The May 2015 edition of The Profit Newsletter is now available for download as a High Quality PDF (print quality) or Low Res PDF for mobile devices. The Profit Newsletter is the official newsletter of the Tampa Real Estate Investors Alliance and is a digital, interactive newsletter for serious real estate investors delivered as an Adobe PDF file to read on your computer, tablet, or smart phone with a PDF reader. Many of the articles and ads in The Profit contain hyperlinks you can click to get more information online. The high res version of The Profit is “print ready”while the low res version may load faster on your mobile device. Also, be sure to Subscribe to The Profit so you don’t miss a single monthly issue.

High Quality PDF / Low Res PDF
See The Profit Archives for our past editions.

Read More→

Last Saturday, I took thirteen real estate investors from the Chattanooga Real Estate Investors Association door-knocking. Before heading out, we discussed how to make a written offer to a seller.

The group had a number of questions: 1) How do I find a property’s fair market value? 2) How do I discover market rents in the area? 3) How do I make a written offer right there on the spot?

The first thing to remember is that an offer is different from a purchase contract. A purchase contract is often a formal document written in legalese that no one – especially the buyer and seller – understands. On the other hand, an offer can be written in plain English on a Post-it note that makes sense to everyone! (NOTE: On North Georgia REIA’s Facebook page, you’ll see three of the written offers I made in Chattanooga.)

Randy Shelley is an investor who lives in that area. We spent the day knocking doors in his subdivision. Though he already knew the fair market values and approximate rents for his neighborhood, I asked him not to share this information with the group. Read More→

“Reality is merely an illusion, albeit a very persistent one.” ~ Albert Einstein

About a year ago, British Airways created an amazing billboard and put it near an airport. When an airplane would take off at the airport, the billboard would detect it. On the billboard, a little kid would follow the plane, pointing at it, until he ran past the end of the screen. When the plane was gone, he would run back into view. The billboard actually interacted with the world outside.

How did they do that? I have no idea.

If you’ve seen that billboard video, you’ve seen an example of “augmented reality.” (If you haven’t seen the video, you can find it by Googling “British Airways interactive billboard.”). Essentially, augmented reality adds digital content to real-life objects. The object could be an ad in a magazine, or it could be a famous painting, or it could be a house you just passed on the road. The essence is this: Point your tablet at it, and stuff happens. That stuff could be a link to a phone number, a video or animation you can watch, or other statistics about the thing you’re looking at. In the case of a house, it could tell you the price, square footage, and comps for the area. It could even give you a tour of the inside of the house. Read More→

In the real estate world, it’s all about income. Real estate IRA veterans know that if prices get too far ahead of rents, driving gross yields down, bad things happen. You don’t want to get caught up in the next bubble, trying to sell over appreciated real estate to some greater fool. Any time your entire investment thesis for residential real estate relies on future price appreciation without regard to income generated, you are on hazardous footing.

Smart real estate investors, then, try to maximize their yields on investment – that is, the amount of cash that comes in as a percentage of the amount invested.

Of course, individual properties vary widely when it comes to the cost of repairs and renovations needed to get them to work. But we can get a good idea of the health of a rental real estate market just by looking at gross yields – that is, income divided by the total current property value.

From that perspective, the market for real estate IRA investors looks strong indeed. RealtyTrac recently published its 2015 Residential Rental Market Report, aggregating rental income and price data from hundreds of metro markets, nationwide. The report comes on the heels of another report from Zillow.com reporting that rents have been increasing strongly, even outpacing inflation and household incomes. That’s not great news for renters, unfortunately, who have seen their fraction of incomes absorbed by housing costs increase from 25 percent to 30 percent in the space of just a few years. But it’s good news for landlords, who are reporting solid returns on investment in the vast majority of markets, nationwide. Read More→

That sounds too good to be true! Guess who made this possible… The Supreme Court of the United States (SCOTUS)! There is a shockwave moving through the mortgage industry caused by a unanimous SCOTUS ruling in January. The court settled once and for all exactly what a borrower’s Right of Rescission is, and what latitude the courts have when dealing with it. The content of that ruling is a major win for homeowners and real estate investors alike, but what exactly does it mean for you and your business?

First let’s begin with what the Right of Rescission is. It was established by the federal government in the Truth in Lending Act (TILA). It gives a borrower the right to rescind any residential mortgage transaction within three days of the lender providing all of the disclosures required by TILA. The traditional Right of Rescission happens within 3 days of the closing and allows the buyer to cancel the transaction and get all funds returned by the lender. The Right of Rescission we are interested in is much more expansive. If the lender does not make the disclosures, or the borrower claims that the lender didn’t provide them, or the lender did not fully disclose the nature of the transaction, or the lender was fraudulent in their representation, the period can be extended up to three years after the borrower discovers the fraud. The bank must give up its claim to the property by providing the borrower with a cancelled note and mortgage and by returning every dollar the borrower has paid since inception of the loan. The lender has to respond within 20 days of the notice of rescission being dropped in the mail by the borrower. Read More→

I will never forget my first business/real estate mentor. I was set to taxi the plane out to the runway on a flight to Carrabelle Florida. My passenger for the day was a wealthy real estate investor and developer. I was flying him to FL for the afternoon because he was in the middle of developing a new condominium community on a prime piece of water front real estate that I had watched him negotiate and purchase a few weeks prior on a separate trip that I flew him to Florida for.

At this point my real estate career didn’t exist at all. I was a pilot flying for a medical supply company in Macon, GA. My passenger (Lee) was a friend of the owner of the company I worked for. The owner had invested in Lee’s next development and had given him access to the plane (and me) to take him down to the development site when he needed. At this point in time I was working on my flying career but I was slowly getting the real estate bug. Little did I know that in less than a year from that fateful flight, I would be completely out of aviation and full time in real estate, never to look back.

As we taxied out to the runway on a beautiful spring day Lee said something that would change the course of my life forever “what’s that button for?” Read More→

Welcome back…again! Quick refresher: We’ve been discussing two classic & powerful, tried & true real estate investing strategies:

Wholesaling and Lease Options, aka “Ugly” vs. “Pretty”.

Part One of this series was devoted to Wholesaling, and Part Two was focused on Lease Options. Examples were given. Terms discussed. Money put on the table. Moving on…

Whenever a ‘newby’ investor asks me where they should start, I usually tell them that wholesaling is a great way to earn some great money while learning the business, so they should consider starting there. After a while, and when their marketing starts generating leads from pretty house sellers, I tell them that it’s a great idea to learn that part of the business so that they can start to make money from those leads as well.

It’s a beautiful thing when a deal fits easily into a ‘type’ of transaction we know how to do, and it’s even more beautiful when all the stars are in alignment & a deal closes smoothly. But we live in the real world here, right? Besides, we’re problem solvers, and that’s why we get paid the big bucks! :) Read More→

As investors we have to watch numerous indicators to insure we make a profit when we buy. Knowing the value of a property is extremely important. Today the adjustment in property tax values is for once a viable market indicator.

Knowing the true value of real estate is critical, try to do a deal without it and see. The guidance and data within REIAComps has consistently shown investors how to determine both solid acquisition value and after repair value to earn lasting profits.

Property values nationwide continue to rebound, according to numerous local and national reports. The taxable value of real and personal property nationally has increased 2.38 percent from 2014 to 2015.

Of the 10-20 reports I regularly review, they show the assessed value of real estate, which is 50 percent of market value, increased 2.75-3.0 percent. Translation, the real estate market is still up, although it is a gradual, slow increase. Read More→

People often ask me, “Russ, how do you stay so motivated, confident, and upbeat?”

My answer? I know my assets, and I make sure that I have more assets than liabilities.

Do you know your assets?

Knowing your assets will allow you to assess whether or not you are heading in the right direction. It will show you if you are winning or losing. I like to know what my assets are because it builds my self-esteem and feeds my ego. There is nothing like a good ego boost!

Here are the 4 types of assets:

1. Physical/ Money
2. Community
3. Education/ Skills
4. People

Physical/ Money Assets

When we think of assets, we typically think of money! But there is much more than that. There are physical assets. Read More→

One of the best ways I know of to grow personal wealth is by creating multiple streams of income in your life and in your business. In an uncertain economy, it is important not to place “all your eggs in one basket.” In order to protect your income long term you need to consider diversifying your investments so whether in a bad economy or a good economy you still have income from some of your investments.

As a real estate entrepreneur, there are several ways for you to accomplish this goal. One way to create multiple streams of income has to do with the way you purchase properties and structure your deals. You can wholesale properties for immediate income, or you can lease/option properties so you get some money today, some each month and a big chunk of cash at the end. When you do a lease/option with a tenant buyer, just remember to increase the initial asking price of the property by at least ten percent so you realize the gain in property values over the year. If you extend your lease/option for a second year, you get another chunk of cash; you increase the price again and continue to get a monthly income from it.

You can also hold onto rental properties and have someone else manage them for you. This way, you get to go the mailbox, get checks and not have to do any of the work or deal with the tenants. Apartment complexes and storage units are another great stream of income, especially when they are managed by someone else. Not only do you realize the gain on the property long-term but the monthly checks are even bigger. Read More→

Many Buyers start house shopping without even knowing the price range in which they are qualified. At Sell Fast Realty, our company policy is that the Buyer must be pre-qualified by a Mortgage Lender and has already submitted all their financial documents so their debt to income ratio can direct them to the correct price range of homes. I get a lot of Buyers who have no idea if they can qualify for the price of the home that they want to buy. My Mentor Students and I use my Buyer information sheet to pre-qualify all of our Buyers.

1. Are they a Homeowner, Investor or Realtor?
2. Their full name, telephone number and email address.
3. What are their wants versus needs: how many bedrooms, bathrooms, and then garage/pool etc.
4. How much money do they have to put down NOW? (Notice the now, because they could be waiting on income tax refund, lawsuit or gift money etc.
5. How much can they afford monthly? I use this rule of thumb: If a house is selling for $100,000 then their monthly payment will be close to $1,000 principal, interest, taxes, and insurance (PITI). However with lower interest rates, then their payment would be lower).
6. Are they a CASH or Mortgage Buyer?
7. If Cash, then what is the price range they can afford? We would request a bank/IRA/investment statement showing this amount.
8. If they are a Mortgage Buyer, have they been pre-approved and for how much?
9. How is their credit? Good, Fair or Poor and what is their credit score?
10. Have they ever filed bankruptcy and when was it discharged (Chapter 7) or dismissed (Chapter 13)?
11. How soon are they looking to move and why?

Before I give information about the house that I am selling, I will ask these questions. If they are represented by a Realtor then I want to know if they are a CASH, FHA, VA or Conventional Mortgage Buyer. Read More→

We always hear how it is important to get a solid Buyers list whether large or small but ultimately of people that can perform. One such Buyer that is relatively untapped for wholesalers are Builders. These are in many ways some of my favorite Buyers because they can oftentimes pay higher prices than investor Buyers who have to hire them. Let’s take a look at why this is:

• Builders can choose whether or not to pay themselves during a build process. If they choose just to get paid on the end profit, this averages a savings of 15-20% that an investor Buyer would have to pay to them.
• Builders can save on their construction costs by not marking up anything. Investors are often billed a markup for these materials costs since they or their subcontractors have to source and pick up the materials.
• Builders save on the overhead of timing. Time is money and a builder has less people to coordinate with to accomplish building a house whereas an investor has to manage more people.
• Builders may do some of the labor themselves. Some of them just love to get their hands dirty no matter how good their crew is.
• Builders may have their own capital. Many investors leverage private capital but a well funded builder may have their own capital, thus saving on interest fees.

When you start mixing some of these potentials savings together, you can see how they can pay more for a house than an investor can thus making the difference in having a deal done vs having no Buyer. Let’s look at a specific example. Read More→

There are certain expenses a real estate entrepreneur will have in the business, and the more it ramps up, the more these expenses will increase along with revenue.

Fortunately for us, our overhead is extremely small. And when I say extremely, let me do a few comparisons for you:

When my restaurant was open, my break-even was approximately $100,000 per month. That’s just what it took to keep the doors open, including all the costs inherent in a restaurant and most other businesses like labor, insurance, utilities, product, etc. The food alone was $.40 of every dollar that came through the door. That’s a tough nut to crack for any business, especially when you’re dealing with small numbers like those found on your dinner check. There were many times I wish I could sell a filet mignon for $10,000 like we get out of houses with little overheard and very little work.

In the restaurant business, we’re open for lunch and dinner most of the time. There were always at least 12-15 people on duty with over 50 employees total, open seven days a week, and a manager or assistant manager had to be there 100% of the time. If that manager happens to be the boss, that pretty much sucks up that life. Read More→