The "How To Buy A House In Days" Blueprint

Transcript

1. HOW WE MAKE BIG MONEY IN REAL ESTATE FROM THE COMFORT OF OUR HOME PAUL LIZELL & MICHAEL NYSZCZOT REO AUCTION ACADEMY
2. HOW PAUL GOT STARTED • 2001/2002 bought my first fix and flip property with a partner. • HUD home - purchased for $29,500 - put in $4,000 and sold it for $69,00 = $30,000 net profit. • Each of us made $15,000 and this got me interested in buying more. • Bought several more properties that year; fixed and flipped while I worked my full time job. Initiated a plan to go into real estate full time - saved up 18 months worth of income. • 2005 - Quit my job and went full time into real estate. Continued fixing and flipping properties with an occasional wholesale deal mixed in. • Was doing great until the market crashed in 2008…....
3. 2008 FINANCIAL CRISIS • Finished rehabs - sold several for big losses. • Used rehabbing skills for general contracting work to put food on the table. • 2009 - back in the game in another capacity. The wholesale model. • 2009-2013 – Partnered with someone exiting the short sale market. We did extremely well. • 2013 – Fully on my own and instituted some different exit strategies. • Continued buying bank REO’s and went heavy into auction properties. • Saw immediate success • Stopped marketing to homeowners and started buying throughout the US. • Growing and scaling the company ever since • 2014 – Asked Michael to join me
4. HOW MICHAEL GOT STARTED • 2006 bought my first investment property. • Multi-Unit Property – I lived in one unit and rented out the others • Worked in my day job and put real estate investing on hold. Only investing was stock market. • 2009/2010 – Started educating myself again in wholesaling and fix & flips. Partnered up with someone else to do wholesaling and with an occasional fixing and flipping properties. • Became Marketing, Sales, and Business Systems Expert • 2013 - Partner had quarter live crisis and decided to moved to West Coast • 2014 – Paul asked me to join his real estate investing operation
5. • Learn how to profit from listing mistakes made by Asset managers on Bank REO properties! • Insider secrets that come from years of experience in dealing with REO Properties • Learn how to move into a new market and feel comfortable making offers in a city that you have never visited! • Selling homes in days in a NEW Market with ZERO Buyers • Bidding at live auctions! • Make money multiple ways: Virtual Wholesaling, Rental Properties, fix and flips. • Freedom to roll out of bed and into your home office to bid on properties! • No dealing with sellers! Topics to be covered:
6. ENTERING A NEW MARKET • Managing Fear • Fear of failure must be managed. Trust your due diligence to guide you. • Wholesalers are my #1 resources for learning/entering new markets. • Offer them a share of the wholesale fee when you have properties in new markets until you build up your buyers list and feel comfortable marketing on your own. • REO Agents • Rehabbers and “buy and hold” investors through networking or my Mastermind Groups
7. New markets: • Entering a new market can be intimidating. • Most investors will stay in their familiar market. • Mid - Large cities: prices of homes can vary tremendously from block to block. • Rental areas = less desirable • Owner occupied areas - properties are cared for and maintained. • It’s vital you know what areas to avoid and what areas to focus on. • Extremely important to forge relationships with a realtor that understands what investors want. These realtors must be knowledgeable of the area to help you avoid making mistakes. • Know what zip codes to buy in and which ones to avoid
8. • Find a realtor that understands the market and is willing to work with investors • Talk with different wholesalers to find out what areas are hot and what areas are not. • Join the local Real Estate Investment Group (REI) and attend a meeting. Find out where the active buyers like to invest and target those areas. • Pull a cash buyers list and find out the hot zip codes (reverse wholesaling) How to enter a New Market
9. Tier 1 cities Developed and established cities with established businesses and good schools Phoenix, Dallas, Houston, Miami, San Jose, Austin, San Francisco, Baltimore, San Diego, Las Vegas, Denver... Tier 2 cities In the process of developing; up and coming companies; more inexpensive real estate Philadelphia, St. Louis, Charlotte, Pittsburgh, Nashville, Orlando, Denver, Kansas City, Tucson… Tier 3 cities Underdeveloped or nonexistent real estate markets. Cheap growth opportunities. Great cash flow properties. Memphis, Cleveland, Cincinnati, Jacksonville, Greenville, Akron, Toledo….
10. RESOURCES: Local Auction Companies & Auction Sites www.hudsonandmarshall.com www.homepath.com www.homesteps.com www.realtybid.com www.bid4assets.com Where to buy: www.hudhomestore.com www.auction.com www.hubzu.com www.AuctionNetwork.com www.XOME.com
11. TARGET ”PROBLEM PROPERTIES” • Problem properties: properties that have been pending multiple times and have fallen through for varying reasons. These properties can be gotten at a “deep discount” because the banks want them off their books. They usually have high DOM (Days on the market) 120+ DOM = High motivation by asset managers to move these problem properties. • Title issues, many times minor but enough to scare off the average homeowner from purchasing. Many times these title issues can be cleared up if you have the patience to wait it out and you may get it at a deep discount. • Example: I am purchasing a property in North Carolina for $21,500 that was under contract by another buyer for $50,000 before the title issue scared them off. That is 57% discount!!! This property has an ARV of $80,000 and needs $10,000 in work. Easy wholesale deal and a home run deal!
12. HOW TO PREPARE FOR AN AUCTION EVENT: • This is the most vital part of the program. • Remember and live by the saying, you make your money when you buy. If you overpay you aren’t going to last long in this business. • The key to determining the price is finding out your MAO (maximum allowable offer). This is determined by finding the ARV (After Repair Value) of the property. For example if the property’s ARV is $100,000 you multiply by 65%= $65,000 then minus repairs $15,000= $50,000. Now take out your wholesale fee of $10,000 and your MAO is $40,000. You must have the correct ARV or your MAO could be too high or too low. • The best way to determine the ARV is to get good comps from a realtor. These will always be the most accurate. You can also use Zillow, Redfin, and Trulia to get a basic understanding but those programs fluctuate and aren’t very reliable. This is why having a good realtor on your side is pivotal.
13. www.zillow.com www.trulia.com www.redfin.com www.realtor.com www.realtytrac.com www.movoto.com www.estately.com Comps Before you buy – Check the comps
14. Step 1: • Select properties in your target areas, these are markets you either work in or are looking to break into. Do your due diligence on these properties. Contacting the listing agent is the most important thing to do when working with REO properties. • Contact the listing agent to find out the condition of the property and what repairs are needed. Are they cosmetic? If structural repairs are needed –Walk Away. • Ask the agent what their BPO (Broker’s Price Opinion) is of the property. Experienced REO agents are very accurate with their BPO’s and if you can expect to get around that number wholesaling the property. • Ask the agent if this is a rental area or mostly homeowners. If a rental area you will be marketing to landlords and not to fix and flip investors. Steps for REO & Auction Bidding REO Auction Academy
15. Steps for REO & Auction bidding REO Auction Academy • Ask the agent if you were to relist the property what would be the 30 day sale price and their 15 day quick sale price. • Ask the agent what the ARV (After Repair Value) is for the property. This will allow you to find out what your MAO (Maximum allowable offer) will be. • For example, Agent says the ARV of the property is $100,000, multiply that by 65% = $65,000 then minus repairs of say $20,000 = $45,000 then minus your wholesale fee $10,000 = $35,000. This would be the maximum you could offer for a property. • In this hypothetical you will find that the bank will likely list the property at $79,900 hoping for an owner occupant. Depending on the amount of work needed the property may sit and the price will continue to fall. These are the properties you should target. • Look for REO’s aged 90 plus DOM (Days on market). • If you are a licensed Realtor ask the listing agent for the lock box code. Either take a look at it or find someone to look at the property for you. I rarely visit a property but I try and get as many pictures of the property as possible. The listing agents will usually have more pictures then are show on the MLS. Ask for additional pictures, you will be able to utilize them for your marketing if you decide to wholesale the house.
16. Steps for REO & Auction bidding REO Auction Academy Step 2: After doing your due diligence you now determined your maximum bid amount. You are ready to start bidding at the online auction. Don’t go over your max bid amount. If you did not win the property, don’t worry, the house might be back on the auction in a few days if the minimum reserve was not met. Another way to buy a REO house is to submit the offer to the bank. It may be wise to go through the listing agent to submit the bid. They will be incentivized to earn both sides of the commission and are more likely to go to bat for you with the offer. When presenting your offer it’s good to submit a repair estimate and point out all of the defects of the property so the asset manager can see all the negatives of the property. If you happen to be a licensed Realtor I would recommend representing yourself so you can earn a commission on the buy side. Some banks will balk at this but overall most are willing to pay that commission even if you are the buyer. Step 3 (if you are Virtual Wholesaling the house): Once your offer is accepted you will need to start marketing the property immediately. We have a Marketing System in place that allows us to sell houses in new markets with ZERO buyers. We use online and offline marketing.
17. Step 4: After you come to a verbal agreement with a buyer get their name, the name or entity they are buying the house, and email address. Use your title company that you are buying. Complete an agreement of sale and send it to them via email and Doc-u- Sign. Step 5: Provide title company all the document and have the buyer wire earned money to the title company. Go to settlement and collect your check! REPEAT! =
18. You won the high bid at the auction, now what??? 1.) Now it’s time to strap on the boots and do some serious due diligence on the property. You have a couple of days before you have to send in the EMD. 2.) Contact the listing agent if you haven’t already and have them send you all the pictures they have of the home. Find out if there are any major defects you didn’t know about. Has this property been under contract before? What is the DOM? Are there structural issues? Does the septic need replaced? If it does does the land perk or will you need to put in a sand mount which is very costly. 3.) If you haven’t already, get the lock box code from the agent. 4.) Start your Marketing System. Do you have a buyers list for this area or do you need to send out postcards to cash buyers? Market on Craigslist.org and zillow.com and your web page if you have one. Contact local REIA’s and market to them. Cold call and email other investors that you see advertising online and offline.
19. HOW TO MARKET YOUR PROPERTY • Market your property on craigslist to cash buyers • Use Zillow to advertise the home for sale • Purchase a cash buyers list to send postcards to and add to your buyers list • Contact other wholesalers and have them help market your property • List the property on the MLS if near retail ready
20. What happens if I can’t find a buyer and and I have to close on the property and don’t have the cash? You can always team up with another investor that has cash and is short on deals. If your property is a deal someone will loan you money or JV the deal with you. If nobody does you better walk away from the property. What happens if I don’t close on the property? - Worst case scenario you walk away from the deal and lose your deposit. - Chalk it up as a marketing expense. Live and learn to fight another day. - This took me a while because I was supremely confident that I could sell any deal no matter what and make a profit. I was wrong and I lost a few dollars on some. - You don’t want to make a habit of not closing on deals or the asset managers and auction companies will blackball you. I know an investor that had 7 under contract from with an auction company and didn’t close on 6 of them and he has been blackballed by the company. This is why your due diligence must be top notch.
21. TYPICAL ISSUES YOU WILL RUN INTO Title Issues More often than not you will run into some minor title issues with these properties. Sometimes there will need to be a deed of correction done and sometimes the bank that sold the note to the current bank made an error in the chain of title and it will need corrected. Sometimes the sheriff sale deed needs corrected. I have had these issues take 6 months to correct in some cases. Problem Realtors Sometimes Realtors won’t respond to your questions or they won’t give you the lock box code because you aren’t a licensed realtor in that state. You can find a realtor that is licensed to help you out or you can move on to another deal if they make it to difficult. Sometimes the lock box codes are wrong or there isn’t a lock box on the property. These are logistical issues you will have to learn how to tackle. Deed Restrictions If you purchase a Fannie Mae property on www.homepath.com or on auction they will issue a 90 day deed restriction from the date of recording. They don’t allow you to sell it for more than 120% of what you paid for it. There are ways around this issue that you can utilize but you must be creative. Some of the methods will add additional costs and some will save you on costs.
22. Case Study: Purchased the property for $57,000 and sold with owner financing for $79,900. Homeowner put down $12,500 and pays $1,002.79 per month in principal and interest payments. They also did all of the renovations on the home. This home could now be listed on the MLS for $149,900 and would move reasonably quickly so the buyer has some equity and I have a note that could be sold relatively easily because of the short term payback. If I keep the note for the length of the term the total profit would be $45,287.67 over an 8 year period.
23. 2018 Outlook (Forbes Magazine) Best cities to invest 1.) Orlando, FL 2.) Salt Lake City, UT 3.) Jacksonville, FL 4.) Raleigh-Durham, NC 5.) Nashville, TN 6.) Atlanta, GA 7.) Springfield, MO 8.) Fort Worth-Arlington, TX 9.) Sacramento, CA 10.) Grand Rapids, MI 11.) San Antonio, TX 12.) Boston, MA 13.) Northwest AR 14.) Augusta, GA 15.) Charlotte, NC 16.) Washington DC area 17.) Minneapolis, MN 18.) Des Moines, IA 19.) Columbus, OH
24. Cash flow markets 1.) St. Louis, MO 2.) Philadelphia, PA 3.) Kansas City, MO 4.) Baltimore, MD 5.) Memphis, TN 6.) Pittsburgh, PA* 7.) Jacksonville, FL 8.) Detroit, MI 9.) Akron, OH 10.) Indianapolis, IN 11.) Fayetteville, NC 12.) Greenville, SC 13.) Charlotte, NC 14.) Columbia, SC 15.) Birmingham, AL These markets are great for picking up cash flow properties to wholesale to long term buy and hold investors. There are several niche markets throughout the country that you can pick up great rentals with low costs. My favorite rental markets are in the North and South Carolina because of the low taxes, lower costs of insurance and the influx of new business moving into the regions. This is going to become a more inexpensive retirement option for baby boomers. Ohio and Indiana are also great rental markets in large part because of the inexpensive taxes and a strong working class pool of renters. *Hedge Fund money moving in
25. EMPLOY SEVERAL EXIT STRATEGIES Wholesale 75% of what I do! Increased my average profit spread from $7,800 to over $10,000 per deal over the last 3 years Continuously look to shift your buying criteria Owner financing Generally done with properties under $15,000. Recover my funds as quickly as possible. Sell the notes. Average over $18,500 per deal! Rehab & Rentals Adding rentals each year for a steady stream of monthly income. Whole-tail or Budget Rehab 6- 12 deals per year and keep repairs to a minimum.
26. Case Study: Purchased the property on acution.com for $22,500. Put $17,500 into it and rented it out as a vacation rental property on flipkey.com. Sold for $75,000 a year later. Whether you want to add fix and flips or rentals to your portfolio, bank REO properties can be a great resource for you. I find the inventory to be pretty steady over the past 3 years and has grown slightly over the past 3-4 months.
27. YOUR TEAM VA (Virtual Assistant) You can hire VA’s very cheap, usually in the $5-$10 per hour range depending on their level. They will be a godsend for you. I have them complete an auction spreadsheet I created on excel to fill out and complete some due diligence work for you. This will save you a lot of time and allow you to focus on other parts of your business Disposition Manager You will need someone to sell the properties for you. You can start out doing this yourself but when you to scale you need to hired a Rockstar. If you pay them a % of spread then have them pay for all marketing, including advertising in newspapers, mailing out to cash buyers and paying for VA’s to help in the sales and due diligence side. Acquisition manager If you would like to truly manage your business you will need to hire an acquisitions manager. This person is responsible for taking the VA’s due diligence work and taking it to the next level to find out if the property is a deal or not. I handle this in my company but I am looking at adding another acquisition manager to scale the business. You must oversee this person more so than anyone else in the organization.
28. THE IMPORTANCE OF CONTINUOUS NETWORKING • If you want your business to truly grow and continue to succeed year after year you must attend multiple networking events. Whether it is a mastermind group or whether you are active in your local REIA; you must always work to grow it. • I am also a big fan of education. I have purchased some of the educations systems of members of the mastermind group I belong to and they have been very helpful to grow my business or give me additional knowledge of alternative investment strategies. I have spent many thousand of dollars on these programs and they really do work if you work them!
29. Change your mindset You must change your mindset if you plan on investing outside of your current market. This may require you actually getting on a plane and visiting the market and meeting with realtors to learn different areas. This experience will really help you understand different markets and allow you to do something that 99% of other investors don’t do. I get the excuse all the time from investors that if they can’t jump in their car and get there in 45 minutes or less they won’t consider the property. What a limiting mindset, first of all why would you want to jump in your car and visit a rental?? If you plan on growing a business you shouldn’t be involved in the repairs of the home other than simply overseeing them. In today’s day and age where everyone has a smart phone that takes great pictures you can hire a project manager to oversee these projects. I currently do 6-10 minor rehabs in Tucson, AZ each year but I live in the Philadelphia, PA market and yet I still manage to get them done. The reason is because I keep the rehabs light and easy, mostly paint, carpet, and light carpentry work. This ensures a 30 day or less rehab.
30. Recent Deals 1.) Duplex in Phillipsburg, NJ Purchase Price $34,500 Sale Price $55,000 Net Profit $20,500 2.) Philadelphia, PA Purchase Price $19,960 Sale Price $30,000 Net Profit $10,000 3.) Tobyhanna, PA Purchase Price $22,000 Sale Price $28,000 Net Profit $ 6,000 4.) Hammonton, NJ Purchase Price $16,500 Sale Price $40,000 Net Profit $23,500 5.) Shreveport, LA Purchase Price $ 4,000 Sale Price $ 7,600 Net Profit $ 3,600 6.) Delta Junction, AK Purchase Price $40,000 Sale Price $75,000 Net Profit $35,000 7.) Kansas City, MO Purchase Price $ 6,500 Sale Price $16,000 Net Profit $ 9,500 8.) Kannapolis, NC Purchase Price $10,000 Sale Price $20,000 Net Profit $10,000 9.) Florissant, MO Purchase Price $16,000 Sale Price $20,500 Net Profit $ 4,500 10.) Maxton, NC Purchase Price $ 9,000 Sale Price $17,000 Net Profit $ 8,000 11.) Tobyhanna, PA Purchase Price $16,000 Sale Price $60,000 Net Profit $44,000 12.) York, PA Purchase Price $ 9,000 Sale Price $19,000 Net Profit $10,000 13.) Newtonville, NJ Purchase Price $ 8,790 Sale Price $18,000 Net Profit $ 9,000 14.) Tucson, AZ Purchase Price $56,000 Sale Price $65,000 Net Profit $ 9,000 15.) Memphis, TN Purchase Price $11,500 Sale Price $13,500 Net Profit $ 2,000