THE INVESTOR HOW TO BUY PROPERTIES FROM THE LAND BANK Presented by Gail Paul
What is the most important player in the distressed property market in Ohio that you don’t know about? It’s the Land Reutilization Corporations, better known as “land banks,” that operate in most counties in Ohio. They are non-profit corporations set up by the state to acquire abandoned properties often through tax sales - and - guess what? - Sell them to responsible property owners who will maintain the properties in good repair and pay real estate taxes in a timely fashion. Does that sound like you? Then get to this exclusive meeting, where Gail Paul, the Vice President of Communication Strategy of the Hamilton County Land Bank will discuss this practically-unknown way of buying off-market properties and land. She’ll talk about: • How to access Land Bank inventory (the Hamilton County Land Bank alone has 560 parcels available right now,
we’re pretty sure there’s one you’d be interested in) • What it takes to qualify to buy a land bank property • How to process works, from application to closing Join us for this career-changing meeting on Thurdsay, June 1, 2017, beginning at 7:30 pm at our NEW LOCATION at the Ramada Plaza, 11320 Chester Road, Cincinnati Ohio, 45246!
JOIN US EARLY AND ENJOY HEARTY HORS D’OEUVRES! The Real Estate Investors Association of Greater Cincinnati (REIAGC) has added food to our general meetings! Please be sure to join us early for hearty hors d’oeuvres and networking fun with your industry peers.
THE PRICE IS RIGHT, MAYBE: A PROPERTY EVALUATION WORKSHOP Do you ever have a problem figuring out what a particular property is worth? Maybe the comparable sales are all over the map, metaphorically speaking. Maybe you’re not sure how to guesstimate the income and expenses on a vacant house. Maybe you just get confused about how to put all the pieces together. Or maybe you’re pretty good at all of that, but can’t get your brain around what to offer so that you make an adequate profit for your efforts. We’re going to try something different at our next early meeting: a workshop-style session where you’ll be provided with information and asked - with a group of your colleagues - to come up with and defend a value for a given property. This is one of the key skills that every real estate entrepreneur must master; come out and participate. You’re certain to learn something that will make, or save, you money. Join us for this highly anticipated meeting on Thurdsay, June 1, 2017, beginning at 6 pm at our NEW LOCATION at the Ramada Plaza, 11320 Chester Road, Cincinnati Ohio, 45246!
10945 Reed Hartman Hwy | Ste. 113 Cincinnati, OH 45242 P: 513 407-3137 www.cincinnatireia.com
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2017 BOARD OF DIRECTORS & COMMITTEE CHAIRS President Anita Johnson 513 334-0444
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Vice President Drew White 513 207-9846
Board Members Ben Bauer Eric Kottner Narendra Mundhe Cheryl Long Linda Hull Tom Terlau Association Manager Nancy Terry 513 407-3137 Cincinnati REIA 10945 Reed Hartman Hwy | Ste. 113 Cincinnati, OH 45242 P: 513 407-3137 | F: 844 734-2472 www.cincinnatireia.com
Disclaimer
The REAL ESTATE INVESTOR is published 12 times a year by the REAL ESTATE INVESTORS ASSOCIATION OF GREATER CINCINNATI. The subscription cost is $120 per year. First class postage paid. © Copyright 2016 by the REAL ESTATE INVESTORS ASSOCIATION OF GREATER CINCINNATI. All rights reserved. Reproduction or dissemination in whole or in part, in any form whatsoever, is expressly prohibited. Printed in the USA. The information contained herein and information shared at meetings and events is believed accurate, but it is not guaranteed or warranted in any manner. The information is provided with the understanding that neither the author(s), program speaker(s), nor the publisher (or its directors, officers, employees or agents) are engaged in rendering legal, accounting or other professional advice. REIAGC does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. We recommend you perform your own due diligence and seek appropriate legal, accounting, or other professional advice before making any investment. TM
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GENERAL MEETING
6 pm - The Price Is Right, Maybe: A Property Evaluation Workshop 7:30 pm - How To Buy Properties From The Land Bank Ramada Plaza, 11320 Chester Road
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FRIDAY MORNING MEETUP 9 am to 11 am Frisch’s Restaurant 2439 E. Sharon Rd, Cincinnati Linda Hull - 513 549-7821 Cheryl Long - 513 429-2583
REHABBER’S FOCUS GROUP
6 pm Slatts 4858 Cooper Road, Cincinnati 45242 Joe Davidson Eric Kottner
WHOLESALING FOCUS GROUP
6:30 pm | Perkins 7108 Hamilton Avenue North College Hill Michelle Clayton - 513 400-4937 Cheryl Long - 513-429-2583
GREATER CINCINNATI REAL ESTATE MARKET UPDATE 9 am Clarion Hotel North
INVESTORS LUNCH
11:30 am - 1 pm Century Inn Restaurant 10675 Springfield Pike Dave Jasper - 513 942-5110 or Max Arroyo 513-772-5736
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GENERAL MEETING
6 pm - Intro to Team Building OR Why I Buy Houses So Ugly You Wouldn’t Touch Them With A 10 Foot Pole 7:30 pm - 10 Days to Mke $30k: How to Make Big Money Wholesaling Houses in 2017 Ramada Plaza, 11320 Chester Road
LANDLORD FOCUS GROUP 6:30 pm Crosley’s Sports Cafe 4901 Vine Street, Cincinnati Scott Ellsworth, 513 659-5531 Jim Shapiro, 513 515-6717
FORECLOSURE NOTE BUYING SHORT SALE FOCUS GROUP
6:30 pm, Wendy’s Restaurant 5909 Mulhauser Road Deb Meyer - 513 266-4008 or John Dohtery - 859-653-3290
HOW TO BUILD A 6-FIGURE WHOLESALING BUSINESS 9 am Clarion Hotel North
CREATIVE BUYING AND SELLING FOCUS GROUP
6:30 pm Perkins, 7108 Hamilton Avenue North College Hill
NORTHERN KENTUCKY FOCUS GROUP
6:30 pm at PeeWee’s Place 2325 Anderson Road Crescent Springs, KY Brandon Brewer - 859-240-7339 Tom Terlau - 859-653-6412
MISSION STATEMENT
OF THE REAL ESTATE INVESTORS ASSOCIATION OF GREATER CINCINNATI (REIAGC) • Encourage our members’ success through education and professional services • Represent REIAGC members as positive, ethical contributors to the economic and the social well-being of our community
PRESIDENT’S CORNER
By Anita Johnson, REIA of Greater Cincinnati President Greetings! Can you believe that it’s already June, and that the first half of the year is almost gone?! I don’t know about you, but it sure does seem like the months are FLYING by and that there are not enough hours in the day to do everything that needs to be done. It seems like it was just spring, and in just a couple of weeks it will be the first day of summer! The Real Estate Investors Association of Greater Cincinnati (REIAGC) has now had two full months of meetings at our new location (Ramada Plaza in Sharonville) and we continue to hear positive comments. We just had our annual Vendor Showcase on May 18 and it was a huge success! We had more than 40 vendors offering products and services specific to real estate investors’ needs, as well as donations by vendors of several gift cards and gift certificates that were given away to a few lucky ticketholders throughout the evening. Overall it was a great evening with lots of good food and networking.
followed by our main meeting which will be all about how to buy properties from the Land Bank. The process of acquiring off-market properties from the Land Bank is something that very few people understand or even know about, and we’re bringing someone in to tell you all about it. On Saturday, June 10, we will have a FREE (yes, I did say it was FREE) half-day seminar on Making Money in Today’s Real Estate Market. At the General Membership meetings on Thursday, June 15, you will learn how you can make BIG money wholesaling houses. And finally, our all-day Saturday session on Saturday, June 24, will be on Wholesaling and will be taught by none other than Vena Jones-Cox. Finally, REIAGC is always looking for volunteers, so if you have an interest in helping with any one of our events please let us know. I’d like to say “Thank You” to those of you who have signed up to be one of REIAGC’s “Most Valuable Volunteers.” We simply cannot do what we do without your support. And don’t forget - we have started the process of recruiting new board members for next year so please let us know if you would like to serve in a leadership capacity for the organization. As I always say, “Everyone has something to contribute.”
We have a LOT in store for you during the month of June. Have a great June! For starters, during our General Membership meetings on Thursday, June 1, we will have a hands-on session Anita Johnson on determining the value of a property (early meeting),
FRIDAY MORNING MEETUP CREATIVE FINANCE FOCUS GROUP: Have deals to sell? Services to provide to real estate investors and landlords? Or just want some time to just hang out with fellow real estate investors, landlords, and service providers with no agenda except making connections? Then join our Friday morning meetup—it’s free and open to the public. This morning networking meeting doesn’t have a topic, but just the chance to meet with fellow entrepreneurs and service providers. This meeting will take place the Friday after the 1st Thursday of every month.You’ll meet great, helpful people and make connections to build your business. A breakfast buffet is optional and available for purchase prices are $12 for hot buffet and $8 for cold buffet, available in the lobby/atrium area until 10:30am. Our next meeting is scheduled for Friday, June 2, 2017, from 9 am to 11 am at Frisch’s 2439 E Sharon Rd, Cincinnati, OH 45241.
THE TRUTH ABOUT MULTIPLE OFFER STRATEGIES (A WORKSHOP) The idea of making more than one offer to the same seller on the same property is a really great one… sometimes. Making multiple offers can greatly increase your chances of getting deals done…sometimes. In this workshop, you’ll look at potential deals, decide whether (and why) multiple offers make sense, and come up with what they should be. If you’ve ever wondered what a multiple offer strategy should REALLY look like, this workshop will increase your confidence and effectiveness in making creative offers. As always, our meeting will be held at the College Hill Perkins at Cross County and Hamilton Avenue beginning at 6:30 pm for dinner and 7:00 for the topic; as always, it’s for members only. RSVP at www.CincinnatiREIA.com.
The Investor
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COMING UP AT THE JUNE 15 GENERAL MEETINGS Early Meeting Beginner Investors: Intro to Team Building: How to Find the Folks Who will Make You Rich Presented by Jerry Fink There’s no such thing as a self-made millionaire. Every successful investor has a team of professionals that they can call on for help, advice, and services. From a real estate agent to a title company to an attorney, a CPA, and beyond, you need to build a competent, expert team around you - and it doesn’t have to be expensive! Learn who you need, what to look for in each team member, and how to find and compensate them at this new investor’s meeting on June 15 at 6 pm. Early Meeting Active Investors: Why I Buy Houses So Ugly You Wouldn’t Touch Them With A 10 Foot Pole Presented by Drew White There are ugly houses, and then there are ragged-out shells in marginal neighborhoods. If you’ve been ignoring the latter because your “formula” says that the seller would have to give you $15,000 to buy them, maybe you’d better hear how Drew White sells them for a profit AND gets the neighborhoods improved in the process. Main Meeting: 10 Days to $30k: How to Make Big Money Wholesaling Houses in 2017 with Vena Jones-Cox Everyone knows that wholesaling is the quickest and easiest way to put cash in your pocket in the real estate business. But do you really understand how wholesale deals work? What practices can make them legal, or illegal? How your buyers look at deals, and what they absolutely hate about wholesalers? Or even how to find great deals in the seller’s market of 2017?
do to get started right now • Which properties in which areas make for the most profitable, easiest-to-sell wholesale deals • How to make the right offer—the one that will make you $5,000 or more in cash—every time • How to put a property “under contract” so that you can legally sell your interest • How to find tons of anxious cash buyers for your deals • How to get your cash up front, before the closing, and never have to buy a wholesale deal before you sell it! Vena is well known for her ability to simplify tough concepts so that even a brand-new investor can easily grasp them, and for the incredible amount of information she packs into her presentations. So bring a notepad, bring a friend, and get to this meeting—it will change your financial life forever! Vena Jones-Cox has been a full-time real estate investor since 1989. She’s wholesaled over 800 properties, and has written the definitive homestudy program on how to flip properties quickly and easily. She’s the past president of the National Real Estate Investors Association and has appeared in Money Magazine, Reader’s Digest, Smart Money, and a host of other national publications.
REIA past president Vena Jones-Cox does, and at our June 15th meeting, she’ll share what you need to know to earn $5,000-$15,000 in the next 30 days right here in the tri-state. Attend, and you’ll discover: • How wholesaling works today, and what you need to
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WELCOME NEW AND HOW TO MAKE MONEY RENEWING REIAGC MEMBERS! IN CINCY-AREA REAL ESTATE REIAGC Would like to welcome its new members and thank its renewing members in the month of April: Veronica Allen Jennifer Baur Korey Campbell Joe Catanzaro David Catanzaro Harjinder Chauhan Jaipal Chauhan Joe Czanik Jackie Czanik Jay Erfman Randall W. Hanifen Jermaine Harris James Hartke Wellesley Henderson Jermaine Hersey John Horsley Victor Humphreys Charles Igwekala Kim Jeffery-Wolfert Jim Jemison Judy Knau Michael Latimore
Lacey Latimore Milt Mcadams Stephen McClanahan Carley McKenzie John Mehmel Dawn Palazotto Greg Pilot Steve Shelton Alicia Stoughton Kyle Taylor Hazel Vargas Joe Verkamp Jake Wolfer Kurt Wolfert Fred Woody Damia Wyche Anthony Wyche Deanna Wyche Dan Young Jason Yutze Lisa Yutze
The Investor
Spend a morning discovering the opportunities in Tri-State real estate and how the non-profit Real Estate Investors Association can help you take advantage of them. What you’ll know when you leave: • What’s happening in the Cincinnati area real estate market today - the opportunities and the threats • Skills to focus on if you’re just getting started • How to network and stay connected: this can make or break your real estate career Bring a non-member friend for free: if they join, you’ll get $25 in REIA bucks to spend on your own membership renewal, courses, or workshops! FREE to REIA members, but you must RSVP: www.CincinnatiREIA.com Saturday, June 10 Time: 9 am-Noon Clarion Hotel, 3855 Hauck Rd, Cincinnati 45241
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FORECLOSURE NOTE BUYING SHORT SALE SUB GROUP
TITLE REPORT - DO YOU KNOW HOW TO READ IT? Your seller has filed bankruptcy and the attorney says they owe nothing on the house. Awesome! But what does that really mean?
INVESTORS LUNCH FOCUS GROUP
At the next Investors Lunch Focus Group meeting on June 13, 2017, we will review how mold can impact your investment properties.
Does that mean it’s really “free and clear”? Does it mean that the $150,000 lien and the second mortgage for $40,000 have been removed and you can buy the house for enough to pay the seller and close the deal?
What are the steps you can take to prevent it from becoming a problem? What are your responsibilities as the property owner? How can you address it once it occurs?
If this is what the attorney is telling your or the seller then you definitely need to attend the note/foreclosure subgroup so you learn how important a title report is when buying a note or a property. And learn how to read a title report and know exactly what is still owed on the property. Join us June 22 at 6 pm and we’ll read a title report.
Lisa McIntyre from Dry Effect, LLC will be our guest speaker. Dry Effect is a family owned Cincinnati based company that has years of experience with water and mold remediation.
When you’re buying notes, a title report is imperative to read so you know what position the note you are buying falls…and you get what your seller said you would be getting. See you at the Wendy’s Restaurant on Mulhauser Road off of the I75 Union Center Exit in West Chester. Dinner and networking starts at 6:30 pm and Deb will start at 7:15pm. You won’t want to miss this meeting! For more information, Call Deb McMillan Meyer 513-266-4008 or John Dohtery 859-653-3290
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The Investors Lunch Focus Group on June 13 is from 11:30 am to 1 pm at the Century Inn Restaurant located at 10675 Springfield Pike. For more information contact Dave Jasper at 513 942-5110 or Max Arroyo at 513-772-5736
LAST CALL NOMINATIONS FOR THE One of the greatest benefits of membership is the education offered and the chance to network with other investors. What you may not know is that this organization is run by volunteer leaders such as yourself. Have you ever wondered when and how you can be a part of growing your education, this industry and your association? Well the good news is that now is the time! REIAGC is looking for volunteer leaders to participate on the Board of Directors and on volunteer teams.
cy Terry at the REIAGC office at (513) 407-3137 or info@ cincinnatireia.com. We are accepting nominations now so call today!
REIAGC is looking for committed leaders to serve on the Board of Directors. Nominations are currently being accepted. Candidates should bring a solid business perspective along with good critical reasoning skills. To participate in this process is easy. Each nominee will be asked to complete a simple three question survey on their skills which will then be submitted to the REIAGC Nomination and Election Committee. The committee is tasked with the responsibility of developing the slate of candidates for REIAGC Election. Members will get the opportunity to vote on the slate. We are trying to reach out to the members to bring you what you want and need to grow your business so help us to help you. If you have an interest in serving in leadership, contact Nan-
criterium-cincinnati@fuse.net
513-474-9600
BUILDING EVALUATIONS BY LICENSED PROFESSIONAL ENGINEERS • Residential and Commercial Inspections • Structural Inspections • Reserve Studies
Max J. Arroyo, Jr. Vice President Investment Property Asset Manager Berkshire Hathaway Profesional Realty
Commercial Services First Circle Property Management
7311 Tyler’s Corner Place First Circle Property Management
West Chester, OH 45069 Direct: 513-772-5736 Leasing and Service: 1-888-288-5912 E-Mail: Marroyo@bhhspro.com www.firstcirclepm.com A member of the franchise system of BHH Afiliates, LLC
Building Value LLC 4040 Spring Grove Ave. Cincinnati, OH 45223 (513) 475-6783 www.buildingvalue-cincy.org
The Investor
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HOW DO I OVERCOME PARALYSIS OF ANALYSIS? BY VENA JONES-COX
Q: I’ve recently started going to meetings of my local Property Owner’s Association, and I think they’re great. The problem is, there’s SO much information that I don’t know what to pay attention to! Every month, there’s another speaker with another opinion on the “best” strategy for this or that. I’m overwhelmed, and can’t seem to get out and actually do anything. Please recommend a course of study that will help a new investor make a nice, simple deal. ©A.G, St. Louis A: I’ll go you one better than that; I’ll tell you the ABSOLUTE BEST strategy for buying and selling property...or would that be less than helpful? New investors who attend real estate association meetings often come away with the same “paralysis of analysis” that you describe. There’s SO MUCH information available, and so much of it appears to be contradictory (buy foreclosures... don’t bother with foreclosures...buy to hold...buy and sell) that one wonders how anyone ever figures it all out. And adding to the problem, every successful investor is willing to defend to the death THEIR strategy as the BEST strategy. Although they’re trying to be helpful, they often add to the confusion experienced by newbies trying to make sense of it all. In my experience, new investors that don’t start making offers in the first 2-3 months never get around to doing it at all. The fear of doing deals only fades with the actual doing of deals; no amount of “book-larnin” will ever give you the confidence you want. So stop trying to learn everything, and focus on what you need to make the first offers. Those things are:
Building on the last example, once you know that wholesale deals are sold to cash buyers for 60%-70% of as-is value, you know a) how to calculate an offer and b) that you need to start finding buyers NOW. 3) Two or three strategies for finding the types of properties you want. Whatever your chosen strategy, finding good deals will consume most of your time and energy. So try 2-3 methods all at once for a few weeks. Discard those that fail and amplify those that work, but always use more than one way at a time. 4) The ability to evaluate the properties you’re viewing. In the case of junkers, you’ll need to know how to find the after-repaired value and the cost of the repairs. Don’t worry about figuring out what the property will rent for; it’s not important to your plan. Conversely, if your plan is to buy and hold multis, you’ll need to learn how to calculate the return on investment. 5) A team and a contract that will keep you out of trouble. Why do you need to know how to do a title search when there are folks who do it for a living? Sure, it might be good to know later, but it isn’t crucial for you to know right now. And if you have a well-written purchase contract that allows you to get out of a bad deal before it closes and an experienced mentor that will help you through your first few deals, how can you lose?
1) Some idea of what you want your real estate to do for you. Know this, and you’ll have a good idea of the exit strategy AND the type, condition, areas, and price range of properties you should be looking at. Want quick cash? You’ll need to wholesale properties. Looking at anything OTHER THAN 1-family junkers is a waste of time. Eliminate other properties and from your thinking and move on.
Renters Warehouse The Professional Landlords
Scott Adams ScottAdams@RentersWarehouse.com 513-334-4010 www.RentersWarehouse.com
2) A working knowledge of how your ONE exit strategy works.
John C. Wagner | 513.857.9179
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STUPID WHOLESALER STORIES BY VENA JONES-COX
Vena is a long-time wholesaler and past president of the National Real Estate Investors Association. She’s on a mission to professionalize the wholesaling business and create wholesalers who make lots of money while also treating buyers and seller right and not making idiots of themselves. Come learn from her at our June 15th meeting! Is it wrong of me to get ticked when people who call themselves wholesalers show a complete lack of understanding of what wholesaling is, or why wholesalers get paid? I mean, it IS my businesses—and I imagine that, say, a pediatrician might get mad of some guy who’d never gone to medical school hung up a shingle and started treating kids’ broken arms. Not that I’m trying to compare what wholesalers do to what doctors do—people’s lives are rarely saved or lost because of what happens in a real estate deal. But I do sometimes wish that wholesalers had to prove some basic level of competence before they could call themselves wholesalers. But that’s not the case: anyone who thinks they can “buy low, sell not so low” is allowed to print business cards that say “Don Dufus, Wholesaler” and run around wreaking whatever
havoc they can manage. My favorite type of stupid wholesaler is the one who’s fallen for one of those, “You don’t really have to know anything, it’s all done for you” sales pitches, bought himself a website, and tries to sell me properties about which he knows NOTHING, from the actual value of the property to the amount and cost of the work needed. In case you haven’t had the pleasure of buying one of these courses/Ebooks/seminars, the basic pitch seems to be this: don’t worry about knowing the market—the tax folks have the value of the property right up there on the auditor’s website. Don’t worry about repair costs—you never need to see the house. Just offer owners half of whatever they’re asking or whatever the property tax folks think it’s worth, and you’ll be fine. Buyers will line up to buy that house at 55% of value. If you don’t understand what’s wrong with that theory, please don’t call yourself a wholesaler. Wholesalers get paid for providing profitable deals to serious buyers, not for getting deal under contract. REAL wholesalers know what they’re offering, know that it’s a good deal, and can stand behind their numbers.
STRIVING TO REACH YOUR FINANCIAL GOALS TOGETHER
Investing in real estate is a serious decision. Don’t go it alone. • Investment Analysis and Due Diligence Assistance • Accounting Services Different levels of service to match your budget • Clean, organized records means less hassle at tax time • Tax Planning and Compliance
Ellsworth & Associates 513-272-8400
What you’ve always dreamed of, someone else who knows accounting and tax to handle it for you. The Investor
9624 Cincinnati Columbus Road Suite 209 West Chester, OH 45241
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The folks I’m talking about seem to think that they can and should get checks for throwing numbers at a wall and seeing what sticks. Here is, as closely as I can remember, an actual word-forword conversation I had last year with one of these “fake” wholesalers: Him: “Hi, my name’s Don Dufus, and I saw on craigslist that you buy junker properties in Cincinnati. I have one that I think you’d be interested in.” Me: “Ok, do you own it, or are you wholesaling it?” Him: [long pause] Me: “It’s fine if you’re wholesaling it, I just want to know if I’m dealing with an owner or a wholesaler.”
erty. “First of all, it’s not in Delhi, which is a bread and butter area with a great school system - it’s in Fairmount, a near-warzone in the city schools. It doesn’t even adjoin Delhi. “Secondly, I could literally buy that house and every house for 2 blocks around it for a TOTAL of $70,000, because 9 out of every 10 houses on that street are boarded up. On a rental evaluation, this house is worth $35,000, max, and that’s really an imaginary number because there are no sales of fixed-up properties in that area for the last 5 years. “Thirdly, it doesn’t need $7,000 in work, it needs $17,000 in work, and the reason I know this is that I sold that property 12 months ago for $1,500. “So, Dufus, I’m curious: where did you get your numbers?”
Him: “I have it under contract.”
Him: [long silence].
Me: “Ok, tell me about it”
Me: “Have you even seen it?”
Him: “It’s at 1234 main street in a neighborhood called Delhi. It’s a 2 bedroom, it’s worth about $70,000 fixed up, needs about $7,000 in work, and I’m asking $22,000”
Him: “No, I’m in Portland. This was a lead I got from my website. I got my repair numbers from the seller, who said he had a bid from a contractor to fix it for $7,000, and he told me it was in Delhi. The County website says it’s worth $70,000. I have it under contract for $19,900, what should I do?”
Me: “OK, Dufus, let me tell you a few things about that prop-
Me: “I guess you’ll have to go to some other Dufus from the West Coast’s website and post it there, ‘cause you’re never going to sell it to anyone who actually bothers to go and see it.” You may think that this kind of wide-eyed naiveté—“It’s done for me! I can make thousands, and don’t have to do a thing!” is rare. If only. I have some version of this conversation an average of once a month with people who honestly think they don’t have to know, or do, anything in order to make money wholesaling. And, let me add, the ‘gurus’ who are willing to sell courses using this pitch are making money hand over fist. Of course, their making it selling courses, not wholesaling houses. But what’s almost worse is people who decide to get “creative” with their wholesaling techniques, and because they don’t really understand WHY it is that real wholesalers do what they do in the ways that they do it, end up doing things that make absolutely no sense.
Sasha Allen 513-449-0514
Don’t get me wrong: there are creative things you can do with wholesale deals—but they kind of have to fall within the parameters of what’s possible, given the nature of the deals we do. For instance, I was recently approached by a local wholesaler who told me about a deal that sounded pretty interesting. After evaluating it and deciding that the numbers were right, I asked what part of the total price the was the wholesaler’s
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June 2017
fee. He informed me that it was $7,000, and that he trusted me so much that he’d take a personal check for that amount on the spot. I, of course, have no problem with paying any fee to a wholesaler, as long as the overall price works for me. But before I wrote the check, I asked to see the purchase contract. Why? Because when a wholesaler assigns a contract, the buyer— me , in this case—is agreeing to ALL of the terms of the contract. Before I pay an assignment fee, I want to know what it is I’m agreeing to. The “wholesaler” then informed me that he didn’t have a contract—he was co-wholesaling the deal for the ACTUAL wholesaler, who was in contract with the seller. The cowholesaler then asked me to pay HIM the ENTIRE wholesale fee (only $2,000 of it was his, the rest was what the actual wholesaler was asking), so that he could get into contract with the real wholesaler, so that he could have a contract to assign me. HUH?? So, this guy was asking me to pay him for something that he didn’t have: the right to buy a property. And, apparently, this is tactic that has worked for him in the past. Unfortunately for him, I actually understand that paying someone for something they don’t have and have no guarantee of getting (who’s to say that the actual wholesaler hadn’t already found a buyer? Or that she was actually in contract, for that matter, since neither he nor I had seen such a contract?) is a really, really bad idea. So I told him I would do this: pay his wholesaler $7,000 for her contract, and let her pay him, the co-wholesaler, his $2,000. He refused on the grounds that he was afraid she’d want to keep the entire $7,000…and he did not at all see the irony when I mentioned that I was sort of afraid the same thing was going to happen if I gave the $7,000 to him. Was it pretty creative of him to bypass the whole deal-finding process and specialize in marketing other people’s deals to buyers? Sure. Was it pretty stupid of him to be out trying to sell a deal that he had no actual interest in, no idea what the contract he was trying to sell looked like, and no concept that
what wholesalers get paid for is a piece of paper he’d never seen and didn’t even know for sure existed? Yep. In a twist on the same “wholesalers who don’t understand that wholesaling is assigning contracts” theme, a student of mine recently related this story (basically accurate, but details changed to protect the Dufus): A co-wholesaler approached him and asked if he could bring a buyer for the student’s deal and get paid for it. The student agreed, and the co-wholesaler proceeded to bring him an offer from a buyer that included a closing to occur in 30 days. Problem: the student’s contract expired in 10 days. Problem 2: the co-wholesaler had already collected $500 from the buyer in return for the deal. Follow this: the co-wholesaler took certified funds from a buyer. The co-wholesaler had no contract on the property. The co-wholesaler allowed the buyer to make an offer that couldn’t possibly be accepted, because the buyer wanted to close 40 days after the expiration of the student’s contract. What, exactly, was this guy thinking? My guess: “I got $500! I got $500!” and not much else. Here’s what I’m thinking: what this co-wholesaler did could easily be construed as criminal fraud. He took money for a product he didn’t have—a deal—and couldn’t get, because rather than thinking about the fact that a contract already existed and needed to be fulfilled, he was thinking, “in real estate, we make offers.” I strongly recommended to the student that he track down this co-wholesaler and slap him upside the head for me, just for claiming to be in the same business we are. PLEASE, if you’re going to wholesale, know your craft and understand your product. If you don’t, the best thing that’s likely to happen to you is that you’ll spin your wheels a lot and not make the money you should. The worst thing could be that you unwittingly break the law, or ruin your own reputation. Get trained, take advice, and don’t try to reinvent the wheel.
Benjamin A. Bauer, Attorney at Law 10999 Reed Hartman Hwy., Suite 108A (513) 851-7600 ● ben@thebauerfirm.com
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11
WHOLESALING FAQ FOR THE EDUCATED BUT SCARED BY VENA JONES-COX
If you’re like most people, you’ve been wondering all along when we were going to discuss all the awful things you’re imagining might happen to you as a wholesaler. And I have no desire to sugar-coat things for you, but the truth is most of the things you’re imagining are extremely rare, and easily overcome. Here are some of the most frequently asked questions about such fears: What happens if I can’t find a buyer for a property I have under contract? If you can’t find a buyer, one of three things has happened: • You’ve made a bad deal, in which case your buyers have certainly made you aware of this or; • You haven’t marketed the deal hard enough to get the right buyer or; • You didn’t give yourself enough time to get your buyers into the property before your inspection or partner approval clause runs out. As you’re probably already aware, any of these 3 failures is unlikely to harm YOU, if you exercised the recommended inspection clause. You’ll simply void the contract under that clause, or renegotiate for a lower price or more time, or in a worst case scenario, let the seller keep any earnest money as per the liquidated damages clause.
the biggest fear that most new wholesalers have. The first is that, bottom line, even if your buyer walks away on the day of closing, the only thing you have at risk (assuming you used the recommended clauses in your original purchase contract) is the amount of your earnest money. The second is that until a buyer actually puts money up front and signs a contract to buy the property, it is not sold. Never stop marketing a deal just because a buyer SAYS he wants it. The third is that assuming you did the right thing and collected the wholesale fee up front, you have a powerful way of negotiating an extension with your seller for the purpose of finding another buyer. Simply offer the seller additional, non-refundable earnest money in return for an extra 30 days to close. In the rare instance in which an actual buyer backs out, try to get him to sign a release saying that he does not intend to close. But whether or not he’ll do so, begin to market to your secondary buyers and, if necessary, let your seller know that there may be a snag in the closing.
In the first case, you might try renegotiating the contract price or option price—you’ll know what to re-offer after you’ve shown the property to 4-5 people. In the other two cases, if you’re certain that you’ve created a good deal, you might consider paying the seller an additional, non-refundable option fee or deposit to extend the period of the contingency and closing. A third possibility is to buy the property yourself, although that is outside the scope of this course. Remember, as long as you have a liquidated damages clause, you’ll lose only your earnest money; if the property is controlled via an option to buy, you’ll only lose your option fee for not closing. But don’t make it a habit. In any case, it’s important, as an ethical wholesaler, that you let the seller know as soon as possible that something has gone awry, and that you won’t be closing as promised. What if the buyer backs out before closing? This is far more rare than you might imagine, especially once the buyer has paid the assignment fee. In my decade plus long wholesaling career, I have had “lookers” (those are the guys who tell you they’re interested, but they have to line up money or bring their father-in-law by to take a look or come up with the assignment fee or whatever) back out dozens of times. I’ve had actual buyers—those who had actually paid the wholesale fee—back out exactly twice. There are three important things to remember about this, 12
June 2017
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What if my SELLER backs out? This is, believe it or not, the slightly more common scenario in my experience (It’s happened to me 4 times vs. 2 for the buyer backing out). If the seller tries to back out (or renegotiate after he’s already signed the contract, which also happens from time to time), you and your buyer have two choices. The first is, let him. This is often the wisest choice when the seller wants out because of a death, illness, or other tragedy. It’s just not worth it to pursue a seller who’s grieving or otherwise involved in some major life change, even if it means walking away from the deal and associated profits. The other is, refuse to let him. By virtue of the signed purchase contract, you have the right to force the seller to honor his side of the contract. When the seller just “decides” not to fulfill his contract— often because he just doesn’t want to, or decides that the money isn’t enough, or whatever. Usually the threat of a “specific performance” suit, where you sue the seller to force him to honor the contract, is enough to make a seller sit down at the table. Just a note: remember that, once you’ve assigned your contract, it’s not really up to you to decide how to handle this situation any more—it’s up to your buyer. And if the buyer can’t or doesn’t want to try to force a reluctant seller to the closing table, you’ll need to refund any assignment fee that you collected. What happens if I make a mistake in the value or cost of repairs of a property? No real tragedy; everyone does this from time to time, especially when trying to estimate a repair you’ve never seen before. Assuming that you used an inspection or partner approval contingency, you’ll exercise it and get out of the contract. Or better yet, try renegotiating the price. But in either case, if you inform the seller before your contingency time runs out, you’ll be able to set things back to rights without even losing your deposit. Learn all about the realities of the wholesaling process and how to do it RIGHT when Vena Jones-Cox presents at our June 15th meeting! The Investor
13
WHY YOU CAN’T SELL TO EVERY BUYER BY VENA JONES-COX
Vena Jones-Cox is a wholesaler with over 25 years experience in the real estate business and more than 800 deals under her belt. She’s also a world-class teacher and coach in the business, and best of all, she’s the guest speaker at our June 15th meeting. Make sure you mark your calendar and get there—whether you’re a brand new wholesaler or an experienced pro, you’ll learn plenty! It’s a frustrating thing when you’ve put a wholesale deal under contract, have evaluated it to the nth degree, and then get told by a buyer that “It’s not a good deal” or “I’d never pay that much for that house.” Yet it will happen to you, over and over again, even when you’re a REALLY GOOD wholesaler, and here’s why: Despite the fact that we use the same set of formulae (After repaired value x 70% less repairs for retail deals, After repaired value x 60% less repairs for rental deals), buyers are not some monolithic group that all have the same costs, the same profit requirements, or the same rehab standards. Yet when we make offers, we can’t do so to satisfy the needs of ALL buyers, or of particular buyers—we have to shoot for a number that makes sense to a lot of buyers, but not to the pickiest or to the ones that have the highest costs. Let’s take an example of a single retail house that’s worth $100,000 fixed up and needs $20,000 in repairs. As a wholesaler, you’d want to pay around $100,000 X .7 $70,000 -$20,000 $50,000 (your sale price) -$7,000 for your profit $43,000 offer. Now let’s look at how 3 different buyers—all based on actual buyers I know—might view this same deal. Buyer #1 is a retailer who buys and sells about 4 houses a year. He uses hard money to close and rehab his deals, an agent to sell them, and contractors to do all the work. He wants to make a minimum of $20,000 per deal, so he’d do his calculations like this: $100,000 sale price -$20,000 profit -$10,000 sales costs (6% commission + 4% for buyer concessions) -$20,000 repairs -$6,000 holding costs -$8,750 finance costs (15% interest + 5 points on $70,000 14
borrowed) $35,250 maximum allowable offer. Clearly, for buyer #1, your $50,000 deal isn’t good enough. Buyer #2 is also a retailer, who buys and sells 6 houses a year. He uses a mixture of contractors and his own labor, borrows private money at 8% interest with no points, and sells most of his houses himself. He also wants to make $20,000, but he’d calculate his MAO differently: $100,000 sale price -$20,000 profit -$4,000 sale costs -$15,000 repairs -$6,000 holding costs -$2,800 finance costs $52,200 MAO. For this buyer, your deal looks really good. Buyer #3 is a high-volume retailer. He uses contractors to do all of his work, and does a higher level of work than the other buyers. However, he’s also able to sell his finished properties at about 5% more than “market”. He’s a licensed broker who lists his own properties, thus paying a 3% commission rather than a full 6% commission, finishes and sells his properties in an average of 3 months, borrows money, at 12% interest, but has a profit goal of $15,000 per property. His calculation would look like this: $105,000 sale price -$15,000 profit -$25,000 repairs -$7,350 sales costs -$3,000 holding costs -$4,200 finance costs $50,450 maximum allowable offer—right on target with what you’re asking. The moral of the story is, as a wholesaler, you can’t and won’t satisfy all of your buyers with all of your deals. And it’s not because you’re doing anything wrong—it’s because your buyers have different needs and desires. Don’t take it to heart if a particular buyer tells you a particular deal isn’t a good one: what he really means is that it isn’t a good one TO HIM.
June 2017
COMPANY
CONTACT NAME
PHONE NUMBER
BUSINESS TYPE
LEVEL
Badcat Properties LLC
Samuel Moore Jr.
moorejrsam@hotmail.com
(513) 485-8599
Financial Services
Silver Vendor
Berkshire Hathaway Commercial Division
Max Arroyo
marroyo@bhhspro.com
(513) 772-7781
Property Management
Silver Vendor
BildWise
Dan Poske
dposke@crnsllc.com
(513) 301-0247
Rehab Project Mgmt.
Gold Vendor
BKH Contracting
Keith Hardig
keith@bkhcontracting.com
(513) 266-8719
Contractor Services
Bronze Vendor
Bowie Properties
Vena Jones Cox
vena@therealestategoddess.com
(513) 471-0141
Real Estate Services
Platinum Vendor
Charles P. Vonderhaar CPA
Chuck Vonderhaar
chuck@cpvcpa.com
(513) 563-0598
Accounting
Bronze Vendor
Cincinnati Home Improvement Company
Chris Penn
CincyHomeImprov@gmail.com
(513) 898-1878
Rehab & Restoration
Platinum Vendor
Criterium-Cincinnati Engineers
Matt Klein
criterium-cincinnati@fuse.net
(513) 474-9600
Inspection Services
Silver Vendor
Ellsworth & Associates Inc. CPAs
Scott Ellsworth
sellsworth@ellsworthcpa.com
(513) 272-8400
Accounting
Platinum Vendor
Exit Best Realty
Marty Russell
martysrussell@gmail.com
(513) 899-9990
Real Estate Services
Silver Vendor
Exit My Foreclosure
Kristin Calendine
kristin@exitmyforeclosure.com
(513) 429-3948
Real Estate Services
Bronze Vendor
Fabulous Floors of Cincinnati
David Caldwell
davidCaldwell@fabulousfloorsusa.com
(513) 453-4006
Floor (Wood) Restoration
Silver Vendor
Federle Realtors
Sasha Allen
teamallenrealtors@fuse.net
(513) 449-0514
Real Estate Brokerage
Gold Vendor
Formula Exterminators
Cindi Goff
cindi.goff@gmail.com
(513) 671-7378
Exterminator
Silver Vendor
Handyman Connection
Derek Christian
CHRISTIANDW@YAHOO.COM
(513) 934-3254
Rehab and Reconstruction
Gold Vendor
Hartlaub CPA Advisory Grp
Marc Steiger
msteiger@hartlaubtax.com
(513) 821-8768
Accounting
Silver Vendor
Home & More
Darrin Carey
darrin@myhomesandmore.com
(937) 458-3303
Icon Property Rescue
Jeremy Clayton
clayton@iconenvironmental.net
(513) 396-6653
Restoration
Silver Vendor
Keller Williams Pinnacle Grp
Kathy Waldeck
kathy.waldeck@kw.com
(513) 553-1883
Real Estate Services
Bronze Vendor
LD and SL Properties
Stephen Hering
STEVEHERING@PRODIGY.NET
(513) 737-6888
Real Estate Services
Bronze Vendor
Let Me Manage It LLC
Michael Rullmann
Mike@letmemanageit.com
(513) 703-1169
Management Services
Silver Vendor
NTN-Indiana/Ohio
John Spafford
john@ntnonline.com
(877) 579-3520
Tenant Screening
Bronze Vendor
OdorXit
Deb Meyer
deb@odorXit.com
(513) 266-4000
Cleaning Products
Bronze Vendor
Olmec Reflections Inc.
Donald Boling
olmecreflectionsinc@gmail.com
(513) 300-9203
Floor Restoration
Silver Vendor
Parkway Title
Louis Breeden
louis.breeden@parkwaytitlellc.com
(513) 701-7296
Title Company
Silver Vendor
Renter’s Warehouse
Scott Adams
scottadams@renterswarehouse.com
(513) 293-5079
Property Management
Silver Vendor
Secured Investment Lending Corporation
Brittany Kiah
brittany@securedinvestmentlending.com
(407) 878-2830
Financial Servies
Platinum Vendor
Security Services LLC
Kristen McClanahan
kmcclanahan@adt.com
(513) 924-2375
Security
Silver Vendor
Serious Property Management
Michael Smith
greg_mike@seriouspropertymanagement.com
(513) 328-3486
Service Link
John C. Wagner
John.Wagner@svclnk.com
(513) 857-9179
Title Company
Silver Vendor
Spring Valley Bank
Dave Woodcamp
springvalleybank@cinci.rr.com
(513) 761-6688
Financial Services
Bronze Vendor
Stepping Stones
Paul Olzeski
paul@steppingstones.rocks
(513) 520-0939
Insurance
Gold Vendor
Swept Away Property Clean Outs
Sasha Allen
TeamAllen@fuse.net
(513) 344-3972
Cleaning & Haul Outs
Bronze Vendor
The Bauer Firm LLC
Benjamin Bauer
ben@thebauerfirm.com
(513) 851-7600
Legal
Silver Vendor
The Northcoast Commercial Group
James Markowitz
james@nccgfinancing.com
(216) 310-4667
Financial Services
Silver Vendor
The Investor
Silver Vendor
Gold Vendor
15
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