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10 Critical Themes That Were Ever Present At The Inaugural BiggerPockets Real Estate Investing Summit

Filed Under : Real Estate by admin

Apr.6,2012

Sorry for the delay in getting this lessons learned post about the BiggerPockets Real Estate Summit, but I took a trip through the North Dakota oil patch after leaving Denver and was overwhelmed with the possibilities!

As I look back at what a great experience participating in the BiggerPockets Summit was, I keep coming back to the recurring themes that I heard during almost every presentation and in almost every discussion I had the good luck to participate in. In fact, it was hard miss these “themes” as they appeared to be the essence from which all of the established and successful real estate investors were operating from!

Whether you are already in the trenches moving forward achieving great success as an investor, or are just getting started, I firmly believe that by embracing these themes you will move toward continued and sustained success. And, why not? The fastest way to success is to follow the actions of those who are already succeeding!

Critical Themes Present Around Successful Real Estate Investors

Successful real estate investors . . .

1. Prepare themselves for SUCCESS. Investors know that their success requires vast amounts of learning. They know that they must spend time and effort “learning” prior to jumping in and they must be willing to participate in every learning opportunity available to them. The next BiggerPockets Summit would be a great investment on your part.

2. Embrace their SUCCESS. Real estate investors have conditioned themselves to accept that they are worthy of success and that their success not only helps them, but also directly and indirectly helps many others as well.

3. Have learned the art of overcoming their FEARS. Successful investors know that they will need to take educated risks and make decisions which are new to them. They are unwilling to listen to their “mind-chatter” and know that getting out of their comfort zone is essential. These same investors have learned to take risks with certainty, overcome their fears, tune-out their mind-chatter and move forward having full confidence in their plan and their abilities.

4. Believe in ABUNDANCE. Every successful investor knows that their success is not a zero-sum game — a game where others must lose in order for these investors to succeed. These successful investors believe that there is vast never-ending abundance fueling their success and the success of others as well.

5. Real estate wealth is not a “Get Rich Scheme”. Successful investors realize that with proper planning they will get “rich” investing in real estate. Yet more importantly, they know that the process of obtaining wealth through their real estate “entrepreneurial” efforts requires discipline and it won’t happen overnight.

6. Have a clearly written set of GOALS. Their goals are S.M.A.R.T Specific, Measurable, Attainable, Realistic, and Time-based. These same investors not only know what their goals are, they have them written down, and they recite them everyday without fail.

7. First become an EXPERT in a single area of investing. Successful investors know that learning the ropes by becoming an expert in at least one real estate investment area will get them to their goals via the shortest path possible. These areas may include wholesaling, rehabbing and selling to homeowners or investors, holding properties as rentals, etc.

8. Have a success FORMULA. Our successful investors have spent substantial time and effort to develop a formula for achieving their success in real estate. This formula considers amongst other things local market conditions, their knowledge and abilities, their financial resources, and their risk tolerance.

9. Know the value of building a TEAM. This team made up of lenders, realtors, attorneys, contractors, property managers, and others allows the successful investor to focus their efforts on finding quality deals and more rapidly achieving their goals.

10. Know the value of STRATEGIC PARTNERSHIPS. They have learned that not every partner is a bad partner, and if chosen with care strategic partnering can be one of the quickest methods to achieving their goals.

Bottom line… have you embraced similar themes for your business? If not, what are you waiting for?

Photos: Dave Bowden, Julie D.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

10 Critical Themes That Were Ever Present At The Inaugural BiggerPockets Real Estate Investing Summit

Real Estate Investing For Real | A BiggerPockets Investment Property Blog

Tags : BiggerPockets, Critical, Estate, Ever, Inaugural, Investing, Present, Real, Summit, Themes, Were

Successful Investing while Holding a Full Time Job – Key #2: Doing Your Homework

Filed Under : Real Estate by admin

Apr.3,2012

The second article in our series of six keys to successful investing while holding a full time job is the one I get the most push back on. I don’t understand it, as I believe that it is very simple, yet people are always trying to cut corners or they try to outsmart the system.

If you are going to be successful investing while holding a full time job (and you have support of your significant other, see Key #1) you need to put in “The Work”. I actually call it “Homework” as it seems easier to digest, after all we all have demanding full time jobs already.

So what do I mean by Homework, how do you complete the Homework and how do you know when you are done with your Homework?

First, what do I mean by Homework?

Because you only have limited time in the day or week given work commitments, about half of the homework can be done at home after hours and on weekends, while the other half of the work needs to be completed in the field in the market you have selected to invest in.

You need to become knowledgeable about your market, meet new people in your market that could be on your team, and you need to see at least 50 properties in your investment market.

50 properties? Why not 10 or 5? “Remember I am smart and I have no time.”

Do what you want, but remember, I said 50 properties. I think an investor needs to see at least 50 properties before they can isolate a great deal from good deals. If you see less than 50 properties you wouldn’t be able to collect enough data points, and you will be investing with incomplete information.

I still review at least 20 new properties a month and I have been doing this for 10 Years.

How do you complete the Homework?

Unfortunately, there is no short cut or easy answer. Time and effort are required to scrutinize the details, call on your contacts, and finally, get on the road and review as many properties as time allows.

Learn the details about your market: find out the price range of different type/size properties, expected rents for different type/size of properties, vacancy situation, neighborhood, cost of rehab, etc.

Expand and talk to contacts in your market and become an expert on the properties for sale in your market.

How do you know when you are done with your homework?

I think the best measuring stick for being done is the ability to answer the questions with confidence:

Can you go through 10 Properties in a day and rank them from best to worst based on your investment criteria?
What criteria are you using to rank these properties?

If you can do this you are well on your way to successful investing in real estate. If you can’t rank the properties best to worst, I suggest you see more properties.

Another key to being done with your homework is feeling conformable calling a stranger. Let’s face it, most real estate agents will be strangers the first time you call them, so make it a practice to call at least one new real estate agent a week.

In the end, by securing full support from your significant other and completing the required homework you will set yourself up for successful investing while working full time.

Key #3 is coming next week

Good Investing

Photo: Phil and Pam

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Successful Investing while Holding a Full Time Job – Key #2: Doing Your Homework

Real Estate Investing For Real | A BiggerPockets Investment Property Blog

Tags : Doing, Full, Holding, Homework, Investing, Successful, Time

Working with Lenders Who Self Manage Appraisals

Filed Under : Real Estate by admin

Mar.30,2012

Anyone who has been actively investing in real estate over the last few years and has been working with a traditional lender knows the kind of difficulty surrounding the appraisal process. It really started in 2009 with the new HVCC laws that went into effect to prevent abuses in the industry between lenders and appraisers. While the intention of the law was good, it definitely created a huge ripple in the housing and mortgage markets that has made the work of a real estate investor much more challenging.

One of the effects of this legislation was the creation of a number of large AMCs (Appraisal Management Companies) which help facilitate the separation of lender and appraiser required by HVCC. For most lenders, the convenience of having a third party appraisal management company to handle appraisers was an easy answer to the compliance requirements of the HVCC legislation. However, those in the business quickly figured out that appraisals through these AMC’s were not only more expensive, but also hit or miss.

As an investor, whether you are buying and selling or buying to hold, it is crucial that appraisals come in where expected. There is nothing worse than spending time and energy to buy a property, renovate it and find a buyer … only to have the deal fall apart (or your profit margins disappear) because an appraiser did a lousy job estimating value.

Interestingly, in the last year or so I have noticed more lenders are popping up with a different business approach to the management of appraisals and HVCC compliance. Many are actually setting up self-managed AMC’s that allow them the flexibility to work off of a much smaller pool of appraisers. In fact, I’ve worked with a few different lenders recently who had as few as 3 to 5 appraisers on their list. While the loan officer doesn’t have the ability to work directly with any of these appraisers (per HVCC), it does make a HUGE difference when you know you have a handful of seasoned and vetted appraisers working on your appraisals. Unlike a large, third party AMC that may have more than 50 appraisers assigned to a geographic area, a smaller self-managed AMC may only pull from a very select group of proven appraisers.

As an investor, having a good relationship with a lender who can provide you with consistent appraisals is absolutely crucial to your business. Whether you are putting permanent financing on a property you plan to keep or selling a retail flip to an end buyer, the appraisal is pivotal to the transaction. One person’s opinion of value can literally change your profit margin by thousands of dollars. Knowing this, investors would be well-served to work with lenders who can deliver consistent and quality appraisals.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Working with Lenders Who Self Manage Appraisals

Real Estate Investing For Real | A BiggerPockets Investment Property Blog

Tags : Appraisals, Lenders, Manage, Self, Working

Real Estate News by the Numbers: Week of March 17 – March 24

Filed Under : Real Estate by admin

Mar.26,2012

A quick rundown of the important real estate news from the week of March 17 – March 24, by the numbers:

1.57% – Drop in new homes sales in February from January. Despite the recent drop, new home sales are up 11.4% since February 2011.

5.8 Months – Current supply of new homes on the market. Although supply dropped slightly for the month, median new home prices were up to $ 233,700 from $ 217,000 in January.

4.26 Million – Existing home sales in 2011. That is up from 2010, when existing home sales were 4.19 million. The market peaked pack in 2005, when existing home sale were 7.1 million.

8% – Drop in sales orders for KB Homes, one of the nations largest home builders, this past quarter. KB Homes shares fell 8.5% in light of the disappointing news.

950 Feet – Height of 70 Pine Street in Manhattan, the former headquarters of American International Group. The new owners, Metro Loft Management, plan to convert the office building into residential units. Once it opens, it will be the tallest residential building in Manhattan, topping the 876 foot New York by Gehry.

4.08% – Average rate on a 30 year mortgage this week according to Freddie Mac. Rates jumped from last week, when average rates were 3.92%.

98% – Number of markets in the U.S., where buying is cheaper than renting. Out of 100 markets, only in Honolulu and San Francisco is it cheaper to rent than buy.

1,000 – Number of Bank of America customers who, in a pilot program, will be allowed to stay in their homes as renters rather than be foreclosed on and forced to leave. The “Mortgage to Lease” program will be tested in Arizona, Nevada and New York, and, if successful, might be expanded to larger number of people.

$ 17.95 Million – Listing price for Alicia Keys Manhattan penthouse. Keys bought the 5 bedroom apartment from singer Lenny Kravitz a few years ago for $ 12.5 million.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Real Estate News by the Numbers: Week of March 17 – March 24

Real Estate Investing For Real | A BiggerPockets Investment Property Blog

Tags : Estate, March, News, Numbers, Real, Week

Holding Paper for Foreign Nationals

Filed Under : Real Estate by admin

Mar.22,2012

I know some people will look at the title of this blog and think to themselves, “what does that even mean?” In short, “holding paper” is simply a real estate term used to describe someone who holds the mortgage on a particular property. There are many experts and articles written about how to create and find “paper” in the realm of real estate investing. While I am not an expert in this area, I do have a good bit of experience working with private investors who lend money to other investors for short and medium term loans.

Many real estate investors get into private lending as a means of diversifying their real estate portfolio. While owning property is a great way to earn a solid return and build equity, it does come with its share of risks and challenges. Private lending can be a great alternative for those investors who are burned out on landlording or who want to balance out a higher-risk portfolio. Other investors (such as my Dad) are simply risk averse by nature and would rather be a private lender than take on the risks of owning investment real estate themselves.

While there are many avenues one can pursue within private lending, one such niche that we have recently discovered is lending to foreign nationals. Many people don’t realize the staggering number of foreign investors who are bringing cash into the United States to buy up real estate. The decline of the dollar worldwide combined with unprecedented real estate prices has created a buying frenzy from investors all over the world. With almost no opportunity to obtain financing, these foreign investors are forced to use cash to purchase investment properties.

We have found that because of the lack of financing options for foreign nationals, private lenders can offer very aggressive loan terms. While many investors will choose to pay cash over high-interest financing, others choose the leverage as a means of obtaining more properties. In fact, I know of private lenders who are getting 50% down and charging 5 points and 12% interest (and this is typically with amortization schedules at 10 years or less) While it’s true that the foreign investor would be hard pressed to create much cash flow with this type of loan, the ability to purchase 2 properties rather than one property is still very attractive – not to mention the rapid equity build-up that would occur (principle paydown and rising U.S. values)

From a private lenders perspective, this is about as low-risk as you will find. With so much down payment invested by the foreign national up front, the likelihood of default is greatly minimized. And even in the event of a default, taking back the property with that kind of equity could also be an attractive scenario for the lender.

I am a firm believer in creating win/win real estate transactions where all parties involved walk away having met their investing objectives. Private lending with investment properties is one area of real estate where this is often the case. For those investors interested in delving into this space, I would suggest exploring the opportunity to work with foreign nationals who can’t obtain conventional financing, but have the cash to put down on a privately financed deal.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Holding Paper for Foreign Nationals

Real Estate Investing For Real | A BiggerPockets Investment Property Blog

Tags : Foreign, Holding, Nationals, Paper

Real Estate News by the Numbers: Week of March 10 – March 16

Filed Under : Real Estate by admin

Mar.18,2012

A quick rundown of the important real estate news from the week of March 10 – March 16, by the numbers:

35% – Amount who think the economy is heading in the right direction according to a Fannie Mae survey. The reading is 19% higher than results of a November survey.

3.9% – Increase in seller’s ask price, year-over-year, as of March 5. Seller’s ask price increased year-over-year for the first time in 6 years this past December.

21 – States that had an increase in foreclosure filings in February, the most since 2010. Also, half the the nation’s largest 20 metros has posted an increase.

$ 33 Billion – Amount Freddie and Fannie asked banks to buy back in bad loans in 2011. That number is 10% higher than the previous year. “The banks don’t typically pay the full amount but during the second half of 2011, the companies collected $ 11.1 billion from banks, compared with $ 6.9 billion in the first half of the year.”

1.43% – Homeowner vacancy rate in Nassau-Suffolk, NY and Santa Ana-Anaheim-Irvine, CA. The two metros had the lowest homeowner vacancy rate in large metros since 2010. Homeowner vacancy rate is defined as “number of homes for sale divided by the number either for sale or owner-occupied.”

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Real Estate News by the Numbers: Week of March 10 – March 16

Real Estate Investing For Real | A BiggerPockets Investment Property Blog

Tags : Estate, March, News, Numbers, Real, Week

Buying with Cash and Ignoring ARV

Filed Under : Real Estate by admin

Mar.14,2012

I don’t ever remember a time when so many investment properties were being purchased with cash. With today’s unbelievable real estate prices, many investors are simply forgoing traditional financing as well as hard money financing in favor of cash purchases. In fact, many investors are simply converting their retirement accounts to self-directed accounts and paying cash for investment properties through their IRAs, 401Ks, etc.

One of the reasons cash purchases have become the norm for many investors is because the price-point of many investment properties doesn’t warrant the headache of trying to get financing. Many investors would rather shell out 40K for an acquisition and rehab and let their money earn a solid return – typically much higher than in a traditional investment vehicle like stocks, bonds, etc.

However, I think there are a number of investors who probably prefer to get financing for an inexpensive property, but some of the constraints associated with conventional financing make it too difficult. As crazy as it sounds, many of these properties, selling for less than a third of what they sold for just a few years ago, can’t get financed in the current environment. Sometimes it’s the fact that appraisals are just so bad as a result of heavy foreclosure activity. Other times it’s because lenders aren’t willing to lend under a certain price threshold. Whatever the case, lower priced investment properties just aren’t great candidates for financing right now and investors have responded by buying with cash in record numbers.

Interestingly, with all of the buying activity that is taking place, investors are paying less and less attention to ARV (after repaired value). It’s interesting to me because it’s been pounded into our heads for so many years that a property purchased and rehabbed well below market value was the primary distinction of a good real estate investment. Now, with prices and comparables in the toilet, investors care more about the kind of cashflow that a property will produce and less about the amount of equity (if any) a property may have. Understandably, if a property can be purchased and renovated for 40% of what it would cost to build new while also producing double digit yearly yields … does it really matter if you’re buying at market value? For a cash buyer that doesn’t have to worry about an appraisal, it probably doesn’t. The cash buyer is probably more interested in cashflow and any equity that develops as a result of recovering prices is icing on the cake.

I think most investors realize that the opportunity to buy at these insanely low prices will not last forever. Prices will recover at some point – it’s simply not possible to maintain values in markets that are adding jobs and people. For investors that have cash sitting in bank accounts earning less than 1%, don’t get scared away by depressed prices. The opportunity to put that cash to work in this real estate market is unprecedented.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Buying with Cash and Ignoring ARV

Real Estate Investing For Real | A BiggerPockets Investment Property Blog

Tags : Buying, Cash, Ignoring

Attention Retirees Living Off Of Bond Yields: Here’s A Viable Alternative

Filed Under : Real Estate by admin

Mar.10,2012

You’re retired, so the risk you’ll tolerate at this point is significantly lower than 20 years ago, right? When retirement came, you shifted your nest egg from equity to the ‘fixed income’ you’ve been programmed to acquire at this point. Thing is, very low risk bonds yield little more than 2-3%. Much more than that and your comfort zone gets pressed a bit. There are plenty out there willing to show you how to get a ‘safe’ 6% bond. Right about then a mental picture of Grandma pops up. She’s reminding you about the warning she gave you so long ago. You know the one — ‘If it sounds too good to be true . . .’

Here’s the million dollar question(s).

If the 10 year Treasury Bond yields 2% or so, how safe and reliable is a corporate bond offering double or triple that yield?

How much is the stability and reliability of your retirement income worth to you?

If something akin to 2008 happens, what will happen to your bond income?

Are you sick ‘n tired of listening to your neighbor down the street bragging about his real estate portfolio’s yield/income?

Are you ready to double to quadruple your bond income by ditchin’ them for far more stable and reliable real estate income?

It’s not been that long ago, when retirees based much of their lifestyle on the double digit yields on their bonds and CDs, back in the early 1980s. When Volker got the interest rates down by crushing inflation, the party was over for retirees. No more makin’ $ 12,000 a month on their million bucks. The lifestyle? Down in flames.

Incomes slashed virtually overnight. I knew some of these folks in San Diego. One couple, fortunately before they signed the contract, was about to buy a new RV. They saw the writing on the wall, and bailed. Good thing. In less than a year their income plummeted by nearly half. Over time it did end up around half of its peak. They were fine, but the cruises were drastically reduced in number, and there were a lot fewer trips back east to see grandkids.

The Takeaway

As soon as you’re able, move your capital from bonds to real estate. A reliable annual cash on cash return will easily be 50-400% higher than what you’re ‘enjoying’ now. Oh, did I forget to mention that much of that annual income will be tax sheltered for over 25 years?

Or how ’bout being able to leave far more to your heirs than you will now, while you’re so heavily into bonds? How ’bout an income that’ll be positively sensitive to inflation? Same with its value.

Tell me again why folks love bonds so much in retirement?

Real Estate Investing For Real | A BiggerPockets Investment Property Blog

Tags : Alternative, Attention, Bond, Here’s, Living, Retirees, Viable, Yields

Real Estate Investors Are Making a Difference Across the Country

Filed Under : Real Estate by admin

Mar.6,2012

I got an interesting call last week from a reporter in New York. He is doing a story on real estate investors and the positive effects they are expected to have on home sales in the next couple of years while helping the housing market recover. I was happy to hear that someone was giving real estate investors and our industry as a whole some positive PR for a change.

NAR Statistics

This reporter quoted a NAR statistic that said, “Home purchases made by investors are up from 18% in 2010 to 24% at this time”. If you ask several different people you are likely to get several different answers on the exact percentage of houses for sale they believe real estate investors are buying. But there is no doubt they currently play a major role in helping move the staggering amount of inventory we have at this time.

That is a pretty big number!

I was a little surprised myself that the number was 24%. I knew that real estate investors all across the country are actively buying up houses, but I didn’t know that almost one quarter of all sales today are closed by investors. That’s a lot!

With that statistic in mind, I really thought about all of the good things that will come about as a result of this.

Making a Difference

There will be profit to be made by real estate investors. There’s no doubt about that. However, there are also just so many other benefits for homeowners, neighborhoods and families. I believe that when we look back on this time in history, there will be a very positive spin put on what our industry as a whole accomplished.

The list of benefits is much bigger than the one I have compiled below, but here are 4 big changes I believe we can expect to see as a result of those folks investing in real estate during this time.

4 Big Changes We Can Expect

Vacant houses in neighborhoods are a magnet for vandalism and crime. Putting homeowners in these properties can do nothing but help the neighborhood and the folks that already live there. Families that have pride in their neighborhood tend to take better care of their homes.
Homes that have fallen into a state of disrepair as a result of being vacant and/or vandalized, will begin to see property values climb as they are renovated and are once again occupied.
With so many houses on the market that need to be filled with people that want to live in them, the banks are going to have to come up with an easier way to get folks into these houses. Getting a loan just has to get easier.
Big investing groups will have great opportunities presented to them with bulk REO’s if everything goes according to plan. They will be poised to make a lot of money while helping a lot of folks.

What positive changes do you see on the horizon?

Real Estate Investing For Real | A BiggerPockets Investment Property Blog

Tags : Across, Country, Difference, Estate, Investors, Making, Real

Real Estate Negotiation 101: Don’t Bid Against Yourself!

Filed Under : Real Estate by admin

Mar.2,2012

I find the “art” of negotiating to be a truly fascinating experience, and find myself often times spending as much time assisting investors to learn the business as I do helping them to understand effective and execute negotiating techniques.

The fact is negotiating is something we do everyday. From our personal relationships (negotiating whats for dinner), to raising our children (when can they start dating), to our real estate business (what we pay for our properties, charge for rent, terms of borrowed money… etc.). In essence we are immersed in negotiating just about every minute of our life.

I got my real start in business life negotiating from a great book by Secrets of Power Negotiating by Roger Dawson. If you haven’t read this book I would highly recommend it. I was fortunate that I was able to execute many of newly learned strategies as I built a small business, and the more I practiced the better I got!

Imagine that!

When I started my real estate business I loved the notion of negotiating. Executing my “walk away power”, injecting “red herrings”, creating “false deadlines” and on and on and on…

More recently I have found I’m almost hooked on a recent reality show called Pawn Stars. Watching the back and forth negotiating between the Pawn Shop and sellers is enlightening to say the least.

In almost every transaction, you can witness the ploy in the title above — “bidding against yourself”

Have you ever found yourself actually bidding against yourself?

You know, when you offer a price in either a purchase or a sale, and in the process the other party reacts, but remains silent.

What is your normal inclination?

To break the silence . . . and often times the first thing you will say is, “well, I could accept a lower price or make a higher offer.” I am sure every one of us has been caught up in this scenario. In fact if you have every been asked to offer your “highest and best” offer, you have more then likely been caught up this obvious trap.

However, some investors seem to get when they are being asked to negotiate against themselves.

Very recently one of my clients found herself in just such a situation. She made an offer that worked for her (meaning that it was a conservative offer) and the lawyer involved immediately went to — “well we have other offers coming in. . . so, I would recommend you provide your best offer now to be considered.”

My client held firm and requested that the sellers be made aware of her offer and if they wanted to get the deal done quickly then they could make a counter offer. When the lawyer balked at this request, what do you think she did?

If you guessed “walked away” you would be correct.

The real message here is this…

The sellers representative wanted the buyer to increase their offer price without any counter offer. Or put into its simplest terms, they wanted her to negotiate against her own offer, just to see if they could get her offer to a higher price, but she didn’t bite.

Are you a good negotiator? If so, great! And if not, get the book, watch some TV and practice, practice and then practice some more.

Image: Ambro / FreeDigitalPhotos.net