Proper Education

•February 19, 2016 • Leave a Comment

Some of you know that I am a real estate investor and Realtor.  Even seasoned real estate investors can get into the wrong deal and lose money, which is why education….the proper education is needed as well as mentorship and experience is so important before doing your first deal.

Would you fly a commercial jet after spending a 3-day weekend learning how to fly one? No.  It would be foolish and dangerous.  The same goes for real estate investing.  You are not an experienced investor after a 3-day course. Nor are you an experienced investor if you attend all the REIA meetings for a year.  Get the proper education, coaching and experience before making your first purchase.  You could lose a lot of money.

So, why am I saying this?  I received a phone call from one of my business partners regarding a relatively new real estate investor or “Newbie”, who had bravely pulled the trigger and got a house under contract to wholesale to a rehab investor (Kudos to her for taking action which is what most people don’t do).  However, the word is she and her partner are scared because her inspection period ended, escrow is now calling for deposits and they don’t have any money nor investors that have made any bids for the property.  The property went under contract just a few days ago, to which I asked “why are inspections so short”?  My business partner asked if she had any contingencies on the property, to which she replied, “I don’t know, what are contingencies?”.

It can be very exciting to get your first house under contract, but if you haven’t negotiated a long enough inspection period or don’t know what contingencies are or “Out Clauses”, you should not be making any offers on properties….please.  Also, where the hell is the Realtor who drafted the contract? Is the Realtor representing the buyer or the seller?  That Realtor should be protecting his or her client.

So I’ve instructed my business partner, who wants to help them get out of their situation, to get a copy of their contract so we can see if there are any contingencies written in.  Hopefully, they will take a step back to learn the proper way of investing in property with a  good school.

20150514_111819

Ugliest home in San Diego

By the way, I know a good school if you’re interested.

 

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Return on Investment or ROI

•September 24, 2015 • Leave a Comment

What is Return on Investment or ROI?  If you have money sitting in a bank savings account, what does it earn?  More than likely significantly less than 1%.  But, lets just say 1% for this example, and you have $10,000 sitting in that interest-bearing account.  At the end of the year, what will it earn?  In case you didn’t know, ROI is usually calculated annually.

Well, check my math please, but $10,000 should return $100 in 1 year [$10,000 x .01 = $100].  That means a 6% return should give me $600, and a 15% return should give me $1500 in 1 year.

What if I invested that $10,000 into a vehicle that will return 15% in 6 months, and it was secured?  I would still receive $1500, but the estimated annual yield would be 30%, right?  Why? Because, I could turn around and reinvest that money in that same vehicle returning 15% for another 6 months and receive another $1500 [$1500 + $1500 = $3000.  $3000 / $10000 = 30%]

Let’s use different numbers….

You have $3500, and you can invest (i.e. lend) that money to receive 6% in 2 months.  What will it return or what is the ROI, and what is the annual yield or APY?

$3500 will return $210.  You will receive $3710 (your original investment and the 6% ROI).  Assuming you reinvest that same $3500 every 2 months in the same vehicle, that should be $210 x 6 months = $1260. Or, $1260/$3500 = 36% yield.

I’m just trying to keep it simple.  There is a lot more calculations that can be done.

***Always check with your financial advisers before making an investment***

Private Lending, Trust and Risk Tolerance

•September 23, 2015 • Leave a Comment

In real estate investing, two of the most important things you need, whether you are the private lender or the borrower, is a promissory note and a trust deed on a property indicating there is a lien.  In other words, there is collateral (real estate) for the loan.

As the real estate professional (borrower), you are securing your lender’s money to the property in the event something goes wrong, your lender will get his or her money back when the sale of the property takes place.  If there is no property to secure the money to, obviously the loan is unsecured.  Your lender is taking a chance and hoping you’re not going to run with his money.  Hopefully, you’ve developed enough trust to be able to do that.

As the private lender, it’s just as I said, you’re taking a chance if the money is not secured to the property.  Before lending money, you need to determine what your risk level is in terms of amount of money and amount of time the money is out of your pocket.  Scenario 1: If a buddy of yours asks to borrow $5, because he was short that day and says he’ll pay you back in 30 mins when he goes to the bank and withdraws from the ATM, more than likely you would spot him or her….no problem (I’m assuming).  Scenario 2: A friend who needs $5000 earnest money to secure a property because it’s a great deal, but does not have it at the moment, but will have it in about a month or two because funds from a hard money lender will be used to purchase the property, and your $5000 will be returned along with an additional 6% ($5300)….that’s a little more to risk, especially if there is only a promissory note, but no trust deed showing you as a lien holder.

if you are a private lender and your risk level cannot handle the latter scenario, you shouldn’t be investing your money.  As a real estate professional or borrower, you should not be accepting any money from someone who has a low risk tolerance.  You really need to qualify your client to determine that.

If you do take money, you better make sure you can pay that person back.  Make sure they feel secure enough with a Promissory Note and have it notarized.  Oh…and have a good attorney.  Run the contract over to your attorney to make sure all is good.

***Always check with your financial advisers before making an investment***

It’s a Miracle!

•August 27, 2015 • Leave a Comment

So, it’s Tuesday evening and my 1-on-1 meeting at 545pm was cancelled. The meeting was supposed to be at 445pm, but I was told 545pm. That freed me up for the Carmel Mountain Cash Flow Meetup at 645pm.

Part of my goals for the week is to attend 2 networking events, and this would make it my 2nd event. I drove 30 miles to the Coffee Bean & Tea Leaf in Carmel Mountain Ranch.

I met several people, which was great because I was suppose to meet 5 new people daily, and there were 4 new people I had not met yet. They were Todd, Vicki, Celeste and Miracle. Funny, I met a young woman by the name of Dream last week when I met with Andy Cruz for lunch.

During the game, I ran into a bit of “bad luck’ at the beginning when I drew a doodad card. As the mechanic in the game, I did not make a lot of money, but I knew typically the low income players usually make it out of the Rat Race early. This was not to be, because I drew the $4000 TV set and was required to purchase it. I did not have $4K, so I needed to put it on credit, which placed a $120 monthly expense. Soon after, I landed on “I had a baby” which cost an additional $110 per month. My income was much lower now. During the majority of the game, I barely got an opportunity card, however during the 2 hours of play, Miracle became my cheerleader. She was rooting for me every time I rolled the dice and saying, “Amazing things are going to happen”. She would say, “you’re going to pay off all your debts, and win the game! Watch…amazing things are going to happen!” At a certain point, I had an epiphany. I began to realize divine providence was at work, and GOD was telling me something through Miracle. I was impressed by her positive attitude and statements, and decided that I really needed to have her attitude and apply it to my current situation. I was now motivated to win this game. I started saying her affirmations every time I rolled the dice. And, I intend to use that as a daily affirmation from this point forward.

I did not win the game. You have to get out of the “Rat Race” to win the game. However, Miracle did. I came away with a positive attitude and a belief that I could do the things I set out to do. So, really…I did win! I can truly say that “It was a Miracle” that happened to me.

Eastlake Business Association – Networking

•June 2, 2014 • Leave a Comment

As part of my business activities I have gotten involved with the Eastlake Business Association (EBA).  We meet every Monday at 1130am at Oggi’s. Everytime I talk about my business, that is 1 point. Everytime I ask for what I’m looking for or need, that’s 1 point.  Today, I was able to talk with at least 3 people and plug in what I am seeking….which is capital investors to come in with funds for my projects. And, as part of the protocol, I get to stand in front of the group and ask for needs.  So, today we had over 30 business people where I was able to say what I am looking for.

We just happen to have another real estate investor / rehabber in the group who said he would be willing to bring some investors to me.  So now it’s a matter of sitting down to discuss when and how.  I think I had a good day in terms of business activity.

Clairemont – 3bed,1bath

•April 22, 2014 • Leave a Comment

I’ve been working on picking up a 3/1 in the Clairemont area. I’m past my 7-day inspections, but we are extending due to a potential problem with the roof and mold. This gives me the opportunity to drop the price. I have been working most of the day to get a mold remediation contractor and a roofing contractor to get out to the property tomorrow for quotes on repairs. Also, been working to get the capital to do this project assuming we get the price reduction. Finding lenders is tough, but it’s part of the game.

Wondering how I can utilize WordPress more effectively

•April 5, 2014 • Leave a Comment

Had a busy week building the business.  On Monday, I had an opportunity to join a business group in the Eastlake area.  Turns out I was not the only investor-rehabber in the group.  I wanted to talk to the gentleman after the meeting to exchange cards and possible add him to my list of potential buyers (or sellers), but he disappeared.  I did however pick up a bunch of contacts and had the opportunity to tell them exactly what I do.

I was able to get a referral to a potential property in National City, and able to secure an ad in the local magazine.  Of course, the Realtors in the group all gave me their cards.  I have meetings to set up with them.

I was also able to meet the woman who owns the home in National City and set up a time to see the property.

On Tuesday, I met with a general contractor who was highly referred to by a good friend of mine.  He showed me the work he does (I like), and he says he knows and understands how fast I need to get the projects done.  He does work for another investor, so he does have experience.

On Wednesday, saw the property in National City.  I brought a different contractor that I had spoken to last week, in order to get his opinion on the property and cost to renovate.  It turns out he wasn’t licensed, but he has been working with an investor/rehabber for over 5 years and knows exactly what needs to be done.  He said, all his projects need to be done in 15 days, and he could do the same.  But after getting the information I needed to analyze the property, it wasn’t a deal.  ARV was at $330,000, and they owed $235,000.  Construction & holding costs knocked the potential profit to $1,400.  I would need to buy the property below the amount they owed on the mortgage.  I tried working the deal toward my Realtor, but she felt that she could get more out of it by selling it herself.

On Thursday and Friday, analyzed several properties sent to me by my agent.  Made a few offers.  All we need to do now is wait to hear from the listing agents.