Tech Corner – Using The Ultimate Property Analyzer

By Shannan Hearne

Last month we talked about the nuts and bolts of installing and opening Larry Goin’s Ultimate Property Analyzer from the Forms CD in your Ultimate Buying and Selling Machine Course.  If you missed that article, please refer back to the March 09 issue of the Ultimate Investor Report for details.  This month we are going to look at how to use the ultimate property analyzer.

When you first open the program on your computer you will see the image below.  This is the “out of the box” way your Ultimate Property Analyzer opens.

Your investment to value is preloaded at 70%.  You can change this if necessary, but remember that Larry recommends never investing more than 70% of the After Repair Value in a property.  Closing costs are pre-calculated at 4% and also can be changed if necessary.  The tax, attorney fees, etc. are preloaded at $2250 and can be adjusted as well.  Likewise, the repairs and desired wholesale profit are preset, but can be adjusted as necessary on a property by property basis.

To adjust any value in the Ultimate Property Analyzer, simply click on the box and type in the desired amount.  If you want to change the desired wholesale profit to $6500, simply click on that box and type in the number 6500.  If you are familiar with spreadsheets, the flow of the Ultimate Property Analyzer should be quite familiar to you.  It operates and handles data in much the same manner.

Now you are ready to input the data necessary to analyze any property you are looking at.  You will get the ARV (After Repaired Value) from the realtor or owner.  Enter that number into the top box on the analyzer and the program immediately does its magic, giving you in the bottom field a maximum amount that you can offer for the property.  Let’s suppose that you predict a $1200 advertising expense when you are ready to resell the property.  You can add any additional expenses or percentage of value expenses in the fields Category 1, Category 2, and Category 3.  This will further reduce the maximum offer field.

Unlike so many analyzers available, this program is very simple to use and designed to help you make an offer during your very first phone call about a property.  What a time saver! 

If at any point you wish to print a copy of the analyzer for a property, you can hold down the control button on your computer and click the print screen button.  Then open up a word document and paste the analyzer into the screen for printing.  That is exactly what I’ve done above to print a copy of the Ultimate Property Analyzer for you.

Now look at the screen shot of the Ultimate Property Analyzer at the top of the article.  I’ve done an analysis on a property with a $125000 ARV requiring $16,000 in repairs that I need to make an $8000 profit on when I resell.  The Ultimate Property Analyzer takes those figures into account, adds in the tax and attorney fees, closing costs, etc.  It gives me a number of $57,750 for my maximum offer.  Remember, I want to make an offer in my first phone conversation with the owner.  And I want my offer to sound educated.  We can assume the owner won’t jump on the first offer in the first conversation – but I’ve seen Larry’s students get such incredible results.  So let’s say I make an offer of $53,658.  That’s a nice uneven number that suggests that I’ve done my research.  It leaves me over $4,000 room to negotiate with the owner, or quite possibly another $4000 in profits on the property.

Now let’s suppose that in the course of negotiations on this property, the market drops a bit and the ARV is only $115,000.

The Ultimate Property Analyzer let’s me very quickly see that I have to drastically reduce my offer to even less than I originally offered on the phone, or I must walk away because suddenly this property isn’t such a deal after all!

This is a simple example of the Ultimate Property Analyzer at work.  I hope that you are more comfortable and confident using this great tool from The Ultimate Buying and Selling Machine.

60 Days To Your First Bargain Purchase
by Bill Bronchick
Finding good real estate deals is an art that takes time to master. Like any business, customers are what drive it. Your primary customer is the seller who is motivated to sell below market value. Finding motivated sellers requires advertising, marketing, salesmanship, and, like any business, keeping your nose to the ground.

Nothing happens and nothing matters in real estate until you find a deal. You cannot put together a deal without a motivated seller and you can only convince a motivated seller to do something creative or that involves a discounted price. A motivated seller is one with a very good and pressing reason to sell below market.

The most common problem new investors face is finding bargain properties. Many who start out in real estate investing quit without ever buying their first property. They go through the motions of looking for deals for a few weeks or months and then decide it doesn’t work. They forget that finding motivated sellers is similar to the salesman finding his first customer . . . it takes persistence and hard work.

Find the Motivated Seller

At the cost of sounding redundant, the concept is simple: find motivated sellers that are willing to sell their properties at a discounted price or “soft” terms. Currently, the real estate market in some parts of the country is hot, hot, hot! Many people are complaining that the strength of the market precludes investors from finding deals on properties. The popular misconception is that in a rising market, even the most motivated seller can find a buyer for his property at full market price.

The truth is, you can find deals in ANY market. Real estate legend A.D. Kessler once said, “There are no problem properties, just problem ownerships.” The definition of a motivated seller fits squarely within Kessler’s idea. A logical person knows that time, money and effort can solve virtually any real estate problem. However, some people are too emotional about their real estate problems or have other motivating issues to deal with.

Some of these issues include:

• Divorce

• Lack of concern
• Inexperience with real estate repairs

• Time constraints

• Death of a loved one

• Job transfer

• Landlording headaches

• Impending foreclosure & other financial problems

Farming Neighborhoods

Successful real estate agents utilize a technique called “farming” to increase their business activity. They pick a neighborhood or two and focus their marketing efforts within that area. You should try the same technique. Start with a neighborhood that is relatively convenient for you.

1. Drive the Area

Spend a few weekends driving around the area. The goal for you at first is to learn about the area, the style of houses and the average prices. Over time, you may expand your farm area, but stick with areas that contain the type of homes you plan to purchase. It is not necessary to begin your investment career by learning every square mile of a large metropolitan area; it is important to learn the value of “typical” homes in your target areas. This knowledge will enable you to make quick decisions about whether a particular prospect is a bargain.

2. Attend Open Houses

Visit open houses and “for sale by owner” (FSBO) properties on weekends. Speak directly with owners and their agents. Pass out your business cards. Make friends. Word of mouth and referrals are a big part of any business.

Part of the process of finding a deal is to know how to recognize one. Take a good look at the property and its physical features. After viewing a couple of dozen open houses in the neighborhood, you will get to know the value of the properties and the different styles of houses. When someone calls you about a house in that area, you will know the value by its description.

3. Look for Ugly and Vacant Properties

While you are driving around neighborhoods, look for vacant, ugly houses. How can you tell if a house is vacant? Look in the window! Of course, this practice may get you shot, bitten by a dog or arrested. First look for the obvious signs of vacancy – overgrown grass, no window shades, boarded windows, newspapers, garbage, mail piled up, etc. If you are not certain whether the property is vacant, knock on the door. If the owner answers, be polite, respectful and ask if he is interested in selling. In many cases, it may be a rental property, so ask the occupants for the name and telephone number of the owner.

If the property is vacant, ask the neighbors if they know the owner. Most neighbors are helpful, as they know “ugly” houses hurt their own property values. In addition, ask the mailman – they know all of the empty houses on the block. Leave a business card and write down the address of the ugly or vacant properties. When you get home, look up the name and address of the owner. Finding the owner of a vacant house can be difficult, which is why the persistent people who find the information make the most money. The name of the owner can be found by calling your local tax assessor’s office or by looking up the deed recorded with the County land records.

If you want to contact the owner, it takes a little more digging. Try speaking with the neighbors or asking the post office for a copy of a change-of-address form on file for the property. Online services, such as www.infousa.com, will search public databases, such as the Driver’s License Bureau and the Department of Motor Vehicles.

Some cities, towns and counties will “tag” a house with code violations. This is often a sign of a neglected or vacant property. Ask your city if you can obtain a list of such properties or find where this information is publicly recorded.

William Bronchick, CEO of Legalwiz Publications, is a Nationally-known attorney, author, entrepreneur and speaker. Mr. Bronchick has been practicing law and real estate since 1990, having been involved in over 600 transactions. He has appeared as a guest on numerous radio and television talk shows including CNBC Power Lunch. He has been featured in Who’s Who in American Business, Money Magazine, the Los Angeles Times and the Denver Business Journal. William Bronchick has served as President of the Colorado Association of Real Estate Investors since 1996.

Examining Equity and Value

By Jewell Hardin

What is the difference in equity over value when it comes to loans ? Equity in all aspects is the fairness of the loans worth. In other words, when lenders offer loans they expect a sort of security known as collateral. The collateral is expected to be fair by measuring up to the loans worth. The purpose is to provide security to the lender, since if you fail to meet payments, the lender hopes when selling your home on the market that he will make up the difference of the defaults on the loan amount borrowed.

Thus, when considering home equity, make sure you can meet the monthly obligations, since failure to do so can lead to foreclosure, repossession, bankruptcy and even court judgments.

Thus, if you are considering home equity loans, you may want to consider the value of your home. How much is your home worth in equity? How much money do you intend to apply for? What is the purpose of the loan? Can you afford to repay the loan monthly without risk? These are all questions you should ask when considering home equity loans to avoid loss.

When you are considering home equity loans, you are venturing to put your home in a slaughter bin. If you fail to meet the monthly obligations, then the big dogs repossesses your home and markets it for profit. Thus, taking such a risk again requires great consideration.

Finally, if you are searching for a method to payoff debts, it always makes sense to get quotes since this is an idea for helping you to compare rates, interest rates, terms and conditions of the loan, and so forth. And of course, don’t forget to read the fine print, since pertinent details will almost be guaranteed to underlie the words.

Bubble, Schmubble – Flipping Works in Any Market
by Bill Bronchick
For years, hot-shot speculators made huge profits flipping condos in Florida and Vegas before they were even constructed. All the while, the naysayers in the ivory towers of Wall Street and academia warned of a “housing bubble” that was sure to burst as all bubbles do. When Fed chairman Alan Greenspan said that national real estate market was “frothy,” the writing was really on the wall, and anyone with half a brain could see that we were in for a “cooling” of the housing market, at best. And yet still, speculators continued to profit, and the real estate bull market marched on…

But the bulls aren’t marching now. Greenspan handed his matador’s cape to the new Fed chairman, Ben Bernanke, who continued the policy of interest rate hikes designed to deflate housing. No longer accelerating at a break-neck pace, home prices have flattened like a pancake in many markets, and new the condo speculators who got in late are in for a world of hurt. Clearly, the housing “boom” is over in many parts of the Country. But contrary to the media hype, this is great news for flippers!

Flipping vs. Speculating

It should be made clear that there is a difference between flipping and speculating. While speculators may be a sub-set of flippers, they are, at best, the amateurs of the real estate investing family. Flippers who have consistent success are more conservative and have a fundamental approach to real estate investing. While it may not be as exciting as speculating, the rewards of more conservative flipping are nearly as generous, and they are paired with far less risk.

The biggest difference between flipping and speculating is that flipping works in any market, whereas speculating only works in certain places at certain times. Las Vegas from 2002 to 2004 was a great time and place to be a speculator, but if you were still in the market in 2006, chances are you got burned by more than the hot desert sun. Basically, speculating often works on the “greater fool” thesis – that you can always find a greater fool than yourself to take a property off your hands in the expectation that he will be able to find yet a greater fool. Eventually, someone is left holding the bag and that’s when the party is over.

Flipping, by contrast, relies on fundamentals. The idea is not to catch a shooting star in a rapidly appreciating market. Rather, the plan is to find undervalued properties, rehab them, present them in an attractive manner, and sell them for a reasonable profit. Not only is a rising market not a requirement of flipping success, it may even be a mild detriment! After all, it is a bit harder to find bargain properties in booming areas. Sure, it can still be done, but the point is that even falling markets are prime for flipping since the holding period is often too short for the value of the property to decline beyond the deep discount at which it is purchased. Assuming that you add value through rehabbing, you almost can’t lose!

Exit Strategies – Always Have a Plan B

While speculators often rely on the “greater fool” strategy, flippers tend to have one of two exit plans: 1) Quickly flip the title to another investor, or 2) Rehab and sell the property at the retail level. While the lion’s share of the profits go to the retailer, a quick wholesale deal can free up your cash (and energy) for the next deal. But what if neither strategy works? What if the market really crashes and the buyers disappear? Is all lost? Of course not!

For complex economic reasons, the rental property market does not always correlate with the housing market. In fact, they are often countercyclical. Although most flippers aren’t terribly interested in being landlords, generating rental income from a botched deal is a solid backup plan. Better yet, you can usually refinance the property after rehabbing it to get all of your money out. From that point forward, the bulk of your rental income will be pure profit, and when the market improves, you can make the sale. Even better, you can offer your tenants a lease with an option to buy, which is attractive to many young families looking for their first home.

The media portrays real estate flippers as the investment world’s answer to Wild West gunslingers, but in reality, nothing could be further from the truth. Compare the “worst case” rental income scenario of real estate flipping with the “worst case” Enron scenario of stock market investing. There really is no comparison! If you take a fundamental approach to real estate rehabbing and flipping, your risk is limited and your profits are virtually limitless. It really is the best of all worlds.

William Bronchick, CEO of Legalwiz Publications, is a Nationally-known attorney, author, entrepreneur and speaker. Mr. Bronchick has been practicing law and real estate since 1990, having been involved in over 600 transactions. He has appeared as a guest on numerous radio and television talk shows including CNBC Power Lunch. He has been featured in Who’s Who in American Business, Money Magazine, the Los Angeles Times and the Denver Business Journal. William Bronchick has served as President of the Colorado Association of Real Estate Investors since 1996.

For more articles from William Bronchick, go to http://www.thecoachingclub.com/event-archives/brain-pick-a-pro/real-estate/william-bronchick/

HOW TO GET GOOD COMPS IN REAL ESTATE INVESTING

Here are some ways to figure out what price you should offer on your houses to get a deal, or to give someone else a deal. I will also show you how to maximize your investment. 

Comps are basically the true value of a house.  You can look at the price of houses for sale, but that doesn’t tell you the true value of a house.  The true value of a house in an area is based on how much houses are SELLING for, not how much the houses are listed for. 

So, if you look in a neighborhood, you may find houses listed at high prices.  They don’t sell at those high prices. They get made offers, they also come down before they sell.  It’s the selling price of the house you want to go by to make a decision on how much you want to get for your house, or how much you want to offer on your house.  It’s also known as ARV (average retail value, or after repair value).  The comps let you figure out what the ARV is. 

Comps also need to be similar houses of a similar age, in the same location.  Now, when I say the same location, you want them to be less than a mile away, the closer the better.  You want them to be sold, if possible, less than 60, or even 30 days ago.  With this volatile market, you really want to make sure that those comps are done on homes sold recently.  So, the closer to your subject property and the more recent those homes were sold, the more accurate your comps are going to be.

Now, we’ll talk about where you can get your comps from.    First off, you can get comps from a Realtor or the MLS.  If you are a Realtor, you already know how to access them.  If you are not a Realtor, you can befriend a Realtor, and usually for about $20 or $25, you can get a Realtor to run comps for you. Realtors are good for getting comps because they are professionally trained to do so.  Note that sometimes when they are working with a Seller, they MIGHT want to bump their price up a little bit to maximize their commission.  Sometimes they might even do it for free.    It’s give and take, do them a favor, give them a listing now and then, you’ll find a Realtor that can do it.  The problem is, a lot of Realtors, they won’t do it over and over again.  They’ll do a couple, but they don’t want to be your source for comps.  Sometimes you can need 5 or 6 a day. 

You can also get comps online, but be leery.  Some companies are good resources, they list sold house prices, but don’t trust them so much when it tells you how much your subject house is worth.  You can use them to see how much houses sell for in your area, but when it comes to finding out how much your house is worth, I have seen as much as a $50,000 spread up and down.  $50,000 low, to $50,000 high.  Those online free sites are not very accurate, unfortunately.  I suggest against that.  The worst thing you want to do is buy a house for even as little as $15,000 more than what it is worth.  Then, you will become a motivated seller, and you don’t want that.

You can also go to the courthouse, though it is tedious for only one comp.  You can contact them and get all of the records for all of the homes that sold in one area and find out what they are selling for.

 I personally use a service online that runs comps for me.  I put the subject address in and it gives us all of the recent sales around there, it tells us how much they sold for, how much loans are for on present houses too.  But, not everybody wants to pay for it.  If you are a true investor, it’s worth paying for, because you want to sit down, push a few buttons, and get your comps.  Please research these companies before signing up with them.  Now, you can move on to make your offers and talking to sellers are buyers. 

Now, how do you evaluate?  It’s easy if all of the properties are the same where it’s the same model home over and over in the same subdivision.  It makes it a lot easier that way.  When you get a few of the sale prices, average them out, then you can figure out how much the house is worth.  It’s real easy with condos because it’s the exact same unit, right across or down the hall.  Make sure that the time is there.  If three identical units sold 7, 9, and 11 months ago, they are not good comps.  You have to adjust for the time in which the market changes for that period of time. 

If they are different types of houses, you have to go by different things.  You have to do more research.  You have to look at the size of the houses, the age of the houses.  If one house is 50 years old and one house is 5 years old, the value is different.  You have to look at the condition of the houses.  You have to look at the extras on the house.  Maybe one house has a 3 car garage and one house has a 1 or a 2 car garage.  One house has a pool.  You have to adjust for that.  If one house has a pool, that house is going to be worth more than the home without the pool.   

In a lot of cases, you can ask your seller what they feel the house is worth, which is always high.  Ask them how they came to that price.  Maybe they will tell you that they had a Realtor who gave them a CMA.  Always double-check on that.  You always have to run comps.  Never take a seller’s word for it.  Always do your own research.

There is also a square footage method.  Let’s say you have eight different comps for homes that are all different in a certain area.  I toss out the top one, which is always a lot higher.  I then also toss out the low one.  Then, I figure out how much a square foot the other houses are selling for.  I take the square footage, the selling price, do the math, and figure out how much per square foot each of those houses sold for.  I write it down, then I average it out and that will give you a good idea.  So, what you do is figure out the average price per square foot is for homes that sold recently in that area, and then you multiply that by the square footage of the house you are looking at.  That will give you a relatively decent comp.  Again, it’s not an exact science.  It comes with a little bit of experience. 

It also comes with learning the territory.  A lot of you are working only in one area. But, there are certain parts of Chicago here, that you can tell me it’s a one-bedroom, one level garage in Country Club Hills, and I can tell you how much it is worth, then adjust it for condition.  It’s because I have dealt with that area.  But, if you are investing all over the country, or if you are in a big city, you have to run your comps.  The easiest way for me is to use a service, instead of doing all of the square footage work.

Now, there are things that you have to look at, that you have to adjust for.  Sometimes you have to throw out homes that sold for very low prices.  You might have 8 or 10 houses all that sold within a twenty thousand dollar range and one that sold for thirty thousand less.  You have to find out why it sold for thirty thousand less.  Did it have a foundation problem?  Was it a foreclosure or short sale?  Right now, there are so many foreclosures and short sales going on, you have to be aware of that.  When you look at your comp list and one or two homes look way high or way low, you either have to throw it out or you have to find out why.  These foreclosures are lowering the prices in areas. 

Now, when I am selling a house, this is what I do.  When I have an appraiser come in, or when I’m pricing my house, I use the highest comps in the area.  When I am buying a house or negotiating with a seller or I’m doing a BPO and that BPO Agent is coming in, and I’m going to give him some comps to help influence his BPO on a short sale, I’m going to give him the lower comps in the area and will tell him that we are basing our offer on these comps.  So, use the higher comps when you are selling, use the lower comps when you are buying. 

Once you have your comps and know the prices that houses are selling for, use these tips to evaluate them:

• Only use sold house prices, never listed ones
• Do not use these comps for properties over 4 units, those are commercial, and done differently
• Try to use comps as close as possible to the subject, hopefully less than a mile, and closer
• Comps should be as “fresh” as possible, 30 days old or less
• Compare “apples to apples”, not 3 year old homes to 60 year old ones
• If a property is priced substantially higher or lower than the rest, find out why
• If the comps are extremely varied, figure out the square footage price for the area, and use that
• Use high comps when you’re selling, and lower comps when you’re buying, in negotiations

Nick Cifonie is a long-time real estate investor, speaker, and mentor.

Nick has bought and sold millions of $’s in single family homes and multi-family properties, using techniques including bird-dogging, wholesaling, lease-options, subject-to transactions, buy and holds, seller financing, retail flips, assignments, options, auctions,and has even flipped property on EBAY! Nick is the current host of the popular “Real Estate Investor TV”, a fun, educational series found at http://www.rei-tv.com

Exactly How You Should Invest Right Now to Double Your Income

The Sky Is Falling! 

Everyone is wondering what to do.  Everyone is fearful.

Actually that’s not true at all.  The unschooled, untrained, unknowing Masses are indeed fearful.  They are reading the newspaper headlines each day and getting more and more worried for their jobs, their businesses, their investments, their retirement.  But, not everyone is fearful.  Some people are happy.  Gleeful. Self-assured.  These are the Rich People.  They know exactly what to do.

In this brief article, I will explain exactly what to do. 

First, go right back to basics.  What is the Number One rule for investing success?  That rule is …

Buy Low Sell High

If it’s so short (four words) and so easy to understand, why isn’t everyone following it?  There indeed is a reason why the Broke People do not follow it.  Here is that reason.

Prices are low when there is a problem.  Prices do not like chaos, problems, uncertainty.  So, they fall.  When there is a problem, prices are low.  Rich People see the low prices, they remember the rule “Buy Low Sell High” and they buy.  Broke People see the problem, get fearful reading the headlines of the newspapers, forget the rule of wise investing, and run.  Yes, run away from investing — right when prices are low.

So, what are rich people doing right now?

Buy Low

Rich people are racing to buy US real estate.  I personally just bought a duplex in a major city.  It was listed at $530,000.  The sellers were extremely eager to sell.  In a very brief several-day negotiation, they lowered the price by a shocking $100,000 to only $430,000.  So, I bought it.  I see the problem; I see the low prices; I buy.

Now, let’s look at the other side of the coin.

Sell High

Just look at the newspapers and besides seeing that real estate prices are low, you will see that gold prices are high.

The previous all-time high gold price, on January 21 1980, was $850.  The World waited for almost three decades for gold to get near that price.  Then, on January 3rd, gold broke that high.  Then, on March 13, gold broke through the $1,000 per ounce barrier for the first time ever!

Now that there is so much good news about Gold, The Masses are buying gold and dumping their real estate.  Weird.  What am I doing?  What are rich people doing?  We are selling all our gold and silver.  I had hundreds of pounds of silver in my safe and hundreds of grams of gold and some platinum all locked away in my safe.  I bought when prices were low.  I’ve just sold it all over the last few days.

Your Turn

You may now be brooding that you have no gold to sell and have no cash to buy real estate.  So, what should you do?  First get into practice by selling anything you’ve got that you can part with that contains gold or silver – old jewelry, silver cutlery, etc.  Second, do anything you can to get into an investment property right now, even if you have to joint venture with some friends to raise the down payment.  Get started.  Begin investing correctly.

Sell when prices are high, even if all your friends are buying.

Buy when prices are low, even if there are problems.