C.J. Lauria

From the desk of C.J Lauria

In my many real-estate-investment-related articles, I have at times stated that we are faced with the “perfect storm” for wholesaling investment properties. While the current state of the economy and housing market is prime for real estate investing, there is another factor that we have not yet considered.

I would like to address the present financial status of the many desirous of starting a home business in the real estate industry. As many of my readers know, my company, Invesdoor™, came up with the “Mentor for Life”™ plan for entrepreneurs across the country. Each week my team interviews scores of sincere entrepreneurs looking to break into the exciting world of real estate investing.

Historically, one had to have a huge “war chest” of cash and excellent credit to successfully accomplish branching out into this type of career. What my team discovered is, that there are a plethora of very intelligent, motivated folks across the U.S. that are themselves victims of the economic reversal in the housing market. Yes. Many who are looking for a real estate mentor and apply to enroll in my mentorship are themselves ones who have suffered damage to their credit and possibly even lost their own homes.

That is why wholesaling is a prime avenue for newcomers into the REI home business arena. In fact, you need neither a lot of cash or good credit to make a good living as a wholesaler. Of course, real wealth will come through actual ownership of investment properties in time. However, in the meantime, with the proper mentoring someone with neither a bunch of money or great credit CAN break into this industry. I suggest a long-term plan, maybe 2-5 years if one wishes to become completely financially independent. It is possible. It is being done right now.

Certainly, without proper guidance, it’s not likely that it will happen anytime soon…if at all. The key is first your attitude, then finding a seasoned mentor that you can afford with excellent teaching skills. You can find self-proclaimed mentors anywhere, but do they really have valuable experience to offer and are they skilled in the art of teaching. If you find a real estate mentor with those qualities you may have struck gold.

There are some factors, though, that you will want to be on guard for. I will address those in my next article.

A tradition as old as business itself is that of seeking to bid on desired products or services. It simply means the highest bidder wins the negotiations. Our culture is colored with scenes of rapidly talking auctioneers amusing their audience as they moved countless dollars of merchandise with the sound of the gavel. Big nationwide auctions have recently made headlines but what is actually better for the average short sale investor…REO or bank auctions? Let’s examine the pros and cons for each.

Purchasing a property via auction frequently entails a commitment to all outstanding debts including unexpected liens and other judgments in addition to those for which the auction is taking place. By purchasing a bank owned property you will typically have assurance of clear title or at least a complete awareness of other fees or liens due.

Property sold at auction frequently has tenants or prior owners still in place, causing new owners to engage in immediate action in order to take possession. Bank owned properties have often evicted former occupants thereby eliminating the need for out of pocket legal expenses. Just keep in mind, this is changing and some short sale investors have encountered squatters. On the other hand, depending upon your plans for the property, having paying tenants may be a strong positive. Personally, I have never favored inheriting tenants. Be careful!

Auctions require advance funding to be in place while bank owned properties may actually offer added terms or beneficial interest rates in order to move a non-performing property off their portfolio. Since it can cost a lot of money for a bank to keep a property on their books, one way they entice others to purchase is by negotiating the terms of the finance offers. This is especially true in areas where lenders may be limited by the number of homes they can release on the market (ie, federal regulations prohibit “dumping” in certain neighborhoods – often the same ones where many non-performing loans were originally written). By offering highly favorable financial terms, banks are able to shift properties off their books without continuing to drive down prices.

The bottom line is that short sales are one of the best bargains of all but don’t underestimate the value in bank owned properties. Auctions are a lot of fun but not always indicative of the best value especially for those just starting out or who only intend to purchase one or two properties. People often behave irrationally at auctions because of the competition and frequently make decisions based on emotion. In my company we aid cash house buyers to acquire investment properties either with all cash or by providing funds from our private lenders. Financing in this manner allows the cash buyer to leverage his/her money so that they can do more deals.

Join our team at http://invesdoor.com/join_our_team/

C.J.Lauria

founder of Invesdoor

If you have a real estate home business you are likely procuring distressed investment properties. The expression “distressed” refers to the situation of the seller that has created an opportunity for you to acquire a lower-than-average purchase price. Inevitably, though, in these situations we encounter “distressed” conditions in the physical sense as well. This means that some form of rehabilitation must occur before it is ready to place back on the retail market.

Assuming you don’t personally wear the tool belt, you will have to hire construction professionals to get the needed work done. There are some essential elements to the process that as a real estate mentor I always advise be checked off your list. As far as any skilled work that is performed, you will want to see the proof of a State Contractor License, Liability Insurance, Workman’s Compensation Insurance (if they have employees) and references. Of course, once you have these documents on file it won’t be necessary to go through this again except to update them as necessary.

There are other considerations, too. For example, what if there is a disagreement between you and your Contractor? The following document will greatly help to avoid that down the road and leave you with a clear title so you can quickly sell your property with ease. First, before you hand them their fist check, get an IRS W-9 form filled out and signed. The information contained therein is important at the end of the year. If you don’t get it now, you may never get it. Trust me!

Second, you must have a contract. Anyone who thinks they can operate without one is simply being naïve. Carefully spell out the scope of work to be performed, terms of compensation, precisely who provides all tools and materials, penalties for failure to meet deadlines, obligations for insurance and liability, and agreement on how changes (change orders) are made. In my REI mentorship program I stress covering these issues well in advance of commencement of work. Contractors are notorious for overlooking these types of details. Don’t leave any matters about the scope of work and payment terms to chance! These topics will all be addressed in a good contractor agreement.

Third, avoid complications at escrow by getting a signed final lien release from your Contractor before he/she gets final payment. In fact, the typical procedure is to get progress releases as (actually before) each progress payment is made. This means that the Contractor is waiving their rights to put a mechanic’s lien on your investment properties on account of some conflict.

In most cases, with single family residences, rehabs don’t often require such involved projects. In fact, I teach my students that rehab should rarely be more involved than simple repairs and cosmetics. That is simply basic “real estate investing for beginners.” In a future article I will address the differences between “rehab” and “remodel.”

This expression is common among most sincere folks contemplating starting their own real estate investing business. In this article, I want to discuss this mindset and analyze the pros and cons therein. As with any new venture, it is always wise to first weigh the costs involved. Furthermore, without a plan our vision of financial freedom through real estate investment could be doomed from the start. For that reason we want to listen intently to what any real estate investment expert might advise. Consider: If we apply the “buy low, sell high” principle we must buy in a market climate when the majority don’t see the need to buy. The truth is that your decision to buy would have to be the unpopular decision at the time. This is just as true when a real estate investing expert chooses to sell. They may feel that it is time to sell (high) while the masses are still in buying mode. Whether you buy foreclosures, short sales, or any other type of investment properties, these will likely be distressed in one form or another. Otherwise, your competition will be intense. In my real estate investment mentoring program, I teach that the better a house “shows,” the quicker and higher it will sell. My students know how I feel about properties that look and smell poorly. They will tell you that it is the ‘look and smell of opportunity.’ . Of course, it takes vision to identify opportunity amidst clutter and filth. However, learning this technique will make you a lot of money. In my business, we wholesale properties in their “as-is” condition to savvy cash buyers who have a trained eye like we are discussing. If a cash home buyer wishes to acquire any of our properties my students are taught to be coaches for those who have not yet learned to identify opportunities out of distressed real estate. The “everybody’s doing it” idea is strong reason to do the opposite. When the U.S. economy took a “bearish” turn I remember Warren Buffet saying that it was ‘a good time to get some great deals.’ Rather than whine about falling values, the REI experts get more aggressive about acquisitions, knowing that the right time to sell at a profit will eventually come. Now is a great time avail oneself of the many distressed situations out there to purchase and hold properties as rentals for at least 12 months to avoid short term capital gains. The market will eventually turn around but then the competition for properties will be fierce. Don’t wait. There’s no time like the present.