Learn how to invest in real estate, flip real estate, wholesale, tax liens, foreclosures, probate, abandoned property, short sales, hard money, owner finance financing, no money down and much more!
The real ninja investor secrets to deal structuring real estate deals and how to get sellers to take your offers REGARDLESS of how much money they want for their property! Learn all of the tips and tricks to secure HUGE profits as a real estate investor utilizing these little known secrets for deal structuring.
Hello and welcome everybody to another exciting edition of extremerealestateinvestors.com. This is the podcast for all of your real estate investing needs, questions, strategies and techniques.
As always, I am super excited to be here today and I continue to get a ton of great e-mails from my listeners throughout the week, asking different questions ranging from what to do with a specific deal that some people are working on for the new investors that are just trying to get into the business now, for the very first time.
I want to welcome you to the podcast and thank you so much for taking your valuable time out of your day to listen to me and what I have to say about the world of real estate investing as I know it.
I want to make sure that everybody out there has a great and clear understanding about how to invest in real estate, what to look for, how to structure deals, what qualifies as a deal and what do with with it once you’ve got it.
If you are listening to me for the very first time, I would highly suggest you go back and listen to the very first episode and all of the previous episodes as well that could give you a snapshot of my history here.
I’ve been in real estate for about 13 years now and I started off a real estate agent just selling houses for commissions and it evolves into a full-time real estate investor who now owns a real estate brokerage with nearly 40 employees and independent contractors working for me.
I’m 36 years old and I’ve done over 700 transactions totaling over $100,000,000 and doing all of that has helped me realized my dream life, my dream lifestyle and I want to help you achieve your dream lifestyle through real estate investing today.
With the techniques that I teach you in these free podcasts alone, you can get out there and consistently make anywhere between $5,000 and $15,000 per deal just by wholesaling properties. The process is so simply that it is practically a no brainer once you understand some fundamental basics about real estate wholesale.
If you wanted to do this business part-time and just make an extra 5 grand a month, i can show you a exactly the steps you need to take to achieve a $5,000 per month additional income. If you wanted to do this full-time, quit your job and get into real estate investing as a full-time investor, the earning potential is limitless.
Currently, I am averaging a very high 5 figure and low 6 figure monthly income and you heard me right. I said 5 to 6 figures consistently and on a monthly basis for my real estate investing.
I can honestly say I am not the sharpest tool in the shed, I never graduated from high school and I must have had well over 50 jobs since the time I was 16 years old until I started making money in real estate.
In fact my first 2 ½ years in the real estate business, I was still working another full-time job just to make ends meets.
Now if you’re anything like I was, struggling to pay bills, to buy the things you want, take vacations with your family, pay for college for your kids or anything else that you desire but cannot seem to get a grip on, you’ve come to the right place. I can help anybody who is serious about making money in real estate just like I’m helping my current coaching clients and investors make money too.
If you’ve been sitting on the sideline wondering what you should do, you’ve come across my podcast or seen some of my videos on YouTube for a reason. Now is the time for you to take action and do something. Listen to my podcast, go to YouTube and search my name, Michael Kevorkian, that’s Michael, the common spelling and Kevorkian is spelled K-E-V-O-R-K-I-A-N and hopefully you’ll get some motivation to make a change in your life for the better.
What I teach in real estate investing is a simple 12 step real estate investing system and is a step by step process to walk you through the beginning stages of real estate investing all the way through being a professional real estate investor.
Today is a very special day for my loyal listeners out there. I am giving away 3 $50 Visa gift cards this week to the first 3 people who go to iTunes and leave me feedback on my podcasts. Is that crazy or what?
I don’t care if you leave me a 1 star review or a 5 star review although the 5 star reviews are always preferred, but nonetheless I’m giving away $50 to the first 3 people who will go to iTunes and leave me a review and comment on my podcast.
Here’s another great reason to listen and comment on my podcast. Leave some feedbacks for all of the other listeners out there and make yourself and quick 50 bucks in the process.
Today what we’re going to talk about is how to structure deals. Okay.
One of the main things with being a wholesaler or on the hunt for properties is you’ve got to be able to know how to structure deals and the offers so you can get a contract with about 80% of the seller’s you meet with. That is about my ratio. I get about 80% of the people that I actually go out on an appointment with to sign a contract with me for me to buy their property.
One of the basic steps to getting to that point and getting that 80% hit ratio is actually pretty simple. What you need to do is a handful of things prior to the appointment and then a couple of things while you’re on the appointment to make sure that you are getting the best deal, getting the right property under contract, that’s the right price so that you can turn around and make a profit whether that’s as a wholesaler, as a rehabber, as a landlord or as a Realtor just listing a property and collecting your commission and this works really well.
I talk about Realtors a lot, you’ve got to understand I am one, proud to be one and I really think if you’re going to be in the real estate business, I’m going to give you some advice. From my perspective I really think it would be wise for you to go out and get your real estate license. It will save you a ton of time, a ton of money and you’ll really be able to position yourself as more of a professional and we’re going to talk about that in some of the marketing and sales tactic training videos and podcast that we do within our coaching business as well as these free podcast, so you’ll understand that it is not by any means and negative drawback, a lot of people who advertise don’t deal with Realtors.
What are people really worried about, are they’re worried about dealing with a Realtor or are they hesitant to pay a commission? In your marketing, just a little tip, a quick tip and I’m not going to go off on a tangent on this.
If you wanted to put out here, handle commission, close fast, we buy houses, that kind of advertising could easily do that without saying no Realtors because obviously if you are a Realtor, you can’t say no Realtors. It’s kind of a double negative there right?
That’s it. You know I really do believe that being in the real estate business is something that you should do to its absolute extreme and I don’t think that you should necessarily go into it thinking you’re going to become an investor, wanting to become an investor and go the way of listing houses for other people but you have at your fingertips a vast array of information that the common and unlicensed person, investor, wholesale wouldn’t necessarily have. You have a great advantage at gathering a lot of information regarding properties, property owners and things of that nature.
If you have any more specific questions you want to ask about my thoughts on being a Realtor or my reasoning, feel free to shoot me an e-mail at firstname.lastname@example.org, I’d be happy to chat with you a little bit one on one.
Anyway, so back to deal structuring and getting a contract of some sort with 80% of the sellers you go meet with, one thing you’re going to want to do, the very first thing is you’re going to want to qualify the lead over the phone. The main thing that you have to remember is that as you do the marketing, the guerrilla marketing tactics that I teach in my coaching and in my home study course is probably some of the most productive real estate marketing and lead generation out there.
Now I’m not going to sit here and tell you that I invented it. What I did was I perfected it. So I have invented a couple of the methods and tactics along the way but for the most part, I took what I have learned over the years and over 13 years I have tweaked it and massaged it into what really works well in my market place. If you do decide to ever sign up with my program, get my home study course, go into my coaching program which I highly recommend you do. You’ll see that you’re going to have to do the same thing. Use it as it is and as that information starts to go out there, the marketing goes out, you get feedback.
What is feedback? Well it’s feeds that are no leads or a lot of leads, unqualified leads, unmotivated leads. You’ll start to tweak a few different things. One’s going to be your marketing, one’s going to be your phone skills, your follow up lead sheet and things of that nature.
Your main thing is you’re going to want to qualify the lead over the phone because you’re going to get a ton of leads.
Just to give you an idea, I have about a 6% response rate to my direct mail campaign which is huge. The national average for direct mail response rate is 1%. So I’m 6 times the national average with just 1 of my marketing pieces that I use which is a huge number.
Give you a little bit more of a perspective here. If you were to take a market the way that I do and you go through the leads the way that I teach and instruct you to do in the coaching program, to put that into a little bit of a perspective for you to understand, when you have your phone ringing off the hook and if you are not taking your time qualifying the lead over the phone, you’re going to waste a lot of time on appointments.
What you want to do is really qualify that lead, really get over the phone, get all of the information that you can. I have a very specific lead sheet that I use that is part of my program. It’s very thorough, it’s not very long but it’s long enough that it’ll build to help build rapport with your seller so that you can loosen them up a little bit, you’ll be able to get into their head a little bit and they can feel a little bit more comfortable with you just over the phone with the questions that you’ ask and how you ask them.
It is extremely powerful and it’s extremely important that you understand that not every phone call is going to be a lead. Not every lead is going to be a motivated seller and not every motivated seller is going to turn up to be a deal.
You got to look at this kind of like the funnel effect, Okay. So you got a big opening at the top and it comes out as a narrow opening at the bottom.
I tell everybody this in my weekly training, when we go through this exercise, our first week in the coaching program. You’re always going to send out more letters than you’re going to get phone calls. You’re going to get more phone calls then you get appointments, you’re going to get more appointments then you get deals and you’re going to get more deals then you’re going to get closings. So not every property that you get under contract you might not be able to sell for some reason or another. I mean it’s just really that simple.
It’s not the majority of the time because we’re selling it for such a great price. But if you bought the property for too much you got it under contract for too much and you’re wholesaling it, wholesaling the contract, you might not be able to sell it. If you’re out there kind of just winging it and trying to see what happens where, you’re going to see this is what happens, sometimes you just think it’s a deal done. Very important that you keep that in mind not to get discouraged. This business is all about consistency and repetition.
Again, qualify the leads as they come in, use the lead sheet and use your best judgments, ask questions, be nice, be informative, try to build rapport. It’s extremely important. If somebody doesn’t know, like and trust you, they won’t do business with you whether that’s you buying or you selling something there is a transaction taking place and if they don’t know, like and trust you, they’re not going to work with you.
In some way or another, that has to occur, those 3 things have to occur in order for people to do business with you.
Now some of you maybe saying “Oh well, if they’re a desperate seller, they don’t care, they don’t need to know, like or trust me.” Yeah, that might be true on some instances but again I’m going to tell you I cannot even remember how many properties I’ve bought for less money than people have told me that other investors have offered them. They were equally as motivated to sell to me as they were to the other person, right? So why did they sell it to me for so much less? Because they got to know me, they got to like me and got to trust me and that’s what it’s all about.
This is a people business. If you’re about dealing with people then don’t sign up for the coaching. Okay. It’s this simple, don’t sign up for the coaching. It is not a business for you to get into if you’re afraid of people, you’re afraid of the phone, afraid to knock on a door, afraid to go [“to on a park” 00:11:55]. This is a business that yields tremendous profits and yes, you have to deal with people even if it’s at their bare minimum, you still have to do it.
I’m not saying you have to be the slickest sales person out there by no means but you do have to have some people skills and understand that if you’re a total reclusive, probably not the right business for you to be.
Okay. So what you’re going to want to do is find out your motivation level and the reason, the cause of the motivation. In other words if their motivation is I just want to see how much I can get for it. Guess what? That’s not a motivated seller. If it’s I’ve got a bad leg, I have a 2 story home and I need selling and move into a ranch, that’s motivation because it’s health issue, it’s a life issue.
Let me say that most of the real estate deals that you get and most of the motivation from the sellers, the motivated sellers I work with and there are dozens and dozens and dozens of motivated sellers calling me every single month.
I’ve got more property than the contract this is toward the end of the month, February 2013 right now and I’ve got more properties on the contract this month than I did last quarter of 2012. Just to put in into perspective, it is crazy busy right now. So it is about midnight, it’s just about to be February 25th and I’m doing this podcast because I made a promise to you I would get you a new podcast every single Monday, every week no matter what.
Again, I get a lot of motivated sellers calling and most of the reason of motivation is not financial, there’s a life issue, it’s a divorce, it’s a bankruptcy, it’s a health issue, it’s a functional issue of the property like the properties that’s becoming run down and they can’t keep it up anymore or it’s an old woman whose husband used to take care of the property and he passed away some years ago and the property has just kind of fallen into just repair. She knows she can’t say this, I’m giving a specific example, here is you can tell. She knows she can’t see and keep the property up and just needs to move on. House is paid for, its ran down, needs a lot of work but it’s paid for and she’s just ready to move on.
Now another appointment I went on just this weekend, I taught somebody over the phone, it was the husband or it is the husband and wife and they’ve been living in the property for 19 years. I talked to the wife, she explained that they were looking to get $400,000 for the property which in my opinion was little high. My wholesale buy price on that according to the DLA [inaudible 00:14:33] software that I provided with my coaching and my home study, the best purchase would have been 325,000 which I think from 400,000 down the street 25 I could easily got.
All right. That’s not a real big stretch but when I went there, I actually went to the property and met with her husband who I’ve never talked to before. We never really had any dialog or any conversation what so over. When I met with him I started talking to him and again just as I would normally do from beginning to end that I started talking to him about the property, what he was looking for, how long you had been there? How long he had been there and what he was looking for as a purchase price and he said 550,000. Now I mean I’ve got a stretch ahead of me. Now I’m originally thinking I’m going to negotiate down 75,000 and now it turned into 225,000 which made it even a little bit more difficult to get over that hurdle.
We haven’t come to any conclusion on that transaction just yet. I did tell him that I would need a couple of days to go back and the best thing to do when you’re dealing with somebody who’s not motivated is to just kind of let him … let him sue a little bit, put him on the follow up marketing campaign, so he’s going to get a letter out in the mail after our phone call tomorrow because I want to reiterate some of the conversation on the phone with him in that letter.
In all honesty the level of motivation is not there. He said you know I just want to see what I can get for the property, if I get the right pricing myself. Okay, so what does that leave me? Leave me with my option of listing the property or walking away which is why I encourage you so much to get a real estate license, right? You should get that real estate license because you want to go ahead and have that opportunity to collect the commission.
You’ve already met the people, you’ve talked to them over the phone, you’ve met them once or twice, okay, you’ve got a relationship there. So they know you now at this point. If you’ve done a good job, they should like you and there should be a certain level of trust built at this point.
All in all, if they don’t take my price or purchase options, which I’m going to get into today with the deal structuring, then obviously you know, we can always go for the listing and collective commission.
Now let’s say the property does [“reach out” 00:16:41], I think the property is worth about 5, 6 leads current condition, with a little bit of light we have. I mean I would say maybe outside about 20 grand and hope to retail it for about probably not 550, probably closer to like 475, 500.
Okay. So let’s say you just [“raised the amount” 00:16:58] at 500 and I’m charging a 5% commission of which I get half and I and I pay the buyer’s agent the other half, what does that come out to be for me dollars wise? That’s $12,500 right? 2 ½% of $500,000. There’s a value in having that real estate license and I would say I probably list and I don’t list them personally, I give them up to the agents in my office. I take a percentage of that from them but I would say I probably get about a dozen to maybe 20 listing a year where I’m getting a commission that had I just been pursuing this as an investor [inaudible 00:17:37] picked up.
Now, your business model, if it’s not something you want to get into, you absolutely don’t have to, I recommend it but again that’s ultimately your decision.
Find out the level of motivation. How motivated are they and why are they so motivated? Health problem, divorce, moving out of state for a job, relocation, whatever the case may be.
You’re going to want to get them to give you a price for the property. Basically the question or questions you’re going to ask them are going to be how much are you asking for your house or condo or townhouse or whatever it is they’re calling. If they give you an answer, write it down and you’re going to follow up with the next question, is that the best you can do? And their answer maybe yes, but if they hesitate in answering, then you know the answer is not necessarily but they don’t want to say that. Keep that in the back of your mind, write it down on your lead sheet so that you know there’s a possibility of some room to negotiate there.
Okay, so let’s say they don’t answer that question. You’re going to go through a couple other questions and on the lead sheet and you’re going to then ask them “Okay Mr. and Mrs. Seller, that do you need to get out of the house with? So in other words how much money do you need to walk away?”
Let’s say I assume there’s a mortgage there. Let’s say I pay off your mortgage, pay all of your closing cost, what do you need to walk away with? What do you need to get out of the house with? Again, they may say I don’t know what its worth. My neighbor just sold for a million dollars and I want a million and a half. You don‘t know but whatever their answer is, you’re going to write that down. There is a spot for that in the seller lead sheet.
Okay? Again, you’re going to to through a couple other questions. This is all designed purposely this way, the seller lead sheet so that it walks them through the process and you’re able to go back to asking them about price in one way or another.
The next question is going to be the third time you’re going to ask them about price. What do you think it’s worth in today’s market in its as is condition? They’re going to tell you, they may tell you I don’t know, so you’re going to write that down. But if they do give you a number, you’re going to go and you’re going to ask them how did you arrive at that price? Not what makes you think you can get it? Who do you think you are? Have you lost your mind? Or anything other than what I just said which is on the seller lead sheet that I provide for you. How did you arrive at that price?
Okay. So you’re going to write down their answer. They may say a Realtor came by, my neighbor sold the house for X amount of dollars or had an appraisal or whatever the case may be. You’re going to take that information, put it in the sheet. The next thing you’re going to do is ask this specific question and here it is, “If you were to sell the property on contract, how much money would you need right now?” Okay, what this does is it open the door to talking about owner financing as a purchase option and it is what is known as an open ended question. That means they cannot answer no to it. Okay, they had been engaged and they need to reply with something other than a yes or a not answer.
Okay, special rule to remember, never ask a yes or no question to a prospective seller unless you know the answer is going to be yes. I’ll say it again, never ask a yes or no question unless you know the answer is going to be yes.
I’m going to read that question back to you again, if you were to sell the property on contract, how much money would you need right now? Can they say no? It doesn’t make sense. Can they say yes? No, they can’t. So you’ve engaged them. Well what do you mean if I sell it on contract? That’s where you’re going to go into the short conversation about how owner financing works.
You’re not going to get into it in too much detail over the phone but you’re going to want to give them the basic idea that is an option for them to sell. Just like renting, you would sell me the property, I give you a big down payment and that’s actually that word big is a matter of opinion. So some people would think $5,000 is a big down payment, other people think $50,000 is a big down payment. So it’s all left to interpretation.
Similar to renting where we would either take over payments if they had them or we would agree to a certain monthly payment, give you a big down payment and pay you a monthly payment over the course of the next 12 to 24 months, you could go 36 months, it doesn’t matter.
Again over the phone you’re not trying to do anything but get an appointment, get information first and then get [inaudible 00:21:48].
So you’re going to want to get all of that info down on your seller lead sheet, schedule an appointment to see the property and discuss their options of selling and how you can help them. Tell them you’ll call them back if you have any questions that come out between now and the time you are set to meet.
The next step is do comps to verify, we make sure that you aren’t wasting your time. If the seller is asking too much money, you need to call them back and try to get their motivating reason for selling again. You really want to kind of exploit that and you should have done a good job with that and gotten a reason why they’re selling and if it’s … again if it’s just … see how much I can get, if it’s running to high of a price out there, just put them on your quarterly mailing at that point and maybe something will come out of it down the road or they might refer you some business down the road. But to waste 2 hours of your time going out there and no point in teaching a dead horse, it’s not going to go anywhere. As the saying goes, there’s no point for you to go out, spend 2 hours of your time with an unmotivated seller.
Again if the seller’s asking too much money, you need to call them back and try to get to their motivating reason for selling again. Ask them over the phone if they would be willing to sell it for whatever you think it’s worth buying as a wholesale price.
You’re going to want to give a range and if they said I want to sell it for a $100,000, you do comps and you see the house is actually worth a $100,000, you know you need to be under 70,000 assuming there are repairs to be made.
The call would go something like this, so you’re going to say “Mr. and Mrs. Seller, I called you back because I have a couple of questions about the property and you can ask some arbitrary questions just to get the conversation rolling. I don’t think I asked you how old the windows were, and is it a single family home? In Chicago it’s a little different, you can have a single family that’s owned for 2 flats and the 2 flats that is owned for a single family.
Just … you have to have a reason for selling and then you’re going to want to then kind of sprinkle back around over the price there. “So you know Mr. and Mrs. Seller, I know you said … by the way Mr. and Mrs. Seller, I know you said you wanted to get about a $100,000 for your property. Now I’ve done my comps and having a look at what’s selling in the neighborhood there, it seems to be that in order for me to be able to get that property off your hands and help you move to Dallas where your wife and kids are,” okay, this the motivating factor, as an example, “Then I need to be somewhere around the 50 to $60,000 range, so that’s what I’m seeing here. How does that sound to you?”
And you wait, you stop talking. You wait for them to answer, take whatever their answer is. Unless it’s like okay, fine, I’ll take it. Whatever their answer is, other than accepting your 50 to 60,000 over the phone is well how to close to their number can you be? Okay, you wait for an answer again. So they’re going to say not a nickel under a $100,000. Okay, well that’s when we start the owner financing conversation again.
Okay, well that’s fine. You know I think I can probably get you a $1200,000 and I might be able to even get you a little bit more if we were able to do that … the owner financing like I had talked about to you before.
Okay, you’re buying it on contract. However you want to avoid that. I mean I have specific conversation scripts that I use, tried and true scripts that work very well in order to get people open to the idea of doing owner financing abilities. May have never thought about it or considered it before.
Your next step, what you’re going to want to do is go to the property. Okay, so you want to meet the seller if it’s possible.
Most people live in their house which I know that on the surface sounds kind of funny but you know, some people might be an out of state landlord, so they might own a property, they’re renting it out and they live in California and the house is here in Chicago. You’re going to want to meet the seller at the property whenever it’s possible and take a look at the house. Going to talk to the sellers about the condition of the property, condition of the real estate market and the benefits of an all cash offer.
All the time that you spend with the seller, you need to politely point out the flaws in the property and press their hot buttons. Again, you’re going to go through “Okay, so how long ago was it painted?” And brand, no [inaudible 00:25:51], you need to take notes, you need to remember what the property looks like in your mind as well as taking pictures of course but you’re going to also want to have some detailed notes.
Okay, how long ago was the property painted? I have the seller questionnaire which is different from the seller lead sheet that you would take on your appointment with you and just fill in the blanks. How long ago was it painted? How long ago did you refinish the hardwood flooring, remodel the kitchen, put the carpet in, do the siding, the windows and the roof, the gutters? Whatever is on that sheet.
You’re just going to ask them a ton of question. Okay, and you’re going to … it’s simple step by step. You ask 3 to 4 questions and then you go back to their hot button.
As an example, I’m going to start right now. “Okay, great. Thanks for meeting me. I appreciate it. I won’t take a whole lot of your time. I just wanted to take a look at the house real quick and get an offer in your hands here.” Great, your shaking hands, smiling, everybody’s happy. You walk in, “It’s a great house. Looks like you could use a fresh coat of paint though. How long ago did you ever paint it?”
“Oh well it was about 6 years ago.” Okay, so you’re going to write that down. Then you’re walking through and “Oh nice, very nice kitchen, very big” or “very cozy” if it’s small. “Very cozy kitchen you got here. How long ago did you remodel?” They’re going to tell you, you write it down. “Okay, 5 years ago. Okay, great, awesome. You mind if I take a look around here and have a look at the bath? Oh, okay. It’s got a stand up shower in this bath and how long ago did you remodel this about would you say?” You’ll write it down, 3 years ago. “All right. Great. Yeah. I know it’s a house, can be a lot of work” and here comes the hot button, right? Get ready.
“I know owning a house can be a lot of work and I’m sure you’re not looking forward to sticking around too much longer. We’ll see if we can get you out of here and get you back to Dallas with your wife and kids pretty soon.” You’re going to say that with a big smile on your face, looking right in the eye and just wait for their reaction and it doesn’t matter what the reactions, okay. And then you’re going to go back to questions.
Okay, “How long ago did you do the hardwood floors? How long ago did you install the tile? They look great.” You’re not going to pick the house apart but there’s a reason you’re doing this is that you’re just you’re sharing out a conversation, you’re building their rapport, you’re getting them to know they can trust you and then boom go to push their hot button.
Okay. Again, if they [inaudible 00:28:04], they couldn’t go up and down the stairs. “My goodness these stairs are something. No wonder you want to sell it. I can imagine if it’s my leg walking up and down.” And in a joking way.
I get light hearted, be fun, be funny and just lighten the mood. Don’t come in there guns are blazing because these people are again very standoff from the beginning because they’re under the impression that you’re going to offer them a very low price for the property and you may very well be doing that but you want to make sure that they’re comfortable with you. If not, no matter what you pay, they‘re not going to take it.
Hot buttons are their motivating reason or reasons for selling. For example, some of the things we’ve gone over again, health issues, life circumstance changes, obviously financial issues is a big one, relocation, death in the family, functional issues with the property where it’s no longer … the seller’s no longer to keep it up and the house is just kind of falling down around and they need to get out. Okay. Those are all hot buttons, you just have to discover that ideally over the phone by doing the right thing.
Remember you got to act like a professional. Don’t be nervous when they call or you call them back. Okay, you got to assume a lot of things here. You’re going to assume than when they answer the phone, they have the time to talk to you, so you’re not going to call “Hi. This is Mike with Extreme Real Estate Investors. Do you have a few minutes to talk about the sale of your home?” No. Call them back, “Hey June. This is Mike with Extreme Real Estate Investors. How are you doing?” “Good.” “Okay. Great. You know what, I got your message” or “I got your e-mail” or whatever the case, whatever the lead came from. “I got your message about selling your house at 123 Main Street there in Chicago.” “Yeah, yeah.” “Okay. All right Great. Let me ask you a couple of questions.” And I go right into the lead sheet. That’s it. I assume that because they picked up the phone they have a few minutes to talk. I’m not going to tell them “Hey, it’ll only take a few minutes.” I’m not a telemarketer. I’m here to do business and I need to get their information.
I have no anxiety about working and talking to them and going through the process with them over the phone. I’m not going to ask if it’s a good time to talk. Why? Because it’s a yes or no question and I never ask a yes or no question unless I know the answer is going to be yes. When I call them and I ask them is now a good time to talk or do you have a few minutes to talk? I don’t know that the answer is going to be yes, so I don‘t ask it. Period. Done. All right. Learn something here.
Next step. You’re going to go through the presentation. I have a home seller presentation. It’s a PowerPoint presentation that I offer in my home study and through my coaching program and it’s going to take you through … take the seller really through the step by step process of how we buy houses. We’re going to step at certain points where the presentation actually queues you as the presenter, to show comps, show a seller net sheet and the multiple offer spread sheet that’s produced by the deal analyzer software.
There are 3 things that we’re going to stop for during the presentation deliberately so that we can go over that with the seller at that time.
Next step, if they say okay, you get the paperwork together and sign up the deal. It’s that easy. [inaudible 00:31:09] price that you need to start talking about owner financing and how it can benefit them.
Here is an example of how one of the conversations might go. Okay and I’m going to just give you this in a nutshell. Let’s go back to that $100,000 examples. The sellers told you 100 grand over the phone, it’s … you’ve done your comps, it’s too much, you call them back, they said no to the 50 or $60,000 that you circled back around to a price on your second phone call, they said no, you said it’s okay, I think we’d be able to do it. We might have to do contract sale but I think I can make this happen for you. Let me come by and take a look at the property. When is a good time to get together?
You set the appointment, you go, you’ve done the presentation, you go through comps, you do the next sheet, you do the deal analyzer software and it produces the multiple offer, a spreadsheet for you, cash offer is too low. Okay. It’s fine, happens all the time, not a big deal. It’s a stuck on price. You start talking about owner financing and how it can benefit them.
Mr. and Mrs. Seller, I know you need to get a $100,000 for the property and I totally understand. And for whatever reason, maybe there’s a mortgage on it for a 100 grand, that’s why we need it so we don’t … we should know that by the time we’re there but let’s say we just find that out or we do know that either way [inaudible 00:32:18] paid off that’s [inaudible 00:32:20]. Okay, meet a $100,000.
So here what I can do, you’re going to determine rents, there’s a process for owner financing that you need to understand and again you know I’ll probably talk about that in one of my upcoming podcast here but there’s a process and in a nutshell what you’re going to want to do is determine rents.
Let’s say that $100,000 house will rent for a $1,000. Okay, for me, I need to set things up so that my investor that I’m going to sell it to or myself is going to make a bare minimum of 20% annual net on a cash on cash return instead of doing all the finance.
What that means is they’re going to need a $100,000 for the property. Let’s pretend I’m just buying this property myself. Okay, I’m buying it for myself, they need a 100 grand, I’ll give them … I’m start with 10% down. You get $10,000 that will help move you to Dallas, get out on a bus, a plane, a moving truck, whatever you need, get you out of here and what I’ll do is I’ll pay you X amount of dollars every month for the next 24, 30 months, whatever [inaudible 00:33:17].
You really need to do a rent to own at about 2 years I would say as a bare minimum. 12 months is not going to cut it unless there’s a lot of equity, unless you’re able to go somewhere in between your cash price and your owner finance price. Again, details on that would come down the road in another podcast or if you decided to do the home study or the coaching program.
“Now, we’ll give you $10,000, 10% down and we’ll make you monthly payments of $300 a month for the next 24 ot 36 months.” Now the way you’re going to structure that is initially of course unless they argue with you. Too bad but also how all levels [inaudible 00:33:57] anyway. That’s going to be a principal only payment.
So let’s say you make a $300 a month payments. One year is $3,600, 2 years is $7,200, so at the end of 2 years you’re going to owe them $7,200 less on the purchase price. You’ve given them $10,000 plus another 7,200 in payments, you’re going to have effectively $17,200 in pay down of the 100,000 that you purchased the property for on contract.
You’re going to get a renter in there, you’re going to collect … this is information that your seller doesn’t need to know. I’m just sharing it with you. You’re going to get a renter in there, you’re going to collect a 1000 bucks a month, you’re going to give them 300, leaves you with 700. You’re going to have $40 a month in real estate insurance so in the event that the property burns down or something happens, you’re covered and have you say your seller’s covers as well and let’s say the taxes on it are $150 a month which comes out to $1,800 per year.
I’m going to quickly add this up. You got $300 for the seller every month, $150 to taxes every month and what did I say? $40 in insurance monthly. You’ve got $490 in expenses every month on this property. You’re collecting a $1,000 a month, so much is that? I don’t even need to calculate it, because that’s how good I am right? It’s $510 per month, net money in your pocket.
Now let’s annualized this return. $510 in your pocket time 12 is $6,120. $6,120, you divide that by the $10,000 that you’ve invested, right? That’s your cash out of pocket, 10 grand and you
have a 61.2% cash on cash return annually. Not bad right? It’s a fantastic way to acquire a rental property.
Another option that you have if you’re not into rentals, lets say I did the deal exactly the same way. I’m going to take that deal and let’s say I take it … it would absolutely have to be a bare minimum of 36 months and ideally 60 months which is 5 years. You don’t want to say 5 years, you say 60 months. 30 months, it sounds like a little bit less like 4 to 6 weeks doesn’t sound like a month and a half or a month month and a half. You’re going to tell them 24, 36, 48 months, whatever maybe.
But what you can do is then take that deal, add a couple thousand dollars to it and sell it off to one of your landlord buyers who will then give you $12,000, give you your 10,000 or they’ll pay the $10,000 and you need 2 grand for the deal where they’re making 62% annually. It’ll be a little bit less because of the 2 grand markup that you just took for yourself.
Now I always say you shouldn’t ever really get into a deal where you’re not going to make a minimum of $5,000 and that holds true. I truly believe that and sick with it. This is an example but as an example of where you can make a quick $2,000 with no money out of your pocket, you simply get that thing locked up and get it out to your landlord list. Okay, another list of buyer that just as important as cash fires are to the wholesaler, the landlord buyer is to the person that’s doing [inaudible 00:37:10]. Okay?
I just put one together and making $23,000. That’s my feet. $23,000 on them and I‘m going to talk about that in one of my upcoming episodes.
Probably the next one because what I’m going to do is interview one of my coaching students next week, was going to talk about [inaudible 00:37:26] deal and it’s just … it’s amazing and the money is just outrageous.
Definitely something you need to get good at and get good at mastering because [inaudible 00:37:36] options. Now I know from a seller can turn into a deal. This could turn into a big yes and a nice, nice payday for you. Okay, so you get the basic idea there right?
Now, my advise to you to go and get a real estate license, become a Realtor yourself comes in basically the following reason is let’s say the cash offer isn’t good, the owner finance is a no for whatever reason, then you can go ahead and talk about listing the property.
Well, okay, I’ll tell you what, since you need all the money and you need it all at once, what we can do is go ahead and get the property on the market for you. We don’t even need to put a sign out there or a lockbox and that depends on your local traditions really more than anything else. We do that a lot here obviously. High rise condo, there’s no point in putting a sign up in their 44th floor condo building but in a nutshell that’s how we would do is just transition from from cash offer which is ideal for everybody involved to own a finance which is still a great deal, to listing which is a wonderful deal for you. Save the deal, get yourself paid a little bit of money and move on to the next one.
Again, by this time they know, they like you, they trust you. Why would they say no? Once they’re in an agreement, you’re going to get them all signed up and take that deal to your buyers to sell as a wholesale deal, rehab it yourself, get it out to your landlord buyers who are looking for rental properties or just go ahead and get it listed either with yourself or with your Realtor associate.
You put the deal together and you collect your fee or your commission and just as a side note, if you aren’t a Realtor and don’t intend on becoming one, then you would refer to one of your Realtor associates and move on to the next deal. You may even be able to collect a marketing fee from your Realtor associate if the license law allows for that, so you can make money on the deal no matter what happens.
I will tell you that I’m not giving you any legal advice here, so check with your state real estate license laws or a real estate attorney to find out more about this. I am not talking about referral fees and I’m not talking about kickbacks. I’m talking about a marketing fee. Just as I would pay to a newspaper or a website. I pay them a fee to advertise. It’s not a kickback, it’s the cost of marketing, right?
There may be a way for you to do that and there may not be and that’s all I’m saying. If it’s a freebie, if you’re just calling your buddy and say “Hey Jennifer come list at this place for me. I got a seller that’s motivated to sell but they’re not willing to work with me.” It’s a nice freebie and you and your Realtor associate are then in great terms and you’re bringing business even if you’re not getting paid directly, you get paid indirectly by having access to all of your Realtor associates information and incomparable and having them work with you on these deals.
All right. So there you have it folks. That is how to stretch your deals in a nutshell at real estate investing.
I really appreciate you taking the time to listen. I want to hear about your success and do a phone interview, podcast with you when you close your first deal. So get out there and make it happen.
You can do this. Believe me when I tell you it is not hard or complicated when you have the right tools, systems and support in place. I want you to be successful, make more money, help people and change a lot of lives for the better in the process.
I can’t explain what real estate investing has done for me. it has totally changed my life for the better and there isn’t a thing on this earth I would rather be doing than real estate investing and helping other people realize their dreams by teaching you what I know and what I’ve learned along the way.
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Remember to always pay it forward and until next time, happy investing and remember to go big or go home.