All Forum Posts by: Monica Bear

@Monica Bear I just wrote a blog post about this if you’d like to read it. Happy to answer any questions!

https://www.biggerpockets.com/blogs/11360/83794-ho...

My first big leap that caused me to take action was putting out an ad. Once people started calling me, asking me to buy their property, it forced me into taking action.

The ad that I put out said, "I Will Buy Your House Today for Full Market Value minus repairs." That kind of ad got me a good amount of calls.

If you're wondering how I could get away with promising full market value, first of all, sellers often have an inflated idea of what their property is worth. And they like to start with a high asking price to leave room to negotiate. So the initial asking price usually isn't their bottom line.

Also Full Market Value is a relative term. It depends on what comps you’re using to prove to the seller what buyers are willing to pay for their property. It’s my job to do a very thorough analysis of the comps so I can help the seller understand my calculation of the true property value.

My ad states, “Full market value minus repairs.” So, it’s also my job to show the seller everything that needs to be done to the property to get it into sellable condition. That way I can discount my offer by the cost of the repairs.

And I always encourage the seller to do a For-Sale-By-Owner. This way, I can discount my offer by the amount saved in broker commissions.

But before I put out the ad, I prepared for those calls by creating a Seller's Questions Sheet, so I would know exactly what to say to each caller.

The most important things you want to know, besides the details of the property:

• How much they owe.
• How much the property is worth.
• How much equity they have (the difference between property value and mortgage balance).
• Whether they are current or delinquent on the loan.
• What their motivations are (why are they willing to sell to an investor).

And before I put out the ad, I also prepared by creating Seller's Categories to help me determine the buying strategy I would use based on the situation of the seller, the equity and the loan status.

Once you have the info from the Seller's Questions Sheet, you can put the sellers into one of the following categories.

Seller Category 1 – Delinquent + No Equity = Short Sale.

Seller Category 2 – Current + No Equity = Seller Finance Rental.

Seller Category 3 - Current or Delinquent + Equity = Straight Purchase.

Take Seller Category 1 for instance. If the seller is delinquent on their mortgage payments and they have no equity, then a straight purchase for a discounted offer won’t work because they have no bargaining room. And a seller finance isn’t ideal because you have to pay off the bank or at least bring the delinquency current.

So, in the case of Delinquent + No Equity, a short sale is often the best solution. A short sale is when you get the bank to agree to take less than the payoff amount, thus giving you some room for profit.

If you’re considering a short sale, make sure to do plenty of research on the subject. Or you can simply wholesale a Short Sale contract to another investor who has experience with that strategy. Short Sales can be easy if you know what you're doing.

Seller Category 2 is Interesting. When the seller has no equity (no bargaining room) and is current on their mortgage, most investors would give up at this point figuring that the seller wouldn’t be motivated enough.

But this is the perfect situation for a Seller Finance Rental deal where you make payments to the bank on the seller's mortgage using an escrow account and then you rent out the place while waiting for the property value to increase and the mortgage balance to decrease, creating equity (profit).

Seller Category 3 Example. In the case of Current or Delinquent + Equity, it doesn’t really matter if the seller is current or delinquent as long as they have enough equity for you to make a profit. This is when a straight purchase is perfect as long as the seller is motivated enough to take a discounted offer.

Of course, a delinquent seller will be more motivated than a seller who is current on their mortgage.

For more details on these strategies read this article on BiggerPockets in the Innovative Strategies forum.

The point of all of this is that having a good plan and setting it up so I would have no choice but to take action made me get out of my fears and actually get started.

It's like stage fright, it seems intimidating at first, but once you start doing it on a regular basis, it starts to feel more natural and the fears fade away.

 Yes.  The list is long.  First, you need to learn how to analyze markets (not properties), and what to analyze before you can practice it.  Like any skill, whether it is in sports, engineering, the arts, etc..., you need to learn the basics.

You can learn a lot of the basics here, but one of the most important elements of any "basics", it to understand not just what they are...but what they mean.

We live in a society of instant gratification.  As a result, we prefer to have the answers handed to us, without understanding the background that makes up those answers.  So, some of the most basic concepts/rules are never applied, because they were never understood.

Without that understanding of those basics, it is almost impossible to make decisions...unless they fit into a nice package that is the same all the time.

I see that here a lot.  Too many are chasing the "deal"...the "buy low and sell high" strategy, and miss out on so many deals because they don't understand the basics.  They limit themselves by their lack of basic math, and how that translates to "how money works".  They get lost in percentages, because they don't understand the differences between stock market analysis and RE analysis.  They're not even close, and when that "distance between them" is not understood, many deals are lost...that could have been.  Worse, many properties are bought, that shouldn't have been.

Analysis is a science, negotiation is an art. The best analysts, make the best RE Artists.