All Forum Posts by: Account Closed

Have your buyer give you the assignment check outside of closing.

My VIP Buyers (who receive a phone call about deals BEFORE THE EMAIL BLAST) know the way I approach my business/wholesale deals:

I am a partner in the deal that I am bringing to the VIP Buyer, however, they are just paying me my portion of the profit at closing in the form of the assignment fee.

If the assignment is on the HUD at closing, and the seller sees it and questions it-I look them dead in the eye and tell them exactly what I wrote above. My buyers also agree-because I've previously discussed this mindset to them. In fact, I actually did a few flips where this scenario was exactly what did happen.

I was flipping a house with my current business partner (we still flip today) and I was dead broke at the time.  He borrowed an extra $10,000 to advance most of my profit expected-and gave me that amount at closing.  After we fixed & flipped the house I was paid my remaining profit around $7,000.

I've never had a closing blow up and not happen as a result of a seller seeing the assignment fee.  

You are providing a valuable service in the world as a wholesaler by guiding the seller through that negotiation and providing inventory for the investor to renovate.  You are the beginning of the process of that decrepit house become a family's home again.

As far as the gun goes-get a concealed carry permit and bring your own. 

I have felt that way until I began consciously replacing the people that surround me.

I went to new networking events and began spending time with people that challenged my own way of thinking to become greater.

Then I began to view the originally discouragements with less importance on my well being.

These days, I've found ways to communicate with people to effect MY ideas in a more effective fashion.  I'm not easily pushed around or mentally effected like I was a few years ago-before my vision-my more successful life-my current reality.

It's funny how that negative pull quiets itself and replaces with people asking for advice-wondering how you did it.  How you created this new, more abundant life.  

Word of Warning-Once that vision becomes real, people start asking for money & loans.  There is a whole new set of emotional challenges that come with the success-the Bigger Pockets-I assume you're seeking.

There are a few good books that deal well with a lot of these challenges by Dan Kennedy-the No. B.S. series (direct marketing, time management, & many more).

HAPPY THANKSGIVING!!

Become the Source of Deals

The players I know and deal with began their relationship with me because I was bringing around REAL DEALS.

First I was wholesaling the deals to other investors, and when I found good deals in their (the players in the market) target neighborhood, they  bought. 

Eventually I flipped the terms-asking for 50/50 split on a deal we ended up closing together.

The next deal, I asked for the money, which I received at 15% and 5 points with a balloon payment when I was done rehabbing and the selling the house.

@David Oldenburg I approach every deal I do as a BUYER.  I do my own numbers as if I'm closing on it with my cash ( or private lenders ) and make my offer at that amount, less a "spread" for my wholesale fee.  

And sometimes I often do close the deals myself and just do the rehab.

As a wholesaler closing an average of 20 deals per month & also a fix & flip investor, I am on both sides of the fence.

As a wholesaler, I've negotiated what I know is a good deal for the right buyer in that neighborhood.  It is a deal I'm always selling for SIGNIFICANTLY LESS than the other LOWEST CASH COMPS in the neighborhood.  However:

I NEVER SEND COMPS, REHAB ESTIMATES, OR ARV'S TO MY BUYERS

I don't send a well designed marketing package with all of the pertinent info.  I honestly feel that it is up to the buyer to due their diligence and decide for themselves whether they should be purchasing my deal.

The best, most experienced and easiest to deal with buyers RECOGNIZE A GOOD DEAL BY ZIP CODE & ASKING PRICE.  

The same way that I KNOW a good deal when I hear the asking price.  If the deal has an asking price that causes me to notice, then it's worth a visit to check out the repairs.

I'm sure newbies hate my deal marketing (or lack thereof), but I'd rather not sell someone their very first deal.  Even a truly good deal can turn into a truly horrible nightmare in the wrong hands.  The pros that typically buy my deals know how to manage a deal-I never risk some newbie screwing up a deal I sold them and pointing the finger at me.

It is the fix & flip investor's job to analyze the risk & reward of the investment they're about to make.  I never put that kind of trust in the numbers presented by a newbie.

We Paid about $13,500 (for 4 separate 4 day seminar trainings) plus an initial $2,000 (for the weekend teaser seminar).  I am grateful that we got sold this package and that I had a family member willing to make that investment on my behalf.

I knew nothing of real estate investing when I took that course and within the first year went from living at my mom's house and earning less than $20,000 per year to making over $100K per year.  In short, my life changed.

Looking back, there was no way I could have come as far as I did in such a short amount of time by taking the advice of a very random group of forums to get to the place that I did.

There's a lot of great info available free-bigger pockets, youtube, webinars, etc, BUT the organized structure of the information found in a properly planned even will trump randomness any day.

WORD OF CAUTION-Anytime you are going to invest in knowledge, education, or mentoring, MAKE SURE THE TEACHER/COURSE CREATOR ACTUALLY HAS THE RESULT YOU DESIRE.

In other words, is the person giving me this advice from a point of experience? (IE-Has the money & houses in their life from ACTUALLY BUYING, SELLING, and/or RENTING Properties)  

Or is that person just repeating something to me that they "heard works" from some other source.  

The big problem with knowledge from youtube, etc, is that you really don't know the person to decide whether they HAVE the result they are trying to teach you how to create in their own life.

There's a difference between a "lender" and a "wholesaler" in the hard money loans/funding deals/banks m arket the same way that there is a difference between "buyer" & "wholesaler" in the investors-buying-houses market.

Many banks & hard money lenders don't lend their own funds.  They are wholesaling funds from another source (ie-private lenders, publicly traded securities fund, etc.)  

I personally know many "hard money lenders" who are loaning money that they have raised from individuals they know.  They are collecting fees, points, and often an interest spread on the payment.  They are middle men trading in money the same way that wholesalers are middle men trading in deals.

Most mortgage "lenders" are actually just originating mortgages and then reselling those loans on the secondary market.

The Silver Bullet-Go Direct to the Source

My private lenders are direct contacts of my partners and I.  No middle men.  My private lenders are also not running around advertising themselves as "hard money lenders".  

My lenders are professionals, business owners, doctors, etc. that have had relationships with us before ever having conversations about investing in real estate through private mortgages with us.

Obviously, finding & building relationships with private lenders is the silver bullet of funding deals. Nothing beats funding a deal with no other strings attached other than a note, mortgage, and balloon interest payment upon resale for 10% APR or less.

I Do Have Skin in the Game 

Although I don't put "money down" on the private loans I take from my private investors, I absolutely have skin in the game.  My monthly advertising budget-which keeps the deals flowing-is $10,000-$15,000 per month.  

I guess some good deals come along sometimes and just fall into your lap, but that is not how to build a business.  I keep my deal flow moving by Investing heavily in direct marketing to provide the opportunities for that investment capital to work.

A successful real estate investment machine will produce returns for lenders & profit for investors ONLY when that machine has inventory to process-ie DEALS.

I can only agree @Toyin Dawodu.  These "hard money" wholesalers are a waste of my time.

IS ANYONE ACTUALLY FUNDING DEALS WITH THESE "LENDERS" OR DO THEY SURVIVE SIMPLY BY COLLECTING "APPRAISAL FEES" "APPLICATION FEES" & "DEAL PROCESSING FEES"?  There the only currency exchange I've experienced when taking a shot to fund through them.

I'd give up.  Anytime I've invested time & money trying to go after old money I end up wasting my resources.

I rationalize the losses that occur in my business by knowing I'm using my time & money wisely going after new opportunities with profits that exceed the losses in question.

This attitude allows me to sleep at night even though sometimes I am walking away from money.

You should come out to the RING meeting on Dec 9th at 7:00 pm.

It is a free event at the Manayunk Brewery

4120 Main Street

Phila pa

Make sure you meet George Beatty-he can help you in Philly (I'm in Chicago)

Above all else, GET SELLER LEADS!!

For me, I Borrow Money from Private Lenders 1 of 2 Ways

1. Short Term with Balloon

2. Long Term with Monthly Payments

Short Term with Balloon

For my fix & flip businesses in Philadelphia & Chicago, I offer my investors 10% interest for the amount of time that I have their money in my possession.  My average flip takes 6-9 months, so their money is working for that period of time.  Once I return the money, I stop paying interest. 

My lenders on these deals have the challenge of keeping that money working because once I return it, they either find a new investment to place that money or wait until my next project to participate once again.  Most just wait.

The average return calculated on a yearly basis is lower than 10% because of the dormant "wait time" in between the investment periods.  Here's an example:

$100,000 loan for 9 months at 10% provide $7,500 return or a total check at closing for $107,500 (my short term loans are balloon-meaning I pay back the principal and interest all in one lump sum at the end.)  

Suppose that lender does not re-invest that $100,000 anymore for the remainder of that 12 month period. This often happens as a result of the "wait time" in between opportunities. The effective ROI on the $100,000 is actually just 7.5%.

Although lenders may dictate the terms they are willing to lend, experienced investors like myself also must AGREE to their dictated terms.  I personally only agree to balloon mortgages at 10% for my fix & flip deals.  

However, I do offer my investors another option should they wish to realize a real 10% return over a longer time period

Long Term with Monthly Payments

I've carved out a unique niche in running "Recovery Houses" for recovering addicts & alcoholics (I've published more info on this at my REI Diamonds Podcast on iTunes).

The Recovery House business (Recoverytown) produces larger than average cash flows from single family houses.  Albeit with a great deal of oversight, but that's a story for another day.

I offer my investors 10% interest on these buy & hold properties for a term of 5 years WITH interest payments monthly. This allows investors that do not need the liquidity for 5 years to enjoy long term interest income at an effective ROI of 10%. There's no "wait time" where the money is not working.

Both of these options work well for my companies and my investors, but I'm always open to finding more economical and scale-able sources of funding to grow.  The banks we have approached with this business model have turned down our refinance attempts because of the "Recovery House"-stating that they do not have a product for such a property.

I'm posting this hoping that maybe you know of a lender that will refinance this type of deal at market interest rates-this would provide a much greater ability to expand.

Thanks!