Posted by Brent_IL on August 13, 2003 at 10:36:52:
Ron,
You?re right; nothing new. Most of it is just several interacting contract terms strung together. I can’t post one or two techniques on the board, but many things are transferable.
I’ll work on my response over the weekend. In a new post, I cut-and-pasted some old comments on using partials so my references wouldn’t sound so cryptic. Nothing new there, either.
NO $, NO CREDIT, LOTS OF CONFIDENCE…HELP! - Posted by Oliver
Posted by Oliver on August 11, 2003 at 13:52:55:
Can anyone tell me what type of ad I could run that would generate the most leads for buying. I have bought many properties before all with no money and no credit but I haven’t been able to buy any property or find any deals in about a year. It seems that the market here (Nebraska)is all dried up. Owners now want the money and all of it now. All my deals have been lease purchase or contract for deeds. Now I just need to buy more property to increase my cashflow.
Thanks!
Re: NO $, NO CREDIT, LOTS OF CONFIDENCE…HELP! - Posted by RichV(FL)
Posted by RichV(FL) on August 11, 2003 at 18:14:32:
Oliver,
You have to have patience in a hot RE market. As Jim said, get your word out.
Did you try to run your “We Buy Houses” ad in the Greensheet/Pennysaver/Thrifrynickel?
They are an affordable way to advertise and IMHO just as good as a “local” newspaper ad.
Fliers are great also and have worked well for me.
The deals are still out there Oliver, they may be a bit tougher to find these days but motivated sellers are out there. It just takes a little more work to find them.
Best of luck,
RichV(FL)
Something I learned from ROBOCOP. - Posted by Brent_IL
Posted by Brent_IL on August 11, 2003 at 16:41:55:
In the first Robocop movie, Dick Jones, the VP villain, quotes the company?s founder as saying, ?Good business is where you find it.? He goes on to extol the company?s successes in areas like prison management.
I think there?s a parallel to CRE investing. If you want to find good deals, and a lot of them, you need to look in places that mainstream buyers are ignoring. I can pass by a fire damaged building and idly wonder about the insurance value. Nothing will register. A rehabber will look at that same building and see nothing but money. On the other hand, I have an easy time with hidebound sellers who are trying to sell over-inflated properties because no one, not even their agents, wants to talk with them. A few years ago, I dealt with sellers that over-priced their house by 15% or 20%. Now, they all think they live in California and are 40% to 50% over FMV. At times, my offers are the only ones that they?ve seen in months.
Once you find a market segment that is being ignored you need to become skilled in providing what they need. You?ll make money, and the group will be better off than they were before you arrived.
turn off that caps-lock key, please - Posted by Jim FL
Posted by Jim FL on August 11, 2003 at 15:34:48:
Oliver,
First, relax.
Now, let me get this straight, you have done “many” deals, but none for a year.
No offense, but when my calls slow for even a couple days, I look to see why?
Now, rather than just seek out some magic wording for an ad in the newspaper, what about developing a marketing plan.
Let me see if I can help get you started.
What is your message?
How should people respond to it?
I’m guessing, your message is that you buy houses?
And people should respond by calling you?
There is your message.
Oliver Buys Houses!
Call him at 555-555-5555
Now, where to put such a message for maximum exposure?
Think this over, ads in the newspaper work, slow, but they work.
Bulletin board ads, buziness cards, road side signs, flyers, vehicle signs, bill boards, television commercials, radio ads, ads in front of the houses you already have.
Get the word out, and calls will come.
Just don’t expect it to happen overnight.
You have done nothing for one year, so you should be well rested.
Use the saved energy now, to market, if you really want deals, they will come.
Good luck,
Jim FL
Goofy sellers. The short answer. - Posted by Brent_IL
Posted by Brent_IL on August 13, 2003 at 05:56:17:
It will take a several days for me to get a readable post into a semi-organized state that?s transferable.
The short answer is:
1 ? Use something to turn the purchase money mortgage into an unsecured note, e.g., SOC, continuous subordination. My favorite choice is substitution-of-collateral.
2 ? Treat payments in aggregate.
3 - Pay them with funny money
People focus on the parts of a transaction that are important to them. Someone who has a property on the market for six months has had plenty of exposure. It isn’t selling because he wants too much, but that’s the only thing he’s thinking about. His need is to prove that he’s right and the market is wrong. In his heart of hearts, he knows it?s the reverse.
That same outlook will lead him to believe that he understands what he?s reading when he reads the purchase contract. He will blow right by one of the redundant clauses that has the end result of turning the security for his note to vapor. I use one obvious clause whose purpose is to be crossed out by an alert seller, the SOC clause, and a back-up clause that isn?t so obvious. The end is the same.
I mentally divide a seller?s equity into real equity and imaginary equity. I?ll try to give a seller most of the real value, albeit over a longer term and with a lower effective interest rate than he ever anticipated. The imaginary equity is up-for-grabs. It?s there as a number only; the effective payments will negate the over-inflated price. He gets satisfaction, but no real money. The sellers have signed off on everything so all the activity is happening within a trust. It?s transparent to the sellers because the trustee is just implementing the terms of the purchase contract.
I use a combination of terms and cash generators, but a traditional way is to use notes bought at a discount. The trustee can switch out the notes as collateral, or the income can be used to make the payments on the purchase money mortgage note. Regarding cash outgo, it?s pretty much the same. It depends on whether the note is unsecured or minimally secured. I?ll try to edit an old post about the most effective way to use partials.
Several terms that I use consistently have a synergistic effect when used together, so I usually determine an optimum time for me to make a balloon payment and steer the negotiated due date to one payment less. As a single example, I have wording and a blank space in the contract for the number of initially scheduled payments to be applied directly to principal. This one sentence can knock one-third off of the balloon payment. More if the agreed upon interest rate is high. It?s prefaced by, ?After a ____ moratorium on payments,? 90 days here, four months there, it adds up. Care has to be taken that the contract addresses the way that changes are to be implemented to the scheduled financing so the terms aren?t conflicting.
The result of the collective terms is to lower the real acquisition cost to 80% to 92% of FMV regardless of the contract price, and to provide for no payments for a few years. 150% of FMV is probably the top limit. A higher percentage of over-valuation can be eliminated just as easily, but it might be an invitation to litigation. I?d assume that the seller didn?t really want to sell. Remember, if the seller doesn?t like the amortization schedule he gets at closing, he can pay me my 3% and opt-out. If we get to closing, most sellers in this category have already used their bragging rights, and have returned to reason.
I?ll work on writing out the presentation.
Great. Now for the meat… - Posted by Ronald * Starr(in No CA)`
Posted by Ronald * Starr(in No CA)` on August 12, 2003 at 10:00:53:
Brent–(IL)-----------
Thanks for you comments. Well-written, as usual. Clear. And interesting.
I promise not to come to IL to invest for at least, oh four years, if you will give us some hints on how you work with such apparently “difficult” property owners.
Good Investing**************Ron Starr****************
How do you do that? - Posted by GL - ON
Posted by GL - ON on August 12, 2003 at 09:29:17:
How do you deal with knotheads who want too much money? I’ve never been able to do that. Wish you would tell us how you do it.
Re: Goofy sellers. The short answer. - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 13, 2003 at 09:36:09:
Brent–(IL)------------
Thanks for your temporary instructions. I look forward to your more considered response.
It sounds as though this is no brand new technique, darn. But perhaps a systematic application of the “soft money” terms approach.
I look forward to hearing more. There may be a lot of need for your techniques. There are a lot of people who over-price their properties.
Good InvestingRon Starr******