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Additional Revenue with Lease Option Programs
This is kind of a little secret that not too many real estate investors know about, but it’s a huge income potential for your business, especially if you do a lot of lease to own, rent to own properties. And that is having a down payment assistance program with your tenant buyers.
Now, what this down payment assistance program is, it’s simple. The people that are trying to lease option your property; they’re going to be giving you a non-refundable option fee. Usually that’s anywhere from 3% to 5%, it’s a couple thousand and upwards to maybe ten thousand, sometimes a lot more than that.
So, people are going to be giving you a non-refundable option fee, as well as determining their lease payment with you. But if you ask a simple question, which is this, “Mr. and Mrs. Tenant Buyer, if I could provide you with a program to help you build up your down payment so that way when you do go to the bank and get a loan, it shows that you’ve put in upwards of 10% to15%, rather than 3%, would you want to participate in that program? And it doesn’t cost you any interest or anything. It doesn’t cost you a dime to participate.” Of course, they’re going to say yes.
“Okay, great. Well, here’s what that program is. We have a down payment assistance program. We’ve already determined what your lease payment is going to be. Is there any way you can contribute money over and above your lease payment each month to apply 100% towards your down payment?”
And they’ll say, “Well, what do you mean?” “Well, here’s what I mean. What’s the most you think you could pay over and above your lease payment each month to apply 100% towards your down payment? This is money that you can pay in installments versus having to come up with a large down payment chunk at one time when you go to the lender.”
“So, whereas a lot of people have problems building up their 20% down payment, you can pay it in over time and you can hopefully get to the point where you want to get to in order to achieve your down payment level when you do go to try to qualify for a new loan.”
It’s nothing more for you, as a real estate investor, than trying to generate some additional cash flow. So, if somebody says, in fact, in my situation I’ve had people pay in close to $400 over their lease payment each and every month to apply towards their down payment.
The only thing that you need to do is you have to write it up in the lease option agreement and you’re going to collect two checks from them each month. One check will be the lease check and the second check will be the down payment assistance program check that you’re providing for them.
And this down payment assistance program check is also non-refundable. So, if they default, then they do not get that money back. If they do not exercise their option to buy, then they do not get that money back. It is non-refundable, just like the non-refundable option fee.
And believe me, I’ve had people that have paid in upwards of $400 a month in addition to the lease payment for over a year and then they’ve walked away for one reason or another.
So, here’s a way for you to establish additional income streams for your real estate portfolios that is simply free money if you ask for it. It’s a great program for the tenant buyer if they utilize it. If they don’t utilize it, it’s no real loss to them, but it’s a way that they could potentially be paying in more money, you could be getting additional cash flow and it’s a win/win all the way around. And it’s a great cash flow boost generator for your business as well.
So, try to incorporate a down payment assistance program into your lease option business if you feel that is appropriate for you.
There are numerous ways to make win-win situations for lease option buyers and yourself as the investor. Let me share with you all the potential programs you can offer.
Go to www.freemakemoneygift.com/invitation.html
Don’t Invest in Weird Properties Just Because the Deal Excites You
Here’s a lesson I learned the hard way. Don’t ever buy weird properties that prevent a fast sale or a fast occupancy. Now, here’s my story, one mistake I honestly made and even sharing this makes me gag on a piece of humble pie.
The first property that I bought using the subject to method where I buy the property and the house is transferred to me, but the loan stays in the seller’s name. I was extremely excited to do this deal. It was my first subject to deal. And the house was odd in regards to it’s lay out and in hindsight, I probably should not have bought this property. It’s was one headache after another.
But the main thing was the property was weird, but I didn’t see it at the time because I was so excited and ready to close the deal that I just completely overlooked some of the things that were weird about the property.
Don’t ask me how I did this because one of the main things that I overlooked about the property was in one of the bedrooms, there was a spiral staircase going down through the hardwood floor into the unfinished basement, which more or less could not be finished. There were too many obstacles - the ceiling’s were too low and (to mimic a very funny Seinfeld episode), yadda, yadda, yadda.
So, there was a spiral staircase going through the floor. It wasn’t poorly constructed, but nevertheless it pretty much removed one whole bedroom from the home and I had more problems getting people to want this home because more or less, it’s a two-bedroom home.
And people are getting very, very picky nowadays. They want more bedrooms, more bathrooms, more room, and you can’t blame them. But I was so excited to get this house under contract for subject to and I just wanted to close it and I was ready to go. And I just completely overlooked the fact that this house was just plain weird.
So, more or less, that property was a pain in my side. So, the take away from this is stay away from functionally obsolescent homes, homes that are weird, homes that are in busy areas, homes that are small, homes that are next to a railroad track, next to a highway, next to commercial centers, in bad areas, different things like that.
Buying weird properties that have different negative nuances around them similar to these will prevent you from getting the property occupied or getting it resold.
So, you almost have to take a look at it from an outsider’s point of view sometimes. Am I going to be able to fill this property quickly? Am I going to be able to get it sold quickly? Are there any surrounding or any other inside or outside influences or nuances that will prevent me from being able to satisfy my exit strategy with this property?
So, I’ve made that mistake. Hopefully, you will learn from this and not make the same mistake that I did.
One reason I can help you in real estate investing is to share my mistakes so you don’t make them. Yes, I’ve had a few. You will, too. But having someone who can help you avoid the costly ones and get through the minute ones is key. Check it out here:
www.freemakemoneygift.com/Invitation.html
Real Estate Investors, Don’t Get Caught in the War Zones
When you are just starting out in investing there is one mistake that a lot of real estate investors make and it deters them from being able to ultimately grow their investing expertise. In the early days, most investors only focus on doing business in the low priced properties, in the low-end neighborhoods. What you and I may refer to as the war zones.
And the reason why I think people do this is because the numbers are smaller, there’re fewer zeros at the end of the property value. So, I think it makes you feel a little bit more comfortable in working in numbers that are not so big. But, to be honest, it takes a certain kind of person to be successful in doing business in these types of areas because it’s difficult to do business in these areas.
And if you think about it, it really is kind of common sense because if you’re going to buy a property and rehab it or lease it out or resell it or put tenant buyers in it or whatever, there are not a whole lot of people that actually want to live in these neighborhoods. So, these neighborhoods are for low-income families and most people who you’re going to want to sell to are not going to be low income families.
Because, whether you believe me or not right now, most of your problems in this real estate business are going to come from low-income properties. It’s going to come from the crap properties that you get because with, no disrespect, but with crap properties, the only people who want crap properties are crappy tenants.
And with crappy tenants comes crappy income. And with crappy income comes difficulty getting paid. So, if this is something you want to pursue, fine. Is it something that I would recommend you pursue? Absolutely not.
There are many, many other neighborhoods and properties out there to do business in and make good money at. So, don’t feel as though you have to start in the low end priced properties just because the numbers make you feel more comfortable because in the long run you’re going to find that there are more problems in these areas and these neighborhoods than you ever thought imaginable.
Yes, a higher priced home has more zeros to it’s value, but that doesn’t mean you will really approach the deal any differently than you would any other deal or buying a lower income property. Investing is still a numbers game and it comes down to the formula you use to determine your maximum allowable offer, taking into account the after repair value and the repair costs. Don’t let larger, higher valued homes intimidate you. If you do, then you will let just about any other person or deal do the same and your investing will not prosper.
So, with that said, really think twice about working in low priced properties because war zone homes and these types of tenants are not good tenants, in fact, they are the worst tenants that you could possibly find.
I’ll be glad to share the many times I was burned by these types of properties. Want to learn from my mistakes? Go here: www.freemakemoneygift.com/Invitation.html
Find a Good Real Estate Attorney
You need to take the time, effort and energy to find a good real estate attorney that will work within your real estate investing business. This attorney should be able to work with your creativity and will work with your questions to come up with solutions to any and all problems or concerns.
There are a lot of real estate attorneys out there. There are a lot of people that want your business, but you cannot work with everybody. A general rule of thumb that I like to use is if I don’t think that I can go to lunch with somebody and have a good conversation at a lunch table, it’s probably not somebody that I want to do business with. I want to be able to sit down across the table with this person and have a decent professional conversation about business and maybe a little conversation outside business as well. You need to find a good real estate attorney that understands you, that understands your creativity and that will work with you.
There are a lot of real estate attorneys out there that do not understand what we, as real estate investors do, and therefore, because they don’t understand what we do, they simply think that what we’re doing is wrong or illegal and they tell us, “No, you cannot do this.”
Well, if somebody tells me no, then I want them to prove to me it won’t work. If a real estate attorney tells me no, then I want them to show me why this is wrong, why something is illegal and provide the written documentation stating such. I’ve had that told to me many, many times. But then I go and I find another real estate attorney that tells me, “Sure, you can do this. We just need to do this, this and this.”
So, whenever somebody tells you no, don’t obviously just assume that it’s no because it’s not in most cases. It doesn’t mean it’s wrong just because a real estate attorney says it is, professionals aren’t always right just because they claim to be, make them accountable to what they say. It’s just like getting a diagnosis and having different doctors have various ways to treat the illness. That’s why so many times you hear others recommend getting second opinions. So, spend the time to find somebody that you can work with successfully who can understand what you’re doing and work with you to find solutions to problems when problems occur.
Okay, there are lots of real estate attorneys out there. Go find one that works best for you. You can start by referrals. Referrals are a great source. Simply make it known that you’re looking for a good real estate attorney and eventually you’ll find one. It took me at least a half a dozen or so real estate attorneys before I finally found one that I was comfortable with.
If you work at it, if you ask around, you’re interviewing them just as much as they’re interviewing you. They work for you. You’re paying them. So, find somebody that you can work with based on everything we just talked about.
Now, here’s my recommendation on catapulting your real estate investing career. Go to:
www.freemakemoneygift.com/Invitation.html
Don’t Let the Economy Determine Your Success as an Investor
This is one mistake I see from all kinds of investors. They let the economy and market conditions determine the success or failure of their business.
It’s no secret right now that we’re going through difficult financial times. We’ve had a shift in governmental policy and changes in the real estate market. There’s no doubt, or secret that the financial market is changing and will have to change going forward. Credit is tight and people are struggling.
But let me tell you, it is not for one second holding me back in my real estate investing business. There are so many ways to make money as a real estate investor, that if you are struggling right now, then you need to step back and find out why.
Despite what the media says, this is a fantastic time to buy real estate. The market will change. It will go back up. And those people that invested wisely and they bought when everybody else was trying to sell, they will do very, very well in the future.
So, more or less what I’m saying here is the economy and the market should not determine the success or failure of your business. And if it is, you need restructure how you’re doing business because there are many, many, many ways to make money as a real estate investor in a down economy.
So, find those ways and implement them.
I’m going to go ahead and share a little secret with you. People need to sell right now. It’s obvious. And did you know that you could buy properties from people and have them be the bank for you? You don’t even have to go to the bank to get a loan.
Now, I’ve talked about this briefly in certain posts previously, but that’s one way in particular that we’re making money and doing well right now while the economy is down. We’re buying with seller financing because people still need to sell their properties.
Another way that we’re doing well right now is with foreclosures. We’re buying a lot of foreclosure properties. We’re doing a lot of short sales. And we are doing extremely well.
So, look into where the trouble spots are and capitalize on those trouble spots. Remember; don’t let the economy and the market conditions determine your success or failure.
If you want to be sure you understand all the options you have in accumulating real estate then you should consider the material I am offering. It’s everything you need to jumpstart your investing career. Go here: www.freemakemoneygift.com/Invitation.html
This is one mistake I see from all kinds of investors. They let the economy and market conditions determine the success or failure of their business.
It’s no secret right now that we’re going through difficult financial times. We’ve had a shift in governmental policy and changes in the real estate market. There’s no doubt, or secret that the financial market is changing and will have to change going forward. Credit is tight and people are struggling.
But let me tell you, it is not for one second holding me back in my real estate investing business. There are so many ways to make money as a real estate investor, that if you are struggling right now, then you need to step back and find out why.
Despite what the media says, this is a fantastic time to buy real estate. The market will change. It will go back up. And those people that invested wisely and they bought when everybody else was trying to sell, they will do very, very well in the future.
So, more or less what I’m saying here is the economy and the market should not determine the success or failure of your business. And if it is, you need restructure how you’re doing business because there are many, many, many ways to make money as a real estate investor in a down economy.
So, find those ways and implement them.
I’m going to go ahead and share a little secret with you. People need to sell right now. It’s obvious. And did you know that you could buy properties from people and have them be the bank for you? You don’t even have to go to the bank to get a loan.
Now, I’ve talked about this briefly in certain posts previously, but that’s one way in particular that we’re making money and doing well right now while the economy is down. We’re buying with seller financing because people still need to sell their properties.
Another way that we’re doing well right now is with foreclosures. We’re buying a lot of foreclosure properties. We’re doing a lot of short sales. And we are doing extremely well.
So, look into where the trouble spots are and capitalize on those trouble spots. Remember; don’t let the economy and the market conditions determine your success or failure.
If you want to be sure you understand all the options you have in accumulating real estate then you should consider the material I am offering. It’s everything you need to jumpstart your investing career. Go here: www.freemakemoneygift.com/Invitation.html
Happy Fourth of July!
I hope you and yours have had a great July 4th weekend. I wanted to take today to celebrate our fantastic USA and share a couple favorite pieces. The first is a tribute to those that serve and all we as American citizens should strive to do daily for each other. The other quote is why men and women serve this nation so that this past weekend we can relax and enjoy our families and Aunt Sally’s baked beans. Happy Fourth of July!
Look for more real estate investing news on Wednesday………
A Patriotic Creed
by Edgar Guest
To serve my country day by day
At any humble post I may;
To honor and respect her flag,
To live the traits of which I brag;
To be American in deed
As well as in my printed creed.
To stand for truth and honest toil,
To till my little patch of soil,
And keep in mind the debt I owe
To them who died that I might know
My country, prosperous and free,
And passed this heritage to me.
I always must in trouble’s hour
Be guided by the men in power;
For God and country I must live,
My best for God and country give;
No act of mine that men may scan
Must shame the name American.
To do my best and play my part,
American in mind and heart;
To serve the flag and bravely stand
To guard the glory of my land;
To be American in deed:
God grant me strength to keep this creed!
You have to love a nation that celebrates its independence every July 4, not with a parade of guns, tanks, and soldiers who file by the White House in a show of strength and muscle, but with family picnics where kids throw Frisbees, the potato salad gets iffy, and the flies die from happiness. You may think you have overeaten, but it is patriotism. ~Erma Bombeck
Assumptions Kill Real Estate Investing Deals and Goals
You probably heard what assuming does for you and me. But, so many are guilty of making assumptions all the time and in real estate investing when you are working with buyers and sellers, making assumptions can kill a deal or prevent you from closing a deal. When you are investing, you have to be very clear about your position particularly when you are talking numbers and assuming what a seller’s minimum sales dollar is or what a buyer’s maximum purchase price is will only lead to trouble.
Investors who make assumptions on what a seller is thinking or what a seller would do or might do if they say this or say that. And making assumptions is a big mistake because what you would do in a situation could be completely different than what your seller or buyer would do in a situation.
So, do not make assumptions for them. Do not base what you think they may or may not do on what you would or would not do. We all think differently, that is why when trying to get an answer from a buyer or seller you need to ask the same question multiple ways until you get the answer to your specific question. Don’t jump to conclusions; make the individual give you their answer.
In reality, there’s really no explanation as to why people do what they do. There’s no good explanation as to why people kill themselves or why people hurt other people or, the list could go on and on.
I’ve had people walk away from thousands of dollars that they put as a non-refundable option fee to purchase a property. There’s no explanation for it. So, don’t try to make decisions based on your assumptions for what other people would do.
Run your business with guidelines and then let your sellers, let your buyers make decisions based on the offers that you make them. Do not make assumptions for them because what you or I would not do, they will very likely do.
If somebody asks you, especially realtors might ask you, “Well, who’s going to give you their property and then stay on the mortgage?”
“Well, obviously not you, Mr. Realtor, but I have dozens of other people here who do.”
There are plenty of skeptics out there who are too scared to try new and creative ways to buy properties and therefore make the assumption that no one in the world would agree to anything less than the same old boring way of investing. To all the skeptics, there are nearly 4.5 million people in Kentucky where I invest in real estate. There are about 600,000 properties that have at least one mortgage and close to 300,000 that don’t have any mortgage. Now, that means there are about 1 million properties that I can market and try to buy and the odds of finding a motivated seller willing to try creative ways to make a win-win situation for them and me are favorable. If I work with even just 1% of them, that’s 10,000 properties for potential deals. Let’s take it one step further and for the sake of crunching numbers, I’ll make it easy and say I make 10K profit on just 1% of the 10,000 properties (100 properties bought and sold), that’s a cool 1 million dollars in the bank. If I make the assumption that I can’t find a motivated seller out of those 10,000 properties then I can’t even begin to start realizing the million-dollar bank account.
So, don’t make decisions based on assumptions. That’s all I’m trying to say with this point. What do you think about those odds? I welcome your comments.
So, let’s make some goals together, check this out:
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You are Real Estate Investor, Not a Consultant
There are a number of real estate investors out there, especially in this down market that we’re in currently with a lot of foreclosures advertising and marketing themselves as foreclosure consultants. If you’re doing this, you need to stop doing it immediately, if you are reading this right now and you are even considering doing this, listen to me when I say you don’t want to go there.
You are not a foreclosure consultant. You are not someone who advises people what to do in their foreclosure situations. Unless you have some kind of certificate with the federal government, unless you work for FHA or Fannie Mae or Freddie Mac or HUD program, then you are not a foreclosure consultant.
You are only one thing. You are a real estate investor. You buy houses. You don’t consult people with people about their problems, unless you have a license.
So, don’t advertise yourself as a foreclosure consultant because there are a lot of people doing this. There are a lot of scams being cracked down on right now. And you do not want to find yourself in middle of that circle. So, if you’re doing this, please stop immediately and that’s really all I need to say about that.
There other sign of that coin is there are a lot of real estate investors out there charging money from people in default for foreclosure services. This merges right along with what acting like a foreclosure consultant. You’re not a consultant and therefore, you should not charge money from people in default for foreclosure services.
You do not charge to negotiate a short sale property, to negotiate a short sale deal with their lender. How do you think that’s going to look if somebody comes back and cries “Foul” on you and you’re in front of a judge and this person can’t make a mortgage payment and you’re not making them any guarantees that you’re going to be able to buy their house, but you are requiring that they pay you for services that you don’t even know if you are going to be able to deliver to them?
Plus, any costs you incur while negotiating a short sale will be minimal and the payday will be big.
It’s pretty straightforward if you ask me. So, do not get into the habit of charging money to people who are in default for foreclosure services, short sale services, negotiation services, whatever you want to call it, unless you have a license to do so.
So, stay away from this whole avenue of things because it is just negative publicity for you waiting to occur.
If you are interested in buying properties through short sales, then I have all the information and tools you need to complete these deals, legally and efficiently. Once you have all the necessary documents and guidance, short sales are a lucrative way to invest.
Check out all the details here: www.freemakemoneygift.com/Invitation.html
Investing Mistake: Borrowing from Equity
A HUGE mistake that a lot of real estate investors make, whether they’re beginning or seasoned investors is they borrow money from the equity in their properties to pay the bills, and think that that money is profit. Well, listen up friends because I’m the guy to tell you and burst your bubble right now that that money is NOT profit. Borrowed money is not income.
If you’re robbing Peter to pay Paul, then you better fix what’s broken before this problem gets worse. Borrowed money is not your money. Profits only come from the sale.
Friends, this is a dangerous trap that a lot of people fall into because they think that they can pull a big chunk of money out and use that money as income and cash flow for their business, but it doesn’t work that way. You have to be smart about it. You can’t expect to grow your business with refinanced properties. It doesn’t work that way.
Now, don’t get me wrong. I’m not against refinancing a property and pulling money out of it, if the property can support you doing that. One of the first couple of deals I did when I got started was actually a property where I did a refinance on it, and I did pull out some cash. But I obviously did not stupidly spend that money on stuff that wasn’t going to give me a return.
That money was for business purposes only, and I used that money to reinvest back into some of my education and some of my other investments, and that money has grown substantially since then.
I have not done anything like that since that one occasion, but I thought I needed to tell you that because I’m not against refinancing a property to pull money out, but the property has to be able to sustain what you’re doing.
All I’m saying, and the message I want to convey to you in this post is, just don’t get into the habit of borrowing money from the equity in your properties on a continual basis because borrowed money is exactly what is says: borrowed money. It’s not your money.
Don’t consider that money as profit for your business. Simply strive to run your business on the profit, which comes from the sale of your properties.
As I’m talking about property sales, here’s another tip: when you are selling properties, make sure you attract attention to your properties and market them to death. If your marketing isn’t annoying at least a few people then your marketing isn’t doing what it’s suppose to do which is get attention. A perfect example is the media, just watch the news and see how many horrid reports you will see about all the bad stuff going on - robberies, murders, and scandals. Unfortunately, the entire negative stories garner the most attention. Don’t get me wrong, your marketing shouldn’t endanger anyone, but you need to get attention and you will get negative feedback.
Just recently, I got calls about some ugly yellow signs in the yard of one of our properties. The person really thought the signs looked junky. Well, those signs accomplished exactly what I wanted them to accomplish. It made people look at the property. Don’t be afraid to stand out with your marketing, even if it’s uglier than most. You need to capture the attention and then sell the house!
So, I started on one topic and jumped straight into another, that’s a Monday for you! Are you interested in reading more about real estate investing that has more flow to it? You must go here: www.freemakemoneygift.com/Invitation.html
Focus on Revenue Especially in Real Estate Investing
As a real estate investor there are many things you should focus on while creating deals and growing your investment portfolio. A big mistake many real estate investors make is they focus way too much on cost control rather than focusing on what they should be focusing on, which is revenue. The point of this mistake, I believe, is very straightforward but it is extremely important that I ingrain in your mind.
For some reason, when times get tough and the economy slows down and markets change and people get scared, they start to really focus on cost control rather than on increasing their revenue.
Now, please don’t misunderstand what I’m saying. I’m not saying that you should not also focus on cost control and understand where your expenses are and cut costs where you can. But at the same time, it’s even more vital to the success of your business that you focus on increasing revenue.
Now, with that said there is a point that I want to make about cost control, which is that if you come to a point in your business where things have changed dramatically financially for you and you need to really focus on cost control, then if you’re going to cut costs don’t cut costs with a scalpel. If you’re going to cut costs, cut costs with a chain saw.
Now, what I mean by that is I believe that you will be a lot better off if you need to cut costs to really get rid of the biggest costs that you can first rather than trying to neatly cut away the smaller costs, if you will. Don’t just start by cutting down on your supply purchases say, staples.
If you really need to protect yourself and survive some kind of financial setback, then start cutting the biggest costs that you can afford to get rid of that will not impact the sustainability of your business, if you will.
So, back to the point at hand, which is that you will be much better off if you focus the majority of your energy trying to generate revenue to close more deals, to get more deals in your pipeline, so that way you can cash out and get more checks; you will be a lot better off if you focus on generating revenue than if you focus on cutting costs control during difficult times, and even during good times. Stop trying to pinch the pennies, and rather start trying to generate dollars.
The businesses that will survive challenges in down economies and struggling times are those that continue working their revenue streams. Oftentimes, I find that truly ramping up your focus on revenue can alleviate the need to cut costs altogether. Remember, make this your mantra: Always Focus on Revenue!
Now, focus on this: www.freemakemoneygift.com/Invitation.html
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