I found that the the list he was using was a good list it. It was a list of sellers who have a high likelihood that they would need to sell their house quickly.

The mail piece that he was trying to put together was yellow letter. A yellow letter appears to be a hand written letter sent to the seller. It’s placed in a hand addressed envelope. These letters have a high likelihood of being opened because it looks like personal mail.

The fact that the letter appears to be hand-written means that it gets a good response rate.

The disadvantage with a mail piece like this is that it takes longer to put this type of letter together. My client taking two months or more to get these letters sent out. By that time, most of the people at already sold the properties or they’d listed them with a realtors.

My advice to him was to simply the mailer so he could get out much more quickly.

Yes, don’t start with the most labor intensive mailer. Start with the easiest to get out, a post card.

The specific service that I referred him to is called www.click2mail.com. This site is affiliated with the United States Postal Service. You can upload your mail list and your your mail piece to www.click2mail.com. They will do the printing. They will do the delivery. This automation makes for a lot less work.

To ensure that he actually finished the task, I asked him to send me an email when he got the post cards sent out. When you add accountability to a task like this that is a struggle, you make it all the more likely that you’ll actually get it done.

How would you as experienced investor go about it? Which issues do I have to be careful about? Do you have any forms or contracts that you recommend I should use?

Answer: Assuming a real estate loan is the process of taking over the existing financing when purchasing the property with the lender’s approval.

The type of loan that your seller has makes all the difference in the world. If it is an FHA or VA loan, the first question to ask is “when was the loan initiated? Any loan written prior to 1989 were assumable without qualifying, whether they were FHA, VA, or conventional. Since then, the rules have changed. If the loan was written after 1989, conventional loans are generally not assumable. However, FHA and VA loans are generally assumable if you qualify.

To determine if you can assume the loan as a landlord who does not plan on living in the property, I suggest you get a copy of the mortgage and take a look at the clause pertaining to loan assumption.

Suppose you find that you can’t qualify to assume the loan but you still want the house. You could also buy the property subject to the existing financing.

When buying a property subject to, you are not getting the lender’s permission to buy the property. You a just taking the over the payments of the existing financing. Banks aren’t crazy about people just taking over their loans, but the fact is that they rarely learn of the transaction (unless you tell them). And as long as the payment gets made, they usually could care less who’s making it.

It looks as if you have some equity in the property, so buying it subject to the existing financing might be an excellent way to buy to get this property. If I were buying the property, I would only buy it subject to. I would not pay the seller much for their equity if the figures you gave me were accurate (somewhere close to $1,000).

As for forms and contracts, the first one you’ll need is a sales and purchase agreement. You can definitely use the one you got through Wealth School. Or, you can use the State contract (the one realtor’s use).

Part 1: The Three Keys to Every Profitable No-Money Down Deal

Part 2: If You Can’t Get Your Money Back in 6 to 12 Months, Why Do the Deal?

There are some sellers that you need to make all-cash offer to, such as offers on bank-owned properties.  In those cases, asking the seller to carry back the financing is an absolute waste of time, effort, and offer agreements. 

It doesn’t stop there.  Most people have been so conditioned by the “normal” way to buy real estate by realtors that asking for terms from the seller isn’t even a consideration. 

As a result, most real estate investors only negotiate on price when making offers on real estate. 

But when you are negotiating one-on-one with a motivated seller who has equity in his property, you can introduce any number of offers.

In his book “The 100 Absolutely Unbreakable Laws of Business Success”, Brian Tracy points out “the terms of payment can be more important than the price in a negotiation”. 

Price is only one factor among many others in a real estate deal.  For any real estate purchase, other factors include

1)      how much the seller plans to carry back,

2)      the interest rate of the note,

3)      the frequency of payment (monthly, quarterly, yearly, etc.),

4)      when and if a balloon payment is to occur,

5)      the length of time in which the note is paid out,

6)      any extras thrown in, like appliances, repairs, etc.

When you negotiate with a seller, you can use any or all of these factors when making offers. 

I’ve heard T. Harv Eker call a negotiation like juggling balls. 

When price goes down, some of the other terms go up.  That means more cash up front, right away.

When price goes up, some of the other factors go down.  That means less cash up front, more cash paid out over time. 

The important thing to remember of about no money down deals is that most people blow it when it comes to putting together the terms of a no-money down offer. 

On free and clear properties, I will almost always include an offer of the seller’s full asking price.  One of the corollaries of Brian Tracy’s law of terms is that “you can offer almost any price if you can decide the terms”.  So offer a high price, a monthly payment that will allow the property to cash flow, and a low interest rate. 

The trick is to make these offers every time you are in a position to make an offer to a motivated seller with equity.  Most of your offers will be declined, but you will jump for joy at every offer that is accepted. 

Have you ever seen one of those pay loan stores? The basic idea is that someone can get a short-term loan by borrowing money against their next paycheck or next number of paychecks.

This can be a life saver for someone who is about to loose something very important to them because they don’t have money for the car payment or their rent.

The downside for the person borrowing the money is the amount of interest and fees they end up paying to the finance company. If you calculate the interest paid, it far exceeds any type of usury limits. I’m not really sure how they get around usury laws, but that’s not the issue in this blog post.

In other words, if you are the one taking out that payday loan, you’ve got to be very motivated for this type of arrangement to make sense to you. Some call this taking advantage of people, but I don’t agree with that. The individual who’s in that situation needs to be the one to decide whether or not that’s a good deal for them at the time they are making the decision.
Successful real estate investors know how to put together creative offers that solve all sorts of problems for those involved. Again, someone looking from the outside at one of these offers might say the investor is taking advantage of the seller. I’ve gotten that before from a relative of the seller.

However, when it comes down to it, that relative isn’t going to do anything to solve the seller’s problem. They aren’t going to buy the property, and they don’t know anyone else who’s going to buy it either. They just end up being a temporary roadblock at best, or a permanent deal killer at worst.

One of my favorite creative offers are no interest, no money down offers. He’s a video where I explain one of these types of offers:

This philosophy of creative problem solving goes way beyond buy properties. It extends to the customers you sell these properties to. For example, I offer most of the houses I have on rent-to-own terms. If I’ve got a prospect who really loves one of my houses, I can usually find a way to sell them the property regardless of their situation as long as they have one the key ingredients to work with (See my last blog post about recipes for success).

It extends to the contractors and handymen I use to work on my properties.

It extends to the lenders who finance my business.

What it all comes down to is finding out what the other party needs. If you can find out how to get them what they need while at the same time getting what you need, you’ll be very successful as a real estate investor.

Add a comment below if you’d like.

Answer: “I feel your pain. It’s not easy to decide exactly where to start buying investment properties.

When I first got started, I was literally driving all over the city looking at properties. I didn’t have any business looking at some of those homes.

It is best to pick what is called a “farm area”. This is a neighborhood where you put your stake in the ground. Where you seriously concentrate your efforts on finding deals.

A farm area is an geographic area in which you intend to buy and lease properties. Why would you want to concentrate your efforts on certain neighborhoods at the exclusion of others? One of the major reasons is so you can learn your market very well. When you do business over and over in certain areas, you learn what properties are worth. You learn what your leasing customers in those areas are looking for. What they are willing to pay.

Another advantage is operational. When your properties are concentrated within a small area, it is easier to manage than if you have properties scattered all over your city. Maintenance becomes easier for your workers to handle when all your projects are concentrated. Making trips to properties becomes easier. Hopefully, your neighborhoods will be within a manageable distance from your home. We recommend that distance be less than 10 miles.

How large should your farm area be? Our recommendation is that you start out with an area of 1 to 10 square miles. Your farm area does not necessarily need to be within one contiguous area with neat boundaries. You may have many islands within one main area.

Here are few pointers on finding that ideal neighborhood: Have you ever heard any of those “You know you are a redneck jokes”? In many senses, you will know you are in the right neighborhood for good rentals if you see some of the telltale redneck signs in the neighborhood: For example, cars parked up on blocks, or old beater cars and trucks.

Some other clues are that it’s an older neighborhood. Even though newer construction is good in terms of being lower maintenance than older construction, the price per square foot of newer construction is also higher. Anything newer than mid-1970’s is questionable in terms of getting a strong enough rent to obtain adequate cash flow from the property.

In fact, a good rule of thumb is that the rents should be 1% to 2% of the total price of the property. Once the rent gets lower than 1%, its cash flow potential is dubious. If you can find a number of properties in a neighborhood that meet that criteria, you have found a good candidate.

Look for rental properties in neighborhoods where average, blue-collar families want to live. We stress families, because you want long term tenants. Turn over is expensive. That is why we don’t like student rentals, room mate situations, or other arrangements nearly as much as average, blue-collar families.

Answer: “I think for people that are starting out in general, I would recommend single family homes. The advantage of multi-unit properties is you can hopefully buy it for less money per unit than you would have to pay for a single-family home. For instance, you might buy a single family house with two bedrooms for 50 thousand dollars. However, you might hope to buy a two bedroom in a multi-family unit for 35 or 40 thousand a piece.”
The rent is a little less per unit than a single-family home would be per unit. The management and expenses are generally a little higher in a multi-family than a single-family home.

But the biggest problem is that a multi-family property is much harder to sell than a single-family home. For single family homes, you two types of buyers. You’ve got other investors like you. You’ve also got retail or owner financed buyers who might want to live in the house.

Retail buyers usually don’t buy multi-unit properties, at least here in Oklahoma City. Not even duplexes.

When you talk about selling a mult-family property you’re only talking about other investors. And the management is a little more complicated for a mult-unit property than a single family home. One factor is that you’ve got some common utilities. You may also have some common land to keep up with and you may be forced to play referee between your tenants.

Can you make some good money? Absolutely. I don’t think apartment complexes, especially in Oklahoma City are the huge money maker because you’ve got investors on a national basis who are also buying those properties, whereas they don’t compete much with mult-unit properties of 4 units or less or single family homes.

Recently, I saw an 16-unit apartment complex in what I thought was a pretty crappy neighborhood. I thought it might go for $200,000 to $250,000. By the time the dust finally settled, it sold for $475,000 to an out-of state investor.

In my opinion, the investor who bought that property isn’t going to make that much on cash flow. In my opinion, they’ll have to hold that property for a long time to make the investment carry it’s weight.

That’s why most of what I buy are single family homes. That’s also what we highly recommend for beginning investors.

For some great insights into getting started investing in single family homes, CLICK HERE to check out this special report I put together for you.

Answer: “To answer that, I’d like you to take a look this video of Steve Jobs in a 1984 video launching the Apple Macintosh.

I love the memories that came up of actually using the Mac to do stuff. It was an incredible tool for its time.
About five years from that launch, the internet was just getting off the ground.
The point is that in 1984, the personal computer was just a novelty to most. Most people didn’t see its potential. But some did.
Five years from now, we’re going to look back to 2009 and say to ourselves, “boy I wish I bought more properties back in the good times. Look at the deals I passed up back in 2008, 2009, etc.” The market is going to be taking a turn, and it’s going to start moving up within perhaps a year or two.
Robert Elder and I are voting with both feet and all my money. The trick is having the systems set up to keep adding more and more properties to your holdings.
The following are 5 keys to being able to consistently adding cash flow properties to your holdings over the next few years:
1) You need to have a source of financing to fund the purchases. This means that you want to use other people’s money – not your own. When you use your own money, it quickly runs out.
2) You need to have a reliable system for managing these properties that keeps your vacancy and maintenance low. You need to have a stable cash flow so that your rents cover your mortgage payments and all your expenses.
3) You need to have a system for finding great deals. When you buy lots of built-in equity, you can buy more properties because you can leverage your equity into buying more and more properties.
You can learn more about all of these three keys in my newest course. But no matter what you do, don’t stay on the sidelines. Buy some real estate – you’ll be glad you did.