Finding Deals without Flapping Your Lips?

I have been mentoring for many years and have found that my best deals come from actually “speaking” directly to a Seller and working out a win-win situation.  Since I first started investing back in 1998, I have not purchased a property directly from the Multiple Listing Service.  However, some Investors would prefer not to talk to Sellers and would like to be fed deals from other Investors or from the Multiple Listing Service.  We each have different personalities and based on your personality and your personal preferences, I may be talking to you.  If this is your mind set, then I would recommend the following:

  1. Find at least 2 Realtors that will be willing to set you up to receive listings that are emailed directly to you for your review, along with Expired Listings.  You will want them to do a search for some of the following key words:  TLC, Handyman Special, Must Sell, Seller Motivated, Short Sale, and REO.

Currently in Florida, it is a Sellers’ market, so when these listing are received by you, you must immediately make offers on the properties.  In order to make offers, you will need to use a Formula called the Maximum Allowable Offer which is MAO.  Your exit strategy will be important, because if your intention is to flip the house without fixing it, you will need to make sure that you leave enough money in the deal for another investor or a cash buyer.  An FHA Mortgage Buyer will require you to own the home for at least 90 days prior to selling, called “seasoning,” and all repairs need to comply with their guidelines.  Many Investors will use 70% of the After Repaired Value of the home, minus repairs to make an offer.  Some Landlords will pay up to 80% of the After Repaired Value on the home to hold as a rental.  Having your Formula, along with knowing average repair costs ready to use, will help you quickly make offers.

What you will also need to know is the After Repaired Value of homes in the area where you are making offers.  Therefore, I would also recommend that you have sold comparables of no more than 6 months old and no more than .5 miles away from the property in which you are making an offer.  You can have these sold comparables sent to you from your Realtors.  This will allow you to get a good idea on the values in the neighborhood so you will be able to make an offer immediately.  Be prepared to make lots of offers based on your Formula, in order to get one or two accepted. Please remember that a Realtor gets paid on commission and many do not know if the property is a good deal, it will be your responsibility to know the values.

Many new Investors are worried about making offers on houses sight unseen.  However, if you are looking to get deals from the Multiple Listing Service in a Sellers’ market, it will be very important that you make an offer on the same day you receive the listing from your Realtor.  Remember, you always have a clause that you will have 15-day inspection period.  If your offer is accepted, you will be able to go and look at the house and see if this is truly a deal or not.  If it is not a deal, then you can cancel your contract.  You will need to have an earnest money deposit, up to $1,000, and submit the check within the 3-day time frame per the MLS.  Another option is to place a paragraph in the contract that states that your earnest money deposit will be sent in after inspection.  I would recommend that you have your Realtor already be prepared with a Standard Purchase Agreement already filled out with all of your information, terms and conditions so that all she/he has to do is fill in the Seller’s Information.  You will also need a Proof of Funds letter at the time your Offer is submitted.  Therefore you need to get pre-qualified with the Hard Money Lenders in your REIA group so that you will be able to provide a Proof of Funds letter with your offer.  Even if you decided later that you are going to wholesale the deal, you will still need earnest money deposit and a Proof of Funds letter.

As a Realtor, when I set up a search for listings to be emailed to Buyers/Investors, I am able to set them up with a website that allows them to save the favorites and delete the listings that they are not interested in.  In addition, having the Sold Listings sent to you will also allow provide you with the values of other deals in the same area in which you are looking.

  1. Have your email placed on all Wholesalers’ lists in your Local REIA Group or anyone else who would just want to wholesale directly to you. I would also ask if they have any references of individuals that they have sold to in the group, to see if that Investor ended up with a good deal.

When working with Wholesalers, it is important to know how they work.  That is, are they doing an assignment of the contract or a double-closing?  If they are doing an assignment of the contract, then it is important for you to know their terms and conditions on their contract, such as “how many days you will have to inspect the property”, and “is your earnest money deposit is refunded, if the house isn’t acceptable per the inspection?” Each Wholesaler works in a different way, so understanding how they work, will allow you to be able to get more deals.

Knowing the After Repaired Value and the Repair Cost on the home IS your job as these two numbers are just an opinion and could be drastically off, which could stop you from getting a good deal.  Many Wholesalers will re-sell other wholesalers properties and that is why you will see the same house on their list of deals being sold for higher or they might even just split the wholesale profit between 2 or more wholesalers.

I hope this article will help you make offers on properties and still remember that negotiating is the top paying job in the United States.  So … I still believe direct contact with a Seller will bring you in more money because you can negotiate directly with them and cut out the middle-man; however, it will take your personal time to market and find the deals.  Happy House Hunting!!!

Kimberlee Frank

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April NewsletterWhen making offers on properties as an Investor, you will need to have your exit strategies in place prior to purchasing the property. What I mean by that is, who is your buyer and what type of financing are you going allow the buyer to use when sell the property. Knowing this will allow you to maximum your profits.

When I look at properties to purchase I always analyze the value of the property and how long I will have to hold the property before I am able to sell the property for a profit. The comparables that I use are through and also the Multiple Listing Service. Realtytrac will give me the values in the area, however, the Multiple Listing Service MLS in addition to values will provide me with how the property was sold ie; Cash, Conventional mortgage, USDA mortgage, VA mortgage or FHA mortgage. You can normally assume houses under $200,000 that many of the buyers purchasing at this price point are FHA mortgage buyers. FHA mortgages are mainly used for first-time homebuyers. The Mortgage Lender requires 3.5% as a down payment which attracts many first-time homebuyers.

What I have found in the price point of homes that are selling for under $200,000 is that 85% to 90% of the buyers will use FHA mortgages. The FHA Lender will put a restriction on the Seller/Investor called seasoning. What that means is that the Investor who purchased the property was expecting to have a quick exit strategy versus having to hold the property for a period of 91 days before they could sell the property to a FHA buyer. The restriction is called seasoning of the property. What that means is that the FHA Lender will look at the date that the Seller/Investor has purchased the property to the date that the Buyer signed the Purchase Agreement as a timeline for seasoning of the property. Let me give you an example: Investor purchased the property on March 1st and now we need to count 90 days from the purchase before the Seller/Investor can even enter into a Purchase Agreement with the Buyer. So the month of March has 31 days in it, the month of April 30 days, and the month of May has 31 days.
I would recommend that the earliest day that a Buyer can even present an offer to the Investor would be May 30th as that would be a total of 91 days. FHA does not count the days from the date that the Seller/Investor signs the Purchase Agreement but instead goes from the date the Buyer presents the offer. This is very important to know as I had one FHA buyer that was denied for a loan because they submitted the offer 60 days into the 90 days but I as the Seller/Investor accepted 91 days into the 90 days. I argued with the Lender that it was not an acceptable offer until the Seller/Investor accepted it but, FHA has their own guidelines and denied the loan anyway. They wouldnt even use an addendum to correct the dates and said that they should not even started processing it until the 90 days was up.

Therefore, when you are selling a house using the exit strategy to sell the property to a buyer using a mortgage, you will need to know what the requirement is from the Lender as to how long the Seller must own the property seasoning and add that additional 3 months of holding costs plus another 30 days to close for a total of 4 months into your profit.
Conventional, USDA and VA Mortgages will allow the Seller to own the property for a minimum of 30 days. I have heard that they will allow no seasoning through the grape vine, however, I have never flipped the house that fast that needed some rehab to test that theory. Obviously if you as the Investor/Seller was selling the house to a Cash buyer, it can close the same day you buy it allowing for a simultaneous closing. There are some conventional mortgages that will say that are conventional and you will think that you dont have to worry about seasoning but I have called and have been informed that they are mirroring FHA guidelines even though it is a conventional mortgage. What that means then is again, you have to hold the property for 91 days prior to selling the property to your end buyer using FHA financing.

Another requirement that FHA mortgage buyers lender require is that you will need to have two appraisals on the property to confirm the value. Should either one of the appraisals value come back less than the offer amount then that is the value that FHA will lend to the buyer. Once a FHA appraisal number is given to your property, that value on the home will stick to your property, NOT THE BUYER, for a period of 4 to 6 months stopping you from selling the property to another FHA buyer unless you accept the lower value.

Make sure you know what type of financing buyers will use on your house that you are flipping so that you are able to maximize your profit. Always fully disclose to your buyers lender that this is a flip house and find out their requirements BEFORE you enter into a Purchase Agreement.

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move through 2017 with high success and help you bring your Real Estate Dreams to Life this year!

Kimberlee Frank
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Mentors are for Millionaire Minds

When I first started in real estate, I spent over $250,000 flying all around the world attending boot camp after boot camp, learning all the different ways I could get involved in creatively buying, selling and holding real estate.  It seemed like it was always the same group of people flying around the world with me and taking the same training.  The only difference I noticed was that many of the people who had attended these trainings had never even made an offer on a property.  They never used the knowledge that they received and just kept on going to more and more seminars.  And as we all do, we exchanged business cards with individuals we met at these meetings.  At that time it was my husband, step-son and I attending all of these trainings.  When I got home from many of the meetings, I would get telephone calls from individuals who still didn’t understand the process of the training they received.

What I learned from all of telephone calls and working with a husband and step-son, was that everyone learned a different way.  Some people could pick up a book or listen to a CD and just do it, and let the chips fall where they may.  Other individuals were visual learners and if they didn’t go to the boot camps and physically see the teacher teach, they were just frozen.  A 3rd group of individuals had to totally understand everything from the beginning to the very end, before they would even take action.  Of course, there are also the social butterflies in the group that would do anything, but without having a teacher telling them to do it, they just froze up.  Bottom line, everyone has a different personality and you can always take the DISC test to find out what type of person you are, which is especially helpful when you are working with a spouse, family member or other business partner.

My personality is a “D”….determined, demanding at times, risk taker and able to pick up a book or listen to a CD and immediately take action.  Now my husband and step-son were a “C” personality that needed to know how everything worked from the very beginning all the way to the end.  I was working as a legal secretary for 18 years doing 1,000’s of closings which included all the paperwork, so I already knew much of the documentation.  However, when my husband and I started, it was his idea that we do this together and he was working at Ford Motor Company and we had a two small children and my step-son who was 18 years old.  The first course was Carlton Sheets.  When we both tried to sit down and listen to the cassettes and read the book, there was always, and I mean always, a disruption or simply not enough time.  So, the Course just sat after we tried to work on it together as a team.  I was so mad that we spent the money on this “get rich” book and it was his idea and he just wouldn’t take the time to participate.  One day, I got a call from Carlton Sheets’ staff who asked me how we were coming along with the Book and Tapes and said that they were offering a Mentor Program that would help us work together and change our lives.  So … I decided without the consent of my husband, that I would pay for this service because I thought if I had someone else telling him to read the book and listen to the tapes, then for sure we would start doing real estate.  The cost was thousands and what I thought was going to get my husband going, instead got me going.  Buckle up!  It was then that I learned about the different personalities.  It didn’t make a difference to my husband if we had a Mentor that we talked to once a week or not, he still wasn’t going to read the book or listen to the tapes because he was a VISUAL learner and he needed to be taught in a boot camp atmosphere.

Honestly, I can say some very valuable information I got from the Mentor was just that I needed to take the time to read, listen and then TAKE ACTION, no matter what.  I learned from the Mentor that a Purchase Agreement had many “out” clauses so if I offered too much, I could always back out. Now the next problem came along, where do I get the money to buy the houses?  We became members of six Local Real Estate Investment Clubs that really helped to keep us motivated.  We would listen to the people who were doing the deals and my husband would say “they don’t look as bright as us, why can’t we do it?”  Well, I recognized why we couldn’t work well together because 1) he was scared, 2) he would never talk to sellers unless we were one on one and 3) he could talk the talk but not really walk the walk.  I truly believed that he had what it took, but he refused to learn the paperwork, which if he would have, he would have been great at it.

Our next problem was where do you find the money???  We started buying, fixing, retailing and holding.  I heard many of the speakers say “just flap your lips and the money would come.”  Well, believe it or not, I couldn’t find the money until I went to the Real Estate Investment Clubs and met Private/Hard Money Lenders.  Having great credit, I thought why don’t I just use my credit to get started even though many of the speakers said that you need to be creative.  This is one tip that will hit your credit score but got me $75,000 to help us to get going.  I started collecting all those credit card applications that said I was approved for $5,000, $10,000 etc. and then I pulled out my telephone book.  I called every bank and credit union in the phone book and called on every credit card application.  I did all of this specifically within a 24 hour period.  Whatever money or interest rate they said they would give me, I took it.  By the end of the day I had obtained $75,000 which was about our annual income at that time.  They asked me what was my income for that year and since we were starting real estate I knew we would make at least double what our income was at that time, so that was my income.  Now you might think I was crazy, at least my husband did, but it allowed us to buy houses cash, fix them up, sell them and immediately pay off the credit cards or lines of credit and profit and by the end of the year, my income was higher than I thought!  I ended up with 40 rentals and lots of rehab houses.

The moral of this story is that having my Mentor was key!  I can give them credit for my success.  I was so stubborn and refused to do the real estate on my own, as this was initially my ex-husband’s idea and he said we were going to do it “together” as a team!  But he was frozen in place and not doing any of the work.  My mentor encouraged me and showed me how to keep moving forward on my own to create a successful real estate empire, which I have done.  I have found that my Mentors have always given me back a thousand times worth my investment.  If you are struggling on anything in real estate, I highly recommend a Mentor, and in order to have a successful relationship with your Mentor, you must take action in your business and not be afraid.  The cost of a Mentor is pennies compared to the results of either succeeding or failing in real estate and/or in your relationship with your spouse/business partner.  Learn from others’ mistakes, it’s a small price for you to pay, considering the huge price they have paid to forge through the learning curves that you won’t have to experience.  You do not have to recreate the wheel!

I hope you enjoyed this article and for many husband and wife teams out there, I recommend preparing a “duties” chart and each person pick what they want to do in real estate and just accept it and not get mad.  Women can change and Men can change, but only if they choose to and choose to for their own reasons, not because their spouse wants them to change.  I recommend that you accept each other with each of your own unique qualities and then maximize the benefits accordingly.

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move through 2017 with high success and help you bring your Real Estate Dreams to Life this year!  NO MORE DELAYS!

Kimberlee Frank

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