Bandit Signs: Try and beat this story - Posted by Tim Jensen

Posted by Steve on February 18, 2002 at 15:31:18:

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Bandit Signs: Try and beat this story - Posted by Tim Jensen

Posted by Tim Jensen on February 15, 2002 at 22:26:55:

Hi All,

I have a very funy story.

I put up very few bandit signs, because they get torn down and the city gets one me. No big deal. Well there has been a guy putting up signs like “cash for cars” and “cash for homes”. Today, as I drove past the K-Mart I saw his yellow sign. However, something caught my eye, it was the red letters on the back of his sign. I turned around and went back. This guy took down one of my signs, cut it in half, then used the blank side, of my sign, to put his meassage on.

Needless to say, his sign came down. Is there no honor amoung Sign Bandits!

Tim

Here is one for you with a happy ending - Posted by Jim FL

Posted by Jim FL on February 16, 2002 at 11:18:11:

Tim,
It is funny that you posted this, it made me laugh a bit.
I’ve had quite a few people steal my signs and use them as their own.
Just this morning on my way to my sons football game I encountered 4 of my signs, still standing where they were placed, but with “Garage sale” signs taped over them.
I of course removed the garage sale signs taped to mine, and returned them to the garage sale after the game.
I also had some older faded signs in my truck that I took down and replaced yesterday, so I gave those to the garage sale holder and said, "Please don’t tape your signs on mine, but if you want some signs to use, here are a few with “H” stands if you want them."
They took them and thanked me for being nice about it, as well as apologizing.
At which time I asked if I could leave them a stack of business cards to lay out at their sale.
I’m glad I did, when I arrived home a few minutes ago there was a seller message waiting saying they picked up my card at a local garage sale.
Talk about a quick response, the cards had only been left there 30 minutes prior.

Yippee!!

Have a good day Tim,
Jim FL

Re: Here is one for you with a happy ending - Posted by Wayne(MD)

Posted by Wayne(MD) on February 16, 2002 at 16:13:12:

You sure prove the power of gorilla marketing! Also seems like you have the proper phrasing on your cards. What do they say?

Wow, Jim! - Posted by Jesse (CO)

Posted by Jesse (CO) on February 16, 2002 at 11:58:56:

Jim,

I’ve only started leaving my biz cards at the shops on the main street near my farm neighborhoods. For the most part, people were happy to take them and display them on their counters. I hadn’t thought of the garage/yard sales, though. Come Spring, I’ll scout these out.

My bandit signs have only been removed or cut up by CAUSS and others so I was back this morning putting them up.

Thanks for a great post!

Jesse (CO)

Re: Here is one for you with a happy ending - Posted by Jim FL

Posted by Jim FL on February 16, 2002 at 20:45:26:

Wayne,
Thank you, yes, I market like crazy, simply because I really do not like to hear “no” when making offers.
I’d rather have sellers calling me, it is just easier.

My business cards are very basic.
I use a decent card stock, bright orange or yellow, and my message, which is;
We Buy Homes
We Take Over Payments
No Equity, No Problem
No Commissions or fees
xxx-xxx-xxxx
www.Mywebsite.com

This is placed in the center of the card, is raised lettering, bold text.
I also have a small letter on the back telling people that we solve real estate problems and close fast.
I do have my name on them as well as my e-mail address in smaller text at the bottom.

Nothing flashy, just basic with my message.

HTH,
Jim FL

Re: Here is one for you with a happy ending - Posted by Steve

Posted by Steve on February 17, 2002 at 22:44:39:

Jim, you advertise “no equity, no problem.” Can you give an example of how you construct a no-equity deal?

Thanks.

Re: Here is one for you with a happy ending - Posted by MP

Posted by MP on February 16, 2002 at 22:42:59:

Jim, what type of message do you use on your signs and other marketing? Or do you use the same exact message as your biz cards on your signs? I have been using a message similar to that on my signs, I got that from info. on site and have been putting out about 20 or more signs a week, but I do not seem to be generating that many calls. Any advice or recommendations?

Re: Here is one for you with a happy ending - Posted by Jim FL

Posted by Jim FL on February 18, 2002 at 01:54:09:

Steve,
First, remember, the idea of “No equity”, is open to interpretation.

When I buy a house with “No Equity”, it will usually be a house that I purchase subject to, and the underlying loan as a GREAT interest rate, and the area is a hot one.
Example:
I signed a deal last week where the seller owed $76k on a house worth about $82k FMV, per comps.
The payments were only ~$700 PITI.
I knew for the area that market rent was $850-$900/month.
I bought the house subject to the existing loan.
I have the seller covering the next three payments and the house is vacant now. (more profit there if I fill it before I start payments, and if the seller does not make these, then I’ll have to should I get a buyer in there. Hence the reason the seller will be making the payments to me, and I’ll send them to the lender myself.)

I will try to sell this house with a L/O for $3k-$6k option money, and rent of $950/month, and an option price of $90k.
The term will be for 12 months, and due to advice from my new mortgage broker, I will be offering $200/month rent credits for all months that are paid on time.
Assuming I get the higher end of option money, I’ll get $6k now, and the buyer will get another $2400 for the year, all taken off the purchase price.
So, $90k - $6k - $2400 =$81,600
Just assume the loan balance does not go down at all for the sake of this post. (it won’t that much anyway)
My backend would be $81,600 - $76k - closing costs = ~$3600 (Very skinny, but to be honest, I don’t expect a buyer to purchase this house within 12 months, and the price may go up if we need to renew the option for the buyer.)
So, $3600 backend + $6k now + $250/month cashflow = $12,600
Not a great deal by any means, but I make it up in volume.

This is also an area where there seems to be a good demand for housing, so the house will also appreciate well, assuming the market is steady for a while.
The seller is already in a new house with a new loan, and basically said, “Jim, as long as the payments are made, we do not care when it is paid off.” (I will however try very hard to get it cashed out within a short time, just to get the sellers name off the loan…just good business.)

You can also L/O properties with little equity, since your buyer will not be purchasing for at least one year, usually more, so there is room to sell for a little more than current market value.

Frankly though, I try to do more deals with equity than not.

If a seller calls me and has minimal equity, and their interest rate is high, then in all likelyhood I’d not do the deal.
There are other factors involved, it is not just the equity in a house that makes me buy it or not.

HTH,
Jim FL

Re: Here is one for you with a happy ending - Posted by Jim FL

Posted by Jim FL on February 18, 2002 at 01:30:47:

MP,
I try to use the same message on all marketing material.
This gives a “Branding” effect.
When people see the same message over and over, repeated in several different medias, they respond better.

HTH,
Jim FL

Re: Here is one for you with a happy ending - Posted by Steve

Posted by Steve on February 18, 2002 at 10:21:20:

So let me see if I’m interpreting some of your criteria correctly.

To buy a house with little or no equity you: 1) require the seller to make a few payments into the future; 2) no repair costs needed; 3) loan is current thus no back payments needing to be made up; 4) payments are less than market rents (great interest rate); 5) in a neighborhood where houses are selling fast. Is this correct?

OK, what if the seller is in a financial crises and can’t make any payments? Would you still do the deal? What if they were behind one or two payments? Would this kill all the profit?

What is a “great” interest rate? Is the rate itself important, or just getting the PITI payment below market rents?

Do cosmetic repairs (let’s say paint and carpet, for instance) nix a no-equity deal? Do you actually do any repairs to houses you buy?

Also, your seller said he didn’t care when the loan was paid off “as long as the payments were being made.” As much as I try to persuade the seller to have this mentality, most still respond, “But how do I KNOW you’ll make the payments?” Those who are already deeply in arrears don’t care, but those who aren’t, like your seller above, do care. How do you respond?

Thanks, Jim. Your advice is appreciated.

Why did broker recommend $200/mo. rent credits? - Posted by MP

Posted by MP on February 18, 2002 at 08:46:49:

What is reason your mort. broker recommended giving $200/mo. rent credits for your tenant/buyers? Would it be possible to just increase price of home by the amt. of rent credits, that you will give out. If rent credits is $2400 for year, then I could add that amt. to price, as long as it will appraise.

Re: Here is one for you with a happy ending - Posted by Jim FL

Posted by Jim FL on February 18, 2002 at 13:18:18:

Steve,
I think you’ve got it.

Let me take a stab at your questions.
You asked;
“OK, what if the seller is in a financial crises and can’t make any payments?”

I have handled this a couple of ways.

  1. To walk away.
  2. Sign an option to purchase the house subject to, and only exercise the option IF I find a buyer. The buyer must of course have enough funds to bring the loan current, and my only expense is marketing the house for sale.

“Would you still do the deal? What if they were behind one or two payments? Would this kill all the profit?”

It could kill the profit potential, this is why I’ll make an offer to take an option, and not make any payments until I find a buyer.

“What is a “great” interest rate? Is the rate itself important, or just getting the PITI payment below market rents?”

For me, a “Great interest rate” would mean the payments are below market rent, so yes, I think you followed me here.
This allows me to sell the house on a L/O, or agreement for deed wraping around the underlying financing with a higher interest rate.

“Do cosmetic repairs (let’s say paint and carpet, for instance) nix a no-equity deal? Do you actually do any repairs to houses you buy?”

No, they do not always “Nix” the deal. It really depends on how bad it is. If the carpet is totally trashed, smells bad, and the walls have holes in them, need patching/replacing as well as paint, I’ll probably pass.
Unless I have buyers that I know can and are willing to do this type of work themselves.
in order for me to do any work to a house, there has to be some equity so I can get paid well for the effort.

“Also, your seller said he didn’t care when the loan was paid off “as long as the payments were being made.” As much as I try to persuade the seller to have this mentality, most still respond, “But how do I KNOW you’ll make the payments?” Those who are already deeply in arrears don’t care, but those who aren’t, like your seller above, do care. How do you respond?”

I tell sellers when I sign a deal where I agree to make the payments that I have a track record, references, and a local BBB listing. They can “check me out” if they choose.
I also make it clear that REI is the only thing I do to support myself, and letting one deal go bad would jeopardize that. Why would I risk my entire livelyhood on just one deal?
I also will often ask sellers a sort of rhetorical question…“If I do not buy your house, what is going to happen?”

This has a tendency to make sellers get that “Deer in headlights” look about them. They realize VERY quickly the reason they called me in the first place was they had no other alternative.
I cannot tell you too many times how important it is to deal only with motivated sellers.

I turned down a deal this morning where a seller was ready to sign what ever I put in front of them.
I did not want the property, because the sellers problems were not something I wanted to make my own.
Too many repairs were needed, and the loans are in default, as well as a payment that the house would not support.
Not to mention, the location was not ideal for a quick resale, no matter the terms I offered.

When dealing with motivated sellers in high volume it becomes easier to not be so hungry for deals that I do ones where I’m not absolutely certain I can sell them and make a profit quickly.
I like to cherry pick to a certain extent.

HTH,
Jim FL

Re: Why did broker recommend - Posted by Jim FL

Posted by Jim FL on February 18, 2002 at 13:00:03:

MP,
That is exactly what I did, added the amount for the rent credits to the price, so no loss there.
The mortgage broker told me about the programs he has available for refi’s on L/O’s, and suggested a rent credit between 15-20%.
I came up with the $200 number myself to help sell the house faster.

HTH,
Jim FL