Fact or Fiction : No Money Down Zero Down Real Estate Investing

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Have you ever seen the movie “Boiler Room?” If not, check it out! One of the best scenes involves Ben Affleck doing a group interview. He works for a less than reputable brokerage firm and tells a fresh batch of recruits like it is. One of the first questions Affleck asks is whether anyone had already taken the Series 7 Exam. When one of the guys pompously raises his hand, Affleck shows him the door saying, “We don’t train old brokers here, we hire new ones!”

When I got started as a real estate investor, I had zero experience in the real estate field. None of my immediate family had ever been an agent. No mortgage brokers, appraisers, or real estate attorneys. I was quite green and had a fresh mind ready to soak up whatever was put in front in me. Having no background, when I first came across the idea of “Zero Down Real Estate Investing,” it was hard to comprehend, but I did not have any preconceived notions to hold my thinking back. I was like the newbie in “Boiler Room.” It is often times easier to learn a new concept when you don’t have to unlearn ingrained ways of thinking and doing.

If you look around at a book store or if you google, “No Money Down Creative Real Estate Investing,” you’ll see an array of information on the subject. I still hear plenty of people refute the claims saying that it doesn’t exist and can’t happen. Anytime I hear something like that I simply say to myself, “Well, they’re right, it doesn’t exist and can’t happen for them.”

Most of the time, the people that don’t believe in the “No Money Down” claims are the ones that have been trained in real estate the traditional way. And I can’t blame them. Had I learned the way that they did, I may have the same mental blocks that they have.

One of my next posts will explain several different ways to structure a “No Money Down” deal. But before I go, think on this one. Just because someone says that they have bought property with no money down, doesn’t mean that there weren’t funds required to close the deal.

Often times, “No Money Down” just means no money out of your pocket.

Two of the most famous gurus on the subject are Robert Allen and Carleton Sheets. I will go into more detail on books, courses, and seminars soon.

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Posted in Real Estate Investment Financing Strategies | 9 Comments »

5 Ways to Get Real Estate Deals Pouring In!

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This is just a primer on a few marketing methods that can get motivated sellers beating down your door. Let’s get right down to it:

1) Bandit Signs

Yes, those oh so beautiful signs that you probably see plastered all over your city (or maybe not if you’re lucky). There is a reason they are there. They work! We always went with the standard, “We Buy Houses,” yellow background and black writing. Our signs were in the shape of a house and had a local # that forwarded to a voice mail system. We found that the local # brought in more calls than having a toll free #.

2) Direct Mail

There are many different types of lists that you can mail to that could have your phone ringing off the hook. Patience is the key though! Sometimes it takes 7 or 8 “touches” with the list you’re mailing to in order to get an appreciable response rate. Here’s a few quick suggestions: out of state owners, expired listings, landlords, properties that have been transfered, etc. The important thing is to just pick a list and get started. The best marketing advice I could give would be to TEST, TEST, TEST! Do more of what works and change what isn’t.

3) “Driving for dollars”

Take a different way home from your norm. Look for houses that could be potential deals. You’ll know when you see them. Grass has grown up over the house. 10 soggy newspapers are in the driveway. Totally lacks curb appeal. Broken windows are almost a sure sign! Write these addresses down and look them up when you get home. Call if you want or add them to your direct mail program. Look for the correct mailing address for the property owner in the tax records so you can get your letter in their hands.

4) Estate Sales

Another great place to pick up great deals. Many times the heirs are left with something that is more of a headache than a blessing, and they just want to get rid of it ASAP! You can also negotiate some favorable financing often times in these situations because they’re just ready to sell it and any money coming in is gravy to them.

5) Internet Classified Sites

There are many Internet sites out there like Craigslist where you can post FOR FREE telling the world about your house buying services. We have done a few deals off of free websites on the Internet just by taking 5 minutes to put a post on their site. This is especially great for beginning real estate investors because the price is right!

Think of more ways to get deals pouring in and put them in the comment area! Let us know what’s working for you . . .

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Real Estate Investment Financing Strategies: What is Your Exit Strategy?

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Recently, I wrote about Developing a Solid Financing Arsenal. After reading one of the comments from our readers, it sparked an interesting question in my head, “How does an investor’s financing arsenal effect their choice of exit strategy?”

When I use the words “exit strategy,” I mean WHAT IS YOUR PLAN? Because you better have one especially in this market!

Here is what it comes down to:

The less options that you have to finance a deal, the less options you have for your exit strategy. The more options you have to finance a property, the more ways there will be to structure the most effective and profitable exit strategy to suit your investment goals.

For instance, you have a property under contract that looks like a good deal. The only financing resource that you have available is a private lender that will let you borrow the money for 4 months. At the end of the 4 month period, you must pay the loan off in full. If your only way out of this loan is to sell the property, you are putting yourself into a pretty tight corner. What if the small renovation that’s needed costs $5K-10K more and takes an extra month to finish? What if 2 other houses in the neighborhood hit the market at competitive prices right after you buy? What if you find out the property is really worth 5-10% less than you originally thought once you go to sell the property? What’s Plan B?

Since your only financing resource above is short term money from a private lender, you’re pigeon holed into having to sell the property whether you like it or not. And what if it doesn’t sell?

A Good Exit Strategy

Let’s say you have built up your financing arsenal to include a hard money lender, several longer term private lenders, an equity line on your primary residence, and you can qualify for conventional financing. Your exit strategy could include a Plan A, B, and C.

Plan A – Buy, renovate, and list the property for sale.

Plan B – Property doesn’t sell within time frame needed so you already have conventional financing lined up. You close on a bank loan to refinance your private lender out. You continue to market the property for sale.

Plan C – Property still doesn’t sell so you begin marketing the property as a rental. You have already done your homework. You can rent the property out and have a positive cash flow.

This is the cornerstone of good financial planning for your investments and THE WAY to develop long term business relationships with your financing team that just keep on giving.

Posted in Real Estate Investment Selling Strategies | No Comments »

Real Estate Investing : IRON FIST Property Management!

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Anyone who has been in the rental business for more than three months knows the biggest problem…TENANTS, TENANTS, and of course TENANTS!!!  No question about it.

Who are these people who call you with all these lame excuses and situations that seem to unfold so effortlessly in their lives month after month?  Their consistent stream of BS is simply amazing! 

Here is the life changing kicker…you don’t have to put up with it! 

It all starts in the very beginning of your landlord-tenant relationship.  Define the rules and your expectations VERY CLEARLY and HOLD STRONG to them! 

The first time they call and tell you why the rent is going to be 5 days late, explain exactly what it’s going to cost them and why.  Do not come off of your late fees even a little bit, especially early in the agreement.  YOU MUST draw the line in the sand with them and stick to it, or they will walk all over you.  Once a tenant understands what paying late means, they will stop putting you behind other bills.  They will miraculously start figuring out a way to pay you on time.  They will continue to test you throughout the lease just like kids test their parents…don’t waiver!

This philosophy has drastically changed tenants’ mindsets about the way they pay us every month.  We have given too many tenants the benefit of the doubt over the years and have learned from our mistakes. 

Set the expectations early.  Hold your ground when they try to change the deal. Now you can sit back, relax, and enjoy the asset you’ve added to your portfolio.

Now, you’re managing the property instead of it managing you!

Posted in Property Management | 2 Comments »

Real Estate Investment Financing Strategies: How to Develop a Solid Financing Arsenal

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I was speaking to an investor group in Columbia, South Carolina last night on recruiting private investors. That always seems to be a popular topic among beginning investors. It seems that many investors have a hang up when it comes to getting a deal financed. One of the investors asked me what I thought about using credit cards, and it got me to thinking not just about his question but about how to develop a solid financing arsenal.

Let’s just say that you find someone to finance some deals for you. You work out some terms and how the relationship will be structured. You hit the ground running and before you know it, your doing deals. You’ve bought, renovated, leased, and sold a few houses. You get another deal under contract and set up the closing.

Right before closing, you get the dreaded call. Your investor says, “Sorry but I’ve had some things come up, and it’s just not a good time.” Your heart drops because you don’t have a back up plan, and you have to break the news to everyone that expects the deal to close the next day.

You’re thinking to yourself, “Well, I guess that things like this just happen sometime. It was out of my control.” WRONG! You only had one source of capital and relinquished all control to them. He said no, and you had no place to go for the money.

Developing a Solid Financial Arsenal

There are two areas to look for capital: on the inside and on the outside.

Start by asking yourself, “What assets do I have that could be used to fund my real estate deals?” Do you have cash, equity in a house, stock you could borrow against, or room on a credit card? Total up everything that could be used and see where you stand. If you are structuring deals creatively with seller financing, often times, you’ll find that you don’t even need much cash to get a deal done.

Now ask yourself, “Who would be interested in provided funds for good deals in real estate?” Friends, family, other investors in the area, hard money lenders, banks? Almost everyone you will ever talk to is interested in making more money. If you can show any of these people that it makes sense to lend money to you because they will make more money by doing so, you’ve got a lender. And the only one that cares about credit are banks!

Developing a solid financial arsenal is all about options! When you have multiple options to getting a deal financed, you are in control which is exactly where you want to be.

Posted in Real Estate Investment Financing Strategies | 4 Comments »