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Category Archives: Seller Financing

Sallie & Freddie Get Kicked in The Fannie!

Sallie & Freddie Get Kicked in The Fannie!

There is a lot of talk these day about the Federal interest rates.

Are they going up, are they going down, what will happen next?

A lot of investors are wondering, distracted and some just waiting for the market to “cool” down before they get in. But the opposite is true!

Now is the best time, especially with this strategy that I am about to share with you. I have been doing this for years. Recently this method went unnoticed, no one cared, it wasn’t on TV, even investors didn’t talk about it at investment groups. But that didn’t stop me, I guess because I like to do things before the waves form. I look out into the ocean and see what’s coming next and start.

This strategy has gained more popularity and status in the recent years because of the biggest bank crisis ever in US history and I will share it with you here…

Did you know that more millionaires were made after the great depression than any other time in American history until recently?? The numbers are staggering and the tables are being over-turned. Here’s what I mean. In 2008, when the “credit crunch” hit the world, banks froze up so much that it seemed like even oxygen was going to be lost…

Jobs were downsized, businesses forced to close, bankruptcies hit all time highs, and sadly people took their lives because they couldn’t handle the pressure of a shrinking economy and a banking strategy that could no longer be trusted.  And that’s when the government had to step in.

This became the newest and biggest financial collapse the world had ever seen.

However, there was a few investors that looked at “rebuilding the economy” as a rehabber would. Gutting it all out. Putting on protective glasses to see through the dust that has taken years to settle and they went to work on a strategy called Owner Financing. A strategy that allows investors to work directly with homeowners WITHOUT the “big” banks getting in the way with their loopholes and “over extended” ways.

I too had a pair of those protective glasses! Let’s just say I have learned from past experiences that it’s important to come prepared so you see when the going is going to get dusty.

When other investors saw what I was doing and how I was still turning deals in a “tight” financing market they wanted some glasses too. So I showed them how to get them and use them to get great deals during this crisis.

Hey, I hope you like my examples here, but the point I am driving home here is that there is a lot of talk from the media about what could or couldn’t happen with interest rates and the economy but don’t let it stop you from investing. Get started now.

At the link below is a training I put together for you on how you can start using this same strategy that I used while everyone was panicking. I was closing deals and making money.

Here it is: http://filthyriches.com/

After you watch this, let me know what you think okay?

Larry Goins, Author

Where To Find Filthy Riches Homes

Larry Goins here and I have spent years perfecting my Filthy Riches model to real estate. If you haven’t heard about my Filthy Riches model, it is all about making more money on a run down $5,000 – $10,000 house no one else wants than most investors make on a $100,000 house…Guaranteed!

Yes, believe it or not, you can pick up a great deal on a $5,000 – $10,000 house and sell it for 3-6 times what you paid for it with no buyer’s list. More about the model later. But where are the properties that I target to generate so much personal income?

The houses in this program are low-income, distressed properties that no one else wants, just not the “dog with fleas” homes. They will need some work before moving in, they just aren’t going to be in too bad of shape. The idea here is you want fixer uppers, not blower uppers. Something that is either livable or close to livable.

These homes might have been on the market for a while for real estate agents, but they are very attainable at a cheap price and with the right approach, can be amazing money making ventures. And the best part is you can buy them at 20-40% of the list price.

So, with all the houses out there that might fit the criteria of a Filthy Riches house, where does a potential investor begin? Some of the most profitable and fastest ways to locate these houses are below.

Vacant houses: We’ve all seen them, the “It’s a Wonderful Life” types of homes. You see tall grass, maybe a window broken or a shutter has fallen down. You know, the kind of house that some people might make fun of…but for the right person, it’s everything they’ve wanted and a huge money maker for you.

In a typical deal, the property owner might have inherited the house from a relative or bought the house as a rental property, but is tired of being a landlord. Or the last tenant skipped town and the property owner hasn’t been able to generate the funds to fix the house up to re-rent it. It might be difficult to find the owner of a vacant house. Most counties have tax records online so anybody can look up a homeowner with the correct address to plug in. In fact, you may just find someone willing in the local tax department to steer you in the right direction, particularly if a home’s taxes are in arrears. Or, you might be able to solicit information from a neighbor, either personally, or through their information via county records and people finder sites.

One “last resort” method that I learned a while back that has been used: take your own “for sale” sign and plunk it on the lawn with your name and number on it. Invariably, the message will get back to the homeowner, who will call you to find out why you put a sign in their yard. This is kind of sneaky but it works. And hey, no harm done.

If you do have the homeowner’s name, you can contact a credit reporting agency and buy a “credit header.” These look like credit reports on a person – minus their actual credit information – which contains all their contact information, including current phone numbers. To find a qualifying credit agency, just Google credit header.

Realtors: Many properties can be found directly through real estate agents. Before contacting one, you might want to look through their website or realtor.com for properties under $30,000. From here, you can contact the Realtor and use a script and projected offer that we discuss in the Filthy Riches course. Even if they don’t have anything readily available, you can always ask them to put you on a notification list if they get more properties under $30,000.

So, why would Realtors be willing to work with you if they’re only getting a 6% commission on a house listed for $30,000 that you pick up for $10,000? That would only be $300, right? Wrong. Many listing agreements have a minimum commission, which research has shown can be around $1,500 per property.

REO Realtor: A third option is to locate and utilize a local REO (real estate owned) Realtor. An REO Realtor is a person who works directly with banks or asset managers who have foreclosed on a property.

Call one of these Realtors and ask them to pull up a report for you that uses these words: REO, Bank Owned, corporate owned, Seller Addendum Required or Foreclosure. These lists will have the coordinating listing agents that worked on these properties. From there, you have a new list of Realtors that work with banks and asset managers who traditionally work with these types of properties.

Bank Owned REOs: You might also be able to find properties on bank’s REO websites. This is a great way to look for properties that are listed before a Realtor has a chance to list it on the MLS or their own website or Realtor.com. If you’re looking to get a jump on the competition, this is a great avenue to explore because you can find properties before other investors have even seen them.

Free Classified Sites: You can use sites such as Craigslist to search for properties or to list your own ad to get homeowners to contact you. If you’re looking for property, be sure to use search criteria such as “handyman special”, “fixer upper”, “cheap”, “cash”, etc.

Houses for Sale Sites: These are similar to classified sites, although they are tailored specifically to real estate transactions, both selling and buying. Sites such as propbot.com are classified sites but are real estate specific.

eBay: You can find some great deals on eBay, although you might have to do a little weeding through the ads. Go to realestate.ebay.com and use similar keyword searches as you would for a classified ad. Additionally, if you bid and buy a house through eBay, make sure you get a general warranty deed or special warranty deed. If they are offering a quit claim deed, it may be because there are back taxes or code enforcement issues involved. Regardless, title insurance will help verify that there are no back taxes.

Auctions: Look for local auction companies and make sure you are on their regular mailing or email list. Also, search websites such as auction.com for properties. Attending live auctions can also help you build your buyer list.

Code Enforcement: Local code enforcement officers can tell you what properties may have code violations against them. They may not be able to get a hold of the owners or the owner may not have the ability to fix the code issues. Some code enforcement officers may be hesitant to provide this information to you, but these records are public information.

A Few Other Sources: Other sources of property information are property management companies (who work with low end property rentals and might know who wants to get out of the business), hard money lenders (who make rehab loans and may have to foreclose on a property for nonpayment), bird dogs (someone who house hunts for you) and “for rent” signs. Often landlords may be willing to sell their properties.

These are some great areas to look if you want to focus on the fastest, best and easiest ways to find properties in order to start making money as soon as possible.

Larry Goins is an author, speaker and coach for real estate investors. His best selling books are: Getting Started in Real Estate Day Trading and HUD Homes Half Off! For more information on the Filthy Riches model where you can learn how to earn returns of 119% – 788%, visit LarryGoins.com or call 803-831-2858.

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Owner Financed Homes – Some Advantages

Why is offering owner financed homes such an attractive option for real estate investors? What are some of the advantages that investors need to be looking to take advantage of?

Be the Bank

Even in the wake of Dodd Frank, offering owner financed homes is well within the reach of even a beginning investor. You do need to get yourself an RLMO, or residential loan mortgage originator, if you are going to sell to owner occupants. There is a rule for small investors that you may not need an RLMO if you only do a deal or two a year, but I would highly recommend that you use one for every one of your owner financed transactions to an owner occupant.

The biggest advantage to offering owner financed homes is that you get to be the bank. You sit back and collect the check. There are no tenants or toilets, unexpected repairs to rental properties, or having to worry about vacancy. When you sell your property with a note, you generate the long term, passive income, without the majority of the long term management.

More Options for the Investor

I’m sure you’ve heard of creative investing, and maybe you never really thought of what it means, or maybe you thought it was just an abstract term. But here is the great thing about offering owner financed homes. You can play with the terms to make the deal work. Down payment, length of the loan, interest rate, it’s all in your power to play with to help you create a win win deal.

Do you normally do deals with 10 year notes? What if that just does not make a certain deal worth it? Well, what do the numbers look like on a 20 year note, or with a small change in interest rate?

We usually try to sell our homes with a monthly price that is line with local rents in the area. If we have to massage the terms of the deal to get it there, we do. This allows us to get more deals, and be more aggressive with our offers in areas the market is strong.

Owner Financed Homes Help Create New HomeOwners

It’s a good feeling helping someone achieve the American Dream, and you can do so by offering owner financed homes.

There are a lot of reasons someone might not be able to get a loan from the bank. Heck, entrepreneurs often have a hard time getting loans from banks because they choose to chase their dreams instead of doing the old nine to five. What we are looking for is a buyer with a good down payment, who we feel is deserving of the loan.

This is where your RLMO comes in. They qualify the buyer for you, and let you know if they have the ability to pay for the loan. They don’t approve or deny a buyer, that decision is ultimately left up to you. But, they do give you all of the information you need to make the correct decision.

Helping someone become a home owner on a 10 or 20 year note, that is what I call a win win. Sure, it may not be their dream house, but it will allow them build equity and own their home sooner than later, while also helping you build long term wealth.

Interested in Owner Financing? You need to check out Nothing But Seller Financing >>.

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How to Sell Your House Quickly

Sell your house quickly

So, here you are with your Filthy Riches Program. You’ve looked for potential properties. You bought your ideal first $30,000 property for $5,000. You’ve marketed the property. Now it’s time to complete the sale… and watch your income start to build. But, how do you really work to sell your house quickly?

Look at it from someone else’s shoes, this is an amazing deal for a lot of people. With the way rent has been going up, more and more people are looking to move. Imagine you are them, paying $600, $700 or more in rent each month.

So, you start driving around your neighborhood to see what else is available and you find a piece of property with an affordable down payment and lower monthly payments than you were paying for rent. And, in ten years, you own the house free and clear! Who wouldn’t jump at a chance like that?

With my Filthy Riches program, this is a piece of property that is valued at $30,000 that you have purchased for $5,000 cash. When you find a buyer who will commit to a $1,000, you only have to recoup another $4,000 to cover all your costs. With an 11% interest rate, the monthly payment is $399.48 a month. In one year’s time, you will have recovered your entire investment. The rest is pure income!

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Sell Your House Quickly

So, how do you sell your house quickly? First of all, it’s important to note that you never even have to leave the comfort of your own office in order to complete the sale. Everything can be done via phone and with the help of an RLMO, mortgage broker and title company.

A mortgage broker is a person or company that works as the middleman between you and your buyer. Traditionally, banks sold their own loans, as did other financial institutions. However, as the market became more competitive, they hire brokers to compete to find buyers. What’s important for you to know is that these mortgage brokers are versed in how to structure mortgages and are licensed to ensure that they are in full compliance with any and all banking and finance laws.

This alone takes a lot of time and pressure off of you, the seller. You don’t have to worry about the intricacies of finance. Simply seek out the right professional who will help complete the transaction and make your investment work for you.

With some of the new laws in place, using an RLMO fulfills the requirements necessary to sell your property with seller financing. Otherwise, you would have to either limit your sales to corporations or LLCs, or you would have to get your own mortgage license. This can take a lot of time and really isn’t practical for the Filthy Riches approach.

A title company is also a handy shortcut to take advantage of in order to speed up transactions. A title company is responsible for doing an “abstract of title” which searches real estate records in order to confirm the property’s owner and reveal any outstanding mortgages, loans or liens against the property. Additionally, a title company will identify any easements or restrictions that may affect the property you are selling. They are responsible for finding any document or record that relates to the past or present ownership of the property. Records searched will include public and court records, property tax records, deeds, mortgages, wills, etc.

Also important for you is the fact that title companies are aware of any legislative acts that might affect the transaction, such as the SAFE Act and the Dodd-Frank act. When you use a title company, ask them if you are in compliance with these legislative acts. This is another level of protection for you.

Another thing I suggest is hiring an answering service to accept all incoming calls. An answering service provides friendly, knowledgeable people who are trained to gather information and ask pertinent questions to get the first steps started in qualifying a buyer.

As your business really takes off, you can consider hiring other professionals to move these transactions along quickly. A closing coordinator can help order title searches and surveys, inspections… pretty much anything to close the deal quickly.

Virtual assistants are popular in growing businesses. A virtual assistant is someone who helps the “small tasks” that eat up your time: answering emails, designing ads, making calls to realtors, etc. There are some great freelancing sites that can help match you up with a virtual assistant.

Working with a realtor can also speed up the process of selling your property. Soliciting the help of a realtor means that you never have to leave your own home in order to put up for sale signs or show the property. This means you can focus on other aspects of your business while someone is hitting the pavement for you to sell your home.

I always suggest that people use docmagic.com as a fast and easy way to prepare all of your loan documents. I personally use this website and strongly suggest that everybody in this business use the tools you will find here. DocMagic, the flagship product of Document Systems, Inc., has become a great tool for the mortgage industry. Made up of mortgage industry professionals and computer experts, DocMagic helps provide a fast and efficient way of creating customized closing loan documents.

Sell Your House Quickly, but Hold Your Note Slowly

After the deal is completed and you are holding the note, you can sell the note immediately to bring in a quicker profit. It’s important to mention that your primary objective should always be to hold onto the note; after all, why sell a note that you are making more than 100% return on? However, when you’re just starting out, there are times that it makes sense to sell your note.

The Filthy Riches program is intended to guide you through the steps of buying properties and selling them quickly. You won’t start seeing an income on your investment until these steps are done, so it often helps to know what services are available to help you sell your house quickly.

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The Ins and Outs of Servicing Your Note

Servicing Your Note

The End Goal is to Keep the Note!

The ultimate point to the Filthy Riches approach is to sell your property and hold tight by servicing your note. What do I mean by this?

Let’s backtrack a bit. In the Filthy Riches approach, a $30,000 property is bought for $5,000 and then resold for a $1,000 down and the seller (you) holds the remainder of the note through the duration of the loan. This means you make the initial investment of $5,000 cash, but immediately recover $1,000 of that in the down payment. You then offer to finance the remainder of the loan – $29,000 to be exact – at an 11% interest rate. This equates to just under a $400 monthly mortgage payment for the buyer. In a year, you recover the $4,000 left from your initial investment in the property.

So, what exactly does this mean for you?

For nine years, you make money on a note that you hold free and clear! Who wouldn’t like that sort of math?

But What About Servicing Your Note?

So, fast forward to after the sale. You may choose to sell your note immediately, but the ultimate goal is to hold onto this note. How do you go about servicing your note? There are a couple different ways you can approach this. You can do it on a ledger sheet, on a spreadsheet, use servicing software, or you can solicit the help of a servicing company.

A ledger sheet or Excel spreadsheet is a simple document that lists the contact information of the buyer, how many payments they owe over the course of ten years, and the monthly amount due. A digital copy of this is available in the full Filthy Riches guide. This might be a good way to help you get started, but when your business really starts picking up momentum, it may be hard for you to keep track of each transaction. The last thing you want is for a borrower to skip a payment, and not catch it because you’re weighed down in spreadsheets! Of course, if you have a financial background, this might be one of the areas you want to hold tight to and find help for some of the other nuances of your busy business.

If you want to go the route of servicing software, there are plenty of options available. You can set up payments through QuickBooks or another type of accounting software. My company uses Loan Ledger, which is pricy, but it also suits our needs to service hard money loans as well. My guide includes a digital Million Dollar Rolodex of other companies that offer servicing software. Look at the advantages of each one to choose what is most suitable for your personal needs. Some companies even offer free trial periods. This is a great way to “test drive” some new loan software. I would suggest using a phantom borrower though. It would be counterproductive to enter all your information for a buyer into the program only to decide not to use that software, after all.

If you don’t want to handle servicing your note, an outside company might be your best option. Servicing companies are great for handling all aspects of the note. Many will service the note and collect the payments each month for you. Additionally, they can handle escrows and the 1099s at the end of the year, which essentially lists out how much interest the buyer has paid out on the loan in that calendar year. They can also handle all the small details that eat up your time, including sending out late notices and even making phone calls on a late payment. Many of these companies also have an online option so you can log on at any time and see the status of each note they service for you.

Again, my Million Dollar Rolodex outlines many of these servicing companies for you. They may charge a setup fee and a small monthly fee as well, but for sellers who don’t have the financial fortitude – or simply the time – to service your own loans, this is a great option. Many of the companies in my Million Dollar Rolodex specialize in servicing loans specifically for small businesses.

If you decide to hire a servicing company for your note, you’ll need to send a letter to your borrower advising them where they need to send their payments. The letter doesn’t need to be long; it simply needs to state the servicing company’s contact information, advising your borrower where to send their payments. A full sample letter is available in my complete guide.

The objective with finding your ideal avenue for servicing your note is to ensure that nothing falls through the cracks. If you do go with a servicing company, absolutely make sure the above mentioned letter is sent. The earlier in your history with this borrower, the better. There might be some confusion if you service the loan and then decide later to hire a servicing company. Obviously a letter is pretty self-explanatory, but you don’t want to give your borrower any reason to be late on a payment.

As with many aspects of my Filthy Riches program, there are number of different ways to approach the same tasks. This is true in nearly all of the steps from locating your first properties to servicing your final note.

There is no one perfect approach for anybody. You need to step back, determine what your needs are, what your abilities are and go from there. Don’t be afraid to adjust your techniques either. For example, for the purpose of servicing notes, you may approach the idea knowing that you were a straight A math student. You may assume you can handle your own bookkeeping only to become bogged down or so distracted with other aspects of the business that you’re making mistakes.

There isn’t anything wrong with altering the way you address the steps of buying and selling real estate. This is an ever-changing enterprise. You may be doing yourself a disservice if you don’t change certain aspects as you become more proficient at the real estate business. After all, Filthy Riches was designed to give you the steps toward financial freedom. Make sure you have your business set up so you can enjoy all these benefits!

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How can Lawmakers Affect You and Your Property?

Real Estate ArticlesLegislators and lawmakers are in charge of creating specific laws to help govern citizens. Some of these laws are created because of a need; others are put into act as a reaction to a certain problem. I’m going to go over some of the current legislative movements, but as you are preparing to buy and sell properties, it’s important to keep abreast of any changing laws and legislative acts that might affect your investments.

Don’t let any of these laws discourage you from following your real estate investing dreams. They might slow you down a little bit, but in the long run, they’ll help protect your business. Plus, working with mortgage brokers and title companies helps keep you on top of any legislative changes that have been made, or are being considered for actual laws.

Two major legislative changes I want you to be aware of in recent years are the SAFE Act and the Dodd-Frank Act.

SAFE Act The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, also known as the “SAFE Act” The intent is to protect consumers while reducing opportunities for fraud and was primarily designed to regulate mortgage brokers, lenders and credit unions. However, within this act, there are certain components that apply to seller financing, such as the principals that Filthy Riches has been built upon.

The part of the law that applies to my Filthy Riches concept is if someone selling a piece of property and providing seller financing – unless it is their primary residence – must be licensed or use a licensed mortgage broker to complete the transaction. While it may seem restrictive, it’s critical to keep us in compliance and ensure that all transactions we make are enforceable in the event that there is a default on the property.

You have several options available to you to comply with the SAFE act.

Get a mortgage license. This can prove to be a very frustrating task. In rare occasions, you can have your license quickly, but it can also take up to a year from start to finish. As many people have noted, when you’re working with government agencies, things tend to bottleneck and the process is slowed down. I really don’t suggest you pursue this route, since it really isn’t necessary.

Hire a licensed mortgage broker. If you are in a different state form the property you’re selling, make sure to hire one within that property’s state. Pay the broker a processing fee. This option is likely the easiest and most cost effective for you. A mortgage broker will likely charge between $150 – $300 per transaction, and this is actually a fee that you can pass on and charge your buyer. There is no need for you to pay for this out of your own pocket.

Only sell your property to investors who will be taking the title in their corporation or LLC name. Since the SAFE Act only applies to individuals, it isn’t necessary when selling to companies.

HUD is tasking each state to regulate the SAFE Act, so before closing any transaction, have your attorney or title company contact that state which governs the house you are selling to see if they have adopted this act. If they haven’t adopted the act, you don’t have to take any steps. However, it’s important to keep abreast of this act in case there is any updated legislation.

The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed by Congress in 2010 and signed into the law by the President. The intent is to protect consumers from Wall Street and Lenders, limiting the risk to the financial system. It also addresses the issues of large financial institutions that rely on the government to bail them out because of the economic impact if these institutions fail.

Within the act, though, there are some sections limiting real estate investors in using the option to provide seller mortgages to residential buyers.

The Federal Reserve Website explains it this way: “The revisions to the regulation, which implements the Truth in Lending Act (TILA), are being made pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposal would apply to all consumer mortgages (except home equity lines of credit, timeshare plans, reverse mortgages, or temporary loans).”

So what does this mean for us? Basically, any seller who sells property with the seller financing option is required to use all the disclosures that a traditional lender would.

Although the law was signed into effect several years ago, few attorneys or title companies have a good grasp on what this will mean when closing transactions. At this point, make sure you ask them if they are compliance with both the Dodd-Frank and the SAFE acts, and you have done due diligence.

Also, make sure you prepare your loan documents using Docmagic.com and always have your borrower sign a Truth in Lending and Good Faith Estimate.

As a side note, let me tell you a little about docmagic.com. It’s a fantastic website that helps you prepare all loan documents. I use this and strongly suggest that everybody in this business use the tools on this site. Founded in 1988, DocMagic, the flagship product of Document Systems, Inc., has become a great tool for the mortgage industry. Made up of mortgage industry professionals and computer experts, DocMagic helps provide a fast and efficient way of creating customized closing loan documents.

Again, laws are ever changing and lawmakers are working hard to ensure that proper regulations are in place to protect US citizens. These laws cover all aspects of our lives and people in our business are no different.

Maintain a good relationship with mortgage brokers and title companies to ensure you have the most up to date information necessary to keep your real estate investments and transactions running smoothly. Ignorance of a law does not preclude you from being held accountable; you need to make sure you are aware of any changes. Ask questions and tailor your business practices to comply with these laws.

What Investors Need to Know About the Dodd Frank Act

 

Is seller financing dead because of Dodd Frank? Do you now have to be a licensed mortgage loan office to seller finance a property? Can you finance more than 3 properties as an investor? Many real estate investors think that the regulation called Dodd Frank which takes effect January 10th, 2014 will eliminate seller financing as we know it.

I have been researching this and found a very knowledgeable attorney named Clint Coons from Anderson Advisors that knows all of the rules and regulations of Dodd Frank and the Safe Act and how it relates to seller financing for investors.

I was able to get him on an interview to ask him some tough questions to find out exactly how the Dodd Frank Act will effect investors and seller financing.

Listen to this recording to find out how to stay in compliance and still be able to seller finance properties to owner occupants as well as investor buyers.

Of course this is not considered legal advice and please consult your own advisor before making any investments or seller financing a property.

3 Tips to Know When it’s time to Sell Your Note

3 Tips to Know When it’s time to Sell Your Note

The ultimate objective for a Filthy Riches student is to hold onto your note after buying and then reselling a piece of property. After all, the real money starts to come in on the second year of the note, and you keep making money throughout its duration without any additional investment on that property.

Consider this. You find a $30,000 dog with fleas home that just won’t move in this real estate market. Believe it or not, chances are you can snatch up this property for $5,000 cash. Then, you need to turn it right around and market it as an owner financed deal. Charge a $1,000 down payment with an 11% interest rate for the duration of a ten-year loan.

What exactly does this mean for you? It means that after you receive that down payment and the payments on the note (just under $400 a month), you’ll recover your $5,000 investment in right around a year. This leaves the final nine years to collect payments on a piece of property you only paid $5,000 for. You win and your buyer wins, because they only had to come up with a $1,000 down payment and monthly payments of $400. This is less than many people pay for rent… and the property is completely paid off in ten years!

So yes, the main objective is to hold onto that note for the full ten years. However, there are times that it just isn’t practical and you need to sell that note.

When you’re first starting your business, you’ll probably want to sell a few of your notes in order to generate more cash for future investments. Or to reduce your own debt load. This is a great way to eliminate your own personal debt.

If you do decide to sell your note, you should try to structure it in such a way that you will be able to successfully sell it. Many institutional buyers are unwilling to buy a note if the borrower is a credit risk or if there is insufficient equity in the property. Make sure your buyer has relatively good credit before selling the home to them. If their credit score comes back at a 520, it’s unlikely you’ll be able to sell that note. However, a buyer with a credit score of 640 or higher makes them a much lower risk – either for you, or for the institution you may sell the note to.

When dealing with the equity portion, you can structure two notes on the property so you can sell one note and keep the other. The first one could be for about 75% of the selling price and the second for the balance. In other words, you can create a first mortgage for $20,000 and a second mortgage for $9,000. You would keep the second mortgage and sell the first one as it would be about 66% of the sales price of the property. This, the note will be easier to sell to an institutional buyer.

Another option is to create just one note with the knowledge that the financial institution you’re working with will only give you a portion of the face value. Think about it: if you sell a $29,000 note at 30%, you would still make a little over $11,000 profit after the sale.

When looking for a financial institution to sell your note to, make sure you’re selling to a note buyer and not just a broker. In my guide, I have included a Million Dollar Rolodex which lists several institutional note buyers for you to consider.

Keep in mind that many institutions will want the note to be “seasoned”, meaning that the borrower needs to have made anywhere between 3 to 12 month payments on time. They will likely also want an appraisal on the property and to ensure the borrower isn’t a credit risk.

In addition to institutions, you may want to look for personal investors to purchase your notes. These people may be a hard money lender, a private money lender or simply another real estate investor who wants to get a good return on his or her investment. People like landlords make great note holders because they like the cash flow.

To look for a private investor, you might want to attend some local real estate investors association meetings. Here, you can network and find out who the some local investors are. Even if you don’t get a good response, you can try a different approach. If you know who uses private money, you can go to the courthouse and find out who their investor is.

However, when working with a private investor, you really only want to deal with experienced investors. Imagine this: an investor buys a note from you, but the buyer defaults on the loan. You certainly don’t want that investor calling you to buy the note back!

In my guide, I have put together a collection of documents that I have a private investor sign acknowledging that you are selling the note without recourse. “Without recourse” means that the investor can’t come back to you if the note is in default to tell you to either pay the remainder of the note, or give them another in its place. This ensures that the investor knows and understands the risks (and benefits) associate with buying the note.

There are times that you may opt to sell a note “with recourse”: if you have many notes built up at your disposal and can swap out a note at any time. If you sell a note with recourse, you can make more money, but it is risky and not advisable in most situations.

These are some handy tips to keep in mind if you do opt to sell a note. While the Filthy Riches program is most successful when you hold your own notes, there are times that this isn’t the right option for your needs.

The Strategy Behind Filthy Riches

The Strategy Bsehind Filthy Riche

Everybody has driven by a house that has been on the market for what may seem like years. You know the house: there might be a broken window here or there, the grass hasn’t seen a lawnmower for the last few summers, and the property overall has the look of negligence.

It might seem ironic, but this is the dog with fleas property that Filthy Riches has based its success upon. We all know in today’s market, these unwanted houses are practically a dime a dozen. These properties are everywhere. They are located in nearly every state and likely even within easy driving distance for you. This is the type property that everyone else avoids – including real estate agents, if they can help it. After all, who wants to be saddled with an ugly, dilapidated structure like this? There is little to no chance to move it off the market. Or the selling price is so low, the realtor’s commission is practically nonexistent. What realtor wants to put the time and effort into the small commission from selling a $25,000 home when the same energy could be spent selling a home with a selling price six times higher?

This is where the emerging real estate investor (you) comes in.

It’s important to note that while you are looking around, there are areas to avoid. For example, those cities that are on the national news for being in a heavy economic slump, such as Detroit, Michigan or Gary, Indiana. On the other extreme, avoid the notoriously high priced areas like most of California.

Once you’ve found the area you want to focus on, start looking for houses $25,000 or less. From here, it’s time to utilize the following formula: offer 18-22% of the asking price in cash. There may be times when you have to use a higher percentage or can get away with a lower one, but 18-22% is a good starting place.

What about double wide homes? These mobile homes can figure into your formula very nicely; just make sure the asking price includes the structure and the land and that the double wide is in the late 90s to early 2000s.

When you’re looking for property, avoid complete dumps. They need to be structurally sound and properties that you will be able to either turn around and resell, or sell after putting in some minor work. If there are huge holes in the ceiling, missing floors, no windows or a buckling roof, join the many other buyers who took one look at the property and walk away. If there is fire damage, water damage, or the walls have been torn out to the studs, don’t consider the property. If you don’t feel the home is either livable or could be made livable with a little work, it’s not worth your time. There is very little chance you would be able to turn that property around to resell without putting significant money into the project.

Don’t remain content to look at one or two properties. Make and maintain a list of properties to consider. Inevitably, deals will fall through and you don’t want all your time and cash flow in one investment.

When you get to the point that you’re ready to buy, don’t get hung up thinking that going to get laughed at when you make an offer at 18-22% of the asking price. Agents need to move these dog with fleas properties because it just looks bad having them on the books. Of course, there will be some realtors that tell you that your offer is ridiculous. But the more you hone your negotiation skills and practice this formula, the more realtors will be willing to listen to what you have to say.

If you are able to purchase a property within the ideal guidelines outlined above and using the 18-22% budget, you can expect to invest around $5,000. Again, this isn’t a concrete number, but it’s a good rule of thumb as you’re considering your purchasing options.

The reason this price range is a good choice for the beginner investor is because of the spread it can generate. If you are buying a home for $5,000, you can realistically plan on reselling it for six times the price. Selling a home for $30,000 with financing is well worth the initial investment. Imagine trying to do that with a $50,000 house. You would have to sell it for $300,000. There is no way you would be able to get six times your investment with more expensive properties.

So, the sale goes through. Now what? Now it’s time to turn the property around and resell it. When you sell your property, you will sell it with a low down payment and finance the balance. So, if you buy the property for $5,000 and sell it for $30,000, you can ask for a $1,000 down payment and finance the remaining $29,000. If you finance that amount for ten years, at 11% interest, the payment will be $399.48 per month. Most people will be able to afford a $400 mortgage and they should be able to find a $1,000 down payment as well.

You always have the option to change the terms. For example, if a buyer can only afford a $500 down payment, you can finance the remainder for seven years with a higher percentage. Other times, you may be able to get a higher down payment. For example, properties that you can sell on eBay can benefit from a bidding war where the down payment may be raised to $2,000, $3,000 or even more. If you can get a down payment of $5,000, you will immediately recoup the $5,000 investment you initially made on the property.

If you’re serious about becoming a real estate investor, you can see how easy it is to find those oft overlooked, dog with fleas properties that realtors and banks want to unload. When you find a handful of potential properties, it’s a simple numbers game to make your low investment work to your favor.

This is one of the many tips and ideas you can find in Larry Goins Filthy Riches program. For more information, contact our office at (803) 831-0056.

 

Get Down and Dirty with Filthy Riches Homes

Filthy Riches Real Estate Course for InvestorsLarry Goins spent years perfecting his Filthy Riches approach to real estate. But where are the properties that Larry targets to generate so much personal income?

The houses in this program are low-income, distressed, “dog with fleas” homes. They are ugly, unwanted and need more TLC than you can imagine. Most people would assume their next owner came equipped with a wrecking ball.

You might be right, depending on some peoples’ points of view, but you are likely very wrong, from the Filthy Riches perspective. These homes might be on the long list for real estate agents, but they are very attainable and with the right approach, can be amazing money making ventures.

So, with all the houses out there that might fit the criteria of a Filthy Riches house, where does a potential investor begin? Some of the most profitable and fastest ways to locate these houses are below.

Vacant houses: We’ve all seen them. The “It’s a Wonderful Life” types of homes. There may be broken window panes, chipped paint, porches with broken steps. The kind of house that some people might make fun of… but for the right person, it’s everything they wanted.

In a typical deal, the property owner might have inherited the house from a relative or bought the house as a rental property, but couldn’t find suitable tenants. Or the last tenant trashed the place, skipped town and the property owner hasn’t been able to generate the funds to fix the house up to re-rent it.

It might be difficult to find the owner of a vacant house. Some towns have tax records online so anybody can look up a homeowner with the correct address to plug in. In fact, you may just find someone willing in the local tax department to steer you in the right direction, particularly if a home’s taxes are in arrears. Or, you might be able to solicit information from a neighbor, either personally, or through their information via county records and people finder sites.

One “last resort” method that has been used: take your own “for sale” sign and plunk it on the lawn with your name on it. Invariably, the message will get back to the homeowner, who will call you to find out why you put a sign on their yard.

If you do have the homeowner’s name, you can contact a credit reporting agency and buy a “credit header.” These look like credit reports on a person – minus their actual credit information – which contains all their contact information, including current phone numbers. To find a qualifying credit agency, just Google credit header.

Realtors: Many properties can be found directly through real estate agents. Before contacting one, you might want to look through their website for properties under $25,000. From here, you can contact the realtor and use a script and projected offer that we discuss later in the Filthy Riches course. Even if they don’t have anything readily available, you can always ask them to put you on a notification list if they get more properties under $25,000.

So, why would realtors be willing to work with you if they’re only getting a 6% commission on a $25,000 house? That would only be $350, right? Wrong. Many companies have a minimum commission, which research has shown can be around $1,500 per property.

REO Realtor: A third option is to locate and utilize a local REO (real estate owned) realtor. An REO realtor is a person who works directly with banks or asset managers who have foreclosed on a property. Call one of these realtors and ask them to pull up a report for you that uses these words: REO, Bank Owned, Seller Addendum Required or Foreclosure. These lists will have the coordinating listing agents that worked on these properties. From there, you have a new list of realtors that work with bank agents and asset managers who traditionally work with these types of properties.

Bank Owned REOs: You might also be able to find properties on bank’s REO websites. This is a great way to look for properties that are listed before a realtor has a chance to list it on the MLS or their own website. If you’re looking to get a jump on the competition, this is a great avenue to explore because you can find properties before other investors have even seen them.

Free Classified Sites: You can use these sites to search for properties or to list your own ad to get homeowners to contact you. If you’re looking for property, be sure to use search criteria such as “handyman special”, “fixer upper”, “cheap”, “cash”, etc.

Houses for Sale Sites: These are similar to classified sites, although they are tailored specifically to real estate transactions, both selling and buying.

eBay: You can find some great deals on eBay, although you might have to do a little weeding through the ads. Go to realestate.ebay.com and use similar keyword searches as you would for a classified ad. If you are looking to purchase an ad through eBay, be sure that you are just bidding on the down payment. Additionally, make sure you get a general warranty deed. If they are offering a quit claim deed, it may be because there are back taxes or code enforcement issues involved. Regardless, title insurance will help verify that there are no back taxes.

Auctions: Look for local auction companies and make sure you are on their regular mailing or email list. Also, search their website for upcoming real estate auctions. Attending auctions can help you build your buyer list.

Code Enforcement: Local code enforcement officers can tell you what properties may have code violations against them. They may not be able to get ahold of the owners or the owner may not have the ability to fix the code issues. Some code enforcement officers may be hesitant to provide this information to you, but these records are public information.

Other sources of property information are property management companies (who work with low end property rentals and might know who wants to get out of the business), hard money lenders (who make rehab loans and may have to foreclose on a property for nonpayment), bird dogs (someone who house hunts for you for a commission) and general for rent signs. Often landlords may be willing to sell their properties.

These are some great areas to look if you want to focus on the fastest, best and easiest ways to find properties in order to start making money as soon as possible.