NoBullRE.com Alert: How To Increase Your Cash Flow By 82%
June 18, 2009
In this market, everybody wants to increase their cash flow. I don’t care if you are a real estate investor, a realtor, a business owner, or most anything else, producing cash flow is top of everyone’s mind. Especially if you could almost double cash flow with a minimal amount of effort. That is exactly what a close friend of mine has done recently and I thought the NoBullRE.com community would find his story interesting to see how it applies to their situation.
Make Your Phone (or Email) Ring…. The Only Answer
Let’s play a little game of what do these people need to increase cash flow. As the figure shows, regardless if you are a real estate investor or any other business owner, one of your biggest needs is for the phone to ring.
Now, from my friend Larry who owns a local hurricane shutter installation business. His results: Phone calls almost doubled (along with sales) over a 2-3 month period. Guess what? His cash flow picture approximately doubled as well.
How Did Larry Double His Business?
Very simply…. He SUBSTANTIALLY increased his exposure where people where looking for exactly what he does. The funny thing is that he increased this exposure in places where very few competitors even begin to know how to play. Where did he do it?
The Web…. here is what his visits have looked like.
But Larry had a web site for a long time with ALMOST ZERO VISITORS. So what happened to explode his call volume? Very simply, Larry took the steps to DOMINATE in Google and other search terms. Take a look at this Google output and Larry now owns 4 POSITIONS in Google first page.
Think about it…… somebody does not sit down at their computer and randomly search for phrases like “Destin Hurricane Shutters”. At that exact moment in time, they are very interested in finding someone that can help them with that topic…… Larry has just put himself in a position to be that person.
Now, also look at Larry’s rankings in other, related search terms. For a real estate investor, maybe the search term would be sell my house fast Tampa.
Larry is my long time fishing budding and now have to apologize to him…… he has gotten so busy he is having a hard time finding time to fish.
Larry Didn’t Lift A Finger To Do This
Larry will be the first person to tell you he knows NOTHING about getting his website in Google. As far as he is concerned, it is pure witchcraft (in reality, its is very predictable).
How Larry did this is to participate as a beta test partner for a new, local web positioning service that is in launch stage as I write this. The cool thing about this service is that a group of techies have figured out how to slash the cost normally associated with getting a web site to dominate. Normally, this service is cost prohibitive except for those with revenues to $1M+ per year….. unfortunately, that leaves a lot of people out in the cold.
Instead, for applicable businesses, this new service can place them for a SMALL FRACTION of that cost. As Larry recently stated:
“I can pay for a whole year’s worth of service with a single sale….. becomes a no-brainer for me and I would pay them lot more.”
FULL DISCLOSURE: I am a partner in this venture that has been in development for about 18 months.
A Unique Offer: We Need A Few More Larry’s To Fine Tune Our Launch
I want to make a unique offer to a few more “Larry’s” and thought that we would do this with some NoBullRE.com readers. Specifically, by helping us fine tune our systems prior to launch, we will:
- Give you a custom software tool that we use (no cost) and training to find unique niches that will work like Larry’s;
- Consulting (no cost) with one of the principals (or me) to make sure you have the right approach.
- Over $1,000 off the cost of the service.
It is vitally important to us to work closely with a few charter members to really iron out our systems prior to launch. If you are interested in this opportunity, then simply put your first name and email in below…. From there, we will provide you our custom software tool and video training so you can decide if this is right for you.
See Future Website: www.eMirrorMarketing.com
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Short Sales May Get A Bit Tough In Florida
June 12, 2009
Some interesting news that has come out today about short sales and in particular, the ability to get title insurance on the flipped property. It appears that some title insurance companies are getting uncomfortable with the practice. There is a good article coming from the Tampa Tribune on this topic. To quote a portion of the article:
TAMPA - It may be a bit tougher now for investors to flip short sales for big profits.
Attorneys’ Title Insurance Fund notified its 6,000 member lawyers this week that it will not insure deals made with a popular - but controversial - method for closing flips of short sales. A short sale occurs when a mortgage holder agrees to allow a home to sell for less than the mortgage balance so that foreclosure can be avoided.
The Orlando-based fund is a major underwriter for lawyers who write title insurance in Florida. In a letter to lawyers, the fund said it has become aware of short sale programs advertised on the Internet that promise to make investors lots of money with little or no work.
It will be interesting to watch to see how this impacts the ability of investors to rapidly turn a profit on their short sales.
Home Valuation Code Of Conduct: Investors Be Ready
May 1, 2009
Today marks a major change in the lending landscape and the way loans are sold to Fannie Mae & Freddie Mac…. Specifically, how they are appraised.
If you have not heard of Home Valuation Code Of Conduct (HVCC),just ask your favorite mortgage broker about it and more than likely their response will be something like:
&$#@%^&%$#^%$#@#$%^
(sorry, but can print what they really will blast you with)
In short, this change is designed to fix the evils of the past.
As always, there are good and bad sides to every change. We will explore the good, bad and ugly of this new approach but first, let’s synopsize what it is about.
WHAT IS HVCC (Short Story)
So what does the code say? Basically, it’s that the people responsible for originating mortgages can have nothing to do with the appraisal process.
In addition, the code also:
* Prohibits lenders and third parties from influencing or attempting to influence appraisals.
* Requires lenders to ensure that borrowers get a free copy of appraisal reports at least three business days before closing.
* Allows lenders to have in-house appraisers, so long as they’re completely independent of sales staff and their compensation does not depend on their estimates or on loan closings.
* Requires lenders to test a randomly selected 10 percent (or other statistically significant percentage) of appraisals and report any problems to Fannie Mae or Freddie Mac, which may force lenders to buy loans back from them.
* Requires lenders to report appraisal misconduct to applicable state agencies.
You can download a copy of the HVCC at: https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvcc.pdf
WHY IS HVCC GOOD?
Let’s face it, the appraisal business has been a bit “rigged” over the last several years.
In short, only appraisers that could “get the deal done” were used on a repeated basis by mortgage brokers, realtors, and or builders. It only makes sense that this is the way the system worked. If you were a realtor, or even if you were a new home buyer, the last thing that you want is for your appraisal to come up short and the deal fall apart.
Since appraisals are somewhat subjective, the appraisers that always got called were those where the subjectivity worked out in favor of the deal.
However, many appraisers felt very pressured to make the deal work….. their future business counted on everybody walking away happy. Of course we are now seeing some of the consequences of that type of approach with our current housing and mortgage crisis.
WHY IS HVCC BAD?
Because now your purchase or sale is a crap shoot.
Why?
Simply because appraisers will be pulled out of a “blind pool”. From my personal experience, only about 20% of appraisers are good at their profession (you know, the ole 80/20 rule).
So you now have an 80% chance of a mediocre appraiser being assigned to your appraisal. Are they really capable of determining the value? I am skeptical.
In addition, most the incentives for the appraisers are now set up to appraise low….. The safe play is to come in BELOW what you may be thinking is actual value.
CONSEQUENCES
HVCC will be implemented May 1, 2009. Many people believe, myself included, that this is going to severely disrupt the home seller market, and investor market, for a period.
Everybody’s major hope is that soon, tweaks will be made into something that is workable for all in the industry.
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Investor Alert: Rental Guarantees
April 9, 2009
Another one bites the dust. Another investor lead astray by what looks like a great thing to the uninitiated: the rental guarantee.
As I write this, I learned that an investor went from buying what I think is one of the best properties that I have seen in the Go Zone to what is in my opinion, junk. Why? Because they were lured in by the “security” of the marketers rental guarantee.
Now don’t get me wrong….. Sometimes a rental guarantee is a great thing on an investment property but the reality is that it is rare. In fact, we are evaluating a deal right now with a rental guarantee but our Red Flags were immediately raised…. Time will tell if the project we are examining happens to be one of those rare cases that works with a rental guarantee.
WHAT IS A RENTAL GUARANTEE?
Quite simply, it is an agreement between the seller and the buyer that they, or a related company will lease the property for some period of time. One example that can work really well is when a subdivision builder sells their model home to an investor and then leases it back as a sales center. That can make a lot of sense for everyone involved.
These rental agreements tend to be as short as 3 months and can be as long as 2-3 years. In addition, the seller might be leasing back a single unit, such as for the model home above, or they may be leasing back a ton of units and then they plan to sub-lease them to minimize their negative cash flow.
RED FLAG #1
When done with multiple units for long periods of time, the lease back represents a substantial monetary liability to the seller. So why would a seller offer this? One possible (and common) explanation is that they are making a boatload of money on the sales of the units and the leaseback represents a small risk. By offering a leaseback that hope to get a bunch of investors to start buying in which case the seller will do just fine.
Generally this occurs when the property is overpriced relative to market. So the “game” is to mark up the property higher than market value, make a bunch of money, and then offer a rental guarantee to make this attractive to investors. But of course, they can’t show that the property is overpriced so somehow they will also need to convince the investor that they are getting a good deal.
For this Red Flag, you should take any discussions on “appraised value” or “market value” with a degree of skepticism and really try to verify. Every once in a while you will find a property that has a leaseback AND is actually priced right…… then you have found an interesting deal. Just realize this is rare.
Red Flag #2
This leaseback can be a substantial financial undertaking for a builder/developer if many units are involved. So, for example, suppose that they offer this for 50 units in a complex at $1,000 per unit, for 24 months. So their total liability is:
50 Units *$1,000 * 24 = $1.2 Million
Obviously they probably PLAN on renting out these units, and they PLAN on selling enough units to be strong enough to cover this but will their PLAN work? If not, good luck on getting all your PLANNED lease payments. However, if what you are buying is till very rentable on the market, with or without them, then your are in a great position.
Red Flag #3
Is the leaseback consistent with market rents? One other common “gimmick” is to offer a leaseback higher than market rents to make the numbers look good. Based on Red Flag #2 and you always needing to plan on those leaseback payments stopping, then you really do need to know the market rent values. If, however, the lease back amount does line up with market rents, then that is a good indication…… the question is how will you, as the investor, know what the market rents are for the area?
Conclusion
Again, don’t misunderstand my intent. SOME RENTAL GUARANTEES are good and as mentioned earlier, we are evaluating a deal with one right now. However, when you hear about an offered property with a rental guarantee, always go back and check your 3 Red Flags.
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Investor Alert: Bank Owned REOs Without Pictures?
April 2, 2009
Many people believe that now is a great time to buy a bank owned properties (see yesterday’s poll). In some locations, you can literally buy for pennies on the dollar.
In addition, in some select areas, properties can be rented to generate 18-25% cash-on-cash returns while still picking up substantial equity.
That is the good news but what do you need to worry about??
The “No Bull” version is that these properties are being offered by everyone, with many of them junk. Heck, it wouldn’t surprise me if Joe The Plumber was trying to get in on the action.
Over the last few months, we have sat in on about 1.2 million webinars (or at least if feels that way) of different groups “pitching” their homes. There is a lot of things to consider to separate junk from good, but let me give you one insider’s tip:
If the offered property is supposedly rehabbed but the provider has been “too busy” to take pictures inside & out, it should raise a flag.
We have been actively looking for the best cash flow homes for ourselves and our clients and it is amazing how many providers don’t have inside pictures. At least for me, I have a hard time believing in a property if I can’t at least see what the inside of the property looks like.
BE REALISTIC In Your Expectations
Please realize that this is a FAST MOVING industry. So, it is not unreasonable for providers to have to sequence the process. From the best providers, here is the process that we have seen:
- You get exposed to the property immediately after their purchase (raw form):
- You decide you like that location and then go to contract (with only exterior picture);
- Their team hits the ground, gets pictures, finalizes their game plan to rehab, and gets info to you;
- You then close AFTER seeing interior pictures
Now realize that these pictures can still be a little rough….. rehab is typically scheduled shortly after you close. It is paid for by the property provider. So when you look at the pictures, DON’T EXPECT pristine condition…. it won’t be. However, you will be able to get a good idea of layout and current condition before they rehab it for you.
Are You Really Ready For What You Will See?
Having been in this business for quite some time now and having seen my share of preforeclosures, VA Repos, and bank REOs, I am over the “shock factor” when I first got in this business.
When someone goes into foreclosure and gets hounded by creditors and debt collection agencies, many go from being an upstanding citizen to being a wild cave dweller. Believe me that most will not “tidy up” the property on exit. Rather, they are much more likely to do cosmetic damage, steal light fixtures, trash carpet, bang holes in walls, etc. 
For the unprepared, this can be quiet shocking. I know when I walked into my first VA Repo, I recoiled in horror.
Now let me tell you what the pro’s know that most people don’t. Most of that stuff is cheap and fast to fix. We have picked up homes that would disgust most people and with a couple thousands dollars and a “mow and go” clean up on the outside, place looked great. However, if you don’t know what you are doing, you can get in way over your head doing it yourself.
As long as the rehab/cleanup is being handled by the property provider, and they and their crew are experienced, then your job is to look past the cosmetic things and really quickly assess what this property will be like with a little TLC.
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Who Is "REALLY" Making $ In Today's Real Estate Market?
Our 29,689 Members Tend To Agree...
It's Usually Not The GURUs
Have you ever noticed that every "Guru" real estate pitch sounds the same........
They once were poor, but now are rich working only 5 hours per week, and you can be rich too if you just buy their "can't fail system".
Or have you noticed that every property promote has a can't miss proposition, if you just buy TONIGHT.
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