The June 2014 edition of The Profit Newsletter is now available for download just in time for our June 12th Meeting with Jimmy Napier. You can download The Profit Newsletter as a High Quality PDF (Recommended) or Low Res PDF for slower devices. The Profit Newsletter is the official newsletter of the Tampa Real Estate Investors Alliance and is a digital, interactive newsletter for new and seasoned real estate investors delivered as an Adobe PDF file to read on your PC, Mac, Smart Phone, iPad or other mobile ready devices with a PDF reader. Many of the articles and ads in The Profit contain hyperlinks you can click or tap to visit websites, watch videos, listen to audios, download content, send emails, comment on articles, share socially and much more! The high res version of The Profit is “print ready” for those who want to print the newsletter on their home or business printer. Also, be sure to Subscribe to The Profit so you don’t miss a single monthly issue.

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The one negotiation technique I use the most is so simple. Let me explain by using an example that happened in the last thirty days. I need to tell you the whole story so here goes.

An individual has just been released from prison. While incarcerated, he learned that the more “stuff” you have, the more stressful your life becomes. I don’t know if he learned that in a class or from other inmates, but it seemed very appropriate for him. He had an old truck that he used before he left five years ago and he called to sell it to me. Some parts were missing and it looked really ugly. 

I have learned to think of most everything as INVENTORY that I buy. I mean to emphasize that word INVENTORY. If I can’t sell it at a profit, I don’t need more “stuff” around to make my life more stressful. Can you tell that I was a “don’t wanter” for this truck? That is among the better lessons I ever learned in negotiation. If you ever lose your control and become a wanter, you might as well write the check and buy the item. The negotiation will end when the other party learns that you really want what they are selling. Back to the story…  Read More→

Today I read an article written by Harry S. Dent who is a famous economist. Mr. Dent is predicting that the Dow is going to tumble down as much as 60% to 6,000 then ultimately tumble again to somewhere around 3,300. Mr. Dent predicts that Gold will fall to $750/ounce and crude oil will eventually fall to $10 per barrel and unemployment will skyrocket, he quotes “It’s going to get ugly”. Mr. Dent predicted the 2008 financial disaster and has been correct about many financial issues over the past 10 to 15 years.

I’m not an economist but I know that we, in the business of houses, have always survived through every cycle the economy has ever thrown at us. Even during the great depression of the 1930’s landlords who had affordable housing survived through those tough years. I believe the secret of being able to keep our properties and even make money in tough times will be based on not so much how much debt we have on each property but how much our monthly mortgage payment is every month. Whether you plan to keep any property as a rental or you plan to sell a property with seller financing terms I believe this will be the key to your survival and ability to prosper in a down cycle of the economy.

A problem I am seeing today where newer investors are concerned is they have no skills talking to sellers. For the past 15 years money has been easy to get for most real estate investors until 2008 when the market dropped out of sight and many investor/speculators lost most, if not all of their properties to foreclosure. Because of the looming market predictions I believe every real estate investor should learn the skills many of us have used for years to negotiate our deals with the sellers directly. I see all too many investors who continue to throw dollars at deals hoping they can get property for CASH. The problem, not all investors have access to unlimited funds to buy property. Read More→

Last month, we talked about follow up and got to the point where we were ready to prepare contracts and even had a dis­cussion on some of those. This month, we are going to finish the “closing the purchase” process regardless of what kind of deal it is we’re closing. That means getting a contract and, when applicable, getting it to the at­torney and letting him or her close the deal.

There are several types of deals you will be closing. The first is a lease option with a sandwich lease which you intend to stay in and then sublease out to your tenant/buyer. The second is a lease option that you intend to assign to a buyer, which we now call an ACTS deal. The third is an owner financing deal which you intend to buy and close with owner financing and stay in the deal. The fourth is an owner financing deal which you intend to put under contract and then assign to a buyer and get out of the deal. The fifth is a taking over debt subject-to deal, which you likely intend to stay in, and the sixth is an all cash deal. The only thing left is an option that does not involve occu­pancy of the house or installing tenant buyers. We’ll ignore that for the sake of this article.

In the case of a lease option agree­ment, whether it be a sandwich or an ACTS, this agreement is signed in the house, or you leave it with the seller, and they bring it to you the day after or whenever you can get them to finally put their signature on the dotted line. Once this happens, there’s nothing else for you to do except find a tenant/buyer for the property, and when that’s done, your attorney will close the tenant/buyer with the ap­propriate lease option agreement while simultaneously contacting the seller and getting anything else signed we need for our own protection. Of course, this is the easiest closing you will do because as soon as the seller signs the agreement, in effect, you’re closed. There’s no formal closing at an attorney’s office until you locate the tenant buyer. Read More→

So in the spirit of John Schaub who spoke at Tampa REIA last month and his message – to “build wealth one house at a time” – it is now my new mission to do just that. After 70+ wholesale flips in the last year and a half, I’m now fully comfortable with the fact that it’s time to get into “Buy and Hold” investing. I know, I know – it’s sooooo NOT sexy. True, but after hanging out with Larry Harbolt and Pete Fortunato and other “buy and hold” investors over the last 2 years, I finally see the light.

Now don’t get me wrong, I will probably always wholesale houses here and there, and today it’s still our Bread and Butter that pays the bills, but it’s time to build that cash flowing rental portfolio. This is for our future nest egg, our retirement, our passive income that will pay our bills for the rest of our lives. Any future excess money we make will go into rental properties (for the foreseeable future). Crazy huh?

Have I lost my mind? What has changed? When I first started out in real estate I really didn’t want to get into rental real estate. It just didn’t appeal to me. I figured we could make our money doing Wholesale Flips, Fix & Flips, and Lease Option flips. Well we can still keep doing that, but it’s time to put any excess money into rental real estate – or into private lending. Read More→

“The soul never thinks without a picture.” ~ Aristotle

It’s summer! It’s time for gadgets! Last month, we talked about some of the smaller extras you might want to get for your new tablet or smartphone – things like screen protectors and styluses and cases. This month, I’m going to talk about some bigger investments you might want to make in your business’s “infrastructure”: a scanner, back-up capacity, and a keyboard. I’ll also mention a couple frivolous items I just can’t resist mentioning.

First, let’s talk about scanners. Trust me, you want one. Why? Because it’s an essential tool for getting, and staying, organized – especially if you’re one of those people who writes stuff on whatever little piece of paper is close at hand. I used to be like that, and I could never find anything. Now, I scan that piece of paper, or receipt, or business card, or contract, and I save it in an electronic folder. I’ve organized those folders like an old-fashioned filing system, so I can find that little piece of information right away. This allows me to have as little paper in my office as possible. More importantly, the fact that I can find information fast gives me credibility and fosters trust.

Buying a scanner is easier than you think. In fact, there’s a good chance you already have one, because a lot of printers have scan functions, too. Your printer probably lives in your office, and this is very handy . . . when you’re in your office. It won’t do much good if you’re out and about and you want to email a signed contract to your lawyer. That’s why I also have a portable scanner that I keep in my car for just such occasions. By the way, make sure at least one of your printer-scanners can handle more than one page at a time. Mine can scan 24 pages a minute, and I can’t tell you how much time that thing has saved me. Read More→

In previous columns, I’ve mentioned Subject-to Deals. This generated a lot of what-is-that phone calls and emails – from both real estate investors and realtors.

To help folks better understand this advanced creative deal-structuring technique, this month I’ll explain what it is. Next month, we’ll look at a Subject-to Deal we just did.

Normally, when you buy a house, the seller’s mortgage is paid off at closing. With a Subject-to Deal, the seller’s mortgage is NOT paid off at closing. Instead, when the property is deeded to the buyer, the seller’s mortgage remains in place and the buyer promises to pay the seller’s mortgage payments, on the seller’s mortgage, for the seller. In other words, the buyer is buying the property subject-to the seller’s mortgage. Think of it as a form of owner financing.

When first hearing about Subject-to Deals, most folks believe this type of transaction must be illegal – Kim and I hear this all the time. Fact is, Subject-to Deals have been around for decades. Look at lines 203 and 503 on any HUD-1. It reads: Existing loans taken subject to. Read More→

Another way I have used to fund part of a deal or the rehab on a deal is to simply use a credit card or home equity line of credit. If you have a credit card with a fairly high credit line or you have a credit card with a home improvement store, these are great ways to fund the rehab on your deals. I will sometimes use a credit card to fund the rehab, and then pay it all off when I either sell the property, or when I get a significant non-refundable option deposit from a tenant/buyer. You must be disciplined enough to pay the money back to the credit card company or your credit line when you receive the profit or down payment from your deal! This is a good method to use for example, when a homeowner deeds you a property with a lot of equity, but the home needs some rehab in order for you to be able to either lease/option or resell the property.

I know that when you use a home equity line of credit funded by the equity in your home, the interest rate is usually significantly lower and the money is easy to get hold off. Usually all you have to do is write a check. I do not advocate using this method unless you know you are going to turn the deal quickly, and I would only use this method as a last resort since I don’t particularly like the idea of you using your own money to fund deals. Read More→

I partner with my students on short sale deals and my Mentor students on all types of deals. As a mentor, my students obviously learn the importance of negotiating as low as possible in order for us to get a good deal on a property. But even after the student has negotiated as low as they can go with the Seller, I will walk through the house and tell the Seller that the price that my partner offered is too high. I finish up by negotiating the property even lower. Why? Because my students are just looking at the front end of the deal and I’m looking at all the expenses to purchase the property, private or hard money interest and points, and the rehab costs for materials and labor. In addition, I’m looking at the cost of insurance, taxes, and the utilities plus the hold time until we sell it, the cost of another Realtor to sell it should the student not conduct open houses/auctions to sell the property themselves.

It’s really hard for my students to see the entire back end of a deal when they are just focusing on the front end. When we go to Home Depot, we must be aware of which features sell a home. Kitchens and bathrooms sell BIG, so we spend extra money in those areas. We get nicer cabinets, granite countertops, medium grade faucets and lights that all match the hardware throughout. Recently I have negotiated and closed several short sales and straight purchases that need rehab. I always stay with a neutral wall color (Behr Toasted Cashew – a light beige), flat white ceilings, and semi-gloss white around the trim and doors throughout. The walls and ceilings are a knock down texture throughout for consistency. Read More→

Welcome back! So if you read last month’s issue, you know by now that there’s a “New Sheriff in town,” when it comes to marketing your real estate business. This somewhat-new solution is quickly proving to be just as, and in some cases, more effective than the old, familiar forms of marketing we’re used to using. This new method is: Video Marketing!

We had also discussed how nearly everyone is not only online these days, but they’re also watching more and more videos all the time. Even on their smartphones. And the more YOUR sales messages can get to these people, the more effective you’ll be. And the more money you’ll make. Simple.

Finally, I’d given you an example of one way you can use video marketing to sell houses: By taking some video of a house you want to sell and talking about it as you go. Remember?

All caught up? Good! Let’s continue…

In this article, I’ll go over a few other ways you can create videos that you can use to sell anything you want, any time you want, to whomever you want to sell! So strap in and get ready. Read More→

In part 1 of this article, we talked about the steps realtors can take to attract Self-Directed IRA investors as clients. In part 2, we are going to speak about making it grow.

Once you are familiar with Self-Directed IRAs and you have perfected your follow-up process, you are in a position to run some unique advertising that is sure to generate a bunch of new clients. You simply run ads that say that you are a realtor who services Self-Directed IRA investors. I can tell you from experience that many Self-Directed IRA clients are wishing they had a realtor who actually understood the Self-Directed IRA investing process.

Keep in mind that current Self-Directed IRA investors are not your only source. When you are familiar with Self-Directed IRAs, you will be in a position to educate investors about a source of funds that they may not have previously considered. There is a wealth of investors out there that have money sitting idle in retirement accounts and our experience has shown that they are very happy to learn they have more funds available to invest with than they realized. We can also help you with this. If you have someone you have introduced to Self-Directed IRAs and you want them to have someone in the industry to talk to, we will be glad to discuss Self-Directed IRAs with them. We offer free consultations and can speak to them about their specific situation and how Self-Directed IRAs will work within that situation. Read More→

OMG! The Mortgage Forgiveness Debt Relief Act has expired! Homeowners owe the IRS more than they could ever pay. This is a catastrophe – not really.

On December 31, 2013, the Mortgage Forgiveness Debt Relief Act expired. For months prior to the expiration and immediately after, there was a rush of “experts” howling and screaming about how homeowners and the housing market were going to suffer. Well, we’re now five months into the 2014 and the sky hasn’t fallen. Were the experts wrong? For the most part, yes they were.

On December 20, 2007, President Bush signed the Mortgage Forgiveness Debt Relief Act into law. The point of the law was to provide tax relief to the millions of homeowners who would have faced regular income taxes on any forgiven debt after going through a foreclosure, short sale, loan modification, or cash for keys scenario on their primary residence. Normally, forgiven debt is taxed at the homeowner’s income tax rate. For example, let’s say your annual salary is $60,000. You bought your house for $325,000 during the anything goes days of 2005. In 2009, you still owed $300,000 but had to sell it for $200,000 through a short sale. The bank forgave the deficiency for the $100,000 you still owed. Before the Mortgage Forgiveness Debt Relief Act was passed, that forgiven debt counted as income, making your total taxable income $160,000 in 2009! The resulting $53,000 income tax bill is almost your entire year’s salary! After the Act was passed, the forgiven debt would have been waived, and you would only owe taxes on you regular income of $60,000.

You can see now why that law was a major help for homeowners during the foreclosure crisis… Read More→

Doing proper due diligence on a property before you buy is an extremely important part of being a successful real estate investor. In this article I will show you some tips for getting your due diligence done with a creative twist.

One of the most important parts about due diligence is getting it done by the right person or right group of people. One of the best tricks I have found is to get my contractors to do it for me and do it for FREE!

I have good relationships with the contractors in my market (you should too). Building a team of loyal contractors to help you grow your real estate business is very important. Here is a short list of the “must have” contractors on your team. Read More→