CleverInvestor.com
Monthly Investing GUIDE
Real Estate
Search Engine Marketing Solutions to Your Negative Cash Flow
7 “Must Have�
Mobile Marketing Tools
Habitat For Humanity
CleverInvestor.com
Table of Contents Introduction by Cody Sperber
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Real Estate Search Engine Marketing by Cody Sperber Ask Dana
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How do I buy without earnest money or proof of funds by Dana ....................................... 7 Solutions to Your Negative Cash Flow by Ron LeGrand ................................................. 8 Expert Corner with Lyle Wall ........................................................................................... 11 7 “Must Have” Mobile Marketing Tools for Real Estate Investors by Matt Miller..................................................................................................... 13 Habitat For Humanity ..................................................................................................... 15
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Welcome to the First Edition of the Clever Investor Monthly Investing Guide By Cody Sperber I remember when I was a brand new investor. The thought of making money by flipping houses or holding rental properties was so intriguing to me. As I started to read books and do research online a small fire started to ignite inside me that grew as I learned more. Before I knew it I was consumed by the possibilities of a better financial future. I became a sponge and wanted to learn absolutely everything I possible could about investing in single family houses and so my journey began. Sound familiar? It should. I can tell you from first hand experience that the only way you will be successful in this business is if you have a true passion for your new craft. Investing in real estate will be the most rewarding, hard work you will ever do! Treat your new craft like a game and you will lose money, relationships, and even your mental health. Treat it like a business, with systems and accountability, and you will reap the financial rewards you have been dreaming of. It has been said that investing in real estate is 10% luck, 20% skill, and 70% concentrated power of will. Think about that for a second. If we count on luck then we are destined to fail and would just be speculating (just like many did during the boom that are all now broke). So that leaves skill, otherwise known as education mixed with implementation, and the power of will. This means that if you are going to be successful you MUST have the right education and millionaire mindset in order to push through the bull crap you will encounter in every deal that you do. And trust me when I say this no two deals are exactly the same. In every transaction I have been in there are unforeseen surprises, stupid people, and financial snafu’s that threaten the deal. It has been my ability to problem solve quickly, stay positive with my eye on the prize, and change direction without focusing on the “old plan” that has allowed me to succeed. “Thank God They Keep Moving The Damn Cheese...Otherwise Every Knucklehead Would Be Making My Damn Money” Cody’s Mentor Lyle Wall So I urge you to begin your investing career by focusing on your “inner game”. Tell yourself every day that things will not go as planned and that will be okay with you. Tell yourself that you welcome the challenges that lie ahead because you know that your competition will give up long before you ever will. And finally, remind yourself of your goals every day, never stop learning, and surround yourself with other like minded people. The money is yours as long as you are willing to do what it takes to go and get it! I look forward to seeing you at the top...and when we all get there let’s look down and be proud of our journey that got us there.
Cody Sperber a.k.a. Clever Investor Page 3
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REAL ESTATE Search Engine Marketing By Cody Sperber
Why Real Estate Professionals Should Join a Social Network We Are All Connected
In our new digital world we are all connected. Social networking websites have evolved the way we interact on a daily basis and many of the traditional marketing methods such as TV, print, and radio no longer drive leads our way. What once used to be an "in-person" event many real estate professionals are building huge referral networks from social network community members they meet online. By fostering these relationships those that work these new online channels are capturing all the business they can handle while those that don't spend the time to get involved are slowly going broke. If you are to survive in the future real estate business you must adapt and learn how to social network online.
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What Can Joining A Social Network Do For Your Real Estate Business? The first and most obvious advantage one has when joining a social networking site is meeting new people without every leaving your computer! There are so many niche social networking websites that it is easy to find others online that have the same interests as you. Most social networking websites are free to join making meeting new friends easier than ever.
A second advantage is staying in touch with old friends. Many of us over the years have lost touch with those we met in the past and most social networking websites have a search function to browse their members. Facebook has pioneered this technology and even recommends friends that the system believes you know. Page 4
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A third advantage is the ability to join or create sub groups within the community. This is great because we can search for that interest us and easily join in the conversation. The more we contribute the more relationships we will build over time.
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A fourth advantage is the social networking platform itself. Many sites offer free blogs, forums, directories, or article / video syndication tools that help us market our real estate services to others within the community and on the web. This is great for real estate search engine optimization and helps promote your services online.
Keys To Being A Successful Online Social Networking Real Estate Professional. Being honest with yourself and your community is the most important rule when networking online. Community members can smell insincerity so don't fake your interest or reason why you are there. Remember that nobody likes a constant commercial so spend more time sharing your knowledge and less time promoting yourself. The more you contribute the more others will want to interact with you. Share a lot and share often. Overtime your will eventually build a trust community that wants to do business with you. Join social networking websites related to business.
Google "business social networking websites" and you will find great examples of business social networking websites to join and get involved in. Last piece of advice is to respond to comments or questions in a timely manner. If someone takes the time to write to you or about you take the time back to respond and interact. It is considered rude if someone makes a comment on one of your blog posts or contacts you through a private message and you don't take the time to respond and acknowledge their contact with you.
QUICK TIP
When meeting new contacts, try to get their name, number, email address and physical address. Then at the holidays, send out cards to all of your contacts. How many agents, loan officers or investors sent you a card last year? Probably none. This will make you stand out from the crowd and help you do more deals.
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Ask Dana
Q: Are there government programs for rehabbing a house? A: The U.S. Department of Housing and Urban Development's Section 203 (K) rehabilitation loan program is designed to facilitate major structural rehabilitation of houses with one to four units that are more than one year old. Condominiums are not eligible. The 203(K) loan is usually done as a combination loan to purchase a fixer-upper property "as is" and rehabilitate it, or to refinance a temporary loan to buy the property and do the rehabilitation. It can also be done as a rehabilitation-only loan.
Q: I agreed to buy a house and now I’ve changed my mind. How do I cancel? A: For the answer to this, you have to look at your contract. The contract is the legal agreement you have made with the seller. Most contracts have certain contingencies where a cancellation is acceptable. To cancel for reasons other than that, there are often consequences and such a decision should not be taken lightly. Keep in mind that while you have been preparing to close the transaction, the seller has taken his home off the market and may have entered his own contract to purchase a home. This can create a chain of sales and purchases, all depending on you to fulfill your obligation. If you do not fulfill the contract, your decision may affect many more people than just one seller. For the legal consequences of canceling a contract, you may have to consult an attorney.
Plans and specifications for the proposed work must be submitted for architectural review and cost estimation. Mortgage proceeds are advanced periodically during the rehabilitation period to finance the construction costs. For a list of participating lenders, call HUD at (202) 708-1112. If you are a veteran, loans from the U.S. Department of Veterans Affairs also can be used to buy a home, build a home, improve a home or to refinance an existing loan. VA loans frequently offer lower interest rates than ordinarily available with other kinds of loans. To qualify for a loan, the first step is to apply for a Certificate of Eligibility. Q: Banks won't typically allow assignment of contracts on REOs. How can I get around this? A: Make offers using an LLC or trust as the buyer for the property. Once your offer is accepted by the bank, sell your interest in the LLC or trust to the end buyer. The end buyer then closes with the bank as the owner of the LLC or trust.
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How do I buy without earnest money or proof of funds? By Dana Van Hoose One of the questions I am asked quite often by students is how do I make an offer without earnest money or proof of funds? It makes sense that this might hold you back from making offers but there actually are a few tricks/solutions to the art of making offers and being a “no money down” Real Estate investor. Now, before I share them with you keep this in mind: A “no money down” Real Estate investor is not just a “no money having” Real Estate investor. “No money down” investing is for the beginner and the advanced Real Estate investor who wants to make a huge impact in their Real Estate investing business.
I don’t have earnest money!
Now keep in mind, there is a big difference in making an offer to a motivated seller vs. making an offer to a bank. Motivated sellers are not as concerned with earnest money as a bank will be. In most cases, I offer $100 earnest money with my offer to a motivated seller. The reality is that 90% of the time they never say a word. However, if they do push back a little and ask why the earnest money is only $100, I simply tell them “my partner never offers more than $100 earnest money because we are planning to close as quickly as possible. I’m sure that’s one of the advantages you see in working with us!” With this approach I am deferring the issue to someone else (my absent partner) and completely avoiding the objection by getting them to agree that working with us is a smart move! Banks are not so simple! They have guidelines…but we have Kung Fu tactics! When you submit your offer simply write in an earnest money amount that is appropriate for the offer (usually 1%) and write earnest money to be deposited upon completion of the title work. Title work takes up until the day of closing which is usually 30-45 days. This gives you plenty of time to find a buyer and assign your contract or put together transactional funding. In essence, your check is never deposited…it is simply handed back to you once it is replaced by your new buyer or your transactional funding investors check!
I don’t have proof of funds!
If you have private investors simply use their account snapshot as proof of funds. If you don’t have private money in place yet, call up one of your local Hard Money or property based lenders and set up a meeting. In the meeting, along with the normal questions you should ask a property based lender, explain to them you have several meetings scheduled with other local property based lenders and you’d rather just work with one good one who understands you will need proof of funds letters so that you can make plenty of offers and send them a ton of business! Watch how fast they offer to type one up for you on the spot so they can earn your business NOW and keep you from going to their competition! Remember, Real Estate investing isn’t easy, but it can be simple if you do it the right way! Watch for my next article on how to interview Hard Money Lenders and get all the money you need for you and your buyers to buy discounted properties with no money or credit! Page 7
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Solutions to Your Negative Cash Flow By Ron LeGrand Are you over leveraged with negative equity, and losing sleep worrying about it? Every time I do an event, I wind up in conversations with several folks in the room who are upside down and owe more than the current market value. This article will address your options, none of which are pleasant, but most certainly one of which will be the final outcome. First of all, you're not alone! The numbers are all over the place, but somewhere between 3 and 8 million people are in the same situation. That doesn't make you feel any better, because when the ship's going down it matters little who's the first to drown. I should take a second here to remind you if you followed my instructions from the beginning, you couldn't be in this position 'cause you would not have personally guaranteed debt to buy houses. It's against my rules, and has been for 25 years! Ok, you didn't know me then, so I'll forgive you, and if you did know me and chose to do it anyway, I'll still forgive you, especially if you're a testosterone laden man. I should point out my forgiveness won't fix the issue, and won't help you sleep. I guess this is where I should also disclose that I have millions of dollars in personally guaranteed debt on commercial property myself. Looking back, I wish I had listened to myself because every one of those projects are at a stand still, waiting for capital and an end use to return. All have issues with lenders, some will turn into litigation, and none have cash flow. So, as I write this, maybe I'm doing it for me as well as you, but at least you'll know there's someone with a much bigger problem than you. Now, don't you feel better already? You have several options. The trick is to pick the best one and move it to a conclusion. That's the hard part. Hope Is Not A Strategy. Most people can make a list of their options on any problem, but I find many quit there. You can't! It won't go away without action! Here are your choices, as I see them: You can continue making payments, probably suffer a negative cash flow until the value goes back up and time fixes the cash flow. This is the solution many advisers will give you because it's the righteous thing to do. Of course, these advisors are not suffering the negative cash flow or are in any pain over your situation. Page 8
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Here's the problem with this advice; you may not be financially capable of suffering the negative cash flow, especially on multiple properties, and even if you are, here are the questions you should answer How long can you afford to go negative? When will it catch up, and will the cost ever be recouped?
Now The Reality. No one knows when your equity will return, and according to an article in USA Today, it may not be in your lifetime! The article said 2005 real estate prices may be the highest we'll see in our lifetime. That's actually correct in one sense, and dumb in another. Who's lifetime? Mine or my 2 year old great grand daughter's? However, the point is right on. I have no doubt it will take years to get back to where we were in value, and cash flow is based on rents which are adjusted to economic conditions, so it may take years to see them climb enough to cover your negative cash flow. In other words, choosing this solution, assuming you can, has no assured positive conclusion, and may just cost you thousands of dollars to protect your credit. You can negotiate with the lender to modify your loans, to drastically reduce the payments, so you at least break even. You may even be able to get a principal reduction, and it's common to get a low interest, fixed rate loan. This costs you nothing if you do it yourself, and very little if you have an attorney do it, which is my recommendation. Don't assume it won't work for you, especially if your opinion is based on any conversation you had in the past with your lender. This changes daily, and is exactly what the government sent billions to the banks to fix. These loan mods are now government
funded. This is your chance to get a piece of the government bail out gifts, and don't assume you won't qualify. There are plans for people who are current and others for people in arrears. Again, it costs nothing to try, and in my opinion, is foolish not to. You can always go to one of the other options if it doesn't work out.
TIPS
Let a skilled attorney do it for you. The results will not be the same as you doing your own. It's worth the cost. Perhaps you could divert a mortgage payment or two to the attorney to get the banks attention. Offer the property back to the bank as a "Deed In Lieu of Foreclosure". This may be your best option by far, because in most states if the bank accepts the deed, they will not pursue a deficiency, and in some states it's now the law. This should be done only with the help of an attorney who can also negotiate no derogatory Page 9
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marks on your credit. You may or may not be successful, but if you are, this is an easy way out and it is the top of my favorite list. Forget any money you have in the deal... When The Ark Is Sinking, Throw Over The Elephant First. You can always get free equity in houses and buy as many as you like and do it correctly this time, being pig headed over loss will likely only make the loss bigger when you finally do come to your senses. You can simply let the lender foreclose if all the above fail. It will ruin your credit, if that's still a concern...and it is, for most that have it. However, it may be time to come to grips where your priorities lie. If your financial drain is causing extreme hardship in your marriage or your health, something has to go! Credit is nice. It makes you feel worthy and gives you freedom to buy stuff you can't pay for now. Of course, that's what got you here to begin with. The good news is life goes on without it. It's not as bleak as you picture it now. People will still love you. Your friends don't check your credit and if it does matter, they ain't your friends. Bad credit can be cleaned. Time will fix it, and you will get some peace along the way. If you know how to make a living and produce revenue, they can't take that away. Your value is in your mind and your heart, not your credit score! Bankruptcy is always an option, and one many are taking. Of course this stops all creditor pursuits, but you should ask yourself - what's the conclusion to this if I file. Chapter 13 will allow you to reorganize and put all of your lenders at the mercy of the court, and you can literally recreate your own debt structure with a reasonable plan. However, what are you trying to save? Is it worth the years of being under tight
scrutiny, and handcuffed to the plan? What's the end conclusion and does it make sense, or are you simply stalling the inevitable...complete liquidation? Tough questions, but must be answered! Your credit is gone, regardless of which type you file. Chapter 7 will be over in a few months, but will strip you down to a new beginning. Maybe that's more than you can handle, maybe not. The more you have, the tougher it is to lose it, but I suspect the more days you spend without peace, the less value all these things begin to have. I said in the beginning none of these choices are pleasant! They all require soul searching, and competent advice. Don't let your answer kill you before you reach it, and if you're worried about what your friends or relatives will think forget it. They're probably in worse shape than you, and are not willing to disclose. Getting through these times will make you stronger, build grit and condition you for better times to come. It will also narrow down your list of so called "friends". It may even make us all stop and gain a new appreciation for the simple things in life, most of which are free. I promise to talk about something more positive next month. I'm getting depressed writing this. I've gotta go take a pill now! http://www.millionairemakernewsletter.com Visit http://www.millionairemakernewsletter.com
to find more about how to survive in today's crucial economy . Article Source:
http://EzineArticles.com/?expert=Ron_Legrand
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Expert Corner
By Lyle Wall
Questioner:
“I invested $10,000 of my ROTH for fix up expenses with a rehabber, with the understanding that I would get my $10,000 back first, and then we would split the profit, 45% for me and 55% for the manager of the rehab project. The elder owner of the property took back a $100,000 first lien at 10% interest, all due and to be paid to the owner-lender at sale, and closing of the fixed-up property. As follows is a summary of what we estimated would happen. Gross Sale proceeds of: Pay off of first lien holder: Marketing and sales expense: My investment paid first before profit split: Estimated profit: Projected split profit between rehabber and myself:
$155,000 to $165,000 FMV -$110,000 - $ 12,200 -$ 10,000 $ 27,800+/$12,510 / $15,290+/-
I have since discovered the rehabber is divorcing, doing drugs, and has failed to manage the marketing of the property, etc. After more investigation, it appears that the rehabber gave several false documents, including phony pay stubs, to the private lender and myself. Actually, we think the rehabber committed lender fraud by any definition. I have a friend in the DA’s office that wants me to press charges against the rehabber, etc. The problem is, the rehabber is in title. I just want to save my ROTH moneys from a loss and messy legal problems. How do I do this?�
Lyle:
Get the rehabber out of title ASAP. Buy him out, threaten him with the legal entanglement, do a combination of whatever is necessary to re-title the property, but get the property under control of your ROTH and/or a third friendly party. Engage a good RE attorney and be certain you pay all legal expenses and filing fees for re-titling the property, etc., from your ROTH IRA. These costs should not be paid by you personally. Be smart and have all invoices and charges paid by the ROTH, etc. Make your best attempt to not get yourself and/or your ROTH in a legal cross fire, as result of not reporting lender fraud as you are now aware that a crime has in fact been committed. Strike a deal with the elder owner-lender to begin paying him by the month, if he is in the need of income, etc. Totally explain to him what has happened. Build trust with him, you are going to need his cooperation. If you hold the property for rental purposes, do not manage the property for your ROTH. Contract a professional property manager. Remember, you are not allowed, under the rules, to give services on behalf of your ROTH. You would be doing exactly that, by managing tenants, etc. If you do it improperly, it could be classified as a prohibited transaction. Remember, there is no statute of limitations for murder in the USA, nor is there any statute of limitation for committing a sin in your IRA. It just is not worth taking the chance. DO NOT DO IT! Keep your cool, be patient, the 75% ITV (investment to value) appears to be very safe. Next time, if there is a next time, take control and get in front of your transaction. We like Land Trust and LLC entities for Page 11
CleverInvestor.com holding title for this type of transaction. Also, we do not normally make a practice of doing short term deals of less than five (5) years. I think this could possibly be construed as a business deal and not an investment by your ROTH, which in fact, could be a no, no, for your IRA. Last, and not least, never, never title the property in the name of a flipper and/or taker of the funds for your wealth building, get in control and stay in front of your deal. Call me if you have any questions.
Questioner:
“What are your goals and what is in your investment pipeline for this coming year?”
Lyle:
I have never believed or been very aggressive in setting goals for the coming year. Actually, since I have been 33 years in the RE investment game, I think in terms of finding opportunities, then developing them accordingly. I never have preconceived thinking to do a certain number of deals per week, per month, or for that matter, per year. I think it dangerous to contemplate in terms of putting a define dollar amount in the investment environment in a given time frame. As for my investment pipe line, normally, we have 2-4 deals in the tube at in any given moment. Presently, we are looking at a four lot subdivision that we purchased out of foreclosure, which will be enough challenge for us this coming year. My goals would probably be considered very simple, by many standards. I will be reading books, investment news letters, and attending investment classes this coming year. I will be thinking, continue to grow, build my knowledge base, and change my life in a positive manner during this next year. I will continue to invest in myself expecting investment returns accordingly, hopefully getting better each day in enjoying life as it unfolds for Gloria and me.
Questioner:
“I know you have been on a continuous reading program for years. What have you read lately that you would suggest for me?”
Lyle:
Yes, I turn off my lap top and read in the evening time to relax and slow myself down. Often times I find myself re-reading many books that I have previously enjoyed. Presently, I am re-reading Lonnie Scruggs books, all three of them to be exact. He writes great horse sense concerning your “dollar employees ” that work when you are sleeping, never taking a day off. I really respect and like Lonnie Scruggs. So will you, if you get the opportunity to meet Lonnie and his wife Joanne. His web site is simply, his name. This past year I enjoyed reading, among many books, “Where have the Leader gone?” – Lee Iacocca, he really does a number on our policy makers at the federal level; “The age of Abundance” by Brink Lindsey, very articulate material; “the dip” – Seth Godin; helps you make choices and why you make them, etc. “The World is Flat” –Thomas L. Friedman, Pulitzer prize winner, then there is the book “It Ain’t All About the Cooking” –Paula Deen, hard to trump the successful story that she has to tell. We are what we eat, we are who we hang out with and we are what we read. Yes, reading is a great humbling equalizer for me. If you want a list of my 50 suggested titles, just email me requesting the list with your phone number and we will send it to you. Good luck in your hunt with your preparation for a better tomorrow!
Lyle Wall - The “IRA Man” has 35 years as a successful real estate investor, and is mentor to The Clever Investor. Page 12
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7 “Must Have” Mobile Marketing Tools for Real Estate Investors By Matt Miller Every day you’re not taking your business on the road with you is another day you’re falling behind your competition, missing out on potential clients, and losing deals to those who do. Mobile Marketing will help you build and grow your business faster by keeping you in the loop, and make it easier for you to do business with those who are on-the-go.
Here are the 7 tools every real estate investor needs to use to succeed today: Zillow (zillow.com) Depending on the info available in your area, Zillow is likely to be one of the only free sources of sale prices and comps. You can also have your available properties added to it with the listing info.
Text via Email (tech-faq.com/how-to-send-text-messages-free.html) Use a handy automated email service to keep in contact with your network on their phones. Just type their number into the phone service provider’s email, and hit send. But remember, the texts may not be free for them to receive even though they’re free for you to send.
Google Maps (maps.google.com) Add your business info and exact location to Google Maps. No more confusing directions or incorrect maps. Check out Google’s Guide on how to edit their maps (maps.google.com/help/maps/edit/promo.html).
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Instant Mobilizer (instantmobilizer.com) Optimize your website instantly. This tool will help you add features to attract mobile users to your website such as auto-generated Google Maps, click-to-call and more.
Google Voice (voice.google.com) FREE calls! You can have all of your personal and business calls sent to one phone, and utilize a dozen different services at no cost. Set up personalized greetings for each number, do conference calls, or even have voicemails transcribed. Did I mention it’s free?!
Twitter (twitter.com) Everyone and their grandmother “tweets”. It only takes 30 seconds to notify your entire network of a deal. If you’re not building rapport with your contacts by sending out daily updates, sharing your listings, or other promotional info, you’re missing out big time.
YouTube (youtube.com) Last but not least, the tool that will let you show off a property fully. Share your listings easily with the whole world, and generate more interest in your deals. By using the right keywords and links, even if the person isn’t interested in the particular property in the video, you can direct them to your other deals or at least get them on your contacts list.
If you take a few minutes a day to utilize these tools fully, you’ll be a Master of Mobile Marketing in no time.
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Focused Giving
Habitat For Humanity Link: http://www.habitat.org/
Disaster strikes in an instant, but shelter and housing needs remain. Supporting families affected by disasters requires immediate, comprehensive and collaborative actions. Long after humanitarian aid organizations have completed their relief work, the need for quality shelter and housing remains for months and years. More than 50,000 families worldwide have been served under Habitat’s disaster recovery programs. By giving the communities the means to rebuild, Habitat has been able to support, empower and work with families in building recovery shelter and housing solutions. Our ability to respond effectively to this disaster will require support from donors, volunteers, churches, corporate partners and other community organizations. Please make a tax-deductible donation today to help families rebuild and repair homes.
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Monthly Investing GUIDE