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http://www.biggerpockets.com/forums/12/topics/180137-starting-out—get-a-quick-start-this-spring-doing-terms-deals

Starting out – get a quick start this spring doing terms deals

i’m starting this thread and I’m going to try to make a post every day on how to get a quick start this spring.

For 30 years I’ve done my best to give us our two offers a cash offer in terms of. Terms offers a more attractive because the seller generally makes more money. But Sellers need to be creative.

How do you find sellers that are willing to be creative?

I think the easiest way is to either find properties that are for sale already with long days on the market or DOM or look for expired listings

These people are trying to sell and they’re not having a good time doing it the traditional way

So what do you do?

If your license, you can’t really go after long days on the market folks because it goes against your ethics as an agent

But if you’re not licensed, you can knock on their door and say

    “I understand your agent Becky has been marketing your house in a while………would you be interested in “thinking outside the box” and getting a creative  solution to your house problem?”

Now I know some of you might think you’re interfering with a listing agreement between the seller and the agent.

If the seller is not performing, getting a cash offer that’s acceptable to the seller, then perhaps the seller can work out arrangement with the realtor.

If it’s an expired listing, I don’t know if people realize this book many new agents go after expired listings, and they try to convince the home seller that their company or their marketing ability is better than what they had tried and they want to relist the house

If you are licensed, and you have a list of expired listings, you can knock on their door, and say, I understand you tried to sell before with an agent it didn’t work out? Would you be open to a creative idea? It’ll take me about 15 20minutes to go over it with you. Boom you’re in the door.

Now  what kind of solution are you going to talk to him about?

Well the existing financing is high in the loan-to-value was high 95% loan to value, every little equity, and the cost to sell the house including the commissions, closing costs, sellers concessions, spruce up costs and holding costs, all these add up to a good amount of money to be taken out of the proceeds of the sale

So for number sequence it’s 100,000 and you show the seller that it’s going to take about 1012% of the value of the house if they owe 95% and they got to pay to get rid of the house

So what’s the alternative? Well selling on terms entails, if you don’t know, some going to rent to own arrangement, or rent them purchase arrangement, or some kind of subject to existing financing, or some kind of wraparound mortgage.

So for us in equity, you going to basically look at everything, the condition, with the sellers need, the urgency for the sellers, existing financing, their comfort level with the due on sale clause with such two in the wrapper on my goods, the lease to own, etc.

To help you to profit with no equity deal on the following:

1. you can lease with an option and then assign the deal for a fee.  Lease options have different rules in different states.   So you should have an attorney that knows lease options really well.

2. Secondly you can look at subject to existing financing or wrap around mortgages or land contracts.

To show the difference what I usually do is  show the sellers that what’s in it for them on the lease to own arrangement and what’s in it for them on subject to,

Lease 2 Own

  • They are going to have to turn their home into investment property
  • they need to get landlords insurance
  • they’re responsible for maintenance, and
  • they have to follow the state laws as far as being a landlord.

With subject to,

  • you buy the property subject to existing financing,
  • your exit is generally a lease to own or renting it out.
  • Because the due on sale clause, I recommend that you try to get a quick sale within a year to be able to satisfy the existing financing being paid off in full

The nice thing about helping sellers of every little equity is that you don’t need to get a bank loan to make some money, and you as a Real Estate Investor don’t need great credit to be able to run a business that helps seller solve problems, especially Low or No equity.

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Man I did that on my iphone!

Here is a better version:

I’m starting this thread and I’m going to try to make a post every day on how to get a quick start this spring.

For 30 years I’ve done my best to give home sellers two offers: a cash offer and a terms offer.

Terms offers a more attractive because the seller generally makes more money.
But Sellers need to be creative.

How do you find sellers that are willing to be creative?

I think the easiest way is to either find properties that are for sale already with long days on the market or DOM or look for expired listings

These people are trying to sell and they’re not having an easy time doing it the traditional way

So what do you do?

If you are licensed, you can’t really go after “long days on the market” folks because it goes against your ethics as an agent to interfere with an agent’s listing.

But if you’re not licensed, you can knock on their door and say
“I understand your agent tried to sell your house in a while back, would you be interested in “an outside the box solution” and getting a solution to your house problem?”

Now I know some of you might think you’re interfering with a listing agreement between the seller and the agent.
If the seller is not performing, (getting a cash offer that’s acceptable to the seller), then perhaps the seller can work out the commission cancelling arrangement with the agent.  Maybe pay $500 for cancelling the listing.

If it’s an expired listing, I don’t know if people realize that many new agents go after expired listings, and they try to convince the home seller that their company or their marketing ability is better than what they had tried before,and they want to possibility to relist the house

If you are licensed, and you have a list of expired listings, you can knock on their door, and say,
“I understand you tried to sell before with an agent it didn’t work out?
“Would you be open to a creative idea?
It’ll take me about 15 to 20 minutes to go over it with you.

Boom you’re in the door.

Now what kind of solution are you going to talk to him about?

Well if the existing financing is high, the loan-to-value was high, say 95% loan to value, very little equity, and the cost to sell the house including the commissions, closing costs, sellers concessions, spruce up costs and holding costs, all these add up to a good amount of money to be taken out of the proceeds of the sale.

So for example, let’s say the house is worth with the CMA $100K
You show the seller that it’s going to take about 10% to 12% of the value of the house to sell

https://player.vimeo.com/video/131984718

Seller Presentation – 3 columns from Brian Gibbons on Vimeo.

If they owe 95% and they got to pay to get rid of the house (bring cash to closing).

So what’s the alternative?
Well selling on terms entails, if you don’t know, some going to rent to own arrangement, or rent then purchase arrangement, or some kind of subject to existing financing, or some kind of wraparound mortgage.

To analyze the house sale, you going to basically look at everything, the condition, what the sellers need, the urgency (time line) for the sellers, existing financing, their comfort level with the due on sale clause with sub2 and the wrap around mortgage, the lease to own (being a landlord), etc.

For you to profit with no equity deal:

One is you can lease with an option and then assign the deal for a fee.

https://player.vimeo.com/video/133853410

Control with a Lease With Option from Brian Gibbons on Vimeo.

Lease options have different rules in different states.
So you should have an attorney that knows lease options really well.

Secondly you can look at subject to existing financing or wrap around mortgages.

https://player.vimeo.com/video/133853994

Sub2 Training from Brian Gibbons on Vimeo.

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https://player.vimeo.com/video/133709997

Wrap Around Mortgage – Intro from Brian Gibbons on Vimeo.

To show the difference what I usually do is take out a yellow pad and show the sellers that what’s in it for them on the lease to own arrangement and what’s in it for them on subject to,
The lease to own: they’re going to have to turn their home into an investment property and get landlords insurance and they’re responsible for maintenance, and they have to follow the state laws as far as being a landlord.

In a subject to, you buy the property subject to existing financing, and your exit is generally a lease to own or renting it out.
Because the due on sale clause, I recommend that you try to get a quick sale within a year to be able to satisfy that the existing financing is being paid off in full.

The nice thing about helping sellers of  little or no equity is that

-you don’t need to get a bank loan to make some money, and

-you don’t need great credit to be able to run a business that helps seller solve problems, especially Low or No equity.

How much money can you make?

Usually 2-5% of the value of the house.
And if you act as a principal in the transaction, you keep it all.

Medium reiskills ebook sidebar
Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840

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Warren Ginn
Real Estate Investor from Raleigh, North Carolina

Ha, I was wondering if you were going to go back through your post. I could almost “hear” you as you were speaking… speech to text? Regardless, thanks so much for posting. I am a new investor and this kind of real world information is fantastic. Also, I agree that finding a mentor is critical and hope to connect with someone here in the area (NC) that I can work with. Thanks again.

Warren Ginn | L&W Ginn Properties, LLC | warren@lwginnproperties.com | 919-827-3947

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Brian Gibbons
Wholesaler from Sherman Oaks, California

@Warren Ginn

You’re welcome and I was actually talking to a Raleigh real estate attorney this last month and she was saying that North Carolina hates lease option so you’re better off doing some kind of a lease with ROFR or right of first refusal

https://player.vimeo.com/video/133855303

ROFR Right of First Refusal from Brian Gibbons on Vimeo.

North Carolina has some strange laws on the books that if you do a lease with option with the tenant and you have a problem with the tenant not paying you were objecting to the lease to own arrangement in court, you can’t just evict you need to go through some kind of a modified foreclosure

Now if I was in North Carolina I would set up a shop that basically did counseling for people that were trying to be homeowners

I would go down to their bank and put them on a forced savings program with their checking account, with their corporation of course 🙂

The loan programs today with FHA offering 3% and shouldn’t take very long to get 3% together, and also send them to a good FICO coach

Medium reiskills ebook sidebar
Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840

Warren Ginn
Real Estate Investor from Raleigh, North Carolina

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Wow, there’s a lot to learn. Can you recommend a good RE atty in NC? If so, you can message me directly. Thanks.

Warren Ginn | L&W Ginn Properties, LLC | warren@lwginnproperties.com | 919-827-3947

 

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Chris Martin
Real Estate Investor from N Topsail Beach, North Carolina

The “problem” people in NC have starts when their NC lease option doesn’t follow NCGS Ch47G to the letter. When a violation happens, by statute (47G-7. Remedies) the case can’t be held in District Court and instead must be held in Superior Court… again by statute 75-1 and 75-1.1

(See also the difference between District Court and Superior Court.)

The above is not legal advice and is for entertainment only. NCGS 84.2.1. not applicable.

wakeproperties@yahoo.com

Chris this is a video of the Lease Option Statute in NC

https://player.vimeo.com/video/133856502

Legal – Contract Law in North Carolina – Lease with Option from Brian Gibbons on Vimeo.

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Thanks for the quotation of the NC real estate statute @Chris Martin !

Medium reiskills ebook sidebar
Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840

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Scott Wagoner
Real Estate Investor from Lake Mary, Florida

Great post Brian! The first post, I was kinda scratchin my head with a very confused look on my face…thanks for clearing it up in the 2nd.

Question….you say you are going to be making a post a day….is that in this thread or each one a different thread? Just want to follow along.

lotsaproperties@gmail.com 407-588-7355 c www.letsfliphouses.com

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Brian Gibbons
Wholesaler from Sherman Oaks, California

@Scott Wagoner

Regarding the 1st post I use my iPhone “text to speech” and it garbled a few words

Now using a headset and talking into it with Dragon text-to-speech!
Since you’re in Florida Scott, I’m going to talk about Florida.

I live in LA but I’m from Boston.

The snow in Boston and New England this winter I think is going to be wonderful advertising for Florida!!

Who in their right mind wants to freeze their rear end off!

Housing in Florida, is it coming back, who knows???

Let’s say you want a quick start in Florida.

It’s my philosophy that we do not be a one trick pony, meaning we all specialize in wholesaling flipping, or specialize in retailing rehabbing, but we have a few tools in our toolbox.

The greatest opportunity in Florida and other places like Arizona, Midwest, etc., housing is reasonable, and the rent to value, is reasonable, is helping sellers that don’t a lot equity and they need to sell on terms.

Cash or terms is the business model.

Give a low cash offer which most sellers hate, and explain to them why it’s so low, because you need to resell it not to a consumer but to an investor.

If they want to go retail that the pay the cost to sell with an agent, which include commissions, closing costs, spruce up costs to compete with all the other houses, like paint, landscaping, etc., and vacant house costs, because houses that are cluttered with people stuff in it just sell a lot longer.

Realtors want vacant houses.

Most agents that arent trained in seller financing, if there’s no equity Agents get nervous, because they know that sellers is not going to be happy.

So why aren’t the sellers happy if they had very little equity?

Most sellers sell with the intention of buying the next house with equity they have.

So let’s do some subtraction

sales price $100,000

minus commissions $6000
minus closing costs $2000
minus sellers concessions $3000
minus spruce up costs $2000
minus vacancy costs $4000

so 6+2+3+2+4= 17,000

Oh my God that 17% of value the house!

Is that typical? I think it’s typical is 10 to 15% of cheaper houses, when the houses are more expensive the numbers are less percentagewise but it’s a lot of money

$300,000 house

minus commissions $18,000
minus closing costs $6,000
minus sellers concessions $9,000
minus spruce up costs $4000
minus vacancy costs $7000

so 18+6+9+4+7= $42,000

30,000 would be 10%, and 45,000 be 15%, so that’s about 14-15%

““““““““““““““““““`
so low equity house that is 95% loan-to-value, $300,000 house, owes $295,000

what’s the problem there?

The poor sellers have to pay get rid of that house.

If the costs to sell are $42,000, and their $5000 equity, they have to cut a check for 37,000. to sell their house!  Ouch!

Even if the realtor said “I’ll take my commission a note” which they never do, you as the seller still got a big check to pay.

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How to sell it in person not on the phone but in person

You need if you negotiating with sellers, and the sellers don’t have an agent, need to present a solution, and presenting a solution is a lot like a financial planner would present a solution for financial planning.

I know this because I have been financial planner since I was 25 years of age.  That’s 30 years.

Talking concepts is very important.

Talking with emotion and not logic is very important.

There’s a danger in educating the seller too much and teaching techniques on how to solve the problem is never a good idea.

I never do that.

I don’t educate sellers.

I give them WHIFFMs. What is in it for me?  WHIFFMs sell.

Like for instance,

I draw 2 lines

Making 3 columns

Column 1, selling traditionally with an agent
column 2, renting it out with a property manager
column 3, seller financing in Florida

Column 1

  • go through all the costs to sell with an agent
  • and also go through the time it takes to sell with an agent
  • days in the market (DOM) tell the average amount of time it takes to sell a house with an agent

So it’s costs money and it costs time

Column 2, renting it out with a property manager, there are risks and rewards

  • A property manager cannot guarantee cash flow so you can make your bank payment
  • A property manager cannot guarantee will be no damage
  • in a property manager does not keep an eye on the property that much, maybe once in a while
  • so if there’s an eviction you have to pay for it
  • and if this damage you pay for it
  • if there’s no rent coming in, you have to pay the mortgage

Column 3, I generally talk about seller financing in general
there’s lease to own and owner financing

  • Lease to own you turn the property into an investment property
  • you are landlord and you have to pay the mortgage
  • your to pay maintenance and taxes and insurance
  • hopefully the behavior of your tenant buyer versus a regular tenant is better, money on time, no damage
  • the tenant buyer wants to buy the property
  • the tenant buyer does not cause you trouble as the landlord
  • the buyer wants you the landlord to give them a good recommendation when they try to get the mortgage down the road; they need their landlord to give them verification of rents (VOR)
  • Owner financing with sub2  means you’re selling the property and the owners have a deed
  • +it’s a little bit like contract for deed where you pay on a contract, and you can either finish the contract or refinance contract and pay off the existing financing

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How to buy subject to
it’s important that you read this next sentence,

I DONT BUY SUB2 UNLESS ITS A PERFECT HOUSE
what’s a perfect house?
4 bedroom 2 bath open plan great backyard
quiet Street
two-car garage
perfect rental
perfect location
great neighbors

I’m going to own it, I’m going to be responsible for making the payment the matter what
if I’m renting it out in the tenant doesn’t pay I still have to make the payment
if there is maintenance to do I have to do that

Due on sale clause
if you do subject to, the due on sale clause is generally a non-issue in my opinion.

This is a fiercely debated topic.

What I do is I use land trusts and property trusts.

Don’t get me wrong: subject to and wraparound mortgages and some kind of lease to own arrangements do give the lender the right to call the loan due.

Does that mean they do call loan due no matter what?  I’ve done them over 30 years I’ve never had the loan called due.  Not once.

Here’s how to endanger the property and have the lender call the loan due.
Don’t pay the mortgage on time
and have the insurance policy lapse

If something’s late the mortgage company is going to investigate it.

If there’s no insurance on their investment, the mortgage companies going to investigate it.

Now if interest rates rise, there might be a reason for lenders to look at their portfolio and review everything.

I don’t know, I just know that if you buy on a wraparound mortgage or sub to, and take care of make the payments on time and insurance, and you some kind of trust to protect yourself, youre in pretty good shape.  Does it guarantee the loan will not get called? NO.

Please don’t ask me for legal advice, I have a great attorney that takes care of all that stuff.  See an attorney that knows sub2, wraps, installment land contracts and other creative real estate.

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So to get back to talking to the seller:

I basically say the seller there’s 2 things that I can do to help you.

But you MUST be willing to be creative.

I’m going to go through your choices, and you tell me which one you like the best, or which one you hate the least!! lol

So ask you this question a start off:

arrow

what if, and not even know if I can get this done, because I’ve to check it out with my business partner, she does all the numbers and crunches the numbers to make sure that it works for us….but what if I could somehow get you a payment for period time that would mirror your PITI payment, your outgoing costs, and this might be for a period time I don’t know, say 24 to 36 payments, create some time that makes some equity by paying down the mortgage a little, not much, a little,

Then at the end of this period of time, whatever the mortgage balance is at that time will be the sales price, we call this “buying it for the loan balance in the future”.

Would that be something we could even talk about doing or maybe not?

“““““““““““““““““““““`
Now I don’t know if you invested in  negotiation training but this is called “the what if statement.”

I’m being a reluctant buyer there,

I’m using the what if statement to feel them out,

just throwing out an idea, and

I’m using appeal to a higher authority with talking over my business partner, and

if they get excited about this, I’m not to get excited that they’re excited,

I’m going to go further and say something like…

“Oh I see that something that you consider… okay…. tell me exactly why that would be a good fit for you I mean what you like about that?”

What does this do? Well this is called “reinforcing”

I use analogy of a rope and TUG OF WAR and there is a line to be pulled over.

tug of war

The sellers on one side and you’re on the other, and most negotiations it’s tug of war.

Well I don’t want to be a tug-of-war.

I want them to pull me on their side, I don’t want to pull them to my side

This “reinforcing” helps them pull me to their side.

There’s another reason for this,

this a nontraditional outside the box kind of solution,

and I want to prepare them the sellers to be talking to their friends about what they’re doing with their house.

They get to answer this question “how you sell your house, how much did you get for it?” to their friends and family.

This is what I want them to say back:

“You know we did something unusual,

  • there was an agent that showed us how to get more money by selling on terms versus for cash, so we did a lease to own arrangement, avoided paying a commission and closing costs, we saved that money, and we got a paid mortgage payment for period time and
  • then pay off our mortgage.
  • It’s a win-win for us
  • we get full price without a commission closing costs,they get a dream house in their neighborhood that they want for their kids and while they rent for a while and then buy it.”

So I take a lot of time with the seller to try to get them to think this way.

It also avoids buyers remorse, where the seller says “oh my God what I just do??? 🙁

NLP has to do with how you hold your hands and look at somebody and talk to them. It’s so hard on paper to show you what I mean. Video is easier. The tone-pitch of your voice has to be going down instead of up.

In the 70’s was a wonderful actor called Peter Falk he was in his 40s of the time, how to show call Colombo. The reruns are on all the time.

https://player.vimeo.com/video/133858652

Lt Columbo teaches you How To Negotiate With Home Sellers from Brian Gibbons on Vimeo.

Peter Falk was this disheveled, frumpy, police detective in Los Angeles, working homicide.

Columbo always scratched his head have a cigar have this raincoat. But the biggest thing is how he talked to people. He always did it in a nonthreatening way.

His language is the way I want my students to talk to sellers. It disarms them. It makes the seller comfortable.

Talking like Peter Falk and Lt Colombo will help you get terms deals.

Happy Friday everybody, I’ll try to get something else up here when I have time.

I would love everyone that reads this to get motivated to think about having a terms business and cash business

A terms business is buying  or ontrolling on

-subject to,

-wraparound mortgages, and

lease option assignments.

A cash business is wholesaling flipping.

And don’t be a one trick pony, have a full toolbox.

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840

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Dev Horn
Real Estate Investor from Arlington, Texas

@Brian Gibbons you are a brilliant man, but you have convinced me that Apple’s speech-to-text still has a long way to go!

Medium wbh square logo
Dev Horn, We Buy Houses®
E-Mail: dev@webuyhouses.com
Telephone: 877-932-8946
Website: http://join.webuyhouses.com/it-works/

_____________________________________________________

Brian Gibbons
Wholesaler from Sherman Oaks, California

Ah Android professional real estate investor, Mr @Dev Horn

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840

Dev Horn
Real Estate Investor from Arlington, Texas

—————————————————————

When the right words are in the right order, you are a genius!  Seriously,  I don’t know anyone else that offers so much wisdom in BP posts.  Sometimes your posts are books, but they are always instructive.  Thanks for sharing.

And for the record, BP nation, @Brian Gibbons has taught me and a bunch of other successful investors & educators a lot about this business.  He’s the real deal.  Perhaps the best coach I know in RE investing….

Medium wbh square logo
Dev Horn, We Buy Houses®
E-Mail: dev@webuyhouses.com
Telephone: 877-932-8946
Website: http://join.webuyhouses.com/it-works/

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Awww, @Dev Horn

I will reciprocate

I love your marketing videos.

Especially the “The Rule Of 7”
https://player.vimeo.com/video/133860603

The Rule of 7 We Buy Houses® – MARKETING EDUCATION – from Brian Gibbons on Vimeo.

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840

Brian Gibbons
Wholesaler from Sherman Oaks, California

———————————————————-

For @Dev Horn and any other folks that need-want  Marketing Info

http://bundlr.com/b/marketing-home-sellers

My Bundlr set of bookmarks…

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Okay I’m going to title this post

To get started to the fastest possible start with the least amount of money, how do I get started?

It is my opinion that the fastest possible way to get started is helping sellers that have very little equity.

There Is 20 million of these houses, 20 million. If you’re in an area in United States with good affordability, meaning you can rent a house for 600 – 1500, and you can buy houses from 50,000 to  250,000, then you’re in a possible seller financing market. This means that the rent compared to PI TI is reasonable.

You can help the seller sell on terms and save some money for the seller, then you can take that house and rent it out for positive cash flow or lease it with an option

Say you have a $100,000 house with $95,000 against it,  seller has to leave soon, market rent is $800, PITI payment is $600

You can make 3% by putting together a lease with an option or a lease purchase

Steps

1. Enter into agreement with the seller as a principal with your LLC.

It’s helpful to be licensed if you do these.

You don’t have to act as an agent to enter into an agreement, you act as a principal.

You just state to the seller that your licensed and your entering into this agreement as a principal.

Why get licensed? Well when you flip lease option contracts in most states, the state run agency that governs real estate agents really want you to have a real estate license. They don’t care if you flip the contract, they care if you been properly trained. ????

I train students all over the country  and its just helpful for you to be licensed.

Ohio, Florida, and California, it’s really important to hold a Real Estate Sales license doing seller financing.

The Department of real estate estate is aggressive there in those states.

Finding a real estate broker that you can work with isn’t easy, because they like to be able to control your work behavior, but there’s many places that will allow you to hold your shingle, meaning your license, and you have the regulations covered.

2. Once the seller agrees to do the lease with option or the lease purchase, you then need to sign a letter of intent, that spells out the terms. This isn’t binding, but it allows the deal to move forward. You can then direct the seller to go down to the title company or lawyers office and enter into the lease with option or lease purchase, getting their signatures notarized.

3. Once you have a legal agreement that you can assign, you then market for tenant buyers. I’ll do a whole post on marketing for Tenant buyers later on in another post.  It’s important to find the right person for that house that can get the mortgage.

4. But so let’s say you found a tenant buyer, if they have the right income, you need to get them checked out by an RMLO.

An RMLO is a registered mortgage loan originator.

5. If you’re in Texas you need to do your homework. @John Jackson on Biggerpockets has done over 500 lease-option assignments in Texas. I trained him in 2002. There’s nobody better in Texas.

6. There’s other states that have unique laws, Louisiana and North Carolina. So we have to do you due diligence about seller financing and lease-options.

7. After you get the tenant buyer to be checked out by the RMLO, and you have a letter that says that if they pay down debt or increase their income or improve their FICO score over two years or whatever, they should be able to get a 3% FHA mortgage, you then have the tenant buyer deposit$$$$  into the title company or attorney’s office.

8. 3% assignment fee to you

9. first and last months rent to seller

10. Sign an assignment contract or option release contract.

I think it’s important to get the tenant buyer to get all the money in, so you need the title company or lawyers office to cut a check for first and last months rent to the seller, and a check to you for the 3 % assignment fee.  DO NOT FINANCE THE TENANT BUYER’S OPTION FEE!

11.To have a good attorney that acts for you and helps you in this area is important.  Don’t try to do it yourself.

There are too many things can go wrong

So I’m going to say in closing here that you are helping a “no equity house” so sellers tried to sell with an agent, it didn’t work out.

So the sellers talk to you about about a lease to own solution where they enter into a lease with an option with your LLC and then you assign the deal for 3% fee for yourself.

Does that sound like a lot of work for $3000?

If you get your systems in place you can get this done in 10 hours or $300 an hour.

If you got a house that has a more expensive market like 300,000 FMV, then you make $9000 a house on your 3%.

Lease Option Assignments are a lot easier than the wholesaling business in my opinion.

You should be looking for problems with sellers, focusing on expired listings, which is cheap marketing.

I’ll post again tomorrow , have a fun Sat!

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Warren Ginn
Real Estate Investor from Raleigh, North Carolina

Wow @Brian Gibbons . I feel like I just wandered into a training seminar… I just saved this thread down as a PDF (into a “Brian Gibbons” folder) in case you suddenly come to your senses and decide that you’re giving away too much for free… Great stuff. I really like reading your “scripts” along with your thinking behind what you’re doing and why.

One question I have as a “newbie” is trying to figure out if this seller-financed approached is directly in conflict with the community of realtors and brokers out there. From what I’ve read, some encourage investors to go ahead and get their real estate license while other claim that doing so can “muddy the waters” between what your responsibilities are as a realtor vs as an investor. How do you square this?

Here in NC, I’ve heard about investors receiving “nastygrams” from the NC Assoc of Realtors telling them that doing these deals means the investor is acting as a broker and thus they are breaking the law.

But I have also heard this can just be a scare tactic from a threatened community just defending their turf.

I’d like to hear what you think.

Thanks again for all the great info!

Warren Ginn | L&W Ginn Properties, LLC | warren@lwginnproperties.com | 919-827-3947

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Brian Gibbons
Wholesaler from Sherman Oaks, California

I’m coaching lacrosse right now

Re your question about agents,

I think there’s two kinds of agents: first type of agent will do anything to help that seller sell the house whether it’s on terms or listing it traditionally but whatever it takes to sell the house.

Second kind of agent is somebody that holds the 6% solution, if they find a seller with 95% loan to value then they walk away from it because seller  can’t afford to sell with an agent, then have to pay to get rid of the house. So that agent doesn’t really care about the seller

And some agents out there they hate real estate investors and

They don’t want them doing lease-option assignments or wraps or sub2 without being licensed,

they think that they’re just a bunch a car salesman trying taking advantage of poor sellers.

Be  transaction engineer!  Dont be a just a wholesaler or just a list and forget realtor.

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Rich Harris
Real Estate Investor from Central, New Jersey

Brian,

Great post my man!

I’ve read it a few times in order to understand exactly what you are teaching and it’s very interesting.

PLEASE keep it up!

Thanks,

Rich

RichHarris19@gmail.com

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Christopher Goldie
Real Estate Investor from Columbia, South Carolina

This is fantastic, exactly what my goals are for this year.

I’ve found with the wholesale deals I’ve done that at least 7 out of 10 calls about the property are looking for rent to own / lease options.

I believe my market is primed for this and when I get can get properties locked up with seller financing, I’m golden.

I’ve starting marketing towards term style deals and just waiting for the right motivated seller.

Now one thing I have tried is calling the agent about a property with long DOM and bascially getting the door slammed in my face.

I believe if more agents were more willing to think creatively they would make so much more.

I’m looking forward to more info to absorb as I pound the streets.

Surround yourself with those on the same mission.

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Chris Martin
Real Estate Investor from N Topsail Beach, North Carolina

Originally posted by @Warren Ginn:

One question I have as a “newbie” is trying to figure out if this seller-financed approached is directly in conflict with the community of realtors and brokers out there. …

It depends. Direct conflict? ‘Yes’ from the standpoint that most brokers will perceive that you are brokering. In addition, 99% of brokers will never have seen this kind of novel approach to “solving” the owner’s no equity dilemma. They may likely be confused as to the viability of “the deal”, and as you know, a confused mind always says no. On the ‘no’, it’s not in direct conflict side… some brokers may have experience with owner financing. In our state (NC) the “standard” Offer To Purchase and Contract form (NC Bar 2-T) supports seller financing via line 1(d) entitled BY SELLER FINANCING and the accompanying Loan Assumption Addendum  Note though that virtually no NC brokers will entertain a lease with option to purchase deal because the old “standard” form for this kind of transaction is no longer available from the NC Bar, NC REC, or NCAR. Why? Conflicts with NCGS Ch47G I posted earlier along with the fact that these deals are problematic for brokers. And brokers that use that old form? See this recent disciplinary action for a hint.

When done correctly, these “deals” are not illegal.

I’d say they are more for ‘advanced’ REI and certainly carry some risk when the deal goes bad.

From what I see, the problems are investors are not following every requirement in NCGS Ch47G, and/or their contract for leasehold interest is flawed, and/or they lose their buyer.

https://player.vimeo.com/video/133856502

Legal – Contract Law in North Carolina – Lease with Option from Brian Gibbons on Vimeo.

wakeproperties@yahoo.com

 

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Warren Ginn
Real Estate Investor from Raleigh, North Carolina

@Chris Martin So if you connect with a homeowner that is looking to sell their property and has already contracted with a broker, do you typically stray away from those deals because they might resist these more “creative” approaches? One of the keys to understanding true “win-win” situations that makes the most sense to me is understanding how all parties get paid. So if your number take into account paying the brokers their 6% commission and the numbers still make sense, what do they care? They’re getting paid, the buyer and seller are happy (each getting what they want) and you get paid my assembling the deal, right?

Or are you seeking properties where brokers have yet to enter the mix?

Warren Ginn | L&W Ginn Properties, LLC | warren@lwginnproperties.com | 919-827-3947

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Let’s keep it simple in NC,

buy on a wrap or sub 2 and own it, then do a lease and ROFR, get the renter qualified for a mortgage

Have your lawyer study the statute @Chris Martin quotes

See if entering into a lease option then assigning i if possible.

If you are licensed and have full disclosure to buyers and sellers, that’s what this business is all about.

One of my colleagues , a real estate lawyer, created a lease and contract for option to purchase, you pay the lease then get the option when the lease has completed.

https://player.vimeo.com/video/133864767

Contract for Option to Purchase from Brian Gibbons on Vimeo.

There can be a lease and delayed sale and purchase with a down payment of say 3 percent could be financed over 24 months, this buyer is a financed sale and needs a RMLO to underwrite the buyer.

Your seller financing team should be your real estate contract lawyer and your RMLO.

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Warren Ginn
Real Estate Investor from Raleigh, North Carolina

Originally posted by @Brian Gibbons:

@Warren Ginn

Let’s keep it simple in NC, buy on a wrap or sub 2 and own it, then do a lease and ROFR, get the renter qualified for a mortgage

Have your lawyer study the statute @Chris Martin quotes

See if entering into a lease option then assigning i if possible.

If you are licensed and have full disclosure to buyers and sellers, that’s what this business is all about.

By “licensed”, do you mean a real estate license? Is it necessary to get a real estate license before starting in real estate investing, or can you simply work with a broker?

Warren Ginn | L&W Ginn Properties, LLC | warren@lwginnproperties.com | 919-827-3947

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Licensed means having a real estate sales license

But acting as a principal instead of as an agent.

If you buy as a principal buyer you are not “acting agent for.”

If you buy for cash or sub 2 or on a wrap, a license is not mandatory but it’s hard to get agents to work with you. 90 per cent of properties are sold via agents.

Selling on rent to own it’s helpful to have a license, especially if your state requires a license to show properties that you do not own for rent.

Getting a license help get respect from everyone, especially lawyers.

Get the license but work with your lawyer and act as a principal

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Mike Clark
Real Estate Investor from San Antonio, Texas

Wow Brian

Your post are right on time and it is obvious you know your “stuff”

I am also adding the “term” business to my rehabbing business and have already invested over several months of time and education

Looking forward to seeing more of your posts

Mike Clark, Dezavin and Brand Properties LLC
Telephone: 12107047015
Website: http://cashoffer4you.com

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Brian Gibbons
Wholesaler from Sherman Oaks, California

#1 Biggest mistake in real estate investing: ready, fire, aim

#2 biggest mistake: not understanding how to talk to sellers.

Here’s what I mean by ready, fire, aim.

You study all this marketing for motivated seller stuff, how to find motivated sellers, spending money on yellow letters, postcards, scouring the MLS, talking to agents, etc.

Then you get a phone call, and you choke.

You don’t know what to say,

you don’t know your marketplace,

you’re just trying to get a quick deal done.

So that’s the  2nd biggest mistake, not understanding how to talk to sellers.

Let’s talk about real estate agent’s listing appointment training:

This is How agents are trained to get the listing,

  • how excellent their marketing is,
  • how great their negotiating skills are,
  • how good their team is,

is  NOT necessary to talk to sellers about terms deals.

Most sellers want:

the best possible financial result,

the most amount of net money from the sale of their house,

in the shortest possible time.

They do NOT want surprises,

they do not want buyers saying

fix this fix that,

pay for this pay for that,

they want the most amount of money from their house, and

they want speed without hassles.

Agents today cannot deliver because buyers that are cash qualified ask sellers for lots of things, ask sellers to pay for things that sellers don’t want to pay for.

And a lot of sellers are cash-strapped, so they can’t pay cash to fix the things of the house, and they don’t want repairs  on credit cards.

So number 1 mistake is – ready fire aim.

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This is what I do when I train new or experienced real estate investors:

I teach them to talk to sellers 1st, then I teach them the write out of letter of intent to purchase or lease real estate.

I love pretty houses that need no work that have little equity, because the sellers are stuck, and there’s 20 million low equity houses in the United States.

They can’t sell with an agent because the cost to sell are 10% to 15% of the value of the house.

So they can have 2 choices: rent it out or sell on terms.

But you can’t give them term solutions without interviewing them 1st.

I posted on biggerpockets.com an article called, “Be the Doctor with the Seller.”

Over 5 years ago I posted it.  It is TIMELESS.

Here it is:
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Be ‘The Doctor’ to Seller’s Problems – Unknown Author

If you want to really be successful as an investor, you must consider yourself as “The Doctor” to the Seller’s problems. Just like medical doctors, Sellers must see you as being professional, well-educated, acting in their “patient’s” best interest, and bound by a high code of ethics.

The medical process is the same everywhere. Whenever you go to a doctor, of any kind, for any condition, he will follow the three-part sequence of examination, diagnosis and prescription.

Unfortunately, most new investors do it backwards. They spend all of their time telling the Seller about their company, services, and how great they are, instead of finding out what the Seller wants or needs.

At the end of the conversation, they know all about the investor, but the truth is that the Seller DOESN’T CARE ABOUT THE INVESTOR! At best, if they haven’t fallen asleep or tuned the investor out, they have already made a decision. And that decision is to NEVER DO BUSINESS WITH AN INVESTOR THAT TAKES NO TIME TO UNDERSTAND THEM.

BEGIN WITH A THOROUGH EXAMINATION

Just as a medical professional would never think of treating you without following these three steps in order, you as a doctor of selling, would never allow a Seller to force you to sell without you going through your three stages as well. In the examination phase, you ask excellent questions, carefully prepared, in sequence, which are geared to give you a thorough knowledge of the Seller’s condition or situation.

The first thing they do is ask you to fill out a medical history form. They want to know about your ailments, illnesses and injuries.

Your family’s medical history. Are you allergic to any drugs? Have you seen other physicians? Who? When? This history form for investors would be the Seller’s Questionnaire which they fill out to help us determine what their real needs and wants are.

Then the doctor comes in, asks you lots of questions, and begins to examine you. He listens to your heart and lungs. Taps your knees and elbows with a rubber mallet to check your reflexes. He looks into your eyes and ears, and up your nose with a little flashlight. He makes you open your mouth, pushes down your tongue with a depressor, and makes you say AH, while he looks down your throat (and you start coughing).

For investors, this examination would be the inspection of the property, where you fill out everything you see right or wrong with the property and take notes of what the costs are for repairing, rehabbing, or minor fixing. Depending upon the answers to the questions and the results of the inspection, more questions will be asked to see what other things we need to know before prescribing a solution.

The Key Is To Find The Seller’s Pain

Investors often miss this important variable therefore they don’t really know what strategy to take when dealing with a Seller. If the Seller was not in “pain” they would have never called you, but they did call you because they knew that they had a problem that needed fixing. You’ve got to discover the financial impact or economic value of the problem. You’ve got to get the Seller to tell you how much it’s costing them or how much sleep they are losing because something isn’t right with their house situation.

DIAGNOSE THE SELLER’S NEEDS ACCURATELY

The second phase is that of diagnosis. In the diagnosis with a Seller, you would repeat the results of your examination and double check to be sure that the problems that you had detected were the real “pains” being experienced by the Seller. You would ask additional questions to confirm and corroborate. You and the Seller would mutually agree that this diagnosis seems to be an accurate description of the condition or problem.

MAKE THE RIGHT PRESCRIPTION

Once this mutual agreement has been reached, and you have identified the “pain” accurately, you can move on to phase three. This is the prescription phase, where you show the Seller that your service is the best available treatment, taking all the factors of the Seller’s situation into consideration for their pain. You show that, on balance, what you are suggesting is the best of all possible solutions.

Investors who sell the way that doctors treat patients find that their deals proceed far more smoothly and result in bigger and better profits in less time. Spend more time asking great questions, and less time talking about yourself and your company, and you’ll create more opportunities, close more sales, and make more money. By asking better questions, and being interested in the answers, you can discover what the Seller’s problems and issues are and then offer a solution. Most of the time, if they are not motivated, they will tell you straight out, right then and there. Hopefully, you did not make a trip for them to tell you this, but you learned this when you spoke to them on the phone using the Seller’s Questionnaire to gather information.

During each conversation, you should ask detailed and pointed questions about what the Seller is trying to accomplish; and what their goals and objectives are. A question I also like to ask is “What would you like to see happen?” And then I LISTEN and take detailed notes about everything the Seller is saying while filling out the Seller’s Questionnaire — even on appointments. It’s okay, they will respect that you are taking notes on how you can help them better.

Another good question I like to ask is, “What would you like our company to do to help you?” This question really allows me to find out what the Seller is thinking and exactly how I can help them. So I really don’t have to guess or pressure them because getting to their motivation is just a couple of questions away. And once I ask those key questions, I know I have a deal or not. And to seal the deal, the one question I use is: “When would you like our company to help you in your situation?”

If the Seller tells you that they have no real timeline, that they will just wait until the property sells, this is often a sign you are not dealing with a motivated Seller.

Make sure you protect your time by being willing to walk away if it becomes clear that there isn’t enough motivation.

No matter how the Seller responds, your main goal is to open a line of communication and develop a conversation about the property and the needs of the Seller. I know that some deals take 5-7 contacts before they close so an important aspect of our System is follow-up.

Even though they may not do business today, they certainly can call you back 3-9 months later because you keep sending postcards and letters and are constantly on their minds. Here is where you separate yourself even further from the other investors and buyers.

I used to get surprised if they called me after a meeting or a phone conversation I had with them a year ago, but by continuing to send them letters and postcards, they remember me and call me because I was first on their minds.

So, if you will treat your real estate business like a doctor’s by understanding and diagnosing a Seller’s problems, you will make just as much as doctor and even more.

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Once you have this “heart to heart talk” with the seller, I then go through a 3 column method with the seller.

Column 1 Selling with an Agent, Paying the Costs to Sell

Column 2 Renting with a Property Manager, dealing with uncertainty of an unproven tenant

Column 3 Seller Financing – Helping a Buyer Buy Your Property at Full Price with Less Sales Costs

Here is a video for the 3 Column Method

https://player.vimeo.com/video/131984718

Seller Presentation – 3 columns from Brian Gibbons on Vimeo.

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Negotiating Skills With Sellers

There are 5 basic negotiation steps with the seller,

1. Rapport Building
2. Avoiding Let Me Think It Over
3. Uncovering how motivated they really are
4. Getting the lowest price (Wholesaling Only)
5. The “What If” Step Close

That will be in another post.

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———————————————————

Curt Smith
Real Estate Investor from Clarkston, Georgia

@Brian Gibbons Wow great recipe for solving the sellers problem.  “Be the Dr”.

Curt Smith, Sweetgum Properties
E-Mail: sweetgumga@gmail.com
Telephone: 678-948-7151
Website: http://sweetgumfunds.com
Wanted: mobile home parks, gareia.org http://sweetgumfunds.com FB: http://goo.gl/bfg7IZ
——————————————————–
Brian Gibbons
Wholesaler from Sherman Oaks, California

Thanks, @Curt Smith I appreciate it!

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Brian Gibbons
Wholesaler from Sherman Oaks, California

So here is the 5 steps to Negotiating a Terms Deal

1. Rapport Building
2. Avoiding Let Me Think It Over
3. Uncovering how motivated they really are
4. Getting the lowest price (Wholesaling Only)
5. The “What If” Step Close

You need to get face to face with the seller first.

Marketing 101 For Terms Deals

Here are 5 prospecting ideas.

A. Listed Houses

Houses that are listed with an agent generally are in an “exclusive right to sell” listing arrangement. This means that there’s no one else that can list the house for sale. The commission is negotiated on the agreement, and if through their marketing a buyer comes even if the listing goes expired, if it is the procuring agent, meaning the agent responsible for sale is responsible for introducing the buyer to the seller, even on the lease 2 own and not a cash sale, they are still going to get their commission.

See

http://homebuying.about.com/od/realestateagents/qt…

If you the real estate investor in your trying to get the seller to consider terms instead of cash and avoid the sales commission, the listing agreement is between the seller and the agent.

I basically say the following to the seller that has a listing sales arrangement with an agent:

“Mr. Seller, you have a legal contract between you and agent regarding selling the house.

“I like you to SAVE the commission if possible but it’s up to you. 6% a lot of money.

“What you could do is go down to the broker’s office and basically get in writing that the listing is going to be rescinded, and you no longer want their services. You also want them to say in writing that you owe them no money regarding selling their house, even if you sell it yourself.

“You may want to get an attorney to make sure that the listing is expired and you can sell it yourself.”

In my the lease to own solution with the seller, the solution has power and value if the seller can avoid paying the real estate commission.

““““““““““““““““““““““““““““““““““`

B. Expired listings

Houses that have expired generally are asking too much money for the house. If the house has reasonably good location is in the reasonably good condition, and it is price correctly, and it’s not messy inside, it generally sells at this price correctly.

A survey of hundreds of realtors that basically said that over 80% of all expired listings are mis-priced houses, meaning the sellers want to much money for the house.

See

http://homebuying.about.com/od/sellingahouse/qt/051707ExpdList.htm

I like expired listings the best, and I like to knock on their door and not mail them anything and not talk to them on the phone.

I know if you live in a rural area that’s hard, or if you’re an expensive area that have gated communities that’s hard, but most middle-class neighborhoods it’s easy to just knock on their door some Saturday afternoon, and have report ready to hand them.

arrow

******In the report you want to have a cover letter, the cover letter basically says the following:

Dear Mr. and Mrs. Home Owner:

I understand due to public record that you tried to sell with an agent, and it didn’t work out.

I’m very sorry for that situation that you had to deal with, and it must been very difficult to deal with.

I have a proposition for you; you may want to consider this proposition because it will not cost you anything to sell your house this way.

I specialize in “lease to own” where the seller can get top sales price for their property, and avoid paying a real estate commission, which can be a lot of money.

They also avoid some of the costs to sell which include closing costs and other costs. Sometimes the total savings to you by doing lease to own is over 8%, which on a $200,000 property is $16,000.

Enclosed are some articles from the Wall Street Journal, Money Magazine, Realtor.com, USA Today and some other public newspapers, about Lease to Own and Seller Financing.

Many realtors don’t know a thing about Seller Financing or Lease to Own, and their Brokers do not encourage their Agents to talk to Sellers about it.

I currently have at least 2 “Lease to Own Buyers” that are interested looking at your house, that will give you full price for your house, and save you quite a bit of money.

In order to properly explain this to you, I need to sit down with you and go through the positives and negatives of this decision, so that you can make a good decision about your home sale.

I get paid from the buyer so you don’t have to pay me anything.

Please call xxx-xxx-xxxx so we can sit down for 30 minutes and go over the basics of how this works for you and your family.

Sincerely,

Brian Gibbons
Innovative Property  LLC
Assisting Home Sellers Solve Problems
xxx-xxx-xxxx
Brian@Innovative.com

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If you notice the letter stresses saving money and doesn’t tell them how it works, and also educates the seller was some mainstream articles from national newspapers and realtor.com.

Print the cover letter to a generic homeowner on good letterhead, and print the articles on good letterhead.

You can use a binder clip to get them altogether.

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If there is no one home when you knock on the door, don’t leave this free report in the mailbox, or or don’t hand it to a child with the parents not home. That’s a waste of time and paper.

If an owner is not home and someone answers, I offer to come back.

If an owner is not home and no one answers, I will put a yellow sticky note on the door. I’ll use a medium black sharpie pen, and I’ll write something like,

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Hi,

If your home is still for sale, would you mind calling me please?

Brian xxx-xxx-xxxx

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if someone calls you off your yellow stick notes, that means they haven’t gotten their free report yet, so say something like,

“oh is your house for sale great, would you mind if I stop by and say hello and take a look at the house?” Keep it conversational.

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C. FSBOs

For sale buy owners they want speed and they want full price without an agent, that’s what they want. They are generally very confused about how to sell the house themselves, how to negotiate with a buyer, how to market for buyers, what kind of paperwork to use, etc.

Many sell via FSBO because they tried to sell an agent and it did not work out, or they have sold before with FSBO in hot sellers market, or an easy mortgage credit market.

What I do with FSBOs is act like cash buyer, sounds like you’re not really telling the truth doesn’t it?

Well, if they accepted a wholesale all cash price I would be a cash buyer!

If you do the 2 and one half hour training  negotiation with the seller and teach the seller “the costs to sell with an agent”, versus renting it out, versus seller financing, it’s all easier to deal with the FSBO.

After I go through the 5 steps negotiation with the FSBO, I generally tell them I can get their house problem fixed in 30 to 45 days, so they want to hire me to get that done, at no cost to them, then they sign a letter of intent to lease or sell.

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D. Landlords

For many landlords of homes, they want tenants that are neat and tidy, pay the rent on time, and don’t call at 2:00 am for backed up toilets.

So I generally act like a prospective tenant and walk through the property.

Most do-it-yourself landlords are very sophisticated, business like, and I just use this “one what if statement with them,”

“Bill let me thank you for walking me through the property, looks like it’s in great shape, I just have one question for you, and if you say no to it I understand, but if you say yes then maybe we can talk about it in more detail, so here’s the question,

“What if I could get you 24 payments at 1100 dollars which is what you want for the rent, and then you would allow me to buy the house, at a price that you can live with, and at a price I could live with.

With that be something we should even talk about or maybe not?”

I leave them a very simple one page letter for landlords, the benefits of lease to own versus regular landlording and my contact details. I might even include a national article from realtor.com or from the Wall Street Journal about seller financing attached to the back.

Many of do-it-yourself landlords wanted to not get involved with lease to own because they are buy-and-hold people, but you will never know unless you ask.
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E. WE BUY HOUSES PEOPLE

The last group of people are people who are trying to wholesale deals, people that are sending out yellow letters, postcards, bandit signs are up on telephone poles, and they get leads that have thin equity, and they can’t do anything with them.

1. You can find “we buy houses people” through the Internet, and just do a Google search, we buy houses Boston Massachusetts, sell your house Boston Massachusetts, you’ll find some.

If I find them on the Internet, I’ll make an appointment to see them for lunch and talk about a marketing arrangement where I’ll pay them to $250 for every lead that I convert into a sale. They are throwing the lead away anyway. They have nothing to lose.

CAUTION: don’t educate the wholesaler as far as how you are making money with terms deals! Just get the lead and pay the commission if you get a sale.

2. You can go to REI a meetings and get in front of the group and say,

“We help wholesalers make more money with the leads they have. We look for thin leads the don’t have a lot equity. The house needs to be in a good school district and a quiet street. If you throwing away a leads at all please contact me in the back of the room.”

Now, on to the Negotiating with Home Sellers For Term Deals!

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Tim Macy
Agent Broker Sub from San Antonio, Texas

@Brian Gibbons great thread!  I’m taking notes on everything.

You seem to go to lease options as a good solution, but from what I understand they’re just about dead in Texas.  I’m not sure if you know the states regs exactly, but I listened to a lawyer give a talk saying that the rules in place made them no longer a viable option.  Any insight would be appreciated!

——————————————

Brian Gibbons
Wholesaler from Sherman Oaks, California

Hi Tim,

See

http://lonestarlandlaw.com/Lease-Options.html

And Contact @John Jackson

I taught him Lease Options in 2002, he does alot of lease option TX assignments, over 500 I think,

http://leasingtobuy.com/

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Matt Ellis
Real Estate Investor from Sheppard Afb, Texas

Thanks @Brian Gibbons. I truly enjoy reading your post!!!

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Now for Negotiating with the sellers….

First step is Building Rapport…

So how you connect with the seller especially if you’re shy or introverted?

First look as good as you can. Business Dress.

I think that you don’t need to look like a banker but not looking like a slob either is important.

a. Business hair cut
b. pressed button down shirt, white or white or blue
c. Gray slacks nice ones
d. Really good business shoes, wingtips
e. Navy blue blazer

Why bother to look like a business person?

Well if you have no deals, I think the “visual” will give you respect from sellers, and you want to close on the first visit, and you don’t want to waste your time, you had better put a lot of effort into how you look.

For women, business suit, white blouse, or red blouse or blue blouse.

Look like a banker or financial planner.

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TOOLS

a. Have a briefcase for God’s sake.

Look like a professional business person.

Go to Marshall’s a T.J. Maxx and buy a nice one.

b. Stationary:

have lots of black pens, blue pens, red pens, felt tip markers, yellow pads, presentation folders, business cards, blank letter of intent forms, presentation sales book, etc.

c. A note about your car:

if you’re poor and you have very little money and you have a crappy car, parked it down the street and walked two minutes to the house.

d. Thank you notes:

there are few business tools more powerful than a simple thank you note with a business card. Stamp, with an ink address stamped on the back for return address, and a note that says something like,

“Thank you so much for investing little bit of time with me, and I’m certain of the ideas we talked about regarding your house situation will definitely help solve the problem you’re trying to solve.

Here’s an extra business card, and please scotch tape it to the refrigerator so you can find my number easily.

Best wishes,

Brian Gibbons
Innovative Property Solutions LLC”

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Now that we have the “image issue” out of the way we can work on the language.The language of building rapport

How do you connect with the seller?

How would you feel that there was some “expert investor” coming over to your house?

Talking about financial issues in real estate?

How cautious would you be as a seller?

How guarded would you be as a seller?

So you must take 5 to 10 to 15 minutes to build rapport.

You must establish a connection.

Many people don’t know how to do that.

Here’s how to do it.

1. Ask the seller questions about himself or herself

You need to build bridges of common ground.

People like people that have things in common with themselves. They’re more comfortable with people that have similar interests and similar activities. Think about your activities that you’re involved with.

You want to draw the seller out to talk about themselves.

Dale Carnegie wrote “how to win friends and influence people” wrote about behavior of people.

People like to do business with people that they like and they trust. People like you and trust you if they have more things in common.

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Draw the seller out of their shell.

Get him or her talking about himself or herself whenever possible.

As an example think of yourself walking into a house.

You – hey of these your kids? (You point to a photo on the end table in the foyer)

Seller – yes those are my kids, John, my oldest. Susie there in the middle. And Luke my youngest.

You – How old are they now?

Seller – John’s 24, Susie’s 18 and Luke is 15

You – oh I have two children (bring out picture in your wallet) theres David 12 and Kelly 10. (building a bridge, creating commonality.)  So, does it get any easier when the get into their 20s ? (big smile)

Seller – it sure does. You know I always thought it was just really important to remember that we were teenagers wants to.  And we survived it!  But looking back, I’m not sure my parents survived my teen years (notice seller is loosening up to you)

You – I know exactly what you mean. I think I was probably the toughest of the bunch for my parents to raise (building a bridge). What is your oldest doing now?

Seller – he’s married with a child on the way. He lives in Boston and works for an engineering company out there.

You – Wow! You’re going to have a grandchild! That must be so exciting for you! How much longer until the due date?

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You get the idea, some people might call the “Small talk”,

I call it the glue that helps me build rapport, and allows people to like and trust me quickly.

What you say if you’re shy or you were brought up in a non-people house, where people didn’t chitchat much?

Here are some ideas…

1) Where did you grow up?
2) Do you have any kids?
3) How old are they?
4) What is it that you do for a living?
5) How did you get started in that career?
6) What do you like to do for fun?

WARNING – just spent too much time building rapport, you are there to get a job done and go through all five steps properly.

There comes a point where some new investors find themselves wasting hours of their time making friends with people BUT not closing any sales.

There need to see if it’s a fit for you and your company fairly quickly use within 15 minutes. The second step, the upfront agreement is important to get into right after building rapport.

Another mistake is that you think that if step one is completed, you not to do any more about throughout the other four steps. You must build rapport as you go throughout the entire meeting with the seller.

I really want you to spend 5 to 15 minutes upfront building rapport before you move on to step two, but that doesn’t mean you’re done building rapport.

Throughout the negotiation you need to gauge your level of connection with the seller, and look for opportunities to deep in this connection. But you need to balance this need to maintain a connection, with your equally important need to move the conversation forward to its conclusion.

ABC, always be closing.

See

http://search.yahoo.com/search?p=always+be+closing…

Pretty harsh sales training, but I love that scene!
The next post will be about setting up an upfront agreement or as I call it,

How to Avoid the Objection, Let Me Think It Over.

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Brian Gibbons
Wholesaler from Sherman Oaks, California

2. The upfront agreement – the second step in negotiating with home sellers

Well the upfront agreement was designed to avoid some things.

What would you want to avoid in a sales presentation?

The classic “thank you but I want to think it over.”

Have you ever heard “a confused mind says no?”

When you bring up “selling on terms” I think it’s very confusing to most people.

So I keep it simple and I don’t use “lease with option” terminology and “subject to existing financing” and “wraparound mortgage all-inclusive trust deed”.

The upfront agreement basically talks about what you are willing to do as a business person, and sets the stage for not coming back ever. I mean ever.

Yes or no, not maybes.

The letter of intent basically says,

Name of owners,

property name,

today’s date,

name of prospective purchaser,

name of purchaser’s company,

intention to purchase on these terms as a principal.

Purchase price

if lease with option, market rent, 12 month term with extensions, exercise price, etc.

If subject to, purchase price, date of possession, date first payment, date of walk through, etc.

If wraparound mortgage AITD, purchase price, note payment, interest rate, etc.

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The upfront agreement

In order for the upfront agreement to work, you need to frame it as a very fair, 2 way business agreement.

Here is a possible exchange…

After the walk through, you’re sitting at the kitchen table, looking at both mom and dad the sellers.

I fold my hands and I looked very solemn, I try to give them is kind of an expression is possible, as sincere as possible, I have my legal pad, a pen, and a blank letter of intent in front of me.

I also have a folder of comps and rental information on the subject property.

So here’s the upfront agreement…

Investor: “So Bob and Susan thanks for the walk through, I just wanted to talk about how I’d like to see our business relationship work.

My job is to look at the property, look at all the financial information, then make a decision, on the spot.

To keep coming back over and over thinking about possible deals is not what I do.

What I do is

if the location is right,

the condition of the property is right,

the layout of the property is right,

the existing financing payments are right, and

the attitude of the sellers are right,

then my job is to put together the deal structure that works for me,

and I basically give the project the green light.

Not a yellow light or a red light, but green light,

the analogy here is that we go forward and get the paperwork done tonight.

To keep coming back is not a good business plan, takes up too much time and nothing gets done.  We are both concerned about getting to a result, right?

On your end, you want to make sure that you’re happy with the terms that I propose, if you’re one hundred percent happy with what I’m talking about, I would hope that you give me the “green light” on this proposal, and you feel comfortable that you finally got a solution to your house situation.

I know it’s stressful selling your house can be, I know it’s confusing at times, but hopefully we can move forward and both give this situation a green light.

Now if there’s something that I’m not happy with, I’ll tell you about it upfront, I won’t worry about offending you, I’ll just tell you,

“sorry this is not good work for me.”

And then I’ll pack up and move on to the next prospective home seller.

I hope you won’t be offended if a very honest and straightforward with you. I know you’ll be disappointed, but I hope you appreciate the straightforward and direct approach I have.

And lastly, if there’s one thing that both of you do not like about my proposed solution, I would hope that you would do the same thing, and tell me,

“Brian, this is good work from some sorry.

That last condition is a deal breaker for us. I’m sorry it’s not going to work out.”

Now I’m absolutely happy to accept that, and I’ll be disappointed, but I understand that you have to have your terms and conditions totally acceptable.

And just not going to work out for you.”

So at the end of our talk today, if we both give “the green light”, both say that the terms are acceptable, we’ll sign the paperwork and move forward,

on the other hand, if either of us give this talk “a red light”, the other party will say “okay, I’m sorry feel that way.”

How does that sound, Bob and Susan, is that sound like a good way to do business regarding your house situation?”

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The psychology behind this is that you don’t want to keep coming back.

A possible conversation you might have at this time in the negotiation is…

“Well it all sounds good but I want to run it by my attorney.”

The attorney objection comes up a lot especially in terms deals. When you’re first starting it’s so important to not get upset the objection.

And don’t cut down attorney saying that they are all crooks were there just a kill deal, even though they are deal killers.

When I say if they bring up the attorney objection is…

“You know I do hear that now and then and I understand your concern. I want you to have legal advice and be comfortable with this decision about your home.

Now I will tell you, unless your attorney is an expert with a lease with option, subject to existing financing, owner financing, and other legal remedies for your situation, he’s probably have a say ” don’t do it.”

Then I reach for my nolo.com article, and go over the different seller financing possibilities.

See

http://www.nolo.com/legal-encyclopedia/seller-financing-home-sales-30164.html

And I walk them through all the situations in the article, from lease purchase to subject to, to installment sale, to wraparound mortgage.

“Bob and Susan, the way I handle this is I write down that you will have 72 hours to have your attorney converse with you about the situation, and if we don’t have a written response from your attorney within that time, we will all presume that there are no objections.

I would hate for you to be charged to pay $500 in attorneys fees and have the attorney say “Don’t do it” and then have you waste that $500.

So how do you feel if I right into the agreement that you have 72 hours to talk to your attorney about this, and if we don’t have a written response within that time, we will presume that there are no objections?”

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So this ends the second step of the upfront agreement, when talking the sellers about selling their home on terms.

The next post is the third step, the motivation negotiation step, finding the real motivation of the sellers.

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Brian Gibbons
Wholesaler from Sherman Oaks, California

I want to talk about trying to discover the sellers true motivation.

The real estate investor has to figure out how the seller feels about certain issues like real estate agents, property managers, things of that nature.

When you ask a question like,

“what were you hoping I could do for you here today?”,

Really listen to what the seller says.

The only way you can do this is to get the seller to volunteer some of their problems.

I use negative phrasing and I sound a little naïve, I sound like Peter Falk in Colombo, you know that 70s show,about that CALIF police Lieut., that dealt with all these rich people in Hollywood accused of homicide.

I love how he scratched his head, using his hands, and using phrases like

oh, by the way…

Can you explain that a little bit better for me because I don’t quite get that…

I know that probably makes you sound stupid, but it allows the sellers to be disarmed.

If you said something like,

“You know Mr. seller the good thing is that if you rent this place out you will enjoy working with your tenants collecting the rents and all that, right?”

At 1st look that might sound a little weird, but what you trying to do is to elicit a response from the seller that he hates tenants.

I made you asked them straight ahead,

“how you feel about tenants? Or

“Do you hate tenants or what?”

That’s not going to be effective.

What is effective is…

“You know Mr. seller the good thing is that if you rent this place out you will enjoy working with your tenants collecting the rents and all that right?

So if he hates tenants, the sellers going to say something like,

“I hate dealing with tenants, it’s a big hassle,

my friend has a rental, he hates dealing with his tenants.”

By you need to act like Peter Falk here, and exclaim,

“Oh, a big hassle? (voice rises) I didn’t realize that…

So you need to practice phrasing the kind of situations that you want them to say that they’re not interested in, but act naïve.

This try another one okay?

“So Mr. seller’s probably not a problem if you don’t sell right now, at least you can move into your new house, if it takes 6 to 9 months to sell this place at least you won’t be a problem to cover both the payments right?”

The most people at 1st look, that sounds like you’re being silly, no one wants to pay a house for 6 to 9 months vacant.

But if you get the response like this…

Seller: “no I don’t want to do that, it’s going be a real financial strain for us to make but those payments.”

Timeline – Urgency
You want to figure out the Seller’s timeline or urgency.

A good way to do this is the following:

“Mr. Seller you know I just need to have an understanding of when would you like this particular sale to happen? You want to happen in 6 months or 9 months ideally what would you like to have this property handled?”

I love that “have the property handled”.

What you want to hear from them if they truly motivated is something like…

“God no. Not 6 months. I need to thing handled like this week or this month”

Now we have a true motivated seller and they’re going to be motivated to listen to you the Real Estate Solutions Provider, and to be agreeable to your creative offer.

Logic does not sell, emotion sells.

And remember one other thing:

We buy for emotional reasons, we rationalize and defend our purchases with logical reasons.

Think about buying a car, you don’t think about the total payments, you think about how it feels and the status you get.

So keep the motion high when you doing this 3rd step.

Next – Getting the lowest price on wholesaling deals.

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Brian Gibbons
Wholesaler from Sherman Oaks, California

In the book Shift by Gary Keller of Keller Williams, published I think in 2009 just after the crash, he talked in chapter 10 called creative financing.

I’ll paraphrase:

Real estate agents to do well have to work much harder to get a listing appointment, because credit is now very difficult.
If RE agents learned this business to train 2002 and 20066,

-when credit was terribly easy,

-liar loans were available,

-100% of value with no money down,

then they didn’t need to learn how to do creative financing.

Like Gary Keller, I started in real estate in the early 80s when interest rates were well over 10% for mortgages.

I do a lot of wraparound mortgages and contract for deed purchases, because getting financing was almost impossible.

The point of the creative financing chapter is this:

As an agent, you need to be very creative in this credit strangled market.

As a real estate investor, you need to make money with every lead.

So let’s talk about an example:

a pretty house quiet street, owes 95,000, comps come in at 100

The days are gone when you can overprice the house and do a price reduction.

The $100K house will sit there for months and months if it’s overpriced.

If you really care about the seller having some success about fixing their house problem, you need to talk about selling on terms and selling on cash.

@John Jackson

and I are good friends.

He lives in Texas and has mastered lease option assignments in TX, not easy in TX.

In 2002 he and I became friends, and I trained him on the basics of cooperative assignments, where you enter into a lease and an option with the seller as a principal, not as an agent but a principal.

You then assign the deal for a fee of generally 3 to 5%.

In the example above for $100K
they owe $95,000

If they listed for a $100K, sellers would have to pay the cost to sell, which include the following:
– commissions 3 to 6%
– closing costs 2%
– sellers concessions 3 to 6%
– vacancy costs we have to pay the PITI while is being sold, let’s say $1000×4 months, and this includes electric , heat, watering lawns, garbge, and so forth
– spruce up costs, such as painting a wall or replacing a carpet, or fixing a fence.

Many sellers don’t have a lot of cash in the bank, and they don’t want to get more debt on a credit card fix up their house and they can sell it.

So this particular seller would probably pay 10% to 15% of the value of the property to sell with an agent quickly. I believe very few agents actually fill out “net to seller sheets”

See

and when they go to closing there shocked is a little they get with all the expenses.

So selling on terms might be a good idea for the seller, if we could find a buyer that would rent for a while and then buy the property without an agent’s commission or closing costs. This is called lease to own.

Understanding the mechanics of lease to own assignments I think varies from state to state.

I coach it nationally.

But I call them “terms deals” which includes subject to, installment sales, wraparound mortgages, joint venture partners, private lenders, land trusts and more.

In most states, if you enter into a lease and an option with the seller, and you’re an agent, and you fully disclosure an agent in your acting as a principal, you’re good to go as far as a business model.

There are some states were lease options have some restrictions like Texas and North Carolina. I won’t go into those here.

And in Florida and OH and CA, you better be an agent to do them or the Dept of RE, who supervises agents will bring a “cease and desist” letter on your business activity.

So, seriously, get licensed and declare you are acting as a principal.

But the drill this thing down, if you advertise for a house that has a problem, you have flexibility in your solution.

If you are working full time, use a service like www.PatLive.com to live answer the calls.

Rules of thumb:

If you are licensed:

A pretty house with 90% loan-to-value, good school district, that might be a lease to own or subject to or a wrap.

A pretty house with 80% loan-to-value, good school district, that might be a listing, a lease to own or subject to or a wrap.

A pretty house with 50% or less loan-to-value, good school district, that might be a listing.

An ugly house with 50% or less loan-to-value, good landlording area, is a good wholesaling deal.

And an ugly house with 80% or more loan-to-value, no equity really, that’s a short sale.

Don’t be a one trick pony, be a transaction engineer.

Give the seller cash offer (which that usually hate), but you’ve got to give it to them, and

2 terms offers, a sub 2 and a lease to own assignment, or owner financing.

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Books I think You Need Now To Build a “Cash Or Terms RE Business”

“Awaken the Giant Within” by Tony Robbins gets to your real motivation. If you do not know what your real “why” is read that book. AwakentheGiant

 

“The Emyth Revisited” by Michael Gerber helps you visualize working “in your business” for a while, then working “on your business” and supervising. emyth

Being creative in deal making involves many skills. Listening well is one of the most critical. One of my favorite books about learning high level listening skills is “The 5 Essential People Skills: How to Assert Yourself, Listen to Others, and Resolve Conflicts” by Dale Carnegie Training. If you lack people skills, PLEASE read this. Also the classic, “How to Win Friends and Influence People.” by Dale Carnegie.DaleCarnegie5essentialpeopleskills

Selling is a skill, and ethical selling is important. “How to Master the Art of Selling” by Tom Hopkins is extremely valuable. TomHopkinsHowToMastertheArtofSelling

If you are talking to wealthy people re: Private Lending, the best book I know is “Values Based Selling” by Bill Bacharach. It is written for financial planners and stock brokers to sell to the wealthy.ValuesBasedSellingBacarach

Know the Fair Credit Reporting Act, the FTC, and how Credit Reports are created and improved are important when assisting seller financed home buyers getting home loans. “Hidden Credit Repair Secrets” by Mark Clayborne is a fine book to learn some interesting tactics to have to improve credit FICO scores.  Hidden Credit Repair Secrets

www.MyFico.com is great too.

How to Finance any Real Estate Any Place Any Time by James A Misko is one of my favorite “creativity books”. JamesMisko

We in REI are problem solvers, first and foremost. He goes into IRAs and Real Estate, Using Options, 1031 Exchanging, Combining Purchase with a Lease. Using Zero Coupon Bonds to Secure a Loan, Sale Lease Backs (not with distressed properties), using loan to equity options, and more. There are 45 examples to learn from. And he is a CCMI, and has been a NAR Instructor.

Gary Keller of Keller Williams wrote a book called “Shift – How Top Real Estate Agents Tackle Tough Times”, and in Chapter 10 he wrote about using Creative Financing to help Sellers and Buyers. ShiftGaryKeller

Many times I will buy that book in mass and give it to real estate brokers that I like to work with. You can buy cheap slightly used books at Amazon, like for a buck!

As far as never stopping to learn, the 2 references I use DAILY are “Dictionary of Real Estate Terms” by Barron’s,  Dictionary of RE terms

and “Black’s Law Dictionary” by Brian A Garner, et al. BlacksLawDictionary

The books by the Wall Street Journal are awesome: “The Complete Homeowner’s Guidebook” by David Crook,WSJHomeOwnersGuide

and

“The Complete Money and Investing Guidebook” by David Kansas. WSJCompleteMoneyInvesting

Lastly, business savvy books I like to read at night:

“What They Don’t Teach you at Harvard Business School”, by Mark H. McCormack, like how to run meetings, running a business, et al. WhatTheyDontTeachYouHarvard

And my all time favorite, “Swim with the Sharks” by Harvey MacKay, of MacKay Envelope Company and the Minnesota Twins. I have used that book to assist me run my businesses since 1986, especially see the chapter on Negotiation.SwimWithTheSharks

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Brian Gibbons
Wholesaler from Sherman Oaks, California

4th Step: Getting the Price Down

How to get the lowest price on a Wholesaling or Seller Financing Deal

2 of my favorite real estate trainers were David Finkel and Peter Conti. I learned this almost 20 years ago from them.

The 1st technique What did you realistically expect to get

The 2nd technique using ranges

The 3rd technique talk about a ficticious buyer through an agent to knock 6% of the price

“““““““““““““““““““

A mistake I find many investors that have trouble getting the seller to come down in a fashion that still keeps both you the buyer and the seller feeling good, it’s a mistake in negotiating price.

How to get the sellers to participate in the financing?

Well need to maintain rapport throughout the entire negotiation that just the beginning.

Being a bully forcing the seller to do all the repairs that you need to do, all the costs of closing, and how the house needs all this work it’s not that attractive right now, this might work if you are purely wholesaling, but doesn’t make you feel very good as a business operator.

I like to use these 3 techniques right in a row….

You: what was that price you wanted for the property again?

Seller: I’m asking 500,000 for the property.

You: Oh and what did you realistically expect to get for it?(1st technique)

* Seller: realistically, I think of get 470, 480.

* You: okay so you realistically expect to get around for 460, 470…(2nd technique)
* right, that make sense to me.. That if it realtor came in here right now with a serious buyer was willing to give you that full 470, or sell, you probably turn that down home? (3rd technique)

* Seller: no, at this point I’d probably take it just be done with it.

* You: sure I understand. Let’s see… 6% of 470000 is… Hang on a second.. It’s been a long day for me.
6% of hundred thousand is 6,000 ….and of 6% of 400,000 is 24,000,
and 6% of 70,000 is 4200.

(That’s 24000+ 4200 or $26,200)

(If you haven’t heard me say this before, you need to play little dumb, play like Lieut. Colombo, scratch your head, the longer you can take with this calculation the better. If you just punch it in your calculator and go 470 thousand times .06, that’s not powerful. What is powerful is the seller thinking God that’s a lot of money, as much is possible.)

Seller: jumping in.. That’s 26,200.

Investor: oh thanks for doing that, 26 200. Okay so the bottom line you’ll be getting about 435,000, okay that makes sense.

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Notes: number 1, what did you realistically expect to get, needs to be said with the right tonality. The word realistically, spread it out, elongated, and when use the expect to get part, say it at a higher voice.

Notes: number 2, whatever the lowest prices seller gives you into a range with his number at the higher end and, if the seller does the object the low end of the range as a new point from which you’ll negotiate.

Notes: you body language should be nodding up and down as you say this

Notes: the range you use is important to match your local market: a hot market is a smaller range, a slow market is a higher range.

Notes: it’s important that you use negative phrasing and it is important that you do the math slowly. To ensure that the seller feels comfortable with the final answer. So this lowest price is going to be your starting basis not the final price. If you’re writing anything down, don’t write anything down until you get to this starting basis price. In that example 435,000. And then when you write this number down you are legitimate ties an it as the top dollar price. You may need to negotiated lower or give him this price

So what you just learn how to do is to simply and easily get the price down by lease 8-10% or more of the original asking price

Next – The Magical 2 words to use to never lose a negotiation.

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Step 5 – The Magical 2 words to use to never lose a negotiation

I use this all the time when I deal with sellers.

It’s one of the strongest things you can do to use these 2 words.

What if they were just 2 words that would guarantee would never be rejected by a seller ever again?

Will it mean to you? How valuable would be to you?

If I asked you donate $1000 to a favorite charity for these 2 words to never be rejected by seller ever again, which you pay it?

You would?

Here are the 2 words…. “What if…”

Here’s why they are so valuable,
because they commit you to nothing
but commit the other side to everything.

So before you make this offer the seller has to tell you off the record so to speak that he or she would in fact say yes to that offer. It’s a way to feel them out, and not lose the deal.

It’s may be too simple for some people but it works.

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Well Bob here’s a possible idea, you might hate it but what if I were to be able to make up these back payments and by your property and just take over the payments from here on out. I’m not sure if I’d be willing to do this or not just yet, but what if I were able to talk my business partner into doing this, is that something we should even talk about or probably not?

““““““““““““““““““““““““““`
remember we’ve gone through the other 4 steps, and this “what if” step helps you understand if you’re on track or not.

If I’m talking about a subject to, wraparound mortgage, or a lease option assignment, I’ll use a “what if” like this…

“Bob and Susan we’ve gone through a lot of different ideas here today, we’ve looked at the cost to sell with an agent, with commissions, closing costs, sellers concessions, vacant house costs, and spruce up costs, we decided that relisting with an agent is not a good idea.

We’ve also looked at traditional rentals, where you hire a property manager for 7 – 10% of collected rent, and paying for maintenance, and that wasn’t the best idea but were open to looking at that.

And lastly we looked at seller financing, where you might be willing to help a buyer buy the property on terms, where you would accept a payment that would be very close or equal to your PITI payment, and do this for about 24 payments, and then whatever the mortgage balance was in 24 payments from now, would be paid off in full without any other further costs to you.

And just so I understand that last option look like the best option because you would net more money, am I reading that correctly?

So, I do want to ask you this one question,

“what if I could draft a very simple agreement, that would allow a payment to come to you for 24 months that is approximately your PITI payment, and you turn this property into an investment property, where you get some tax advantages from the IRS to do that, and about 24 months from now, the house would be sold, and then you would have your mortgage paid off in full, with no additional costs,  no closing costs or realtor commissions…..what if I can get that done for you, can you see any other reason why we couldn’t go forward today and get a simple agreement signed today?”

Now if you know the steps before this,

  • building rapport,
  • the upfront agreement to avoid the me think it over,
  • discovering the motivation of the seller, and
  • decreasing the asking price,

this “what if step” is just a trial close, and unless you really haven’t done a good job with the 4 steps before, if this should be very easy, should be an easy close.

The next step from here is a letter of intent that I ask the seller to sign. We are going to sign this letter of intent without a notary present, and the sellers then make an appointment to sign a lease and an option at a title company or an attorney’s office with full notary witness of the lease and the option.

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
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Brian Gibbons
Wholesaler from Sherman Oaks, California

Now that you’ve negotiated a” what if statement” you want to pull out a letter of intent.

This basically talks about some very simple terms, for either owner financing, sub 2 or lease option assignments or sandwiches.

The letter of intent should basically say the following, for a lease option assignment.

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(NOTE – THIS IS NOT A LEGAL DOCUMENT – TAKE TO YOUR ATTORNEY)

Letter Of Intent to Lease with Option

Subject property is at this address: ___________________________________________________________

Owners of Record are: _____________________________________________________________________

Legal Description is: _______________________________________________________________________

Purchaser: (name of your LLC) _______________________________________________________________

The above Owners of Record wish to enter into a Lease with an Option with the Purchasers.

It is understood that the Owners of Record and the Purchasers understand the following:

1. The Purchasers are licensed in the state of ____ to act as a real estate agent, but in this transaction is acting as a principal buyer and not “agent for”.
Please be advised that purchaser is a real estate investor that intends to enter into the agreements contemplated for the purpose of investing in real estate as a going business concern and to make a profit.

2. The Owners of Record and the Purchasers agree to enter into a Lease and an Option To Purchase. This lease and option will have the following Terms and Conditions in items 3 – 12.

3. The Rental Term for property’s Rental Agreement shall be for 12 months with possible qty. (2) 12 month extensions.
The rental amount per month paid in arrears is $________________ per month, starting on __________ (date).
These terms may be changed with both Owners of Record and Purchasers written consent.

4. The sales price shall be EITHER based on
a) the AVERAGE comparable values that have sold in the last 3 months with attached Comparable Marketing Analysis or
b) $____________________.
These terms may be changed with both Owners of Record and Purchasers written consent.

5. It is understood that the sales price cannot be higher than appraisal, as to assist the purchaser qualifying for a new mortgage.
If the appraisal is less than the sales price, at the time of exercising their option, the owners of record and the purchaser both agree that the sales price will be based on the new appraisal.

6. The option fee will be $_______________, and at the time the option is exercised, the option fee will be applied toward the purchase price.

7. This letter of intent will act as escrow instructions for both the owners of record and the purchaser.

8. It understood that this letter of intent is a “meeting of the minds” of general terms, and conditions, of the lease an option that will be signed with notary witness.

9. It also understood that this letter of intent is not binding, but serves to communicate intention of the purchaser and owners of record.

10. Time limit: either party, the purchaser or the owners of record, can cancel this letter of intent by simply not entering into a lease option by this date and time:
Date:______________ Time:________________
After this date and time, this letter of intent is void.

11. Purchasers are allowed to assign their Lease and Option to a third-party without the consent of Owners of Record.
Owners of Record realize and understand that the Purchasers will assign for a fee and to create a profit for Purchasers.
Owners of Record realize that there is no fee paid from Owners of Record to Purchasers for entering into this letter of intent.

12. Existing In-Force Listing Agreement
___ There is ___ There is not
an existing in-effect listing agreement with a real estate agent.
It is understood that if there is an existing in-effect listing agreement with an agent, that agreement may be in effect and a commission may need to be paid when the property is sold.

 

Signatures

Owner 1 x _________________________________ Printed Name _____________________________ Date ________________

Owner 2 x _________________________________ Printed Name _____________________________ Date ________________

 

Purchaser 1 x _________________________________ Printed Name _____________________________ Date ________________

Member LLC Name _______________________________

Purchaser 2 x _________________________________ Printed Name _____________________________ Date ________________

Member LLC Name _______________________________

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840
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Brian Gibbons
Wholesaler from Sherman Oaks, California

https://www.dropbox.com/s/uayra1g4h4xnd4t/make%20money%20with%20all%20your%20leads%2001.m4a?dl=0

https://www.dropbox.com/s/0xp88bwekmxkhj8/make%20money%20with%20all%20your%20leads%2002.m4a?dl=0

Above are 2 short recordings on buying on terms.

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840

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Chas Fabiano
Real Estate Investor from chandler, az

Great Information…thx for sharing.

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Okay the spring is starting and I just want to ask everybody

are you ready to go talk to Sellars?

In this thread is marketing ideas for expired listings, for listed houses, for landlords, for FSBOs, for we buy houses people that have thin leads

In this post I’m going to keep it really simple

Step one you need a good attorney

Step two you need a good RMLO

Step three you need access to the MLS

Step four you need a letter of intent to talk to Sellers about entering into a lease and option or subject to or wraparound mortgage

Step five you need to know the basics of talking to sellers that have little equity

Step six is you need to close on a letter of intent, and follow through to get the seller to sign either a lease with an option, a wrap around mortgage sale, or a subject to existing financing sale

Step seven depends on whether or not you have a lease with option or sub two or wrap

If it’s a lease with option, you want to enter into a lease with option with the seller and your LLC. Then get the keys and place a large sign on their front yard

If it’s a sub to or a wrap, you want to take possession and have 30 days paid on the house upfront so that you can either rented out as an owner or lease purchase the property

Hope that brings clarity to this process, on the seller side

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
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Christopher Goldie
Real Estate Investor from Columbia, South Carolina

@Brian Gibbons, I took what I was able to absorb from all this information you so kindly gave us, and applied it yesterday with a seller. We were unable to reach a deal as she wanted a big chunk of cash which made it over market value. Despite the fact she could no longer afford to make the payments on her vacant house. Go figure?

But thank you, I will be pushing forward as a much better equipped investor thanks to you.

Surround yourself with those on the same mission.
————————————-

Brian Gibbons
Wholesaler from Sherman Oaks, California

@Christopher Goldie

Here are some questions that I’d like you to report and I might be able to help you if you answer these questions

What is market value based on comps?

What is existing financing balances and payments, arms or fixed?

What is her motivation for selling?

What is her timeline for selling?

What is her plan in case the house doesn’t sell, rent?

What kind of a quiet street is it, or is it busy?

What kind of condition is the house in?

If your specific about these questions I can probably help you, including

what kind of big chunk of cash she wants?

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
Website: http://BrianGibbonsREICoach.com
Brian Gibbons – My BP Blog http://goo.gl/v0BoJO ph 818-570-0840

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Christopher Goldie
Real Estate Investor from Columbia, South Carolina

@Brian Gibbons

To start off, I’m currently rehabbing a house 3 doors down from the subject property. I watched the rehab about 2 1/2 years ago as one of my brothers live in this same neighborhood. This street is the main entrance. The area is industrial with the Amazon distribution center, the local power company’s main headquarters, rock quarry, and a new pharmaceutical manufacturing facility in the works, all within a mile or 2 and 2 major interstates. Just to paint a picture.

Wednesday I called the realtor from the sign in the yard, mainly just to poke around and compare my project. Setup a meeting thursday morning. Did a little research, house was on market for 295 days. I get there and he never shows and the sign is gone, but there is an older lady walking around the yard. Introduced myself, told her I was supposed to meet the agent for a showing. She tells me she just released him. Through a casual conversation I get this info:

She bought the house 3 years ago from a rehabber for her Marine son, he gets deployed a year ago April with no signs he’ll be back anytime soon and basically stuck her with it. She lists for $89,500 per her agent’s recommendation.

Comps are $80k for 3 bed 1 bath ( I’m looking at $72k for my 2 bed 1 bath)

She has zero desire to rent, wants it gone. Gotten to the point where she can no longer afford the payments, not late yet, but decided just to let bank have it back (her words)

Mortgage balance is about $69k ( no statement with her) Payment is $500 PITI ( again couldn’t verify)

Current area rents per a PM/ Investor I know are $850 easy, $900 for this house given freshness of everything. I realize this may be a marginal deal but I believe in the area’s appreciation and some cashflow.

I honestly couldn’t see where I would have to spend more than a $1000 for repairs, everything, floor to roof was 3 years old.

My offer was on the fly given what she gave me, but it was to buy subject to the existing mortgage, take over her debt, prevent foreclosure or ruining her credit. She was super excited about this and so was I, until  in addition she wanted $8k in cash. Which put sales price at $76k, plus $1k repairs and $1k in closing. I explained the values wouldn’t support it, given what she owed, repairs, and cash to her. So the only option I could consider was only taking the payments. She insisted, I thanked her, handed her another business card and left.

That was about the short of it. I got her contact info and will follow up in 10-15 days.

Now about my negotiating experiences. I work in commercial site clearing and grading where everything is basically competitive bid and very little negotiation. I buy properties from HUD so no real seller contact.

Would love some advice, Thanks!

Surround yourself with those on the same mission.

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Brian Gibbons
Wholesaler from Sherman Oaks, California

I’ll respond to this tomm

great report!

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Arleigh Cortez
from Bakersfield, California

Thank you @Brian Gibbons for a thread that is sooo valuable. I’m definitely trying to piece it together. Been listening to all your negotiation stuff and I must say, good stuff.

I was wondering what the flow was: Find seller, negotiate, get LOI, use attorney to draft contracts, market for tenant/buyer, use RMLO to help with plan, and then what??

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Originally posted by @Arleigh Cortez:

Thank you @Brian Gibbons for a thread that is sooo valuable. I’m definitely trying to piece it together. Been listening to all your negotiation stuff and I must say, good stuff.

I was wondering what the flow was: Find seller, negotiate, get LOI, use attorney to draft contracts, market for tenant/buyer, use RMLO to help with plan, and then what??

1. Marketing for Sellers – Expireds, Cancelled Listings, Long DOM Listings, Go see the seller, give a letter about lease to own vs selling for cash.  See

http://www.biggerpockets.com/blogs/3/blog_posts/43…

2. Negotiating with Sellers

http://www.biggerpockets.com/blogs/3/blog_posts/43…

3. See attorney about drafting lease and option from Letter of Intent.  Have seller sign lease and option and notary witnesses signatures.

4. Record the option

5. Market for Tenant Buyers

5a) Start a WordPress Blog about Lease 2 Own, what is in it for the Renter or Credit Challenged FHA Buyer; go to ipage.com , get a domain like PrescottRentToOwnHomes.com if you lived in Prescott AZ

5b) Get a Tenant Buyer site at OnCarrot.com

See

https://oncarrot.com/rent-to-own-website-templates…

5c) Get a BIG Sign on the front yard

Rent To Own Home

Rent $1100

24 months or less

666-xxx-xxxx 24 hours rec message

5d) walk door to door 50 houses next to house in neighborhoods.  Hand out flyer like this.

https://www.dropbox.com/s/pfhme0kfcyx9gu9/Pick%20Y…

6.  Tenant Buyer Presentation and Paperwork

Show the tenant buyer prospects the property.  Get them to sign a Earnest Money Agreement and a Option Release Fee half of 3% of FMV.

ex) 3000 Option Release Fee, get a check made to Title Company for $1500, write Option Release Fee in memo.  Deliver to Title Co.

DO NOT MAKE CHECK OUT TO YOU OR YOUR COMPANY.

7. Final Items

I would cancel the original lease and option once the total option release fee has been collected and cashed.

A new lease and option is then created with the seller and the tenant buyer, and signed and notarized.

Keys and contract papers are delivered to the tenant buyers and sellers.

You collect your option release fee and go onto the next deal.

Good luck!

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Brian Gibbons, REISkills.com Mentoring
E-Mail: Brian@REISkills.com
Telephone: (818) 570-0840
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Cody Steck
Real Estate Agent from Salt Lake City, Utah

Great thread! I love it!

A few questions for you though… Say that these sellers need to sell but don’t have the ability to own two homes at once, how do you tell the sellers they won’t be able to buy another home while they have a loan on their current property (the one with the lease option on it)? Do they have options? Will they just have to rent?

What do you tell the sellers will happen if the tenant buyer does not purchase the home at the end of the lease agreement? Doesn’t that basically put the sellers back at square one?

When you use the negotiation tactic of “what if I can get you a monthly payment that is close or equal to your PITI?” What happens to the spread on the monthly rent? It sounds like this is specifically for a wraparound and not for a lease option assignment?

How do the sellers get past paying closing costs at the end of the lease option agreement when the tenant decides to buy? This is still a 1-2% outlay right?

Thanks!

Realtor with Century 21 Everest Realty Group 801-244-2297 ctsteck@gmail.com

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Brian Gibbons
Wholesaler from Sherman Oaks, California

Geez @Cody Steck

Sellers have 3 options

Sell with an agent and pay the Costs To Sell with an Agent
Rent it out
Sell it Creatively with Terms (sub2, wrap, lease 2 own, lease purchase, installment sale)

Show the home sellers all of their options.

Help the seller sell and solve their problem.

Have buyers pay closing costs or split them.

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E-Mail: Brian@REISkills.com
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Learning Center – How Do I Invest with Terrible Credit?

Creative Financing 101

No Banks No Credit

1. Lease Option and assign – easiest – You lease Option from Seller and assign for 3% to 5%.  Be fair, charge market rent, market sales price, no rent credits.

2. Sub2 – Get the Deed – must deal with the due on sale clause – not impossible.  You get the deed, seller agrees to keep the loan in their name for a short time, good for fix and flips, not long term.

3. Wrap Around Mortgage – must deal with the due on sale clause – not impossible. You wrap a new loan around the existing financing, aka “all inclusive trust deed”, seller agrees to keep the loan in their name for a short time, good for fix and flips, not long term.

4. Land Contract – popular in many states.  Depends on Local Customs.

5. Free and Clear Houses – Buy on Private First Mortgages – Create good private terms, like a Moratorium on payments, Subordination, and Substitution of Collateral.

6. Sandwich Lease Options – You lease options from seller, sub lease, sub option – you must pay seller even if Tenant Buyer you are sub leasing and sub optioning to.

7. Joint Venture with Seller on minor rehabs, free and clear house – You get private money for minor rehab, give note for equity, no payments to seller for 4 months, buy it, fix it, resell it, pay off private loan and seller’s private note

8. Joint Venture with Doctors and Business People – many ways, I like LLC creation and JV Agreement, I find and supervise a local rehab, get funding with private individual, or hard money, buy it, own it, fix it, resell it, split net profit after all expenses, large numbers does not need 50 50% split, can be 25 75 split if deal is strong enough.

9. Wholesaling and Co-Wholesaling – You find a deal with a lot of equity and a lot of work in a reasonably good area.  You can co wholesale by partnering with other wholesalers, either just find the house and seller, or just find the Cash Buyer.

This is just residential, commercial is wide open.

Dodd Frank applies to financing owner occupants.  See

http://www.biggerpockets.com/blogs/3/blog_posts/39…

the CFPB has the final say on owner financing.

Creative Financing is useful for not just credit impaired investors; there are restrictions even with good credit on US Govt backed loans such as FHA 203B

http://portal.hud.gov/hudportal/HUD?src=/program_o…

Marketing for Creative Deals

Forget the MLS except for Expired Listings and Cancelled Listings.  I like LONG Days On the Market (DOM) , “about to” expired listings.  Knocking on doors is the fastest way to a good creative deal.

Getting Licensed or Having a Licensed Agent in your C Corp or S Corp or LLC

Having a good excuse or reason for Bad Credit might be enough of an explanation to getting approved for a Realtor’s Agent Sales License.

Good luck to anyone with bad credit.

It is a temporary problem.

Start building you Good Credit NOW!

See

http://www.myfico.com/CreditEducation/ImproveYourS…

Learning Center Joint Venture Partners

Purchase with JV Private Money or Hard Money (exit consumer buys rehab when finished)

Advantages Of Retailing
There are some very important advantages to working within the Retail Deal Section.

· The biggest advantage to retailing houses is the paydays, which can be very large.
· Sometimes you will be giving the buyer a seller held second mortgage as part of getting the buyer qualified more easily.
· After doing several retail deals and holding back several seller held mortgages, the monthly cash flow from these second mortgages can begin to add up.
· You can also use the second mortgages as down payments on other deals or sell them at a discount for cash.

Another nice thing about retailing is that you get to deal with prettier houses in nicer ar~as than if you were wholesaling and you get pride in the accomplishment that you made an old house look new again.

Disadvantages Of Retailing

Of course, Retailing houses does have some disadvantages. We said a minute ago that Retailing is the hardest way to invest and there are several reasons why.

First, you have to find a deal that you can buy at a steep discount which can be harder to do sometimes in nicer areas.
After finding a deal, you usually have to come up with the funds to purchase the property along with the funds to hire contractors.
You also have to deal with these contractors, which is probably the worst part of investing in real estate. Just ask any experienced investor what they think about dealing with repairmen. Repairing houses can be a hassle and it can be an even bigger hassle if you don’t know what you are doing.
The whole time the property is being repaired and is on the market, you have to pay holding costs such as mortgage payments, taxes & insurance.
Once you do find a buyer, you have to get them qualified for financing. As part of getting them qualified, you may have to help them with their mortgage application as well as help them fix their credit.
Something you have to worry about with the buyer’s new financing is “seasoning” issues. Seasoning is the amount of time you as the investor have owned the house. Banks don’t like to do loans where you as the investor are reselling the house at a higher price than you bought it for. The fact that it needed work doesn’t matter.
To get around seasoning problems, many investors have their buyers get FHA or Fannie Mae financing, because these loan programs do not have any seasoning requirements. However, these types of financing loans can result in you as the seller paying some hefty closing costs on behalf of the buyer.

All in all, retailing houses can be very time consuming and requires some skill.

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This is probably the BEST information about running a REI business you will EVER come across.

Please contact me below for personal one-on-one mentoring.

Remember:

It is up to you, and these next 5 years of hard work can get you INDEPENDANT of EVER NEEDING A JOB again!

All the best to you and your families,

Brian Gibbons

Mentor for REIs since 1986
Team@REISkills.com
www.REISkills.com