Author Archive
The Power of a Refusal Option
Posted on September 18, 2017 byI hate being an idiot, but when you screw up like I just did, it qualifies me to be the biggest nimrod in the land!
The most powerful document in real estate investing is the option agreement. Sadly, the least used and most misunderstood document in real estate also happens to be the option agreement. Why don’t more folks know how to effectively use options to control property? Probably because there are so few investors who have experience using options.
Most folks have heard of Lease Options, but what about Purchase Options, Performance Options and First Right of Refusal Options, to name but a few? Read More→
How We Creatively Funded A Recent Deal
Posted on August 10, 2017 byHow do seasoned real estate investors creatively fund their deals without going to a bank? To show you one way, let’s look at a deal that Kim and I recently got funded using a private-money lender.
This deal began when Kim and I were high bidders at the December 3, 2013 property tax auction in Cartersville, Georgia. We bought the tax deed on 50 Akin Drive for $2,800. The purchase money came from our checking account and was used to pay up the property’s back taxes for tax years 2010, 2011, 2012 and 2013. By the way, despite what the TV infomercial claims about buying tax deeds, as the high bidders, we only owned the tax deed, not the property!
Over the next twelve months, either the property owners (who had abandoned the property) or their mortgage company had the right to buy back the property’s tax deed for our $2,800 purchase price, plus pay us a fee of 20% interest. Read More→
Avoid the Certainty of Poverty
Posted on July 13, 2017 byHad a good conversation with an investor friend about the financial collapse of Greece. The country is so broke that not only can it not repay its loans, it can’t make its note payments either. What’s Greece’s solution to this financial meltdown? They want to borrow even MORE money!
It’s crazy for anyone – including a country – to believe that the way to get yourself out of a financial hole is to dig it even deeper! Yet that’s exactly what Greece – and way too many American families…and America herself – is doing.
Jack Miller, my long-time teacher until he joined the other angels in heaven, taught us how to avoid the certainty of poverty. He also shared what he had learned from Warren Hardin: It’s inconvenient to be physically alive but financially dead! Read More→
Buying at the Foreclosure Auction
Posted on June 8, 2017 byFrom 2013 through 2016, Kim and I have rarely been the high bidders on a property at the foreclosure auction. Why the dry spell? Because the cheese has moved! For example, from 2007 through 2009, the best deals were found buying short sales. From 2010 through 2012, the best deals were found buying at the foreclosure auction. From 2013 through 2016, the best deals have been found by buying pre-foreclosures. Remember, the cheese is always moving. To be successful, you can’t keep going back to where the cheese was – you must go to where it is today!
Here are the basic steps Kim and I follow when bidding at the foreclosure auction. (NOTE: Be aware that each state’s foreclosure laws are different.) First, in Georgia, before a property can be auctioned for foreclosure, it must be advertised in the county’s paper of record for four consecutive weeks before the auction. Call your county’s Clerk of Court’s office and they will tell you in which paper and on which day(s) the “legals” (including foreclosure notices) run.
On the day the foreclose notices first run for next month’s auction, we buy that paper and transfer the foreclosure info in the paper – which is difficult to read – onto our Foreclosure Sheet – which make it much easier to read! Read More→
How to Work Pre-Foreclosures
Posted on May 9, 2017 byGoing to the foreclosure auction was the best way to find real estate investing deals from 2009 through 2012…talk about lots of low-hanging fruit! We were often able to buy a nice three-bedroom, two-bath home in a solid neighborhood for $35 a square foot. Then in 2013, the cheese moved. Buying on the steps was no longer the best place to get deals.
Let me explain: In April 2012, there were close to two hundred properties advertised for foreclosure in Bartow County, but at the auction, there were only five investors bidding on them. It was like shooting fish in a barrel. One year later – April 2013 – there were less than eighty properties advertised with more than fifty – that’s 50 – investors and hedge funds bidding on that handful of properties. Suddenly, because of the law of supply and demand, winning bidders found themselves paying $80 to $110 a square foot for a house. This was a huge year-over-year price increase!
Did this mean that all the great deals had disappeared? No, it simply meant that to find great deals, investors had to look somewhere else – like buying properties pre-foreclosure. Read More→
Be 100% There!
Posted on April 12, 2017 byHow important is it, when meeting with a seller, buyer, renter, realtor or contractor, to be totally focused on that person? If you’re not paying complete attention to what that person says and how he or she says it (tone of voice, hand gestures, body position, eye movement), isn’t there a good chance you’ll miss critical information that’s being shared with you?
The number of people who are not 100% there during a meeting has become epidemic – and is a major pet peeve of mine! If you’re over fifty years old, you already know what I’m talking about. Baby Boomers grew up without cell phones, emails, and text messages. Heck, we didn’t even have phone answering machines!
Here’s an example of this epidemic at work. A real estate investor needed help structuring a deal and asked for an hour of my time. He drove up from Atlanta and met me at the Adairsville Waffle House. Read More→
Two Pay Checks Away From Being Broke
Posted on March 8, 2017 bySure, there are reasons – good reasons – to not own rental property: tenants, vacancies and repairs, to name three. But have you ever spent time thinking why owning investment real estate might be a good idea?
Last year, my father-in-law was rushed to the hospital with what doctors thought was a massive stroke. When the ambulance arrived, he was taken directly to ICU where a ventilator was inserted, and to prevent further injury, he was given medicine to induce a coma.
Kim and I had to live at the hospital for several weeks. Gotta tell you, an ICU’s waiting room is full of interesting life lessons. Read More→
Are Your Property Taxes Too High?
Posted on February 9, 2017 byAre your property taxes too high? If they are, in the past three years, how often have you attended your county commissioners’ meetings to voice your outrage?
My mother taught me early on that silence is a form of acceptance. Most times at these county commissioners’ meetings the silence was deafening!
If your property taxes are too high and if you don’t speak out at the public government hearings, then you lose your right to complain. Instead, just step up to the window and pay the nice lady what you owe without one complaint!
Since 2006, Kim and I have fought our property taxes 142 times. We’ve won 122 times – that’s an 86% success rate. I don’t say this to brag; I say this to let you know that you can fight your property taxes and win! Just know that it’s a learned thing, not a born-knowing-how-to-do-it thing, and it begins with standing up and speaking out! Read More→
Stay the Course
Posted on January 11, 2017 byHow do you succeed as a real estate investor? How do you succeed as a person? Simple: Stay the course!
But what course? Whose course? Heck, how do you know if you’re even on the right course?
Your course begins with an idea – YOUR idea! What feels right to you? Answer this question: What were you put on earth to do? Ever thought about this? I mean, after all, you’re here for a reason, right? What’s that reason?
For eighteen years, I sold Electrolux vacuums door-to-door. It paid me a lot of money. Only one problem: I wasn’t put on earth to sell vacuums door-to-door. So why didn’t I quit much sooner? Because everyone around me told me that I’d be a fool to walk away from the huge money-earning potential Electrolux offered. Read More→
Be Hard on the Problem and Soft on the Person
Posted on December 8, 2016 byAn investor who has owned four rental properties for the past three years called me for help. He was at his wits’ end. Because he hated dealing with tenants so much, he was seriously considering dumping all of his rentals! By the way, this is not an uncommon feeling for new, inexperienced, and under educated landlords to have.
When we met to discuss his situation, he let me hear a recording of a conversation he had had with a tenant a few days prior…and I use the word “conversation” with loosely.
The tenant consistently paid his rent six to ten days late. This sent the landlord into orbit. Over the phone, the landlord screamed at the tenant, “You are a liar, an idiot and you’re totally worthless! Pack your crap and get out of my house right dang now!” And from there, the landlord’s words really turned foul. I felt sorry for the tenant and angry with the landlord for losing control. Read More→
How Can One Deal Lead to More Deals?
Posted on November 9, 2016 byMost folks think real estate investing consists of finding a deal, taking it down, getting it rehabbed and sold, and then going out to find the next deal. But what if you structured the deal in such a way that one deal leads to more deals? Let’s look at two real-world examples of this.
A few years ago, our good friends Joe and Ashley English, found an investment property they wanted to buy. Only one problem: they didn’t have the money to buy the home. Joe sent an email to several investors explaining that he was seeking funding.
Within minutes, Joe’s phone rang. It was Pete Fortunato – the best creative deal structurer we’ve ever met. Pete was on Joe’s email list.
After a short conversation, Pete agreed to fund Joe’s deal with these terms: Joe would pay Pete one-half of the $400 net monthly rent. In addition, if Joe sold the property, he and Pete would split the net profit 50-50. This is known as a performance loan. The purchase money would come from Pete’s Roth. Read More→
Own Nothing, Control Everything
Posted on October 10, 2016 byA real estate investor offered to buy me lunch in exchange for information. He wanted to know how we hold title to our properties; in other words, whose name is on the deed?
When we met, he explained that he’d gone to the deeds room in the courthouse to look up which properties Kim and I own. After much research, he concluded that we don’t own any houses – and he was right!
But how can I be a real estate investor and not own any real estate? Easy answer: We don’t own any properties personally! Having assets in our names can be reckless. Plus, it can wreak havoc on our estate plan when we die.
(NOTE: I’m not an attorney or a CPA, so what I say is just my opinion. Seek competent council before you make any big, life-changing decisions.) Read More→
What Does Creative Deal Structuring Look Like?
Posted on September 7, 2016 bySince 1999, Kim and I have continually learned from Pete Fortunato how to creatively structure and fund our deals – without going to banks!
The BEST real estate investing meeting we attend is the weekly Real Estate Exchangers meeting in St. Petersburg, Florida. It’s creative deal structuring and funding at its most pure.
Here’s an example of a deal that was put together at yesterday’s meeting.
Rich has a SUV that he’ll sell for $3,000 cash. Pretty straight up deal, right?
Pete offers to trade his Nissan truck for Rich’s SUV. But Rich doesn’t want a truck; he wants $3,000 cash! Does Pete have a hearing problem or what?
Here is a classic example of Use What You Have, To Get What You Need, To Get What You Want. Read More→
Sage Advice From an Old Investor
Posted on August 9, 2016 byAfter closing the doors of North Georgia REIA forever, we have been reminiscing about the best lessons we’ve shared with our group.
With this in mind, here’s some sage advice from an old investor.
How do I know whether a deal is good or not? How do I know what I’m looking at? And if I decide to take the deal down, how do I get it funded fast without going to a bank?
When Kim and I began our investing careers in 1995, we thought all houses were pretty much the same. But over time and with experience, we’ve learned what types of houses make the best investments. Read More→
Options: The Safest & Cheapest Way To Control Real Estate
Posted on July 13, 2016 byLong ago, Kim and I learned that options are an incredibly powerful deal-structuring tool that allows you to control lots of real estate for little or no money…and with very little risk! And here’s the best part: Because so few know anything about options, you have almost no competition!
Simply put, if you are not using options as one of your primary real estate investing tools, then you’re leaving a lot of money and opportunity on the table.
When most folks hear the word “option,” they automatically think lease-options. While lease-options are fairly popular, they are just the tip of the option iceberg.
Options allow you to control a property without the risks associated with ownership. You can control one (or all) of the benefits that come with ownership: income, profit, amortization, growth, use, management and tax benefits.
One of the best things about options is that you can control hundreds of thousands of dollars worth of real estate for less than $100 – and control it for decades. No other document in real estate is this powerful! Read More→
The Music is in the Man
Posted on June 8, 2016 byIn my early twenties, I’d decided that to be successful, I needed to buy a Mercedes Benz and a gold Rolex watch. Dean Kates, who was my mentor back then, told me the following story to help me understand that greatness comes from within, not from what you own – that bling is pretty much meaningless!
After many years away, a world-famous violinist returned to his small hometown in Georgia. He came to play a benefit concert to raise much-needed funds for his high school’s music program. Because the violinist was one of the very best musicians in the world, the town spared no expense rolling out the red carpet for him.
At a reception held two hours before the concert, many of the performer’s high school chums showed up to pat him on the back and wish him well. As a group, they asked to see his one-of-a-kind Stradivarius that had been built in the 17th century. It was said that the music that flowed from his Stradivarius was the sweetest, purest, most heart-touching melody the world has ever known. Read More→
Getting Mailbox Money Without Tenants
Posted on May 10, 2016 byTwo decades ago, Kim and I set a goal to replace our earned income with investment income.
There are a couple of advantages to achieving this goal. First, you don’t have to labor for a living. In other words, your capital is working for you instead of you working for your capital. Second, the tax rate on earned income is much higher than it is on investment income. Said another way: With investment income, the government lets you keep more of what you make, and when it comes to money, more is better than less, right?
To accomplish this goal, we figured we’d need fifteen single-family rental properties. Each month, the tenants would send in their rent checks. Part of these checks go toward paying the mortgages, insurance, property taxes, vacancies, repairs and management. We get to keep whatever is left over to spend or invest how we see fit.
There is a downside to owning rental property. Though for tax purposes the government considers what you make to be passive income, there’s still hands-on work that needs to be done to maintain the property and manage the tenants. Read More→
You Bought the House…Now What?
Posted on April 13, 2016 byWhen Kim and I were baby real estate investors, we were totally focused on buying our first investment property. Then one day it actually happened! I remember leaving the closing attorney’s office feeling pumped up. When we got in the car, Kim asked, “Now what?”
Now what, indeed! I hadn’t given that part of the equation much thought. This happens to a lot of new real estate investors. So once you buy a house, what do you do next?
To answer this question, let’s look at three properties we worked on recently.
The first is 337 Rail Drive in Adairsville, Georgia. Kim bought this house at the November 2015 foreclosure auction. From the start, it was a flip. In other words, we bought this property to resell quickly. We’re flipping this home because we need to replenish our cash reserves.
Shortly after purchase, Kim had the property trashed out. Because our contractors were tied up rehabbing Akin Drive, she elected to delay doing the extensive repair work Rail Drive needed. Instead, she offered it at a wholesale price, which was well-below market.
In less than a week, Kim found a qualified buyer and accepted her purchase offer. Unfortunately, about a week later, the buyer changed her mind because she was scared about the amount of work the property needed. We refunded her earnest money, hugged, and parted friends. Read More→
Pick Your Bone: Wishbone, Jawbone or Backbone
Posted on March 9, 2016 byTo succeed at real estate investing, or business, or life, requires bone – the right kind of bone.
Because real estate investing is pretty easy to understand – you buy a house and then either sell it or keep it as a rental – lots of folks are interested in becoming investors. Want proof? Look at all the traveling dog-and-pony shows coming through town offering their “free” seminars to a “select few.”
We get lots of calls from would-be investors who’ve attended one of these get-rich-quick-snake-oil events. Most actually believe that real estate millions can be acquired by working only thirty minutes a week and without meeting face-to-face with sellers. That’s like a doctor trying to build a successful practice having office hours from 9:00 to 9:30 a.m. and without seeing any patients. Crazy, right? Read More→
Goodbye. We’ll See Y’all Later!
Posted on February 9, 2016 byKim and I want to thank you for reading our weekly real estate investing newspaper column for the past 13 years. With this last article, we say: Goodbye, y’all!
In 2003, when we started this feature, we were still fairly new to real estate investing. As we gained knowledge and experience, we shared the creative deal-structuring techniques we learned that allowed the impossible deals to become not only possible, but also probable.
We also shared most every mistake we made along the way. We did this because more great lessons are learned from failure than from success!
And, we wrote a ton of articles about what it takes to succeed. No matter what field you’re in, the attributes it takes to succeed can be boiled down to these ten: love, accomplishment, discipline, persistence, belief, integrity, associations, a yearning to learn, sacrifice and giving back.
The story about how our weekly column first got in the paper demonstrates these attributes at work. Read More→
