Structuring offers is a deceptively simple concept. You can learn the basics in a couple hours, but it takes analyzing hundreds of deals to really start to understand the subtleties. Use the Structuring Offers Checklist as crib sheet to remind yourself of some of the key concepts you will need when analyzing deals and structuring offers to sellers.
In the Structuring Offers Checklist we cover most of the basic strategies for analyzing deals including an all cash offer which is based on the 70% minus cost of repairs formula. As an aside, some investors use 65% minus cost of repairs and some people use whatever the maximum percentage their hard money lender will loan minus the cost of repairs.
For most of the offers that I structure I want to calculate the net operating income first and so we include that as a prominently placed, early step on the checklist.
We do include sub checklists for structuring subject to, lease option and owner financing offers as well which are very important if you are trying to buy properties using any of those creative finance strategies.
We also address structuring offers if you plan to wholesale the property with the key consideration for doing that being: knowing what you wholesale buyers are willing to pay. Knowing their buying criteria allows you to structure offers where they are excited to buy even with your wholesale fee included.
Until my next post,
James
P.S. Interested in learning more about how to analyze deals? For a limited time you can download How To Analyze Deals Volume #2 for free.
We break the Bills Checklist for property management down into two primary categories: automatic payments and manual payments.
Automatic payments include things that we have set up to automatically be paid like mortgage payments, property insurance and property taxes. We primarily confirm that these were paid and that the correct amount was paid for these. Once they are confirmed we log that it was done.
Manual payments are for most other bills that need to be paid manually. We may still use bill pay to pay them, but not an automatic, recurring bill pay service.
Once we have made the manual payments there usually is some logging to be done regarding the payment and that is included in our system for paying bills manually as well to completely document that payments were made and to keep our files organized for taxes and accounting purposes.
The system we have for paying bills is important, but becomes increasingly more important for real estate investors opting to work with private lenders and buying properties with owner financing or subject to.
Until my next post,
James
Most of the work that we do with tenant-buyers is covered in the Property Management Checklist while they are renting the property awaiting closing, but we also need to stay on top of the purchase agreement with have with them. The Tenant-Buyer Checklist addresses the purchase agreement we have with them.
Running this checklist allows us to remind the tenant-buyer that they should be working on buying the property. We encourage them with postcards, occasionally letters and calls that they should be working on getting a loan to buy the property and/or building up their down payment to us so that we can offer them owner financing.
With most of our tenant-buyers we would be willing to offer them owner financing on the property instead if they build up a large enough deposit with us and convert our rent to own relationship into a owner financing relationship.
Or, we would encourage them to find more traditional financing and cash us out of the property by having them talk with their lender and/or our preferred lender.
Reminding your tenant-buyers consistently increases the likelihood that they will complete the agreed up transaction to buy the property so regular reminders are helpful and effective.
Until my next post,
James
Tonight for our Real Estate Investor Bronze Members I am holding a training webinar called Real Estate Investing Strategies Working Right Now. In this webinar I will be talking about which real estate investing strategies are working best right now and highlight some of the training materials we have for our Real Estate Investor Bronze Members that can be used to learn specific implementation strategies, checklists, forms and downloadable training courses on the specific areas.
These are some of the topics that I have on the outline to talk about:
- Wholesaling – Wholesaling is a great way to generate immediate chunks of cash as a real estate investor and a strategy that I strongly recommend for new investors wanting to get involved with the business as it will help you earn while you learn.
- Virtual Wholesaling – Virtual Wholesaling is similar to wholesaling in many ways except you are able to focus on markets that are not local to you in your wholesaling. You will be growing multiple buyers lists, employ marketing in multiple geographical markets–often out of state–and have key dream team members in those areas to help you.
- Buy And Hold – Right now a good long term Buy And Hold strategy is extremely powerful. Interest rates are at or near all time lows, the trend is that more people are moving toward renting and we are heading toward a period of high inflation meaning property values will likely rise considerably. A potential challenge is investor financing which I plan to address in detail for our members.
- Subject To and Lease Options – Buying properties “subject to” the existing financing or structuring a creative Lease Option deal are two different, but similar strategies that specifically address the investor’s financing challenges while still solving problems that many sellers have in our current market.
- Partnerships – There are many folks that want to get involved in real estate investing but do not have the time or expertise to really learn the business. There are some great opportunities for professional real estate investors that have the time and expertise to partner with folks interested in the benefits of real estate investing (income, depreciation, equity build up, appreciation and, in some cases, leverage) to work on the financing side with professional investors so that each of them could achieve more than they might otherwise achieve alone in a win-win partnership.
- Multi-Units and Apartments – While this is not an area of expertise for me since my focus has been primarily on single family homes, I see an opportunity in this strategy and I think for the right person it is something worth at least looking into.
In tonight’s training session, I will also be sharing the amazing resources that we have for the following as well to address the very specific challenges of financing on the side of of the investor buying and also for profitable exit strategies for investors as well:
- Owner Financing – Since this is a major area of focus in our business, I have some amazing resources and training materials on this topic.
- Private Money – Last year when I actually got licensed in my state to be able to raise private money, I was one of only two people who had gotten licensed in the last 10 years and yet there is a huge opportunity with the low returns that folks are getting on their money for real estate investors to work with private individuals with private money loans secured by investment real estate.
- Rent To Own and Lease Options (as exit strategies) – I will also be sharing some of the strategies for offering creative, flexible financing to your end buyers to make your exit strategy more profitable and give you a significant marketing advantage.
As you can see, there is quite a bit to cover on tonight’s webinar so I will be mostly pointing out specific training resources that we have already available including checklists, systems, forms, audio downloads and more. I will, technology willing, be placing the recording of the webinar up on the Real Estate Investor Wiki within a couple days.
Until my next post,
James
There are lots of different strategies for investing in real estate from short sales to pre-foreclosures to REOs and other bank owned properties to lease options and on and on. My personal preferred strategy is to focus on finding high equity properties and start with a offer that asks the seller to accept a note for their equity.
So, if you are working with real estate agents and brokers to help you find deals then here is how I suggest that agents find potential deals for me.
First, there is a HUGE variety of agents with a very wide range of unique experiences, beliefs, knowledge levels, work habits and personality types. Not every agent is a good match for working with me and I suspect not every agent will be a good match for working with you.
Some agents when I first tell them what I am looking for think they should look in their MLS for properties that list “owner financing” or “owner can help finance” or “seller financing”. Experience shows that this is the wrong approach. The overwhelming majority of sellers advertising that they will accept owner financing are investors like me that are selling on a rent to own or would consider a land contract. Are there exceptions? Yes, but go ahead and test this yourself and you will see that most are not good fits for how I buy.
The preferred way for agents to find potential deals for me involves two steps:
First, if the agent can look up approximately how much is owed on the property (the majority of areas you cannot get good data for this but you can roughly estimate based on lien data from public records). We are looking for properties that are likely free and clear or have very low loan balances. Many agents when you tell them this is what you want, tell you that all the properties in their market are foreclosures and that there is no one like this. I strongly disagree… one third of all properties in the United States are owned free and clear (see this compiled summary chart).
Second, and this is probably the most common way, is to call the listing agent and tell them something like this:
I have a serious buyer who is interested in a single family home like your listing, but he is only interested if they seller would consider accepting a note for their equity if he puts up a down payment. Is this even something your seller would consider?
Some agents will “build up” their buyer (me in this case) to make it more attractive. That can help, but its not required.
Some agents will try to guess terms, interest rates, how much down and so on… don’t bother. It doesn’t matter, at this point, what the seller thinks they want because the property actually dictates how much monthly we can pay (Net Operating Income). All you are doing is pre-screening to see if it is something they’d consider.
Once that happens, the agent should call and provide full info on the property for us to do our offer analysis and make an offer.
I hope that helps you understand how I work with agents to find deals for me.
Until my next post,
James
P.S. To learn more about my strategies and how to implement them in your business, upgrade to our Real Estate Investor Bronze Membership today.
I’ve talked before about the important of building your dream team and having a great title company on your team is critically important. In fact, many people do not realize all the different things that a great title company can provide.
While I was putting together the Title Company Interview Questions as an exclusive resource for our Real Estate Investor Bronze Members I was reminded of just how important my title company is to my business. For example, here are some things that a title company may be able to provide to you:
First, they can close your deals and provide you with title insurance to protect your interest in the property.
Second, many are offering to help negotiate short sales for you.
Third, many can provide access to comparable sales data so you can determine the value of your properties before you buy.
Fourth, many can pull up mailing lists from public record including Absentee Owners and Free And Clear–both are excellent marketing lists. Many can pull a foreclosure list for you as they are filed. Some, and this is much rarer, can give you access to probate data if that is part of your business model.
Fifth, many will help you with the paperwork you need when you are using owner financing or private lenders to do your deals.
So, take some time to find a great title company for your real estate investing business and you’ll find it saves a lot of time and money.
Until my next post,
James
