All Forum Posts by: Mitch Stephen

I think everything comes from the gut on this one...yes, you can verify some things but a fifteen minute discussion about what happened can do more to help you make the decision. I leary of people that bame everything on everyone esle. there are reason that are legit; death, ilness, accidents with injury etc., etc....but it can be hard to seperate fact from fiction.

In general, Birddogs are newbies....not all but most. Tell your birddog exactly how you want thenm to present you a deal. They need to earn thier potential $$$. So tell them what you expect. i expect:
1. A comprehinsive CMA
2. Photos
3. DOM ( Day On Market)
4. An accurate re-haab estimate. This may be the most imprtant information.

In reference to #4; I see a lot of deals that would be deals but for the inaccurate estimation of re-hab expense. this is the "RUB." Wholesalers tend to have great margins but make is so buy greatly under estimating the cost of repairs (Intentionlally or not).

BUYER BE WARE: do you own assessment of the repairs because that is where you will lose your profit.

There is a rather famous saying in our industry: 'You make your profit when you buy." I have added the tag line to that slogan: "You lose your profit in the re-hab."

Esitmatien re-hab expenses is sthe most critical thing you will ever learn. It makes you or it breaks you.

--Mitch Stephen--

First off...let me apologize if I came off pompass. After re-reading all the posts I'm afraid it could've been taken that way. I've learned I depend a lot on my smile and expressions and they just don't show up here.

I was trying to express (in a passionate way) that people I talk to, in my community, who know my track record or who can find where I've been easily and research me and don't have to worry about an altering motive "Take the Money and Run" mentality.

Furthermore, I am completely in tune with what type of person needs what I can do for them (KEY: what I can do for them). My note buyer is generally between 60 and 80 years old. They can't start over. They are trying to live out there retirement, there life, in some level of comfort and reasonable security. The last 10 years in the stock market has cut many of them in half financially if not worse. They simply can't survive on 1% CD Rates, They have become very distrustful of corporations and even banks. All they need, what they are praying for, is a reasonable return with something they can understand. Wanna scare them off? Offer them a 20% return. Watch them run!

Institutional note buyers were not working for me because of the same reasons they don't working for most of us... because they stopped paying 83% - 85% and more for notes anchored by the kind of people I sell houses to (second chance people). So I started marketing for and listening for my type of note buyer in the local private sector. And I am finding them. I try to present my plan to one person a day, five days a week. I hold a luncheon once a month and discuss My NOTES and the pro's and cons of each note. I can over come the cons by giving discounts. For example: a note with collateral worth 50% more than the note balance needs no discount...collect 10% ROI or reload the place for DOUBLE! (with my help). A note with collateral worth only $10k more than the balance needs to be discounted an additional $10k to hedge the buyer's risk. The sincerity shows. I know when a note needs a dicount. PLUS...I'm setting myself up to be the hereo if this note goes south (bad). If I resize that southbound note at a higher nance than when the note buyer own previously, what do you suppose happens? Yep, I walk on water in their investment stories around the dinner table. It's not all benevolent. At the prices the pay me they deserve it! ...and I can afford it.

Bottom line is to instill this possibility:
PLAN A: Make 10%
PLAN B: Make 10% for a while, resize the note up to the top of the market, then make 10% on the new improved note balance.

It's pretty good when the PLAN B can make MORE than PLAN A! But you need to be able to explain this to the private sector.

By the way, Marc Faulkner IS NOTE an institutional note buyer in eyes because he finds these individuals
- individuals!- and brings them to you.
When Marc has a buyer and I don't...I sell.
Why? Because I believe a true investor knows, without a doubt, there's another note tomorrow. Make a check, take your wife to a nice dinner and celebrate, toast to Marc....wake up in the morning and shout out at the top of your lungs...NEXT!

One last thing: I always make my note buyers give me "First Right of Refusal" to buy the notes if they ever want to sell. Why? Ask yourself, "What generally happens to notes and the value of houses over the years?
Besides, I'm gonna be 80 one day...and I may be quite content with 10% - 12% while I'm retired on the beach in Playa Del Carmen, Mexico.

We'll talk about my commitment to my note buyers another night. Someone remind me;
"Mitch, why do you stay so closely tied to your local note buyer?"

Run an add on CraigsList.org and describe your potential investment to the "T." Get involved with aperson that has done it over and over. Follow their lead and give them 50% for helping you navigate the situation.

I'm starting to sound like a broken record...but find the people in our area that are reputatble and that know exactly how to do this and bring the deal to that person.

You want to excellerate your learning...I' telling you; Find that person!

There is a tendency for investors to think if they are not hitting a home run all the time, that they're not being a successful investor. I was fortunate enough to be very poor when I started investing. That meant a little bit of money went a long way with me. If I made $5k - $7k it really improving my conditions.

Being greatful for the "base hits" ultimately made a huge difference in being able to hold out and stay in the game until I was mature enough in the business to move up.

At first, I was just a house finder with a money partner. I'd make half of the deals I brought to THe table. I'd make 50% of $8K - $10K - 15K - $20K.

Back then, I would Find/Buy/Fix/SellOwnFin/SellNote... If I was starting in today's market I'd do it a bit different. I'd Find/Buy/Fix(or NOT Fix)/SellOwnFin/TurnOverNote to MoneyPartner for a fee.

You see, my wealthy money partners simply hated selling notes at a discount for Cash. I, on the on the other hand, needed the cash! It cost me some partners (not mad at each other...just different motives). In retrospect, I should have had an arrangement (in advance of the deal) to turn the note over to them for a price that worked for everyone. NORE: THIS IS A GOLDEN NUGGET!

The point is to get into a position where you can liquidate as a young investor but still stay important to, and connected to, your veteran/mentor investors who don't need to liquidate.

This Topic is in the psychology section because "psychologically" you have to look at the house flipping business with a different mind set...see yourself as an intern for the first few years. See yourself taking some baby steps and don't get disappointed when you don't make $30,000 all your own.

Using this "50% of something is better than 100% of nothing" theorey, you'll be able to sell when you need to, get ahead in the savings department, and then buy an occasional deal yourself when things are smooth and you are confident...or when the exact right deal comes along for YOU.

I had a years worth of salary when I found my very own private lender. That was when I decided to go full time.

It all started because, while I was definitely an entrepreneur, I pschologically put myself into the a worker bee mindset, so I could learn by helping others achieve their goals. I helped others make money. I found outstanding deals and then gave up 50% of the profits. I did all the the work...and gave up 50% of the profits.

In time, I got a good reputation and some much needed confidence but more importantly, I got connected, I got knowledge and eventually, I got known. All my wealthy investors' networks became my networks. Their successful mind set - became my mind set. I was working for knowledge...and it is a mind set.

There is a book out there that does just that...

MY LIFE & 1,000 HOUSES:
Failing Forward to Finacial Freedom

...but I must warn you; I'm the author.

I talk a lot about what I tried that didn't work for me. I am a product of self-education after high school. The book describes my thought processes on the way to the money as I navigate my way after the "Get Rich" books, CDs and seminars. I fall down a lot in this book. Get the first 100 pages free at 1000Houses.com

Peter,
I believe there is NO NUETRAL. You are moving forward or you are moving backwards... you are either making money every month or you are losing money. I suggest you find a strategy that makes money every month AND has the possibility of appreciation. That way, if the sepeculation of appreciation doesn't come true, you've still made some money for your time and effort.

--Mitch Stephen--

Dear Mr. J Scott,
I don't have to tell you that things have changed and keep changing...so...the numbers that worked when I started are different now. At least some of the numbers are different...I am now buying houses at the exact prices I was buying them at 15 years ago...but note selling numbers and bank loans to investors have deminished in value and/or availability on the investor side.

Look, I buy a house for $23k. I pay myself $2k...so I'm in the house $25K...

(I borrow the $25k from a private lender at 8%. I give the private lender a 1st Lien of $25k on the property...one house one lender).

My goal is to carry a note for AT LEAST double what I have in it. So I offer the house for sale with owner financing for $55k. Let's say[u] and carry a note for $52k

I've now made $5,000 for myself...$2k I paid myself when I bought and the $3k down payment). I couod have made more...if I'd have collected a bigger down pmt.

I also have a note for over double what I have in the house. $250 to $350/ mo Positive Cash Flow...with no expenses (in a perfect world. Remember, I'm NOT a landlord).

I season the notes (or not) and sell them to private individuals that value ME and a 10% to 12% ROI.

The 2 main obsticales are:

Where do YOU find the private lenders for the money to buy the huoses?

Where do YOU find the private investors to buy your notes at 10% to 12% ROI?

ANSWER:
You find them in your long history of having INTEGRITY and your track record of never ever missing a payment to anyone - EVER!

The people that loan me money will not ever loan YOU money...they loan to ME! They are buying Mitch Stephen...because of a relationship that started years ago and on a very modest level.

The people that buy notes from me will never buy notes from you...they are buying ME!... becasue when things went sideways with a note (which happens now and then) I showed up and fixed things...even improved their standings in the process. It started the same as with the people that loan me money...a long time ago and on a very modest level at first.

So, YOU want relationships like that? Start talking to people on doing just one deal...even just a small deal. And then, Never ever ever give excuses...simply PAY and Pay on time...forever!

I wish I could give you some simpler plan...but it hasn't been simple for me...it's been work and cultivation. One row being hoed at a time.

Wow! Thanks to everyone! Thank for the advice Bryan. To Ryan I day;
Technically i started out lanlording. I got to 25 houses, quit my job and discovered the money wasnt going into my real bank account like it was supposed yo on paper. Repairs, vacancies, move-outs, court costs, lost time...were killing me. I couldnt sell. No one in the nieghborhoods i had houses in could get a new loan. In desperation I offered "owner Financing." Then, something magical happened; I collected an average of $3,000 down per home (25 x $3,000 = $75,000) and people stopped calling with repairs, started improving my propertis and stopped moving out every 6/12 months. THEN, the note buyers started calling me! That's a whole nother story.

--Mitch Stephen--

For once being poor worked in my favor. I was very good at finding deals. then I found a guy who put up the money if I'd bring the deals to him. We'd split 50/50. At the time we sere buying, Fixing, selling with owner financing and them selling the norte for cash. I made $30,000 total profit on my first 2 deals. That was more than I made in a year working for a paycherck. So, I kept my wits about me, put the money in the bank and rationed it out to myself at the sme amounts I was used to. I didn't change a thing to do with my overhead or my pay...but I did quit my job. That began my fulltime career - March 1996, Never looked back