake their mindset big time. Do it well, and consistently and they can also become some of your best accountability partners! They’ll keep you in check.

Lead by example. Do what you want them to do, and explain it. That means budgeting, investing, following your dreams, and stepping up to do difficult things. Teach them to embrace adversity and challenges in order to get stronger in all these areas, so they can get more of what they want and are capable of.

Teach them smart investing and money management and how to stand on their own, who they can get help from and learn from, and to problem solve. With these, they’ll be able turn the smallest monetary inheritance or property portfolio into even greater multigenerational wealth. Failing to do this, and ignoring these conversations while you have the chance, your heirs can blow your multi billion dollar inheritance, property empire and lifetime of discipline and sacrifice in a matter of months.

What inheritance are you leaving your kids? I’d love to know what do you do to build these things into them.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.

Choosing the Road to Wealth

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By Kathy Kennebrook (The Marketing Magic Lady)

More people are becoming millionaires today than ever before in the real estate business. So what makes these wealthy entrepreneurs so different? They chose the road to wealth and real estate as the vehicle to get there.

When choosing the road to wealth, there are some important distinctions that set the truly successful folks apart from everyone else. Some of those include the ability to visualize a specific outcome, pursuit of a dream, constant motion and a relentless determination to reach the goal. Giving up is not an option. Like the saying goes, “Quitters never win; winners never quit!”

I have found in the real estate business that there are two kinds of people, the “doers” and the “wannabes”.  There are truly focused folks who get up every morning with a clear and defined direction who want to make their business work no matter what it takes. They pursue their dream relentlessly and continue to grow on a daily basis, garnering all the education they can along the way to take them even further along in their business.

Then there are the people who go to seminars or buy books and tapes and do absolutely nothing with them once they get them home. I have personally witnessed this over and over again.  They have one excuse after another why they can’t do this business.  For them, the status quo is the easy way in any situation.

I used to be one of those people who did absolutely nothing. I continued to work day after day at a job I hated, and I had every excuse there was for not getting started in the real estate business.  So I can relate. You could say, “I’ve been there, done that.”

There were three main things that held me back:

  1. Lack of focus.
  2. A true desire.
  3. Abundance of fear.

You can absolutely tame all three. I am living proof that you can. The biggest change that occurred for me finally was the desire to succeed.  An even greater desire was to get back all the money I had spent on courses and seminars.  As I always say, “Whatever it takes to make you move forward!”

I discovered there were some very easy ways to get focused and get on track.  One was to define the specific reason I wanted to succeed.  For me it was to get back the money I had already spent on educational materials and to get rid of a job I hated.  At the time, my job entailed being on the road for long periods each week which resulted in my not being home much, something I very much wanted to change.  I spent many years in a “dead-end job” making a lot of money for other people.

For you, it may be putting money away for your kid’s education, taking a trip you’ve always wanted to take or maybe becoming involved in charities you want to support. Whatever that reason is for you, commit it to paper and out loud to those around you. There is nothing I know that will force you to take action more than committing to a goal out loud. Become persistent in the realization of your dream. Use the knowledge you already have and move forward from that point.

Visualize your success!  Every extraordinary, successful person has visualized their success in their mind and then on paper first.  Their dreams were put into action, resulting in a reality of success.  Bottom line, this is the outline of the road to wealth.  Unfortunately, most people get stuck in the “dreams” part of that road to wealth.

Enlist the help of your local real estate club or a mentor to stay on track. If there isn’t a real estate club where you live, contact other investors in your area and form your own group. This is a great way to network and get the support you need. I had a mentor early on in my business and I attended meetings of our local real estate club on a regular basis. I found this to be a great way to stay focused and excited about the real estate business.  I continued to work with other investors in my area who were already doing the business.

If people around you are telling you it won’t work, don’t let them “steal your dreams”. Only you can make the decision to be financially free. I know that lots of my friends and family members thought I was crazy to want to do this business. I’m glad I didn’t listen! Hang around with like-minded people, wherever you can find them. Learn from people more successful than you.  Hang around with people who make more money than you do. Decide what it is you want to do for your business on a daily basis and implement a plan of attack.

Enlist the help and support of your spouse and children or a partner while growing your real estate business. There are lots of things they can do to help and you’ll achieve a feeling of team work which will keep you moving forward. Write a specific list of goals you want to achieve, no matter how small. Set goals for tomorrow, next week, next month, next year. This is one way to create a road map you can follow toward attaining your goals and growing your real estate business.

Do whatever it is you need to do to keep moving in a positive, forward direction. Don’t let the “naysayers” get you down. They just want to keep you where they are. Don’t take advice from anyone who makes less money than you do. You have a right to live the kind of life you want, so be willing to do what it takes to attain it.

Real estate is one of the best ways I know to grow wealth quickly. If you believe you can’t change your attitude about the opportunity to create wealth through real estate, I assure you that you can. You just have to make the decision to choose the road to wealth.

That road to wealth is to stay focused and to never give up.  Success can be yours…today!

For more information on Kathy Kennebrook’s systems for the Real Estate Investor be sure and visit her website at www.marketingmagiclady.com. While you are there be sure and sign up for Kathy’s FREE monthly newsletter and received $149.00 of real estate tools absolutely FREE!!

Florida Land Trusts

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By Randy Hughes

Oftentimes I am asked, “Which state should I form my land trust in?” As a continuation of the subject discusses in my last newsletter, you now understand that you do not have to form your land trust in the same state where you live or where the property is located. In fact, there are many benefits to using an “out-of-state” trust to hold title to your investment property. I have covered these benefits in previous newsletters. This newsletter will concentrate on Florida Land Trust Law. In future issues I will explain other major state land trust statutes.

The Florida Land Trust Act, 689.071 covers real and personal property. “Beneficial Interest” means any interest, vested or contingent and regardless of how small or minimal such interest may be, in a land trust which is held by a beneficiary. “Beneficiary” means any person or entity having a beneficial interest in a land trust. A trustee MAY BE a beneficiary of the land trust for which such trustee serves as trustee.

I have talked before about Florida being the only state that I am aware of that will allow the trustee to also be the sole beneficiary (because of the Merging of Interests Doctrine). Other states allow for the trustee to be one of multiple beneficiaries, but not the trustee if she/he is the ONLY beneficiary. Personally, I would NEVER make the trustee and beneficiary one-in-the-same because it defeats the purpose of anonymity of ownership by exposing the beneficiary to public scrutiny.

Personal Property. The Florida Statute goes on to say, “In all cases in which the recorded instrument or the trust agreement, as hereinabove provided, contains a provision defining and declaring the interests of beneficiaries of a land trust to be personal property only, such provision is controlling for all purposes when such determination becomes an issue under the laws or in the courts of this state. IF NO SUCH PERSONAL PROPERTY DESIGNATION APPEARS IN THE RECORDED INSTRUMENT OR IN THE TRUST AGREEMENT, (emphasis added) the interests of the land trust beneficiaries are REAL PROPERTY (emphasis added).

This section of the Florida Statue stresses the fact the if you do not state either in the Deed to Trustee OR the Trust Agreement that the Beneficial Interest is “personal property,” it will be deemed as “real property.” Which is exactly what you do NOT want. I think to make it unmistakably clear, you should put in BOTH the Deed to Trustee AND the Trust Agreement that the Beneficial Interest is personal property!

Land Trust laws are not changed very often for any State, but three years ago Florida amended their Land Trust Statute which effectively made it not possible to sue the Trustee or Beneficiary of a Land Trust. This was a powerful change that made Florida’s Land Trusts even more popular to use. You might consider using a Florida land trust.

I encourage you to learn more by going to my FREE online training at: www.landtrustwebinar.com/411  or text “reasons” to 206-203-2005 for my free booklet, “Reasons to Use a Land Trust.” You can also reach me the old fashion way by calling me at 866-696-7347 (I actually answer my own phone unlike most other businesses in America).

How To Sell A House In A Difficult Market

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By Lex Levinrad

Are you having a hard time selling your house in today’s market? As prices have declined and as sellers have become more desperate to sell it has become increasingly difficult to sell a house for fair market value.

More than 50% of the properties that are listed on the MLS are either bank owned properties or short sales. These properties are already substantially discounted for cash buyers. This fact can make selling your property for fair market value extremely challenging.

So what do you do in this type of environment if you want to sell a house? The first thing you need to do is to think outside of the box. If you are doing what everyone else is doing then you are probably going to find it very difficult to sell your house. Why? The reason is because the strategies that worked in a good real estate market will not work in a difficult market.

If you want to learn how to sell a house quickly then the first thing you need to do is review what everyone is doing and why that is not working. So what is everyone else doing? Most sellers are listing their properties with a realtor on the MLS (Multiple Listing Service) and are waiting for a buyer. Why does this strategy not work? This doesn’t work because listings at fair market value do not seem like a great deal to buyers and because it is very difficult for buyers to qualify for conventional financing.

The key to selling a house in a slow market is to do something differently. What you need to do is make your listing so unique, so different to all the other listings that it immediately grabs buyer’s attention. How do you do this? Do the following:

  • Price your property very aggressively i.e. way below all other retail sellers
  • Create an instant buying frenzy for your property by listing aggressively
  • Hold an open house on a Saturday and Sunday
  • Hold an auction for your property the following Saturday at 2 p.m.
  • Advertise your auction online and offline and spend some money marketing
  • Stage your property and make it nicer than all of your competitors
  • Offer to pay all closing costs for the buyers
  • Offer to pay 6% commission to buyers agents even if you are a realtor
  • Offer an incentive such as new appliances to buyers
  • Have a mortgage broker ready to pre qualify buyers on all open house days
  • Be prepared to help contribute towards the down payment for FHA buyers
  • Take a video of the property and post your video on You Tube
  • Make a postlet of your property and place the video into your postlet
  • Create a blog and syndicate your video of your property on your blog
  • Syndicate your video on Facebook, Twitter, Linked in etc.
  • Let the world know that there is going to be an auction for this property
  • Create a buying frenzy even before the auction has begun

If you do all of the above steps then you should be able to easily sell your house quickly. If you purchased a house at a good price from the bank and are selling it for a profit then your goal should be to sell it quickly and move on to the next property. Don’t let greed get in the way of common sense. Book a profit and move on to the next deal.

To your success

Lex

Should I buy my own home first, or rent and buy investment homes?

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By Adiel Gorel

A classic question I get when talking to a would-be real estate investor is: “Shouldn’t we buy a home to live in first before buying investment homes?”

The answer, of course, depends on where you live.

When considering owning your own residence, there are various layers of reasoning. Some are logic and numbers-based. Some are emotional, traditional and familial.

Owning your own home can be associated with safety, security, having “arrived”, satisfying family members’ aspirations, the stability of having a (hopefully) permanent place to live, and so on.

Of course, everyone has a different set of emotional considerations when it comes to owning a home.

These vary from person to person and, needless to say, are hard to quantify.

In this article I will address the logical, numbers-based approach to the question of whether to buy your own home as your first real estate move, or rent and buy investment homes instead.

The numbers tell the story

If you are considering buying your own home, the price of the home matters, the rent required to rent that same home matters, the local property taxes matter, the mortgage interest rates matter, dwelling insurance rates matter, and even the new 2018 tax law weighs in.

If you live in a market where property taxes are relatively low (say, between 1 and 1.7 percent of the home price per year), and insurance rates are reasonable, then if you are considering buying a home under about $400,000, that should be a “no brainer” as your first step. Between $400,000 and $500,000 would still be a reasonable range to consider buying the home. In such a market, once you step up to the $500,000 range and above, the math may well start to turn as you climb higher in price, in favor of renting a home in the area in which you live, and owning rental homes in more optimal places.

In markets where the property taxes are high (like in Texas and Oregon), and insurance rates are high (Texas again, for example), the “no brainer” number may shrink to $300,000 or so, while the range above which you may consider renting your own home while buying affordable investment homes in other markets, will likely be $400,000 or above. This is because with high expenses for property tax and insurance, (which as a homeowner you would be paying) the overall numbers and logic “turn the corner” faster.

Certainly, in expensive areas like the San Francisco Bay Area, Los Angeles, San Diego, New York City and others such markets, it is usually far more logical to be a renter, while owning rental properties in affordable markets, where rents are actually quite high as a percentage of the home purchase prices.

Buying homes in expensive markets may not make sense

If you are thinking of buying a home in the San Francisco Bay Area for $1,400,000, for example, and if that same home can be rented for about $4,700 per month (quite typical in 2018), the math is in favor of being a renter living in that house. While $4,700 per month appears to be very high (in absolute terms it is), it is actually very low compared to the purchase price of $1,400,000. While renting the house for $4,700 (and not being responsible for property taxes, dwelling insurance or repairs as a tenant), you might, (in this example) use a similar amount as a 20% down payment on the $1,400,000 home (plus closing and loan costs), to buy about SEVEN rental homes in an affordable market, using 20% down on each – all brand new in good areas, for, say, $180,000 each, in a market with low property taxes and low insurance rates.

Each one of these $180,000 homes will fetch a rent of $1,500 per month. Now that is high rent! (as a percentage of $180,000). Seven such rental homes, requiring a similar total down payment as the $1,400,000 which is rented and not bought, will fetch a gross rent of 7*$1,500 per month = $10,500 per month. That is indeed high rent. And these will be brand new homes which are fully under warranty to boot. In addition, the seven new investment homes can be diversified over a larger geographic area or even over more than one metropolitan area.

Sense of accomplishment and satisfaction in purchasing rental homes

Another example could be a potential home purchase of a residence costing $725,000. That property could most likely be rented for about $3,200 per month. For the amount used to put a 20% down payment (plus closing costs), you can rent this home, and buy four brand new rental homes for $180,000 each rented at $1,500 each. Total gross rent: $6,000 per month for the 4 houses, and they can be new, under warranty, in good locations, and paradoxically each may likely be bigger in size and bedrooms than that one $725,000 home, which is also likely substantially older. Again, the four rental homes can also be geographically diversified.

Even the sense of accomplishment and satisfaction of home ownership, may be fulfilled by owning four brand new, good sized and well-rented homes in an appropriate market, while paying a relatively low rent in an expensive market. In fact, the higher the home prices in the expensive market, the lower (relatively) the rent gets as a fraction of the home price. Thus, the savvy investor can pay a bit more in rent and get a bigger, more expensive home to live in, while investing in more optimally-priced markets and choosing areas that have not yet boomed, and which can yield higher rental rates.

The 2018 tax plan

Under the new 2018 tax plan, taxpayers who itemize will be able to deduct their state individual income, sales and property taxes up to a limit of $10,000 in total starting in 2018. For expensive homes in states like California, New York, and others, the $10,000 limit will diminish deductions which could be used before, making home ownership even less logical beyond a certain home price. In states with very high property taxes, even less expensive homes will reach that limit and become less attractive tax-wise. I am seeing many smart Silicon Valley high-tech people, and others interested in living in expensive areas, opting to rent their residence, and buy several (or many) investment properties in affordable markets where the rent numbers are good.

The deductions available for rental properties have not been affected by the 2018 tax law, and in fact a new deduction, the “pass through deduction” was added, which could benefit many real estate investors. The logic behind renting your own residence while buying affordable investment homes has been taken further by the new tax law.

People do not have to buy rental homes in the areas in which they happen to live. I myself own rental homes all over the United States, as do thousands of our investors. Since we have a solid support infrastructure in many appropriate real estate markets, investing in another state becomes easier, since the local teams in that market will handle the rentals, maintenance and support for the investor.

Local infrastructure makes it doable

The local infrastructure in the various markets is comprised of property managers, local savvy real estate brokers, maintenance crews, insurance agents, and any other function needed to support the busy investor, who may live far away. We have many foreign investors, who live across the ocean, invest in multiple rental homes in appropriate markets in the United States.

Different colorful houses suit house shape holes of wooden board, 3D illustration.

Our company, ICG, has been holding 1-Day Expos for over 20 years every quarter with market teams, expert speakers, extensive Q&A and networking etc. near the San Francisco airport. During these events I always cover many subjects in detail, including the subject of this article.

You can attend for free by mentioning this article in an email to [email protected], register online (icgre.com/events) using the code FREEREALTY411, or call us at 800-324-3983.

Looking forward to seeing you.

About ICG and Adiel Gorel:

ICG (International Capital Group) Real Estate Investments was established in the 1980’s. Adiel Gorel, founder and CEO, has been helping people achieve financial security for over three decades, and in that time worked with investors to purchase over 10,000 homes. Gorel is a real estate broker in several states in the U.S., an international keynote speaker, and notable author of three books: Remote Controlled Retirement Riches – The Busy Person’s Guild to Real Estate Investing, Invest Then Rest – How to Buy Single-Family Rental Properties and Remote Control Retirement Riches – How to Change Your Future with Rental Homes. He has been featured on major television and radio networks across the country and in Fortune Magazine. He has also been featured on Public Television with his show, “Remote Control Retirement Riches with Adiel Gorel.” To invite Adiel Gorel to speak for your group, email [email protected] and visit AdielSpeaks.com. For more information on ICG Real Estate Investments visit icgre.com.

Following Up with Motivated Sellers Can Make You Millions

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By Kathy Kennebrook (The Marketing Magic Lady)

Let me ask you a question; are you properly managing your prospects? Are you taking the time to follow up with the sellers who didn’t initially accept your offers, or the sellers you still need to make offers to? Did you know that you are leaving thousands of dollars in potential income behind if you aren’t following up with sellers? One of the easiest ways to make a fortune in the real estate business and gain the advantage over your competition is to take the time to follow up with motivated and semi-motivated sellers. You’ve already got the seller in your pipeline, you’ve already done the marketing and spent the money to find this person, now all you need to do is to follow up with them until they either sell you their property or tell you to go away. How much simpler could it be?

There are two types of sellers we are going to follow up with, those we’ve already made offers to who haven’t accepted our offer and those who have not made any decision after our initial contact with them. Quite often, you will need to make multiple contacts with sellers before their situation changes and dictates that they sell their property to you. If you stay in touch with these sellers, you build credibility with them and when it comes time to sell they will contact you first, even if they have been contacted by someone else in the meantime.

There are a lot of investors in the market these days, and most of them have a very limited knowledge of how the whole follow-up process works, not to mention the inability to create successful deals. What they don’t realize is that many of the sellers you will be dealing with have a variety of problems they aren’t sure how to solve until they are contacted by you.

Some of those may include divorce situations, estates or health issues where there may be emotions tied to the property. With these sellers it may take a little longer before they make that final decision to sell. Most of your competitors will simply throw these potential deals in the trash when they don’t get the property under contract after the initial contact or offer is made. I have made deals many months after the initial contact with the seller was made simply because I took the time to follow up. Not only did I build credibility with the seller, but now they like me better and trust me more than the next investor who may come along.

These are the types of sellers I will place in my follow-up system and follow up with at least every thirty to sixty days if not more often. I have made thousands of dollars on deals other investors would simply have thrown in the trash because I took the time to follow up with a semi-motivated seller. Probably half of the deals I do in a typical year come from following up with these sellers.

In addition, with the help of a fellow investor who is also a software developer, I now have an incredible software system that does all the work for me. It reminds me when I need to do my direct mail campaigns, it reminds me when to follow up with sellers, it has a section to track potential buyers and build a buyer’s list, and it keeps all the information on the properties stored including a photo.

In fact, once I have followed up and purchased the property, my system will match the property with one of the buyers on my buyer’s list, so now; even that part of my business is automated. And once again, isn’t that the whole point to this business, to automate as many things as you can so you can work with the sellers and make the deals happen. You don’t need software to get started with this type of a system. You can simply use an auto-responder and a folder system to begin following up with motivated sellers.

Here is a recent example from my files- I contacted a seller who had inherited a property in Florida where I live and he lived in Michigan. The home belonged to his aunt who had pretty much raised him his whole life. When she passed away the home was left to him and he just couldn’t bring himself to sell it right away. I actually met with the seller and made an offer on the property. He had initially accepted my offer, and then he decided to hold onto the property for awhile and use it as a vacation home. After a year and a half, he got tired of having to deal with all the maintenance issues on the property and ended up selling the property to me for the initial offer I made because I took the time to follow up with him every thirty days or so.

I actually ended up making even more money on this deal than I would have in the first place because the house had appreciated in value during the period of time that he kept it and he had made improvements to the home. Most investors would have thrown this deal in the trash as soon as the seller said no to their initial offer, but because I took the time to follow up, I purchased the property and made a significant amount of money on this deal. I still get holiday cards from that seller.

I’m sure you’re already aware of how important it is to follow up with sellers. It only takes a few minutes each week to follow up with these sellers if you have a good follow-up system in place. I use my follow-up system to follow up with sellers I have made offers to but who haven’t said yes or no to my offer, and with sellers who own homes in areas where I want to buy. I do this by using both direct mail and e-mail to follow up with these sellers. Sometimes if the situation warrants it, I will call them. My system even reminds me to do the follow up. How much simpler can it be? AND…since the seller has already been getting contact from me for a few weeks, if their situation has changed they are ready to sell to me. This is a pretty typical scenario.

With sellers who specifically have properties in areas where I want to buy, I do repeat mailings to a specific list with specific parameters in mind such as out of state owners, quit claim deeds or old sale dates. Each time I do the mailings I continue to clean the list I am using by taking out bad addresses, deals I have purchased or folks who tell me not to mail to them again. The more I mail to these folks, the more credibility I build with them. If you are using a follow up system in your business it is very easy to track these mailings. This is an absolute marketing machine because not only are you doing deals day after day, you are constantly planting seeds for future deals.

If you take the time to follow up with motivated and semi-motivated sellers, you will make more deals and buy more properties with absolutely no competition for these properties whatsoever. It’s a win-win situation for you and the sellers.

For more information on following up with sellers, check out my website at www.marketingmagiclady.com. While you are there be sure and sign up for our free newsletter and get $149.00 in bonuses absolutely FREE.

Why Hiring a Coach Can Help You Build a Rock Solid Brand Fast

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By Sharon Vornholt

Does this sound like you?

You’re always looking for something or someone to help you get over the next hurdle; to help you get to the next level. You know you need a coach, but you might be confused about choosing the right coach for you and how they can actually help you grow your business. You’re wondering if you will you be wasting your hard earned money.

Or maybe you are heading off in a new direction in your business, and you’re not sure how to put all the pieces together when it comes to branding and marketing. You know there is someone out there that can help you streamline the whole process.

If this sounds like you, I can tell you that you are not alone.

Each and every one of us wants to be better at what we do. We are all searching for the next thing we need to do or learn to grow our business. It has been my experience that choosing the right coach to help us master that next “thing” is almost always a game changer for us both personally and professionally.

I can tell you this for sure: you will almost always make more money faster when you hire a coach that can shave years off your learning curve.

Why is that?

The reason is, when we have the right coach to help us take those next steps, suddenly everything becomes easier. The path automatically becomes clearer. The obstacles begin to disappear. And during that process, we generally take a big leap forward in growing our business.

It seems to happen almost magically. That’s because choosing the right coach really can shave years off your learning curve.

What Is the Biggest Thing Holding Most Entrepreneurs Back?

The lack of a rock solid brand, and this is one area where a coach can really help you. Most people either have a weak brand, or they have no brand. What this means is that in most cases you are simply invisible. Who wants to be invisible?

If you look around your field or industry, you probably know someone that is great at what they do, but they are the best kept secret in their industry. No one knows about them.

Or, maybe this sounds like you:

You’ve built a business, and it might even be a great business. However the problem is that people don’t know about it. They don’t know that you are the expert in your field, and that my friend is poor branding.

Let’s Talk about your Brand

People think of colors and logos when they think about branding, and those are the visual components of your brand. What your brand really is though is how people feel about you. It’s also what they say about you when you leave the room. Yikes! What do you suppose they say? Chances are they say “Ben is a nice guy” or “Katie is a great gal”.

But let me ask you this; is this all you want people to say about you? What about your expertise? Where does that shine through? If you haven’t consciously built your brand, it’s probably non-existent. No brand = no shine.

You Need to Change the Conversation

What they should be saying is “Ben is the go to person in ___ (you fill in your field). If you want someone to do that for you, Ben is the expert. He is the person to call.

Or… “Katie is the most knowledgeable real estate person I know. No matter what your needs are, she can make it happen. There is really nothing she doesn’t know about real estate”.

That is what would happen if you had a brand built around your expertise. You have a wide circle of brand awareness and recognition.

Make no mistake about it; building a rock solid brand that shows the world who you are, what you stand for and exactly how you can help your ideal client shows up directly in your checking account.

It’s money in the bank.

Your brand and how it shows up to the world is much more of a determining factor in how much money you make than your actual skills and expertise. Now I want you to think about that for a minute.

I’m not suggesting that you don’t need to good at what you do, because you do. I am merely telling you that in your ideal customer’s mind, it’s all about perception. How you are perceived in the market place directly impacts how much money you make.

Marrying Marketing and Branding – Dollars in Your Bank Account

When you are able to successfully marry your marketing and your branding that’s where the real magic happens.

Remember that marketing is what you do to get leads in the door, and branding is what makes you stand out from the pack so that your ideal client chooses you (rather than your competition). When your marketing is on track and you’ve build a rock solid brand, you will be the obvious choice.

Trust Strategies

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By Randy Hughes

After using Land Trusts to hold title to my real estate, contracts and notes for the last 40 years, I have discovered that 99% of the population does not understand the nature of a Land Trust nor the many benefits that can be derived. I consider this good news.

Because of their low profile, Land Trusts are very useful for (off the radar) real estate transactions. The following ideas are merely suggestions that you might consider. Be careful to think through all the ramifications before engaging in these concepts.

If you want to borrow money conventionally and you will use a deed to real estate as collateral for the loan, you will have to give the lender the full deed. In other words, you cannot divide a deed up into pieces no matter how much you are borrowing. For example, if you owned a parcel of real estate in your own personal name (your name is on the deed), with $100,000 of equity and you wanted to borrow only $20,000, you would have to collateralize that deed in full. In other words, you would have to give $100,000 of equity to secure only a $10,000 loan.

The Land Trust can be used to solve the problem of over-collateralizing a loan. The beneficial interest of a Land Trust can be divided into unlimited shares. Therefore, a Land Trust holding a piece of real estate with $100,000 of equity could use some of its shares (but not all of its shares as is required by a personally held deed) as collateral for a $10,000 loan. With a share value of $1,000 there would be 100 shares.

The beneficiary of the Land Trust could “temporarily assign” 10 shares for a $10,000 loan. This would leave 90 shares unencumbered that could be used for future financing. The flexibility of using a Land Trust far exceeds the standard method of title holding.

In another scenario, assume that two real estate investors have owned their properties (of similar current market value) inside Land Trusts for 30 years. Both investors are “out” of depreciation. Neither investor wants to conventionally sell their properties and incur huge capital gains.

Once again, the Land Trust trots in for the rescue. Each investor (beneficiary of the land trust) sells the beneficial interest to the other on an installment sales agreement. The terms are nothing down, interest only (no capital gain to report) and a ten-year balloon (enough time to figure out what to do next).

What this transaction accomplishes is a new amortization schedule for each investor (new basis). The deal is private and flies under the assessor’s radar (no reassessment upon the “sale”) and no transfer tax is triggered. If the parties involved so desire they can hold options to buy the beneficial interests back after (or during) the ten years has lapsed.

If you don’t think this will work, look up and read the tax court decisions on; Weaver, 71 TC No. 42. 1978; Rushing CA-5, 441 F.2d 593, 1971 and Pityo, 70 TC No. 21 1978.

The key to taking advantage of these creative ideas is finding someone who will “play.” Of course, my mind wonders to people who have studied my Land Trusts Made Simple® home study course or taken one of my live seminars. It is those who understand how the “game is played” that benefit you the most. I encourage you to seek out other “players” like yourself…it will benefit you greatly.

There are many other similar structures that I discuss in detail in my Land Trusts Made Simple® home study courses. Please go to: www.landtrustsmadesimple.com for more information. Or, if you would like to attend one of my FREE Land Trust Webinars, go to: www.landtrustwebinar.com/411 Also, feel free to call me with any questions. I actually answer my phone! 1-866-696-7347

 

Garage Sale Real Estate – Make Money in Real Estate and be Dead Broke Doing It!

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By Jimmy V. Reed

Folks are always telling me I would love to make money in real estate but “I’m just too broke” And I would respond every time, so was I. Back in the late 80’s I started reading books on how to make money in real estate. Every time they kept telling me you find a good deal, then you go get a loan and buy it, fix it, sell it or hold it. That’s when I would say to myself well it sounded too good to be true.

Later I learned it is too good to be true. I learned how to Wholesale Properties. I learned what I would say was the greatest technique in real estate. How to buy a house without actually buying the house. Now let me tell you how that works. I compare it to when I would go garage selling with my wife on the weekends. We would drive around looking for SIGNS! You know Garage Sale Signs. We would find a sale and then look for a deal, and we always seem to find at least 1 deal. However once we started making offers and negotiating, By the way I have taught thousands of students whose number one fear is to make an offer. But the second you put them in a garage sell they start making offers so low it was like kicking the seller in the knee cap. Any way we would finally agree upon a price. And many times realize we didn’t have enough money on us to purchase the item. So we would ask the Seller to hold it until we came back with the money. And wahlah Garage Sale Real Estate!

I know you’re thinking what? Well let me tell you the secret to this. At the garage sale we would run to the ATM get the money come back and pay. Now take this principal a little deeper as we teach in our Wholesale Classes. Tell the seller to hold it, how? A simple Purchase Contract. That’s when you tie up the property until you have the money. I know I know you’re broke! That’s ok because while it is under contract we contact other investors who are looking for deals! That’s right we are deal finders finding deals for our customers. These investors have CASH! Now we just assign the contract to them for a fee. And now you just got Paid!

Sometimes we even use a double close to close on the property because the profit margin is so large. That one is a lot of fun. Well hopefully by now you at least can see a glimpse as to how so many investors can make money in real estate without having money. Did you know when you go to a car lot, or even Wal-Mart, the items you purchase from them has most likely not even been paid for by them yet. That’s right Wholesaling has been going on in most business forever. Now the question is are you up for some Garage Selling? Well it’s all up to you, but if you need a little help look us up, we’ve been teaching Wholesale to investors since 1991.

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Jimmy V. Reed

Jimmy V. Reed of Fort Worth, Texas has been investing in real estate since 1987. In 1991, he started conducting full-day training sessions on Wholesaling. He then began teaching and mentoring others throughout the country. He is currently the founder of the Fort Worth Real Estate Club www.1REclub.com and has his own real estate training company that includes Wholesale, Probate, Mentoring & a Biblically based Debt Free training course and more!

More info available at www.JimmyReed.net