Jim Fleck Real Estate

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Jim Fleck discuss Flipping real estate for fast cash

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  • 1. +,,- * . / ( to a homeowner for a substantial profit however there are a lot of risks that come Wow…I feel like the world changes every with the “retailing” approach. This is retail month. New laws, new war, new politicians, flipping. new layoffs. I do not recommend you take that approach I know lots of people need checks. So I’m until you are more experienced, especially going to dedicate these next few issues to now with real estate markets not yet getting checks quickly. You’ll be getting the appreciating. nuts and bolts of my Cash Now system that will be made available on TV beginning in However, I’m doing one right now. I July. purchased it for $122,000, I put $10,600 into the rehab and I just listed it with my agent on Also, to reduce costs to you, the newsletter the MLS for $189,900 which is priced to sell will now be delivered by email. But of fast! course, you should know that because that’s how you got this one. So let’s get started For our purposes, when I speak about flipping making some money. a house, I am talking about: Fast Flipping for Fast Cash What is “Flipping”? A lot of money can be made by “flipping” !# " $ %& houses. There are a lot of different definitions. Some people call it “rehabbing,” others call it “wholesaling,” which is the term ' # I like to use. ( ) * In the world of real estate, flipping is a strategy you can use to make money without In other words, you as an investor are spending any of your own money – or using basically selling your contract to another any of your own credit. investor and letting them finish closing on the property. This strategy is one that you can implement with virtually zero risk. At that point, the other investor may choose to fix up the property and sell it for an even You may have heard of people who flip a bigger profit. They may even choose to keep house that they have also “rehabbed” it and then rent it out. meaning they buy it, fix it up, and then flip it
  • 2. - *" 0 1 2 How I do this Be clear -- if is I find a you have not bargain Advantages to Wholesaling established property that • Almost risk-free equitable an investor interest and • No cash, credit or financing needed would want you try to and you take a • You never actually take ownership of the property sell the small profit for (No closing costs; no holding costs like taxes or property, finding the insurance) you will be property. The acting • No repairs for you to do point here is illegally just that it does not • Generates the quickest cash in the business as if matter what the someone was other investor posing as a does with the property after they buy it from real estate agent who did not have a you. license. Basically… we work as “middlemen” by With equitable interest come several options. wholesaling a property. We find a property at Among them are: a discounted price, assign it to another investor or rehabber for a fee, and let them • You have the right to sell the property finish closing on the property. • You can assign the contract to someone else, or What we are doing is leaving most of the profit for • You can flip the property to a first-time the rehabber in exchange for a very quick and no- home buyer risk profit. The purpose of this newsletter and all my The other designation I mentioned before was future ones is going to be to get you a very “retailing” which is when you buy a house, fast check, as I focus on flipping. Flipping fix it up, and sell it for a big profit. We are wholesale deals, REO’s, Foreclosures, you not retailing. Not yet anyway. The example I name it, we can flip it. mentioned above is retailing and you can see how much profit there is. However, I do have The best way to accomplish this is to flip the some money wrapped up in that property. property to another investor at a higher price We’ll discuss funding later in this issue or then you had contracted to buy it from the some of the next few issues. seller for and you keep the difference. “Equitable Interest” = A Fast Check In essence, the new investor will actually take your place in the agreement you signed with Once the seller signs a contract with you, the the seller. It is now the new investor’s property is “under your control” because you responsibility to complete the agreement and have established what is known as “equitable purchase the property. interest.”
  • 3. - *" 0 1 2 The new investor may choose to fix up the Remember, you are only at risk for the property, they might keep it, they might rent amount of the earnest money deposit. If you it, or they might even try to sell it to someone put zero money down, you have zero risk. else. They assume all the responsibility and No one can come and force you to buy their risks; therefore you “should” leave most of house. the profits for them. Quite often these days, I will put down You will simply take a small finder’s fee. $1,000 - $1,500 in earnest money on a property. Why? Recently the “sellers” which Do not get me wrong about the small finder’s in my cases have been banks lately, have fee which will not necessarily equate to a been requiring more earnest money than $10 small check for you. I have flipped properties or $100. I am fine with putting that kind of for as little as $3,000 and on the other hand, money down also because I know I have a list the week I’m finishing up this newsletter I’ll of buyers lined up and ready who will buy the be flipping a property for about $20,000! property. I also know that I always have an inspection period after the bank accepts my This Is Clearly the Best Risk-Free Strategy offer to get out of the deal and get my grand in Real Estate to Create Quick Cash! back. / 3 4 5 $ Use your best judgment because there are situations where it may take more money to • 5 0 * 6 *4 2 • 5 4 4 *7 secure a great deal. Just make sure you know • 5 8 / 7 what you are going to do with a deal (the • 8 $ 9 : 9 :: property) before you put any more than $100 % down. • 5 • 5 ; The contract will simply state you have the right to buy the property at whatever price < 5 ; = 4 > = you establish with the homeowner/seller. If 4 / * > / . > = = 9 :? ; . $ 7 you fail to perform or fail to execute the contract, then you forfeit your earnest money deposit. That is it. Are you concerned about out-of-pocket costs Having this type of clause in the contract like earnest money which is the deposit that is should give you some comfort. New students typically made when you make an offer on a often feel uncomfortable thinking, “Oh, no! property? What if I cannot find the money or what if I do not find a buyer?” If the answer is yes, just know with this strategy, you will usually not put any money Again, remember the worst-case scenario is down at all and even if you do, it might be you will only lose your earnest money deposit only $10 or $100. In my world of real estate, and if you didn’t put any money down, you this is considered virtually risk-free. have nothing to lose!
  • 4. - *" 0 1 2 Not putting any money down is not the only topic for another newsletter) you can do as way to make this a risk-free venture. There is many of these deals a month as you can find. language that can be added as an addendum to the contract that states the “deal is subject The following month after that I devoted a to partner’s approval.” So that in the event total of 60 minutes to put together four deals you do not find a buyer, you can return back and I made a fast profit of approximately to the seller and inform them that, “You know $35,000 flipping properties. what? My partner did not approve this deal.” For sixty minutes of work I made $35,000, This phrase won’t work with all types of that is $35,000 per hour! Not too shabby for deals, such as REO’s but you can usually use an hour of work in one month. it with a regular homeowner. Once your system is in place for example and With these strategies, you will have the you do just one of these deals a month for an knowledge of how to flip properties… get average of $10,000 which is very doable; you quick checks… pay off those credit card can make $120,000 a year! Even if you only balances… pay off your loans… build your made $5,000 per deal that would still be an savings and clean up your credit, in addition extra $60,000 a year. Imagine what you to assisting you in furthering your real estate could do with that kind of money. investment career. Increase that to 2 deals a month at $10,000 Past Three Months per property (at 15 minutes per deal, 24 deals would take approximately 6 hours); now you A couple months before writing this are looking at $240,000 a year, or $40,000 newsletter, I flipped three properties for per hour. This is why buying and selling real approximately $5,000-$6,000 each for a total estate makes millionaires! profit about $17,000. Not a bad month. Concerned about the economy? Housing I also bought a fourth property that month, “bubbles”? Don’t be because these types of which I rehabbed; the one I mentioned above. deals can be done in any type of market; it potential for profit in that property is about does not matter whether the market is at a $70,000, If I discount it for a quick sale, I peak, at a bottoming out, or simply flat. will still probably make a fast $50,000 to $60,000 on that deal alone. Remember the key is there is no risk because you are in control of the deal, and you never You can make very good cash, just like I did. take possession. That $17,000 cash helps pay the bills. It pays for the nice cars and the big house, funds Let’s say you live in an area that is going private school for my three kids, and the toys. down, even steeply. Given that you are not going to take possession and actually own the The point is, when you do not have any property yourself and you are going to assign limitations, both real and self imposed (a it to someone else, the condition of the market will not affect you.
  • 5. - *" 0 1 2 Here is a “worst case” scenario example: to hold or rehab and then sell, I might decide I do not want to keep the property for various You find a property worth $100,000. You reasons after all and in those cases I can purchase it with a contract for $70,000, and always wholesale the property to another you assign it to another investor for $75,000, investor with no risk. In those instances, basically adding in a $5,000 finder’s fee for wholesaling can be used as an exit strategy to you. For purposes of this discussion, by the not have to buy a piece of property. time the deal is ready to conclude let’s say the value of the property has now dropped and FINDING BUYERS the property is only worth $90,000 and the investor determines he no longer wants to buy One great source is the Internet. the property at $75,000 and does not close, what’s the worst thing that can happen? For example, Yahoo! Groups? are people who form a group based on similar Before I answer this question you must demographics or to talk about a specific topic remember that you probably have no money of common interest. If you visit or perhaps you have $10 or $100 in earnest www.yahoogroups.com and type in “real money that you put down (I normally do not estate” in the search box, you will find put any money down with sellers); which numerous groups of people who are looking means you basically have no risk and will not to buy and real estate and may be interested lose anything except for maybe the $10 or in your geographic area. $100 earnest money (which in my mind is the same as losing nothing, especially when you eBay.com sells more real estate than any make so much money when deals do close). other single source in the world I’m told. At www.eBay.com you will be able to find Using this technique alone is the single buyers and have the ability to sell property greatest reason you can make quick Cash using this wholesale flipping method. Now in real estate with no risk, no limitations, and with unlimited potential. Networking and Saying the Right Thing In addition, if you collected an earnest money Networking is a critical element in your deposit from your buyer like I do for $1,000- success as a real estate investor and in finding $2,000 and the buyer does not close, you buyers. could possibly keep their earnest money deposit and then turn around and even though Attending real estate investor meetings is a the property is only worth $90,000 in the must, even if you have to drive an hour to get current market sell it to another buyer who to them. Visit the National Real Estate might want that property. Investors Association website, http://www.nationalreia.com to find links to The other thing I like about this strategy is real estate investor clubs in your local area. that sometimes when I am buying properties Check out the links for local groups and find out when and where the meetings are.
  • 6. - *" 0 1 2 Begin to network with the people you meet at When you are speaking with a potential these meetings and ask who is buying buyer, it is important to find out what they wholesale properties and what they are looking for. Networking will help you find investors to It is Easier to Find a buy your properties… Not only that, but Property, other people will find you as well. for a Buyer, When you are networking for buyers, focus on the fact that you are doing an investor a big favor. Do not just focus on the amount of money you are going to make. want. Write down what kind of deals they are looking for, being sure to get their name, Remember you are essentially being paid a phone number, and email address. “finder’s fee” because you are being paid for the work of finding properties and not taking It is always nice to know you have a buyer any of the risk. For that reason there is only a lined up for a property. In other words, if you smaller amount being made by you compared already have a property then all you have to to the big profit that is available in the deal do is find a buyer, right? Just know there can for the investor that is taking the risk to be pressure to find the right buyer for the “rehab” the property. property before possibly losing the deal. If you focus on attempting to do something Ideally, the best way to look at this situation good for an investor and bring them really is to already have a buyer from a long list of “juicy” deals, this give you the opportunity to potential buyers and already know what they have the ability to move your properties very want, and then the only pressure is to find a rapidly because the investors will continue to property for them and then complete the deal. come back to you and buy more and more properties. On the next page I’ve listed a list of questions you could ask while networking. Either At the end of one year, you could easily have memorize a bunch of them or simply carry 20 investors buying a single property from them on a clipboard and fill it out while you each month which is 240 properties a talking to someone. Feel embarrassed doing year. At $10,000 a piece that is $2,400,000. that? Then get over it, or get a job.
  • 7. - *" 0 1 2 Questions You Should Ask While Networking Checklist • Is there a price range you prefer? • What is the maximum percentage of the market value you will pay? Based on the ARV – After Repaired Value - the fair market value after a property is repaired, up to its maximum value.) • What type of properties would you like? • How quickly can you close when I have that type of property for you? • How will you pay? (You are looking for whether they will buy with cash, finance with a hard money lender, or finance with a traditional lender) • Are you pre-approved? (If financing) • Will you need an appraisal? (If financing) • Will you be able to provide a proof of funds letter once I find a property? • How many properties have you purchased in the last three months? How many properties are you planning to buy this year? (This gives you an idea of whether they are really a player or not) • Do you have any references? (This is an optional question and is asked if I am a little uncomfortable with them and do not feel they are a self-assured investor) • Do you have any other investor friends I can speak with who might be interested in the extra deals I get that you do not want? The answers to these questions will always looking for a property someone allow you to create a virtual database of wants, and conversely, you will always information that will need to be have a buyer to match the properties continually updated. This way you are you already have found.
  • 8. - *" 0 1 2 Having these tools available to you they a regular basis. Soon, you will grow a will allow you to secure properties list of buyers who can make you very much more confidently when you know wealthy. you have a buyer waiting in the wings. I also like to send an email to my buyers every other week. I write a little - * newsletter teaching different strategies buyers can use to make money with their real estate. Other times I may fax them an article I wrote or something I have just read in the newspaper that I think they may be interested in. I may also pick up the telephone and call them, or even send a “voice blast” that calls their phone and leaves a recorded message from me. All of these methods serve to keep the lines of communication open. It also keeps me in the forefront of their minds so when I send them my deals they remember who I am which will result in a lot more sales. There are always new investors who get started with me who do everything right: they find an investor, talk with that investor, ask all the right questions, then those new investors go silent with no contact whatsoever until they have a property that needs to sell immediately otherwise they will lose it. Do not make the mistake of letting your network get stale. Keep talking with your buyers. Keep finding out what they want and what their situation is on