Hey, it’s Larry here.  One of the questions that I get more often than any other question about working with us is:

How do I submit a property to you?

What is your buying criteria?

Well, as many of you know – at least those who own my Ultimate Buying and Selling Machine, which is my course that teaches how to buy and sell houses the same day using the Internet, which is based on my book Getting Started in Real Estate Trading – I need to be able to sell my properties at 70% of the after repaired value. That 70% includes purchase price, repairs and closing costs.

In other words, whenever I buy a property, I need to be able to add my $5,000 to $10,000 to $15,000 to it, then include repairs, closing costs (which I generally figure around 4% of the 70%), taxes, insurance and attorney fees (which I usually figure around $2,500) – and that is the price that I need to be able to sell it for to another investor. I want another investor that buys this property from me to be able to buy it, pay all the closing costs, fix it up and then they have 30% instant equity built into property.

Is it easy to do that? No, not all the time. But if you will do this in buying your properties to resell to other investors, it will be an easy sell if you negotiate a deep enough discount or you can turn around and sell it to another investor at 70% including purchase, repairs and all closing costs.

Also, I get people that want to know about submitting a note to me, as far as Filthy Riches type note. By the way, I only buy Filthy Riches notes from Filthy Riches students. That way you know exactly what we are looking for and how to protect yourself and get the most amount of money from your notes.

Because these Filthy Riches notes are such small deals and because you are buying them at $4,000, $5,000 or $6,000 and then creating a note buy [xx 00:02:19] sell price of $30,000, there is not really a lot of equity – real, true equity – in the notes. So you have to be able to sell them at 25-35% yield.

But if you are buying a property for $5,000 and you sell it for $30,000 and they give you a couple thousand dollars down, even if you only get $15,000 for the note, you still made $10,000-12,000 on this deal, so it’s still a really good deal. In fact, if you buy it for $5,000 and you end up netting $12,000 or $15,000, then you sold it for 2-3 times of what you’ve paid for it. You can’t do it on $100,000 or $200,000 house – there’s absolutely no way.

I hope this helps in understanding how to submit a property and a note to me. For complete details on submitting a property or a note to me, just go to www.InvestorsRehab.com and click on a link Submit a Property. It will give you all details about submitting a property to me to buy and submitting a note as a Filthy Riches student to buy.

Thanks a lot and be sure to look for next month’s newsletter where we have some really special items included for you! So thanks a lot and have a great day!

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You might think I’m off my rocker for suggesting that a housing boom can actually work against you, but it has happened to many, many investors, including myself.  Let me share with you two observations I’ve made after going through a housing boom into a housing collapse.

#1: A housing boom can keep you from learning to negotiate.  Think about it.  When property values are going up thousands of dollars per month, you could actually buy a house for full market value and resell it later for a profit.  You could buy just about any house on the market without picking and choosing, or offering less than asking price.

Conditions like these only last a short while and are no way to run a portfolio in the long run.  What will happen when home stop going up in value?  You won’t have any negotiating skills, which take time to develop and cultivate, and you will either waste time learning, continue offering way too much and getting into trouble, or not making any offers at all.

#2: A housing boom can make you focus on short-term profits  I remember when any investor with a pulse could get a loan to buy a rental property, often with no down payment and 100% financing.  Or, people would get short-term financing with ridiculously high payments, because they intended to (and could) sell the house for a profit in a few months.

So guess what happens when financing gets harder to come by?  Your whole operation will get shut down.  Or, you might buy several properties with short-term, expensive financing, but not be able to sell them OR rent them out, and then you’re stuck. 

#3:  A housing boom makes you too lazy to find private money.  In  my opinion, the key to success is to build relationships with private lenders constantly, so that you can always borrow money on easy terms no matter what your exit strategy.

So while a housing boom is great in regards to your houses’ equity increasing, the side effects are the 3 temptations I’ve listed above.  I recommend negotiating well and finding private lenders regardless of your market conditions.

Click Here: http://stinkymarketreport.net — In this FREE digital book, learn the secrets that a $100,000,000 real estate investor has discovered about making money in a slow market, by understanding how market cycles REALLY work.  Or, for info on Alan Brymer, go to www.AlanBrymer.com

MOLD:

Mold in houses has become one of the most popular scares in recent years. Although it has been around since before caveman days, our industry is always out to find something new to charge thousands of dollars to correct. Most molds, even black in color are not the toxic poison type of mold that causes illness in people. The temporary fix is to use a 50/50 mix of bleach and water to clean the surface. This does not kill the mold, it just removes the surface visibility and unless you take away the moisture or cause of the mold it will return. For mold remediation of black mold and mold infestation, please refer to my article on mold in your previous issues of REIP magazine. If you have significant mold in sight, one of the brands of product I recommend is Microban. It is highly effective in handling problems associated with mold, fungi, bacteria, germs and so on. You may find it by calling a janitorial supply company from your yellow pages book.

Microban is used by professionals for mold remediation; yes the toxic black mold remediation that costs thousands of dollars by people wearing HAZMAT suits. It is also used for water damage, flooding, sewage backups and such. Another type of product for the same problems is called Shockwave and may be easier to find locally. The effects of mold can be breathing problems such as asthma, headaches, rashes, stomach ailments and so on. The four steps to eliminating mold are to contain it, kill it, remove the dead mold, and protect from further contamination. This may mean an exhaust fan in bathrooms, better ventilation in rooms and crawl spaces. Placing dehumidifiers in strategic areas in the house, or using hepa filter air cleaners as well. You can get a mold test kit at major hardware stores for about $10.

LEAD BASED PAINT:

Lead based paint is a toxin found in many living quarters and can cause serious illness or even death. It is especially toxic to children and can even affect babies before they are born. A good thing is that lead based paint that is not deteriorating is not a threat. Also there are options to be done to reduce and eliminate the hazard. You can contact lead from paint by breathing it, touching flaking areas of paint, dusty paint surfaces and during renovations it can be cast into the air from hammering, sanding, sweeping and more. Youngsters can get it on their hands from doors, windowsills floors and such and then put their hands in their mouths as we commonly see them do. This can affect brain function as well as nervous systems in children. Long-term exposure leads to hearing problems, learning problems, behavior problems, headaches and lots more. Adult symptoms are more described as reproductive problems in both genders. Difficulties during pregnancy, a rise in blood pressure, nerve problems as well as bad digestion, memory loss and muscle pain. This threat goes lower risk in younger houses because lead paint was stopped for making and using it around 1978. So newer houses have less risk of this problem. Lead based paint test kits are available at most larger hardware stores for about $4 a kit. The most common places to check would be windows and sills, doors and doorframes, stairs, railings, decks, screen porches and lets not forget furniture. Don’t overlook your prized antiques either. If it’s old furniture that has original finished surfaces, this area is often overlooked. Any peeling, flaking or chipping paint accompanied by dust is suspect. To do it yourself or hire a pro for lead abatement, you need to stay clear of sanding, sweeping and vacuuming as this will spread the dust air born. Lead based paint must be removed (the painted structure) or most common is to encapsulate the paint. Products can be bought that you spray, brush or roll over the lead paint to seal in the hazard. The E.P.A. (where some of my research was obtained) has a booklet for free on lead based paints; it’s effects, the abatement and prevention available upon your request. This will provide you with some useful info.

METH LABS:

Another toxic terror that is becoming more well known is finding out that the house you bought or are thinking of buying as an investment was once used as a meth lab, a crack house, or some other form of drug related house. This came up at a seminar I am giving in Portland this week. The person asked my opinion about his deal and that it was previously a crack house. He made an offer and it was accepted. The house, he said, was a property seized by law enforcement and it had been vacant for a while. I listened and told him that I would not want to buy this house myself. Puzzled, he asked why. First, this information will need to be disclosed to all interested in buying it and could be a turn off. Second, I asked how it had been (cleaned up). He told me that the city had given the house a clean bill of health. So I said will they accept any liability if anyone has any health related problems? He said no. I told him that all liability would rest on his shoulders and he would be solely responsible for possible trouble. He thanked me, and said he really wanted to be talked out of the deal cause it was too much for him to do on his first deal. It was almost a total gut job. Now keep in mind, under his circumstances, I told him no I wouldn’t but it myself. However, I do know several investors with a lot more experience in this type of house that would have jumped all over this deal, and made a huge profit as well. It was the experience level here. He probably should get his feet wet without starting with an issue on the house like that one. The problem with drug related houses is that there is no set way to tell how much residue is still in the cracks, crevices, vents, gaps and other areas that may still cause exposure to the toxins. There is no real data on how long of exposure to this will it then affect someone. It is the responsibility of the homeowner from purchase on for any liability caused by this. So how do you know if it’s a drug house or meth lab? Generally there are beakers and burners and test tubes present shortly after abandoned. There may be a smell present and cans of cooking fuels around. There may be burn marks on countertops as well as dusty residue in kitchen and bathroom areas. Samples can be taken by taking scotch tape and (lifting) debris from surfaces of countertops, sinks, carpets, bedding, curtains, floors and utensils found in the property. Have them analyzed by a law agency and get a report. Then decide if you want to do the deal. Remember, this does not scare a seasoned investor who knows how to deal with creative real estate. This is an opportunity, or a niche, because most people will pass on these kind of deals, and the ones that do them…PROFIT.

CARBON MONOXIDE:

This is a problem that can be found in many homes. Even mine. I just recently had my furnace replaced and was about to remodel my basement and add some on to the house when I noticed an exhaust pipe from the furnace had separated from a portion of pipe. This had been easily 3 months or so since the job was done. I went to a local hardware store and got a test kit for about $6 and did the test. It came back as a dangerous reading from the kit. If not found, this could have turned out to be serious health risk. CM is an odorless, colorless gas or liquid and is hard to detect without a test kit. Though my culprit was a furnace, others could include kerosene and gas space heaters, leaking chimneys, gas water heaters, wood stoves, and gas operated equipment like cars. Some people in winter will start their cars in the garage to let them warm up before leaving for work and even with the door open this poses a threat. Even in low concentrations, fatigue and chest pains can happen. With more exposure it may cause dizziness, lack of vision or concentration, headaches and nausea. Exposure can be fatal. To reduce risks EPA guidelines say to keep appliances properly adjusted. Always use vented heaters and never use alternate fuel sources on thing meant for a certain kind of fuel. Such as do not use gas in a kerosene heater. I have seen workers do this on jobsites in the cold. You need to have an exhaust fan over gas stoves. Never grill indoors with any gas driven bar b que and have your furnace checked and serviced often. I hope this information will help and educate you as to the dangers of TOXIC TERRORS IN YOUR HOME.

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Using “Small Math” to Make BIG Profits

By Trace Trajano

Unlike most people I love math. I am an engineer by training so I am used to “Big Math”…you know the kind of math that involves too many Greek symbols. However, in real estate investing all you need to know is small math – addition, multiplication and subtraction. This is the math that your third grade teacher wants you to master. If you can do third grade math or small math you can make BIG profits in real estate.

I have a formula for making the right offers on a property. This formula works in any market – whether the market is HOT or cold and it works in any country. No other formula for making offers works as universally and it uses “small math”. It works whether you’re trying to rehab a deal or you’re trying to wholesale it.

Here’s the formula:

MAO = CF x ARV – Repairs – Profit

One of my students – Maria Senger from Michigan used this formula in successfully buying and then wholesaling her very first deal. The market right now in her part of Michigan is slow (albeit better than Detroit). Based on her analysis, the ARV or After Repair Value or the value of the property when it’s fixed up or in move-in condition is $105,000. According to her estimates, the property needs about $5,600 in renovation or repairs. Based on her market, she used a Cost Factor of 0.8. The CF or Cost Factor is 1 less the percentage of the value of the property that you allocate as the cost of selling. Very simply, CF is related to the cost of selling a property. The longer the property stays on the market, the higher the cost of selling and CF goes farther from 1.0. For example in a slow market, use a cost factor of 0.8 even 0.7 for markets like Detroit. For hot markets or areas where houses sell in 30 days use a CF of 0.9.

Factoring in a profit of $20,000 for her renovator/buyer and $10,000 for herself, her MAO or maximum allowable offer is $48,000. She initially offered $40,000 for this house that the seller – which happens to be a bank – was asking $63,000 for. She made the offer anyway. The bank lowered their price to $55,000. Then she countered at $45,000. The bank still did not budge. Everyone agreed to meet halfway to $48,000 – her Maximum Allowable Offer. The MAO is your absolute highest and best offer – going above this means you’re lowering your profit and even risking losing money on the deal.

What happened afterwards? Once she has the property under contract – or once she has control over it with a purchase contract, she then worked diligently to find a buyer for the house. She sold the house 2 weeks later for $55,000. She made $7,000 profit using “small math”.

Another student of mine – Jay Castillo from the Philippines used the same formula for buying and successfully selling a house on a rent to own basis. He found a bank owned property that is being auctioned. Based on his analysis, in the neighborhood where the house is at, the property being auctioned off has a value between P1.9 Million and P2.5 Million. To be conservative, he used an ARV of P1.9 Million. Based on contractor estimates, he thinks he can renovate the house for P30,000. He found out that similar houses in the neighborhood sells quickly – within a month – and this is why he used a cost factor of 0.9. He factored in a profit of P350,000 for himself for buying, fixing then selling the deal. Based on all these numbers, the MAO is P1.33 Million.

During the auction – of which he was the only bidder, he got the house for the minimum bid of P1.1 Million. He proceeded to renovate the house. His actual renovation cost is P130,000 (P100,000 over!). Two weeks before he finished renovating the house he already found a buyer. The buyer agreed to buy the house for P1.9 Million on a rent to own basis. The buyer put down P350,000 and Jay will have a cashflow of about P5,000 a month over the next 10 years and P18,000 a month from year 11 to year 15. All in all – not a bad deal. Had he sold it for cash for P1.9 Million, he would have made P800,000. Now that he sold it on rent to own, the cumulative cash he will get is about P3.1 Million – a P2 Million profit!

Not bad for using “small math”.

So now that you know how to use “small math” to make BIG profits, what do you do? Focus on learning how to find good deals and make a lot of offers using the simple formula I shared with you. If you do, I guarantee it, you will be counting BIG checks soon!

Source: http://tracetrajano.blogspot.com/2009/07/using-small-math-to-make-big-profits.html

Websites You Can Use Dec 2009

By Shannan Hearne

I’ve hijacked Larry’s column this month to share a totally cool way that you can increase your income from what you are already doing – building your buyers list and looking for real estate deals – on the internet.  On this month in history, the concept of affiliate marketing was hatched fifteen years ago.  Unfortunately for decency purposes, we can’t talk about what industry came up with the concept.  It is better left unsaid.

The internet cleared the way for virtually (no pun intended) anyone to earn extra income by telling people about good companies to do business with.  Affiliate marketing took off like a rocket because it was easy and because the internet created powerful ways to automatically track referrals.  We go around telling people that “referrals are the lifeblood of our business” but then we don’t give them an easy way to be compensated for their referrals.  We basically have to count on them sending us referrals out of the goodness of their hearts.  Internet based affiliate marketing gives us a tracking mechanism.

On this anniversary of the affiliate marketing concept, I want to share with you some websites to help you nab your fair share of the affiliate income that passes hands every month.

BrandClik http://www.brandclik.com allows you to earn an income on in-text adwords in your published content online.  For example, if you write an article about rehabbing properties you can sign up with Brand Clik and earn a commission every time a reader clicks the word “rehab” in your article.

The most widely recognized pay-per-click company you can place ads on your website for is Google’s AdSense.  http://www.Google.com/adsense is a method by which you get paid for allotting some of your web site space to other companies’ offers and earn money every time one of their ads is clicked.  There’s no tracking or thinking involved.  Google takes care of the whole thing and sends you a check.

What if you have multiple web sites dedicated to different things?  An affiliate program directlry like http://www.AffiliateTips.com can provide you with lots of web site monetizing programs to put on your web sites.   On your real estate web site, you might want to put an affiliate link for CPA (cost per action) ad for a mortgage company.  These types of ads often pay in excess of $20 per action or more.  An action normally is categorized as providing the company with an individual’s name, email address, phone number, and any other sort of information they hope your site visitors will leave.  There’s no work on your part.  If the site visitor is interested in the advertiser’s offer, they will fill out the CPA form and you will get paid.

Commission Junction http://www.cj.com offers a central location to participate in multiple offers from multiple companies.  Then Commission Junction sends you one check each month.   Offers that could be relevant for a real estate oriented web site include home improvement links, do-it-yourself links, lawn, garden, bed, bath, etc. 

Other affiliate marketing opportunities can be found at http://www.leapfroginteractive.com, http://www.xy7.com, http://www.amwso.com, http://www.pepperjam.com, http://www.clickconversion.net, http://www.adlucent.com, http://www.clickbooth.com, and http://www.onetechnologies.net.

If this whole concept is relatively new to you, check out Affiliate Helper http://www.affhelper.com for all sorts of tools and resources to help you get started raking in additional income through affiliate marketing.

One of the easiest ways to make money selling sideline items on your website is through Click Bank http://www.clickbank.com which only markets digital products.  So your visitors to your web site can pick up an ebook or a free report of interest to them, download it instantly to their computer, and then Click Bank sends you your commission.  A quick search of Click Bank offers and the first real estate oriented one I found pays 60% on an $85 sale!

If you decide to put affiliate income into action on your website (or in your newsletter or your emails, etc.) you will want to subscribe to Shawn Collins Affiliate Tip blog.  http://blog.affiliatetip.com.  Shawn is one of the true gurus of affiliate marketing and affiliate incomes.

Finally, if you know lots of real estate investors and you think that they would benefit from Larry’s courses, you can even sign up as an affiliate for Larry and market his stuff on your website.  No strings attached!   http://www.larrygoins.com/affiliateprogram.asp  We’ll even give you some free software that you can give away with your affiliate link embedded inside so that people will use it, purchase other items from The Goins Group, and Larry will send you a check.

Real Estate Radio USA is devoting an entire column to affiliate marketing in the real estate arena.  http://www.realestateradiousa.com/2009/06/17/affiliate-marketing/  This colum by Barry Cunningham will be very useful as you develop your own affiliate income streams.

One of the definitive affiliate program directories is located at AssociatePrograms.com.  Allan Gardyne is the Godfather of affiliate marketing.  His specially picked list of 65 real estate programs with great profit potential for you can be found at http://www.associateprograms.com/directory/home-and-garden/real-estate/.

Hey, wait!  Larry’s affiliate program isn’t listed there.  Oh rats.  I’ll talk to you later, right now I’ve got to put back on my marketing hat and get Larry listed at Associate Programs!

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Analyzing the structure of your deal with Filthy Riches

Filthy Riches is a concept developed by Real Estate guru Larry Goins of buying and selling distressed, low-end, and cheap, “dog with fleas” properties that virtually no one else wants which can be done in any state, and then selling them with a low down payment and carrying the financing for the buyer.

In this article we look at how this system works.

How does it work?

When you sell a property you will sell it with a low down payment and finance the balance. This is what makes low-end properties so easy to get rid of. A typical property that you buy for $5,000 will go right back on the market for around $30,000 with $1,000 down and you can finance the balance of $29,000 for 10 years at 11% interest and the payment will be $399.48 a month.

Now almost anyone can afford a $400 a month payment and if they are serious about becoming a homeowner then they can find the $1,000.

You can change the terms to fit your buyer, especially if they have more cash with a little less credit or maybe have good credit but not quite $1,000 to put down. You may have them put $500 down and finance the balance for 7 years with a higher payment. This will even give you a higher yield on your $4,000 investment.

Sometimes you will be able to get more down payment. For example, if you sell the property on eBay where the bidders are bidding n the down payment then sometimes it may go for $2,000, $3,000 or even $5,000 or more. Then you have nothing in the property. This is great for you and it is also a good deal for the buyer because they got to buy a property that YOU negotiated a steep discount on and they didn’t have to qualify to get a loan. If the buyer is an investor, even better because they now have become an instant property owner without qualifying for a loan and can fix it up and rent it out for a positive cash flow. This is a win-win situation for everyone!

As a general rule, try to keep it simple and try to keep most of your deals at $1,000 down and $399.48 a month for 120 months, which is 10 years at 11%. However never turn down a larger down payment.

Larry Goins is a coach, author, trainer, and real estate investor.  His critically acclaimed new course Filthy Riches http://www.FilthyRiches.com contains more information on deals for low end real estate for the real estate investor.  Visit Larry’s website at http://www.LarryGoins.com

Six Benefits of Owning Rental Property

By Charrissa Cawley

During a real estate downturn it’s easy for someone to overlook the big picture and question why they should be interested in investing in the residential real estate market. It can be difficult not to listen to media reports and members of Congress talking about how hard it is to be alive. Don’t forget that before this real estate downturn, real estate was the hottest investment you could find. While it’s true that what goes up must come down, it’s also true that everything that falls eventually reaches the bottom, and bounces back up. Here are six reasons to invest now and be ready for the big bounce when it does come.

• Passive Monthly Income – By investing now and using your head by performing some simple calculations, you can ensure that you have more money left over at the end of the month than you need. This positive cash flow is like a gift that keeps on giving because it will show up in your mailbox every month whether you’re there to meet it or not. $200-$300 per month may not seem like a lot of money, but when you have 5, 10, or even 20 checks like that coming in that you don’t have to earn doing some repetitive or backbreaking job, a seemingly inconsequential amount of money can suddenly look pretty good.

• Security – A small child may rely on a blanket, a pacifier, or a thumb for a sense of security. Recent events have demonstrated that — while we may be older — we still like to feel confident that we have options during scary times. Owning real estate gives you that same feeling because you know that regardless of what happens you still have options.

• Depreciation – Thanks to the generosity of the U.S. Congress, real estate allows you to take an annual tax deduction for the loss in value of your real estate. Ironically, while you are busily taking a tax deduction for the lost value, the actual worth of your property is going up. Real estate has taken a temporary hit, but you get the depreciation credit even when real estate values increase (which is most of the time).

• Capital Gains Taxation – whenever you purchase something and its value rises while you own it, the federal tax code requires you to pay a special tax on that item when you sell it. Fortunately, no tax is due until you sell it. While there are a couple of steps involved, you can also extend the time you have to pay that tax in the event that you do sell it, which is a major benefit to all those who are able to capitalize on this little quirk of the tax code.

• Appreciation – Real estate appreciates – increases in value – far more frequently than it loses value, and with these increases come the opportunity for you to add to your net worth. You’ll still have the monthly income your positive cash flow provides so you have a second way to cash in on real estate – a third way if you bought it at a great price. You could look at the trickle of monthly income as a down payment on the flood of cash that will come your way through appreciation – value you can benefit from by selling or by pulling equity out to help fund future purchases or use for anything you like.

• Pride of Ownership – Do you remember how proud you felt when you got your first car? It may have been a beat up Volkswagon, but it was yours. Imagine how your chest will swell with pride when you drive down the street and look at your house, and you realize that you own another just like it across the street, and several others that are even nicer around the corner. There’s no better feeling in the world than knowing that you own something that so many others only dream about.

There are lots of great reasons why you should want to own real estate; these are just a few of them. I can appeal to your desire to build a portfolio of appreciating assets that will add to your net worth on a year to year basis. You can look at your net worth on paper and try to comprehend what all those zeroes mean, but the biggest prize will be the looks of adoration in the faces of your family when they realize that your time is their time, that they have your undivided attention, and you can go anywhere or do anything you want to because you had the good sense to start investing when a lady named Charrissa told you it was a great idea.

So invest now, and reap all of the rewards that are waiting to come your way.