All Forum Posts by: Omar Johnson

Among the means at your disposal for collecting leads and growing your quick-turn real estate business is establishing a farm area where you do business on a regular basis. This is a technique used by many different types of professionals to assure themselves a steady supply of business.

So what are the advantages to having a farm area? Familiarity is the big one. As you stake out and cultivate your territory you will become familiar with the area, the market, what types of people live there, what types of people are buying there, what types of properties are being sold, and for how much.

This makes it easier and quicker for you to evaluate deals. Having a farm area also allows you to consistently focus your marketing, leading to repeated exposure and increased response rates. If you continually market to an area with signs, fliers, business cards, and direct mail, it will become essentially saturated with your marketing message and your response rates will soar.

There are some drawbacks to farming as well, which are fairly easily overcome. The main one could be that your focus is narrowed to the area you are farming, but if you choose your farm area well then this should really be more of a help than a hindrance, because it will mean more business for you overall.

Farming does require a large time and energy investment on the part of whoever does it, but this can either be you or it can be someone you hire on a wage or commission basis or someone you partner up with. The only real reason for concern might be if you feel uncomfortable in the neighborhood you are farming, but then you might want to work in a nicer neighborhood anyway.

There are some specific tools that are necessary to employ this technique, for you or your help. A car or similar means of transportation is at the top of the list. A digital camera is also essential, as well as a notebook with a log sheet and printed maps of the farm area. The best use of the digital camera comes from using it in conjunction with a small dry erase board to capture information. And finally, any time you are in your neighborhood you should have a stack of business cards handy.

When you farm, you're just in the field looking for leads. Go street by street, recording and photographing anything that looks interesting to you: abandoned properties, fsbos, ongoing rehabs, and anything else that gets your attention and that might put you in touch with a motivated seller or buyer.

It's important that you be consistent about farming and about placing your marketing. The more you talk to people in the neighborhood and hand out your business cards, leave your fliers on doors, and place signs in visible locations, the more business you will have, and if you are consistent your business will be. While you are driving track your progress on the map with a highlighter, so that you will be sure to cover the entire area.

If you use farming as a tool you will enjoy the benefits of working in an area where you are familiar with the neighborhood, your customers are familiar with your marketing, and your closing officer will become familiar with you.

Unquestionably real estate is a big money business. If you are a quick turn real estate entrepreneur determined to be in the game for the long haul, it should not involve your money, however. Understanding financing is an important part of playing the game of real estate well and of designing an enduring business.

The most commonly conceived mode of real estate financing is conventional. This typically means a 30 year mortgage acquired through a mortgage broker or institutional lender. This subject is mainly important for your buyers, or for you if you also work as a loan officer.

There's really no good reason you should use conventional financing yourself, with all of the tricks you should know. The exception might be if you are a portfolio investor and are refinancing your properties, or if you are purchasing commercial properties. Generally, the best way to take out conventional financing is any way but in your own name. Qualification is based on the borrower's income, assets, and credit profile, and requires a personal guarantee of repayment. There are much better positions you could be in as an investor.

The alternative financing methods might be referred to as nonconventional. These would include the methods of raising cash traditionally used by investors, generally known as hard money and private money. Hard money is typically intended for the acquisition of rehab properties. It has a high interest rate, a low loan to value ratio, and usually a short term balloon note of six months or a year.

Private money just means money borrowed from a private individual, and can come from a person's savings or retirement fund, according to whatever terms you negotiate. Qualifying for these types of financing doesn't necessarily involve your credit profile or financial status, but rather the terms and quality of the deal and your relationship with the lender. To acquire them you will have to present a deal to the lender that they will feel safe investing in.

There is a third category of financing, which might be called creative financing and which consists of other types that don't fit into the previous two categories. One example is subject to financing, which is just the lingo for taking over the existing payments when you take control of a property.

You will acquire the property by deed and bring and keep the mortgage payments current, but the loan will stay in the name of the original borrower. This is basically the safest form of financing ever invented.

A second type of creative financing is seller financing, where the seller of the property carries back a mortgage. This may only be used to partially fund the transaction, perhaps as a second mortgage, or the seller may carry everything but the down payment. And finally, some investors now teach about how to obtain and use business lines of credit for real estate investing purposes. Capital in the form of business lines of credit and business loans is readily available to all new businesses with effective leadership.

Don't consider this article exhaustive, because new techniques of financing are always waiting to be invented. This is an area of real estate where cleverness and creativity can unlock many doors.

With historically high rates of default on home mortgages lenders are facing many more foreclosures than they have in the past. This allows for short sale investors and pre-foreclosure specialists to thrive in the current market. However, not everyone who defaults on a mortgage should be considered a candidate for a short sale.

A short sale is only one of six loss mitigation options, and playing the pre-foreclosure game successfully requires a working understanding of the other five. In this article we will look more closely at all of the options available to a homeowner with a defaulted mortgage so that you will be able to present a balanced picture to your client and help them make the decisions that are in their best interest.

Does working with sellers in pre-foreclosure mean you have to be a loss mitigation expert? No, but it does mean you should be familiar with the options available to your client and be able to refer them to a different specialist whenever appropriate.

The purpose of loss mitigation options is to provide an alternative to foreclosure for homeowners who have had difficulty keeping up with their payments but who may still be willing and able to stay in their homes. Generally speaking, a lender is not likely to offer loss mitigation options to the owner of an investment property. And a short sale is usually the last choice on the lender's list of options, only slightly better than an actual foreclosure.

The first loss mitigation option, in order of the lender's preference, is a repayment plan. This is where the homeowner catches up the payments and brings the loan current, perhaps by making higher than normal payments for a set period of time. The lender experiences no loss this way. The second option is a loan modification, where the borrower and the lender agree to new loan terms that are acceptable to both, perhaps with a lower interest rate but larger balance.

Third is a forbearance, which is where the lender allows the borrower to go for a specific amount of time without making payments, perhaps adding the back payment amount onto the balance of the loan. Those three options all apply to a homeowner who is able (eventually) to pay for the house.

For the homeowner who doesn't have the means to stay in the house, the lender's preferred option is an assumption, which is where somebody else who qualifies assumes the loan and resumes payments. Next is a deed in lieu of foreclosure, which is where a lender agrees not to foreclose but rather accepts the property by quit claim deed, which will protect the borrower's credit somewhat. And finally, the last option considered by lenders before foreclosing is a short sale.

Understand that making use of any of these alternatives requires strict qualifying by the lender. All loss mitigation alternatives require there to be a legitimate hardship on the part of the borrower. A repayment plan, loan modification, or forbearance will require demonstration of the borrower's ability to pay, an assumption will require the assumer to qualify for the loan, and a deed in lieu or a short sale will require documentation of the borrower's inability to pay.

As a pre-foreclosure investor, only after you have informed your client of and eliminated all other options can you confidently proceed with negotiating a short sale.

There Are Four Ways To Make Money In Real Estate

1) Wholesaling- finding bargains and selling them to bargain hunters.

2) Retailing- Where you would keep the bargains yourself and fix them up and sell them at retail price

3) Getting the deed-taking over ownership of properties "subject to" the existing mortgage

4) Lease option/Option- taking control of properties in cases where the owner won't deed you the house until they get cashed out or their loan is paid off.

In Wholesaling you wouldn't hold on to a property. Your goal would be to simply find the bargain and make money by assigning the contract to an investor who is interested in fixing it up and selling it at retail price.

When you're Retailing you are simply buying a property at a low price then fixing it up and selling it at a high price to the end consumer. So when you think of retailing just remember that it basically means buy low and sell high.

Getting the deed involves taking over ownership of the property by taking over the payments on the existing debt. The right way to doing a "subject to" is by never assuming the loan. Just let the loan stay in the previous owner's name while you just simply take over the payments.

Lease Option/Option- This is a great way to take control of a property without owning it. In a lease option scenario you would take control of the property by leasing it from the owner with the option to buy it.
When you lease the property from the owner of course subject to their existing mortgage you must have in your lease agreement the right to sublease to a tenant/buyer. The difference between the payment on the mortgage and the rent that you would collect from your tenant/buyer would be your "spread" or the monthly cash flow that you would receive.

In addition, you make money when that tenant buyer has paid you a non-refundable deposit to move into the house. The deposit would go right in your pocket. This non-refundable deposit would be applied as a down payment for them on the house. Furthermore you make money on the back end when that tenant buyer finally gets financing and buys the house from you.

When the house is bought by the tenant/buyer the owner's loan balance is paid off and if they had any equity and they were willing to leave some on the table, your back-end profit would derived from that.

Your back-end profits would be the difference between the price that you optioned to buy the house for from the owner and the purchase price that you gave to that tenant buyer.

a straight option- In a straight option You would simply get an option to buy a property at a specific ideal price.An ideal price would be a price that would allow you to make a substantial profit when you've have sold the property.

Once you've negotiated the option price with the owner, you would locate a buyer and do what is called a simultaneous close and walk away with plenty of cash if you structured your deal the right way.

I am an ultra successful real estate investor, rather than go back and forth replying to erroneous comments they only one I will respond to is by Mike's and the rest I will take a pass.

All "subject to" means is taking over a property subject to the existing financing.

For all of you aspiring real estate entrepreneurs and investors who want to make money in the real estate game Lease Options and Options are great way to accomplish this with little money or no credit. Let's examine the beauty of making money in real estate using this creative way. Lease Options and Options. Lease options are a great way to take control of a property without owning it. In a lease option scenario you would take control of the property by leasing it from the owner with the option to buy it.

When you lease the property from the owner of course "subject to" their existing mortgage you must have in your lease agreement the right to sublease to a tenant buyer. Buying a property "subject to" the current mortgage loan it simply means that you don't get new financing, you would just leave the existing loan in place and take over the payments.

Once you have made a "subject to agreement" with the seller you would then sublease it to your tenant buyer. When you sublease to a tenant buyer, the difference between the payment on the mortgage and the rent that you would collect from your tenant buyer would be your "spread" or the monthly cash flow that you would receive.

In addition, to this fabulous arrangement you would also make money when that tenant buyer has paid you a non-refundable deposit to move into the house. The deposit would go right in your pocket. Sounds pretty good doesn't it?

This non-refundable deposit would be applied as a down payment for them on the house and subtracted from their purchase price. Furthermore, you make money on the back end when that tenant buyer finally gets financing and buys the house from you.

When the house is bought by the tenant/buyer the owner's loan balance is paid off and if they had any equity and they were willing to leave some on the table, your back end profit would derived from that.

Your back end profits would be the difference between the price that you optioned to buy the house for from the owner and the purchase price that you gave to that tenant buyer. Sound easy doesn't it? Well, in reality it is.

Let's move on to examine a straight option. In a straight option you would simply get an option to buy a property at a specific ideal price. An ideal price would be a price that would allow you to make a substantial profit when you've have sold the property.

For example, a house by the lake is appraised at $700,000 and has been on the market for a while and the owner is willing to sacrifice some equity to get rid of it.

You've negotiated with the seller to get an option to buy the house for $600,000 and you then turn around and sell that option to a buyer for $650,000 .You just made $50,000 and everyone benefits from your efforts. The seller sold a house they had trouble selling and the buyer of your option and the house instantly gets $50,000 of equity from the house and of course you made your $50,000.

In conclusion, as you can clearly see using the Lease Option and Option methods are creative ways that A Real Estate Investor or Entrepreneur can use to easily make money in real estate.

As a real estate investor it is important to choose a business structure that gives you the maximum asset protection as well as the best tax advantages. Although I can't advise you as to what type of entity you should structure your company as (you should consult with attorney) I can give you a brief overview of the different types of entities. Sole Proprietorship. A sole proprietorship is basically a one person company and is simply "you doing business". There isn't any filing requirement to start you business using this structure unless you are using a fictitious or trade name. If you a using a fictitious or trade name you must file a "d/b/a" or doing business as with your state, city or locality. The only types of fees associated with being a sole proprietor are the licensing fees that your city or state or locality charges for doing business.

Tax Consequences of a Sole Proprietorship. The income made by a sole proprietorship is income earned by its owner. In addition, as a sole proprietor, you report your income, expenses, profits and losses on schedule "C" on your federal income tax return. This income is subject to a self-employment tax.

Disadvantages of Sole Proprietorship .One of the disadvantages of a sole proprietorship is there is unlimited liability. If you got sued everything you have personally is at risk. There is really nothing shielding your personal assets. If your business goes bankrupt, you must file for personal bankruptcy protection to avoid the business debts.

General Partnership. A general partnership is an entity that is formed with two or more parties. No paperwork needs to be filed to create a partnership. In fact it can be formed with a simple handshake. However, it is better to have a partnership agreement that spells out the terms of the partnership. If there is no partnership agreement then the partnership is governed by state law. The majority of the states in the U.S. have adopted the Uniform Partnership act which consists of a set of rules of how partnerships should act if they don't have a formal agreement.

Liability of a General Partnership. A general partnership has no liability protection for partners. Partners are jointly liability for any acts of negligence. So whether or not a person in a partnership committed a negligent act he or she is still personally liable for that act.

Tax Consequences of a General Partnership.The general partnership itself doesn't pay taxes it simply files an I.R.S. 1065 form. This is only an informational form that summarizes income, expenses and profits and losses of the general partnership business.

A general partnership is treated as a "flow through entity" which means that the profits and losses of the partnership "flows through" to the partners who report their share of income or losses on schedule "E" of their personal income tax returns.

The way that this works is that the partnership would send each partner an I.R.S. K-1 form that states their share of the partnership profits or losses.

Limited Partnership. In order to form a limited partnership, the partnership must file a "Certificate of Limited Partnership" with the state in which it is organized. There are two types of partners in a limited partnership. There are the general partner and a limited partner. The general partner controls the day to day operation of the partnership and is liable for all business debt where as a limited partner is not responsible for business debts and/or claims.

Liability of a Limited Partnership. The general partner in a limited partnership have unlimited liability and if a judgment is rendered against the limited partnership and that partnership doesn't have enough assets to cover the claims, the creditor can go after the general partner's personal assets. Sounds risky doesn't it? Well it is!

Now unlike the general partner a limited partner has no liability beyond what they initially invested in the partnership. Creditors can't go after limited partners for the debts of that limited partnership. In addition, limited partners unlike the general partner are not personally liable for acts committed by the general partner unless they participate in management decisions.

Tax Consequences of a Limited Partnership.A limited partnership is also treated as a "flow through entity" for tax purposes. I must point out to you that in "flow through" entities, the owners pay individual income taxes on all net profits of the business. This is the case whether they receive those net profits or not.

Corporation. A corporation is a business entity that carries its own legal status, separate and distinct from its owners. Its' primary advantage is to provide owners with limited liability against business claims. A corporation requires a filing of an articles or "certificate" of incorporation with the state. There are two types of corporations "C" corporations and "S" corporations. An "S" corporation status must be elected.

Tax Consequences of a Corporation. A "C" corporation files an IRS form 1120 and pays taxes on its net income. The primary disadvantage of a "C" corporation is double taxation. Profits are taxed first at corporate tax rates and then again at the individual level. when owners receive profits from the corporation in the form of dividends.

An "S" corporation is taxed just like a partnership. It files an information IRS form 1120-S and the profits and losses "flow through" to the shareholders. The S corporation sends each shareholder an IRS K-1 which states the shareholder's share of profits or losses.

Liability of a Corporation. A corporation provides liability protection for its owners (the shareholders). If the corporation was sued, the owners are not personally liable.

Limited Liability Companies. A limited liability company (or "LLC)" is a hybrid cross between a corporation and a partnership. To form a LLC the requirement is that you must file an "articles of organization" with the state. An LLC is owned by its' members or partners and it is governed by its operating agreement.

Liability of a Limited Liability Company. A limited liability company provides protection for its' members. The members are not liable beyond their contributions to the company. If the LLC is not able to meet its' debts, the members are not liable for these obligations. In addition, if the LLC is sued the members are not personally liable. An LLC can be "member managed" or "manager-managed"

Tax Consequences of LLC. An LLC is also a "flow through" entity and for single member LLC the tax reporting requirements are basic. All you have to do is attach an IRS form Schedule C which is a Profit or Loss from a Business to your Form 1040 individual return. You will also have to file IRS form Schedule SE which is a self-employment tax form. On this schedule you will calculate the amount of self-employment tax owed. This self- employment tax is a combination of Social Security and a Medicare tax .If there are two or more members of LLC, then that LLC generally must file its' taxes as a partnership.

Like I mentioned previously that requires the LLC to file a form 1065. Income, losses, deductions and credits allocated to each owner for the year are reported on Schedule K of form 1065. A schedule K detail is given to the respective members of the LLC detailing their specific shares of profits and losses. They would then use this information and attach the K-1 to form 1040 of their personal tax return and use it to calculate their personal income tax owed.

Limited Liability Partnerships. LLP's are a special type of partnership designed to provide individual partners with protection against malpractice by other partners in the business. In some states this is known as a registered LLP, or RLLP. LLP's are primarily designed for professions such as doctors, lawyers and accountants.

So there you have it, an overview of the different types of business entities in which to choose from. In running your real estate business, it is imperative that you to choose the entity that works best for you. Furthermore, you should also seek the advice of a competent attorney and an accountant before choosing a specific entity.

As a rule of thumb you want the best assessment of the business structure that will allow you to keep a significant amount of income that you made from your deals while minimizing the taxes that you have to pay to Uncle Sam. It makes no sense to make the money as a Real Estate Investor and to give a great deal to the IRS just because you didn't choose the appropriate business structure.

What makes or breaks an investor? There are entrepreneurs who are seemingly a success overnight while others work their way to the top. Some investors arrive on the investing scene with a big bang only to fizzle away. Other investors work quietly over the span of years keeping their success under wraps. Some investors become wealthy beyond imagination and some don't do so well. Is there a formula to being a successful investor? Is there some mapped out guideline for what will make you succeed or at least keep you from failing? The answer is, unfortunately, no. But there are a few traits all good investors tend to have.

To begin, a successful investor is a focused investor. Focus refers to concentrating on the work at hand. Focused investors ask questions like "What do I need to do to be successful," and "What is changing in the industry that I need to be aware of." A focused investor isn't quick to jump the gun or change directions while running at a fast pace. Instead, a focused investor always keeps an eye on the industry. He or she develops a plan of attack and sticks with it. By doing so, the focused investor is proactive and not caught by surprise when something big occurs.

The focused investor knows that in order to make something work, you have to stick to what works best. Diversions and distractions have no effect on focused investors. Instead, they are content to concentrate on what needs to be done. They know they aren't going to get rich quick, or if they do it is simply a series of fortunate events that made it possible.

Successful investors also avoid poor advice. There is a saying that goes "advice is like armpits, everyone has them and they stink." What is good for one person may not be good for another. The savvy investor knows poor advice when he hears it and avoids it at all costs. Know one knows what is best for you better than you.

While it is nice to get advice and, with so many people giving it out, it's easy to come by, that doesn't mean you have to take it. People of all kinds give advice. Some know what they are talking about and others do not. If someone is giving you advice, ask yourself two questions 1) Is this person a qualified expert in the field they are giving advice in and 2) Is this person as successful as me? In other words, is his or her advice paying off on a personal level?

If you can answer "yes" to both of these questions, it is probably okay to consider the advice you are being given. If not, you may want to think twice before jumping onto someone else's ship.

You can also detect bad advice by asking yourself how the advice affects your focus. If you have your focus set and someone comes in and tries to shake that up, you know better because they key to success is your focus.

Being a successful investor takes time and work. If you remain focused and disregard bad advice, your even more likely to find yourself at the top.

Your Mindset Will Determine Your Success As A Real Estate Investor. What your beliefs are and the way you think are the two defining factors that will determine whether or not you will have success as real estate investor. These two defining factors are what is known as a mindset. A mindset is universally defined as a habitual or characteristic mental attitude that determines how you will interpret and respond to situations.
Two examples of individuals having incredible mindsets are Michael Jordan, and Tiger Woods.

Tiger Woods has a mindset and a core belief that every golf ball that he hits will go in, and every tournament that he plays in he will be victorious. All of his golf shots don't go in and he doesn't win every tournament, but is there any wonder why he has of this writing won 54 golf championships at the age of 30? It has to do with his mindset.

Michael Jordan is known as the best basketball player that has ever lived. But did you know that he was cut from his high school basketball team as a sophomore because at 5 feet 9 inches he was deemed to undeveloped?

Of course that did not deter him. He practiced even harder grew to 6 feet 6 inches and within the next two years became a high school All American.
He went on to establish a distinguished career, which included hitting the last shot to win the NCAA college basketball championship, winning 6 NBA titles, 5 league MVPs and a slew of other accomplishments.

Why was he such a winner? Why did he dominate?

Simply because of his mindset, he believed that he was a winner so he won, he believed that he was destined to dominate so he dominated. So let me ask you, what is your mindset when it comes to your real estate business?

Do you have super goals or mediocre ones? Do you promote your real estate business a little or a lot? Are you finding truly motivated sellers? Are you building momentum for your business or are you slacking off?

Whatever your case may be there is always room for improvement. For example, instead of being happy with doing a couple of deals in a year, develop the mindset and take the action necessary to do 50, 100, or even 300 deals a year.

Don't say that it can't be done because there are real estate investors who are achieving those types of numbers. Remember it's all about your belief system and the way that you program yourself to think. If you think that you can, and act on that belief chances are you will accomplish your goal.

So the message is simply this, when it comes to your real estate business, make sure that as a real estate investor and entrepreneur you develop a superior mindset that will enable your business to prosper and grow exponentially.

Every single person in the world at one time or another has had a fear of something. Whether it is a fear of something physical such as spiders, heights, the dark and water, we all deal with fears. For some real estate investors the biggest fear that they run up against is the fear of talking on the telephone with sellers. They suffer from telephobia.

Telephobia is the fear of talking on the phone. As a real estate investor if you have this fear and anxiety of talking on the phone with sellers you must overcome it in order to be a successful real estate entrepreneur. Do you have a fear of talking on the telephone to sellers because you are afraid you may screw up? Forget what you had to say? Or get flat out rejected? If one of these fears describes your case. Then this is the best way to handle them.

If you fear being rejected, you must rejection proof yourself.

Rejection is part of the game. It will happen. In fact it will happen often. Some sellers will tell you no, but you must not take it personally or it will be detrimental to your career as a real estate investor. Never let the fear of rejection stop you from making that phone call or visiting the seller.

If you are afraid that you may screw up or forget what you had to say use a phone script.

The phone script works because you know exactly what to say. There is no guessing or "shooting from the hip". A well-polished phone script gives you a consistent approach that keeps you focused on what you are trying to accomplish and achieve. When you use a phone script there is little chance for you to screw up or leave out important information.

Deal only with motivated sellers

If you have to overly convince a seller to sell their house to you, then they are not motivated to sell. You will never lead them down the path of closing a deal. In fact, they will be standoffish and resistant to your overtures which will create tension and unnecessary frustration. Don't ever fear talking to a seller this, just don't talk to them.

Deal only with motivated sellers. A motivated seller is someone that needs to sell. You won half of the battle when you understand that there is a big distinction between someone wanting to sell a property versus someone that needs to sell a property. One is a suspect and the other is a prospect. Deal with prospects only.

In conclusion, you should never fear talking on the phone with sellers because what is f.e.a.r. anyway? False Expectations Appearing Real. It's all in your head. To overcome your fear of talking to sellers on the telephone simply change your mindset.