Today's message is a tough one. It's tough because it deals with a topic that is VERY difficult for some people to come to terms with. But once they do, their lives are forever changed by it.
The culture in our nation today suggests to us that the things that happen in our lives are--in large part--out of our control. The pervasive underlying tone of society suggests that all the things we experience in our health, our relationships, and our business endeavors (good or bad) are somehow out of our hands. That's not true.
You have to take 100 percent responsibility for your life if you want to thrive. If you're used to playing the role of the victim, successful entrepreneurship (and life in general) will be extremely difficult for you. If you feel your life is the result of other people's actions and decisions--and not your own choices--that means you have no control over your life. It means others are controlling it for you.
It's only when you take complete personal responsibility that you can truly learn and have power over every situation. It's easier to play the victim card, but if you do that, you won't progress in life.
Now keep in mind, we're not suggesting you take blame for things other people do or beat yourself up for mistakes. We're all human, after all. And humans make mistakes. We're talking about the attitude that you're the cause of everything that happens--and has happened--in your life. Who do you think is creating the outcomes in your life? You are!
You're the ONLY one that can produce a result in your life. If you don't like the outcome, you must change the behavior. Unsuccessful behavior is trying to find the scapegoat in your life. Successful behavior is understanding, real simply, that if it happened--you did it.
So look around you. Countless people in our country today like to play the blame game. And they are as miserable--and unsuccessful--as can be. Don't fall into that mode of thinking. Start accepting personal responsibility immediately. You'll be amazed at how you begin to have power over all situations. If you've been used to society's way of thinking, it may be a hard pill to swallow at first. But soon you'll start to see results in every facet of your life. You'll start to experience more positive outcomes in your health, your relationships, and especially your business endeavors.
Remember: You are the cause of everything that happens in your life. Adopt this attitude and never look back. Once you have this power, the only person who can stop you is you!
If you have the desire, you can be an entrepreneur. But just having the desire won't necessarily make you successful. There are three fundamental attributes you will need. Whether they come to you naturally, or you have to work on developing them, these three qualities are vital for building a successful foundation for self-employment.
- Know Your Business
The first essential element for success as an entrepreneur is to know your business. Whatever it is--know it like the back of your hand. Whatever entrepreneurial endeavors you are involved in--be it real estate, network marketing, Internet commerce, you name it--you need to strive to have an exhaustive knowledge of it.
Most people think the way to get involved in self-employment is to go out and start or buy a business. The part they leave out is training for the business. There's something to be said for just "taking the plunge," but you should at least know how deep it is before you jump in.
Once you dive in, you must continue to educate yourself about your business. After all, continued education is what will drive your earnings through the roof. So whatever business you decide to pursue, commit to learning as much as you possibly can. Every single time you meet another professional, attend another seminar, or read another book in your field, you are building your own professional competency. Find out how to write your own business plan through a free course at Trump University.
- Focus
Most of today's millionaires--and even billionaires--didn't start off owning 10 or 20 different businesses. They started making money by focusing on one. You simply cannot make big money by putting energy into a dozen things at once.
Some entrepreneurs love to try and put ALL their ideas into motion at once. But that's how you lose focus. And losing focus will kill your momentum in any entrepreneurial endeavor. Don't be one of those people who gets sidetracked as soon as you start to get some traction in your life. If you want to build momentum--and keep the focus--quit driving in the city. Get on a highway, put your foot on the gas, and forget about the exit ramps.
Approach your business with a single-mindedness of purpose--and don't let anything draw your focus away until you have made it successful. From there, you can continue to build that business, start a new one, or--as many entrepreneurs like to do--both!
- Persistence
You knew this one was coming. Persistence. A necessary attribute for ANY entrepreneur. So many aspiring entrepreneurs would be much more successful if they only gave themselves a chance. But every time they are about to break free, they encounter some resistance and decide it's too difficult. Don't be one of those people.
Call it what you want--perseverance, relentlessness, determination, resolve--just make sure you practice it. When you hit a wall--as you most assuredly will--it's okay to withdraw, regroup, and try another strategy. That's not quitting. That's smart business. Practice persistence in all your entrepreneurial endeavors--and stick with them.
We've all heard the age-old advice about the power of positive thinking. How many times have you heard someone trot out a line about filling your mind with good, positive images and avoiding the negative ones?
Now that you understand the concept of the subconscious mind, it should be clearer than ever why doing this is important. Positive thinking is important because the thoughts and images that occupy your conscious mind become seeds planted permanently in your subconscious mind. And your subconscious mind will make them real!
Speaking of seeds, let's consider an acorn. When an acorn falls to the ground, it will remain an acorn until it comes into contact with soil and water. When it does that, it begins a change. Particles of energy in the earth are attracted to it. Shoots extend from the bottom of the acorn into the soil to find more water. Another shoot at the top becomes a stem and reaches for the sun.
As the roots grow, they extend further and deeper into the soil--attracting the water and minerals they need for this new sapling to flourish. The stem produces leaves, and these leaves spread themselves out, attracting sunlight and particles from the atmosphere.
As the acorn continues to expand, at some point it ceases to be an acorn and instead becomes an oak tree. The roots, bark, trunk, branches, and leaves are all produced from the acorn, which had a patterned plan for life built within its nucleus.
Choose Your Own Programming
Once the acorn comes into contact with what it needs for life, there is no doubt what it will become. It will become an oak tree. You are much like an acorn in that you are a seed that will grow when given energy.
However, unlike the acorn, what you become is not predestined. You can choose your own future. And the fertilizer--the thoughts and images--you allow into your subconscious mind will determine what you become. Unlike the acorn, you are a co-creator; you can choose your own programming. Therefore, the beliefs you hold... the things you consciously dwell on... are planted deeply into the vault of your subconscious mind. And it is these things that become the patterned plan for what you will grow into.
Overcoming Negative Suggestions
From the day you were born, you've been bombarded with negative suggestions. As a child--or at some point during your lifetime--you've undoubtedly heard:
- You can't.
- It's no use.
- You'll fail.
- You're not allowed.
- Life is too hard.
- Don't trust anyone.
- It's not worth it.
- It's too much trouble.
- And on and on...
We could fill pages with the other people's negative rules and regulations for us. But now that you understand the power of your subconscious mind--and how to change those long-held negative beliefs--it's time to write your own rules. It's time to create your own future. Beginning right now, choose your own programming. Make sure the beliefs you hold ARE YOURS, not those that were taught or suggested to you by others.
In addition, make sure you surround yourself with positive energy and fill your mind with constructive beliefs. You are the co-creator of your own life. And unlike the acorn, you can be whatever type of tree you want to be.
With the skills you've learned in this issue, you can literally begin programming yourself for success. With an empty chalkboard to write on, make your health, wealth, and career exactly what you want them to be.
Have you ever wondered how two students can study the same materials, take the same course, and do the same homework--yet one gets an "A" and the other gets a "C"? Have you ever wondered how two entrepreneurs can start similar businesses, utilize similar strategies, and employ similar staff--yet one business fails and the other takes off like a rocket?
Why is this? Why do some people seem to draw energy and success to themselves like a super-magnet, despite less-than-average intelligence, wealth, and background?
The answer is because they are using the greatest tool on earth. They are releasing the hidden power within their mind that brings more wealth, health, and happiness to them. You also have this power. It's called your subconscious mind. And the difference between those who succeed, and those who don't, is that successful individuals use their subconscious minds (whether they realize it or not) to attract to them what they want.
Your Mind Has Two Parts
You have only one mind, but that one mind possessed two distinct parts--each with separate attributes and powers. The two parts of your mind are the conscious and subconscious. Let's look at the characteristics of both:
- The Conscious Mind
Your conscious mind is like the navigator/captain of a ship. He directs the ship. He sends orders to the crew. They, in turn, control the instruments, steering, boilers, and so on. The crew and people in the engine room don't know where they are going. They simply carry out his orders. He's the captain and they obey him because he is in charge. In fact, they would steer the ship onto a reef if the captain gave faulty instructions.
- The Subconscious Mind
Your conscious mind is the captain of your ship. Your subconscious mind takes all the orders you give it, based upon what your conscious mind believes and accepts as true. It does not question the orders.
Whatever you habitually think with your conscious mind sinks down into your subconscious mind, which then attracts what it needs to make those things come into being. Your subconscious is your creative mind. If you dwell on wealth, wealth will follow. If you dwell on lack, lack will follow.
The Law of Attraction
The important thing to remember is this: Once your subconscious mind accepts an idea, it begins to execute it. And it will attract what it needs in order to manifest your beliefs into your physical life. Whatever you claim mentally and feel as true, your subconscious mind will accept and bring forth into your experience. All you have to do is get your subconscious mind to accept an idea. Once that happens, it will bring forth the wealth and prosperity you desire. This is often referred to as The Law of Attraction.
It is important to remember that your conscious and subconscious are simply two spheres of activity going on within your own mind. Your conscious mind is the reasoning mind--the one that chooses. For example, you choose the books you read, your job where you work, and the car you drive. You make all your decisions with your conscious mind.
Your subconscious mind unconditionally accepts what is impressed upon it by the conscious mind. It does not reason. It is like a bed of soil that accepts any kind of seed, good or bad. Your thoughts are the seeds. Destructive, anxious, futile thoughts continue to work negatively in your subconscious mind. Sooner or later they will emerge and take shape as an outer experience that reflects those thoughts. They will attract into your physical world what you have planted in your mental world.
Changing Your Results
Now that you understand the two parts of your mind, you can see why two seemingly-similar people can get such different results from a seemingly-similar scenario. If two entrepreneurs open similar businesses with a similar business plan, they will each get different results. Why? Because they react differently to the challenges they face based on the conditioning or beliefs within their subconscious minds.
If you haven't been getting the results you want in your life, start paying attention to the messages you let in. Think of your conscious mind as the "watchman at the gate." Here are three ways to change what you're getting:
- Fill your conscious mind with the images, thoughts, and beliefs you want it to plant into your subconscious mind. If you haven't been doing this, it will not be easy at first. But just being aware of the two parts of your mind, and the roles they fill, will start to reverse the trend.
- Surround yourself with the people and experiences that will positively impact your beliefs. Many of your beliefs are formed based on your familiarity with what's close to you. The more supportive, positive, and encouraging your environment is--the easier it will be to impregnate your subconscious with constructive thoughts.
- Identify your negative beliefs about money, work, love, etc. Unexamined, they create behaviors that will cause failures in your life. From there, begin to make constructive autosuggestions to yourself. In other words, write down, mentally go over, or verbally repeat the new messages. Over time, the new messages will begin to replace the old messages and recondition your mind.
There's a reason wholesaling is a favorite strategy for many real estate professionals: It's not a complicated technique. Below, we've broken it down into six simple, straightforward steps.
- Find a Property
Before you can wholesale a property, you need to find a good deal. Use whatever method you prefer for finding good deals--and then get that deal under contract. A good wholesale deal must be 25 to 40 percent below retail value. For example, if you find a house that's worth $100,000 and you can purchase it for $93,000, you probably won't profit from the deal. You need to find a deal with a good profit margin so that when you wholesale it to someone else, they profit from it as well.
Don't be too greedy. Make sure you allow room for the next person to profit. Develop a system where motivated buyers (other investors) want to do business with you because you passed on the profit. They'll keep coming back.
For example, if a house is worth $100,000 and you can buy it for $60,000, don't attempt to wholesale it to another investor for $95,000. Instead, wholesale it for $70,000, and you'll make $10,000, which is a nice profit for you. The investor will make a bigger profit, but he's also fixing it up, borrowing the money, and taking all the risk.
- Analyze the Deal
Begin this step by determining how much you can get the property for. Then find out how much the property is worth by talking to agents, looking at comparable properties, or even obtaining an appraisal (if you're not comfortable with the first two yet).
Next, determine what repairs are needed to bring the property to full retail value. If this is new to you, bring in a licensed contractor to give you a detailed repair bid. During this step, be sure to keep all the information together. You may need it later.
- Get it under Contract
To place the property under contract, use a standard buyer's contract, which includes a contingency clause, disclosures, and long closing period built into the contract. Make sure your contingency clause says, "This contract is contingent upon buyer's inspection and approval before closing." Try to negotiate a closing period of 90 days for your deals.
Be sure your contract includes permission to show the property to prospective buyers. Also, make arrangements with the sellers for a way to show the property. Consider putting the following clause in your contract: "I'm going to have people I work with look at the property. That may include partners, an appraiser, a contractor, or a handyman. We need to have access to the property." This will allow you to show the property to the people you need to make the deal happen.
- Find a Buyer
To find buyers, start building a list. Ask other investors, rehabbers, or landlords if they are looking for properties. If they are, put their names in your database. You can also run classified ads and find potential buyers through the newspaper. Real estate agents also know rehabbers, as do people at your local real estate association. Then, when you get a wholesale deal under contract, you can send out an email or a flyer. Send the email to your list of potential buyers. Take the flyer to your real estate association and pass it out. Tell them it's first come, first serve. This will create a sense of urgency.
- Assign the Contract
Once you find a buyer and negotiate a price, the buyer pays you to sign over the contract to him/her. You use an Assignment of Contract for Purchase and Sale to make this happen. Once this form is signed, the buyer simply steps into your shoes; all the rights you negotiated in the original contract become his/her rights. To ensure the seller can't back out of the deal with the new buyer, be sure the original contract says, "This contract may be sold or assigned."
- Closing
Once you've sold the contract, you are out of the transaction--so this step doesn't really involve you. However, we're covering it so you can see how the process ends. Since you sold (or assigned) the contract in Step Five, if the buyers don't close, that's not your problem. Make sure you have a contingency clause in your contract saying that if the end buyers don't sell, you still get paid. But typically, the original sellers will close with the buyer--you simply played the role of matchmaker.
If you are a real estate rookie, say hello to your new favorite strategy! We'll refer to it as wholesaling, but you may also hear people refer to it as quick-turning, assigning the contract, or flipping. Why will it be your favorite strategy? Easy. Because you: •Don't put your credit at risk. •Don't need to use any of your own money. •Don't do any repairs or rehab work. •Get paid a nice chunk of change for doing it. In fact, it's not uncommon for a wholesaler to make a profit of $5,000, $10,000, or even $15,000 per deal! Wholesaling is a great way to get started in real estate. Keep in mind that you're getting paid for doing something very important: finding good deals for others. You can help people who rehab property, people who buy and hold property, and people who rent out property. All of these people will pay you to find good deals for them. Wholesaling works with small houses, large houses, commercial property, raw land--literally every type of property. Your job is simple: put buyers and sellers together. You play the part of the middleman, the matchmaker. Below is an example to show you the simplicity of this strategy. Example of a Wholesaling Deal Let's say you find a property worth $200,000, and you can purchase it from the seller for $130,000. You have 60 days to close, contingent upon your inspection (which gives you a way out of the deal if necessary). You run an ad online and in the paper that says, "Three-bedroom, two-bath house on Second Avenue. Make an offer. Must sell." Don't mention a selling price in your ad. In negotiation, the first person to mention a number loses. In addition to the ad, send emails and flyers to all of the potential buyers you know. You can also call real estate agents in the area and say, "I've got to move this house quickly. Do you have any potential buyers?" From your marketing efforts, a buyer (it could be an investor or an owner occupant) agrees to buy the property from you for $140,000. At $140,000, the buyer is getting a good deal. And that works for you, as you are paying the seller $130,000. It's a win/win/win. The seller sold the house, the end buyer got a good deal, and you pocketed the $10,000difference. Consider it a finder's fee. It happens all the time. The Advantages of Wholesaling Many new investors need capital to get started. If this is you, get your cash flow going by wholesaling properties before trying other things. Once you do a couple wholesale deals, you can try other strategies such as rehabbing, lease options, or landlording. All you will have invested is your time. The following are some advantages of wholesaling properties: •You don't need any money or credit. •You have no tenants to deal with. •You don't need to get into rehab work. •You can wholesale any kind of property. •You have no liability if you write your contracts properly, and use the appropriate contingency clauses. •Your profit can range from $5,000 to $15,000 per house! •The profits from wholesaling can fund your other real estate investments and help you start becoming profitable in real estate very quickly. The Disadvantages of Wholesaling The following are some disadvantages of wholesaling properties: •There is no residual income. •You won't build up long-term wealth with these properties. •You have to pay taxes on your profit because they are cash transactions. Wholesaling is a good way to get started in real estate investing. And as you can see, the advantages of wholesaling far outweigh the disadvantages. If you are a real estate rookie, we encourage you to give it a try. You'll probably find wholesaling to be $5,000, $10,000, or $15,000 of the quickest bucks you've ever made!
Five Tips to Lower Your Risk
Here are five ways you can lower your risk when rehabbing real estate:
- Make sure your contractors are licensed, bonded, and insured Whenever you find people to work on your properties, also make sure they are subcontractors, not your employees. The best protection is to have workers sign subcontractor agreements. Below is a valuable checklist.
Make sure the contractors you hire:
- Carry their own workers' compensation insurance.
- Set their own hours, and don't clock in.
- Work for others in addition to you.
- Have their own transportation and tools.
The most important thing is to make sure everyone who works on your property has workers' compensation insurance. What would happen if someone working on your property fell off the roof and got injured? Well unfortunately, many state courts would hold you liable for those injuries--so ask for proof of workers' compensation insurance. If they don't have it, deduct the premium out of their pay and buy it for them. This is the only way to avoid costly liability in the event that an uninsured worker gets hurt on your property.
- Determine repairs at the outset
First off, make sure you are only dealing with contractors that you've checked out. Call their references, and don't necessarily go with the least expensive one.
Once you've settled on a contractor, get a written bid. Have every repair put in writing, listing all materials to be used. List the type of tile to be installed, each plumbing fixture, every can of paint, etc. Lastly, make sure the contractors understand that you'll hold them to the written bid.
- Have time limits and per day penalties
Some investors sign a repair contract and give the contractor six months to finish the job. Four months later, they discover nothing's been done! Never let more than a week go by without knowing where the job is.
One way to do this is to break the job into a timeline. Have completion dates written into the contract so you and the contractors know what needs to happen and when. For instance: If a house needs the yard cleaned, a tear-out, drywall, a paint job, and a new roof, schedule it out. For example, in the first seven days, the yard will be cleaned, the tear-out will be done, and the drywall will be started. By the end of the second week, the paint will be finished. By the end of the third week, the roof will be completed.
Make sure both you and the contractor understand and agree on this ahead of time. Then, if the contractor gets behind, withhold payment until the work is completed as agreed upon in the contract.
- Only deal with pre-approved buyers
You should never sign a contract with a buyer until they've been pre-approved for a loan. In today's market, lending requirements are very strict. So if your buyer tells you he/she is pre-approved, contact their lender or mortgage broker to confirm it.
If a buyer intends to purchase with all cash, that's great! Just make sure you verify that they have the money. Ask for a recent bank statement that shows they have the cash. This is called "verification of funds."
- Get the right insurance
Tell your insurance professional exactly what you're doing. Make sure you have the right amount and proper type of insurance to cover your investing activities. Put all recommendations in writing and keep them as future protection in case you find that you don't have enough insurance.
Vacant property is often difficult and expensive to insure, so shop around and make sure you're insured for its full replacement value.
Five Tips to Lower Your Risk
Here are five ways you can lower your risk when rehabbing real estate:
- Make sure your contractors are licensed, bonded, and insured Whenever you find people to work on your properties, also make sure they are subcontractors, not your employees. The best protection is to have workers sign subcontractor agreements. Below is a valuable checklist.
Make sure the contractors you hire:
- Carry their own workers' compensation insurance.
- Set their own hours, and don't clock in.
- Work for others in addition to you.
- Have their own transportation and tools.
The most important thing is to make sure everyone who works on your property has workers' compensation insurance. What would happen if someone working on your property fell off the roof and got injured? Well unfortunately, many state courts would hold you liable for those injuries--so ask for proof of workers' compensation insurance. If they don't have it, deduct the premium out of their pay and buy it for them. This is the only way to avoid costly liability in the event that an uninsured worker gets hurt on your property.
- Determine repairs at the outset
First off, make sure you are only dealing with contractors that you've checked out. Call their references, and don't necessarily go with the least expensive one.
Once you've settled on a contractor, get a written bid. Have every repair put in writing, listing all materials to be used. List the type of tile to be installed, each plumbing fixture, every can of paint, etc. Lastly, make sure the contractors understand that you'll hold them to the written bid.
- Have time limits and per day penalties
Some investors sign a repair contract and give the contractor six months to finish the job. Four months later, they discover nothing's been done! Never let more than a week go by without knowing where the job is.
One way to do this is to break the job into a timeline. Have completion dates written into the contract so you and the contractors know what needs to happen and when. For instance: If a house needs the yard cleaned, a tear-out, drywall, a paint job, and a new roof, schedule it out. For example, in the first seven days, the yard will be cleaned, the tear-out will be done, and the drywall will be started. By the end of the second week, the paint will be finished. By the end of the third week, the roof will be completed.
Make sure both you and the contractor understand and agree on this ahead of time. Then, if the contractor gets behind, withhold payment until the work is completed as agreed upon in the contract.
- Only deal with pre-approved buyers
You should never sign a contract with a buyer until they've been pre-approved for a loan. In today's market, lending requirements are very strict. So if your buyer tells you he/she is pre-approved, contact their lender or mortgage broker to confirm it.
If a buyer intends to purchase with all cash, that's great! Just make sure you verify that they have the money. Ask for a recent bank statement that shows they have the cash. This is called "verification of funds."
- Get the right insurance
Tell your insurance professional exactly what you're doing. Make sure you have the right amount and proper type of insurance to cover your investing activities. Put all recommendations in writing and keep them as future protection in case you find that you don't have enough insurance.
Vacant property is often difficult and expensive to insure, so shop around and make sure you're insured for its full replacement value.
| | Government Agencies Are Busy Creating Real Estate Investing Opportunities in Virtually Every American Community Some real estate investors complain about the government. That's easy to understand. None of us like code enforcement, property taxes, building codes, etc. But the fact is, you should love the government, because it's hard at work creating hundreds of thousands of good deals for you. Many government agencies acquire properties well below market value and then turn around and sell them to the public. These government-owned properties are not hard to buy. After all, government agencies encourage people (homeowners AND investors) to buy property in communities all over the country. Why? Because it is to the government's advantage to provide safe, well-maintained, affordable housing to its citizens. Here are several examples of how government agencies acquire properties for pennies on the dollar, and how you can find them: - Property Tax Defaults
Properties are sometimes seized by county governments due to an owner's failure to pay local property taxes. Check with any county tax assessor's office about their tax sales.
- Bank Failures
The Federal Deposit Insurance Corporation (FDIC) comes into possession of homes and businesses whenever a bank fails and has repossessed assets in its possession. Once they become the property of the FDIC, they are sold at very low prices in order to liquidate them quickly.
To bid, call your local FDIC office or call the FDIC at 877-275-3342. You can also go online at www.fdic.gov, click on Asset Sales, then Real Estate Sales, then FDIC Real Estate for Sale where there is a form you can fill out to get a list of properties specific to your area and needs. After identifying properties in which you are interested, each includes a contact name/number to get further information about that property and/or make your bid.
- Probates
The government sometimes acquires property upon the owner's death after the taxes and other liens have failed to be paid by any beneficiaries. Probate of the estate is frozen until taxes/liens have been paid. In many cases, the heirs prefer to sell the property rather than pay what is owned and go through a lengthy probate procedure to divide the property.
- Foreclosures
The Department of Housing and Urban Development (HUD)
HUD obtains foreclosed properties when the mortgage was insured by the FHA (a division of HUD) and sells them to the public, non-profits, and governmental agencies--usually at discounted prices. HUD properties include all types of single family dwellings (1-4 units) and multi-family dwellings (5 or more units). For further information, call the FHA at 800-225-5342. To locate HUD properties for sale you can find lists in daily newspapers and online at www.hud.gov/homes.
To submit a bid, you must use a licensed real estate broker. HUD uses a competitive budding process on-line at the above-listed site and the bid giving the highest acceptable net return is chosen.
Veterans Administration (VA)
Properties are acquired by the VA when veterans default on their mortgage payments (if it was a VA loan). VA properties are sold through an agent of the VA, Ocwen Federal Bank (www.ocwen.com). These are available for sale to the general public, but not to veterans.
Bids must be made through a licensed real estate broker who is registered to sell VA properties. The VA may pay some closing costs.
United States Department of Agriculture (USDA) The USDA, through their Rural Housing Service (RHS), sells foreclosure properties such as: - Single and multi-family rural housing
- Farm/ranch properties
The properties are offered either directly by the RHS or by a broker. For further information about the purchasing process and to obtain lists of their foreclosure properties, you may call the USDA Rural Development Office at 202-690-1533 or check out their website at www.rurdev.usda.gov.
- Seizures of Criminal Assets
U.S. Marshall's Service (USMS) Asset Forfeiture Program
The USMS offers properties for sale to the public that have been seized by federal law enforcement agencies. They include residential and commercial real estate, raw land, and even personal property (boats, cars, etc.).
To obtain their current National Sellers List--which lists contract service providers and federal agencies authorized to sell these forfeited properties--go online to www.usmarshals.gov or call 888-878-3256.
Some of their seized properties are listed with Fidelity National Asset Management Solutions (FNAMS). Fidelity is a full service national asset management firm (a real estate broker). These properties can be found at www.fnams.com.
U.S. Department of the Treasury
Real estate seized through U.S. Treasury criminal investigations--including homes, condos, and commercial buildings--becomes property of the U.S. Treasury. Most properties are liquidated through cash sales by voice auctions at the actual property's location. For information, call the Department of the Treasury at 202-622-2000. For other important information, go to www.treas.gov/auctions/treasury/rp.
One thing to remember is that most government-owned properties are sold in “as-is” condition. Although rehab work is often needed, the low price--and the big potential for profit when you sell--will usually offset repair costs. We recommend that you inspect any properties for sale--especially those being auctioned. If repairs are needed, you can fix up the property and then either sell it at a profit or rent it out to receive a nice monthly cash flow. (For tips on rehabbing property, review Issue #124.) Any way you slice it, there are lots of exciting ways that the government creates real estate deals. There are even more exciting ways that the government acquires and then liquidates those properties. So the next time you are tempted to complain about the government, just remember what a great help they can be when it comes to creating and finding great deals for you! Your Local Courthouse Is a Goldmine!Searching Public Records and Attending Court Cases Can Yield Great Leads for YouAs a real estate investor, your county courthouse is a veritable gold mine of information. First of all, there are many types of courts that help create motivated sellers (even when they didn't think they were motivated). Let's take a look at six of those. - Codes Court
Go to your local housing administration office to find out scheduled dates for codes court--where landlords and investors go to defend their interests. The codes court enforces the codes and can issue fines. They can even condemn homes and have them bulldozed.
The docket for the day is usually posted outside the courthouse, and the proceedings are all public record. Motivated sellers come to these courtrooms. Chances are you'll find a good deal.
- Eviction Court
In every major city, evictions take place at least a few days a week. Who shows up there? Tenants, attorneys, landlords, and managers. Owners who have a conflict on their hands and go to court to resolve it can also be in the market to sell for a good price.
Know that when you go to eviction court, you may find some great deals, and you'll also find better entertainment than any TV sitcom. If you'd rather avoid the drama, simply get the names, addresses, and phone numbers of people on the docket. Send them a letter that asks, "Do you have any properties you'd like to sell?" Then follow up.
- Probate Court
You can look in the public records, where deceased persons' assets are listed. We talked at length about probate property in Issue #122. Contact the attorneys and the families and say, "Would you like to unload these properties quickly? I can help you out."
- Divorce Court
Because divorce records are public, you can actually look up case files and see what a couple owns. Many may have a home they must sell, and they're often willing to take a discount just to settle their assets and get out of the marriage quickly. Get to know some divorce attorneys, keep in touch with them, and show up at divorce court. You might find some good deals there.
- Tax Sales
If people don't pay their property taxes, the government taxing entity will demand payment and can force a tax foreclosure. You can buy the property at a tax sale or, in certain states, you can buy a tax lien certificate for the amount of the back taxes. By purchasing a certificate, you will receive a specified amount of interest on your money. (Some tax lien certificates pay anywhere from 10 to 30 percent interest!)
- Environmental Court
People who leave too much junk on their properties end up in this court. And don't we all have too much junk? Just don't keep it in your yard, because this court fines people for not removing trash and not cleaning up the debris in their yards. These homeowners are often ticked off about being harassed by the local government, and would like to leave their properties.
Owners of properties that end up in these courts can be highly motivated to sell. Go meet them (and their attorneys), get their names, and contact them afterward. They could turn into good deals. Searching Public Records
When you visit your county courthouse, you shouldn't just check out the previously-mentioned courts. You should also use the opportunity to search public records. Concentrate on four departments--the recorder's office, the county tax collector's office, the clerk of the court, and the real estate assessor's office. Depending on the county, you can now find many of these departments online. - The recorder's office can give you the names of the past and present owners, how much was paid each time the property was sold, and the financial aspects of each transaction. It will also have information regarding any liens or judgments against the properties.
- The county collector's office usually handles tax liens against properties with unpaid taxes.
- The clerk of the court's office can furnish information on any mortgage foreclosure, including remaining balance, the original balance, the lender and the lender's attorney, plus the name and address of the defaulting parties.
- The assessor's office has the most complete information on properties. It can give you the assessed value of a property, the square footage, any improvements, and the lot size. It can even give you the name of the person paying the taxes, which is usually the owner, and much, much more.
Visit your county courthouse today and take advantage of the goldmine of opportunities you find there. By searching public records and attending court cases, you will find more potential deals than you'll know what to do with. |
Some real estate investors complain about the government. That's easy to understand. None of us like code enforcement, property taxes, building codes, etc. But the fact is, you should love the government, because it's hard at work creating hundreds of thousands of good deals for you.
Many government agencies acquire properties well below market value and then turn around and sell them to the public. These government-owned properties are not hard to buy. After all, government agencies encourage people (homeowners AND investors) to buy property in communities all over the country. Why? Because it is to the government's advantage to provide safe, well-maintained, affordable housing to its citizens.
Here are several examples of how government agencies acquire properties for pennies on the dollar, and how you can find them:
- Property Tax Defaults
Properties are sometimes seized by county governments due to an owner's failure to pay local property taxes. Check with any county tax assessor's office about their tax sales.
- Bank Failures
The Federal Deposit Insurance Corporation (FDIC) comes into possession of homes and businesses whenever a bank fails and has repossessed assets in its possession. Once they become the property of the FDIC, they are sold at very low prices in order to liquidate them quickly.
To bid, call your local FDIC office or call the FDIC at 877-275-3342. You can also go online at www.fdic.gov, click on Asset Sales, then Real Estate Sales, then FDIC Real Estate for Sale where there is a form you can fill out to get a list of properties specific to your area and needs. After identifying properties in which you are interested, each includes a contact name/number to get further information about that property and/or make your bid.
- Probates
The government sometimes acquires property upon the owner's death after the taxes and other liens have failed to be paid by any beneficiaries. Probate of the estate is frozen until taxes/liens have been paid. In many cases, the heirs prefer to sell the property rather than pay what is owned and go through a lengthy probate procedure to divide the property.
- Foreclosures
The Department of Housing and Urban Development (HUD)
HUD obtains foreclosed properties when the mortgage was insured by the FHA (a division of HUD) and sells them to the public, non-profits, and governmental agencies--usually at discounted prices. HUD properties include all types of single family dwellings (1-4 units) and multi-family dwellings (5 or more units). For further information, call the FHA at 800-225-5342. To locate HUD properties for sale you can find lists in daily newspapers and online at www.hud.gov/homes.
To submit a bid, you must use a licensed real estate broker. HUD uses a competitive budding process on-line at the above-listed site and the bid giving the highest acceptable net return is chosen.
Veterans Administration (VA)
Properties are acquired by the VA when veterans default on their mortgage payments (if it was a VA loan). VA properties are sold through an agent of the VA, Ocwen Federal Bank (www.ocwen.com). These are available for sale to the general public, but not to veterans.
Bids must be made through a licensed real estate broker who is registered to sell VA properties. The VA may pay some closing costs.
United States Department of Agriculture (USDA) The USDA, through their Rural Housing Service (RHS), sells foreclosure properties such as: - Single and multi-family rural housing
- Farm/ranch properties
The properties are offered either directly by the RHS or by a broker. For further information about the purchasing process and to obtain lists of their foreclosure properties, you may call the USDA Rural Development Office at 202-690-1533 or check out their website at www.rurdev.usda.gov.
- Seizures of Criminal Assets
U.S. Marshall's Service (USMS) Asset Forfeiture Program
The USMS offers properties for sale to the public that have been seized by federal law enforcement agencies. They include residential and commercial real estate, raw land, and even personal property (boats, cars, etc.).
To obtain their current National Sellers List--which lists contract service providers and federal agencies authorized to sell these forfeited properties--go online to www.usmarshals.gov or call 888-878-3256.
Some of their seized properties are listed with Fidelity National Asset Management Solutions (FNAMS). Fidelity is a full service national asset management firm (a real estate broker). These properties can be found at www.fnams.com.
U.S. Department of the Treasury
Real estate seized through U.S. Treasury criminal investigations--including homes, condos, and commercial buildings--becomes property of the U.S. Treasury. Most properties are liquidated through cash sales by voice auctions at the actual property's location. For information, call the Department of the Treasury at 202-622-2000. For other important information, go to www.treas.gov/auctions/treasury/rp.
One thing to remember is that most government-owned properties are sold in “as-is” condition. Although rehab work is often needed, the low price--and the big potential for profit when you sell--will usually offset repair costs. We recommend that you inspect any properties for sale--especially those being auctioned. If repairs are needed, you can fix up the property and then either sell it at a profit or rent it out to receive a nice monthly cash flow. (For tips on rehabbing property,
Any way you slice it, there are lots of exciting ways that the government creates real estate deals. There are even more exciting ways that the government acquires and then liquidates those properties. So the next time you are tempted to complain about the government, just remember what a great help they can be when it comes to creating and finding great deals for you!
Plan Ahead - Simplify Things for Your Heirs & Loved Ones
In this issue, we'll discuss how to avoid probate and how to make sure your assets never become an investment lead for someone else--and we'll do this by eliminating the probate process entirely!
Probate is the term for the legal process of disposing of the estate of a deceased person (or decedent). After paying the debts and taxes incurred by the decedent in his or her lifetime, probate distributes the remaining property among people as the will directs--or among surviving members of the family (heirs) and other claimants according to the judgment of the court. A person's assets can be comprised of real property or personal property. Real property can be homes, commercial buildings, raw land, or apartments. Personal property includes vehicles, furniture, jewelry, clothing, and knickknacks.
Specifically, probate does the following:
- Proves in court that a decedent's will is valid.
- Pays debts and taxes incurred by the decedent in his or her lifetime, including monthly mortgage payments on the home.
- Distributes the remaining property among people as the will directs--or among surviving members of the family and other claimants according to the judgment of the court.
Will Having a Will Avoid Probate?
Sometimes the person dies with a valid will, which means the person died "testate" and the decedent's estate will be transferred as described in the will. On the other hand, a person may die "intestate," meaning without a will. If a person dies intestate, the decedent's estate will be transferred according to state law. In either scenario, the probate process entails gathering and accounting for the decedent's assets, ensuring debts, creditors, and taxes are paid, and distributing the remaining estate to the appropriate heirs.
A will doesn't avoid probate, it initiates it.
It doesn't matter whether the late owner has a will, estates must go through the probate process. And probate can be a lengthy process. Because of the enormous volume of cases--almost 2 million each year--and the enormous backlog within the judicial system, probate cases can take an average of three years to settle. That's a long time for loving, but eager heirs.
How to Avoid Probate for Your Estate
While you'll want to consult your own legal or tax advisor, most experts agree the best way to avoid having your own estate go through the probate process is by setting up a living trust. Living trusts enable you to avoid probate completely and cost much, much less than probate. Nowadays, a living trust can be set up for $1,500 and often much less.
When you set up a living trust, that trust is considered a separate entity--one that is apart from you. Think of it as a corporation--a separate legal entity. If you fund a trust, that trust owns your property, which means it can continue even when you pass away.
Probate courts have no jurisdiction over property owned by a living trust. After your death, property in the trust can be distributed, privately and easily, to your family or friends with no interference by probate. One caveat: When your property changes--when you sell one home and purchase another one (or several as a real estate investor)--make sure your living trust is updated to reflect your changing circumstances. You don't want to pass away with an outdated, inapplicable living trust.
Why is this so important? Because in order for your estate to avoid probate, all assets that require title, such as checking accounts, safe-deposit boxes, stocks, bonds, automobiles, or real estate, must be in the living trust. If they are not, a probate must be initiated. In fact, if even one of these items is not included in the living trust, probate is required. So make sure you keep your living trust current.
By setting up a living trust, you are making sure your assets never become an investment lead for someone else! In fact, you will eliminate the need for your heirs to even go through the lengthy and costly probate process at all. Check with your financial advisor for the details of getting a living trust initiated. Don't wait until it's too late. One day, your loved ones will thank you for it.
Five Tips to Lower Your Risk
Here are five ways you can lower your risk when rehabbing real estate:
- Make sure your contractors are licensed, bonded, and insured Whenever you find people to work on your properties, also make sure they are subcontractors, not your employees. The best protection is to have workers sign subcontractor agreements. Below is a valuable checklist.
Make sure the contractors you hire:
- Carry their own workers' compensation insurance.
- Set their own hours, and don't clock in.
- Work for others in addition to you.
- Have their own transportation and tools.
The most important thing is to make sure everyone who works on your property has workers' compensation insurance. What would happen if someone working on your property fell off the roof and got injured? Well unfortunately, many state courts would hold you liable for those injuries--so ask for proof of workers' compensation insurance. If they don't have it, deduct the premium out of their pay and buy it for them. This is the only way to avoid costly liability in the event that an uninsured worker gets hurt on your property.
- Determine repairs at the outset
First off, make sure you are only dealing with contractors that you've checked out. Call their references, and don't necessarily go with the least expensive one.
Once you've settled on a contractor, get a written bid. Have every repair put in writing, listing all materials to be used. List the type of tile to be installed, each plumbing fixture, every can of paint, etc. Lastly, make sure the contractors understand that you'll hold them to the written bid.
- Have time limits and per day penalties
Some investors sign a repair contract and give the contractor six months to finish the job. Four months later, they discover nothing's been done! Never let more than a week go by without knowing where the job is.
One way to do this is to break the job into a timeline. Have completion dates written into the contract so you and the contractors know what needs to happen and when. For instance: If a house needs the yard cleaned, a tear-out, drywall, a paint job, and a new roof, schedule it out. For example, in the first seven days, the yard will be cleaned, the tear-out will be done, and the drywall will be started. By the end of the second week, the paint will be finished. By the end of the third week, the roof will be completed.
Make sure both you and the contractor understand and agree on this ahead of time. Then, if the contractor gets behind, withhold payment until the work is completed as agreed upon in the contract.
- Only deal with pre-approved buyers
You should never sign a contract with a buyer until they've been pre-approved for a loan. In today's market, lending requirements are very strict. So if your buyer tells you he/she is pre-approved, contact their lender or mortgage broker to confirm it.
If a buyer intends to purchase with all cash, that's great! Just make sure you verify that they have the money. Ask for a recent bank statement that shows they have the cash. This is called "verification of funds."
- Get the right insurance
Tell your insurance professional exactly what you're doing. Make sure you have the right amount and proper type of insurance to cover your investing activities. Put all recommendations in writing and keep them as future protection in case you find that you don't have enough insurance.
Vacant property is often difficult and expensive to insure, so shop around and make sure you're insured for its full replacement value.
One of the most satisfying and popular ways to make money in real estate is buying a property at a discount, fixing it up, and selling it on the retail market. This is called "rehabbing" or "retailing." This lucrative type of investing can be very rewarding, allowing you to see the results of your work immediately.
Many successful rehabbers focus on fixing up bread-and-butter "family" properties, making $15,000 to $20,000 on each. Doing two or three houses like this a year can provide you a great supplementary income, while doing six or more a year can provide you with a good living and freedom from a job.
Cosmetic vs. Structural
When looking for an investment property to rehab, keep your eyes open for fixes that will make a big difference, but not necessarily cost a lot. Look for houses that need cosmetic changes such as new:
- Paint
- Carpet
- Fixtures
- Landscaping
Until you become an expert at rehabbing, avoid properties with structural problems such as foundation problems or rotten wood. These can sometimes be extremely profitable, but they can also sometimes turn into "money pits." It's best to avoid structural problems as a rookie rehabber and stick to buying houses that need little more than "curb appeal."
Buying it Right
It's often said that real estate investors make their money when they buy, not when they sell. This simply means that when you get in for the right price, you are guaranteed to profit when you get out.
So what is a good deal? You want to have at least a 25% margin--after expenses--to ensure that you make enough money. For example, if a house in perfect condition will be worth $100,000 fixed up, you must get it for $75,000 or less. But we're dealing with fixer uppers here, which means the houses you buy will NEVER be in perfect condition.
So let's assume that $100,000 house needs $20,000 worth of work. Well, now you must get it for $55,000 or less. This gives you plenty of room for repair costs, holding costs, unseen expenses, and profit.
Limiting Your Risk To make every deal as profitable as possible, you must limit your risk. The biggest risks in rehabbing property are:
- Repairs cost more than you thought they would.
- Property doesn't sell as quickly as you had planned.
- Property doesn't sell for as much as you want it to.
- You don't have the proper insurance coverage.
Pros and Cons of Rehabbing
While you can make a great deal of money in rehabbing, it can be frustrating and time-consuming if you don't do it right. Beware of the risks listed above.
On the other hand, you don't have to deal with tenants, you can see the progress being made every day, and you're updating housing and improving a neighborhood. It's rewarding to drive by houses you've bought, rehabbed, and sold.
If rehabbing houses interests you, try doing one or two while maintaining your current job. If you enjoy it, and it makes you enough money, perhaps you might try going full time as an investor. Fixing up houses for new buyers is one of the most satisfying things you can do in real estate--and the most profitable
The Worker, Homeownership and Business Assistance Act of 2009, which was signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts. The new law:
- Extends deadlines for purchasing and closing on a home.
- Authorizes the credit for long-time homeowners buying a replacement principal residence.
- Raises the income limitations for homeowners claiming the credit.
Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.
For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.
People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after Nov. 6, 2009. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers. The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009.
Several new restrictions apply to homes purchased after Nov. 6, 2009.
- Purchasers must attach a properly executed settlement statement to their return.
- No credit is available if the purchase price of the home exceeds $800,000.
- The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
- A dependent is not eligible for the credit.
- The new law gives the IRS broader authority to deny first-time homebuyer credit claims, without having to first audit a taxpayer’s return. Known as math error authority, this authority applies, retroactively, to credits claimed on original and amended 2008 returns, as well as to claims yet to be filed.
Additionally, there are new benefits for members of the military and certain other federal employees:
- Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit. Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011. If a binding contract is entered into by that date, the taxpayer has until June 30, 2011, to close on the purchase. Members of the uniformed services, members of the Foreign Service and employees of the intelligence community are eligible for this special rule. It applies to any individual (and, if married, the individual’s spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.
- In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community. This relief applies where a home is sold or stops being the taxpayer’s principal residence after Dec. 31, 2008, in connection with government orders received by the individual (or the individual’s spouse) for qualified official extended duty service. The credit is still allowable even if this happens during the year of purchase. Qualified official extended duty is any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer’s principal residence (whether inside or outside the U.S.) or while residing under government orders in government quarters. Extended duty is defined as any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.
Under the American Recovery and Reinvestment Act (ARRA), more parents and students will qualify over the next two years for a tax credit, the American Opportunity Credit, to pay for college expenses.
The American Opportunity Credit is not available on the 2008 returns taxpayers are filing during 2009. The new credit modifies the existing Hope Credit for tax years 2009 and 2010, making the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.
The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.