No such thing as a free lunch - Posted by Bob Selby

Real Estate Investing
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Posted by Dan (NY) on June 12, 2000 at 20:45:48:

My evidence is circumstantial, I don’t check every new deed filed. I just know a lot of investors, realtors, lawyers and bankers in my area and no one I know has ever done an L/O or “Subject To”. I also never see any “Rent to Own” (L/O) ads in the local papers.

So you could be right, there could be stealth operators in my area. Do you really think it is common that there are “Little Guys” buying 3-4 houses a month and making 15-20k profit per mo.?

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No such thing as a free lunch - Posted by Bob Selby

Posted by Bob Selby on June 10, 2000 at 22:44:14:

I am fairly new to this board and have seen quite a few posts from folks new to the business or looking to get into it. Just thought I would take a moment and share my personal experience from the past year or so that I’ve been in the buying/renovating/reselling property game.

First, this like everything else in life, takes a TON of commitment. All these courses telling you about how easy it is to find property and buy it with zero down while having bad credit, are completely full of crap based on my real life experiences. You either need plenty of cash, AAA credit or the determination and means to rehab property thats in need of considerable work.

There are plenty of lenders out there that do “hard money loans” which are primarily based on the equity in the home rather than your personal credit. These lenders will provide the funds to purchase the property along with funds to fix it, so long as the home is worth it. As an example, I live in Detroit, MI. My last hard money deal was on a home that I purchased for $10k. The home needed roughly 20k in repairs, and comperable homes in the area have been selling for 70k. Most of these lenders will loan up to 50% of the homes completed value, so I was able to borrow the 30k needed to purchase and repair it with no problem.

My total out of pocket including deposit, broker fees and mortage fees will be about $6000. In the end (assuming the home sells for 70k) backing out my cost of the home, cost of repairs, cost of retailing the home through a realtor, and cost of financing, my end profit will be roughly 24k to 27k. The home is in a very nice neighborhood and should flip fast, but I would be a fool to hope for a return on my money in any less than 90 to 120 days (also assuming I can make all the repairs within 30 days of purchase)

As you can see thats not bad money, but it’s no gravy train. Just finding a home that will fit this formula is very difficult. The house has to be priced right, in a neighborhood with good comps and decent sale times, be reasonably easy to repair and have enough potential profit margin in the end to cover any unexpected cost overruns. I probably look at 100 houses in Detroit to find just 1 that fits that formula. It’s not just as simple as checking the MLS either. You have to constantly keep an eye on all the auctions in the area and establish relationships with dozens of realtors that handle REO property. Often times like anything else, its who you know rather than what you know that helps find desirable deals.

I left a good paying job to start this business out over a year ago and it’s been a pretty rough struggle. I now fortunately to the point where I have substantial resources in place to find and flip these properties, and the more deals I do the more financial resources become available to me. I guess you could say that I see the light at the end of the tunnel and I can safely say that its not a train :slight_smile:

The long and short of it is that dont let these fast paced infomercial types pull the wool over your eyes. This is a rough and very competitive business and is NOT for everyone. Success here doesnt happen overnight and required just as much, if not more dedication than any other career you can choose. If you are willing to tough it out and have the cash and/or resources to back you up, the rewards are definately worth it however.

Best of luck to everyone out there (Lord knows I can always use a little luck myself too :P)

Bob Selby

http://www.metro-homes.net

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Re: No such thing as a free lunch - Posted by Dan (NY)

Posted by Dan (NY) on June 11, 2000 at 21:44:26:

Bob,

Just wanted to let you all know that I basically agree with everything you said on your post. I have been a real estate investor for almost fifteen years, and a full time rehabber for three years. I am just now beginning to really reap the rewards of this business, but it has taken alot of hard work, research and of course CASH.

Now all the L/O guys and “Subject To” guys are going to be squirming in front of their computer monitors over this but here goes… as far as I know, there is no one within 30 miles of where I live making any kind of money off of L/O’s or other “no money down” type of deals. NO ONE. I know literally dozens of realtors, lawyers and bankers, and I keep track of many distressed properties. The only other sharks I see in the water are ones with large moneybags.

Having said that, why do I visit this site? I am always looking to make my job easier and faster and keep ahead of everyone else. Keep up the good work!

Dan (NY)

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Re: No such thing as a free lunch - Posted by ScottS

Posted by ScottS on June 11, 2000 at 15:33:47:

A quoate from you…an opinion based on real life experince from me…

“First, this like everything else in life, takes a TON of commitment.”

I agree whole heartedly!

“All these courses telling you about how easy it is to find property and buy it with zero down while having bad credit, are completely full of crap based on my real life experiences.”

I disagree almost entirely. The part I do agree with is that it is not extremely easy as some courses my suggest. But you can do it…I know…I DID and do…and actually what some folks may consider often for a part time basis.

“You either need plenty of cash, AAA credit or the determination and means to rehab property thats in need of considerable work.”

In my experience over the last few years…WRONG, WRONG, WRONG.

From your post I can see you are still looking for HOUSES. Specifically ones to rehab. As I learned from my friend and mentor, Joe Kaiser, you MUST learn to look for the motivated sellers.

I am just trying to remember the last time one of my sellers asked about my credit, my bacn account balance, or if I could fix up a property.

I can tell you the home I just got for FREE ($190K home)that needs NO work sure did not ask those question.

As some have already eluded to, add a few more methods of buying and selling to your arsenal and you’ll understand exactly what I am saying. To make the blanket statement you have made shows you don’t know what you don’t know.

As for me, I’d sure like thos interest rates to rise a little more, he he he.

I am not trying to rub you the wrong way or cause an arguement…I am just saying maybe you should learn the ways we buy houses with no credit, no money, and no huge bank accounts.

Good luck and keep up the good work.

Scott

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Re: No such thing as a free lunch - Posted by BR

Posted by BR on June 11, 2000 at 09:17:43:

Bob, you are correct, it’s no cake walk, however you are at a point to where, as David says you need to add more tools. The path you are on is perhaps the toughest path you could have chosen. You have gained success and much knowledge in the process. Now add another tool and don’t look back. I would suggest you look into Bill B’s Cash Cow and L/O courses (both of them). Sometimes a deal calls for cash and sometimes you can get it ‘subject to’ for little or nothing down. Now suppose you can get a property ‘subject to’, now you can sell it by L/O. A much easier path than the one you are on. Also sandwich L/O’s will work if you can’t get the deed.

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Re: No such thing as a free lunch - Posted by David Alexander

Posted by David Alexander on June 11, 2000 at 03:55:49:

Bob,

You currently are using one tool in your toolbox, buying properties with All Cash using Hard Money Lenders. If you learned just a few more tools, got better at marketing, and started implementing some systems into your buying and selling you’ll soon be buying 2, 4, 6 properties a month consistently.

Right Now your just buying and selling houses, is that Investing, I dont know do you have a plan, as to how to acquire the wealth that you think is being sold as get rich quick.

The money in this business can be obscene, I’ve experienced it and the great thing is I’m a little fish compared to alot of the folks on this site.

Stick around, Hone your knowledge, if your having trouble finding properties then change the way your looking, that is look for sellers… Motivated ones.

David Alexander

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Re: No such thing as a free lunch - Posted by Russ Sims

Posted by Russ Sims on June 11, 2000 at 02:25:30:

You say “You either need plenty of cash, AAA credit, or the determination and means to rehab propery that’s in need of considerable work”. This statement tells me that you are looking at a very different segment of the market than many of us are, and that you probably haven’t studied purchase methods such as lease/options or buying “subject to” existing liens. The truth is you DON’T need good credit to buy homes zero down. In 15 of my first home purchases, credit was an issue only 3 times. That means I bought or controlled 11 homes, all zero down with no credit check whatsoever…
I absolutely agree with you that it’s no cake walk. This business does take the commitment you elude to. But for you to say that you need good credit, money, and/or rehab skills to make a go of it tells me that you’ve got a lot to learn about creative real estate investment.

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Re: No such thing as a free lunch - Posted by scott in va

Posted by scott in va on June 11, 2000 at 02:06:14:

i understand your post my question is im not looking for get rich quick but what is the best way to start with not alot of money and bad credit i have determination and desire just looking for guidance thanks

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Re: No such thing as a free lunch - Posted by JohnG

Posted by JohnG on June 11, 2000 at 24:44:37:

I don’t quite get where you are coming from.

You state that this is a lot of work, there are lots of obstacles and many people are being sold on how easy it is and its a peice of cake to make it in real estate.

Then you say that you have found a great deal that should make you about 30,000 in 90-120 days.

Am I missing something ?

Lets see. Thats equivalent to 90,000 - 120,000 a year depending on whether you do 3 or 4 of these deals in a year. I ask you (and the many newbies listening) how does that compare to what you earned at your job and how much time, effort, and sweat you put into your job to earn that kind of cash. I would bet that the business you are in now will compare very very favorably to the job you left.

This morning I spent an hour with a new caretaker of a property that I just bought. I shared with him a little of what I do and what I expect of him as my on site caretaker and it astounded me how much this person was prepared to do on a daily/monthly/yearly basis for so little return.

Meanwhile, I will keep the property for 2-3 years and I will sell the units off individually (its a townhouse complex) and I will pocket thousands of dollars compared to literally the hundreds of dollars I would make in the “job” or “role” as caretaker.

So, I agree with your conclusion. There is no such thing as a free lunch. If you choose to work at a job, you pay for that lunch every day and its quite a costly meal !!!

I prefer to own the restaurant !!!

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After 15 years… - Posted by ScottS

Posted by ScottS on June 11, 2000 at 22:11:09:

I sure hope I can sneeze at the profit I have made using L/O’s and Subject to’s. Until that time…just leave the crumbs to me because the crumbs are more then I earn protecting our country…but…just a wee bit too close to stop right now.

I’ll get there someday…BUT…I’ll ALWAYS know L/O’s and Subject to’s are a GREAT way for the beginner to get started. Then education in the areas where the big dogs play, and before you know it…You’re a “Player”

Just hope you are remembering what it’s like to be a “little shark”. We don’t get big meals but the large number of little ones keep us full.

Thanks for the view from the other side.

ScottS

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Re: No such thing as a free lunch - Posted by Bob Selby

Posted by Bob Selby on June 11, 2000 at 22:04:53:

Well, I dont feel entirely too bad now :slight_smile: I have been scrambling these past few days trying to educate myself on L/O’s to find what I’m missing. I’ve picked up quite a bit in a short while and do plan to try and incorporate a L/O on one property in particular that I just aqquired… it seems perfect for it from what I can tell. Ultimately the nose to the grindstone approach I have been taking coupled with some of these new approaches will make the rest of this year a bit smoother for me.

Bob Selby

http://www.metro-homes.net

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Re: No such thing as a free lunch - Posted by Bob Selby

Posted by Bob Selby on June 11, 2000 at 18:05:46:

The first thing I would say that in no way are you rubbing me the wrong way. I am here for the same reason that many others are, to learn where I can improve and grow my business. Any feedback along those lines is greatly appreciated and I certainly wouldnt argue against it.

What you elude to as I read it, is that credit nor money is required in your deals and that sounds great to me. I however have not been so fortunate and have been bringing money to the table on every closing I have made. Would you mind giving some specefics on how you are acccomplishing this?

I have recently started studying L/O’s at the suggestion of folks on this board and can see how they would benefit me. I also see how they are predicated upon finding “motivated” sellers. In my mind however, I have a difficult time imagining how someone could be that motivated to sell, yet not require any kind of cash outlay. Even people in pre-forclosure need cash to get the property back on track. Are these lease options the sole tactic you rely on to put together such deals?

As one other poster mentioned, I too would be interested in specefics on how you come up with a 190k property for free as well :slight_smile:

I’m not asking for you to spend countless hours training me to do what you do, there are clearly folks out there who gladly do that for a fee. Merely some general information that substantiates your claims that I could further research for myself.

Any input is appreciated,

Bob

http://www.metro-homes.net

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Tell us about the $190K house you got for free! Please ScottS?NM - Posted by GL

Posted by GL on June 11, 2000 at 17:30:10:

Please?

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If you dont mind… - Posted by Bob Selby

Posted by Bob Selby on June 11, 2000 at 07:22:17:

The path I am taking is clearly not the only one available, and quite possibly not the best one, hence my interest in this board and those of you who post here. You speak of “other tools” and I was curious that besides the avenues I am taking to purchase my properties, what alternative means are there to aqquire property or possibly just control its equity. Any tips to point this “little fish” in a simplier direction is always appreciated :slight_smile:

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Re: No such thing as a free lunch - Posted by Phillip

Posted by Phillip on June 11, 2000 at 09:51:16:

The homes your purchased no money down was that on a lease option sandwiche position? Could you describe the situation where credit was an issue?

Thanks!

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Re: No such thing as a free lunch - Posted by Bob Selby

Posted by Bob Selby on June 11, 2000 at 01:08:14:

Well, the entire context of the post was simply to make the point that there is good money to be made in this busines, but simply ordering someones videotape and brochures in the mail isnt the key to the riches. It took me well over a year and alot of sweat to get to where I am now and I have a long way to go still.

In a nutshell was just trying to discredit the “get rich quick” mentality that this business generates while not discouraging anyone with the right mindset.

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sneezing - Posted by Dan (NY)

Posted by Dan (NY) on June 12, 2000 at 15:20:14:

I never meant to put down the amount of money you or anyone else might be earning from L/O’s or Subject To’s. My only point was that in the area where I live and make a living investing in Real Estate, there is no one doing large (or small) numbers of those type’s of deals.

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Free Houses - Posted by ScottS

Posted by ScottS on June 11, 2000 at 22:04:08:

Bob,

L/O’s and Subject to’s are pretty much my bread and butter deals. Since I started out having no money and living paycheck to paycheck on military pay I had to find ways to be able to buy real estate.

One day I met my good friend Joe Kaiser in person. At that time he had been working full time in REI for over 14 years. He told me the following words that to this day ring in my ears and I have seen him post to other “newbies” time and time again on his website.

“If I was to start all over again, and sometimes it might be fun, I would start by building a strong month to month cashflow with Lease Options. Lease Options are the ultimate investment for the beginner because they can be done with little or no money and very little risk.”

With Joe’s untireing help I was able to learn how to do Lease Options. It took me a while because I was not spending my time looking for sellers, I was looking for houses. I guess in a sense I still look for houses but I have found ways to find the motivated seller in the houses I feel comfortable dealing with.

My typical, if I dare use that word, seller is a homeowner who has owned their home less then 3 years and has little equity. Most of these homes are in average neighborhoods. Both the Lease Option and the Subject to work very well with low equity homes.

The home I just got for free is a $190K home where the seller has owned it for just over a year (13 months to be exact. They called me on a ad I run in the paper. This seller was born and raised in a small 300 person villiage in the interior of Alaska, and now works on the Northern Slope where he is on a schedule that requires him to be away for 4 weeks and back home for two. This schedule has worn on the family with the wife being stuck in the “big city” with no family around to keep her company during the husbands long stays away.

All they wanted was for someone to cover the payment on the home so they would not have to be landlords from far away while the wife moves back to the villiage and he continues his working up North.

We had them sign the deed to an entity we control. Just because that’s how we do business with properties that have no equity. We agreed to cash out at loan balance in 10 years if not before. Now I will turn around and sell the property on a long term contract.

Also the seller has agreed to wait until we find a buyer or until September for me to start making payments.

Another AWESOME article that Joe Kaiser recently posted was titled “Getting On The Same Page As The Seller”. In it he explains the importance of finding out what is the seller’s REAL motivation for wanting to sell and find a way to satisfy that motivation and still make money. I’ve found that by just getting on the same page you CAN and WILL make a lot of money.

I have also witten a couple success stories which JP has listed on the site in that section. If you want to see a couple more numbers stories go there and look for a couple one called “Perseverance Payoff $8,000” and another called “6 deals net $42K CASH in 58 days” those are both mine. All done with techniques I learned from getting my first deal done, spending some money on education, and then working hard to do deals.

I owe a LOT to my friend Joe who graciously helped me get started. Sometimes I wonder where I would be if it wasn’t for his help, but at the same time (without getting arrogant) I have to look in the mirror and say “Good job so far” realizing I have a LONGGGGGGGGG ways to go to get to the level of many of the people I have learned from.

Another thing Joe says that I like to reflect on a lot is “The journey is half the fun”. So don’t forget to take time to look back and reflect on the “journey”.

I hope this hasn’t rambled to far off course and I have given proper tribute to the one person who helped me get started.

In case you haven’t noticed…you can learn a lot just by watching Joe Kaiser. If you read this…Thanks Joe!

Scott

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Here’s one… - Posted by Ben (NJ)

Posted by Ben (NJ) on June 11, 2000 at 07:47:55:

my friend Roy has made a career out of doing mass mailings to property owners whose names appear on delinquent tax lists. He offers to purchase the property for $100.00 and includes a quit claim deed for the seller to send back to him. As to be expected, only 1 or 2% take him up on this offer but that is still enough to make good money. The majority of what Roy picks up is vacant land but he is able to creatively market it, taking back financing, selling to neighbors, bartering it for something else, etc. He
details some of his angles on taxsales.com. This is no slick guru sales pitch but a real guy doing real deals. (I have no affiliation with it either, I am just impressed with the simplicity of it).

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Re: No such thing as a free lunch - Posted by Russ Sims

Posted by Russ Sims on June 13, 2000 at 01:45:35:

Yes, most of these homes are being controlled/purchased by way of lease/options. Some of them I have purchased “subject to” the existing loan.

Some of the early deals I did required that I show my credit report to the seller. In one instance I was lease/optioning from a “tired landlord” so he expected to run my credit before signing with me (he runs credit for all of his tenants). In another instance a seller was concerned that I didn’t have a lot of deals under my belt so she wanted to check my credit out. What kind of surprised me though is that on my very first and third deals, the sellers didn’t ask to see credit or references at all. I mean it’s kind of wild when a home seller will hand you the keys and move out of town without even checking you out…God bless 'em for being so trusting.