Working with a Realtor - Posted by Maria

Posted by Jack on March 09, 2006 at 18:51:15:

There is really no comparison between relators and waiting persons. Their 10% to 15% tips on the amount oa a meal check does not compare with a $200,000 to $1,000,000 or more sales price on a house. at 6% thats $12,000 to $60,000 a pop. To be quite realistic there are no relator services worth anything near that. Think about it!

Working with a Realtor - Posted by Maria

Posted by Maria on March 01, 2006 at 10:09:19:

My husband and I are making the first steps to become real estate investors, means reading, talking with different profesionals who we think may help us, etc.
One of them is a Realtor who works for a reputable Real Estate company. She has been very deligent regarding to quick responses, and yesterday we met at her office for the first time. The thing is that she (her company) wants us to sing a contract of exclusiveness, means that we can not look for properties by our own, and even if we do so, we have to report them to her.
Is that right way to go? What do you suggest? If we find a house for sale by owner, do we still need a realtor to close the deal?
Thank you for comments and have a wonderful day.

Realtors ROCK! - Posted by Downriver Brian

Posted by Downriver Brian on March 02, 2006 at 21:14:51:

So much anti-realtor propoganda in these posts. In defense of agents, let me share with you some of the recent success some of my clients have realized:

  1. House comps at $445k - Price I negotiated: $360k. Amount of work? Maybe five grand.
  2. House comps for $135 to $145 - Price I negotiated: $85k my buyer quitclaimed that property to another investor at closing for $5000. They made more on the deal than I did!
  3. Property comps for a MINIMUM of $270. Maybe as high as $310. My clients contracts for $219,900 with 2.5% back at closing.
  4. Client contacted me two days ago telling me she was looking for a good cashflow property. Within fifteen minutes I found her a duplex that is a GREAT deal in a great area which will cashflow between $200 & $400 per month.

This is just a few of the deals I put together for my clients. I guess there is a lot of merit in what the others posted though. If you sort through all the fluff that was written here the theme is: “The only Realtor that understands what I am trying to do would be one that DOES IT THEMSELVES!” Find that Realtor and if you get along together, you found gold.

As to the Exclusive Buyer’s Agency. It’s tricky. In Michigan it’s all but required to have a Buyer’s Agency Contract(though it doesn’t have to be exclusive…that’s just normally slipped in there) to have a true “Buyer’s Agency Relationship” with the cleint. Default in MI is that everyone without a Buyer’s Agencey agreement works for the seller! 4 out of 10 agents don’t even KNOW that!

Being an investor myself, I never look to put my clients in a position where they will work only with me. (I do that SHAMELESSLY with retail buyers…too much work to have them go to someone else…I don’t list houses without a contract either) I simply cross off the paragraph that states the client will work with me “exclusively” and have them initial next to it. If the client wants a short term relationship (i.e. they just want to do this one deal I tiped them off to) then I cross out the above paragraph AND limit the contract to 30 days, about the time it takes to close a deal. If they want to do another after that…it’s just as easy to scratch up another agreement. It’s all about knowing what your clients need, giving it to them, giving it to them fast, and giving it to them in such a way that they make so much money that they call you asking “do you have another KILLER deal? Not yet? Can you call me first when you do?”

Re: Working with a Realtor - Posted by Pat

Posted by Pat on March 02, 2006 at 19:36:33:

Sign that agreement and you’ve broken a Cardinal Rule of REI: You’ve given up CONTROL of your business.

I work with realtors on occasion but those I work with understand that they are only "eyes and ears’ for me. If a property I’m interested in is in the hands of a broker, I’ll use one I’ve educated to look into it for me and or present the offer. From that point on she gets out of my way. On the opposite side of the coin, I never list my properties for sale with brokers as I want to move them in a timely manner; not have them “buried” in the MLS. Usually it takes one ad for one week and I’ve got a buyer and a sale within 30 to 60 days.

Having taken the sales agent course for my state, I can tell you that realtors are trained to fill out forms, instructed in legal aspects and taught how not to get themselves or their companies in trouble. Nothiong is taught in the way of recognizing what constitutes a good deal. Just list and sell. Getting a broker involved in your investing business is like going to H&R Block. They’ll fill out the forms right, but don’t ask them to do a tax plan. The same applies to your business. It’s interesting that the majority of realtors in my area don’t own property or invest; just hustle houses.

Keep realtors in the right place and use them to YOUR advantage. Sign that agreement and they’ll use you to theirs.

by the way; if I had a dollar for every time a realtor brought me a “money maker” for which the numbers didn’t work, I’d be retired at an early age.

Viewpoint of former Realtor - Posted by Bigfoot

Posted by Bigfoot on March 02, 2006 at 04:58:28:

I still hold my brokers license but 95% of my business is my own deals. Reason the Realtor would like an exclusive is that many of these ‘investors’ aren’t the professionals that you see here, but rather newbies with only the CS course, no credit, no money, and no clue. They think they can buy ANY prop no money down,owner financed, rather than looking for the right one, which we know is unrealistic. But when you fail to produce the magic list of NMD props, they go off to find someone else, failing to understand that everybody uses the same MLS. I can understand the desire to not sign an agreement for non-listed properties, but for listed props, the Realtor is trying to gain some insurance that you wouldn’t waste their time.

Re: Working with a Realtor - Posted by Berno

Posted by Berno on March 01, 2006 at 13:14:28:

Ed spits the truth! Personally, I worked with the listing agent almost every time I looked at a listed property. One day I met an agent that had a great personality, great vision and was fairly well connected. The next time I was ready to look for properties, he got the call. He proved himself to me on the next deal and I have done more with him since. He’s a great partner who turns me on to possible deals before they hit the market.
Long story short, if I would have signed a contract like you are talking about, I would have missed out on meeting this great man who is more like a partner to me than a realtor. It’s truely win-win and we love working together. Don’t limit yourself. I question anyone who would try to “lock you down” with them. If they were good, they wouldn’t have to…people would keep them around! Kiss a lot of frogs (realtors) and find one you want to keep. Good luck!

Re: Working with a Realtor - Posted by Ed Garcia

Posted by Ed Garcia on March 01, 2006 at 11:10:55:


As far as signing an exclusive agreement with this Realtor, it?s not even a consideration.

Maria, Realtors, day in and day out deal in retail sales.

Where do you think their mentality is going to be? Retail Sales.

They can?t comprehend buying at 50 or 60 cents on the dollar. If you tell them that?s what you need as an investor, their answer is ?that?s unrealistic?. In most cases their idea of buying a good deal is 85 to 90% LTV. So most of your prudent investors feel Realtors are useless as far as buying. Some of us even feel that they are just order takers and many times are deal killers.

If you work with them for a while and don?t buy because they?re not bringing you the type of deals that you thought they were going to bring, they?ll drop you like a hot potato and accuse you of wasting their time.

PASS, no exclusive agreement.

Because you tell us that you and your husband are making your first steps in becoming a Real-estate Investor, I thought I?d share with you an old post written John Boy in 2002 that may be of some interest to you. Hope it will help you and your husband,

Ed Garcia


Posted by JohnBoy on June 13, 2002 at 19:15:40:
Here are a couple of ideas that should help you get started in the right direction and answer how you can do a no money down deal with no cash, no credit, no income, no nothing, except having some general knowledge backed with a desire to succeed by going out there and taking ACTION!!!
The way most people make money in this game is by using creative techniques to solve one person’s problem while being able to structure the deal to where it makes you a profit.
The key to finding a lot of deals in this game is to look for the MOTIVATED SELLERS… forget about looking for houses, that’s a waste of time and requires way too much work!!! Narrow it down to dealing with “MOTIVATED SELLERS” and make fewer offers that result in getting more offers accepted!
Let me give you an example on buying a house for full market value, with no money out of your pocket, picking up a quick $5k up front, some positive cash flow every month, and a nice payday on the back end… plus where talking about dealing in NICE homes…NO junk properties!
Mr. Seller has a newer home he purchased about 2 years ago. When he purchased the home he put about 5% down and was able to qualify for 95% financing. After closing cost he had hardly any equity left. Mr. Seller ended up buying a new home a couple years later. He’s been trying to sell this home before he has to close on his new home. He can’t even afford to list the home with a realtor because he doesn’t have enough equity in the property to even cover the 6% - 7% commission he would have to pay a real estate agent.
Now the Seller’s new home is finished, ready to be moved into and he needs to close on it. He closes and figures he’ll sell the old home soon, but soon enough doesn’t seem to be coming. Now the Seller is starting to have some financial problems because he has to start paying two mortgage payments until someone buys the old home. The Seller has a problem now because he can’t afford to make two mortgage payments. If something doesn’t give pretty quickly, he’s going to fall behind on the payments on the old home. He’s going to pay the new homes mortgage first. But he doesn’t want to be late or get behind on the payments of the old home either. The Seller is worried about damaging his credit if he misses any payments.
This is where I would come along and be in a position to SOLVE HIS PROBLEM! I can put a stop to the Seller’s worry and stop the bleeding TODAY! All the Seller needs to do is agree to my TERMS and I’ll even pay him what he owes on the property, which is pretty close to full market value. The Seller knows he wasn’t going to get any money out of it after paying off his mortgage and closing costs, so all the Seller wants and all he NEEDS is to get out from under his mortgage payment!
I agree to take over the Seller’s mortgage. I take it over “subject to”, which means I assume the Seller’s loan without even qualifying through the lender that holds the Seller’s mortgage. The Seller will deed the property over to me. I now OWN the home. The Seller is still on the loan that has the lien against the property. The Seller remains responsible to the lender for that loan until I pay it off! Usually within a few years when my tenant ends up exercising their option that I will give to them under a lease option agreement. I won’t be liable for the loan on the property to the lender. The Seller’s bank can’t come after me if something where to go wrong. The loan is in the Seller’s name, not mine! However, I will be liable to the Seller to perform on our contract agreement to make his payments and pay off that loan eventually, but my liability is to Seller, not his bank.
The Seller deeds the property over to me. The house is worth $150k. The Seller’s loan balance is about $145k. I agree to start making the payments in 30 - 60 days from today! Now I have 30 - 60 days to market the property before my payments start. The payments are $1400 PITI
What is the FASTEST way to sell a property? Sell on TERMS!
So I run an ad in the paper.
NICE! 4bd/2ba House
Call xxx-xxxx
The phone starts ringing off the hook!
I find a potential Buyer that has $5k to put down and says they can afford to pay $1700 per month. ($150k homes in the area would rent for $1200 - $1400 per month, so getting $1700 a month on a $1400 rental when offering an OPTION TO BUY, will bring a premium rent and people will gladly pay it, because no one else will even finance them because of one reason or another) I agree to give them an option to buy the home for $165k in one or two years. YOU get a premium on the sale price because you’re offering TERMS!
I collect the $5k up front as “Non-Refundable Option Consideration” and “IF” they exercise the OPTION, the $5k will be deducted from the purchase price of $165k, leaving my Tenant/Buyer with a balance owed of $160k. If they don’t exercise the option the option money paid is non-refundable and is lost by the Tenant/Buyer!
I get the $5k up front, plus first month’s rent of $1700. Since I was lucky and found this Tenant/Buyer in the first week, I get to keep 100% of the first two months rent since my payments won’t start for 60 days! So I collect $5k + $1700 first month rent up front, for a total of $6700. The following month I collect the full $1700 for rent and the 10 months after that I collect $300 per month positive cash flow. At the end of the year, IF the Tenant/Buyer exercises their option, they will pay $160k. After paying off the underlying mortgage of $145k remaining on the Seller’s mortgage, I’ll collect another $15k at closing.
So let?s see, that’s…
$5k option money up front
$1700 first months rent
$1700 second months rent
$300 x 10 months rent = $3k
$15k at closing ($160k - $145k = $15k)
That’s $26,400.00 over 12 months total PROFIT!
Now what happens if my Tenant/Buyer doesn’t exercise the option in a year???
Now I get to start all over again! I get to collect another option fee, raise the rent after a year for inflation and get a higher selling price for the option the next time around!
I just keep repeating the process over and over again until someone eventually exercises their option!
Assuming every tenant was to exercise their option in the first year… how many deals like this would you have to do each year to make $100k???
Just FOUR deals like this one and you’re making $105,600 per year!
How many hours would that work out to be to find and structure a deal like this and get a Tenant/Buyer in the property? Not very many!
How many hours per week would you have to put into working at your job to make $105,600.00 per year???
One thing to remember is that the typical homebuyer or seller does not understand any type of creative real estate buying or selling. They typically use a realtor to buy or sell. When that realtor doesn’t sell that home or when that buyer can’t get that loan… that’s where motivation starts to set in. The Seller starts getting motivated to sell and the Buyer starts getting motivated to buy. In either case they both either, just want to get out of the property or buy to get in. The Seller will just let the property go to get their problem solved and the Buyer will gladly pay any price to just get in if you can solve their problem.
Motivated Sellers are those that have been trying to sell but haven’t been able to for one reason or another. Or they may be facing foreclosure. Or they may be in a divorce situation. Or they may have been transferred with their job and need to move on, but they don’t want to leave the house empty or deal with renting it out to renters being so far away. Or they may have lost their job and can no longer afford the home and need to find something less expensive. Or they may have purchased another home and are now stuck with two mortgage payments. Or for whatever other reasons, they just need to get out from under their mortgage payments.
The Buyers just need someone that will sell to them. They can’t get a bank loan or some just “think” they can’t get a bank loan and they only care about two things! How much down and how much per month? If they can afford the payments and have enough to put down in order to allow them an opportunity of owning a home, price doesn’t matter to them as much. They just WANT to be able to buy a home!
Your job is to become the “PROBLEM SOLVER!” Instead of thinking in terms of, I’m looking to buy properties, or I want to be an investor, or how do I buy properties with no money, or how do I get financing, etc…
Start thinking in terms of being a “problem solver”. Your job is to find SOLUTIONS to fix someone else’s problems! Your job is to sit down with these people and find out what their problem is. Once you figure out what their real problem is, you now know what they NEED! They all WANT an all cash sale. They WANT full price and WANT someone to just waltz in and buy their home the traditional way. But your job is to find out what they really NEED! Once you find out what their PROBLEM is, then you can determine what their NEED is. Once you know what they really NEED, then your job to get the deal closed is to just come up with the SOLUTION that will get them what they NEED that will SOLVE their PROBLEM!
You are not a real estate investor, you?re a PROBLEM SOLVER! You find SOLUTIONS to solve anyone’s PROBLEM! That’s how you make the deals come together!
The best way to find the Motivated Sellers is to get them to find YOU! You get them to find you by getting the word out that you buy property! Any property, any condition, any price, any time! It doesn’t matter. Just present the property to you and you will figure out a solution to solve the Seller?s problem to get them what they NEED!
You get a bunch of business cards printed up. Put them out everywhere you go. Hand them out to everyone you meet. Get flyers made up. Post them everywhere you can. Put them in Laundromats, bowling alleys, advertising boards in supermarkets, car washes, etc. Put them anywhere and everywhere you can put them! Then get some poster signs made up. Post them anywhere and everywhere you can. Telephone poles. Nail them to a stake and post them in the ground on every intersection in town. Let the world know that “YOU” buy houses for CASH! Just give you a call!!!
Eventually people will start calling YOU! Most won’t be motivated, but some will! You want the ones that are MOTIVATED! When they call YOU, that’s when you screen them over the phone first and determine their motivation. Then you go visit them and get face to face with them and build a relationship with them. You want them to get comfortable talking to you. They may want to talk about their dog for all you care. Let them! Get comfortable with them. Let them build some trust in talking with you. Whenever they talk, you SHUT UP and just LISTEN!
Listen to everything they say. The more they talk, the more information they let out. The more information they let out, the more you learn about their PROBLEM. The more you learn about their problem, the more you will be able to find out what they really NEED! Once you got that information you can now figure out a SOLUTION that will SOLVE their PROBLEM by being able to give them what they NEED! Your solution to their problem gets them what they need and you make a profit for your problem solving skills! You’re a PROBLEM SOLVER! You are the DOCTOR OF SOLUTIONS! DR. BUYER, the master of problem solving!
OK, so now you have a general idea on how this stuff can work. But HOW do you go about getting started with all this? Start by going to the top of the main page on this site. On the left side click on the link that says “Success Stories” and then READ EVERY ONE OF THEM AT LEAST THREE TIMES OVER.
Then when you have finished with that, next click on the link that says, “How to Articles” and READ EVERY ONE OF THEM AT LEAST THREE TIMES!
Then go click on the “Money Making Ideas” link and READ EVERY ONE OF THEM AT LEAST THREE TIMES!
From there, determine which type of investing most appeals to you most (Lease options, renting, flipping property, rehabs, etc) and then click on the links that offers courses for sale. Find a course that pertains to the type of investing you like most and start with that! Master that and then move on to another type of investing to expand your knowledge to enable yourself to have more tools in your toolbox to work with. That will allow you to find more solutions to close more deals!
There are SEVEN different news groups on this site.

  1. The MAIN NEWS GROUP is where you will find the most valuable information here that is posted by MANY investors that are out there DOING this stuff full time on a daily basis! This is a news group for discussing real estate investing, no money down and creative financing. You can find this news group at the following link:
  2. The Carleton Sheets Group, also known as news group II, which is where most new people end up coming when they first find this site. You will find the LEAST amount of real world knowledge on this page since most of everything is pertaining to questions like, “Does Carleton Sheets really work?” This is the news group for questions or comments or discussions infomercial personalities like Carleton Sheets and others. You can find this news group at the following link:
  3. Then there’s the PAPER AND NOTES FORUM which is the news group that pertains to making money in real estate paper, such as notes and mortgages. Here you can discuss how to make money investing in discounted cash flows and paper, including discounted mortgages and mobile home paper. You can find this news group at the following link:
  4. Then there’s the MOBILE HOMES NEWS GROUP for making money investing in mobile homes, mobile home parks and mobile home paper. You can find this news group at the following link:
  5. Then there’s the COMMERCIAL REI NEWS GROUP for commercial properties such as apartment buildings, shopping centers, office buildings, etc. You can find this news group at the following link:
  6. Then there’s the FINANCING FORUM that is the news group that pertains to financing real estate deals. You can find this news group at the following link:
  7. Then there’s the Legal Forum that is the news group that is for general questions about real estate law, including real estate contracts, legal documents, legal forms, asset protection, taxes, tax issues and business organizations. You can find this news group at the following link:
    After you have done all this you should have a pretty good understanding of what’s involved. If you have a particular question on something then scroll to the top of the newsgroup that pertains to the type of property you are interested in and click on “Search the Archives” link and type in the word or words pertaining to your question. You will probably get MANY posts that have been posted in the past that will answer your questions many times over!
    AFTER you have done all your research and reading up on everything, this is how you should start with the next step once you are ready to start looking for deals.
    Before I get into the different ways of doing different types of deals I want to go over a few other things first. I get a lot of e-mails in addition to seeing many posts being made by people saying they need to make some fast cash in order to pay other obligations they have. Most of these people are talking about doing a L/O deal where they will be putting a Tenant/Buyer into the property and using the option money they get from their Tenant/Buyer in order to get the fast cash they are looking for. In my opinion this isn?t the smartest way to get started in this business. The first thing you need to focus on is building your cash up to give you some reserves in order to cover yourself should you end up with a deal that goes bad. You have to cover your obligations to the seller. You have to protect your Buyers. If your immediate goal is to get some fast cash to use towards other obligations, then getting involved with a deal that you are going to remain in the middle of is the wrong way to go about this. You need to focus on deals where you can get in and out of, with a quick profit where you have no further obligations or liability in the deal. Then you can use the profit you make and spend it on whatever you choose. You won?t have to worry about getting caught up in a mess that you cannot financially afford to be in.
    So what type of deals can you do that will allow you to do this? Well, the answer is pretty much any type of deal if you know how. So let?s look at some of the ways you can accomplish this using different types of deals.
    The most common deal that everyone hears about getting started with is flipping properties. The first thing that comes to mind when hearing the term, “flipping properties”, is doing wholesale flips, where you find a run down property, get it under contract, and flip it to another investor, leaving the other investor with the lion share of the profit and making a quick profit for yourself. The truth of the matter is there is more ways to do flips than just looking for run down properties. You can flip just about any type of deal, whether it be a wholesale flip, a retail flip, whether it be making a cash offer, doing a L/O, or even a “subject to” deal.
    This is where having the knowledge comes into play. The more knowledge you have, the more ways you will know how to structure the different types of deals and be able to make a fast profit without having to take on the risk by staying in the deal.
    If you have done your research then you should already know by now that the deals to be had are from sellers that are motivated. You also know that the best way to find these motivated sellers is by making it easy for them to find you. You know that the way you make it easy for them to find you is by marketing yourself and letting the world know that you buy property.
    Once you are set up with marketing yourself, this means you are going to run into many different types of sellers, with different types of properties, with different types of problems that you are going to need to know how to structure the deal in order to make it work. Not every deal is going to work by just trying to do a L/O on it. Not every deal is going to work by being able to just get the deed by doing a “subject to” deal. Not every deal is going to be a Junker, where you can do a wholesale flip. In order to take advantage of anything that comes your way, you?re going to have to know about as many ways as possible to do a deal in order to prevent from missing out on the opportunity of making a nice profit, just because you only knew about one way of doing things.
    Based on my experience and knowing what I know now, if I were just starting out and I was cash poor, or had little cash to start with and I needed to make some money to pay other obligations first, these are some of the ways I would focus on putting fast cash in my pocket, without having to take on the risk of staying in the middle of a deal.
    One way, would be the wholesale flip. If a ran into a property that was in need of a lot of repair I would get it under contract and flip it to another investor that was into doing rehabs. Depending on the amount of profit I was able to pencil in for myself would depend on how I would handle doing the flip with my Buyer. If I were just making a smaller profit, between $2k - $5k, I would just assign my contract over to my Buyer and be done with the deal. If I were to stand to make a larger profit on the deal, where I didn?t want my Buyer to know what I was making to prevent from losing that Buyer, I would set up a simultaneous closing and close the deal at a title company or at an attorney?s office if attorney?s were the ones that handled closings in my state, rather than title companies.
    Whichever way I handle closing the deal, once it?s closed, I?m out of the deal with a quick profit in my pocket and I don?t have any further obligations or liability in the deal. I can use the profit for anything I choose without having to be concerned about something going wrong with the deal later since I?m not involved with it after that.
    I might have a seller that calls with a nice property they need to get rid of. It could be a deal that might be had by getting it way below market value if it had a lot of equity in it. This may require a cash offer in order to get it tied up under contract. Once I have it under contract, I can then market it at a good price below market value in order to get a fast sale, and either assign my contract over to my Buyer, or set up a simultaneous closing between the Seller, myself and my Buyer. This is pretty much the same as flipping a wholesale property in need of a lot of repairs, only in this case, I?ll be marketing it for a retail Buyer instead of a wholesale Buyer. Just like the wholesale flip, once I close the deal with my Buyer I?m out of the deal with a fast profit in my pocket. Now I can use that profit towards anything I want without having to worry about any unforeseen circumstances that could arise since I?m no longer tied to the deal.
    I might have a Seller that calls with a nice property to get rid of, but they have little to no equity. Well, we know trying to make some kind of a cash offer isn?t going to work because the Seller owes too much on it. So in order to make a deal out of this I?m going to have to be able to buy this one on some type of terms. If I can buy it with favorable terms then I can structure the deal in such a way that would allow me to use forced appreciation. I can do this by reselling the property and offering some type of terms to my Buyer. The problem is, I don’t want to have to remain in the middle of this deal because any cash I need I have to use for something else. Since I?m cash poor, and I don?t have an adequate reserve fund set aside, and I won?t be able to put any cash I get up front from this deal into a reserve fund, I?m going to have to do this deal in such a way that will allow me to get in and out of it, with no further liability on my part.
    So what if I were to get this under a L/O arrangement? Usually under a L/O deal I would get a Tenant/Buyer to put into the property where I would make some up front cash from the option consideration my Tenant/Buyer pays me, plus some monthly cash flow while they lease the property from me, and some additional profit on the back end when they go to exercise their option, since their option price would be higher than my option price I have with the Seller. Since I?m going to be using any cash I get up front on this deal for other obligations I can?t afford to take any risk by staying in the middle of this deal.
    What happens if my Tenant/Buyer turns out to be a deadbeat and stops paying? Or what if they lost their job and couldn?t pay? What if they refused to peacefully vacate the property and I had to hire an attorney to have them evicted? What if I got the property back and I had to go in and make $2k - $5k in repairs just to get the thing ready for another Tenant/Buyer?
    Remember that I?m cash poor and I had to use any option money I got up front from the Tenant/Buyer to pay other obligations. I only made a couple hundred bucks per month while they lived in the property that they did pay on. I probably used that extra cash for other things also. So where do I get the money from to take care of this problem? I?m cash poor and I have no credit where I can borrow from anywhere. So now what? Let me tell you what. YOU?RE SCREWED!!!
    OK, so how can I avoid that from ever becoming a problem? Easy! Don?t stay in the middle of the deal! Rather than getting all wrapped up in becoming greedy with wanting to risk everything just to get that extra monthly cash flow, and any back end profit, IF the Tenant/Buyer was to exercise their option, just get as much as you can up front and ASSIGN your contract over to your Tenant/Buyer. Just use that money they would normally pay you as the option consideration and take it as your assignment fee to let them just step into your position. Your Tenant/Buyer actually ends up with a much better contract because they will have more than one year to exercise their option that you would have given them under a new L/O contract with you. They will get your contract, which will be a lower monthly payment than what a new contract with you would have been. They end up with a much better deal by being able to take over your original contract you have with the Seller. ALWAYS make sure you get a signed release of liability from the Seller when you assign your contract over to someone else. That way if you?re Buyer should ever screw up; the Seller can?t come back to you and hold you liable for the contract.
    All you need to do is continue to do deals like this until you have made enough money to take care of your other financial obligations that you needed the cash for. Once you have taken care of that you are ready to move on to the next step. The next step will be building your cash reserves. I would want a minimum of $25k in cash reserves built up before feeling safe enough to protect myself before using any of the profits from the deals I do, that I will remain involved with.
    If you are already in a position to where you don?t need to make some fast cash to use towards other obligations, then you can start with this next step, which is building up your cash.
    Now that you are ready to start building up your cash you can either continue to do deals, where you flip them to an end Buyer or assign your contracts over to them. You can then take the cash you make and put that away in your reserve fund until you get enough saved up before venturing into other things. Or you can jump-start your investing by doing more deals where you can take advantage of building up monthly cash flow and equity that will provide you with some nice paydays on the back end when you?re Buyers eventually cash you out. Your main goal here should be focused on getting your reserve fund built up before you touch any of the up front profits you make from your Buyers down payment money or option consideration money. Put all of that into your reserve fund until you have at least $25k in reserves. If you average $5k per deal in up front cash then you will only need to do 5 deals to get your reserves up to $25k.
    Once you have built up your reserves you will have the cash on hand to deal with any unforeseen problems that may arise. Basically, you will be using your Buyer?s cash to cover any expenses you incur should one of them default on their agreement. Then when you get another Buyer to put into the property again you can replace the reserves you used with the cash you get up front from them. Meanwhile you can use any of the monthly cash flows coming in for other things, like replacing your income to live off of.
    Once you?ve reach your minimum goal of getting $25k in reserves you can then start using some of the up front cash you get on future deals towards other things. Even though you have some reserves built up you should continue to take some of the up front cash you get on future deals and put that away towards building cash that will allow you to do other deals you normally couldn?t do without having cash on hand to invest. As your portfolio of properties continues to grow you should add a little more towards your reserve fund to allow you enough cash to carry you over, should you ever run into a problem where you end up with a handful of vacant properties at once. If the economy or something were to take a dive you will have enough cash to carry you over until things turn around again, hopefully!
    As you continue to do deals and get more experience your knowledge base will grow with it. Then you can start looking into other things if that is something you choose to do and diversify your investments.
    So if I were starting out today I would start with flipping property, L/O?s and doing “subject to” deals. With having a good understanding in each of these types of avenues of real estate investing, I could have more than enough to keep me busy with doing a lot of deals. The key is to educate yourself in everything you can that pertains to these types of deals and you should be way ahead of the game if you implement a good solid plan and take action!
    If you could afford to, I would buy at least 3 courses. One on flipping properties, one on doing L/O?s and one on doing “subject to” deals. If you can?t afford to get all 3 right away then pick one on L/O?s or flipping properties and start with one of those. Then take action and get out there and just do it! Get that first deal under your belt by flipping or assigning it over to another Buyer and cash out with a quick profit. Take $300 - $400 of that profit and buy the next course. Then go out and do another deal and take enough out to buy yourself the 3rd course. Then crank out the marketing and get those Motivated Sellers finding you! Then close some deals and begin building your way to financial freedom!
    The important thing is to implement a good plan and stick to it until you reach your minimum goals in order to give yourself a solid foundation to where you don?t get yourself into trouble and end up living in a financial nightmare!
    I can get into a lot more detail on this but it would require writing an entire course on the subject and this is already getting way to long. These are just some basic ideas to help you with finding some direction on where to start after you have done your research and educated yourself with the basics.
    Now if you have to ask me any questions on this stuff, then that just tells me that you haven?t spent enough time reading through this site. Anything you could have a question on pertaining to the type of deals I?m talking about here can be found in the archives, or in the how to articles, or the money making ideas section, or even in some of the success stories here. So go back and read through everything again if you need to!
    If you search the archives on the MAIN news group by typing in, “getting started” you will get close to 500 posts on the subject. You will find a ton of good information reading through them.
    For those reading this that haven?t researched this site, search the archives, read the how to articles, read the money making ideas section, read the success stories, and EDUCATE yourself. Then move forward by putting together a plan of ACTION!
    I hope this has been of some help to you and helps you in finding some sort of direction to getting started.
    May the force be with you!
    Here is another post I read here on this site in the past. It?s an excellent post that was posted by Todd (MO) about setting goals.
    Posted by Todd (MO) on April 25, 2001 at 15:59:00:
    In Reply to: How do you write/organize your goals??
    The following are some excerpts from a training I did on goal setting and achievement. I hope you find it useful.
    Setting Goals
    Perhaps one of the most important things that you will do to ensure your success is setting goals. Many people, however, fail to recognize the importance of this activity, and tend to pass it over as unimportant. But nothing could be more vital to your success than learning how to properly set goals.
    As I mentioned in the secrets to success section, one element that all successful people have in common that is responsible for their success, is that they set specific goals and devised a plan for achieving them. This means that they were able to determine exactly what it is they wanted, and knew how they were going to get there.
    There are 3 basic types of goals. They are:
    1.) Improvement goals ? Things that we want to change or make better. Lose weight, quit smoking, have better relationships, etc.
    2.) Achievement goals ? Things that we want to accomplish. Top salesperson, greatest golfer, best teacher, etc.
    3.) Financial goals ? Things that we want to acquire. Making a million dollars, being financially independent, cars, homes, etc.
    Ask a majority of people about their goals in these areas, and they will typically give some vague, general answer. If it?s an improvement goal, they may tell you that they want to lose weight. While they may be able to lose weight without a clearly defined goal, their chances of really succeeding long-term are slim until they specify how much weight they want to lose, and devise a plan for how they are going to do it.
    If you don?t know where you?re going, how will you know when you get there?
    The keys to effective goal setting are:
    1.) Be specific about your goal. State exactly what you want. Instead of just saying I want a new car, state "I will have a ?98 BMW 740i, white with tan leather interior, chrome wheels."
    2.) Set a date for reaching this goal. "I will have it by May 5, 1998."
    3.) Devise a plan for reaching the goal. "Thru real estate investing, I will acquire at least 2 income-producing properties a month that will create a net cash flow of $300 per month each, and I will buy at least 1 property per month that I can fix-up and resell for a $10,000 profit."
    4.) Indicate where and with whom you will have/accomplish this goal. Who else will be involved and/or affected?
    The 7 Keys to Goal Achievement
    Once you have written down your goals and developed a clear idea of what you want, you still have to get there.
    I have put together what I consider to be the 7 keys to achieving your goals. These are the crucial elements from start, to implementation, to achievement of your goals that everyone must do in order to make them a reality. Again I want to emphasize how important it is to put into action the information that I am giving you here, it is vital to your success. Please don?t take it lightly.
    1.) Desire ? It all starts with a dream, a desire to have or accomplish something. If you don?t want it, then why bother going after it?
    2.) Belief ? In order to accomplish/acquire something, you must possess the beliefs that it is achievable and worth pursuing. That reaching this goal does not conflict with your values. That no one will be harmed or adversely affected by it. And lastly, you must possess the belief that you are capable of achieving it, and that you can learn whatever is necessary to accomplish it.
    3.) Knowledge ? You need to acquire the knowledge and information that you will need to know in order to do, accomplish, or achieve whatever it is you are attempting. This means learning the “how-to” of what you want to do. You will also need to read about, listen to, and/or model someone who has already done what you wish to accomplish in order to learn the mental strategies that are necessary to accomplish this goal.
    4.) Opportunity ? The opportunity must exist for you to take action. Is this something that you can do now? If not, when? Are there external (or internal) factors that are getting in the way?
    5.) Vision ? In order to accomplish the goal, you must have a clear idea of what it is that you want, and create a compelling internal representation in your mind that you can “see” vividly. You can also use external pictures of your goal that you review daily. The better you can visualize your goal and its achievement/accomplishment, the better your chances of getting it.
    6.) Planning ? Devise a concise plan for the achievement of your goal setting long-term, short-term, as well as daily goals. Also implement the use of a day planner type system to help you plan your time and to “track” your progress towards its achievement.
    7.) Commitment ? Stick to it, no matter what. You must be prepared to do “whatever it takes” (without hurting anyone) to accomplish your goal. Use vision and planning to create such a great picture of your goal that you fall in love with the thought of its accomplishment. Post the following statement up on your bathroom mirror and recite it to yourself every morning.
    "I will not give up, no matter how many obstacles I encounter, or how much pain I endure. Because these things are nothing compared to my desire to succeed."
    Posted by Ed on June 14, 2002 at 14:24:43:
    In Reply to: BEST WAY TO GET STARTED IN REAL ESTATE! posted by JohnBoy on June 13, 2002 at 19:15:40:
    We all know that everything ALWAYS works out in real estate, but let me just ask a question.
    Let?s just say you are unable to rent the property in the 30-60 day period after taking over “ownership”.
    Do you then return the property to the Seller and say “sorry”. Remember you are the investor who is going to solve his problem! Or do YOU come out of pocket at that point?
    And by the way…why would he agree to not get any money from you (for the 30-60 days you stated) to pay the payments he couldn’t keep making in the first place!
    I was at a Ron LeGrand seminar a few years ago when one of LeGrand’s students had this exact scenario happen to him. When he asked for advice from his "mentor?, whom he had just recently given about
    $ 5000 for “butt-camp”, the response was to "walk-away quickly and in the dark"
    Let’s see:
    Investor - $ 0 (open to possible litigation)
    “Motivated” Seller - deep "dootie?!
    Stray from the “party-line” just for a second, John-Boy.
    What would YOU really do!!
    Posted by JohnBoy on June 14, 2002 at 14:50:12:
    In Reply to: Re: BEST WAY TO GET STARTED IN REAL ESTATE! posted by Ed on June 14, 2002 at 14:24:43:
    Depends on how you structure the deal.
    If I take “ownership” by taking the property subject to where I commit to making the payments after 60 - 90 days, then I make the payments out of pocket if I have to because that is what I contracted to do! And I have had this happen and it was on a L/O deal. But I committed to start paying in 60 days no matter what so that is what I had to do.
    Now if you can’t make that commitment then don’t do it that way!
    Instead you can tie it up subject to you finding a suitable tenant to place into the property within 60 - 90 days.
    Then if you can’t find someone you can walk away or negotiate to get another 30 days or whatever. But in this case you are making the deal subject to you first finding a suitable tenant/buyer before even committing to doing the deal. And the seller is aware of this up front! Of course it doesn’t mean they will suddenly forget that part and still be p*ssed off at you over it, but that is the terms of the deal you agreed upon with the seller up front.
    Also, if you don’t have the cash to commit to staying in the middle of the deal you shouldn’t do these types of deals to begin with until after you build up adequate cash reserves.
    So to specifically answer your question, it depends!
    If you can’t commit to making the payments then don’t do it. If you can commit to making the payments and you are prepared to take that risk then do the deal!
    BTW, I don’t know what these gurus teach or tell people to do and I’m not one of them that has something to sell to people. My information I share is FREE!
    But it does appear there are some selling information for outrageous prices and giving out crappy information. Maybe I should start selling my information and maybe that would put some of them out of business! LOL

Re: Working with a Realtor - Posted by John

Posted by John on March 01, 2006 at 11:05:40:

By signing the “contract of exclusiveness” or one like it you would owe a commission on anything you bought, weather you used that agent or not. Just explain to the agent that you will used them on listed properties but on FSBO’s not brought to you by them deffintly not. Understand the agent is trying not to waste their time working with someone that may never buy a property or try to work with a dozen or so agents. Try to understand their position somewhat, so be nice.

The agent will tell you that you need them to handle all this and you must use their contracts. The truth is you don’t need them to negociate the deal and you don’t have to use their forms. They have to use them but you do not.

When buying a property from a person you should have your R/E attorney draw up a contract and handle the closing. You could use a generic contract after attorney review.
As you are new to this, don’t get become motivated buyers. Study your market. Attend many open houses. Scour the for sale ads in the newspapers. Try to get people on your team; Attorney, CPA, title company, an Agent, A Mortgage Broker, and others.
#1****invest time and some $$$ in you education. Read and study here and other sites, join a REI group, learn creative ways to buy a property.

Re: Working with a Realtor - Posted by Filippo C.

Posted by Filippo C. on March 01, 2006 at 11:01:24:

do not sign it!!! let her know you will only sign on property she provides you with & you and husband are interesting in buying it.

other than that she’s trying to get you into an agreement that even if she doesnt find you property & you and husband find property on YOUR OWN you still need to give her a cut because you signed that agreement.

YOU ARE NOT OBLIGATED TO SIGN IT EVEN IF SHE IS WORKING WITH YOU TO FIND PROPERTIES! Let her know you did your homework & know you’re not obligated to sign it & if she wants to still work with you great. If not then you’ll just have to find a realtor that will without agreement!

Thats because most are horrible - Posted by Gene

Posted by Gene on March 09, 2006 at 12:41:22:

I have had many deals that fall apart when dealing with realtors. Eg…listing agents go on vacation and deal falls apart. Lack of communication.

For me deals are much easier when no realtor is involved. I guess if you don’t know what you are doing they add value but for me they seem to be a hinderence.

I cannot wait untill the MLS is public, or a better way of selling/buying is formed (mostly likely on the internet). It is not far off now. There will be very good alternatives in the near future. Look at travel agents…10 years ago they were everywhere…now nobody needs them.

Re: Realtors ROCK! - Posted by Karriem

Posted by Karriem on March 03, 2006 at 12:53:54:

The reason realtors get a bad name is because so many of them are really crooks! Now Trust me when I say not all of them are crooks, because you truly have some realtors who truly care for their clients and who’s willing to bust their butts for them to get the best deal possible. I been a mortgage consultant for a few years now and met all kinds of realtors and I thank God 99% of them have been great professionals. However, that 1% who spoils it for the rest of them really need their head examined right away, because they think their getting over on someone and in the long run they will lose way more than they’ve gained!!! so please do not knock all realtors if thats whats happening on these post, because just like it takes one to give them a bad name, it can take one to change it also!!!

Happy Investing
"I sell money to make money, yes it is legal and I love it"!!!

Re: Realtors ROCK! - Posted by Frank Chin

Posted by Frank Chin on March 03, 2006 at 08:33:34:


I’ve been a buyer and seller, and the my wife spent six months working as a RE agent. She’s been telling me as a seller to watch out, since in theory, a listing agent is supposed to work for the “seller”, often then turn out to work for the buyer.

In our last sale, we interviewed a number of realtors and sold it via an “open listing”. The comps we were given varied widely.

You mentioned one property that comps at 445K, but negotiated for 360K, were you the buyer’s rep?? If you were the seller’s rep, and I was the seller, I probably would have a bone to pick with you.

Actually, I bought a property way below market, in fact walked away from another offer I made a week before, and got it through an agent. During the process, I sat in on calls between this agent and the seller, and the relationship appeared “antagonistoc”. She thought the seller was an idiot, and my dealings with him later proved her right. BUT it appears that she was trying to be on our good side, as I bought the place for rental, and she was hoping to be the rental agent, and then, sell us other rentals afterwards.

While it worked to our benefit, it made me wonder as the seller was the one paying the commission in theory. In practice, she seemed to be working for us.

Frank Chin

Re: Viewpoint of former Realtor - Posted by Jack

Posted by Jack on March 09, 2006 at 18:53:58:

I agree with that. Most relator services for an investor are a waste of time

Best POST EVER!!! - Posted by Filippo C.

Posted by Filippo C. on March 02, 2006 at 12:50:53:

That has got to be the BEST POST I’VE EVER SEEN in my life!!!


Re: Working with a Realtor - Posted by Tim

Posted by Tim on March 01, 2006 at 11:31:57:


How come I submitted in two requests to be interviewed for your seminar yet you never called back? I did this over a week ago.


Highly unlikely… - Posted by Downriver Brian

Posted by Downriver Brian on March 09, 2006 at 13:50:06:

I have to disagree with you on some of your points.

The illustration comparing real estate agents/brokers to travel agents is akin to comparing apples to oranges.

Let’s break it down.
In most states if you “hold yourself out to the public as a person selling real estate” you are required to be liecensed with the State. The state doesn’t approve of just anyone to be trusted with such a weighty matter as the sale of someones personal residence. Have a felony? You’re out. Been in a mental institution for any period of time? You’re out. Been involved in embezelment of any type? No license for you.

The MLS is not a unified system. It is owned, maintained, and administrated by the local board of realtors. Some are more broad than others. VA, DC, MD and DE are all under the MRIS system. Michigan on the other hand has multiple systems for different areas.

The MLS is not just a simple advertising medium either. The listing ticket is considred a valid contract between brokers. If you put 3% to buyer’s agent on the listing ticket, it WILL be delivered.

90% of properties are listed on anyway…so in essence, you can do your own search yourself. The search tools just arn’t as advanced. However, you can’t just go buy those properties, you do have to go through an agent.

As to the analogy of travel agents:

A)Travel Agents are still relied on by people that want service. Like me. I’m only 26 years old, so I don’t remember the days where you have to have a travel agent to go anywhere. My first recollections of dealing with travel issues is Priceline. Before that it just wasn’t an issue for me. Still, I prefer an agent. Why? Because you don’t pay THAT much more, and I want to deal with REAL PEOPLE. I hate calling the utility company and talking to a “computer person” I just pound zero till I get to talk to a representative. Same with travel. I want to talk to one person that can take care my flight, hotel, and rental all in one kit-n-kaboodle. So they are not “outdated”

B) Travel agents arn’t licensed like Realtors. I can walk into a travel agency today, get a welcome aboard brief, and weeding through customers tomorrow. Not so with real estate.

C) Service: Service is the lifeblood of the real estate profession. Sellers that pay less commission get less service. By default. There will never be an “” of real estate, because a computer cannot negotiate price or terms. A computer cannot evaluate millions of different properties and account for each and every one’s differences (a computer can do this with hotels through ratings, reviews, and price comparision).

Introduction of a “better way of selling/buying” is highly unlikely because you would first have to change the laws of the states to allow someone other than an agent (a giant online conglomerate) be trusted with selling someones home. I’d love to see that happen. Esp with the loby power of the board of realtors comming to play. It’s like the teachers union. Well…not that bad.

I agree with you on your intro point though…if you don’t work with an agent that knows what you are doing…the ball can be droped, blow your deal, and cut a chunk out of your profit. If you have the time and also have a plan in place to move your properties yourself…sell them yourself.

Just don’t try to sell more than 5 in one year in Michigan without a license. That’s illegal. You’d have to get licensed if you want to sell 6 or more in one year. Gotta love the legislature when it sticks up for your profession. [:wink:

I didn’t work for the seller - Posted by Downriver Brian

Posted by Downriver Brian on March 03, 2006 at 11:06:51:

In MI there is agency disclosure. Default is that all agents work for the seller unless there is a Buyer’s Agency Agreement that binds one agent to a buyer who has sought him out.
This is how I work with all of my investors. They contact me. I represent them (not the seller) and I negotiate on their behalf for their best interests. If I can get a $300,000 property negotiated downt o $50,000…I’ll do it with a clear conscience. And no, that hasn’t happened yet.

As to agents treating their sellers like crap…I’ve seen this happen as well. It boggles the mind. The seller will NEVER work with that agent again. It’s destroying their repeat and referral business. Someone like that will always be working for today because their service ensures there will be no repeat business tomorrow.

Re: Viewpoint of former Realtor - Posted by Bigfoot

Posted by Bigfoot on March 09, 2006 at 19:10:08:

No worthwhile Realtor would turn down working with a legitamate investor. Maybe 1 or 2 % of MLS props are worth an investors while. So in that respect, having ready access to those props as they came on the market would hardly be a waste.

GOOD ADVICE – SOME HOLES! - Posted by Innovator

Posted by Innovator on March 04, 2006 at 24:04:02:

The concept and advice is pretty good, but there are some big dangers that aren’t addressed.

Re: Working with a Realtor - Posted by Ed Garcia

Posted by Ed Garcia on March 01, 2006 at 13:39:06:


First of all I?d like to say that were running a little behind due to Terry or myself personally interview the candidates and haven?t gotten around to everyone yet.

Sorry for the delay. Tim, I checked for a ?Tim? or the e-mail address that you?re using, and can?t seem to find you. Perhaps you?re using another name or e-mail address. If you like, you can call me personally at (909) 944-0199 and I?d be glad to go over the workshop with you and clear everything up.

Sorry for the inconvenience,

Ed Garcia