Generating Leads: Financial Freedom Through REI

[Moises R Cosme]

Generating Leads:

First, things first: (1) there are opportunities available on the market, (2) you do not need to become best friends with a real estate agent BUT you do need to have your stuff together; before you call the agent, make sure you have your financing in place & that you have figured out how much cash you will need to make the purchase. Agents/brokers like selling property to Buyers they know will always perform. (3) do not assume the Agent/Broker will do the diligence work for you… This is part of having your stuff together – make sure that you are doing your work up front, the Agent/Broker is only there to facilitate the purchase.

Baystate Auctions: this is an auction website, we check on this site daily

Towneauction.com: this is an auction website, we check on this site daily

MLS search: we have access to MLS, IF you do NOT feel free to email us we can connect you with an Agent on our team that will set you up with a feed for a preset search. If you work with one of our Agents, they will want to represent you in the purchase so be aware of that. The MLS is an underused source of deals… about 1/3 of our deals are sourced from the MLS.

Auction.com: online auction website, we check on this site daily

Hubzu.com: online auction website, we check on this site daily

Expired short sales: this list will come from the MLS, short sales are an excellent investment opportunity; find the listing, get a name & number for the Sellers and call them to see if they would be interested in trying again (this is how we brought 356 Chestnut St. Gardner, MA to market – the Seller had tried short selling for a year & a half, we called him and paired him with a broker that was able to get the deal done – both of us won, he got rid of the house & we bought an asset that is a really important part of our year)

Foreclosure starts: each registry of deeds has a search feature that allows you to search for new ‘complaints’, you will have to do some legwork to compile the list and then search for phone numbers BUT this is FREE… Realtytrac offers a service where you can get a list of foreclosure starts as well.

Probate: each county has a probate court & they release a weekly list of new probate cases filed; the docket will almost always include a name for a personal representative and the attorney representing the estate.

The key to having a consistent pipeline of projects is to work through all of your lead channels all of the time… Here is a rundown of our current pipeline & how we sourced the projects:

1. 356 Chestnut St. Gardner, MA Cold call (non owner occupiers/expired short sales)
2. 11 Scenic Ave Webster, MA Cold call on Foreclosure starts list
3. 36 Ridge Ave Athol, MA Active on MLS
4. 43 Cortland St. Chicopee, MA Cold call on Foreclosure starts list

Updates on current projects:

1. 44 Blanchard St. Gardner, MA
2. Purchase date: 6/10/2020
3. Sale date: 9/22/2020
4. Renovation expense: $55,935.27
5. Profit: $45,714.30
6. How did we find it? Referred to us by a flipper, it came across his desk but it was way outside of his territory.
7. Value adds: we did a pretty good job of negotiating the price down, the initial offer was $160,000 (including the wholesale fee). We got the price down to $140,000 – that part was critical, since if we buy it at $160,000, our profit would have been $25,714 & the project is not was worthwhile at that number.
8. Issues: this purchase happened at the height of the pandemic for lenders, in our case, our lender flat out stopped lending money… They suspended our line of credit. That forced us to find alternate lending sources… We checked with Bob Kline of Regal Funding, in Newton – his terms were 35% of the entire loan, plus 4 points, plus 12% interest – that did not work. We then found Lendinghome.com – Lendinghome.com offered 20% down, 1 point & 11% interest. Unfortunately, we did not have a good feel for their processing & underwriting – their process takes a minimum of 4 weeks, the sales person told us 14 days; we had an agreement with the Seller to close quickly, so we made the purchase in cash. Making the purchase all cash, is not as awesome as it seems – we tied up $195,000, which made things a little tough specially because we finalized another purchase right after this one.
9. Things we learned: (1) having cash on hand is useful, we saved ourselves some money by financing the project ourselves. We constantly work toward being ‘frugal’, we keep excess materials from past projects on hand, we are always on site with our projects to make sure work is getting done… All of these little things made it possible for us to pull off the purchase. Believe it or not, the little things in a renovation add up to big losses or gains in the end, (2) we like being hands on with our projects – up until this project we were half in, half out on actually working on site all day. We had the feeling that our job was to be ‘investors’… This project taught us that we enjoy the day to day work – we are not experts, so the things we do ourselves is limited but finishing the paint & doing other simple tasks saved us about $6,000 & got the project to market 2 & ½ weeks early. We believe that between the savings and getting the project to market early we added $17,000 to our bottom line.
10. 356 Chestnut St. Gardner, MA
11. Purchase date: 8/31/2020
12. Sale date: NEVER (we plan on holding this one & making it one of our core holdings)
13. Renovation expense (projected): $123,000
14. Profit (projected): $20,000 (we expect to cash out refinance at 70% of ARV, so we should be able to payoff the entire loan, get the money that we put in back & get an additional $20,000 in cash out)
15. Cash flow projection: +$1,000/month ($1,800/month ‘all in’ expense with $3,000/month in rents)
16. How did we find it? We pulled a list of non-owner occupiers in Gardner & cold called through the list; we got the Seller on board and referred him to an experienced short sale broker that negotiated the sale between us.
17. Value adds: we expect to take advantage of accelerated depreciation. The advantage is that accelerating the depreciation will act as a tax shield for our earnings during the course of the year, lowering our tax liability – the downside is that we need to be committed to owing the property for a long, long time (in our case the plan is to own it forever & hand it down to our kids). WE ARE NOT ACCOUNTANTS, so any discussion about our tax strategy on this one is based on guidance that we have received for ourselves – we strongly suggest that if you are interested in understanding these strategies that you consult with an accountant.
18. Issues: we did not understand the financing structure for this transaction, our purchase price was $60,000 and our lender agreed to finance 100% of our renovation, but in order to do so they increased the amount of cash we had to put into the deal from $30,000 to $44,000… Normally this would not be a problem BUT since we purchased 44 Blanchard St. all cash, we definitely felt cash flow pressure.
19. Things we learned: (1) going through numbers, layouts, quotes etc. is annoying but necessary… This project will be tough, but we have already saved ourselves about $1,200 by doing the clean out. We knew walking in that we would have to do a lot of the simple work ourselves so that we could renovate the property completely and still get cash out when we refinance… The formula is simple, our lender will allow us to cash out 70% of the property after renovation value, in this case the property projects out to be worth $320,000… That means we can get a total of $224,000 out. The total loan payoff will be: $159,255 & we had to put in $45,000 – that means that after we payoff the loan & recoup the money we put in we will be able to take an additional $19,000 to compensate for the time we invested in the project. The only way we are going to be able to pull this off is by staying on top of our numbers for the entire length of the project.
20. 11 Scenic Ave Webster, MA
21. Closing date: 10/16/2020
22. Purchase price: $106,000 may go up to $120,000 (there could be $14,000 worth of liens on the property that we may need to pay)
23. Renovation: $45,000
24. Expected Resale: $235,000
25. Projected Profit: $46,974
26. 36 Ridge Ave Athol, MA
27. Closing date: 11/15/2020
28. Purchase price: $109,000
29. Renovation: $40,000
30. Expected Resale: $229,000
31. Projected Profit: $54,453

If you have questions on financing, evaluating a project or looking for projects – email us, our goal with these seminars is to create a community of investors… We believe that if we grow a community that we will see more opportunities for making money through real estate. Thank you so much for taking time out of your day, we hope you got something out of it.