Real Estate Investing Tips by Scott Roemermann

Aug 29 2010 ∞

Real Estate Investing Twitter Updates for 2010-08-29

(Original Post: http://www.investing-secrets.com/real-estate-investing-twitter-updates-for-2010-08-29/)

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Understanding the Foreclosure Process

(Original Post: http://www.investing-secrets.com/foreclosure-process/) Every state and county has slightly different rules concerning the sale of pre-foreclosures and short sale investing, but there is a basic process that each follows.  This foreclosure process takes quite a long time before a property is sold at the sheriff’s auction and even, in some cases, before the homeowners are evicted from the property.  Yet, even so it’s still a good chance for real estate investors to pick up properties at a discount along every step of the way.

Begins with Non-Payment

A lender is often a bank that lends the buyer money based on their job, down payment and credit history to purchase a home.  In return the buyer agrees to a home mortgage with that bank to begin paying back the loan.  The bank makes money because the loan accrues interest over the lifetime of the mortgage.  The buyer becomes a homeowner and everyone is happy.  Should the buyer turned homeowner stop paying back the loan through the mortgage, the bank has a safety net in being able to take ownership of the homeowner’s property. This is called a foreclosure.  The foreclosure is initiated by the bank when the homeowner has stopped making payments on the home mortgage.  The bank may wait an extended period of time before beginning the foreclosure, allowing anywhere from 3 to 6 months for the homeowner to being making payments on the mortgage again.  The bank would prefer not to take a property back in foreclosure.  It’s a messy, lengthy process and the loss mitigation officers must consider property the bank owns to be a non-performing asset.

Property Enters Pre-foreclosure

A foreclosure is begun when the bank files a Notice of Default through a trustee with the County Recorder’s Office.  This notice lets the county and the homeowners know that the bank is getting ready to foreclosure on their property.  In short sale investing the home is now considered to be in pre-foreclosure. During pre-foreclosure the trustee appointed by the bank, usually a local attorney, prepares for a foreclosure.  The trustee makes every reasonable effort to contact the homeowners and let them know about the upcoming foreclosure.  This can be done by posting the Notice of Default on their property, sending it in the mail and also placing it in the classifieds of the local newspapers.  The trustee may also call the homeowner to see if they can work out payment arrangements to get the mortgage back on track. If the mortgage loan isn’t brought up to date in this 3 month period the trustee files a Notice of Sale with the County Recorder’s Office.  This Notice of Sale is also posted at the homeowner’s property and placed in the local newspaper classifieds.

Goes to Court

Some states require that the Bank go to court and sue the homeowner for their property as part of the foreclosure process.  This process can further lengthen the pre-foreclosure period which is a good thing in short sale investing.  The short sale process can be a little lengthy itself, so the more time you have to put together a deal, the better. The bank’s trustee will have to notify the homeowners of the upcoming court date and ask that they show up.  However, many homeowners fail to show up in court to fight for their property.  This can be because they are ashamed or afraid.  Some don’t know the laws very well and could even be concerned that they’ll be arrested for a bad debt. If the homeowner presents a good case in court or even if the homeowners just show up and provide their foreclosure information, there is a good chance that the court will provide the homeowners with a few more months to try and catch up their mortgage or make arrangements. The court may also decide to award the property to the bank, especially if this property has gone to court previously or the homeowner doesn’t even show up to state their case.

Foreclosed Property Up for Sale

After the bank forecloses on the property it goes to the Sheriff’s Auction, also known as a Foreclosure Sale or Trustee Sale.  This auction is a part of the foreclosure process and can be anywhere from a few weeks to several months from the time the bank has foreclosed on the property. There are several different popular methods for holding a Sheriff’s Auction, but the most popular is held right on the courthouse steps.  The county clerk auctions of the foreclosures one after the other by property number to the public.  The highest bidder wins that property.  The opening bid on each property is often equal to the remaining loan balance that the bank is owed, plus interest accrued and any additional fees associated with the Sheriff’s Auction. At this point, short sale investing is bunk.  If you still want that property you’ll need to wear the hat of a foreclosure investor and get right in there with the bidding.

After the Sheriff’s Sale

If no one bids high enough to meet what the bank sets on the foreclosed property it is purchased by the bank’s trustee and becomes a bank owned property.  It is called, ‘Real Estate Owned’ or REO at this point and usually sits on the banks portfolio until the bank can get it sold to a post-foreclosure investor. If an investor bids on the property and wins it they are winning the Trustee’s Deed to the property.  They become the owner and can do with the property as they wish. Sometimes the homeowners may still be living in the property after it is sold at auction in the foreclosure process.  In this case the new owner may wish to work out a rental agreement with the homeowners, or ask the homeowners to leave.  If the homeowners refuse then the new owner must evict them. The owner can file an eviction notice with the country sheriff to start the foreclosure process and usually within 4-6 weeks the sheriff comes out to forcibly evict the former homeowners.  However, this happens several months to a year after the bank sent the home into pre-foreclosure.  Most homeowners have plenty of time to make other arrangements and have either left or are in the process of leaving when the property is sold at auction. The foreclosure process is a lengthy one, but it provides lots of time for short sale investing to take place before that sheriff’s auction.

Aug 22 2010 ∞

Real Estate Investing Twitter Updates for 2010-08-22

(Original Post: http://www.investing-secrets.com/real-estate-investing-twitter-updates-for-2010-08-22/)

Aug 16 2010 ∞

Potential Mistakes Every Wholesaler Makes

(Original Post: http://www.investing-secrets.com/real-estate-wholesaling-mistakes/) Real estate wholesaling is all about closing the deal. You may spend a lot of time looking for a house to flip or you may spend very little. You may keep a house flipping guide by your side at all times, but when it comes down to closing the deal, you need to be a good seller. There are plenty of way to close a wholesale deal or flip a house, but what catches the real estate investor off guard are the little mistakes or sometimes big mistakes that make people nervous about a sale. Beware of falling into these traps! [widget:ad_unit-243246181]

Bragging Rights:

They say a first impression is very important and that is especially true of the first meeting with your homeowners. The goal of this meeting is to get them under contract with you to sell the house. During that meeting you want to be polite and professional. That doesn’t mean bragging about the hundreds of deals you may or may not have completed already. House Flipping Tip: Coming off too slick when meeting with a buyer or the homeowners before any contracts are signed can cause you to lose that contract.

Greed:

This is an especially problematic trait for house flippers. There is a tendency to want to bring in just one big sell through house flipping a property. This desire for a large cash payoff can cause the investor to lose the chance to make any sale on the property. An asking price that is too high will be out of reach or unattractive for potential homebuyers. House Flipping Tip: Take the first good offer that is made on your real estate wholesale or house flip.

Impulsiveness:

Your best chances for making a profit in real estate wholesaling is to create a process and perform due diligence before signing anything. Some investors just want to jump right in on a house flip or wholesale. So, they sign that contract before figuring out if they can really make a profit on their investment of time and money. Take a little time to calculate the market value of the property you are interested in compared to the price the homeowners are asking. Then, you’ll know what you can offer the homeowners and what you can ask in finder’s fees from the buyer on a wholesale. House Flipping Tip: Perform Due Diligence and develop a plan for your house flip before signing.

Real Estate Pitfalls:

You can also fail to close a wholesaling deal through some common pitfalls that crop up. The failure to make a closing can be very damaging to the house flipper, who has to cover the investment in the property and carrying costs until it sells. [widget:ad_unit-243246181]

Over budget:

It’s easy to get over budget when fixing up a property for the house flip and that can ruin your bottom line even when you sell the property. Keep a tight rein on your remodeling budget during a house flip. That means paying close attention to your contractors, being sparing with what you purchase for the home and being vigilant about turning off utilities or remembering to turn off things like the lights when you leave the home. House Flipping Tip: Set a budget and stick to it.

Lazy Contractors:

It’s the proverbial contractor who is always claiming to be done in ‘two weeks’ but he or she tends to run into the months late time period. There are a lot of great contractors out there, but also a few poor contractors. When you are remodeling a house to flip, you’ll have to do your research before hiring a contractor. You’ll also have to be willing to fire that contractor if he or she isn’t up to snuff. House Flipping Tip: Research a contractor before hiring and don’t forget to ask for references.

No Inspection:

Don’t just take the homeowner’s word for it. Pay to get an inspector to look over the property before you enter the purchase agreement. This way you’ll have the information you need to fix up a property and won’t be caught off guard by any major structural problems. It’s also a good idea to have the inspector’s report on hand for the buyer. House Flipping Tip: Pay the few hundred dollars up front to have the property inspected.   Any of the above reasons can be the cause of your inability to close a wholesaling deal. Stick close to this house flipping guide and you’ll find that you are more likely to flip those houses successfully.

Aug 04 2010 ∞

Costs of Starting a Wholesaling Business

(Original Post: http://www.investing-secrets.com/starting-a-wholesaling-business/) There are a lot of things to be responsible for when starting a wholesaling business. You’ll be in charge of finding the leads, finding the buyers, bringing them together, finding a good title company and even drawing up appropriate contracts. Once you get the know-how of house flipping basics, these responsibilities become quick and easy. Yet, when you are starting off, it’s a lot to take in. No one wants to further muck-up the process with worry about unpaid bills and trying to finance these wholesaling efforts. Yet, there are a few costs to be aware of when starting a wholesaling business. [widget:ad_unit-243246181]

House Flipping Basics and Wholesaling Basics

When involved in wholesaling there are two levels of cost. The first is the cost associated with house flipping. The second is the cost associated with wholesaling. These are two separate, but closely related enterprises. You’ll have to decide as a real estate investor whether you’ll be flipping a house or just wholesaling it. This will determine your costs.

Wholesaling Costs

The costs of starting a wholesaling business are really minimal. You’ll be focused on selling that house before the agreement to sell the house reaches its closing date. As soon as you get a client to sign the agreement to sell their house you should be out the door or on the phone looking for potential buyers. These buyers are usually other investors who like to buy houses cheaply and fix them up for rental or the traditional real estate market. They may even be hard money lenders who are looking to expand their business into new areas. You won’t be spending money to fix up the house, on insurance or even placing the property with a realtor if you can help it. Yet, you’ll also usually be responsible for closing costs and even a referral bonus if someone referred the property lead to you. Basic Wholesaling Property Costs:

Loan costs or closing fee

You may be responsible for one set of closing fees when you buy the house and sell it to your buyer. This depends on how you set up the sale. Most likely the title company will just deduct the closing costs from your profits before cutting you a check.

Referrals

Property wholesalers sometimes offer referral bonuses to people who provide them with property leads. This is usually about $500 to $1000.

Advertising

You’ve got to get your name out there. Advertising doesn’t need to cost much, just as much as a ream of paper and some printing ink or as much as a radio spot and classified ads in the local paper. This is up to you.

Appraisal Costs

Depending on where you are and how you close the deal you may need to hire an appraiser to look over the house and give you an estimate of its market value.

Home inspection

Wholesaling property buyers aren’t usually nervous about buying a home that needs some work, but they may want to know what kind of work needs to be done before purchase. So, you’ll have to get a property inspector out there to evaluate the damage so you can present the information to your buyer. [widget:ad_unit-243246181]

House Flipping Costs

When you decide to start house flipping as an investor your costs will include all of the above and more. House flippers often fix up the property they are trying to flip first and will even place it with a real estate agent to try and sell the property for top dollar. Basic House Flipping Costs:

Loan or Mortgage

House flippers can also buy the house they intend to flip. This can mean a mortgage in your name or at least cash out of pocket that you’ll have to make back on the sale of the property.

Insurance

Since the property will be in your name house flipping basics says you’ve got to cover it!  It can be difficult to get homeowner’s insurance for a wholesale property. Your best bet may be to pick up Builder’s Risk Insurance. This is insurance that’s intended for properties being built or in the process of being remodeled.

Carrying Costs

These are the basic costs of owning a home. You won’t have to worry about them when starting a wholesaling business, but if you intend to be a house flipper this is what you’ll be responsible for:
  •  
    • Utilities
    • Monthly Mortgage Payment
    • Property Taxes
    • Regular Maintenance
House flipping basics says; the longer you hold that property in your name, the more carrying costs you’ll have. The more cost you have, the more you have to sell the property for just to break even.

Remodeling and Repair

House Flippers will want to repair any damage to the cheap property they’ve just purchased. So you’ll be responsible for remodeling costs and repair costs to the contractors you hire.

Realtor Commission

When the house actually sells on the market, you’ll probably have a realtor’s commission to pay. However, this usually comes out of the profits from the sale of the real estate property. This is usually about 6% of the selling price. As you can see, house flipping costs are much higher than the basic costs for wholesaling a property. Yet, there are benefits to both options. Starting a wholesaling business costs very little for the investor, and involves wholesaling a lot of houses for an average of $3,000 to $5,000. House flipping costs a lot of money initially, but promises a bigger payoff on one house. Some flippers claim to make anywhere from $50,000 profit per sale all the way up to a whopping half a million dollars (in rare cases when the housing market was explosive!)

Aug 03 2010 ∞

Find Wholesaling Leads

(Original Post: http://www.investing-secrets.com/find-wholesaling-leads/) Marketing is an important element for success in any real estate investment. In wholesaling property it’s essential for bringing in leads and selling property. It’s very difficult to find enough homeowners looking to sell property without marketing. You can’t exactly go door-to-door asking people if they are selling. Plus, looking up properties in the county courthouse will only let you know which homeowners are in debt and in foreclosure. Not which ones are looking to sell their homes.

House Flipping Basics: Marketing

So, you need to draw the homeowners to you with marketing and advertising. This isn’t as difficult as it sounds. Marketing your wholesale business can be as simple as putting up a few handwritten signs in the area where you’re looking for wholesaling property. Or it can be as quick as placing an ad in the local newspaper. [widget:ad_unit-243246181]

Bandit Signs

A lot of real estate investors use bandit signs to advertise houses for sale, but you can also use them to advertise your wholesaling business. You should ideally place these signs everywhere you can in your area. Signs are the easiest and most visible marketing tool you can use. Make sure that your signs are simple, with bold print or bold dark handwriting on them. You can simply state, ‘I buy cheap real estate’ on your bandit signs, along with your phone number or even website. Or you can also write, ‘Will Pay Cash for Any House’ on your signs. These are great and simple ways of drawing in house flipping leads.

Flyers

In addition, you can use your word processing program to create a simple flyer with tear off strips at the bottom containing your contact information. Blanket your area with these flyers. Place them in laundry mats, on telephone poles and even ask local businesses if you can place a pile of them on their check out counter. A great place to see if you can leave a bunch of flyers is the local library. They’ll often have a bulletin board for these kinds of items.

Classified Ads

Another option is to place a simple classified ad in the local newspapers. Place your ad in the papers, the local shoppers and even in local real estate magazines. The wording for these ads is the same as above. Tell them ‘I buy houses!’ and provide your contact information.

Networking

You can also bring in wholesaling property leads by getting people to work for you! A network is very easy to build up and usually starts by talking shop with other local real estate types. You can contact all kinds of investors and people involved with real estate to let them know you are buying homes. [widget:ad_unit-243246181]There is a long list of people you can contact to bring into your network:
  • Local Real Estate Clubs
Contact and join these local clubs. It’s a great way to meet like-minded people, educate yourself and find both buyers and sellers.
  • Realtors
There are plenty of realtors and they usually specialize in different kinds of property, including foreclosures. Make contact with a few realtors and let them know that you are looking to buy some cheaper houses that they wouldn’t normally be able to place on the market. You might be surprised what they have on hand.
  • Landlords
Landlords are a great resource for both selling property and buying property. Give them your card, tell them you’ve got properties on hand for cheap and that you are always looking to buy properties too.
  • Local Attorneys
Attorneys are involved in all kinds of real estate from foreclosures to inherited properties. Let them know that you are looking to buy unwanted homes. The attorneys may have clients who are looking to sell off some property on the cheap. Finding wholesaling leads is a cinch once you get started. All you need is the proper advertising and a good network to bring the leads to you. It may take you a little while to get the leads started coming in, but remain optimistic and persistent and you’ll find more work than you can handle.

Aug 01 2010 ∞

How Much Can You Make Wholesaling Houses for a Living?

(Original Post: http://www.investing-secrets.com/wholesaling-houses-for-a-living/) Many real estate investors use wholesaling to supplement their income on a regular basis. However, if done right you can use wholesaling for your entire income. You too can take advantage of wholesaling to supplement or complete your income, but just how much money can you bring in through wholesaling houses for a living? [widget:ad_unit-243246181] Real estate wholesaling is different from flipping houses, so those who make money flipping houses should know that real estate wholesaling will bring in considerably less money. However, you’ll be able to make more deals as a wholesaler so you’ll be bringing in that money more often. Real estate wholesalers can count on a glut of cheap homes being available on the market. Even though you’ll only be bringing in a certain amount of money per sale you’ll always have another sale around the corner. This can certainly be called job security.

Average Profit Per Wholesaling Deal

How much money can you make wholesaling houses for a living as opposed to those who make money flipping houses? The average real estate wholesaling deal brings in between $3,000 and $10,000 in profits for the investor. This is a very small amount compared to the profits of those who make money flipping houses. A house flipping deal can bring in about $30,000 once the house sells to a buyer. Remember, that house flipping can take several months, up to a year to complete. Plus, you’ll be investing a lot of money and time in that one house flip. A wholesaling deal can close in just a few days, and I’ve heard of deals that closed on the same day as the investor found out about the property. That’s $3,000 in one day. Imagine closing 3 or 4 wholesale deals a month for just $3,000. 4 deals times $3,000 equals $12,000 a month wholesaling houses for a living. Now, take that $12,000 times 12 months in year and you get $144,000 a year wholesaling house for a living! That’s an incredible profit compared to the measly $30,000 you’d make flipping a house over the course of a year. The idea in wholesaling houses for a living is for your buyer to get the majority of the profit. You’ll be getting a kind of ‘finder’s fee’ for the property and the buyer gets to spend time fixing up the property and marketing it for a larger profit of his or her own. This doesn’t mean that you have to let the properties go for a pittance. Don’t ever let that buyer talk you out of the fee you ask for assigning the contract on a wholesale property or even talk you down to a drastically reduced fee. The lowest you should make on a real estate wholesale deal is about $3,000. This is often on properties that you may only hold for a few days and don’t even spend a lot of time on looking for a buyer. Of course, all sales also depend on the house and its real market value.

When Do I Get the Money?

Any investor who wants to make money flipping houses will find that they don’t actually get their profits until after the house is sold. After you find a buyer for a home it can take about 30-45 days for the mortgage company to get to the actual closing. You’ll have to wait until the title has cleared with the title company. That means an investor can spend months investing time and money into the house and not get paid until that property is sold. [widget:ad_unit-243246181]When you close a wholesale deal, it’s possible to get your profits within as little as a week. You’ll be lining up another real estate investor to buy this property, so it’s likely that they’ll be able to pay cash for the house. A cash buyer is a great lead to have when wholesaling houses for a living. You can have the buyer transfer the funds to pay for the property right into an escrow account with the title company. The title company processes the paperwork and you can pick up a check with your profits in just a few days. When you are assigning a contract on a wholesale deal, there is potential for an even quicker payment. Just instruct the buyer to bring a cashier’s check for the amount of your fee to the closing deal. Once you assign the contract, the buyer hands you the cashier’s check and you only have to wait as long as it takes for the check to clear with your bank.  Compared to those who make money flipping houses, the concept of wholesaling houses for a living is a great idea. You’ll close deals more often and get cash buyers for the wholesales, meaning that you’ll get more profits faster.

Jul 25 2010 ∞

Real Estate Investing Twitter Updates for 2010-07-25

(Original Post: http://www.investing-secrets.com/real-estate-investing-twitter-updates-for-2010-07-25/)

Jul 22 2010 ∞

Benefits of Real Estate Wholesaling

(Original Post: http://www.investing-secrets.com/benefits-of-real-estate-wholesaling/) These days it’s incredibly tempting to start wholesaling when you are looking for a long term investment or quick cash profit. Yet, it’s also a little bit intimidating. Legal issues tend to muddy the waters for new investors and there is even a sense of fear. No one wants to take a risk and lose their money. Yet, that’s what people do with their money every single day. Invest in the stock market and you are taking a risk. Buy gold and you are taking a risk. Sometimes, especially with the stock market, that risk is even higher than the potential risks of starting a wholesaling business.

[widget:ad_unit-243246181]Wholesaling Benefits

As a wholesaling investor there are lots of benefits too. Wholesaling does not require a lot of money to get started; sometimes it requires very little cash indeed for investors who are selling those properties almost immediately to buyers. Plus, when you take advantage of real estate wholesaling you can learn as you go. No need for certificates or special degrees. Heck, even a real estate agent needs a license to sell houses, but you won’t! There are even more great benefits and plusses to being a real estate investor. Basically, the benefits to starting a wholesaling business are:
  • Little to no start up money required (if done right).
  • No educational requirements, degrees or licenses needed.
  • Work when you want on houses that you want!
  • Pick the people that you want to work with and when.
  • Not time consuming.
  • Don’t need good credit.
  • Start earning now!
  • Small to large cash profits as soon as you sell. That’s cash in hand!

[widget:ad_unit-243246181]What’s Your Place in Wholesaling?

As a real estate wholesaling investor you are essentially the middleman. You are the guy that finds the houses for sale and connects the buyers with them. Once you start learning more about starting a wholesaling business you’ll find that there are plenty of buyers for wholesales as long as you look in the right places. Plus, there are plenty of motivated sellers and it will be easy to get them to come to you with the right marketing. When you find a property that the owners are motivated to sell you’ll lock the owners into a purchase agreement and start looking for a buyer during the 30-60 day period before closure. If you’ve already gotten your buyer list built up it may not take you very long at all to find a buyer. Then you just mark up the price a little on the sale. A wholesale deal done properly can earn you at least a few thousand dollars without putting down more than a few hundred in cash. This is because your buyer will pay the marked up price of the property to your title company and the title company will just cut you a check for the difference. Barring that, you simply ask for a finder’s fee when you turn over the property to the buyer that you’ve found. Starting a wholesaling business has never been easier. If you are looking for a great career or a way to make some extra cash then real estate wholesaling is for you.

Jul 21 2010 ∞

What is Real Estate Wholesaling?

(Original Post: http://www.investing-secrets.com/wholesaling-real-estate/) Real estate investing is an excellent way to earn profits or earn a living, but before you start wholesaling houses for a living you should take a little time to learn what it’s all about. Wholesaling is in essence a business-to-business trade. You, as the wholesaler seek out a product for a certain ‘low cost’ price and then place that product in the hands of your buyer who is often a hard money lender or another investor. [widget:ad_unit-243246181]You seek out affordable properties and put them in the hands of other investors or buyers. For your trouble you get paid a nice profit that is almost like a finder’s fee. The process of wholesaling houses is one of the most simple and straightforward investing practices out there. The time from find to closing is also one of the shortest periods out of all the other niches in real estate investing. 

Don’t Buyers Search Out Property Themselves?

On the surface it may appear as if real estate wholesaling is a little redundant. It seems like the buyer could easily search out cheap properties on his or her own with no need for a middleman. These buyers do seek out properties on their own, but they can’t find all of the great deals. The kind of buyer that seeks out wholesale deals is usually always on the lookout for more properties. These buyers are also very busy. Wholesaling buyers are constantly working on properties, rehabbing them and selling them on the traditional home market. Plus, who wouldn’t jump at a property that’s still offered to them at way below the market value? Real estate wholesaling and house flipping often confused in real estate, but they are slightly different practices. When you wholesale property you act as the middleman seeking out cheap properties and connecting them with buyers for a slightly higher price or a kind of finder’s fee, either way it depends on how you arrange the closing. Very little time is spent fixing up the houses or even placing them on the traditional housing market. House flipping usually involves rehabbing a house with the homeowner or fixing it up enough to make it very ‘market ready’. There are also a lot of open houses and attempts to bring in a more traditional buyer who is looking to live in the home after purchase. House flipping can provide larger pay offs than wholesaling houses for a living as these cheap houses now sell for full market value. It also involves a lot of extra work and it’s harder to sell a house at full value. Real estate wholesaling is really a very simple business. You develop a process for bringing in wholesale leads, develop a buyer list and start assigning contracts to your buyers. It really is easy once you get the process started.

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