Methods To Buy Real Estate

Some of The Methods To Buy Real Estate

If you missed the previous post, we discussed Getting Started. We touched on shows on HGTV, single family, multifamily, and a few other topics. Now, onto some methods.

There are many methods to buy real estate. However, not all methods work for the investor. For example, buying a home with traditional bank financing usually isn’t recommended, because for one, you’re putting your personal credit on the line, and it’s generally advisable to use other methods. This blog post will cover some of the ways and places to buy Real Estate. Note that links to external sites are not endorsements. Rather, they are just one site with information on the subject matter, provided for educational usage. We do not suggest following their techniques, unless you know what you’re doing, or have someone to help walk you through it. Note that we will focus directly on buying real estate, and not methods such as real estate investment trusts.

Buying Real Estate At Auction.

Should one buy real estate at auction? The initial appeal of looking at real estate at auctions like Auction.com, and others, are that they’re cheap. BUT, you generally must put up deposit money, which can be a few hundred, or thousand, to bid. If you’re just getting started, this may not be the best method to go. Depending on the site, some deposits may be refundable, and others may not. In addition, if you win, but don’t meet the reserve figure, then you don’t get the deal. Finally, remember that you’re competing against everyone else who is at the auction, or looking at the auction site. They people who are auctioning the property are looking for the highest bid. In the case of bank auctions, especially, they’re going to announce it on every platform available to them, to increase the chances for a high bid. Finally, it can be very difficult, if you’re not the end buyer. For the same reason that you can’t assign the contract of an REO, you can’t assign a won auction…indeed, if you read the above, you’ll possibly need a few thousand, just to bid. Then, you’ll need to be able to close at the auction, or within a set time, sometimes within 24 hours. You can use transaction funding (there will be a post about this, later) to buy that, but you’ll need to have your end buyer in place. Of course, if you have your end buyer lined up, or make some sort of arrangement with them, you can always buy the house in the name of an LLC, with yourself as “manager.” Then, if you win the house, you “assign” your ownership in the LLC to the end buyer, who comes to closing as the “owner” of the LLC. Make sure you follow your jurisdictions regulations for buying and selling a business. For more about auctions, read this article on Investopedia.

Buying REO, AKA, Real Estate Owned: Houses Owned By

The Bank.

Generally, after the auction, a house that doesn’t sell at the auction becomes REO. The bank owns it. Bigger, national banks—Bank of America, Chase Manhattan, Wells Fargo, etc.–have their own departments that handle these properties, and are placed with a realtor to sell. Often, they will try to sell the house at market value, to make up for their losses. These can sometimes be good deals, but just like there are a lot of people trying to get a good deal at an auction, there are a lot of people looking to buy REO. You’ll need to run the numbers, to see if it’s a deal. If it’s close to retail or market value, you won’t be able to wholesale it. You may be able to flip it, or buy it for a rental, of course. However, as mentioned in the auction section, wholesaling it is another matter. Also, as mentioned, you can use transactional funding, or “assign your LLC.”

Smaller, local banks, credit unions, or regional banks may or may not have the same resources for dealing with REO. Likewise, since they’re smaller, they may not have as many, or any, REO to buy. These can also be difficult, because unless you know who to talk to, and how, you’ll beat your head against a wall of gate keepers. Even if you reach out to “disposal managers,” finding the right people can be difficult for the new investor. Here is a little bit more on REOs. One other article I’ll point you to, regarding REOs, is about “shadow inventory.

Buying Real Estate Subject To.

In short, Subject To means that you are agreeing to buy a house, subject to the existing mortgage(s), along with any taxes or other encumbrances. This should not be confused with assuming the loan, which is the more “formal version.” The owner deeds the property to you, and you take over making the payments to the lending institution. For more on this, and some tips for due diligence, read this article.

The Lease Option.

There are a lot more methods, but the last I’ll touch upon is the Lease Option. Unlike a lot of other methods of REI, the Lease Option tends to focus on the “pretty homes,” or those that may need cosmetics, small updates, and “light repairs.” The Lease Option can be used in conjunction with, or independent of, rent to owns. They usually do involve seller financing of some type.

Have you ever leased a car? If you have, then you already know what a lease option is. When you lease a car, you do so with the option to buy it at the end of the lease period. If you don’t wish to buy it, you can give it back and buy or lease another car. Substitute house for car and you’ve got the idea!

A lease option is exactly what it says it is. It means leasing the house with the option to buy the house within a certain time frame at a predetermined price. This process may also be referred to as lease purchase or rent-to-own. Many people think that this procedure entails taking a security deposit plus the first month’s rent, putting the tenant in the property and waiting for the tenant to call at some point and say: I’d like to buy the house now. That is a lease with the hope that the tenant will buy! How we lease option a home is not even in the same universe. All the conditions of both the sale and lease will be spelled out in advance and a specific time line will be adhered to.

Why Do Lease Options work?

Lease options work because there is a huge market for them.

This market is made up of buyers who have some sort of problem that will not allow them to qualify for a mortgage. The problem could be bad credit or lack of the full down payment. A lease option affords these people the opportunity to purchase a home that they otherwise could not acquire.

On the other side of the coin, a lease option helps a homeowner to sell a home that for whatever reason (job transfer, divorce, retirement, location of house, etc.) could not get sold quickly enough or in a conventional manner.

The lease option process is not very complicated. Lease options work because both parties need each other. I find these people and put them together.

What Are the Lease Option Benefits to Tenant/Buyers?

Price locked in up front.
Low down payment.
No loan qualification needed.
Option consideration.
Time to obtain good financing.
No taxes to pay.
Time to repair credit.
Time to save additional down payment.
Time to check out the house and neighborhood.
And some others.

What Are the Lease Option Benefits to Landlord/Sellers?

Huge market of buyers all the time.
No management headaches.
No realtor commissions.
Higher quality of tenant.
Seller [may] retain tax shelter [check with accountant for specifics].

In the next post, we’ll get into some terms, and what you’ll need to learn, regarding wholesaling, and investing SFH.

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Getting Started In Real Estate Investing

You want to get started in real estate investing?

That’s great. It’s a nice field to get into. The question is why? Did you see a show on HGTV? Did you see the thousands of dollars they made…realizing of course, that it can take 2 – 6 months–and sometimes even longer!–from the time you close on the deal, until it’s ready to be sold. Then, you have the time it takes for a property to sell. You’re competing against EVERY OTHER HOUSE ON THE MARKET! While, in theory, it can happen within 90 days, once it’s ready, it’s not uncommon for houses to sit for 6 – 12 months, or longer. When you decide that you want to get into real estate investing, the most important things are not only what your end goal is, but how are you going to actually get to that end goal?

These blog posts will take you through some of the many methods of real estate investing, and will give you starting points. There are many aspects of REI (Real Estate Investing). The main types of REI are SFH (Single Family Homes), MFH (Multifamily Homes, like apartment complexes and mobile home parks), Commercial, and lots/land. There are more, and as I mentioned, REI has a lot of areas. For the purpose of this series, and for anyone who wants to learn with us and JV, our focus will be on SFH. This is mainly about the numbers. Could we focus on, say for example, land? Yes. But, when you look at it, nationwide, do you think there are more people who have homes to buy and sell, or lots/land?

I also want to provide some elaboration, regarding single family homes. For the most part, it’s just what you would think: a simple home, with a one or more bedrooms, bathrooms, a kitchen, and maybe some other rooms. But did you know that often, in investing, and even regarding financials, “SFH” is considered “4 units or less.” This means it can include duplexes, triplexs, and even quadplexes (sometimes called four-plexes). However, once it goes to five units—by the “powers that be”–5 seems to be the “magic number” for it to be multifamily.

Investing in SFH

Other properties that can be considered SFH include town homes, row houses, condos, and mobile homes. It should be noted that for the most part, few investors invest in mobile homes. Let me elaborate. First, if it’s in a +55 community, that is a very specific niche. When you buy, you want to buy with the end goal in mind. With everything else, an investor wants as many people as possible to look at buying their property. With this ages restriction, it limits your end buyer, and puts an unneeded risk for most investors. Then, there is the very fact that it’s in a community. For the most part, unless you develop a great rapport with the owner, or manager, as the case warrants, you’ll need to make sure it’s ok to rent your property inside of their community. There are people that do this, and there are a lot who don’t. You need to make sure all the rules you may give your tenant(s) align with the community. Most don’t want to do this, simply because they don’t understand, or want to bother to learn, all the nuances. Thus, most investors won’t do mobile homes. Also, if for some reason, there’s complications, and they have to move the mobile home, and it’s not a simple rv/trailer, it can cost anywhere from $2k – $10k, to move the mobile to a new site. Thus, it becomes another expense that investors don’t want to loose sleep and money over. The exception, of course, is if the mobile home is not part of a park. If the owner also owns the land/lot that it sits on, and the owner is looking to sell the whole thing, then there tends to be more interest in it, since the end investor has more control of the deal. Many of the above reasons can also be why some, or most, investors don’t want or like to invest in condos, or in HOAs. HOAs aren’t deal killers, but not something all investors will deal with.

In the next post, we’ll look at some of the various REI methods. Stay tuned!

Now Offering Affordable Legal Services and ID Protection

In this day and age, perhaps two of the biggest issues are legal issues, and identity theft. With that in mind, we are now offering affordable legal services and ID protection.

The Legal Plan. [LEGAL PLAN IS TEMPORARILY WITHDRAWN]

While people are supposed to be offered “equal justice under the law,” the sad fact is that unless you have the money to afford a lawyer–which can average at $200/hr!–you most likely will not be able to receive the legal help you need. Enter the legal plan.

For a nominal monthly fee, much less than most lawyers’ hourly fee, you can have access to a quality law firm, in your jurisdiction (US & Canada), to help you with legal issues. There are plans for individuals, families, and small businesses.

Some of the features of the legal plan–personal and small business–are:

  • You can have unlimited phone consultations and letters written on your behalf.
  • Contract and document review.
  • Discounts on additional services.

The Identity Protection Services.

We have all heard the stories of people who have had their credit cards, Social Security Numbers, and other financial information taken. However, Identity Theft is a much larger issue than that.

Child ID Theft: Social Security Numbers Stolen Before Birth!

Medical Identity Theft: Mom has authorities threaten to take her kids!

These are just a few of the types identity theft issues that exist. But instead of solving those issues on your own, you can have a team of licensed private investigators work on your behalf, for about the same monthly fee as in the legal plan. Find out more!

New Calendar and Workings

I am now using a new calendar.

I am now using a new calendar. After a lot of issues with the old system I was using, I’ve decided to give TeamUp a try. We shall see if this will work, to help scheduling time with other professionals. This calendar will only feature my “in field” time, which is 10:00 a.m. – 5:00 p.m. PST. Before that, I will be working on emails, and scheduling with my virtual assistants. Both before and after that time, unless it is an emergency, I prefer not to be called, as I am a new father, and want to spend time with my baby boy, and ask all professionals that I work with to respect that, please.

Not available on weekends.

This is two-fold. Saturdays are my Sabbath. I will not go into my spiritual & religious beliefs and preferences, just as I will not ask you yours. I will aim to respect any professionals I work with, regarding such beliefs, and ask for the same, in turn.

Since most of the people I know–for those who have a religious preference–have their day on Sunday, I’ve found that Sundays are simply best for me to have “family time,” especially with the new baby. Also, I honestly cannot recall any financial institute having hours on a Sunday, and with a lot of working being on REOs, and various NPNs/NPLs, I find it best to do the bulk of my work on days when they are open. Of course, there are various federal “bank” holidays, where other professionals can work, and unless I otherwise note on the calendar, I’m generally available during the week, on the times listed, barring unforeseen circumstances.

If it is real estate, we can work it!

My primary transactions have been with various forms of residential properties, being SFH or MFH. We are always looking to work with any form of commercial:

  • Office,
  • Retail,
  • Agriculture,
  • Etc.,

At this time, we are only working with secured transactions, and not unsecured transactions–business debt (C&I), and consumer debt (eg, credit cards)–with new clients. Before working with unsecured debt, we must have a firm and established relationship with the client. When we have completed a few transactions that are secured by real estate (REOs and/or notes), we can explore unsecured transactions, for clients interested in these sort of transactions.

Winter Has Been Long

In some ways, the winter of 2016-2017 has felt long, and mainly because some others have been having issues with the cold weather. There have been a few cases where the winter has caused some outages, which has delayed work, but that’s life.

We are now working the NPN/NPL niche, with the focus on bank and credit union nonaccurals. We look for those debts that are +90 days, and are not getting payments. Our company has a number of investors, that are interested in this, and we are looking to source these accounts.

If you work with a financial institute, and you know that there are a number of tapes with nonaccurals, Non-performing notes/loans, etc., we welcome referrals.

Looking to Explore NPNs

100K Investing, LLC, is always looking to explore opportunities. The current opportunity we are looking at is NPNs, or NPLs, also known as Non-Performing Notes or Non-Performing Loans.

At this time, or main focus will be on both brokering these notes in the Inland Northwest to those who are interested in the area, and to provide due diligence services on these notes, tapes, or pools. You can find out more my going to the cash for notes tab, and select NPN.

Fundraisers Earn 5% Commission for Account’s Life

Are you looking to raise money for your fundraisers? It can be for big ones like a school or church, or a personal one, such as medical expenses or help getting back on your feet.

Our business is willing to make ongoing contributions to your crowdfunding campaign. This includes, but isn’t limited to crowd funding campaigns on KickStarter, GoFundMe, Indiegogo, and the other crowdfunding sites.

How does this work? We help businesses get paid for their invoices within 24 hours, as opposed to 30 – 90 days.

For each business you refer to us, that can use this service, we’ll provide 5% to your campaign, for the Account’s Life. If they do invoice (also known as accounts receivables) factoring for one month, you get 5% for 1 month. Same for 6 months, or 6 years. However many invoices the business(es) you refer to us to be factored, and whatever the value, you get up to 5%.

Has your fundraiser been going slower than you had hoped? Are you able to reach out to people, especially local businesses, and inform them about factoring? You can mention your cause, or not, at your discretion. Let them know how factoring can help their business, and if they decide that factoring is something they wish to do, you will earn an ongoing 5% commission, for the life of the account.