Super Tips For Selling Your Rehab Deals Fast
By LouC | March 5, 2008
So what is the trick? So much time and money is spent on systems updates, roofs, and structural issues, that many times there’s nothing left for what really makes the sale: what your potential buyers see. And more importantly, what they fall in love with. People don’t walk into your house, and say, “Wow, they have all new electric. Let’s buy.” That’s just a core expectation. The trick to selling houses fast is to seduce your customers to fall in love when they walk through. It has to feel like a home to them.The two most inexpensive yet surefire ways we have found to create this atmosphere is through color and through decorating.
A tastefully decorated house really stands out from the others. New house builders learned this a long time ago. Why do you suppose they hire interior decorators? But they have the advantage of creating one masterpiece to sell many. Rehabbers don’t have that luxury. But we discovered that a house can be “staged” to feel like a lived in home. Staging is the art of artistically placing décor items around the house. Perhaps a colorful place setting on the kitchen counter along with open coffee beans for aroma, and an open recipe book turned to a colorful picture. Bathrooms dressed up with beautiful towels, sweet smelling soaps, and window treatments as shower curtains. Finally, fireplace mantels decorated as if the family was already living there.
But even staging doesn’t create the ambiance you need. It is the warmth that comes from color. You may have heard to use a white-on-white color scheme to remain neutral and not turn anyone off. The truth is – no one is turned ON either. Buyers aren’t attracted to all white houses. At best, there’s no emotion. With the use of contemporary designer colors, however, these same people fall in love with the home. That’s the emotion that sells. When they love, they buy. And they fall in love with houses that are brought to life with full color.
Best of Success & Abundance,
Lou Castillo,
Real Estate Investing
National Trainer and Mentor….
www.InvestorRiches.com
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Fire your family, Fire your friends!
By LouC | October 8, 2007
Today is my birthday and I plan on spending most of the day with my wife, so I’ll keep this short.
Over 12 years ago when I began my journey as an entrepreneur I realized quickly that the biggest hurdle I would ever come across was my own mind.
You see, I was like almost everyone else that decided to take the plunge into owning my own business.
I was a 9-9 corporate employee that couldn’t eat, sleep, or vacation without being on call or chained by the corporate handcuffs.
Finally in the late 90’s I said ENOUGH! - I’m going to make this happen!!
I quickly learned that most of my family and friends didn’t quite see things the same way I did anymore.
…Some made a point to tell me I would fail every time I saw them.
…Some didn’t take me seriously and tried to make me feel like my decisions were risky or stupid.
…and some just ignored my big life changing decision all together pretending everything was the same because they we’re so sure I would fail and they wanted to save me the embarrassment.
It didn’t take too long before I made a serious decision to FIRE everyone out of my life that didn’t believe I could be successful.
If you want to be successful you must surround yourself with like minded people.
People that support your dreams rather than tear them down are worth their weight in platinum!
Don’t listen to the negative chatter all these people spit at you!
(by the way, most of these folks don’t mean to be negative, they just don’t know any better!)
If you’d like to speak with one of my specially trained real estate strategist about your business and get some powerful tips for taking your business to the next level go here:
http://www.investorriches.com/consult.htm
You won’t regret it!
they’ll support your dreams and show how to make them a reality.
Best of Success and Abundance,
Lou Castillo
P.S. Josh, my staff, and I are working on some very BIG things that we’ll be releasing very soon, so keep your eyes peeled for more details!
P.P.S. Don’t forget your business session below:
http://www.investorriches.com/consult.htm
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Can you eat an elephant?
By LouC | September 28, 2007
Have you ever set a goal for yourself that just seemed too large to achieve?
I have. And I felt defeated before I even started. That’s totally unproductive.
I learned a trick that really helped. I hope it helps you too. It’s the idea of eating the elephant one bite at a time.
Break your goal down into the smallest possible steps needed to make it happen. When you look at the small steps, you’ll realize that you can easily achieve them, which will ultimately result in achieving your larger goal.
Let me use an example:
Suppose that you want to make an extra $20,000 a month. If you’ve never made
$20,000 a month, that can seem like an unrealistic goal.
But let’s break it down. How many deals would you need to do? No more than two.
How many motivated seller leads would you need to have per month to create two deals?
About 40 leads.
40 leads is 1.3 per day. Now, your goal isn’t to earn $20,000 a month, it is to generate an avarage of 1-2 leads every day.
That IS a realistic goal that feels comfortable. It’s easy to commit to creating 1-2 leads a day.
The best part is that by making this small effort every day, you’ll make $20,000 every month.
Let me know when you use this idea and what results you achieve.
Best of Success & Abundance,
Lou Castillo
P.S. If you haven’t gotten your copy of the Online Real Estate Empire CD, I set aside a FREE copy for you here: http://www.onlinerealestateemp
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…Wonderful words about the Online Real Estate Empire workshop…
By LouC | September 21, 2007
I just received this email from a student who came to our last Online Real Estate Empire workshop in Atlanta, Ga.
—-
We have learned a lot from our training with Lou Castillo and the Investor Riches group and are enjoying their follow up to make sure we can succeed with the instruction we’ve received. What a treat to work with a group of professionals that are truly thoughtful, caring, and dedicated to their customers’ success. They are all helping us to succeed in the direction we’ve chosen to go based on the outstanding education and focus we’ve already received from Lou, Josh, Larry, Amanda, et al. We are totally impressed with the helpfulness and knowledge of these people and their genuine caring for our success. I think you will truly benefit by joining them at their next course. They are really there for us!
Claudia Howard
Athens, Alabama
—
Claudia, keep up the great work and thanks so much!
- Lou
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Listen Up - Don’t become a victim!
By LouC | September 21, 2007
Hi,
Are you committed to achieving your goals?
I don’t just mean that you WANT to achieve them. I mean are you really determined to make them happen?
Will you overcome obstacles, or just blame your poor luck?
I’d like to share a story with you. A few months ago a young college student begged me to mentor him and he would pay me double my fees later from his earnings.
I always decline these requests, but something in his tone suggested that he’d be different.
But was he really committed to is own success? To test it, I gave him a couple of tasks to complete:
1. Drive down and meet me in person
2. Show me that he had saved $2,000 to put towards his Marketing.
Task #1 he completed immediately. Task #2 on the other hand was a different story. Month after month he had another excuse. He lost his job. He had unexpected expenses. He was mugged.
Whether his excuses were the truth or lies is totally irrelevant.
What’s important is that he had an incredible opportunity and let it slip by simply because he couldn’t stay committed to a goal. He became a victim of his circumstances rather than empowered by the passion of his dreams.
What about you? Are you a victim? Or are you passionate about your goals? It’s YOUR decision – don’t give it away.
Take control, and receive everything you deserve.
Best of Success & Abundance,
Lou Castillo
P.S. If you’re passionate about real estate investing, but not sure how to achieve your goals, sign up for a complimentary phone consultation with one of my strategists. Click on this link now to request a session: www.InvestorRiches.com/consult.htm
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Are You Afraid Of The BIG BAD ‘Due On Sale’ Clause?
By LouC | September 17, 2007
I want to make you aware of a clause that is in most mortgages today called a due on sale clause. What that clause says is that the bank has the right to call a loan due if the title has been transferred. It doesn’t say that they must call the loan due. It doesn’t say that they have an obligation to call the loan due. It simply states that they have the right to call the loan due. I understand that this could be concerning to you when doing a subject to deal. It was concerning for me too when I first got started so I talked to several different attorneys who represented banks and asked them if they had ever foreclosed on anybody using the due on sale clause. Several attorneys told me that as long as the person was making on time payments, they have never foreclosed on them. When I heard a bunch of attorneys tell me that, then I decided it was okay and was confident the banks would not call the loan due.
Here is why a bank doesn’t actually exercise their due on sale clause. You may think the bank would want the house back, but they actually don’t. Banks are in the money business, not real estate. What they want is for their money to be out there in play earning them interest. Now when a loan is not performing, in other words when it is not having on time monthly payments, then it is considered part of their non performing portfolio. The federal government now requires them to put additional money into reserves to cover those non performing loans. So the bank actually gets a double whammy with this. They are not getting their interest payments on their original loan and now they have to put more money into reserves that can’t be loaned out and earn them money. Obviously, this is not good for somebody that is in the money business.
Let’s say that you were dealing with a seller that was in a pre foreclosure situation. That means that the loan was a non performing loan. You caught up the back payments and now you are making on time monthly payments. So for the bank you took it from a non performing portfolio and put it into the performing. This is good for the bank. They found out that you bought this home subject to the existing mortgage, the title has changed and they decide they are going to call the loan due. Now they are smart enough to figure out that if they call the entire loan due the first thing that you are going to do is stop making monthly payments. As soon as you stop making monthly payments the loan goes into the non performing portfolio and the bank has to put money into reserves. That is not a good thing for them. So now they will start the foreclosure process. If you are in a state like Georgia that whole process might take three to four months. If you are in some other states it could take six months to two years. During that entire foreclosure process how the bank isn’t getting any money.
They are also putting out real money because now they are having to hire a foreclosing attorney to actually start the foreclosure. Let’s say that they finally come to foreclosure. They recognize that if they finally get the house back that it probably will not be in good shape, so they are going to have to fork out more money to repair the house. Now they own the house. They have to pay taxes. They have to do regular upkeep. They will have to pay utilities. They will have to hire a real estate agent. They will have to hold onto the property. During this time they still won’t be earning any money on the house, but they will have to keep spending money. Finally, they get it sold and they get their money back out. Finally they can release the money in reserves. Then they go and put all that money out to work for them. In other words, they are going to put it out in a loan earning interest. But isn’t that exactly where we started this whole process? They had a loan that you were making monthly payments on. So they would go through that whole big circle to get back where they started. It doesn’t make financial sense to the bank.
Having said that the due on sale clause will not be exercised by the bank, the same can not be said for another investor. If you see that an investor has a loan or it is a private individual don’t take the chance. Get written permission to take over the mortgage subject to. Don’t do a subject to if it a FHA or a VA loan either, because many times they will exercise the due on sale. I can not guarantee that a bank would never exercise the due on sale clause, but you just have to weigh whether the risk is worth it or not. I can tell you that I have done dozens and dozens of these and never had a bank even blink at it.
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7 Steps To Successful Negotiation In Real Estate…
By LouC | July 5, 2007
- Ask a lot of questions to find out what’s really important to the seller and what they really want. Don’t be afraid to ask questions. That is probably one of the weakest skill sets I see in investors; they don’t feel comfortable asking people questions. Many times when I am coaching investors, they will call me to ask about a deal and they do not even have basic information from a seller because they were to afraid to ask. If you don’t have the answers, there is no way to help the seller or structure a deal that works for you.
- Ask open ended questions. Close ended questions will only get you a yes or no answer, but by asking open ended questions you allow the person to speak freely which will give you more information to work with. You need as much information as possible so you can create a deal and solution that works for both of you. Here are some examples of questions to ask and how to ask them: You don’t want to ask how many bedrooms and baths does it have. It is better to say, Can you tell me about your house? This way the person will tell you how many bedrooms and bathrooms along with other things about the house. Another great question to ask once the seller has described the house is “Wow, it sounds like a great house and you’ve lived there a long time. I bet you have seen a lot of changes over the years.” Once they answer that, I’ll say “So may I ask you if you have lived there so long what is making you want to move now?” By asking this I am getting what their real motivation is. Plus they just substantiated that it is a great house and they’ve lived there for a long time so now they feel like they have to give me some substantial kind of reason to justify why they would want to give that up. Most times when I ask this question the seller just opens up and tells me everything that is going on in their life. Another common question is “does the house need any repairs?” The answer to that is usually, NO. But if I say “tell me about the condition of the house”, the seller has no idea where to go with that. They will start describing all different parts of the house and what’s going on. I’ve had sellers tell me that the biggest problem is that the basement floods when it rains. That is crucial information I might have never gotten by just looking at the house.
- Connect to the seller on some personal level. As they talk to you try to find something in common. For instance if they tell me their kid is in college, I’ll tell them mine son is also in college. The more comfortable they feel with you, the more information they will share. The more comfortable they get in talking with you, the easier it will be later on when you get to the much more personal financial questions about their mortgage and payments. What is important here is that they see you as a consultant and somebody who is on their side.
- Listen to everything that the seller has to say. This is absolutely critical because you don’t know what piece of what they are going to say is going to play into the deal later on. One time I had a lady tell me that her son had gotten hurt in an automobile accident and was in rehab. At the time I didn’t establish that as important information. But later on in the transaction what I realized was that her son was still in rehab and what she really wanted was for him to be able to complete his rehab while they still lived in the house. So while I was pushing for a quick sale on the house what she really wanted was to be able to stay in the house. Once I understood that and I linked all those things together in my head, I offered her that we could sign the paperwork that day so that you know that the house was sold, but she could move out of the house anytime in the next six months. Once I made that offer to her it was nothing for her to sign the agreement. But I had to have had those early conversations to really be able to understand what was going on in her head.
- Don’t knock the seller’s house. You do not want to insult the seller. This is their home and the place where they live. By going into the house and pointing out everything that is wrong with the house, you are creating a me vs. them divide. There is never a situation where it is appropriate to knock the house. In fact, if there is anything I can compliment about the house I try to do that. Even if the whole house is falling apart but there is a beautiful rose bush, I’ll compliment that. Again, you are trying to build rapport and a personal connection. You will never be able to if you are pointing out all the negatives about the house. Once the personal connection is made the negotiations will be much easier.
- Determine the real motivation for selling the house. What’s really important to them? What’s really going on? For instance, it could be that they are just behind in their payments and they just can’t take any more. It could be just something simple like that the house is in disrepair and they just want to move on and know that there is no way that they could sell it. It could be that they are just fine financially but that they are getting a divorce and they just want to get away from the other person. The house is the only thing holding them back. Whatever it is you need to uncover what is important to them. Why do they want to sell now and what is really their hot button? What do they need and what do they want? Remember people always respond more to what they want than what they need. For instance, they may really need to sell their house but what they really want is to be able to relax again and to enjoy life. What they really want may be for the bankers not to call them any more. May be to not receive any more phone calls from attorneys. What they may want is to not have to deal with their spouse. What they may want is for their spouse not to get any proceeds from this house. What they may want is to be able to move into an assisted living house tomorrow and not have to worry about this house any more. What they may want is to not have to worry about how I am going to move all of my personal belongings. So always get down to what they really want and then present your offer in terms that address their wants.
- Know what is important to you. You need to know what your deal breakers are, what you can easily give in on, and what you absolutely have to have. Sometimes what may be important for them may not be a big deal for you. The things that you have to consider are the price and the terms. How does that price have to be paid to them? Are they going to give you any sort of seller financing? Are you going to be able to purchase the property subject to the existing mortgage? What about a vacancy period? Can you have control over the house for some time that nobody is in the house? If you want to wholesale it, can you get your buyers in easily? Or if you want to renovate it can you get all your contractors in and get all the bids done early. What about tenants? Are there tenants on the property? If you give in on something the seller wants, then make sure you receive something in return.
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Adventures In Probate Real Estate…
By LouC | May 9, 2007
Here is an interesting deal that illustrates the mechanics of probate or estate investment home purchases.
The Seller (I’ll call him Scott) co-owned this house with his mom, and both had signed on the loan. Unfortunately Scott’s mother died three years previously.
Scott allowed the sister to live in the house, but she did not make the mortgage payments which were now 6 months in arrears. Scott is tired of dealing with the house and is ready to sell. But when he and his mother bought the house, they did not purchase with ‘joint rights of survivorship”. Had they bought in this manner, if and when either died, total ownership would have passed immediately to the other person.
To complicate matters more, Scott’s mother left no will for her estate with six other siblings all awaiting their share. If that’s not enough of an investing adventure for you — the bank is threatening foreclosure so time is of the essence to create a deal.
In fact, the bank is not just threatening….the house is scheduled to go to the courthouse steps in three weeks. Why would anyone even try to purchase a mess like this with a short timeframe? Well, Scott owes $33,000 + $5,000 in back payments. The house just needs cosmetic repairs totaling no more than $10,000, and the house will have a market value of about $140,000.
That leaves approximately a $92,000 margin less expenses until the property sells – definitely worth pursuing as an investor!
I calculate that the most I could offer on the house (and still leave a $30,000 profit) is $79,000. After the $38,000 to the bank, that leaves $41,000 for Scott and his mother’s estate. There is an incredible deal if we can work through the probate issues. But I’m sure you’ll agree that it is worth the trouble!
So, how do we work through the estate controversy? The challenge here is to get all of the siblings to work together. As long as no one contests the proceedings, the probate through the courts is rather simple. However, if just one sibling contests the distribution, then the probate can take a long time, and make some attorneys rich. As an investor, our job in these situations is to clearly demonstrate to each and every sibling how it is in their best interest to cooperate – this is not an east feat.
First, all of the siblings have to agree on the sale of the house, and the percentage that they will receive. Remember, Scott will get his 50% as the half owner, plus he is entitled to 1/7 (he and 6 siblings) of the other 50%. Unless it is a close family, this will often be a sore point. Next, all of the siblings have to agree to appoint one of them as “Administrator of the Estate”.
If agreement is difficult at this point, the leverage is that if they do not reach an agreement soon, they won’t have to worry because the bank will foreclose, and everyone will lose everything. It is clearly in their best interest to work together – quickly.
Once they all agree, then the courts will appoint the Administrator who can sign for the Estate. As the investor, I will need Scott to sign the Purchase & Sales Agreement as the 50% owner, and I will need to the Administrator of the Estate to sign for the other 50%. If Scott is the Administrator, then he will need to sign twice: once personally, and once as Administrator of the Estate.
Next, we need to stop the bank from foreclosing. In this particular deal, there was not enough time to complete the purchase, so I took a risk. I had already run title, so I knew that only the first mortgage existed as a lien. I agreed to make the $5,000 payment of the arrearage to the foreclosing attorney to reinstate the loan, and stop the foreclosure quickly. To protect my interest, I had Scott sign a 2nd mortgage for that amount over to me with a one month maturity. That way, if they did not ultimately sell me the house, they would have to pay me back or I could foreclose. This was a safe rick given the profit potential.
At this point, with all of the probate issues resolved, the Purchase and Sales Agreement signed, and the foreclosure stopped, the closing could proceed like normal. As an investor, the key is to understand how the probate issues work, and help the family reach a quick and amicable resolution so that everyone can prosper.
Best of Success & Abundance,
Lou Castillo,
Real Estate Investing
National Trainer and Mentor….
www.InvestorRiches.com
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How Much Should I Pay For This House?
By LouC | April 19, 2007
I probably answer this question for investors a couple times every week. The problem is that they don’t have a good formula for determining the most they can pay and still make a profit – so they’re scared to make any offer. Here’s the formula I use for single family homes:
The Maximum Offer (MO) is calculated by first determining what the house will be worth after renovation which is referred to as the After Repaired Value (ARV); less the rehab dollars required; less the Buy/Sell/Hold (B/S/H) costs; less profit amount desired
MO = ARV – Rehab – B/S/H – Profit
Let’s break that down a little further. To determine the ARV, study comparable sales data. Comparable sales are those properties which sold in the last 6 months to 1 year, and within ½ to 1 mile from the subject house. But other factors must be considered as well. The more characteristics between the properties that are similar, the more valid the data. Make sure that the house itself is similar in square footage, bedrooms and baths, age, style, and architecture. Don’t worry about condition except as it will affect the amount of rehab dollars required. Next, look at the neighborhood and the individual street. Do they look the same? Or is the comparable property on a beautiful street while the subject property is on a street riddled with empty littered lots and boarded up houses? The point is to view the potential investment as your end homeowner occupant will. If they could buy your completed investment on the bad street, or a house on the beautiful street – either for $150,000 – which would they choose? The other house of course. Which means your house is not worth the same – it must sell for less to attract a buyer.
Rehab dollars differ from renovator to renovator depending whether they do the work themselves, use less expensive sub-contractors, or use an expensive general contractor. The scope of the work should be the same – it is whatever is required to make the investment look like the comparable houses (unless the plan is to sell well under market value). I do not attempt to obtain all of the various contractor bids when I am making offers. All the real deals would be sold before I could ever have an offer together! Instead I have developed ranges of rehab dollars based on the overall condition of the home. Is it an exact science? No, but neither are the bids – there will always be something missed. So why not work with a guide that is probably 90% accurate and allows for quick offers?
Buy/Sell/Hold costs include expenses such as appraisals, attorney fees, title search & title insurance, loan origination fees, debt service, utilities, insurance, taxes, real estate commissions, and closing fees paid on behalf of the end buyer. Again, these costs vary depending on each investor’s individual situation. In the Atlanta area, 15% of the ARV seems to be a good average allocation for B/S/H costs. If you are the renovator, calculate your specific B/S/H costs, then utilize that percentage for future offers.
Profit margins are the fun part of the equation. How much do you want to make? If you’re wholesaling the property, you also want to consider how much you should leave in the deal for the investor buyer to make the deal attractive.
That’s it. That’s how you calculate the most you’ll pay for a property. But that’s not what you SHOULD pay. It is the maximum you’ll pay. It is the deal-breaker. You will not pay one penny over the MO. Your negotiations should lead you as far below the MO as possible. The difference in amounts is additional profit in your pocket. What you SHOULD pay is the minimum price below the MO that the seller will accept.
I call this the MIN-O.
Best of Success & Abundance,
Lou Castillo,
Real Estate Investing
National Trainer and Mentor….
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