Have you ever thought about getting into real estate investing?
I know everyone has seen those late night infomercials about how you can buy property for “no money down, etc.” While attending a larger real estate seminars it’s it’s hard not to get excited. You have all of these self-proclaimed “guru’s” running around making all sorts of “money” while most Americans are struggling to pay the bills. I’m not one that is interested in doing what other people do. In fact, I generally try to avoid the herd mentality all together. However, similar to when you are bidding on an item on Ebay and you are excited about getting a “deal”, a real estate investing seminar can draw many people to purchase a real estate guru’s CD and tapes. Usually towards the end of the real estate guru’s allowed time, he or she will announce some special offer to the first X number of people. This isn’t what gets me and many others. It’s the fact that when he or she announces this “special” deal, people are literally RUNNING to the table to drop $1000 or more. Looking back on it, it sounds absolutely crazy that a person could get caught up in this, but the real estate guru’s are very good at what they do, selling.
Why do you need a real estate investing mentor?
There are two ways to learn, you can either go out and make the mistakes yourself, or you can learn from someone else’s successes and failures.
“There are no secrets to success. It is the result of preparation, hard work, and learning from failure.” – Colin Powell
Perhaps I am not as patient as others, but I would much rather lean on another person’s knowledge when tackling a new field. This will enable you to get a jump start on the learning curve. This could potentially shave YEARS off your goals not to mention potentially avoiding many of the expensive pitfalls involved in real estate investing. Still not convinced you need a mentor for real estate investing? At the very least, be in close contact with a good Realtor and a good real estate attorney to make sure you are not breaking any laws.
Here are some common sense “rules” I personally use when going to a real estate seminar or meeting so I don’t buy something I shouldn’t buy?
1. If it sounds too good to be true, it usually is the case.
2. If they talk about how much money they have and the cars they own, definitely walk away.
3. If people talk about how easy it is, run. In my opinion, real estate is not complex, it’s a numbers game like many things in life, but it’s not easy. It takes hard work.
4. Whenever someone is trying to sell me something, I ask myself these questions:
a. How are they making money? What’s in it for them?
b. Ask them, “if I knew what you knew, would I buy your product?”
c. Ask them, “if I buy your product, knowing what you know, am I soon going to regret this purchase?”
5. A friend of mine is susceptible to the selling techniques used by many of the real estate guru’s so he simply leaves his check book and credit cards at home. The funny part about him is that he’s been a full time real estate investor for over 30 years. He knows the in’s and out’s of real estate and has been retired from his job for over three decades, yet he is still tempted to buy.
6. If the real estate guru paints a picture of all sunshine and no pitfalls, run. There are a ton of ways to make money, but I’ve never seen a way to make money that doesn’t involve risk. Speaking of risk, Stock market, anyone?
7. If you are serious about real estate investing, don’t invest money in a national guru that lives 1500 miles away. Invest in someone that lives in your town. Only they will know the intricacies of your market. For instance, my wife and I signed up with a local real estate investing guru from Dallas. Dallas is 40 miles away from Fort Worth (where we live). This guru has heard of the different areas of the Fort Worth area, but wasn’t familiar enough with the area to know that the City of Fort Worth is investing a lot of money in an area known as the Fairmont Historical District. The guru also didn’t know of Fort Worth’s plans to build an “Uptown” area making North Fort Worth a nice long term real estate investment.
8. Ask for a list of people and their phone numbers that the real estate investing guru has helped so you can check their references. If they are indeed as good as they say they are, then they shouldn’t have a problem giving you references of people they have helped succeed. A local real estate investing club, we recently joined, has pictures of their members on the wall with the numbers from their first deal.
9. Get everything in writing! We had a local real estate investing guru who we decided to be mentored by. Everything went really well from the beginning. We checked his references and everyone had nothing but high regards for the individual. However, part of the agreement was that we would partner with the guru on a few deals. We spent many evenings learning from the guru. We were pumped and happy we found him! However, when it came time to actually start doing the deals, the guru changed his mind and decided that he was too busy to work with us on deals.
10. Make sure they have an office. This rule isn’t necessarily a deal breaker for me, but I think it’s something you should be cognizant about. In my opinion, it would be optimal if the real estate investing guru you hire has an office somewhere. It’s always nice to track people if they decide they aren’t going to return your phone call.
11. Instead of straight compensation, structure the mentor being paid based on your performance. Unfortunately, there are a lot of factors that go into whether a person becomes a successful real estate investor. For some people, they are “fence sitters” and will never pull the trigger. I’m not going to pretend to have the answer, but it would be nice if the real estate investing guru was paid based on the performance of the student. For instance, it would be nice if a student agreed to buy their investment houses through the guru or some similar arrangement in exchange for being mentored. The only problem for the guru is that a large percentage of people, while interested in real estate investing, will never do a deal. This certainly puts the real estate investing guru with a big heart in a predicament, but it won’t take very many of those students who never do a deal to not mentor anyone else unless they are paying a large sum of money.
Lastly, if you are doing to invest money in a real estate investing guru, please take the time to read John T Reed’s reviews of the various gurus. He has become pretty famous in the real estate investing community through his reviews of gurus, the books he has written, and the newsletter he publishes.
Have you ever invested money in a real estate investing guru? What were your experiences? Have you done any real estate deals?
Photo by: Woodley Wonder Works
Guru’s – A great take on real estate guru’s by Mr. Cheap over at Four Pillars.
http://www.creonline.com/ – This website has an extensive list of articles and a really active forum for questions.
http://www.biggerpockets.com/ – A really large community of real estate investors. I’ve found the forums to be really useful.
What is a judgement? Wikipedia defines a judgement as:
If a judgement is made, it entitles one entity (a person or business) the right to collect the amount of the judgement from the other entity involved. The only problem is that the court doesn’t help you find the debtor or the debtor’s assets. This is a huge need, but there are few services available that perform this task. Al Schweitzer, from my understanding, is the “father” finding debtors and a debtor’s assets. I recently went to a meeting where he was speaking. I go to a lot of real estate meetings and entrepreneur meetings in general and I was surprised I hadn’t heard of this before. Here are a few facts that he gave out (note I have not been able to verify whether these are true or not).
1. 80% of judgements go uncollected
2. Courts award judgements in the US every 1.5 seconds.
3. Judgements can last 3-10 years
As a wanna be entrepreneur, I’m always looking for other potential ways of making money. Al went on to state that:
If you are owed money from a judgement, you can legally take all of the money from his/her account, garnish wages, place a lien and all without being a bill collector or attorney.
I thought this was absolutely fascinating. I must admit that part of the appeal is that because it almost sounds borderline “dangerous”. I will certainly follow up with an attorney and follow up with a future blog post.
Here were some of the websites given that allow you to find people who in many cases, don’t want to be found.
So, all of this sounds cool. How do people make money?
1. Find the debtor
2. Send letters and call if you do not hear from them after a week or two.
3. Ask them if they would be interested in settling their debts if you could cut their debt in half. Do they have the cash to settle the debt now?
4. Call the creditor.
5. Ask them if they would consider selling the judgement for $.20 – $.30 on the dollar.
6. Purchase the judgement.
7. Settle the judgment with the debtor and pocket between 20 to 30% of the value of the judgement.
All of this sounds relatively easy, but it usually is when people are trying to sell you something as Al was at the meeting.
There are some other uses with this knowledge:
1. If people have judgements against them, do you think they might be potentially facing foreclosure soon? This could be a way to find pre-foreclosures for real estate investors months before other people start mailing to them.
2. You could use these techniques of finding information on people to screen potential tenants.
3. Do a thorough background check on potential business partners.
4. Locate abandoned property owners.
5. Use judgements to reduce the price of the property you are trying to purchase.
In my opinion there is certainly a lot of value that Al has to offer. I’m pretty frugal so I was not willing to fork over the $500 for the tapes and CD’s or the like. It’s $279 and $767 respectively for his kit through his website, Courtcash.com. I do have a friend that purchased the kit, but he reported that it’s been on his bookshelf, untouched.
photo by Dbking
Other Posts that may interest you:
photo by carolynn.will
This is a guest post by Greg Wilson. Greg rehabs about 40 houses a year and does this full time. As Greg would say, “I am the real deal”. If you have questions about rehabbing or “flipping”, he is a good resource. If you have questions about anything real estate related, he is also a good resource since he lives and breathes real estate investing. You can learn more about Greg by visiting his blog: http://blog.successfulrehabbing.com/
- Schedule your closing 7-10 days before heavy-trash pick up.
- Walk the house.
- Talk to the neighbors.
- Have your contractor walk the house.
- Have the house inspected.
- Perform pre-foundation repair plumbing tests.
- Fix leaks.
- Schedule the utilities to be turned on.
- Remove non-realty items.
- Order insurance.
- Change the locks.
- Install a key box.
- Clean-up landscaping.
- Repair the foundation.
- Perform plumbing tests.
- Fix leaks.
- Replace windows.
- Repair woodwork, siding, or masonry as needed.
- Paint the exterior.
- Repair the roof.
- Order your dumpster.
- Line up demo workers.
- Have the dumpster delivered.
- Install a “For Sale By Owner” sign.
- Send out your local area marketing.
- Use a Realtor.
- Build out framing.
- Install plumbing.
- Install electrical.
- Repair HVAC.
- Install sheet rock.
- Tape & Bed.
- Apply texture.
- Plumbing finish out.
- Electrical finish out.
- Paint interior.
- Switches & outlets.
- Change fixtures.
- Upgrade appliances.
- Install flooring.
- Perform non-MLS marketing.
- “Outside eyes” review.
- Complete punch list #1.
- Install carpet.
- Complete punch list #2.
- List as “Active” with Realtor.
- Clean the house.
- Hold Open House.
Other Articles of Interest
This guest post is by Renee Kolar. She is a Realtor from Tarrant county. If you are looking for investment property in Fort Worth, she’s your Realtor! Her website is http://reneekolar.com or she can be reached at 817-237-9755 or via e-mail at reneekolar [at] sbcglobal.net
photo by A.M. Kuchling
Do you want to find a good realtor? Here are 13 questions to ask.
1. How long have you been a realtor?
2. How many companies have you worked for since you have been licensed?
3. How many properties did you sell last year?
4. What is your Realtor Specialty? I.E. residential, foreclosures, luxury homes, investments
5. Have you worked with investors in the past?
6. What types of investors are you currently working with?
7. What area of town do you specialize in?
8. Do you have any references? (a list of satisfied customers I could call)
9. Are you full time or part time? How many hours a week do you work? What days and/or nights are you available?
10. Will you put in the time to help me find just the right property?
11. Do you have connections with local vendors? (mortgage company, portfolio lender, bank, title, plumber, electrician, foundation company, etc)
12. Do you have your own real estate investments?
13. Do you have the flexibililty to negotiate with your broker?
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Am I going to target houses or people?
With houses, you are looking for ugly houses. With people, you are looking for ugly situations. In a sense, I’m going to target both: people because people sell the houses (duh), but I’m also targeting houses that are within my “farm area”. Although I feel targeting people is a better “bang for the buck”, marketing to a house is the only other way to target a farm area besides marketing to non-owner occupants (which I am also doing, but I’ll get to that later). There is a need for goals, a plan to achieve the desired results, and focus. If I am looking for vacant houses all over town, it’s difficult to not get overwhelmed and thus, being focused is a must. If I put a comprehensive plan together and STICK TO IT, I’ll stayed focus and I WILL achieve my goal.
photo by Torres21
What people and houses am I targeting?
I am targeting people that may need to sell a house. Again, duh. There are many groups of people that might need to sell a house: those going into foreclosure, people transferring jobs, getting a divorce, people who have inherited a property, and landlords who may not want to be landlords any longer. From these groups, I have decided to target people who have inherited property. Reason being that there is motivation to get rid
of the property in exchange for cash from the inherited “estate”. Most heirs already have a place to live and do not want to deal with the responsibilities of an extra house. A lot of the inherited property, which we’ll call probate property, is often loaded with equity which means more potential profit for the real estate investor. Because heirs typically have little to no money involved with the house, any money they receive is basically “free”. And because another of the aforementioned groups sometimes falls into the probate
category, by default I am also targeting non-owner occupants – or as I like to call them, landlords who wish they weren’t.
What is my farm area?
My main farm area is the South Hills neighborhood in Fort Worth. There are many reasons I am targeting this area. For one, it’s central and easy to get to and from. I personally like this aspect of the neighborhood, but it is also desireable for prospective buyers and tenants. South Hills sits on the outskirts of the TCU (Texas Christian University) area, which is one of the most desireable in Fort Worth. The homes are older and a lot of them need repair. It is also safe and well established. You can drive through the neighborhoods and most of the lawns are well-kept. This is also not a neighborhood that most of the investors I know target. The downsides are that there are not a lot of people selling in that area. A lot of people enjoy this neighborhood, live there a long time and rarely decide to move so it’s difficult to find houses for sale. That’s where I hope my direct marketing will come into play. In essence I will plant seeds that will hopefully flower into phone calls and real estate deals.
So, how am I marketing to them?
I will use direct marketing in the form of postcards, letters and door-hangers in six week cycles. For probate property, I plan to send postcards the first and second weeks. I will then send letters on the fourth and sixth weeks. For the non-owner occupant houses, I will market to them once a month. I’ve picked a few areas and will keep my number of non-owner occupant houses to around 700 to keep my advertising costs in check.