The Investment News: March 2012

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The monthly newsletter for Mid-America Association of Real Estate Investors. Offering Networking and Education for area Real Estate Investors. Find us online at www.MAREInet.com.

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The Investment News: March 2012

  1. 1. MID-AMERICA ASSOCIATION OF REAL ESTATE INVESTORS Investment News NETWORKING : EDUCATION : COMMUNITYRead Online www.MAREInet.com/Newsletter March 2012 SELLER FINANCING Non-Performing Notes SHORT SALES MARKETING SHORT SALES Disclosing Intent Right Message
  2. 2. BUSINESS MEMBERS ADDRESSING THE NEEDS OF THE REAL ESTATE INVESTORType Company Web Phone ContactInsurance APIA REOIns.com 877-752-2742 Lisa GoodnerLender Argentine Federal Savings ArgentineFed.com 913-402-1500 Ann WilkinsonPartnering kcmoHomeBuyer kcmoHomeBuyer.com 816-523-4400 Don TuckerProp Mgr Abraxas Prop Mgmt AbraxasMgmt.com 816-474-8800 Meka CayceProp Mgr Jamieson Home Team JamiesonHomeTeam.com 816-503-4671 Kevin JamiesonProp Mgr Premier Leasing MyPremierLeasing.com 816-841-9500 Jeff WoodsRealtor Realty Resource RealtyResourceKC.com 816-523-4400 Kim TuckerSecurity Devcon Security DevconSecurity.com 913-907-4942 Marian CollinsStaging ShowHomesKC ShowHomesKC.com 770-853-3506 Amanda PalombaSupplier Canyon Stone Canyon-Stone.com 913-254-9301 Matt PuckettTitle Accurate Title Company AccurateTitleco.com 913-338-0100 Jackie White Real Estate Investors and Landlords depend on a well rounded team of professionals. If you are building your team or looking to make a trade, start your recruiting with our Vendor Members and Business Associates. See a complete list of suppliers and any discounts they may of- fer to MAREI members by visiting, www.MAREInet.com. www.MAREInet.com/ServicesPage 2 MAREInet.com
  3. 3. Contents MAREI News In This Issue Business Members 2 Contents 3 Fine Print 4 Staff 5 Directors Notes—Non-Performing Notes 6 Disclose Intent on Short Sale Flips 8 Member Benefits at a Glance 10 Seller Financing to the Rescue 12 Alternative Financing Workshop—March 17 15 Welcome New & Returning Members 17 Marketing: You Get What you Ask For 18 Calendar of Events—SubGroups 22 Investment Properties 24 Tips for the New Website: Posting Property 26 Join Now 28 March Meeting Jump Start Your Investing! Pre Meeting in March Get started on the right foot with Short We have a search engine friendly property marketing Sale Real Estate Investing. Presented by tool on the new website. Fairly user friendly too, but veteran MAREI members Donna Wilson and Laura Bullock. you might need some tips to get you started in the right direction. Come early on the 13th for our 5:30 Pre- Tuesday March 13th., from 6 to 9 Meeting to find out how to most effectively post your - New Member Orientation at 6:30 properties for investor buyers on our site. - Speed Networking at 7:15Investment News Page 3
  4. 4. MAREI Notes 2011 Contact Information National REIA PO Box 8685, Prairie Village KS, 66208 Awards of Phone: 913-815-0111 Excellence Our Mission Statement Mid-America Association of Real Estate Investors is dedicated to promoting ethical real estate in- vesting and to protect and promote the best interest of our membership through educational and networking opportunities as well as community, legislative and public relations. Legal Disclaimer MAREI does not exist to render and does not give legal, tax, economic or investment advice and disclaims all liability for the action or inaction taken or not as a result of communications from or to its members, officers, directors, employees and contractors. Each individual should consult his/her own counsel, accountant and other advisors as to legal, tax, economic, investment and related Honors matters concerning real estate and other investments. Content Disclaimer Of Merit The views and opinions expressed by authors of articles contributed to this newsletter do not neces- sarily reflect those of the association, the board of directors or the staff. Electronic Advertise in the Investment News Rate ScheduleCommunication Size Full Page Non-Member $175 Member $140 Business Associate $115 & 1/2 Page 1/4 Page $145 $75 $105 $65 $85 $50 1/8 Page $55 $35 $25 Membership A 10% discount is given on ads pre-paid for 6-12 months. Any changes to a pre-paid ad will incur a minimum charge of $20. The deadline to submit ad copy is the 1st of Development each month. All ads must be prepaid. Contact to verify ad format can be accepted. PDF preferred. There is an additional charge of $25 to typeset a business card ad or 1/4 page ad layout, $60 for a 1/2 page or full page lay-out. Opportunities also exist for advertising on www.MAREInet.com. Call 913-815-0111 for more information. Email ad copy to info@MAREInet.com. Mail payment to MAREI, PO Box 8685, Prairie Vil- lage, KS 66208 or request an online payment for to use credit or debit card.Page 4 MAREInet.com
  5. 5. MAREIKim Tucker 816-523-4400DirectorKim@MAREInet.com Staff Scott TuckerDon Tucker 816-523-4400 John Welchert Meeting AmbassadorPresident Meeting Ambassador STucker319@gmail.comDon@MAREInet.com 816-522-0002Steve Burns Dan Goodwin 913-642-5218 Shelda GoodwinAudio Visual Meeting Ambassador Meeting Ambassadorcashflowtreasures@gmail.com DanGoodwin@kw.com SheldaGoodwin@kw.comL. Scott Ficinus, SFR, WHS Debra Felderhoff Michelle WinberryMeeting Ambassador BS, LS, Indep Subgroup Weekly WednesdaysScott@Ficinus.com Investment News Page 5
  6. 6. Director’s Notes Back in early January the phone rang and on the months sell it for a profit as a performing asset. other end was Jeff Merrick . Jeff works for several In the next scenario, the borrower says “We companies that sell bulk packages on notes. It have been trying to work a short sale, but the turns out that he knows Eddie Speed, our guest bank would not work with us. If we could pay trainer for March on note buying , and even sells just $10,000 less than what we owe, we could quite a few notes through Eddie’s Company sell it.” So if they owe $100,000 and you just Colonial Funding. bought the note for $75,000, you just made an Anyway, Jeff and I had a lengthy conversation easy $15,000. about the buying of Non-Performing notes. You His last scenario is the borrower says “We have see when a home owner does not make their been trying to deed the house back to the mortgage payments and it is still on the banks lender, but they would not work with us, can we books, it is usually classified as a non-performing deed the house to you?” That gives you a note. And Jeff said we can make some awesome house almost immediately with out the hassles deals with non-performing notes, if you know what of foreclosure that you can now resell or rent. you are doing. Many of the issues right now stem from the He had three typical scenarios for this type of mega banks being unwilling or unable to negoti- note. All include buying the note for a discounted ate to with the borrower. Because you would be price due to the fact that the borrower is not pay- a small lender dealing with one or two loans that ing, the more notes you buy, the larger the dis- you purchased for a large discount, you are in a count it seems.. position to work with them and resolve their is- His first scenario is that you buy the note at the sues and creating a win-win situation for all in- steep discount. Then call the borrower up to ask volved. Before you start tackling buying notes, why they are behind and they say something to especially non-performing notes, be sure you the effect of “With the increase in real estate know what you are doing. taxes, insurance cost and interest rate adjusting This concept has intrigued me for several years. the payments are just too high. If we could elimi- So please join me at the Note Seminar on the nate all of our late payments and start fresh, with 17th. We are going to be taking a ton of notes! a lower interest rate and amortize it for another 30 years we could make payments easily. But the Kim Tucker bank would not work with us.” Because you are now the bank, and bought the loan for pennies on the dollar, you are in a position to work with them Director and make this a performing loan and in a fewPage 6 MAREInet.com
  7. 7. accurate Accurate Closings: On Demand Training Smooth, Timely, Professional. 30 Minute SegmentsTitle Services Provided for: Top Investor Trainers FSBO, Wholesale, & REO Transactions New Construction Closings From the Comfort of Commercial Purchases and Refinance Your own Internet Connection All Types of Loan Closings 1031 Exchanges $39.00 Training Courses FHA, VA, USDA, Conventional Loans, and Hard Money Loan Closings REO & Lease Option Refinance & Reverse Mortgages Creative Financing Doc Prep, Prelim HUDS, Curing Issues Automated Investments Auctions & Foreclosures Short Sale Closing & Assistance Short Sales 100 Years of Combined Service! Government Grant Money www.AccurateTitleCo.com 913-338-0100 phone www.MAREIU.com Asset Protection Insurance Agency www.REOIns.com 877-752-2742 Property Management Rental Services Kansas City Metro www.JamiesonHomeTeam.com Real Estate Owned / Forced Placement Kevin Jamieson For Investors & Finance Institutions 816-503-4671 Investment News Page 7
  8. 8. Should You Disclose Intent On Short Sale Flips Short sale flips – the process of shorting a property In essence, this is no different than a regular then reselling it for a cash profit in a simultaneous wholesale flip except instead of paying off seller’s closing – has been taking heat lately from title com- lender in full, investor pays off seller’s lender at a panies and real estate brokers. Realtor blogs are discount. filled with drivel about how these transactions are The Hoopla illegal or unethical. What’s the real truth? Some Realtors and title companies think there The Basic Process should be full disclosure to the lender and seller The process of the short sale flip works as follows. about the resale of the property, otherwise the bank and seller are being “defrauded”. In order to Step 1: Investor signs a contract to buy a house be defrauded, someone must be owed a legal from a seller who is behind in payments. duty of disclosure. Step 2: Investor contacts seller’s lender to negotiate short sale As far as disclosure to the seller, I see no issue Step 3: Investor gets lender to approve short sale because the seller is not getting any money out of Step 4: Investor lines up backend buyer the deal either way. His lender will not agree to a short sale while the seller walks away with money. Step 5: Investor closes with seller, paying off lender, So any profit made by the investor is fair game. then resells to backend buyer in simultaneous clos- ing for a profit. As far as disclosing to the lender that you plan on reselling the property for a profit, of course you Don’t miss this event! Monthly MeetingMarch Monthly Meeting: Agenda More info and Registration Thursday March 13th, 2012,  5:00 Set Up http://www.MAREInet.com/March 6pm to 9pm  5:30 pre-meeting Career Education Systems,  6:00 check in FREE for members, Guests  6:00 vendor hall $25 at the door, $15 if you pre- register  6:30 new member orientation Getting Started as an Investor,  7:00 mini speed networking focus on Short Sales  7:15 Donna Wilson/ Laura BullockPage 8 MAREInet.com
  9. 9. are going to do that. That’s what “Consumer Protection”. Exactly that the package is 100 pages longinvestors do – they make a profit. which bank is the consumer?? and the bank’s loss mitigator is probably not going to read the con-If you planned on keeping the Disclosure tract in detail, but who’s fault isproperty as a killer rental instead Chances are this will end up in that?).of flipping it, there would be no is- court someday and a jury will havesue. If you fixed the property up Should you further disclose in your to be convinced that failing to telland sold it 3 months later, there cover letter to the lender that you people you are reselling your prop-would be no issue. have a buyer lined up to resell the erty for a profit is somehow a fraud property to at a higher price?For some reason everyone gets upon the lender or the seller. No-upset because you are flipping it body wants to be the test case, so Maybe. Maybe not.an hour later for a profit. I think that to be on the safe side, Article written by Attorney WilliamIn other words, what exactly trig- your contract with the seller shouldgers a duty to disclose to the clearly disclose that you intend tolender that you intend to make a resell the property for a profit.profit? Well, in at least one state “Buyer may resell the property in a(Colorado), the law now requires simultaneous closing for a higheryou to disclose if the resale is in- price and make a profit.”tended within 14 days. This re- This covers the seller, but whatquires an all-cash closing on the about the lender? Well, the lenderfront end with no back-end con- gets a copy of the contract in thetract signed until day 14, risking short sale package the investorthe loss of your back-end Bronchick, Investor and Founder submits to the lender. This putsbuyer. Geniuses at the Colorado of the Colorado Association of the bank on notice (We all knowLegislature passed this law under Real Estate Investors. First 100 Attendees To March Meeting Receives a FREE Copy of the April 2012 Issue PERSONAL REAL ESTATE INVESTOR MAGAZINE Subscribe http://www.MAREInet.com/PREI Investment News Page 9
  10. 10. MAREI’S MEMBER BENEFITS PROGRAM YOUR MEMBER BENEFITS AT-A-GLANCE USE THIS PAGE AS A GUIDE TO VALUE ADDED DISCOUNTS TOOLS AND SAVINGS CREATED JUST FOR YOU ON GOODS AND SERVICES YOU USE EVERY DAY.Landlord Services Suppliers Marketing Affordable Landlord Websites with aScreening for tenants & workers with 15% discount or free trial for members. 20% discount for members. Learn how to save money at Home De- pot and register for a 2% Rebate for all purchases & rentals across the US. Websites for investors, landlords, and Electronic collection for bounced other services. FREE trial. rent checks. No charge to you. FORMS & DOCS All members receive a discount card Service ProviderMember Library is packed with forms to access our exclusive discounts upand docs, plus 15 % discount at EZ to 40% off all paint, supplies, andLandlord Forms for premium forms. flooring—nationwide. Discount card for all members providing a 10% discount on all services.Market your rentals on the nations topranked rental site. Member discount Members have access to many great is 20% off Regular Prices. tools and savings including discounts News & Information of up to 7% - nationwide. E-UpdateOffice Solutions Our weekly email update with what’s happening in real estate including properties for sale, government af- Discounts of products through Sears fairs and local market data.Save on select FedEx Office copy and Commercial plus 5% off Gift Cards. print services up to 20% and on Investment News FedEx Shipping up to 22%. The newsletter for Mid-America Asso- Membership ciation of Real Estate Investors: pub- lished monthly and distributed both in print at our meetings and digitally to ourReceive discounts up to 65% on over database of over 5000 people. 12,000 products you use the most online and in store. FREE membership in Community Buy- ing Group for all MAREI members to Continued . . . . bring you even more great discounts.Page 10 MAREInet.com
  11. 11. Member Service We have several services as part of our website to help you growMagazine for the real estate investor. your business.With discount subscriptions for MAREI members. MAREI’s Government Affairs ac-Other Discounts tively monitors national legisla- tion and rule-making that im- pacts the real estate industry and harnessing the strength of MAREI members at the grassroots level. Calendar of Events to stay up to date with all of our activities. MAREI mem- bers also re- ceive timely Calls to Action Nearly 70% of QuickBooks users say when there is athat it makes their business more prof- time for our itable. Get your Accounting on track. members to Buy at a 40% discount through Na- take action on an important vote. tional REIA. Browse the member properties to Members also find your next deal. Take the REAL ESTATE BOOKS have access time to post your investment op- to the latest The nation’s largest provider of portunities for other members in Market real estate training materi- and site visitors to browse. Data. als, DEARBORN is America’s Premier Real Estate Pub- lisher. Members receive up to 40% off. VISIT The Member Library is packed and ever growing with pdf ver- ww.MAREInet.com sions of entire books, EBooks, Special member discounts for Look under Resources - Articles, Forms, and Documents. members at Avis, Budget, and Enterprise Rentals. Discounts Investment News Page 11
  12. 12. Seller Financing To the Rescue How Investors Can Profit from the Emerg- more quickly and at higher prices. That’s be- ing Solution to the Real Estate Crisis cause it offers a much larger pool of potential buyers. As a real estate investor, you know all too well that the mortgage industry is suffering from a With safe seller financing, you underwrite major meltdown. Too many institutions have loans before they are made, and then manage been lending money in a blind, reckless way. them thereafter. You must learn how to iden- Lending institutions are folding, foreclosures tify and qualify capable buyers who are ex- are reaching record highs, and subprime lend- cluded from traditional mortgages as a result ing has caused a catastrophe for property sell- of today’s tightened underwriting standards ers, buyers, and lenders alike. and the diminishing number of conventional lending institutions. As a result of today’s credit crunch, there’s a limited pool of qualified buyers and a shrinking Seller financing is fast emerging as the solu- supply of conventional lending sources. In addi- tion to the collapse of many lending institu- tion, there’s a growing number of would-be tions, and the shrinking supply of financing buyers who can no longer obtain conventional available from those that survive. For you, the loans—and an abundance of properties on the real estate investor, it could very well be the market at low prices. key to your survival in this business. Seller financing is coming to the rescue. It’s Seller Financing Goes Mainstream filling the void created by the mortgage crisis, After the high-interest rates of the 1980s, offering an alternative to those hard-to-come- seller financing became a specialty niche by conventional loans. But seller financing can among real estate transactions. The upheaval do more for the real estate investor than just in the housing market, however, is now creat- move property. For one, it can sell property ing an extraordinary demand once again for this alternative funding source. Consider this: two years ago, seller financing accounted for about 1 in every 400 real estate transactions. Today, it accounts for 1 in every 50 transactions. What’s more, some real es- tate experts predict that seller financing will soon become the financing vehicle for one out of every ten real estate transactions. Not since the 1980s, have I seen the extraor- dinary increase in, and necessity for, seller financing. What does this mean to you? Seller financing provides you the opportunity to sell your prop- erties to quality buyers, at the full retail prop- erty values and more quickly, for a substantial and steady income stream. The smart real es-Page 12 MAREInet.com
  13. 13. tate investor will become adept falls that brought down many the place and fled? With fal-at using this method. Indeed, lending institutions, however, the ling prices in the housing mar-your level of success will likely investor must weigh the risk of ket, even the equity might bedepend on how well you use each loan and proceed only with reduced. The seller/lenderseller financing. those that present a high likeli- gets stuck with unpaid bills hood of success. That means be-For Quality, Qualify and costly repairs. The honey- ing meticulous about qualifyingQualifying for a conventional the buyers and lending only to moon is over.mortgage today is much more those of the highest caliber. Like fiancés, borrowers aredifficult than it was just a few emotionally involved with the From This Day Forward . . .years ago. As a result, there are transaction and might notmany more quality candidates for Most people enter into seller fi-seller financing than there were nancing contracts with the same view their situation objec-in the past. These are people enthusiasm with which they enter tively. Even well-meaningwho’ve been rejected by conven- into marriage. They’re as happy buyers might believe they cantional lending institutions, in at closing as newlyweds at the afford to commit to a long-part, because less money is altar. Everybody’s eating the term loan without realizing allavailable. More restrictive under- cake and tossing the rice. But if the responsibilities and ex-writing criteria are in effect, the commitment is based solely penses they will incur, norwhich disqualify countless candi- on blind faith, the relationship their ability to meet those ob-dates who have both a willing- may dissolve faster than ice in ligations. Equally excitedness and the ability to meet the the punchbowl. about closing the deal, therequirements of the loans. In ad- No investor finances his property seller might be blind to thedition, many other would-be buy- for a buyer with the belief that potential risks in doing busi-ers have had hardships that the arrangement will turn sour. ness with a particular buyer.they’ve since overcome. At most, it’s considered a remoteTogether, these factors contrib- possibility with tolerable conse- Other investors recognize theute to a startling fact: As many quences. If the buyer defaults on risks but believe they canas 50% of the people who the loan, the investor assumes sidestep a foreclosure actionwould have qualified for a that he can simply annul the by having the buyer pre-signconventional mortgage just deal, repossess the property, and a deed back to them at clos-two years ago no longer do. avoid any loss. ing. That would be an invalidTrue, there had been much reck- But this assumption is flawed. deed because the buyer can-less lending to risky borrowers in The buyer has occupied the prop- not waive his future rights.recent years. But since the erty for months, perhaps years. But there is no protection forshakeout in the lending industry, What condition is it in now? Have the seller in case the arrange-many good candidates are now the taxes been paid? Are the in- ment goes sour. Seller financ-being denied the opportunity to surance premiums up to date?borrow money. ing doesn’t come with a pre-nup. Has the buyer kept up with theSeller financing is the ideal solu- routine maintenance and repairs? Clearly, the smart approach is totion for these people and inves- Or, as in the case of some fore- learn all you can before you’retors alike. To avoid the same pit- closures, has the buyer trashed (Continued on page 14) Investment News Page 13
  14. 14. (Continued from page 13) with dating; it’s smart with lending. Likewise, real estate sellers should evaluate their seller-finance candidates with this same level ofheavily invested in the relationship. scrutiny. Yet too often, they fail to conduct dueA Safe Bet diligence. This careless approach results in count- less defaults and creates the impression thatHow risky is seller financing? Much lower than it used seller financing is riskier than it should be.to be. In the past, would-be borrowers paying onseller-finance mortgages were, as a group, much The savvy investor will ensure good underwriting,riskier than they are today. That’s because it was not only to achieve a smooth and successfuleasy, too easy, to obtain a conventional loan. People transaction but also to maximize the cash value ofwho failed to qualify for traditional mortgages were, the note. Most note holders don’t realize that theby definition, the riskiest borrowers. number one variable that affects the cash value of their note is the buyer’s credit. So not only doesLending institutions have since tightened their crite- disciplined underwriting mean a more trouble-freeria, making it far more difficult for would-be buyers to loan, you also create a more salable loan in theborrow money. As a result, more people are now pur- future, and one that’s worth more.chasing property with seller financing. Squeezed outof conventional lending, formerly qualified applicants To help ensure a profitable relationship with yourare increasing in number and anxious to buy prop- borrower, then, you must perform due diligence.erty. This raises the quality of the typical seller- The independent investigation will assess the ac-finance candidate. curacy of your buyer’s statements regarding as- sets, income, employment, debt, and so forth.Many are “just missed” borrowers who now fall nar- Due diligence allows you to make sound decisionsrowly outside the newly tightened criteria of lending based on solid facts, not subjective impressions.institutions. These are reliable, low-risk prospects It allows you to distinguish the quality borrowerwho show every intention of meeting the terms of from the risky one. And you can then create atheir loans, and they have the ability to do so. They more valuable loan.would have easily qualified for conventional mort-gages in the past but no longer “measure up” on pa- Ronald Reagan said it best with his signatureper. phrase, “Trust but verify.”What the savvy investor must do is differentiate be- You Can Bank on It!tween those deserving buyers and the obviously risky Using another analogy, imagine that you’re con-ones. Your success will depend on the thoroughness sidering buying stock in a bank. Despite theby which you investigate each prospect and then use bank’s history of solid performance, let’s say itsound judgment when deciding whether to offer seller now decides to relax its due diligence procedures.financing. This saves both the time and expense of verifyingI Do Diligence the loan applicants’ statements and examining other sources of pertinent information. With lessReturning to our marriage analogy, approving your stringent requirements, the bank is now able toseller-finance candidate is a lot like choosing your life qualify more borrowers and process more loans.partner. Risky loans. Now here’s the question: Would youFew people enter marriage without having first gath- want to own stock in that bank?ered considerable information about their mate. It Unfortunately, many property owners enter intostarts with that first encounter, when your date pre- seller-finance contracts with that same, carelesssents himself or herself in the best possible light. He approach. They don’t pull a credit report, verifyappears honest; she seems responsible. As you get to income statements, examine the employment his-know each other, you like what you see and you want tory, or investigate the buyer’s liabilities. It’s likethis to work. You make plans. eloping on that first date.Smart couples approach the altar having already dis- When you seller finance, you’re buying stock incovered and judged their fiancés’ background, char- your own bank. Make sure you can bank on youracter, values, strengths, and weaknesses. They con- decisions.duct their own due diligence before their “I do’s.”Many singles even hire a private investigator to do an You can be extremely successful in this business,independent background check on their potential if you use a methodical approach that calculatesmate before proceeding with the romance. It’s smart (Continued on page 16)Page 14 MAREInet.com
  15. 15. More Information . . . HOUSES WANTED More Confidence  Built After 1950 Minimum 3 Bed, 1.5 Bath Eastern Jackson County MO or Johnson County KS Retail Value $100k-$200k More Profits No Rental Tenant ScreeningLocal Cash Buyer Looking for 2 to 4 Houses a Pre Employment Screeningmonth to purchase, rehab and sell. Money Part- Contractor Screeningners want their money placed quickly so they canturn their money fast and make a profit. Can’t do Collection Servicesthat with out houses! Bring us a deal! Discounts for MAREI MembersEmail: kcmoHomeBuyer@gmail.com www.AAAScreening.comSubmit Online: kcmoHomeBuyer.com 816-436-0085 Be sure to Join Now (Or Renew) Go online at For everyone that joins now or at the meeting Do the math. on Tuesday we have several free giveaway Your vacancy is costing you every day. Fill your vacancy faster and save money items for you to choose from: with Rentals.com! Buying Real Estate without Cash or Credit (Peter Conti & David Finkel)Discounts for MAREI Members: How to Create Multiple Streams of Income Receive 20% off all Regular Buying Homes In Nice Areas with Nothing Down Priced Advertising. Log into Member’s Area, click on Member (Peter Conti & David Finkel Discounts and look for MAREI’s Buy Even Lower, Discount code! The Regular People’s Guide to Real Estate Riches (Scott Frank & Andy Heller)Investment News Page 15
  16. 16. (Continued from page 14) is find them. the property (your basis), the less risk you can afford to take. The Basis Basicsthe risk and weighs the benefit. Let’s say you’ve invested(Trust me, I know.) In addition, During my 28 years in seller fi- $75,000 in that $100,000 prop-it’s much more profitable than nancing, the question I’m most erty. You’re now at a greater risksitting on an unsold property. But frequently asked by property of losing more, if delinquencyseller financing does require that sellers is this: At what point and default occur.you understand some fundamen- should you make a very aggres- With a low basis you can lowertal principles—and that leads us sive underwriting decision? your underwriting standards. I’veto our next analogy. The answer depends entirely on known and even consulted withPlaying Your Cards Right how much you’ve invested in the real estate investors who main- asset. If it’s worth $100,000 and tained a fairly liberal underwrit-Let’s take this concept to Las Ve- you’ve invested only $25,000, ing practice. These transactionsgas. You certainly wouldn’t play you have a “low basis.” With a succeeded because the investorsBlackjack without first under- low basis in a property, you can had a low basis in their proper-standing the rules of the game. better tolerate a default risk. ties. With an inordinately low in-With that knowledge, for exam- vestment in the property, say 20ple, you wouldn’t take a hit if you In a way, you’re like a pawn shop or 30%, you can tolerate the ad-have 18 and the dealer shows a owner. You’ve taken as collateral ditional risk. This strategy, how-4. Otherwise, what stays in Ve- an item whose value is far ever, is riskier and more chal-gas is your money. greater than the money you’ve lenging. It demands greater at- loaned. If the transaction pro-Yet a lot of people who offer tention to detail, and requires ceeds as planned, your customerseller financing are gambling with more time and resources to ser- repays the loan with interest, andtheir own assets. That’s because vice the portfolio. But if you have you make a profit on your loan tothey don’t understand the basic a low basis, you can apply lenient him. If your customer defaults,principles involved. Rather than qualifying criteria and still be you take possession of the collat-analyze the risk and then judge successful. eral. Having invested only a frac-wisely, they unwittingly close tion of its retail value, you can Seller Financing: It’s a Gooddeals with high-risk buyers. then sell it to someone else for a ThingSmart seller-financing is profit- healthy profit. Having purchased more thanable. There are plenty of aces in That’s why the higher the per- 30,000 seller-financed notes, I’vethe huge and growing pool of po- centage of your investment in seen a pattern of success andtential buyers. All you need to do failures. These aren’t just theo- retical concepts. They’re the re- sult of actual experiences involv- Get Your Own Free Copy ing a range of variables. With due diligence, good judgment, Find out how you can profit. and some common sense, you can become very successful Download your with seller financing. And the MAKING MONEY FROM timing couldn’t be better. Free Ebook Today! THE MELTDOWN Today there are plenty of qualityHow to Profit from the Nation’s Growing Real Estate Crisis people who deserve the opportu- Go Online to nity to own their own homes. They can afford to buy your MAREInet.com/freeMMM property, and they will make their payments on time. In addi- tion to your own success in this Information on business, you can provide a March 17th Seminar much-needed service that will help others. Are you ready to say Go to Page 27 or online at: “I do”? MAREInet.com/EddieSpeed By Eddie Speed, Note Business Expert & MAREI’sGuest Trainer By Eddie Speed on March 17th.Page 14 MAREInet.com
  17. 17. New Members Renewing Barry Bottemuller: Leawood, KS  Albert & Josephine Abraham: Shawnee Eric Buchman: Kansas City, Mo  Bemate Bomboma: Overland Park, KS Terry Carter: Freeman, MO  Day Boswell: Overland Park, KS Perry Cashion: Lees Summit, MO  Michael Bryant: Lees Summit, MO Rene DeCrumpe: Kansas City, MO  Larry Christensen: Weatherby Lake, MO Joey Frey: Leawood, KS  Ken Collyard: Shawnee, KS Kymberly Griggsby: Kansas City, Mo  Laura Johnson: Kansas City, MO Bret & Nancy Hoover: Independence, MO  Steve Lau: Overland Park, KS Ronald Ireland: Kansas City, MO  Lisa McKay: Overland Park, KS Lisa Rabbe: Kansas City, MO  JJ Palowski: Kansas City, MO Dale & Phyllis Steinman: Chanute, KS  Stephen Summers: Independence, MO Investment News Page 15
  18. 18. Marketing Seller-Finance You Get What You Ask For! By W. Eddie Speed sell the note, it’ll be a challenge to get a decent price for it. Eureka! That moment of mutual exhilaration has finally arrived when your prospect says to you, Many real estate professionals conclude that the “This is it!” He decides to buy your property—and prospect pond is stocked with only the riskiest of you’re eager to sell it to him. But then reality hits. candidates, since that’s the response they re- Your buyer’s application for a conventional loan ceive from their ads. In fact, the quality of poten- is rejected. The deal falls through, yet again. tial buyers seeking properties with seller financ- ing is much better than you might imagine—and This scenario is becoming all too common, caus- it’s improving. It’s the advertising that needs ing immense frustration for individual sellers, help. By simply changing the wording of their realtors, investors, and buyers alike. But as I re- advertisements, I’ve helped countless real es- ported in “Seller Financing to the Res- tate professionals find better buyers. cue!” (Invest Magazine, Oct. 2008), there’s an alternative to conventional lending that addresses The Right Pitch for the Best Catch these situations. Seller financing is filling the To get the best results, your ads should reach lending void created by the mortgage meltdown out to the best buyers. This simple strategy can and the credit crunch. boost your real estate business big time. Success with seller financing requires smart mar- Whether you’re using newspaper ads, yard keting. With the right marketing, you’ll be able to signs, websites, email blasts, flyers, direct mail, identify and target your best prospects. You’ll be billboards, Craig’s List, or any combination of able to interact with people who are not only ca- marketing tools, market wisely. Specify the kind pable of meeting their repayment obligations but of buyer you’re looking for. are most likely to do so. To use a fishing analogy: If you want to lure the To attract these low-risk buyers, I recommend an prime candidates, you need to use the right bait. advertising method that is remarkably simple yet Fish for anything that bites, and you’ll find your- powerful. It’s a technique that challenges the type self unhooking the catch and tossing it back, of ads that are commonly used for seller financ- again and again. Meanwhile, you’re wasting ing. your time and your tackle. As a real estate pro- fessional, it’s what you hook—and keep—-that The typical seller-finance advertisement targets counts. the broadest audience possible—and focuses on the least qualified candidate. The result is pre- So, how do you “fish” for the best buyers? It dictable. If you use vague, all-encompassing ads, starts with the bait. Or more accurately, the line you’ll attract buyers with lousy credit, zero assets, that you use. sporadic employment, and/or substantial debt. “Bad Credit? No Credit? No Problem!” Even if the property sells, it could take up to 20 years of monthly repayments before you’ll know Does this line sound familiar? Search it on whether you’ve made the right decision. Remem- Google® and you’ll find more than 17,000 list- ber: you don’t get paid in full at the closing of a ings. Earlier today, I even heard it on the radio. seller-financed transaction. And if you decide to This copycat copy is so overused that it satu-Page 16 MAREInet.com
  19. 19. rates seller-finance marketing. ing, you should ask yourself: Is this candidates—and increasingly, bet-Perhaps you’re even using this the buyer I’m looking for? ter candidates are needing it.line, or something similar, yourself. Seller financing is also being used Good Guys, Bad Luck to create far better loans on pricierWorse, the bad-credit/no-credit Meanwhile, people with fairly de- properties.message speaks to the folks you cent financial circumstances willleast want to attract. It announces, There are plenty of responsible, likely dismiss your ads. That’s be-albeit unintentionally, “No qualifica- capable people who would have cause until recently, “seller fi-tions required!” If you can fog a qualified for a typical mortgage nance” or “owner will carry” adsmirror, you can get a loan. only recently—and their numbers targeted the riskiest buyers and are increasing. These just-missedThe fact is that you almost never sold the least attractive properties. applicants are being squeezed outfind good-credit buyers with a bad- As it emerges as a mainstream of conventional lending because ofcredit ad. Before spending one financing method, however, seller changing market conditions, moremore dime on this kind of advertis- financing is attracting much better restrictive qualifying criteria, a Property Management Section 8 Housing “Presentation is Everything!” KC Metro Wide Canyon-Stone.com Jeff Woods 550 E. 56 Highway, Suite B Olathe, KS, 66061 Broker www.MyPremierLeasing.com Phone: (913) 254-9300 816-849500 Fax: (913) 254-9301 info@canyon-stone.com www.Canyon-Stone.com Investment News Page 17
  20. 20. (Continued from page 19) your time chasing chancy deals might have been turned down for a and getting frustrated by the out- conventional loan only because ofshortage of available funds, and come. recently tightened lending prac-personal circumstances that make tices. On paper, they’re labeled Back to my fishing analogy, you’llthem look risky on paper. unqualified but just barely. These catch fewer fish with a more re- prospects feel they deserve the strictive ad, but they’ll more likely opportunity to buy the property be what you’re fishing for. YouThe bad-credit ad looks like the they can afford because they know won’t waste your time and re-seller is seeking desperate buyers. they’re honest and trustworthy. sources catching—and tossingMany low-risk borrowers won’t They can—and will—meet their back—unqualified buyers. You’lleven consider doing business with repayment obligations. Now, isn’t get what you advertise for.someone who caters to the poor- that your ideal buyer?est of prospects. What does that Here’s a superb example of this Why not ask for deserving buyerssay about the condition of the principle. I knew a real estate in- in your ads? This comes with aproperty, the price the buyer will vestor who was at the top of his bonus: You’ll feel especially goodhave to pay, or the terms of the game. His advertisements offered about being able to serve them.loan? properties for “only $500 down.” As a result, he attracted just what The Low Down on High DownBetter-qualified people don’t rec- he asked for, plenty of buyers who Paymentsognize themselves as risky bor- could afford only $500 down. Overrowers, and they certainly don’t Over the years, I’ve known a hun- time, his buyers defaulted at a ratelump themselves into that category dred or more seller-finance inves- that was three times that of otherof bad-credit types. They don’t see tors who buy mobile homes in buyers who paid significantlythemselves as the bad guys, but rental parks. They purchase them greater down payments. And hegood guys in a bad situation. for cash at rock-bottom prices, say probably missed out on some de- $2,000 to $5,000 apiece. ThenThey’re the retiree on a solid pen- cent buyers in the process. they spruce them up, and sellersion whose employment history If you want qualified buyers, ask finance them for substantially moreended a decade ago. They’re the for them. You’ll filter out most of than they paid for them. Appealingcareer soldier whose income is the high-risk candidates before to the low-credit/no-credit pros-modest but reliable. They’re the you even hear from them. You can pects, these investors attractworking woman who’s advancing spare yourself and your clearly plenty of buyers. Risky buyers.in her career and making final pay- unqualified prospects much Buyers with dreadfully low creditments on her college debt. They’re wasted time, expense, and disap- scores who put little money down.the “just missed” buyers who are pointment. Without much skin in the game,ideal candidates for seller financ- these buyers have little to lose ifing. Serving the Deserving they’re delinquent in their pay- Ask and Ye Shall Receive! To attract the most viable candi- ments or go into default. dates, there’s an even more dis-So, how do you market seller fi- This can be a successful invest- criminating approach you mightnancing in a way that attracts ment strategy but only if you main- want to consider. You can appealthese prospects? It’s simple. Just tain an extremely low cost basis to low-risk prospects with theask for them! Forget the vague and are prepared to deal with sig- word, “deserving.”and desperate, I’ll-deal-with- nificant problems. When asked,anyone ad. Instead, try something “Seller Financing for Deserving Buyers!” I’ve warned potential investors thatlike this: 30% of their loans could go into This can draw an even better re-“Seller Financing for Qualified Buyers!” sponse, since you describe your default. A colleague of mine tried it targeted prospect as not only a and succeeded. After several hun- “Qualified Buyers: Owner Will Carry!” dred deals, though, he told me I qualified buyer but a quality per-Tell your prospects what the son. I’ve seen excellent results was wrong. The default rate was“catch” is upfront. That way, you’ll from such ads. Here’s why: only 29%.spare the riskiest buyers the disap- If those are the odds you want to “Deserving buyers” recognizepointment of a rejection while you play, go forth and multi-buy. But themselves in these ads. More-encourage the best candidates to there’s a better method, one that over, they appreciate that you rec-call. Better still, you won’t waste has proven quite successful by a ognize they’re out there, too. TheyPage 20 MAREInet.com
  21. 21. long-time real estate investor in off a large debt are prime candi- specific weakness. Bad Credit? NoPennsylvania. dates for these transactions. Credit? Problem!Vince Sellers also buys mobile Catering to this market requires The Bottom Line for Top Dollarshomes on the cheap. But he even more attention to your adver- In your seller-finance ads, youproves that with the right ad, you tising message. Why not use an should pitch to your most promis-can find the right buyers. Vince’s upscale, feel-good ad like: ing prospects. Whether you want aads clearly specify what he wants: “Luxury Living for Deserving qualified buyer, a deserving buyer, “Owner Financing with Large Buyer: Owner Will Carry.” a significant down payment, or Down Payment.” some other criterion, tell would-be Give Credit the Credit it De- buyers what you’re looking for. LetAnd that’s exactly what he gets: serves! them screen themselves out of thebuyers with $8,000, $10,000, even running so that you don’t have to.$12,000 in down payments. That Now let’s look at the secondary Rather than sell them on youralone covers his cost of the prop- market. As a buyer of seller- property, position your offer so thaterty and provides him with some financed notes, the question I’m they’ll want to sell themselves toimmediate profit along with it. The most often asked is, “What’s the you. You’ll waste less time with theonly thing Vince does differently discount on this note?” This al- decidedly unqualified, and can fo-from his peers is this: He adver- ways leads me to a critical point: cus on the quality candidates youtises for what he wants. The buyer’s credit is the number most want to do business with.Premium Properties Enter the one factor that determines the dis- If your phone rings less often, itSeller-Finance Market count. doesn’t matter. That’s because it’sIn general, seller financing has not the response rate but the con- Other variables that contribute tobeen used for low-cost housing version rate that matters. So start the amount of the discount includeand land transactions. During the asking for those quality buyers. the property itself (the collateral),1980s, there was a notable excep- You’ll have more quality transac- down payment, structure of thetion. When interest rates on con- tions as a result. Eureka! sale and note, seasoning (howventional loans soared past 18%, many payments have been col- Suggested Pull Quotes:owners of luxury properties turned lected), and loan documentation.to seller financing. It allowed them “The typical seller-finance adver- In all of my years of note acquisi-to establish their own interest tisement focuses on the least tion, I can usually attribute therates, down payments, monthly qualified candidate.” note’s value to these factors. If thepayments, and terms of their note has a negative in, say, the “You almost never find good-creditloans. This flexibility allowed sell- seasoning, yet the other factors buyers with a bad-credit ad.”ers to offer affordable rates and are positive, it has the potential forbuyers to make their payments. “The buyer’s down payment alone a good price.When institutional lenders dropped can cover your cost of the propertytheir interest rates to more toler- But of all of the factors that deter- and provide immediate profit.”able levels, expensive properties mine the amount of discount, the “The buyer’s credit is the numberbegan selling through conventional buyer’s credit counts the most. In one factor that determines the dis-financing. fact, bad credit can be a deal count.” breaker.Rampant foreclosures at all levels “It’s not the response rate but theof the price spectrum are now Let’s say you have two identical conversion rate that matters.”placing even luxury homes on the scenarios, except one buyer has amarket at bargain prices. With the credit score of 750 and the other’s Learn more from Eddie Speed,shortage of conventional mort- is less than 550. That alone can Founder of Note School®, at hisgages, especially jumbo loans, affect the amount of the discount all Day Training in Kansas City onseller financing is making a come- by 25% or more. And that as- Saturday March 17th.back on these high-end properties. sumes there’s an offer to purchase Details & Registration onThis offers tremendous profit po- the low-credit note in the firsttential for the real estate profes- place. Page 27 or online atsional. The just-missed buyers This is yet another reason why you http://www.MAREInet.com/noteswho have the wherewithal to pay should avoid ads that cater to this Investment News Page 19
  22. 22. CALENDAR events , Locations, Cost & Registration at www.MAREInet.com/CalendarSaturday, March 3rd  7:15pm Presentation 9:00am: Tax Free Wealth—All Day Semi- Wednesday, March 14 nar with Equity Trust, Airport Marriot.  9:00am Sub-Group: Weekly Wednesdays 4:00pm SubGroup: Blue Springs / Independ- Saturday, March 17 ence Real Estate  8:30am All Day Alternative FinancingSunday, March 4th Workshop, Career Education Systems 9:00am: Sub-Group: Lees Summit Real Es-  4:00pm SubGroup: Blue Springs / Inde- tate Investors pendence Real EstateWednesday, March 7th Sunday, March 18 9:00am Sub-Group: Weekly Wednesdays  9:00am Sub-Group: Lees Summit Real Es-Saturday, March 10 tate Investors 4:00pm SubGroup: Blue Springs / Inde- Wednesday, March 21 pendence Real Estate Investors  9:00am Sub-Group: Weekly WednesdaysSunday, March 11 Saturday, March 24 9:00am Sub-Group: Lees Summit Real Es-  4:00pm SubGroup: Blue Springs / Inde- tate Investors pendence Real Estate InvestorsMonday, March 12 Sunday, March 25 5:00pm Deadline to Reserve Vendor Table  9:00am Sub-Group: Lees Summit Real for Tuesday’s Meeting Estate InvestorsTuesday, March 13 Wednesday, March 28Monthly Meeting Career Education Systems,  9:00am Sub-Group: Weekly WednesdaysWard Pkwy Shopping Center Saturday, March 31 5:30pm Pre-Meeting—How to post properties on the MAREI Website  4:00pm SubGroup: Blue Springs / Inde- pendence Real Estate Investors 6:00pm Monthly Vendor Hall / Networking Sunday, April 1 6:30pm New Member Orientation  9:00am Sub-Group: Lees Summit Real 7:00pm Speed Networking Estate InvestorsPage 22 MAREInet.com
  23. 23. Sell Vacant Houses Faster “Flexible rehab options and for more money! and purchase financing How? We transform vacant houses - often for qualified investors! seen by buyers as stale, lifeless, unappealing - Ann Wilkinson into fully-furnished, inviting, valued Show- Vice President homes. Now in our third decade of service to Mortgage Loan Production Homeowners and their Realtors, weve become 12501 Antioch Rd Americas premier home staging service coast- Overland Park, KS 66213 to-coast. Ph: (913) 402-1500 Fax: (913) 402-0673 Our professional home staging services can add AnnW@ArgentineFed.com thousands of dollars to your sale price -- and at the same time reduce the stress and expense of mar- www.ArgentineFed.com keting your property. ShowHomesKC.com Amanda Palomba 913-227-4364 Wireless Security Systems Keypad, 3 doors, 1 motion, 1 primary & 1 door siren One time Charge of $99 plus tax Includes installation Requires 36 month contract. Monthly Monitoring Fee $39.99 Management Solutions Sell house transfer to new owner to help your properties or move to new house Operate Smoothly DevconSecurity.com Increase Desirability Marian Collins: 913-907-4942 Enhance Investment Value Attract & Retain Tenants Find us Online www.AbraxasMgmt.com 816-474-8800Investment News Page 21
  24. 24. PROPERTIES Eagle Bay Missouri $99,000 Package: house, cot- Danny Hammond tage, bus, boat www.EagleBayLO.com 10812 Newton $43,000 4 bdrm Turn Key South KC 4 Christoph Becker bdrm Sect 8, Net ROI Kansas City, Mo 816-419-1165 23% 3212 Victor St $49,500 4 bdrm Amazing Turn Key Christoph Becker Completely Rehabbed Kansas City, MO 2.5 ba 816-419-1165 Net ROI 24% 2912 Lockridge $30,000 6 plex Historic District Candace Vanice Kansas City, MO May be eligible for Historic Tax Credits 3435 Holmes $50,000 Candace Vanice Kansas City, MO 3312 Holmes $50,000 Candace Vanice Kansas City, MO 3414 Charlotte $50,000 $15K in TIF Funds Candace Vanice Kansas City, MO 1010 E 33rd St $50,000 $15K in TIF Funds Candace Vanice Kansas City, MO 703 E 34th St $75,000 Renovated Candace Vanice 1019 S Brookside $54,900 3 bdrm $2,000 buyer agent Kevin Jamieson Avenue (1/2) bonus, Updated 1 ba Reece & Nichols Independence, MO 913-384-8331Page 24 MAREInet.com
  25. 25. No address provided $9,000 3 bdrm Easy Rehab, Dis- Virtue Investments counted. Could be a 1 ba Makeba Hart great rental North Jackson Av $49,999 3 bdrm Turn Key Beauty Virtue Investments Kansas City, MO 2 ba Makeba Hart 5173 Palmer $12,500 3 bdrm Fixer Upper Bilal Hazziez Kansas City, Mo 1 ba Raytown Schools 816-237-8696 Video 7508 High Grove Rd, $57,500 mls Large Ranch Joe Clark Grandview, MO 2 car gar, bsmt Reece & Nichols 8300 E 104th Tr $38,700 mls Large bdrms, eat in Jamieson Home Team— kitchen, minor TLC Reece & Nichols. 913- Kansas City, MO 384-8331 12### E Blue Ridge $55,000 3 bdrm Great Cash Flow Virtue Investments Blvd 1ba Makeba Hart Kansas City, MO 3509 E 30th St $14,000 3 bdrm Move in Ready 3 Bedroom BluePrintPropertySolu- tions.com Christoph Kansas City, Mo 1 ba Becker 816-419-1165 5637 Highland $24,500 4 bdrm Move In Ready! 25% ROI! BluePrintPropertySolu- This home is 99% Move In tions.com Christoph Kansas City, Mo 1.5 ba Ready and will be cash- flowing in no time at all. Becker 816-419-1165 5038 Bellefontaine $9,500 2 bdrm Fixer Upper should rent BluePrintPropertySolu- $600, Repairs: tlc, plumb- tions.com Christoph Kansas City, MO 1 ba ing, furnace Becker 816-419-1165 3703 E 68th St $7,500 2 bdrm With a little TLC, this home BluePrintPropertySolu- would make a great cash tions.com Christoph Kansas City, Mo 1 ba flowing investment prop- erty Becker 816-419-1165 See More Properties MAREInet.com/PropertiesInvestment News Page 23
  26. 26. Using the Website Some Tips Property Pages: MAREI members people to look. can log in and post their investment  Photos, be sure to load up at least properties to the site. For the search 1 photo of the front and make that features to work, the more items you photo your featured images. For share about the property the better. multiple photos, it is suggested to We do request that these be your prop- embed an online photo album or erties that you own, have a controlling video. interest through a contract, or a listing  Contact Information: be sure your agreement as a Realtor. member profile is up to date and Best Practices that you make sure to include your website link, company name, your  One property per posting. name and a phone number. People  Packages - list each property indi- can’t contact you about your prop- vidually and note in the text that erty if you don’t tell them how. property is available as a package  Take a look at the properties on the and the address of the other prop- previous pages. Note that proper- erty. ties with very little info did not in-  Details - fill out as much property clude on their listing. information as possible in the fill in the boxes section including complete address, bedroom, bathroom and To find out more about how to use price. these portions of the website, please visit:  Tag Line - this appears on sum- mary pages, so be sure to have your www.MAREInet.com/Help-Page key points about the house here. We will be meeting at the March meet- We would suggest that your title be ing at 5:30 to show you how to post a the address and that your tag line property. be your catch phrase info to getPage 26 MAREInet.com

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