Toto, we are not in Kansas anymore.
Many years ago I watched the Wizard of Oz for the first time. However, I watched the movie on a black and white television. The problem with this was when Dorothy’s house landed on the Wicked Witch of the East and she steps out, nothing looked different to me. Still black and white. Yellow brick road . . . what yellow brick road?? Horse of a different color, so what, it was gray and then it was white. To me, the horse apparently was just aging.
Not many children would experience this now a day. However, my point to my story above was maybe it was good thing having it in black and white. No rose colored glasses for me, nuh uh! Well, I visited with some of my Texas Real Estate Lenders and wanted to discuss with them some of the issues they may be coming across with their fix and flips. Well, I found out some interesting news and have found that their main problem was learning how to price the property correctly.
So, let’s talk about an investor, let’s call her, umm, Toto, NO! Dorothy. Well, she gets this property, spends a few weeks, maybe a month and fixes it up. Chooses the tile, the paint colors, the carpet and the house is beautiful. In fact, to her, the house is the MOST beautiful one on the block. Well, Dorothy, take off your Rose Colored Glasses. I am sure it is a lovely home, but more than anything you have invested blood, sweat and tears into the home, so it is like your baby right now. You need to take a step back and reassess things.
It is time to sell the property and I am sure when you first purchased the property you had a value in mind. However, a lot of mistakes that investors will make is they never reassess the value of the property after the repairs are finished. OR they reassess it themselves. Don’t do this. Get another opinion. In fact, get two or three so you will get an unbiased value on your property. The value could change, it could get better or it could get worse. Perhaps you did more repairs on the property or the market is on the rise. You will not know this information unless you get an objective opinion. Also, note that the value of the property is not just based on the City and State, but also on the “micro area” or the area within an area.
Another thing to keep in mind is to make price reductions. Some Texas Hard Money Lenders are making the mistake of using set price reductions because that is what they have always been told is the norm. Well, this is just not the right approach for the market place. What you will want to do is every two weeks to a month, reassess the value, look at the actives, look at the solds, and look at under contracts. These will all help you determine the correct amount to make a price reduction.
I spoke with a Texas Hard Money Investor that was doing a loan with DoHardMoney.com and we discussed their property and price reductions. Their first plan was to make the “normal” $5,000 reduction every month until they got the house sold. But I explained to them by doing that they would be just chasing the market and would never get anywhere with it. They worked my method and we came to a determination that the correct amount (which fair warning here may sound astonishing) would be to do a drastic reduction of $15,000. Upon doing this they immediately began getting a flood of showings and I am certain should be receiving MULTIPLE offers soon. So, now, they will not only get their house sold sooner and gain their profit, but with the multiple offers, they will gain a good portion of that reduction back. One other thing that I mentioned to them for the next fix and flip was to make sure that they look for properties in the right demographic price range where you are going to have to most probabilities of selling.
I hope these tips helped, and just so you know, when I finally got the colored television, WOW, a lot of stuff sure clicked in place for me on that movie. Finally I understood why they called it the “Emerald City”!
The Seven Habits of Highly Effective Real Estate Investors
No. I am not Stephen R. Covey. But it’s a catchy title, isn’t it? Honestly, I haven’t read his book, but his steps, seem pretty common sense to me. Be Proactive – well yeah, if you are going to just sit there, then don’t expect a lot to happen. Begin with the End in Mind – That makes a lot of sense to, it is like those people that just set out to drive, may have been pretty, but really in the end just a waste of gas and kind of expensive. Next was Put First Things First, well if you put first things last, that would be rather silly, don’t you think? Nah, just kidding. Put First things First, what this means to me, is you need to decide what is most important and get that done first, the others will fall in place after that. Anyhow, he goes on to state several more habits that help you go from dependence to interdependence and then self-rejuvenation.
Well, I have decided to come up with my OWN seven habits, that I think if followed can help you find a profitable property (therefore making you highly effective as a real estate investor). So, here they are:
1. Know what you are looking for and know what to stay away from. This may sound obvious, but how many times have you seen a house that just looks fantastic only to have done the homework and find out that you just wouldn’t have been able to sell it?
2. Have a lot of opportunities. Look at foreclosures, auctions, FSBOs, bank sales, etc. These will open up a wealth of opportunites for you.
3. Make lots of offers. If you don’t make the offers on the properties you find interesting, you may never get ANY. So, make a lot.
4. Stay engaged and follow-up. Don’t expect them to follow up with you. They won’t. Do your homework, stay in contact with all involved with the property.
5. Work with agents, teaching them what you are looking for. If they don’t know what you want they you will be wasting their time and they will be wasting yours.
6. Understand repair estimates. Know what your repairs will cost you when you go into the fix and flip. Then you will know how much profit you will gain in the end.
7. Understand how to evaluate the value of the property, what a property is worth. This will give the power to make educated decisions when it is time to put the property on the market as well as when you need to make price reductions.
That’s it! Seven EASY steps. If you can follow these, you can gain a great profit with your fix and flips and you may have time to read Covey’s book if you so desire. BUT, I would recommend looking for ANOTHER property to fix and flip. Get more money.
Well, I have decided to come up with my OWN seven habits, that I think if followed can help you find a profitable property (therefore making you highly effective as a real estate investor). So, here they are:
1. Know what you are looking for and know what to stay away from. This may sound obvious, but how many times have you seen a house that just looks fantastic only to have done the homework and find out that you just wouldn’t have been able to sell it?
2. Have a lot of opportunities. Look at foreclosures, auctions, FSBOs, bank sales, etc. These will open up a wealth of opportunites for you.
3. Make lots of offers. If you don’t make the offers on the properties you find interesting, you may never get ANY. So, make a lot.
4. Stay engaged and follow-up. Don’t expect them to follow up with you. They won’t. Do your homework, stay in contact with all involved with the property.
5. Work with agents, teaching them what you are looking for. If they don’t know what you want they you will be wasting their time and they will be wasting yours.
6. Understand repair estimates. Know what your repairs will cost you when you go into the fix and flip. Then you will know how much profit you will gain in the end.
7. Understand how to evaluate the value of the property, what a property is worth. This will give the power to make educated decisions when it is time to put the property on the market as well as when you need to make price reductions.
That’s it! Seven EASY steps. If you can follow these, you can gain a great profit with your fix and flips and you may have time to read Covey’s book if you so desire. BUT, I would recommend looking for ANOTHER property to fix and flip. Get more money.
In the Final Lap, but OH NO! No GAS!
Yep, NASCAR! Imagine that, you are in the final lap, you are ahead of everyone else, but you didn’t fill up so you ran out of gas. I know, that sounds absurd! That would NEVER happen. But what if it did? Wouldn’t that driver look like the biggest fool alive? He gets this far and didn’t prepare for the simplest thing when he knew (obviously) this was going to be a rush (it’s a race!).
So, I know, odd analogy. But, my point is, if you are an investor, and you go to all this trouble to find a great property, get it under contract and then you wait. It comes to three days before it is required for you to have the funds to close and THEN you decide, I should probably find a Hard Money Lender. Doesn’t that sound a lot like the scenario above, don’t you think you may run out of gas? I want to talk to you today about quick money loans and the fastest way to obtain them.
If you are looking for quick money loans when it comes to real estate you are definitely going to look for a hard money loan. Now let’s talk about how quick a hard money loan can actually get accomplished. It is important to realize all the events that have to occur. One of things that I see quite commonly, that gets in the way of getting a quick money loan or a hard money loan, is the borrower. The borrower is typically the one that delays the process and what a borrower typically does to delay a hard money loan number one is waiting too long to make an application.
So first thing you want to do is give plenty of time to your hard money lender, your quick money lender, to actually get the deal done. Give them as much notice as you have. If you know loan is going to go under contract then get it over to them right away so they can start working on it.
Second thing is the borrowers don’t do the full application. They do bits and pieces of the application. They miss wire and try turning in something that is only partial. A partial application is getting in the way of the process and when you are in hurry on your real estate you can’t delay the process. You need to do it as fast as requested through the entire application.
The third way we see borrowers delay the process in doing a hard money loan is that they don’t provide the necessary documents in a timely manner. You see most lenders are going to need a copy of the real estate purchase project. Most lenders are going to need a title report or closing protection letter. Most lenders are going to need a couple of things and if you can gather those things up and get those to the lender within a day or two at the most it is going to speed up the process.
Now let’s talk about a quick money loan from a lender’s perspective. The first thing the lender is going to need to do is get the application and review the entire application. After that they are going to order the evaluations on the property, get somebody to determine a value. Once that value is determined then it needs to be looked over to see where that value lies and final loan amount needs to be established. When final loan amount has been established then conditions need to be met. Conditions are meaning real estate purchase contract, title work or that type of stuff. Once all that is received then it all needs to be looked over or underwritten and once that happens; docs ordered need to go in and once the docs ordered then the docs are able to get drawn up. When the docs are drawn up then it goes over to the title company.
So as you see the biggest delay in this process actually has to do with elements that are out of lender’s control. Lots of time lender has no control over the title company and lots of times they have no control over the evaluators because most reputable hard money lenders are actually going to use an independent third party evaluator someone that can actually look at the property that is not going to be biased and that is going to take some time. Some times it can take 3-4 days if you are in a rush. If you are delaying on giving the documents it is going to slow the process as well. So when we talk about getting quick money loans and quick hard money it is really important to remember to give the documents, make the full application and know what the time frame is going to be.
Good luck, make the final lap and win the race.
For the Real Estate Investor Dream Team Roster we have . . .
Well, it isn’t Magic Johnson, Michael Jordan, Karl Malone, John Stockton, Scottie Pippen, but hey, if they read the blog, I suppose it could be. But really what we are talking about it getting together YOUR Dream Team to meet your goal to be a successful Real Estate Investor. Let’s talk about goals. There is a great quote that says “in the absence of clearly defined goals one becomes involved with activity that is eventually consumed at”. Outside of investing, I find myself doing this simply when I am cleaning. I will be working on one project cleaning the kitchen for example, and then next thing I know, I have completely torn it apart because I haven’t focused on the one task at hand which was the mop the floor and instead I have taken the baseboard down and started re-sanding it, because I saw a knick in it and when that happened while I was in the garage I noticed, man, that floor sure should be swept up. THAT’S where that box of screws went! Oh, hey, if I build some shelves, I can store all of that. Oh, I should go to the hardware store to get some more wood. Honey! They had a great deal at the hardware store for light fixtures. Get my point? That is what happens to so many rehab investors. So many rehab investors are so consumed with activity they never reach goal of actually flipping a property for a profit.
So if a rehabber develops a dream team that is going to help them to reach their goal they will be HIGHLY successful Real Estate Investors. Let me explain further. I think if you are a rehab lender, you are getting started, or even if you are a seasoned veteran; one of the most important things you can do is set a goal. How many properties are you going to rehab for a profit between now and the end of year? What about in the next six months?
The other thing you want to look at is what you want your average profit to be per property. Of course you wanted to be as high as possible, but what’s realistic and what can you really do? Next you want to investigate how quickly you can get a property rehabbed from beginning to end. What is the fastest time frame, what is the goal that you can set for those time frames, and that is the goal you need to have on every single project as well.
Now, going back to our subject of the Dream Team and establishing relationships with hard money lenders. It is important that you find a lender that is going to help you to be successful. One way to assist with this is to find somebody who is going to let you go a few months without making monthly payments. You have got other things to worry about. You all ready have so many objectives to accomplish.
Going a few months without making monthly payments is something that is going to have massive benefits to you as the borrower when it comes to finding a hard money lender. Also on your Dream Team you want someone who can fix up the property, you know, a handy man or repair man. You also are going to want to find someone to be able to market your property so find your real estate agent now. On your Dream Team find somebody that can assist with potentially getting a loan for a new borrower if they haven’t found being qualified through a lender. Get a relationship with good mortgage broker.
“You can’t cover the sun with your finger,” is what the Cuban Coach said about the United States Olympic Dream Team, that is how every other investor will feel when they come up against you and your Dream Team by your side. Developing a dream team and having clearly defined goals will help you become successful as a Real Estate Investor.
So if a rehabber develops a dream team that is going to help them to reach their goal they will be HIGHLY successful Real Estate Investors. Let me explain further. I think if you are a rehab lender, you are getting started, or even if you are a seasoned veteran; one of the most important things you can do is set a goal. How many properties are you going to rehab for a profit between now and the end of year? What about in the next six months?
The other thing you want to look at is what you want your average profit to be per property. Of course you wanted to be as high as possible, but what’s realistic and what can you really do? Next you want to investigate how quickly you can get a property rehabbed from beginning to end. What is the fastest time frame, what is the goal that you can set for those time frames, and that is the goal you need to have on every single project as well.
Now, going back to our subject of the Dream Team and establishing relationships with hard money lenders. It is important that you find a lender that is going to help you to be successful. One way to assist with this is to find somebody who is going to let you go a few months without making monthly payments. You have got other things to worry about. You all ready have so many objectives to accomplish.
Going a few months without making monthly payments is something that is going to have massive benefits to you as the borrower when it comes to finding a hard money lender. Also on your Dream Team you want someone who can fix up the property, you know, a handy man or repair man. You also are going to want to find someone to be able to market your property so find your real estate agent now. On your Dream Team find somebody that can assist with potentially getting a loan for a new borrower if they haven’t found being qualified through a lender. Get a relationship with good mortgage broker.
“You can’t cover the sun with your finger,” is what the Cuban Coach said about the United States Olympic Dream Team, that is how every other investor will feel when they come up against you and your Dream Team by your side. Developing a dream team and having clearly defined goals will help you become successful as a Real Estate Investor.
Bang for your Buck, but Don’t Shoot Your Eye Out!
I love the movie, A Christmas Story. Many people do. But I think the main reason that I loved it so much was how excited Ralphie was to speak with Santa Claus to ask for his Red Rider BB Gun and then he froze up at the last minute. Every photo I have seen of myself when I was young, whether on Santa Clause, the Easter Bunny, etc., I was crying or had a look of sheer terror on my face.
So, getting back to Ralphie; he asks EVERYONE for this Red Rider BB Gun and their answer is always the same, “You’ll shoot your eye out!” Well, the thing is, (spoiler here, if you have never seen the movie) he gets his gun and it ends up cracking him in the eye, and he nearly shoots his eye out. But, what if his parents or anyone had told him, Ralphie, maybe we should work on something that is a little bit more age appropriate for you. Now, I know you are all thinking one of two things: 1. What fun is that? Or 2. Do you even have any kids? Who would say that to a kid?
But, the point is when we work on something that is maybe a bit too big for our so called “britches” (pants); then you may get your eye shot out. Or when the time is right you freeze up and don’t ask for the right thing (like price reductions). Let me explain.
So, I visited with Utah Hard Money Lenders and have been seeing a 50% decline in sales month by month due to fewer buyers. There are less people going into the marketplace looking for properties and other hard money lenders think this may be due to the buyer’s tax credit. They feel that the buyer’s tax credit actually pulled the future buyers into the marketplace too early and that is why available buyers are going down in numbers.
I would like to think that no matter what, if your home is the nicest home and the least expensive it will sell. I do not care what the interest rates go to. I do not care what is happening in the economy; in the market place it does not matter. If you have the nicest house for least amount of money your property will sell, no questions asked, always, no matter what.
I also think it is important to realize the availability of buyers. If you are under $250,000 price range I would estimate that 80% of the buyers are there. If you are over $250,000 between $250K and let say $500,000 about 10% of the buyers are there. And from $500K to a million about 5% of the buyers are there and million up give another 5%. I am estimating here. It is just based upon my knowledge and reasoning with Utah hard money lenders.
Getting an idea for what is the availability of buyers is important because the higher you go in your purchase or your sale price, the fewer buyers available that could purchase that price range. (Reference above about getting a bit too big for your britches)
So, if you want the biggest bang for your buck, and you want best odds of selling your fix and flip, then you will want to keep the price under $250,000. Because odds are you will be able to sell the property under $250,000 as the most amount of buyers are in that price range.
The next thing is pricing a property accurately. If you are doing regular price reductions, which a lot of people are when they are trying to sell a property, you have to be careful that you are looking at the comparable. You are looking at the actives, the solds and to look at properties that are under contract. Properties that are under contract can tell you something about the value. You do not want to hang you hat on that. But you want to be looking at those things in determining the price of the property. So I hope this is helpful advice in visiting with some Utah Hard Money Lenders and knowing what is happening in the marketplace, how to price the property and what to look at so you don’t shoot your eye out.
So, getting back to Ralphie; he asks EVERYONE for this Red Rider BB Gun and their answer is always the same, “You’ll shoot your eye out!” Well, the thing is, (spoiler here, if you have never seen the movie) he gets his gun and it ends up cracking him in the eye, and he nearly shoots his eye out. But, what if his parents or anyone had told him, Ralphie, maybe we should work on something that is a little bit more age appropriate for you. Now, I know you are all thinking one of two things: 1. What fun is that? Or 2. Do you even have any kids? Who would say that to a kid?
But, the point is when we work on something that is maybe a bit too big for our so called “britches” (pants); then you may get your eye shot out. Or when the time is right you freeze up and don’t ask for the right thing (like price reductions). Let me explain.
So, I visited with Utah Hard Money Lenders and have been seeing a 50% decline in sales month by month due to fewer buyers. There are less people going into the marketplace looking for properties and other hard money lenders think this may be due to the buyer’s tax credit. They feel that the buyer’s tax credit actually pulled the future buyers into the marketplace too early and that is why available buyers are going down in numbers.
I would like to think that no matter what, if your home is the nicest home and the least expensive it will sell. I do not care what the interest rates go to. I do not care what is happening in the economy; in the market place it does not matter. If you have the nicest house for least amount of money your property will sell, no questions asked, always, no matter what.
I also think it is important to realize the availability of buyers. If you are under $250,000 price range I would estimate that 80% of the buyers are there. If you are over $250,000 between $250K and let say $500,000 about 10% of the buyers are there. And from $500K to a million about 5% of the buyers are there and million up give another 5%. I am estimating here. It is just based upon my knowledge and reasoning with Utah hard money lenders.
Getting an idea for what is the availability of buyers is important because the higher you go in your purchase or your sale price, the fewer buyers available that could purchase that price range. (Reference above about getting a bit too big for your britches)
So, if you want the biggest bang for your buck, and you want best odds of selling your fix and flip, then you will want to keep the price under $250,000. Because odds are you will be able to sell the property under $250,000 as the most amount of buyers are in that price range.
The next thing is pricing a property accurately. If you are doing regular price reductions, which a lot of people are when they are trying to sell a property, you have to be careful that you are looking at the comparable. You are looking at the actives, the solds and to look at properties that are under contract. Properties that are under contract can tell you something about the value. You do not want to hang you hat on that. But you want to be looking at those things in determining the price of the property. So I hope this is helpful advice in visiting with some Utah Hard Money Lenders and knowing what is happening in the marketplace, how to price the property and what to look at so you don’t shoot your eye out.
Are you in a Money Pit; or just a caught in the Pitfalls of Hard Money Lenders?
So, you work hard, you find a GREAT property, and then you think, now what do I do? So, you look online and find something called a “Hard Money Lender”. Well, that is all well and good, but if you find the wrong Hard Money Lender, you could find yourself caught in the pitfalls of Hard Money Lenders!
Let me explain. A while back a couple found a property and wanted to fund it with a short term equity loan. They wanted this type of loan, because they were trying to avoid affecting their credit scores for whatever reason. They searched out a Hard Money Lender. He gave them a great song and dance and told them that he could provide funding and it wouldn’t go on their credit score as long as they paid off their loan. That was JUST what they wanted to hear.
So, through the process, he began to ask for information. Now, this is uncommon with Hard Money Lenders that they will ask for information. But you should know that you are looking for an equity based loan. What does that mean to you? That means that the Hard Money should be basing their loan on the PROPERTY not the person. So, getting back to my story. He asked them for bank statements, tax returns, proof of income, etc. They thought this unusual, but provided this information to him anyway.
It then came time for closing. As they sat at the closing table, they found that the loan wasn’t a hard money loan at all. He had decided to work with the banks and instead get them a Portfolio Loan, a loan that was going to be packaged and sold out. This was going to go on their credit; it was going through the banks! That was why he needed all of that paperwork.
Needless to say, the couple was VERY upset. They decided not to go through with the loan. And immediately began searching for another Hard Money Lender. That was they came upon DoHardMoney.com. We provided the loan to them at a 100% financed.
Now, some thoughts on this story: One, not all hard money lenders are graded equally. Two, it is important to realize that often we hear stories about people going to the closing table expecting to close on a loan and the parties do not show up . . . INCLUDING the lender. You want to make sure you are working with a hard money lender that has a good reputation, which has a physical website presence and has a physical office presence. Make sure that they operate as a reputable company and not just some guy with extra money in his pocket because you are always going to run into problems.
Investors’ Guide for those who find it hard to sell their properties
Labels: hard money lenders virginiaWhat to do if your properties aren’t selling? I from Private Money Lender Arizona tried to talk with a few real estate investors who are struggling for quick selling of their property(s). Let’s hypothetically name one of them as Mr. Fred. He has got three properties on the market and was facing difficulty in selling them. He told me although he is quite stressed due to these circumstances of real estate market but his all three properties are priced properly. I told him let’s make an evaluation of the factors which may be leading your potential clients towards NOT TO BUY your property.
First factor we chose for evaluation is the price of the property. And here we found that Fred was making a huge mistake while determining the price of the property(s). In his market analysis he was purely concentrating on what has been sold in that market and determining the prices of his properties on this basis. He surveyed for the sold properties in that area and then determined his own prices as he concluded that his property worth this much price. At this point I told Fred that your very first step is in a wrong direction while you set the price for your property. Always concentrate on ACTIVE properties rather than sold ones. Because in an appreciating or depreciating market the prices of your properties need to be set on the basis of active properties analysis for faster selling.
So first thing we did is we analyze the competitor properties in the concerning areas of Fred’s properties. Also you need to consider it that we evaluated the existing scenario of Private Money Loans Arizona for his properties. We looked at the active and sold properties in neighborhood. In a downward market it is more important to be competitive with actives than sold ones because sold properties could show you a property sold for but may not have any bearing on what they are going to sell for because the sales price in the future is going to be less than it is in the past.
If you are looking in the past, you are only going to see what is sold but not necessarily what is for sale. So active homes are competition for Fred’s properties we concluded. Sold homes are used as a guide to see the past prices are or it may give you a range of pricing or the high price depending upon your local market. As I talked to Fred and say Hey what is happening in your market place and we discovered it is a depreciating market place. So we looked at all the active and sold properties that were around there and confirmed that sold properties were higher in price than active properties. Fred had been pricing properties based upon the sold properties and not upon the actives.
For example if a property has sold for $150,000 but there is a home across the street which is in same general condition is active for $130,000. Is a guy going to buy $150,000 house and the answer is NO. If he can buy one for $20,000 less why should he be interested in what a property is sold for in the past? He is going to be interested in what’s active on the market. So from a buyer’s stand point, we actually adjusted the prices of two of his three properties. One we thought he is right and the other two we thought need an adjustment on. How often you should be reviewing pricing on your property was Fred’s next question and my answer was every two weeks.
And we at Private Money Lenders Arizona do this with our esteemed real estate investors in order to help them determine their desired Private Money Loans and prices of the properties.
Happy Investing!
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