Very Long Introduction From NC

[Marty M.]

Hello!
I have been lurking for a couple of months, so I thought it was a good time to finally introduce myself. I live in Fayetteville, NC. I spent eight years as an infantryman in the Army and then went into corrections. I hated that, so after a few years I found a job in office management. I have always wanted to be an entrepreneur, but was afraid to leave the security of 9-5. I don’t know what my tipping point was, but I know that a few people’s products were instrumental in opening my eyes to a different world. It started with a short video clip I saw of Tony Robbins talking about the importance of changing a “should” to a “must” if you want to reach your goals. Then I read MJ Demarco’s book, which, despite its clichéd name, is the best perception shifting book for an aspiring entrepreneur that I know of.
Something in my attitude changed soon after that. I don’t know how to explain it, other than a movie reference. I became Peter Gibbons from the movie Office Space. Not that I neglected my responsibilities, I just couldn’t remember what it was about starting a business that intimidated me so much. How do you change a “should” into a “must”? Quit your job with only one year’s worth of wages in the bank. That ought to do it! ? I’d like to point out here that I have the most supportive wife in the world!
The biggest problem I faced after that was that I had no idea what kind of business I wanted to get in to. I realized that I’m not a creator, I’m a systems guy. I tinker with systems and improve on them. I also realized that, while I’ve never missed paying a bill, my credit wasn’t great (upper 600’s) because I had never cared enough to cultivate it (that has changed). This is where I usually stopped my business plans, paralysis by analysis. “I need an idea.”
This is where MJ’s book was so instrumental for me. I don’t need an original idea; I need a better method of executing an existing idea. So, instead of kicking the can down the road, I decided to go into real estate. This was prior to doing any research at all. I just knew that real estate has historically rewarded ingenuity and persistence. I felt I brought those two things to the table, if nothing else.
By now, it was November and I had absolutely no idea how, without any money and shaky credit, I was going to get involved in real estate. The first person I came across was Joe Crump. I watched all of his free stuff and tried very hard to do a “safety net” deal (calling people who have for rent, getting an assignable lease option, assigning it for a fee to a buyer). This didn’t work at all. The owners would find renters LONG before I could get a lease option tenant in there. Maybe his “safety net” method works, but certainly not in my area. To be fair I live in a highly transient area (Ft. Bragg is right next door), so renters are everywhere!
The fact remained that while his method of allowing the owners to market their home for rent while you try to sell it as a lease option didn’t work, selling lease options did, even if it took a little longer than it would to rent. So my question became, how could I keep the owners from marketing their home for rent while I look for a lease option tenant? That question lead me directly to Wendy Patton.
Wendy teaches sandwich lease options and subject to’s. She’s extremely sincere and gives an immense amount of information out for free. I’m sure everybody here is familiar with sandwich lease options, but when I found out how to do this I was euphoric. I could lock an owner in for 30 - 90 days, receive the upfront down payment, monthly income and a back end when it sold. Wendy advises that you don’t do a deal without at least $20k equity. I disregarded that advice (sorry Wendy). I can make money on a house with no equity. When I have enough deals to be picky, I’ll start adding qualifiers.
So, December 20th I signed my first deal with an owner. I got this deal from cold calling (something I absolutely hate) on FSBO's. Before January ended I had placed a lease option tenant in it for $3000 option fee and $70 per month above my rent. I know I pulled the trigger too fast on this buyer. I should have aimed for a higher spread, but I was overly excited. The best part of this deal is the fact that there is $23,000 spread in the back end (Seller optioned it to me for what they owned $107,000; I optioned it to a buyer for what it's worth $130,000). The first thing I did after this deal was buy Wendy Patton's book as a way to reciprocate for the lessons she freely taught. I admit that I learned so much more from the book that I feel like I should reciprocate again. ?
The next house I picked up in the middle of January had no equity at all. That's okay with me, because I still make money off of this. This deal came to me as a referral from a friend in the military. It's a 10 year lease option. Lurking around a few forums (mostly this one and MJ’s) I made some tweaks on this contract. The option amount is "the principle amount of loan #_______ at the time option is exercised." In the first week of February I placed a lease option tenant into this home for $3000 option fee and $205 per month over my rent. I decided before doing this home that I would only do 1 year lease options with my tenant buyers. This increases the amount of money I can make from each property and also eliminates people who will never buy. I do want someone to buy these homes.
I didn’t pick up a deal in February. This was daunting, because I felt like I had started to pick up steam. I sent out direct mail. I didn’t use bandit signs because I hate they way they’re all over the place. The direct mail I sent was a series. Instead of sending one letter to a mailing list (in this case expired’s) I created a series of 6 letters to go out every 2.5 - 3 weeks. Interestingly, I just sent out the third letters to the first group and the third letters have netted more call backs and appointments than the first two combined.
At the very end of February I got a referral from an Agent whom I had taken to lunch and explained what I do. She had owners who had no equity and was leaving town fast (military reassignment). I met with them and we signed a deal.
This deal ended up taking longer to get done than I thought. Once the owner finally vacated I started working on getting someone into the home. I think I made three BIG mistakes with this deal that I have learned from:
1. This home is worth about $85k, I owe 72K on it. It's a good deal, but my expectations were wrong. The other two homes I had were over $125k, which in my area makes them middle income homes. Getting a down payment was easy with those homes. This home attracted buyers that were lower income and couldn't come up with the down payments and wanted the rent much lower than I wanted. The owner, having credit that made her high risk, has payments that are almost $700 per month. Most people who called on this home wanted to pay no more than $700. I was aiming for $900.
2. When I was talking to the owner on the 8th of March (two days before she vacated), she indicated that she'd feel more comfortable with her finances if I could commit to a date that I would take over the payments. Feeling confident that I could have the house filled within 60 days, I told her that she can take the next mortgage payment and I will take the one after that. I should have been more specific. 10 days ago she called to make sure I was going to make the April payment. I still didn't have a tenant (but I had an offer I was considering). I reminded her that she was to make the next payment and I was taking the one after that. She went ballistic. Apparently the March 1st payment isn't late until March 15th. As she had not yet made the March 1st payment at the time we had talked, that counted as the next payment. After making sure that she understood that I believed her logic was nonsense, I agreed to take the April payment. I know I could have held out, but I don't want to make business decisions with my pride. She ended up extremely grateful to me and I have hopefully turned a potential antagonist into an ally. People will do much more out of spite than gratitude, so I feel like this was an investment on my reputation to at least keep it neutral.
3. Because of the two problems above, I became consumed with this one house. I neglected activities that would have allowed for the possibility of adding another house. Not only that, I don't think my obsessing helped one bit in getting this house moved.
To ensure I didn't have a negative cash flow issue (something I have vowed to avoid at all costs) I had to put someone in the home for $1000 down (this just covers the referral fee I am paying the real estate agent who brought me this deal) and $780 per month (my mortgage is $696). The option is for $88K, so if it gets refinanced, I'll make over $10k AND my option is for the pay off amount on the owner’s loan at the time the option is exercised, so this is still a profitable deal, but I learned a lot from it.
On a different note, I have decided to start using the option payments I get from the buyers to create Lonnie Deals with mobile homes. They’ll have to be lease options because of the SAFE Act, but I’ll structure them to have much of the monthly payments going toward the principle. I have 1 year in which everything I earn in this business can be reinvested to create more. Private money and bank money is not an option for me, so I must stay creative and flexible.
Assets - $363,000
Equity - $49,000
Passive Income - $428
Money Invested - $0

I know this was a very long introduction and may have been TMI overload. For that, I’m sorry. But I have found it to be rather cathartic and I appreciate you reading. I look forward to being a part of this community and would like to express that much of the early success I have had has been directly impacted by all of you on this forum who share information. Without this forum, I would have been dead in the water long ago. So, from those of us who mostly hide in the shadow and watch and learn, thank You.