Anyways, here is a brief discription of Radon: Nuclear Fallout in Your Home

Do you have a Radon Gas in your home?

The truth is, radon is EVERYWHERE but not in the way you might think. There’s good news – anyone can now have the technical wisdom once saved for specialists and government representatives! (Keep reading to find out how you can protect your life and the lives and health of your family

This odorless, colorless, tasteless gas is a natural part of the radioactive decay of uranium; the problem is, radioactivity is a leading cause of cancer.

The Environmental Protection Agency estimates that as many as 30,000 Americans Die each year from Lung Cancer as a direct result of living in or working in an area with elevated levels of this harmful gas.

This book is for the purpose of educating the general public in concepts normally reserved for a select few engineers, scientists and technicians which specialized jargon and expertise.

It’s not your fault. The failure is with the Scientific and Engineering sector as a whole, which has simply not provided everyday people with the information that they need to know, in words they can understand to protect their families and themselves from this potentially DEADLY phenomenon!

See how easily you can test for radon yourself without all the costly technicians who talk over your head!

Learn what Radon is, how it is formed and why it is a Hazard to your Health.

Radon Gas does not occur in your home at a constant rate. The rate can change even during the course of a single day and you need to know whether you and your family are at risk today!

Now you too can Protect your Family’s Health starting today if you have the right information.

You can learn how to tighten your grip on this Silent Killer with my new digital guide…

This text is a must have for Real Estate Investors and Homeowners alike!

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Anyways, this article appeared in Yahoo this morning and I wanted to share it, because whether you do stocks, or forex, or real estate, the rules are always the same, and the author of this article does a GREAT job of telling it like it is.

Rules That Warren Buffet Lives By

by Stephanie Loiacono
Tuesday, February 23, 2010

Warren Buffett is arguably the world’s greatest stock investor. He’s also a bit of a philosopher. He pares down his investment ideas into simple, memorable sound bites. Do you know what his homespun sayings really mean? Does his philosophy hold up in today’s difficult environment? Find out below.

“Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1.”

Buffett personally lost about $23 billion in the financial crisis of 2008, and his company, Berkshire Hathaway, lost its revered AAA ratings. So how can he tell us to never lose money?

He’s referring to the mindset of a sensible investor. Don’t be frivolous. Don’t gamble. Don’t go into an investment with a cavalier attitude that it’s OK to lose. Be informed. Do your homework. Buffett invests only in companies he thoroughly researches and understands. He doesn’t go into an investment prepared to lose, and neither should you.

Buffett believes the most important quality for an investor is temperament, not intellect. A successful investor doesn’t focus on being with or against the crowd.
The stock market will swing up and down. But in good times and bad, Buffett stays focused on his goals. So should we. (This esteemed investor rarely changes his long-term investing strategy no matter what the market does.

“If The Business Does Well, the Stock Eventually Follows”

The Intelligent Investor by Benjamin Graham convinced Buffett that investing in a stock equates to owning a piece of the business. So when he searches for a stock to invest in, Buffett seeks out businesses that exhibit favorable long-term prospects. Does the company have a consistent operating history? Does it have a dominant business franchise? Is the business generating high and sustainable profit margins? If the company’s share price is trading below expectations for its future growth, then it’s a stock Buffett may want to own.

Buffett never buys anything unless he can write down his reasons why he’ll pay a specific price per share for a particular company. Do you do the same?

“It’s Far Better to Buy a Wonderful Company at a Fair Price Than a Fair Company at a Wonderful Price”

Buffett is a value investor who likes to buy quality stocks at rock-bottom prices. His real goal is to build more and more operating power for Berkshire Hathaway by owning stocks that will generate solid profits and capital appreciation for years to come. When the markets reeled during the recent financial crisis, Buffett was stockpiling great long-term investments by investing billions in names like General Electric and Goldman Sachs.

To pick stocks well, investors must set down criteria for uncovering good businesses, and stick to their discipline. You might, for example, seek companies that offer a durable product or service and also have solid operating earnings and the germ for future profits. You might establish a minimum market capitalization you’re willing to accept, and a maximum P/E ratio or debt level. Finding the right company at the right price — with a margin for safety against unknown market risk — is the ultimate goal.

Remember, the price you pay for a stock isn’t the same as the value you get. Successful investors know the difference.

“Our Favorite Holding Period Is Forever”

How long should you hold a stock? Buffett says if you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes. Even during the period he called the “Financial Pearl Harbor,” Buffett loyally held on to the bulk of his portfolio.

Unless a company has suffered a sea change in prospects, such as impossible labor problems or product obsolescence, a long holding period will keep an investor from acting too human. That is, being too fearful or too greedy can cause investors to sell stocks at the bottom or buy at the peak — and destroy portfolio appreciation for the long run.

You may think the recent financial meltdown changed things, but don’t be fooled: those unfussy sayings from the Oracle of Omaha still RULE!

The original article link is http://finance.yahoo.com/banking-budgeting/article/108903/rules-that-warren-buffett-lives-by for those interested

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Here is how we did it:

We found out through our network about a couple who is going through a divorce. They were in foreclosure and had every intention of simply walking away from each other and the home and starting over again. Not an uncommon scenario, in fact in this economy is it extremely common. The number one reason for divorce is money and the number two is fidelity. Yep, people are more worried about who is paying for what than they are who is sleeping with who,, but that is another blog entirely.

So, as it turns out, the home is a 4 bed, 2 ½ bath at 2800 square feet. It is in one of the areas of Little Rock still moving, and is worth 160+ if it is the cutest house on the block. The problem is, that with three teenagers and no money the home is not the cutest on the block, in fact it needs a bit of TLC; about 10-15K worth of TLC. It will take just under $8000 to catch up the loan and they owe right at 90k. Now, part of their problem had to do with a variable rate mortgage (ARM) that went from 750 per month to 1200 per month. No problem there, we negotiated with the bank to bump it down to 750 for the next three years citing the economy, job issues the heart attack that the husband had, etc. They were happy to do it because…guess what…they don’t want the house back and were overjoyed to have the 8k!

Our total commitment is 18k to 23k and our total potential on a straight retail sale is 160k-the 90k loan-15k repairs- 8k to buy out of foreclosure, which equals 47k profit; just over DOUBLING our money. Oh wait, want to see how we could triple our money?

We could Lease Option the place at170k with 10k down and payments of 1150 per month. Now we make 400 per month over the next three years; another 14,400 bucks and all the while the owner/tenant is paying down the note. In three years say they have knocked it down to 85k. Our profit is then 10k down payment +14,4000 rent profit for three years + the 47k we talked about earlier + plus the 5k difference in the note that isn’t even in our name! $23,000 in, $76,400 out. Not bad for a crapped out economy, eh.

Now guys, in an ideal world, the house would be totally pretty and we would do no work on it, and we would negotiate to just start payments back up with the bank, but I think I have shown with a REAL LIFE EXAMPLE that with a little ingenuity, and a bit of education, you can pretty much do anything you want in real estate; the only limits are your imagination and creativity.

How do you think I know that?!

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I found a few facts pretty interesting, and they are really the subject of this post.

For example, did you know that when we landed on the moon back in the 70’s we left allot more than just a flag and some footprints? Apparently the LEM (Lunar Excursion Module) has two parts. There is the part where the astronauts actually sit, and then the base where the legs and such are located. There are no less than 6 of these bases sitting in various spots on the moon; it seems we had to leave that part behind in order to get off the surface when it was time to go. Also, the “lunar rover” vehicles, which were the “dune buggy like” 4 wheelers used in the Apollo 15, 16 and 17 missions all had to be abandoned as well. Every probe we brought up there is still on the surface as well. Souns a whole lot like “littering” to me. Don’t feel TOO bad though, It seems both China and Russia have done the same thing.

Perhaps the most interesting “artifact” left by Americans on the moon are the three golf balls hit with a Nine Iron by Alan Shepard. Now I understand that people love their sports and all, but come on now guys…Exactly what scientific purpose was NASA exploring when they let Shepard do this? I mean really guys, the Space Program has cost us BILLIONS and for what; golf balls on the moon? I guess I am just too serious about life ’cause I think that is just plain silly.

So it seems that if you litter on a federal highway, you get fined $1000 but if the federal government litters, it is called science. And remember, a $1 Titleist becomes a priceless artifact if it is hit by the right guy in the right place with the right stuff.

Humans are scary.

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35 Preston Drive, Jacksonville, Arkansas 72076: 3 Bedroom, 1 bath house with 1200 s.f. of living area. Asking $78,000 and currently rented at $700/mo.

This wholesaler, we will call him “Joe” wants me to buy an investment that will make me $700 bucks month, but I have to give up 78,000. I think any of you who have had even a little bit of training in real estate, not to mention basic math can see that this is NOT a deal; however, let’s take a look at it anyways, because I think we can all learn something here.

A quick look at the county data tells me the house was bought in 2007 by an investor from a bank; in other words it was an REO. The county has a value of 58 k on it and the home has central heat and air and was built in 1974. His square footage is a bit of an exaggeration at 1200; it’s actually 1168. The taxes are $630 per year.

Most of you know that I do not recommend zillow.com, realtor.com or any of the other sites out there as a replacement for a good realtor’s CMA, but for getting a rough idea of whether or not I would want to spend any time on a deal, or enroll one of my realtors to do the same, I often will check zillow for some basic numbers. Just as I suspected zillow believes the house is worth 82K, so this guy is asking pretty close to retail. I also checked realtor .com who said the median LIST price(not SALES price) for the neighborhood was 85K.

So, do we buy houses at retail boys and girls? And they all answered a resounding NO! But then, we already knew that; we are just looking at all the reasons why it won’t work for purposes of education.

I already know from experience that the insurance on this sucker will be around $350 per year if you have an umbrella policy like I do. If you don’t own many houses then you will not have one of those blanket style vehicles and the insurance will be higher, say $450 per year; but let’s just use $350 since this is just for example anyways.

A 100% loan at 20 years and 6% will cost me $640.48 per month if I escrow the taxes and insurance. Personally I try to never escrow taxes and insurance because I want to have use of my money during the year, not let it sit at some bank with no interest and then allow them to pay my bills with it; but if you are a new investor it might be easier on you. So I will make a $60 profit per month. Well, I’ll make a $60 profit per month as long as the renter pays me on time, nothing breaks and I don’t have to run an ad in the paper for a new renter.

What’s that you say? Interest rates are down and I can finance for 30 years? Okay, let’s look at that. First off, interest rates are down only for low risk loans. As an investor you are NOT going to get the owner occupant rate. Most of the banks I have ever dealt with will only go a maximum of 20-25 years on a single family investor loan. Of course I know a guy in Texas that used to tell the banks he was moving in, and then at the last minute “something changed” in his life and he decided to rent it instead. That might work for a while but eventually the banks will figure out what you are doing.

Okay, so you want to look at 30 years anyways…fine. Thirty year fixed with the same information as before will be a $549.22 per month payment. You will make $150 per month. Carpet and vinyl in Arkansas is about $2.25 per square foot installed. That’s $2700 bucks or 18 months of your profit. Paint will cost you 8 months profit. A water heater 5 months profit. You might want to look at what your future maintenance is going to be before you buy this sucker. How do you think I know that?

There is another problem with financing for thirty years as well. Interest! Yeah, I know, the tenant will be paying that interest, but let’s look at the numbers for just a minute, shall we? If we figure an average of 2% growth in terms of equity, your 78,000 home will be worth about 103K in ten years. The problem is, with a 30 year note, you will only have paid the note down to 65K; and based on the economy at this particular point do you really want to count on making your money with some future equity?

There are four main ways to make money in real estate. Depreciation, Appreciation, Equity and Cash flow. There are actually another six, but they are way too complex for this conversation, so let’s just look at the first four. Of the four only one is guaranteed to put money in your pocket now and that’s cash flow. As many of you know I am a student of Robert Kiosaki, and truly believe that an investment should pay you TODAY. Anything that does not put money in your pocket the day you acquire it is a liability. Ask all the folks with negative amortization loans in California, how they feel about equity and appreciation right now. One they aren’t getting and the other they never got!

Personally, I do not touch a rental unless I can make $300 per month minimum. Also, I base that on a 10 month year, because the average length of tenancy in Arkansas is 14 months and nationwide I read somewhere that it is around two years. That means that once a year I will be running an ad at $150 for the month and at minimum doing a cleanup and “make ready” at a cost of about $250.

The other way I look at any potential rental is that the numbers must still meet the MAO formula that I use if I was going to do a wholesale or retail flip on an ugly house.

MAO = (60%)*(ARV) – repairs

Your Maximum Allowable offer can be no more than 60% of the After Repaired Value based on a strong CMA and other evidence minus any repairs that are needed.

Given no repairs, this deal would still never make the grade based on the fact that the wholesaler is asking close to if not more than retail for the home.

Concentrate on making your money on the front end every time, all the time and you will not lose nearly as often. Remember that you will lose at some point. Investing in Real Estate is like riding my Harley. It is not a question of “if” I will lay the bike down it’s a question of “when”. You ride as long as I have and you know that you are going to lay it down eventually. My goal is to have you lay it down less, and to do less damage when you do lay it down.

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Buyers with cash emerge as force in residential real-estate marketplace

Cash buyers trump a financed offer because sellers feel that a cash deal is less likely to fall through around complications with buyer financing.

By Jane Hodges
Special to The Seattle Times

Jacqui Evanchik was surprised when she received a cash offer for her one-bedroom condo at Capitol Hill’s Trace Lofts. But she said “the offer was attractive because there was no financing contingency. She expects to close on the sale later this month.

The common area roof deck at the Trace Lofts, on Capitol Hill, where Jacqui Evanchik got a cash offer for her condo.

The developer refurbished a warehouse, added floors and a new building next door to create The Trace Lofts, on 12th Avenue and East Madison Street. The building dates to 1919.

The lobby at Trace Lofts is a nod to one of its past lives as a warehouse for vintage sewing machines. It’s also been, among other things, a moving-company warehouse and an athletic supply store, according to the developer.

Jacqui Evanchik, a 53-year-old software consultant, knew when she listed her one-bedroom condo at Capitol Hill’s Trace Lofts that she’d chosen to do so in a difficult market. Home sales have been anemic for a while.

She knew her $300,000 listing appeared at a slow time of year, around Thanksgiving. And, she’d accepted that she could wait months for an offer and even then might only break even. What she didn’t expect was this: a quick, all-cash offer.

“The offer was attractive because there was no financing contingency,” Evanchik says.

Of course, it wasn’t perfect at $10,000 below asking. But after some negotiating, Evanchik and the buyer compromised at $294,000. She expects to close on the sale later this month. Evanchik’s agent, Jeff Prescott of Re/Max Metro Realty in Seattle, says all-cash offers are on the rise in Puget Sound, just as they are elsewhere in the U.S.

“I’ve got three cash deals going, … ” Prescott says. “That’s a significant jump in all-cash.”

Nationally, all-cash offers accounted for 22 percent of the market during December, according to data from The National Association of Realtors. For all of last year, all-cash offers represented 8 percent of the market, up from 7 percent in 2008, says Walt Molony, an NAR spokesman.

The trend appears to be led by investors, who have few viable lending options now, says Guy Cecala, publisher of Inside Mortgage Finance in Bethesda, Md. In recent months, 98 percent of investors’ purchases of distressed property were completed in all-cash deals, says Cecala.

The Northwest Multiple Listing Service is unable to track data on all-cash offers. But anecdotally, agents say cash is playing a bigger role in the local marketplace.

“This really kicked up in the past 10 months,” says Paul Harvey McLaughlin, an associate broker with John L. Scott Real Estate’s University Village office.

McLaughlin says the trend comes from two buying groups — primary buyers who believe that cash makes them more competitive bidders, and investors with a similar outlook or an inability to tap loans for investment property. McLaughlin says he recently handled a $429,000 short-sale listing that sold for $380,000 to an all-cash buyer, despite the fact that a buyer with financing had offered $395,000. In a short sale, the seller owes more on his or her mortgage than the home is worth on the market. Lenders weigh in on the sale — and in this case, the lenders chose cash, McLaughlin notes.

McLaughlin estimates that when a buyer pays all cash he or she may be able to pay 5 to 10 percent below asking, in part because sellers — whether individual or institutional — like the assurance of cash.

In early January Ian Bell, owner and broker for First Exclusive Inc., a Seattle-based agency specializing in homebuyer representation, said that one of his buyer clients lost a home priced in the high $200,000s due to the seller’s choice of a rival, all-cash bid.

“This trend has been percolating,” Bell says. “The seller went with the all-cash offer.”

Chris Stiebler, sales director for Escala, the luxury condominium project in downtown Seattle where home prices average $2 million, says that he has sold four units for all cash. Stiebler says that he and his colleagues expect that 40 percent of the building’s sales will come in the form of cash deals, and 60 percent will include mortgage financing, typical for the luxury end of the market.

Stiebler says luxury buyers sometimes buy in cash to facilitate a quick closing. They can always seek out a mortgage or home-equity loan after the fact so that their cash isn’t completely tied up in the property.

Greg Abbott, an associate broker at Windermere Real Estate-Bellevue Commons, says buyers with cash don’t always get a big discount. He represented a house listed for more than $1.2 million this past summer that got a full offer from a buyer using financing for 90 percent of their purchase as well as a cash offer for about $10,000 less. The seller accepted the cash offer, Abbott says, because the buyer’s financing looked “a little weak,” he says.

“It all becomes cash to the seller at the end,” Abbott says. “It’s just that an all-cash offer leaves a few variables out along the way, and because of that some sellers like them.”

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This set of signs is near the Krogers in the Heights, here in Little Rock.

Is it just me or does this seem a wee bit confusing?

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***************************************************

The Other Six – For Investors Only

These are among the subjects that I teach in my courses and coaching programs. These are advanced techniques that should not be attempted by the untrained. To use the words of Adam and Jamie from my favorite show “Myth Busters”, ” NEVER ATTEMPT ANYTHING ON THE SHOW, WE ARE TRAINED PROFESSIONALS AND DO THIS FOR A LIVING”. If you do these wrong you may only lose a few bucks, but if you really screw up, you may find out that you broke some law and are liable for damages to a seller or a buyer or both.

Buy Low. We call this Wholesaling a house or a Wholesale Flip. When you buy below market you get instant equity that will be converted into a profit when you sell. There is too much involved to go into the details here, but basically it works like this: Find ugly house, get seller to put ugly house under purchase and sales agreement, sell purchase and sales agreement to another investor via “assignment of contract” for a reasonable profit, cash check.  Offer a reason for the seller to sell low: fast closing, cash, assume some debts or liabilities, etc. Or just make a low offer. The seller may have his own reasons to sell it cheap, so you never know. This technique is an awesome way to get your feet wet in the world of investing because it takes no money for all practical purposes and only depends on your willingness to do some work and do some talking to people.

I started doing real estate part time in 1990, but I really did not get serious about it, until I became burned out with Civil Engineering around 2001.  I attended a free weekend seminar on the subject of investing where among other people I heard a man by the name of Ron LeGrand speak. He talked all about a number of tactics including wholesaling and like all the rest of the speakers tried to sell me his courses. Well, I bought his course for a number of reasons. One was the fact that he said that I had 30 days to look through the stuff he gave me for signing up and if I thought I made a mistake I got my money back no questions asked.

Being an engineer I was SURE his techniques would not work even on a good day so I determined to prove him wrong. I followed the directions and within 10 days I had my first wholesale flip under contract and it closed about two weeks after that. The course cost $4995.00 and it just so happened that I made $5000 on the flip. Needless to say I did not get my money back, and it has been an adventure ever since.

Sell High. Clean it up nice, make it easy to buy, and find the right buyer to get top dollar. This is a Rehab and Retail or “Retail to End User” deal. You still start with an ugly house, but you make it a pretty house and then you flip it to an owner occupant.  There is a ton of money in this method if you do it right, and to be honest it is my favorite way to do houses.  There are easier ways to make money in this business but there is just something that tweaks my ego when I see some young newlywed couple move into their first home, a home that I have had remodeled, a home that used to be the nastiest piece of crap on the block. I take that which is old and junky and make it new and pretty. I build monuments. Okay, maybe that’s taking it a bit far, but hey everybody has to do what they like and even though this is not the fastest, most stress free, uncomplicated buck in this business, I like rehabs.

There are many potential problems with rehabs not the least of which is hiring the contractors that are worth a rip.  In my book titled, “Stop Contractor Rip Offs Now” I go into great detail on that subject alone and even give the reader sample forms in MS Word that they can use to plan their rehabs and hire the guys that will do the work right as well as sample specifications to give them an idea of what needs to go into a contract to cover them and their assets. If you are interested in a digital copy go to http://www.reinetusa.com/store or you can get a paper copy at ammazon.com or lulu.com. (ISBN #978-0-557-03087-3).

Also, a word to the wise on doing a rehab: keep the work at about 1/3 or less of the total cost of what you have in the house according to my MAO formula.

MAO = (60%)*(ARV) – repairs

Your Maximum Allowable Offer can be no more than 60% of the After Repaired Value based on a strong CMA and other evidence minus any repairs that are needed.

In other words if you have a home worth 100k of it was the prettiest thing on the block, do not buy it if it needs more than 20k in work unless you REALLY know how to estimate repairs and you are highly experienced in running remodeling construction jobs. How do you think I know THAT?

Subject To. If you hang out with me very long you will learn that this is what I call getting a FREE HOUSE. This technique works best with pretty houses in pretty neighborhoods that can be flipped for a quick profit, but will even work with the homes in the poorer areas, provided they are rentable and don’t need any substantial work. The neatest thing about doing these deals is they are way less about the home and way more about all the paper attached to the home.

I think the best way to explain this type of deal is to give an example.  I got a call one day from a couple who had a major problem and needed a quick fix. He was a forklift operator for Wal-Mart and she worked as a waitress. They had an average home, in an average neighborhood. He had the opportunity to get a promotion from Wal-Mart but he would have to move nearer to their home offices which was a little more than a three hour drive from Little Rock. There was no way for them to afford two mortgages on their salary, and the realtor they talked to said to expect their home to stay on the market for 90-120 days based on their location and the market conditions at the time.

They called me and let me know what was going on. I got a deed for their house “subject to” their existing mortgage, and based on the equity they had offered them 10K in the form of a second mortgage on the property with no payments and no interest until I sold the house. What all this means is, the first mortgage stayed in their name, and I did not owe anything on the second until I got rid of the house.

The total of the first was 42k and the house was worth around 85k. The payment was about 400 per month. I rented it on a lease with the option to buy for $700 per month for nearly two years. That person did not buy, in fact she broke the lease a month before the two year term was up. The next couple were able to buy after about 6 months and I cashed out after paying the original owners their 10K. Here are the results of that sale:

Sales price:                                                                                 85K

First mortgage (paid down by tenants) :                       -40K

Second Mortgage paid off at closing:                                -10K

Subtotal , Profit on sale:                                                           35k

“option fee” collected and forfeited from first tenant     2k

Profit from rent for 2.5 years @300/month                     9k

Total Profit                                                                                     46k

Ok, it took me 2 and ½ years to get all that, but what did I have at risk? In the worst case scenario, I would not have been able to find  tenant owner and would have given the property back to the original owners, who would then have to list it with a realtor and make payments for 4 months, while they waited to get it sold.

Offer financing. You can often get substantially more for a property if you offer financing. This is especially true if you let someone buy it with little money down. You can also get good interest on the loan. Financing can work both ways; with the sellers in the form of taking back a second mortgage or with the buyers in the form of anything from “down payment assistance” to a “lease option” to straight out owner financing through either a land contract or “contract for deed” or if you are in Texas a vehicle called an AITD, “all Inclusive Trust Deed”.

There is no way I can go over all of these types of financing in a small space such as this, however here is a quick overview of each.

Taking back a second mortgage refers to a seller “loaning” the buyer some of the money they need in order to buy the home. It can be both an effective selling tool for the buyer  with little cash and a good investment for the seller if he needs out quickly. I always shoot for “No Payments and No Interest until I cash out when I resell the home to an end user. My justification for this is simple: If I am going to help the seller out by removing the problem of two mortgage payments, one at his old house and one at his new house, It is certainly fair that he not stick me with two payments, a first and a second. Besides, although he is in second position, it still gives him a secured interest in the home until I get it sold. It is fair for everybody. Everybody wins. Everybody makes money.

I use down payment assistance when somebody has no money and bad credit but still wants the chance to buy. It works like this. I install them as a renter with a one or two year lease, we agree on a future price, and we put it in writing. Let’s say the lease is two years, $700 per month and they gave me a $700 security deposit. Anything they pay beyond the $700 bucks  per month becomes part of their down payment should they decide to buy the house and be able to qualify for a loan.

A Lease option is the logical next step for folks in the financial boat I just described. These folks may have a few thousand to put down, but based on credit challenges, they just can’t qualify to buy right now. We settle on a price and I take a NON_REFUNDABLE OPTION FEE from them. If you use this method make sure it is very plain and written on paper that they sign in the presence of a notary or you will end up giving them back their fee in court when they say the big bad real estate investor took advantage of the poor defenseless little wannabe homeowner/renter.

If they have between 5 and 10 percent down I will owner finance to them but usually only on a 10 year balloon. I don’t want to be “married” to a homeowner for longer than that, and in this state, even if the buyer defaults on a land contract, the courts will treat the contract as a mortgage and you will have to drag the buyer through a bankruptcy and foreclosure and they may still get to keep the house. Remind me to tell you sometime about the home where I was forced to give away 100k in equity over that very thing. Hey, I still made 70k but when you compare that to losing a lake front house that you had intended on moving into, making 70k feels like a loss. How do you think I know that?

Change use. If there is a higher use for the property, you can convert it to make it worth more to the next owner. Sometimes this means making condos into apartments, or apartments into condos. Maybe converting a home into office space will get the biggest return. Most gurus will tell you that homes on busy streets are not a very good investment, and to some extent I agree with that statement; however, once you get a bit of experience, these homes that nobody else wants can be a freakin gold mine if you are savvy and can play the political game with the city.

I know you have seen this occur all over your town, but maybe were unaware of what actually happened.  As a city grows they need to convey more and more traffic from one area to the next. Many times that means putting a four lane where there was previously only a 2 lane residential road. These house become fairly undesirable for people because of the traffic noise and the inherent danger to children as the play near the busy streets.

Sometimes, an investor can buy a home cheap in these areas and turn it into a commercial office space. Many times, when the city changes the road they will also change the zoning so that you CAN change the use of a home. Sometimes you will have to have it changed.

Sometimes, just changing the zoning of an area makes it worth substantially more money. If you get in the growth path and are able to buy raw forest or agricultural lands and have them rezoned t residential or commercial property you can turn around and sell the engineering plans alone for big bucks, but be careful. This is NOT real estate 101, this is for proven operators whole know what they are doing. I want all of you to think big, but if you think that your first deal is going to be a 25 million dollar land development, you are probably going to be rudely disappointed. Go flip a house or two and get your feet wet.

Sell in parts. In real estate, the parts are often worth more than the whole. There are many examples of this from splitting off an extra lot or two from a larger parcel to selling timeshares and fractionals. Just as in the “Change Use” section, this is pretty advanced real estate investing, but it is a creative way for many investors to get extremely rich with just a single parcel of land. I am not going to go into these types at all, but I did wan tto give you a few definitions.

A timeshare is a form of ownership or right to the use of a property. It has also come to mean the properties of this type themselves. These properties are typically resort condominium units, in which multiple parties hold rights to use the property, and each sharer is allotted a period of time in which they may use the property. Units may be on a part-ownership or leased “right to use” basis, in which the sharer holds no claim to ownership of the property.

A fractional purchaser typically receives an undivided percentage interest in fee simple in an

individual residential accommodation and the related common areas of the applicable resort or other property, affording the purchaser the right to occupy such accommodation or one of similar size and type and use the property’s amenities for a certain number of days or weeks each year. A fractional accommodation is most often a condominium unit but can also be a townhome, detached single family home, or hotel suite. Some fractional projects participate in an exchange program, whereby purchasers have access to other properties of comparable quality located throughout the United States and abroad.

Finally:

Some of my friends have been asking me lately why I am starting to teach. “After al Al, You don’t have to work, and you make plenty of money sitting on your butt”, they say.  I have made my living and continue to make my living in real estate; it is by fair my first love. To be honest, whether I teach a single person what I do or not, I will still do deals. Some time ago I got to feeling like “is this all there is”. I read allot and have noted that this is a common problem among people who have achieved their goals, particularly at an early age. Many of them go on to teach others what they know. They do it for two reasons and these are the same reasons I am doing it: Its fun and it makes money.

The day it isn’t fun I will stop, trust me. I have worked many jobs that aren’t fun, and they suck. It is a chore to even get up in the morning and take a shower and go to them. I swore two things when I walked from my last engineering job; first, that I would never let another human being ever treat me again the way the sorry excuse for a waste of air main supervising engineer of that office treated me, and second that I would never again do any job that wasn’t fun.  One of my favorite quotes is “Do what you love and you will never work a day in your life”. I think Mark Twain said that, but I’m not sure.

I have a few courses and books available for those of you who would like to learn more about how to become what I call “gainfully unemployed” using real estate investing as the vehicle to do so. I also offer a coaching and mentoring program and a private “for students only” real estate forum where I and other experts do ongoing trainings, webinars and even some one on one counseling  and consulting for a monthly fee. If you have any questions drop me a line at Al@S4inv.com or visit me on the web at www.AskAlHow.com .

Whether you ever attend one of my courses or not, whether you and I ever meet or not, whether you make it in the real estate business or some other business, the best advice I can give is another quote by Mark Twain, “Keep away from small people who try to belittle your ambitions. Small people always do that, but the really great make you feel that you, too, can become great”; and one by me, “I have never met anybody who sucks at everything, everybody is great at something”. Find your something.

For more articles like this one go to:

http://www.reinetusa.com

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There are ten major ways to make money in real estate, four of which are available in ALL properties. The other six will vary from property to property. Making money in this business is limited only by one’s imagination, and the prevailing laws in your country, state or province, county or parish, and city; however, there are different schools of thought when it comes to which vehicles you should use when you try to invest for a living.

The First Four – Count on Only One

Appreciation. Making money in real estate can be as simple as holding on and waiting. To really get the most appreciation in value, however, you should buy in an area where demand is growing faster than the supply. This is not always the easy thing to do. In theory you just get yourself ahead of the rest of the investors in the growth corridor and bingo, instant appreciation.  Here are the inherent flaws in this way of thinking.

First off, unless you are clairvoyant or one of the “founding fathers” of an area, you will never know for sure which direction everything is going to go. Once the sprawl is headed a particular direction you can certainly get on the train, but by that time prices are going to be heading up which of course means profits will be heading down.

In the current economy, many people who were counting on appreciation are now seeing the values drop below what they paid. Not a major issue if you are in it for the long haul, but what if you are in a negative amortization loan like so many folks in California and areas of Arizona like phoenix? In many cases, they may be better off walking away from the house and dealing with a foreclosure than waiting around for the value to turn around.

Equity. Provided you do not do the type of loan described in part 1, you gain equity with every payment you make. Get the lowest interest rate you can and more of each payment will go towards the principal. If you can in any way afford to do it, pay a bit more each month to the principal; even if it is only $50 or $100 bucks. This works especially well in the very beginning of the loan when the amortization schedule has you paying 99% of the payment to the interest and 1% to the principal.

A 250,000 loan on a 30 year fixed at 5% costs 1342.05 per month. Over the course of those thirty years you will pay $233,141.28 in interest; This means nearly 50% of the money you give the bank over the next 30 years will be interest and you will pay almost double what you negotiated for the use of their money.

Now, add a mere $100 bucks a month to the payment. With a little discipline you can do that, just go out to dinner one less time per month with your family. You just knocked nearly 5 years off the note, and saved more than 38,000 bucks in interest. If you bumped it up to $200, you save more than 65K in interest and pay off the loan in 22.5 years instead of 30. Go get yourself a sportscar with the 65K you saved.

Depreciation. The federal government has decided that eventually all things are worth nothing. What this means to you is that after all the tax law changes, you still get to declare a loss for depreciation that doesn’t really exist. If you are an investor, this can save you a lot at tax time, meaning more after-tax profit. To maximize this you need to buy property that has its value primarily in the buildings, because you can’t depreciate the value of land.

Now, there are a few quid pro quo’s you need to know about. After twenty seven and one half years, you cannot depreciate the property anymore. That is the point at which the feds say that it is now worth nothing. So, the problem comes if you sell something worth nothing for $500,000 you have a very large capital gain that the IRS is going to want 15% of. Don’t fret; our boys on the hill have got this one figured out too. Just buy another property for more than what you sold the half million dollar property for and do what is called a 1031 Exchange, you get to start the depreciation process all over and if you bought the other property for say $500,000 then there in no capital gain.

Cash flow. When you buy income property the right way, you not only have your tenants paying all the costs and paying down the mortgage loan, but you also have positive cash flow. Hear this guys, THIS IS THE WAY TO BUY PROPERTY. As far as I am concerned this is the ONLY way to buy property that you plan to hold. The other three ways to make money in this business are all what I like to call “phantom money”; in other words it may or may not be there and a bunch of it has to do with things completely out of your control.

An investor I know was in hot water with several commercial properties a couple of years ago when the market went south. Through a series of events, some of which were due to her own stubbornness and others which we completely out of her control, she became severely behind with the building payments. She found herself with no cash flow and millions of dollars in mortgages. I could give you all the long gory details, but the short version is that she had an opportunity early on to essentially walk away from the properties and no financial harm would come to her. She argued that she would lose a million in equity, to which my answer was, “if you have a million in equity, auction it and get the money out and retire and move to your second home in Costa Rica and walk away from all the headaches. Her replay was, “well I can’t get a million in this market…especially with an auction”.

She got very irritated with me when I told her the truth, but guys here is the truth. The “equity” you have in a property is only based on what somebody will ACTAUALLY PAY for it. If nobody will buy your property then it pretty much isn’t worth a penny. You can get three different appraisals from three different companies and a can guarantee they will be three different prices and NONE of them will be what the property sells for, particularly when you are in a hurry to sell it.

Said another way, Cash flow will buy your groceries and put gas in your tank; Equity, Depreciation and Appreciation will not!

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That being said, here is his question and my answer:

“I just made my first offer on an REO.  Any thoughts on how to get a “proof of funds” letter or something like that for the offer?  I don’t actually have the funds and if I did I wouldn’t necessarily want to show that to the bank.  The offer is for $100,000 on a $177,000 house. Please advise …”

Problem #1:

I called him and got a little more info: He wants to flip it, he does not have the funds needed to give the realtor for “proof of funds” and it needs 15k in repairs. So first off, according to my formula it isn’t even a deal.  For those of you who don’t know my formula, I never offer more than 60% of the After Repaired Value, (ARV) not including repairs. 60% of 177,000 is 106,200. If you subtract  15k from that your maximum offer can be no more than 91,200.

Problem #2

Okay, let’s say that he offers 90k instead of 100k. This is great, he is within the Maximum Allowable Offer, (MAO) right? Wrong. Remember, he wants to wholesale it. He has no intentions of keeping it for a rental nor does he want to rehab it and retail it to an end user.  This means he has to have a deal that is lower than MAO in order for him to attract another investor. If he doesn’t have this,  he is using what I call the “greater fool theory” of real estate, which means he is trying to find an investor who knows less than him. Not hard to do, but it will ultimately get you a bad reputation around town and you may find yourself relocating your business because nobody will deal with you.

Problem #3

So let’s say he makes an offer of 85k. This will make him 5k, not bad for a wholesale deal, considering he will never own the house, he doesn’t have to work on it, and he will not have to hold it and wait to sell in a slow market.  But wait; he is dealing with a realtor. He WILL own the house! See, the realtor is not going to let him sell his interest in the contract to another investor. That’s what  the realtor’s purchase and sale agreement is all about, protecting the REALTOR’S interests. Don’t think for a minute it helps you as the buyer or as the seller.  Read one all the way through sometime, you will see what I mean; the language is all about limiting the realtor’s and his broker’s  liability. 

Problem #4

Hey, if he has a buyer, why not just do a simultaneous close? Yes, I guess he could do that; however, here is the problem I see with a simultaneous close of that nature: First, when his realtor finds out what he did, this guy will get black balled from the realtors entire brokerage. Yes, I know most realtors are morons, but that is no reason to have everyone of them in town pissed off at you. Second, and more importantly, let’s look at his buyer. If the buyer has a brain cell one in his head, he will see the realty sign in the front yard. He will realize the wholesaler is making a few bucks off of him, and he will get pissed and walk from the deal or call the realtor to try and negotiate a better deal. Yes, technically no laws are getting broke here, but do you really want all those people mad at you? By the way, depending on the state an argument could be made that you are breaking the law by engaging in “Tortious Interference” and/or “Restraint of Trade” and you may find yourself going to court. Yes you might win, but do you really want to spend $2000-$3000 for an attorney and waste all that time? It might just be easier to just find another deal …or ten.

Problem #5

If you are going to play with REO’s you are going to have to deal with the bank’s rules. Period. End of story. If you do not have proof of funds, all you are doing is wasting the realtor’s time, the banks’ time, and the most important time of all…your own. Actually that’s not true, if you email ME about it, you are wasting MY time which is far more important….ok, just kidding; but you see my point right? That being said, let’s look at a couple of ways to get proof of funds:

• 1. Go to a bank and get proof of funds. If your numbers are right, (i.e. you used MY numbers not the ones we started with), and you don’t have crappy credit, you can by the house and flip it via a wholesale or a retail deal.
• 2. Find a hard money lender and get proof of funds from him. You will pay more than with a bank, but again, if you used my numbers, you will still make a good chunk of cash and these sorts of lenders could generally care less about your credit score.
• 3. Get a partner. Hey, a partner is great when you are getting started. They put up the money, you put up the work, everybody makes money. You might want to think about having two or three potential partners sitting backstage all the time.

The Bottom Line:

I think you guys can all see, that as this deal sits it is a “no deal”.  It is not feasible from not just one, but several angles.  For myself, if I could get it at $90,000 I might consider it for a retail flip.  177k is just over the median around here, and that means I would be able to find a buyer who could get a loan, or perhaps a lease option tenant with plenty of cash, who could  qualify and therefore cash out soon. Of course that is a completely different exit strategy than the one proposed by this wholesaler; and therein lies the point of this whole conversation. He only knows one way to do a deal.  Like I said at the start, I admire his tenacity, but right now he is having all the effectiveness of a car stuck in the mud; lots’ of noise and crap flying everywhere…not allot of forward movement.  You need to know EVERY exit strategy. You need to know ALL the ways to do a deal. Get trained guys. Once you are trained KEEP getting trained.  Education in this or any business is a lifelong endeavor, it is the key to success, and it will pay you high dividends.

More training and articles at:

www.reinetusa.com

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