All Forum Posts by: Joey English

What’s going on at the foreclosure auctions?

In Georgia, foreclosure auctions happen the first Tuesday of ever month on the courthouse steps between 10am and 4pm in each county. In order for a lender to foreclose on a property, they must put the public on notice by advertising in the local legal organ for four consecutive weeks prior to the auction date.

In 2012, Ashley and I found a lot of our deals by going to the courthouse steps. We continued to work the foreclosures and attend the auctions every month until mid 2014. By working the foreclosures, I mean Ashley and I would sit down and read ever foreclosure ad in the newspaper. We’d get all the important information out of the ad like who the lender was, who the borrower was and what attorney was foreclosing the property. We also gathered things like the property address, the legal description and how much the original mortgage was.

Next, we’d door knock all the “pre-foreclosures” being advertised in the newspaper. This gave us an opportunity to inspect these properties and meet the homeowners to possibly make a deal. During those years, between 50 and 75 properties were being advertised each month. Only about half of those actually made it to the auction.

Then something strange happened in 2014. Companies like Brookshire Hathway formed a thing called hedge funds. These hedge funds were basically a mutual fund that, instead of investing in shares of stock like traditional mutual funds, invited investors to pool their money to buy shares in real estate.

This was great for the individual non-real estate investor. It gave them the opportunity to invest in real estate without having the same risk as being an individual owner. And because of the allure of owning property with depressed market prices, as well as low returns being offered by banks and other common investment vehicles, investors lined up to buy into these hedge funds.

This gave hedge fund companies deep pockets. Consequently, they went to work buying up as many properties as they could at foreclosure auctions. And since they were working on a percentage return versus cash on cash, like most mom and pop investors, they dominated the auctions. They often times paid retail value or more for properties.

The mom and pop investors simply couldn’t compete. Since they’d become dependent on the foreclosure auction to make a living, they had to start traveling to more rural counties where the hedge funds were not present.

I went to the foreclosure auction for the first time in over a year this past month. Things have changed quite a bit since the last time I was there. We had only 10 properties advertised in the newspaper – that is down for the typical 75 properties when we first started. Four properties out of those 10 were going to be auctioned.

As I surveyed the scene on the courthouse steps, I counted 10 investors. Of those, only three of us were actually from Gordon County. The other seven were from other counties and had representatives bidding on their behalf at multiple court houses. Ten investors and four properties – those aren’t good odds.

With two target properties and cashier checks in hand, I decided to stay and see what would happen. Besides, I needed to test the situation to see if auction was a viable source for deals anymore. One property fell off the docket, and I lost the bid war on the other. This is a perfect example of why, as an investor, you must have multiple strategies in order to acquire property in an ever-changing market.

Pete Fortunato said it best, “You must evolve or die.”

@Brian Pleshek, Here is an idea on how to find a good mentor, and I do not mean someone that is trying to sell you a coaching program. Find the most successful investor in your area and offer to work for them for free. They will think you are kidding. When they figure out you are serious, that you would like to work to learn, not earn, they will test you out. They may have you do something monotonous, outlandish or gross, like plunging toilets, but do it with enthusiasm and with a glad heart. The next step is come back and do it again. And keep coming back. They will be taken aback by your willingness to do whatever it takes to learn from them. They'll also be impressed that you were willing to give before you received. I literally did this with Bill. I will do a write up on how that happened for me sometime soon. It is a good story. But I learned this tactic from the book Rich Dad Poor Dad.

@Chris T. We sure have. I did a very similar structure with my floor man. He put floors in, paid for cabinets, put a deck on and other things as part of his option consideration. He also gave us some cash, which is always great.

We've also had success using work as the consideration for the deal with other deal structures as well. For instance, We have taken work instead of down payment on Lonnie Deals. I've even let people paint the house they are moving into instead of taking a security deposit.

This is a great strategy. But just a disclaimer, I have a construction back ground and can pretty well tell if someone knows how to do the work they claim to just by asking a few questions. 

For instance, a great question to ask a painter is how they like to paint pop corn ceilings. If they say roll it, do not use them.

The secret formula to investing success

“Opportunity is missed by most people because it is dressed in overalls and looks like work.” -Thomas Edison

I’ve been blessed to know and have relationships with some truly great investors. One family in particular adopted Ashley and me as their real estate kids. You always hear great things about these people, and they’re very well known in the real estate investing world. There names are Bill and Kim Cook.

Toward the end of Ashley’s pregnancy with our oldest, Bill and Kim invited us to come live with them at their ranch. We took them up on the offer and it shaved off the two hour commute I was making to rehab a property we were moving into in Adairsville.

I have to say, I cherished that time. Living with the Cook’s not only solidified a family relationship between my family and theirs, but it also gave me some amazing insight into how successful people work.

One of the things I learned during our stay was the secret formula to success. Would you like for me to share it with you? OK, here goes.

Get up and go to work!

Bill and Kim got up at 4:30 every morning and went to work in the office. They were either doing a property write-up, working on an offer, reading a manual from a seminar they had just attended or handling some other form of paperwork before the rest of the world woke up.

They literally put in three or four hours before most people arrived at their jobs. Next they’d head out the door to run a few miles or hit the gym – more work. Afterward, they’d come home, take a shower, and head off to the rest of the day to meet with sellers.

I marveled at how much these two people could churn out in a day’s time. They were focused, strategic, and determined. This work ethic coupled with their inherent generosity and awesome personalities are what have made them so successful.

I’ll never forget the lesson Bill taught me at my best friends wedding. It was a beautiful September day: warm, but with a breeze from the lake kept us cool. After Matt and Candice said “I do”, the procession left the lake for the reception hall. As best man, my job was to get the wedding props torn down, get all the chairs on the trailer and get over to reception before it was time to give the toasts.

It was me and 100 chairs. No one thought to help. That is, no one other than the most successful guy there. Bill walked over and just starts helping. He was never asked. He didn’t have to be. He saw what needed to be done and he did it. That’s because successful people do what unsuccessful people aren’t willing to do.

It was one of those “Stop, take it all in and let this lesson sink into your soul” type moments. And Bill taught it to me by putting up chairs. What a teacher!

Are you doing what needs to be done in your investing life?

Whether it’s going to a seminar on the weekend, setting the alarm an hour early, or meeting with a seller in the evenings, what are you willing to do to make success a reality?

Bill and Kim will never know the impact they’ve had on our lives. Without them, I’d still be going door to door pressure washing houses. They showed us how to do what needs to be done – to work hard, not for a dollar, but for financial freedom.

Grateful doesn’t seem to adequately describe the feeling.

For all that you are, for your teacher’s hearts and how you inspire others, we love you Bill and Kim!

Don’t let a rental eat your seed corn:

Jimmy Napier was one of my teachers. He’s an old country boy from Chipley, Fl., and when you listen to him, his accent and story telling reminds you of a young Andy Griffith. And just like Andy talking to Opie and Barney, Jimmy uses roundabout parables to teach you about investing.

One story he tells is about corn. It goes like this:

“Suppose you had only one seed of corn that you could plant. You till your dirt, make sure it’s fertilized well and then plant your seed. While the plant grows, you take great care to water and weed so the plant will do its best.

Suppose that one plant only produced one ear of corn. Man’s tendency is to eat that one ear, but you must resist. Those seeds are your seed corn for you to plant next year.

The next year you till your dirt, make sure it’s fertilized well and then plant your seed corn from last year. Suppose you got 15 seeds last year, and suppose this year each plant only produces one ear apiece. At 15 seeds per 15 ears, you end up with 225 seeds for the next year.

Man’s tendency is to eat an ear or two on this go-round. Don’t do it.

The next year you plant, you’ll have plenty of seed. And when it produces a crop, you can eat all the corn you want and still have enough seed to plant again.

This only works if you don’t eat your seed corn.”

The other day, I was talking to a young couple who are fairly new to investing. They’re highly motivated, positive as can be and ready to do whatever it takes to become financially free.
They were telling me about a property they’re buying that’s going to produce a cash flow of $200 a month. I thought to myself, “This is a great deal.”

As I asked them questions, they told me about the property. They let me know the house would rent for $1,000 a month. Then came the kicker – I asked what their mortgage payment would be. They told me it would be $800 a month.

There’s the downfall – this house is going to eat their seed corn. When you’re getting started, you may think you calculate cash flow by subtracting your mortgage payment from your rental income. That’s logical, because it’s your money coming in minus your money going out. So in this case, $1,000 minus $800 equals $200 in cash flow… right?

Wrong. This house will have a negative cashflow of around $150 a month.

What our young couple, like a lot of new landlords, didn’t account for was their expense factor.

Your expenses factor is all the business expenses associated with owning and operating a rental property. They include things like taxes, insurance, vacancy, repairs and even the cost of management. These are true costs that you’ll experience each year while you operate a rental.

Your expense factor on a single-family home normally runs around 35 percent of your rental income. So in our young couple’s case, they’d expect to pay $350 of their $1,000-a-month rent toward expenses. That leaves $650 to pay a mortgage and ostensibly make a profit. In this case, our young couple would have $650 to pay an $800 monthly payment. That means they’ll need to find $150 outside of this property to make their mortgage payment.

In Jimmy’s parable, your seed corn is the money you have to invest. With a negative cash flow of $150 per month, this rental can eat that seed up in a hurry. Applying the expense factor to your accounting ensures you’ll have enough seed to plant each year. And like Jimmy said, before long, you can eat all the corn you want.

How the Fourth Commandment will make you a successful investor

It never fails: each time we start a new property a contractor will ask me why they can’t work for us on Saturdays.

You see, our job sites shut down on Saturdays. That’s because I observe Sabbath from sundown on Friday night to sundown on Saturday night – and no it’s not because I’m Jewish.

Believe it or not, I solidified my conclusion about when to observe Sabbath based off of what day of the week folks celebrate Easter.

As best I know, everyone who celebrates the resurrection of our Messiah agrees that it took place on a Sunday. So knowing that He rose Sunday morning, when I read the following passage, it told me what day of the week Sabbath is.

“Now after the Sabbath, toward dawn on the first day of the week, Mary Magdalene and the other Mary came to see the tomb.” -Matthew 28:1

This verse puts Sabbath a day before the resurrection, and that’s how I determined Sabbath is on
Saturday.

Something has happened in our society today, however, that has led many people away from celebrating Sabbath on Saturday. We as a people have also forgotten the instructions Yahweh laid out for us in the Fourth Commandment.

So let’s read it:

“Remember the Sabbath day, to set it apart. Six days you labor, and shall do all your work, but the seventh day is a Sabbath of Yahweh your Elohim. You do not do any work- you, nor your son, nor your daughter, nor your male servant, nor your female servant, nor your cattle, nor your stranger who is within your gates. For in six days Yahweh made the heavens and the earth, the sea, and all that is in them, and rested the seventh day. Therefore Yahweh blessed the Sabbath day and set it apart.” -Exodus 20:8-11

There are three points to consider here, two of which I believe to be keys to success for everyone, but especially real estate investors.

Point one: the Sabbath occurs on the seventh day. Check, we got that.

Just prior to that statement, the Bible says, “Six days you labor, and shall do all your work”

Point two: have you ever considered we’re commanded to work six days?

For some reason our society changed the arrangement from working six days and resting on the seventh to working five days and watching sports the other two. Don’t get me wrong – I like sports, but watching TV or attending games all weekend won’t make you a successful real estate investor. And unless you incorporate a bookie effectively, there’s a high likelihood it’ll do nothing for your financial freedom.

If you’re working five days a week at your job, that’s great. Count yourself blessed. But what are you doing on that sixth day?

There’s an opportunity to be had here. Real estate investors do the opposite of the masses. So that means while everyone else is popping a top and sitting down to watch football on the sixth day, you need to be working your area and knocking on doors because everyone’s at home- including sellers.

That makes the commanded sixth work day the best day to work your neighborhoods, meet with sellers and be looking for deals.

What you do on that sixth day will greatly influence your success.

Point three: take a day off every week. The commandment says six days work is done, not 30 straight days. You need this time to be with Yahweh, to let go, re-center and let your subconscious do its thing. This off time is where creativity is born.

Our bodies were designed to adhere to this command. When you work six days and take the seventh off, your physical, spiritual, emotional, mental and even your financial health will greatly improve – and so will your success rate.

If you want to learn about real estate investing, buy the man lunch

I’m often asked where the best place to get education is for new investors.

Truthfully, some of the best seminars I’ve ever taken happened over lunch when I’ve taken out successful investors and had in-depth discussions.

Here is how I prepare: before we go, I tell the investor I want to be respectful of his or her time; I ask how long they have for lunch? It’s normally an hour or so. I ask them to pick the place to eat. While there, I turn my phone off and ask lots of questions.

Something I’ve noticed is that successful people tend to be very generous with their experiences. Buying them lunch presents you the opportunity to learn from their past without making the same mistakes yourself.

As the hour begins to draw to a close, I make sure the waitress knows the order is all on one check and that it comes to me.

I use this strategy to turn lunch into a “lunchinar” as often as possible. But get this – these successful investors are often taken aback by me picking up the check.

One of the most successful guys I know told me he’d stopped going to lunch with people he wasn’t acquainted with. He said that they’d invite him out, feast on his knowledge and experience, and then wouldn’t even buy him lunch.

“For me,” he said, “It was a working lunch. I was teaching the entire time, but I was getting absolutely zero pay. They didn’t even show enough appreciation to buy my lunch. It felt like they were just using me.”

The other day I was at an investor lunch. It’s a monthly invitational type meeting where seasoned investors get together to talk shop. We normally email before hand to see what topic we’d like to investigate.

One guy who I haven’t seen for months showed up at the meeting. He’s a good friend of mine, and we sat beside each other. Somehow the topic switched from whatever we’d scheduled to mobile home and mobile home parks – my friend’s forte.

He spent the next hour tutoring us on owning and operating mobile home parks. He walked us through the numbers on the expense factors and the cap rates he’d experienced. We talked about deal structures, funding for mobile home parks, zoning, septic versus sewer and slew of other topics for the entire hour.

The information my friend shared was invaluable. It was real-world, and it all stemmed from his experiences. Even though this wasn’t a take-you-out-to-lunch type of occasion, I had no choice but to show my appreciation by picking up his tab.

When you are new to investing, finding good education can be difficult. My personal opinion is to steer clear of the infomercial courses. They are way overpriced, the classes don’t give you enough information and they try to upsell you a coaching program to counterbalance the incomplete course.

I know this because when we started I maxed out two credit cards to take one of those $11,000 courses.

Later, at my local Real Estate Investor Association, I learned a good course should only run around $500. And when you get through with these courses, you’re prepared to get started with the new strategy.

If $500 is too much right now, find an experienced investor and take them to lunch. Have them pick the place, ask them for a time limit and respect it. While there, turn off your phone and ask lots of questions. But above all, buy the man’s, or woman’s, lunch. This act of appreciation will set you apart from others and pay more dividends than you will be able to count.

Using A “Handyman Special” Option

Have you ever experienced buyer’s remorse after purchasing a property that needed too much work? If you haven’t, count yourself blessed.

One time we bought a home that needed a ton of work. When we started pursuing the deal, I lived 15 minutes away; I was full of vigor and ready to knock out so major rehab.

A year later, when we finally made it to the closing table, Ashley was seven months pregnant with our firstborn. I was neck deep in a rehab we were planning to move into and I was running out of time to get my bride into her new nest before our first chicklette got here. Needless to say, all that vigor I had when we made our offer had been spent.

Taking inventory of the situation, I realized I now lived an hour away from this property. I had very little time to devote to it, and every day it sat vacant was costing us money. We had to do something quickly.

In its condition, we couldn’t just sell it and make a profit. Besides, we wanted the long-term cash flow that could be made by renting it or selling it with owner finance.

To begin turning around a stagnant situation, we offered the property as a “handyman special” lease option.

This turned out great. We found a tenant buyer who loved the area and rented the house to them for $400 a month. We sold them a one-year option to buy the house for a good price in return for a non-refundable option consideration of $4,000. We worded the option to say that as long as they fixed the house up and made on-time payments for the entire year, we were willing to give them owner financing on the home.

Then disaster struck. We got the $4,000, which was great, but instead of doing all the work on the house, the tenants just moved in.

Having someone occupy one our properties when it was in that sort of condition violated my moral and business principles. However, we hadn’t spelled out in the paper work that the tenant couldn’t move into the house until repairs were made. Reluctantly, we decided to let it ride.

To make a long story short, 17 months and 10 pay-or-quits later, we got them out. I’d learned my lesson and decided to use the flexibility found in options to control what happened next. (Actual picture of the home)

Recall that an option is a contract that gives someone the right, but not the obligation, to buy or sell something for an agreed-upon price within an agreed-upon time-frame for an agreed upon consideration.

We offered the property again as a handyman special lease option. This time, we took no cash. Instead, we used the material cost associated with fixing the house up as consideration for the option.

We gave the new tenant buyers a credit towards the purchase price equal to the amount of their material costs for the necessary repairs. We also worded the option so they couldn’t move into the house until they had completed fixing it up. If they did, it voided the option.

Basically, we got free labor, and they got free materials. And since our tenant buyers had put time and effort into the property, we got tenants with a sense of pride and ownership living in our house. They fixed the house before they moved in and paid on time for entire year. This made us delighted to carry back financing on the home. (Actual picture of the home. They did such a good job.)

It was a win-win strategy.

Investors need to have faith like potatoes:

Since Ashley and I got married, I’ve been trying to grow potatoes – notice I said “try”- It’s been crazy: every year something happens.

The first year I didn’t know you were supposed to mound. Mounding is when you put dirt around the stalk of the plant. If you mound as the plant grows, it stimulates the plant to produce more potatoes. Since I didn’t mound, my Yukon Golds grew to the size of large peanuts. It’s hard to make meal off of that.

The next year I decided I’d do it the easy way. I planted them in a 50-gallon trash can. The idea is you put dirt in the bottom of the can for the potatoes to start. As they grow, you just fill the can with more dirt. You do this until the can is full. Then, you flip the can over and out come all the potatoes.

I believe this strategy would work well if done correctly. My two attempts didn’t yield great results. One time, I forgot to cut holes in the bottom of the can so water could escape. This made my potatoes rot. The other time, things were going great. The plants were growing and I was mounding when I was supposed to. Then one day, in place of my beautiful plants was a very fat and satisfied green horn worm. That little sucker had feasted on all my potato plant leaves, meaning, yet again, no potatoes for the English house.

Last year I tried planting them in mulch. I mounded like I was supposed to, I watched to make sure no worms were on the plants, and I watered like I was supposed to. When it came time to harvest, I found no potatoes. What I found was a gelatinous sludge. Apparently, my mulch retained so much moister that the potatoes decomposed.

This year was different. I planted in raised beds with well-drained dirt. The plants were growing great. I mounded- things were still going great. Then I went outside to behold my wonderful plants and… some blankety-blank neighborhood animal had pulled up the stalks. I was fit to be tied. I was so mad I wouldn’t even tend to the ones I’d planted the previous week.

Then one day I decided I need to look and see if possibly there were any potatoes in the ground. To my surprise I found beautiful, perfectly sized red potatoes. AH- success!

Potatoes grow underground, which means you can’t see if the plant is bearing fruit. And it’s not until all hope disappears that you get to reap a reward- that takes faith.

Starting out in real estate investing is like growing potatoes. You try many different ways to find deals to no avail. Some deals look very promising, only to go sour. Others are going great, until someone swoops in and eats them right in front of you. (Like when someone comes right behind you and offers more than you did on the property.)

Every seller you talk to, every offer you make, every effort you take is a potato. You put it in the ground and let grow – and you have no idea what’s happening beneath.

Have faith.

Proverbs 14:23 says “In all labor there is profit, But talk of the lips leads only to poverty.”

Ashley and I door-knocked and road foreclosures in two counties for two years solid before we found our first house deal.

After that first deal, things just took off. We had been planting for two years and things were growing underneath – we just couldn’t see it.

Keep going! Keep looking at houses and talking to sellers.

Have faith like potatoes. Things are growing beneath and within you that you can’t yet see – but you will.

Here is a video clip from a favorite inspirational movie of mine called Facing the Giants. You keep going, don’t quit and watch how far you can go.

https://www.youtube.com/watch?v=-sUKoKQlEC4

lol, I like that Mike.