In fact the New York Times just did an article about it here: http://nyti.ms/9LkKpA

You can see the live website on MSN.com here: http://theinvestedlife.msn.com

Facebook Fan Page: http://bit.ly/9ZH4fa

Check it out and let me know what you think….post a comment or send me an email on the contact us link above.

Remember, this works for any bank owned property (or short sales) listed on the MLS (Multiple Listing Service).

Again, We use the LLC method to AVOID double closing problems and to AVOID using flash cash lenders that eat up our profits.

I’m eliminating everything I’ve already covered up to this point, so I’m assuming you have REO leads (or MLS listed Short Sale Leads (cheap and ugly are best)), and you’re ready to put that offer on paper and you want to do it right.

1. First off, YOU don’t write offers. Your realtor does for you. You only need to talk the talk and direct them (if they need it) on what goes in the blanks.

2. These will all be CASH or Hard Money Offers with NO FINANCING CONTINGENCIES whatsoever. I prefer to write them all as cash offers…even if I know my buyer will likely be using hard money. (more on that later).

3. You tell the agent what ENTITY (your LLC you created to sell) and what price you want to offer based on the formula I gave you. Then only other important information is:

• How much for Earnest Money
• When is the Earnest Money Delivered
• Inspection Deadline (date)
• Closing Date
• Other Dates

Earnest Money: you have to at least put up the minimum but I usually offer more. It makes my offer stand out from some others if there’s multiple offers. It’s not uncommon for me to do $5,000 even if they are only asking for 500-1,000.

If you don’t have that much, that’s fine, use the minimum…you can even have the offer written to allow you to deliver earnest funds 1 or more days after the acceptance of the contract by the lender. I do this all the time. ESPECIALLY for short sales. It might be 30 days to several months later before a bank accepts your offer. No way I’m leaving thousands dollars laying around in escrow on a deal I might not even get.

You fill out your assignable contract with the seller. (example below of one of my offers)

4.1. Price and Terms. The Purchase Price set forth below shall be payable in U. S. Dollars by Buyer as follows

Inspection Deadline: I use this as my way out if something goes wrong. 10 days is a standard inspection period. It’s even standard on the lead based paint disclosure required on any pre-1978 construction house purchases…this gives you 10 days to find a buyer with No Risk! No buyer? Ask anyone that looked at the deal what they would pay and counter your own offer on your “inspection findings”. Never back out directly on inspection…counter your own offer…it will save you some “face” if you made a mistake, both in your realtor’s eyes and the listing agent (who probably gets many other REO listings)

Closing Date: Keep it short but 2-3 weeks is about as fast as any lender can get to the closing table so that’s usually the time frame I give.

Other dates: See below as an example:

2.3. Dates and Deadlines.

Keep in mind, when I’m dealing face to face with a seller (or someone’s doing this for me), I’ve already given them a verbal or written letter of intent (often with 3 or more ways I can buy their property (complete multi-offer system is HERE!) ) and I’ve let them decide which one is best…so, I’m just filling out on paper (the contract) what we’ve already agreed on. This isn’t a “here’s my offer, take it or leave it” situation. You just need your contract to be assignable. You’ll also want some way out of the deal if something doesn’t go to plan. I usually use a simple inspection clause without a date limitation on it. This gives me up to the closing to exit safely.

4. When your offer is accepted, usually my agent calls me (or emails me) that we have a deal. It might be a day or more later before I actually see a signed copy of the contract, but I immediately upon a “verbal” acceptance start marketing the deal to my buyers list. I’m usually calling my “A” buyers as soon as I hang up the phone wth my realtor telling me I have the deal. I’ll also blast it out to my e-mail list with a picture and the specifics on the after repaired value, repairs and the total price of the house (purchase + my assignment fee)

5. Get buyers in to see it. Usually REO properties are on a combo box, not an electronic box requiring a realtor “key” to unlock…so they are easy to show or have your buyers go by and see.

6. Once your buyer says yes – you have them bring you a certified funds deposit (equal to or greater than your earnest deposit) and have them sign an agreement to purchase the LLC you have on the contract. You’ll need a legal document for this. I had my attorney draft one that covers all the important aspects of a real estate agreement, but as the purchase and sale of an an LLC. Mine cost $1250 but you can get it, and my entire seminar on wholesaling for a fraction of that price HERE!

7. You then coordinate with the title company who will be signing at the closing…it will be your buyer, because at closing they will be the owner of that LLC on the contract.

8. Make sure your buyers and any hard money lenders involved are CC’d on any title work emails and all are aware of the closing date. (if you wrote the deal as cash and your buyer is bringing in a hard money lender, you have to notify the title company and they may require you to sign an addendum to the contract.

9. Go to closing and get a big check – your final payment, and make sure everything goes smoothly, and focus on your relationship with the agent and your buyer.

10. Celebrate your victory. Take a little of your profit and treat yourself for you accomplishment. With the rest of it…what’s the best investment for your cash? Invest in more marketing? Invest in more real estate education to increase your cash getting skills? Pay off bad debt? A combination of a few of the above perhaps. Either way, congratulate yourself…you did something awesome!

To Your Success,

Michael Jake

Your Local Mentor

www.localmentor.com

“I just closed my first wholesale deal and made an assignment fee totaling $22,200! I’ve already received a check for $11,000 and will receive the other $11,200 soon . . .I couldn’t have done it without the help of Michael Jake’s guidance and expertise. Michael taught me everything I needed to know such as marketing for wholesale deals, talking and negotiating with sellers, making the right offers, and how to quickly find a buyer for my deals. Michael’s system has given me the confidence to repeat this process and make these big paychecks over and over again!” – – Kevin Kudrna, Retired Air Force

P.S. Find out what Kevin already knows HERE! It’s the most up to date content out there on Wholesaling Houses and Wholesaling REO’s.

Colorado Real Estate Investing Club

Are you looking to network with other real estate investors? Join a local real estate investor club and surround yourself with other like-minded individuals.

It’s a great idea to bring plenty of business cards to network, but if you’re new…have a plan to maximize your time. I suggest you always ask someone checking people in at the door to introduce you to someone there that you think will have the biggest impact on taking you to the next level.

Just getting started? Ask to meet some of the ACTIVE buyers. If you want to wholesale deals or find partners, this is a great way to go about it.

Looking for more funding sources? Ask to see who the active lenders are for distressed properties.

Need a good contractor? Ask! I think you get the point…don’t go in without a plan. Know what you want to accomplish and ask.

Are you in Colorado? Check out the Colorado Springs Real Estate Investing Club

The house is in a great area called Holland Park in Colorado Springs on the West Side of town. I love this area, and tried to buy a house in the neighborhood when I first moved to Colorado Springs. I got out bid on one house and ended up buying in another area, but I it’s a nice median priced area west of the interstate. The only problem is there aren’t many deals in this area. Most owners take very good care of the houses and the only “below market” houses are often on the busy streets on the edges of the neighborhood. To date I’ve only bought 2 houses in Holland Park. One we still own as a rental. It’s too nice of an area to focus on for wholesale deals and fix and flips. This was a mistake I made early on. It’s close to where I used to work and I’d drive around all the time looking for distressed deals, and there just weren’t many. Other areas have better ongoing opportunities if you are focusing on a specific area.

Here’s my video walk through:

Instead of fixing it up, I offered it (first) up to my wholesale buyers list and, sure enough, someone offered me $13,750 for the deal. A bird-dog brought me the deal. It was foreclosed on by a lender (I think this particular “lender” was more like an investor that bought bad debt, foreclosed and then sold inventory on terms) and they had been advertising it on craigslist and with a few bandit signs in the yard.

They wanted to use their contract (non-assignable) so I just created an LLC (could have done it with a trust too, but not all buyers understand trusts and not all hard money lenders lend on trusts in my area. It’s easier (in my area) to use an LLC), went to contract with the lender with my new LLC, then after my buyer liked the deal and we agreed on a price (I offered originally at 92k and we settled at $88,750. That was 13,750 to me and much better than what I’m making on MLS listed wholesale properties. After more careful inspection (by my buyer) we both agreed it needed more rehab cost than I originally thought, hence we agreed on a better price.

I filled out an agreement to convey membership interest in the LLC, and took a 3,000 deposit at the time we agreed and then the final sale of the LLC would take place on the same day as the closing with the balance of 11,750 to paid in certified funds. After a couple weeks, we closed and I showed up at the title company and collected a check…after drinking some free coffee.

I’ve been asked to keep up with some blog posts on their website and this topic came up from a question on the discussion board over there. I answered it there, and I figured I’d share it with you here too.

Home Equity

When do you think it’s smart to pull equity out of your home, and how much is too much?

My question is why pull out your home equity at all? If you want to pull out equity to buy toys or supplement your lifestyle, I say, NEVER is the best time! [not in the msn.com reply but...I've seen a lot of situations where owners got WAY OVER THEIR HEADS tapping into home equity like it's an ATM for buying crap like ATV's, Jet Skis, or even paying off credit cards that have been racked up on similarly useless novelties that go down in value. Many were short sales waiting to happen or already have been foreclosed on because the owner who should have been in a safe payment with a ton of equity from longer term ownership, but they blew it on lifestyle crap. Read "The Richest Man In Babylon" and "The Millionaire Next Door" for real traits of the wealth.] If you want to use some of your home equity to get you into another real estate investment, then I would say let’s talk…

First things first; I don’t think you should refinance your existing first mortgage which would start your amortization back to 30 years. If you are going to refinance NOW to take advantage of super low interest rates, great, but I would try to shorten your amortization and keep the same payment you’ve been making. For instance, if you have had your loan 5 years and you are currently at 6% but can drop it to 4.5% by refinancing, consider a shorter term mortgage – like a 15 or 20 year mortgage if available…sometimes rates are even better for shorter terms.

If you have equity on top of the existing loan balance, I would use home equity line of credit. I would have a very specific plan on what you’ll do with the money. My opinion on use of Home Equity Lines of Credit is to use it only on quick turn deals. For instance, you purchase a bank foreclosure for 50% of the after repaired value and you can fund the purchase with a hard money loan, but you need say $20,000 to rehab it and cover your holding expenses. Within 3-6 months the house is fixed, marketed and sold. You get a profit on the resale, you pay off the hard money loan and you pay down the Home Equity Lines of Credit to repeat the process. Let me state….get the right education before you do any real estate deal like that. You need to know the conditions in your marketplace and go at it well educated and well thought out before you go risking your home equity.

A good plan might be to fix and flip 2-3 houses and use part of the profits toward buying a good long term investment property and use the rest to build cash reserves and pay down your 1^st mortgage.

Michael Jake

http://www.localmentor.com