Update on Last Post
I haven’t called the homeowner back from Asbury Park because I think he wants more than what the house is worth. I’ll probably do a follow-up call with him in another week or so.  He could be more motivated at that time.

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On another note, Tuesday night, I decided to get more mailers ready to send out. I still have the labels and stamps from the information I gathered last month.  The homeowners I’m marketing to now are pre-foreclosures.  Pre-foreclosures are simply homeowners who cannot make their monthly payments so the bank is trying to foreclose on them.  My list comes from a web site I have a subscription to but there are people who go to the court house and gather that information for a fee. A fellow investor friend of mine get her pre-foreclosure lists that way. My second favorite type of list I have and like to market to are absentee owners. Absentee owners are simply homeowners who do not live in a house they own.  I have labels and stamps ready for that list too.  Absentee owners have been my most successful type of list.  I get that information from the NJ County Tax Records.  That information is free for everyone, including real estate investor (Kudos for us).  And just so you know, although most of my investing is in NJ, I do invest out of state and what I do in NJ can be done anywhere.  You just need to do a little online research to find what you need in your location of interest.

What do my post cards look like?
My post cards are oversize medium/bright yellow cards with red & black text.  The portion of the postcard that is red has a larger font headline that reads something like, “Discover How To Have A Well-Qualified Buyer Who Can Buy Your Home And Close Within 10 Days So Your Next Mortgage Payment Will Be Your Last”.  I like this post card because the size and color makes it stand out and it has a headline that grabs your attention.  The only negative is that oversized postcards are regular rate for sending letters via US Postal Service.   The normal small post cards have a cheaper rate so it’s less of a marketing expense.

As I told you in my previous blog, I bought land from one owner who only had one deed for the two lots. Well I got word yesterday that the deeds were separated and I now have two deeds for two LOTS. Every little step is progress so I’m happy that things are moving forward. The reason two deeds are beneficial is because it is like having 2 different properties. I can easily sell one if I wanted to.

On a second note, I got a call from a home owner in Asbury Park that is interested in selling his house. During the call screening process I like to get as much information as possible. That information includes, the description of the house (how many beds/baths and so forth), is the mortgage current, how much does the owner think the house is worth, how much the owner owes, and the condition of the house. What I notice time and time again is that home owners are just not realistic about the condition of the house. In this particular case, the home owner stated that the house was in good condition, it needed little things here and there but for the most part it’s a great sturdy home. I repeatedly asked if the house needs work and he continued to say it was in good shape besides little things that could be done. I also asked if he was close to the beach. The home owner stated that you can see the beach from his house. Well, I went to the house last night and it was not as the home owner stated. Every room in the house needs work. The kitchen and bath need to be updated completely. The ceiling in the house need new sheetrock. The house is older so it has those square ceilings, not sure of the material but it should be replaced. The basement has water damage…Because it rained all day yesterday, when I got there that evening, there was water in the basement. Also, when you are outside, you do not see the beach. The guy told me he owed 140K on the house but he got the house appraised for 300K around 6 months ago. I asked for the appraisal but he said he had to look for it. I’m thinking it’s not worth the 140K. It is unfortunate but reality will have to sober a person. I feel bad for the home owner because he is behind on payments and you can tell that he is eager to be out of a bad situation. I believe this is indeed a short sale situation.

I’m back with my most recent real estate adventure to report. I’m happy to say that as of yesterday, I closed on two LOTS to build duplexes on. At least that is my goal. I have a silent partner on this deal and I’ve been working at this for over 6 months. I also have a reputable and experienced builder that will show me the ropes and assist me along the way. It’s a relief to finally close and get this project moving.

As of now there are 2 separate LOTS which I want to get two separate deeds for. What we plan to do is split one of the LOTS and build 3 duplexes…Selling each unit separately. I’m very excited about this project and pray everything goes well. Of course, time is always a factor so it’s time to get the show on the road.

My first step is to work toward securing the funding to build the units. Right now the mortgage market is at one of its lowest points. Underwriters are scrutinizing everything down to the last penny. Banks are getting very strict with lending money to builders because of the higher risk involved in getting the units sold. I am very optimistic about being a builder now because the profit margin is there even if we needed to set the prices below market. In any case, in order to get the bank to approve any loan, I will need to get my plans approved by the city. There are a couple steps that are needed to make that happen. I’ll give you updates and let you know the steps I’ve taken along the way.

God Bless & Happy Investing!

PS. Pray that all goes well as it is my number one priority to have God’s Grace over any project I do.

Although rehabbing and eventually building is my biggest passion in real estate, Short Sales are where it’s at in this market. As the real estate market changes so is the need to change your investment strategy. I wasn’t a big fan of doing short sales because of all the paper work and bank interaction that is needed but the market is so full of pre-foreclosures and home owners who need to get out of their house with little to no equity that the short sale is the only option. Without short sales, home owners can’t sell their homes; Without short sales, it’s usually not a good investment for you. So, short sales here I come…..

At this point in my investing career, I have unloaded all my rehabs. In this slow market, it took almost a year to sell the last rehab. I completed that rehab just in time for the spring market and got a lot of inquiries when it first hit the market. Unfortunately, it was at a time when mortgage companies just started to buckle down on who they will approve for a loan. My original asking price on the last rehab was 330K. I got offers in at 320K and 310K. Both buyers did not work out/couldn’t get a loan. After going dead mid summer, I needed to make a change to get rid of the house, so I knocked almost 50K off of the price. The new asking price was 275K. The following weekend after making that decision, two offers came in on the house, by the grace of God. We picked the strongest buyer and sold the property for that price. Fortunately for me, this rehab allowed me to reduce the price by that much and still make money.

Here are exterior before and after shots for those who are interested. My after picture wasn’t that great due to my digital camcorder.

BEFORE

AFTER

I’m glad that house is complete and I can move forward. It’s better to adjust with the conditions of the market than to hold on to a house that will reduce your profit with holding cost and/or give you headaches. Now I’m working on purchasing land to build houses on and I’m also working on a short sale.

To pick things up a little, I have to start my marketing campaign again. I like to focus on either absentee owners or pre-foreclosure. Unfortunately, there are so many individuals that are going through that situation. It’s never ideal to see so many people suffer through the economy….Hopefully I will be able to help people get out of a bad situation and also be able to successfully invest in real estate. Happy Investing!

Hi All! I realize that it’s been a while since I’ve posted anything but I’ve also realized that I don’t have the time to tell about my past deals. The only way I can stay updated with this site is to talk about current or most recent things. So, for those who were looking forward to seeing pictures of the inside of “Flip That House - Part I”, I must apologize for not posting them. If I get requests to post, than perhaps I will but if not, I’ll just talk about current conditions.

Just to keep you informed, since I’ve been away from the Blog, upon my return, I found out that google bought blogger.com. Because of that situation, the whole login process is different. I couldn’t find my old log in account username and the “Help” portion of the site really didn’t help much. Needless to say, I had to repost all my entries on a new account. It was annoying at first but since I didn’t have much, it turned out to be quicker than trying to figure out my login information. So when you see everything posted with the same date, you’ll know why.

So in today’s real estate market, can we say “Foreclosure, Foreclosure, Foreclosure”. The market has taken a really big dip for the worst. Mortgage companies are at their wits end, sellers are in a panic and buyers are having a party!! Is this a great time for real estate investors?? In my opinion, you bet it is! You just have to be smart, look for deals that make sense and plan effectively and efficiently.

My first true Rehab was a shipwreck (literally). You will see the before and after pictures below. I like to flip houses that are really run down. There is more room for negotiations, but of course, more rehab work to do. I found this particular house through an absentee owner’s (real estate owners) mailing list I get through the tax records. I can explain more about marketing at a later date. The homeowner responded to my letter and that is when I discovered she was also in foreclosure. This was a prime win/win situation. The homeowner saved their credit and escaped foreclosure and I got a rehab project. The house was a 12 bedroom 5 bath house. The previous owner turned the property into a rooming house. A rooming house is a house with furnished rooms to rent; with common areas such as the kitchen, bathrooms and possibly a sitting room to share. Some rooms have their own bath. The previous homeowner turned the back porch into a bathroom because there was not a bathroom on the first level of the house. They also added a bathroom in the basement which had 3 bedrooms and a kitchen for rent. The home was originally built as a large single family property and that is what I decided to restore the home back to. After finalizing/hiring my contractors, my first order of business was to start from the top-out to the inside-up. What that meant was that I needed to repair/secure the roof so I could stop the water from dripping into the house to prevent continual water damage. I start my rehabs from the outside in, unless I’m able to work on both the inside and outside at the same time. That depends on my budget and contractors hired. The roof is the first item that should be fixed. But, I also like to restore the outside first (if needed) because I want to generate spectators quickly. People will notice the restoration of an “ugly” house and began to talk about it in the neighborhood, which is great for the flipper because your ultimate goal is to sell the property. Neighborhoods are especially happy to see a transformation. You will find that they are not shy about thanking you during the process. The outside of the home had the old style shingles on the top half and stucco on the bottom half. There was a tree in the front that was so large that it made it hard to see the front view of the house. I put vinyl siding on the top and repaired and painted the stucco on the bottom. I also cut the branches at the bottom half of the tree to make the front of the house more visible. See the transformation below.

BEFORE (click on photos to view a larger size)

AFTER (click on photos to view a larger size)

By the way, did you catch my cameo in the picture? Yes, that’s me (Jersey Girl) in the front door of the before picture!

I’ve been to a few real estate investment clubs. One meeting in particular always comes to mind.  The room was pretty full but nice because I like to blend in with the crowd. Outside the meeting room was what they called vendor tables. Vendors are individuals or companies who sell useful products to investors (i.e. mortgage brokers, contractors, inspectors, etc.). You have to have a vendor membership in order to market your product at the club. The speaker that day was Bryan Ellis. His talk was about a certain kind of motivated sellers that I never heard of, called expired listings. Expired listings are people who have tried to sell their house through a realtor on the multiple listing systems (MLS) for a period of time (usually 6 months). If the house does not sell within the designated time frame, it will be marked as expired. The only way to get this information is through a realtor because they are the only ones who can get access. Bryan also spoke about “Subject-To” financing. This is when you purchase a house subject to the existing financing. Essentially, you just take over the current mortgage payments and can apply for conventional financing for the home at a future date (depending on your agreement). All of this was very fascinating for me to hear because real estate investing was more involved than I thought. There are so many creative ways you can invest and what I knew was the very tip of the iceberg. It was great and that meeting was exactly what I needed to get started in real estate investing. Bryan Ellis was a good sales person and that’s what you have to be as a real estate investor. You need to know how to talk to people and how to be convincing. Needless to say, that day he was selling three packages and I bought them all (Hard Core Marketing, Hard Core Lease Options, and Hard Core Subject-To Financing). But I promised myself that I would not buy another package or another speaker’s material until I put the one I bought into action and made a real estate deal happen. I kept that promise! I also joined the club that day and continued to go to meetings.

I think real estate investment clubs are great for beginners. They definitely give you what you need to get started, especially if you do not have a clue about real estate. They are also good for networking with other investors. But, I also think investment clubs can be a place you get stuck and waste your time and money. For instance, I met a young lady at the club who also bought Bryan Ellis’s packages. The next meeting, she bought another national speaker’s package and through conversing with her, I found out she attended a $2000 real estate boot camp with another national speaker about a year prior. When I asked if she had bought real estate or invested in a deal, she said no. She also proceeded to tell me, she did not like Bryan Ellis package because she found that it was not helpful. My thought about this particular lady is that it is not the package, it’s HER. People can tell you the “secrets” to making millions but nothing will ever happen unless you follow the instructions and that is the bottom line. Most investment clubs have speakers who show up all the time to sell something to “want-to-be” investors. All of those speakers and club leaders know that most will not do anything with the information except waste their money. But they do not care. They are in it to make money and they convince you that their package is the best way to go. Stay focus and do not buy everything because it sounds good. At this point in my investment adventures, I do not attend many meetings. I get tired of them trying to sell me stuff. But again, I’m not saying these clubs are all bad, I’m just saying you really need to measure your own motivation and talents pertaining to real estate investing. Do not waste your money, time, and energy on something if you will not follow through with it. Before you know it, time will fly by and you would have spent thousands of dollars and have nothing to show for it. So don’t just talk real estate investing, do real estate investing!

If you want to find a club near you, click here

After we settled into the house, life’s problems got in our way. My husband and I were not getting along and seemingly growing apart. Unfortunately, real estate was put on hold as life began to happen. Instead of getting into a drawn out story on how my marriage fell apart, let’s just say we separated. He moved out of the house in November of 2004. I continued to live in the property for awhile. Once the decision was made to get a divorce, we decided to sell the house. Throughout that year, I really didn’t think about real estate investing. It almost became a forgotten dream.

We decided to put a “for sale by owner” sign out to see what would happen. This was in the middle of the marketing boom so we figured it would sell quickly. A couple of Keller Williams Realty agents stopped by to tell me about a program they have for owners who want to sell their home without agents. After thinking about it for a few days and discussing with my soon to be ex, we decided to work with them. The program seemed beneficial and our main goal was to get rid of the property. Also we were not generating a lot of leads by having the sign out on the yard for a month or so. The program the Keller Williams agents presented to me would help you sell your home without paying the commission. They said it was a program they offered to generate company awareness in the community and to get referrals. Agents outside Keller Williams could not bring a buyer and the house did not go on the MLS. Under this no commission program, they advertised the house in the real estate magazines, flyers and throughout their Keller Williams offices. They also put a sign in the yard and held open houses.

In my opinion, they used this program to get connected with you so they can convince you to do the full listing. I’m not mad at their tactics, as long as the net to homeowners is what they want or need from the sale of the home. In any case, that is exactly what happened in our situation. They increased the sales price a little and lowered the commission from the usual 6% and “Wa-La”, we have a full listing where both parties are happy; The seller and the agent. They already had buyers lined up from other agents and the only way they would connect us with the agents’ buyers was to do the full listing. The house sold approximately 30 days after agreeing to list it on the MLS. We sold the house for $250,000.

Based on my previous post, The Fix Up, here is an analysis of the first house I bought.

Purchase Price: $180,000
Repairs: $10,150
Realtor’s Commission (4%): $10,000

Sold Price: $250,000
Net Profit: $49,850

Not bad for the first home I ever bought.

Note: When calculating expenses on rehabs, you should always include the mortgage payments and any holding costs (utilities, sewer, water expense, etc). But, since we actually lived in the home, it was our living expense and not credited to the rehab.

After the year of silence in real estate investing and going through a divorce, I decided to get active again. I needed a distraction from everything that was going on so why not get involved with things I enjoy doing. I had already started reading my bible more often which helped ground me in my belief; I took swimming lessons, because I didn’t know how to swim; and I took tennis lessons to have fun. The local adult school sent out booklets of the classes they offered for that semester which included the swimming and tennis. The timing was perfect for me to receive that booklet.

I randomly had late nights where I didn’t get much sleep but one night in particular, there was an infomercial on about Real Estate Investing. Although I had not thought about investing in a year, I felt compelled to stay tuned to all that was being said. This was an infomercial by Russ Whitney, a real estate guru who made millions in real estate investing. They were giving a free seminar 45 minutes away from me, 2 weeks from the day I saw the infomercial. I quickly called in and registered because they said it would fill up quickly. I was not familiar with real estate seminars so I didn’t know what to expect. All I knew was that they were giving this information out for free.

The day arrived to go to the free seminar. It was held at a hotel in North Jersey. When I first got there, the line was pretty long and as we entered the room, it was filling up quickly. I was very eager to hear what they had to say but unfortunately it was not a step by step lesson on how to get started in real estate investing. They pretty much explain that one of the best ways to invest in real estate is with OPM, which stands for “Other People’s Money”. It was the first time I heard that acronym/expression used but they did not explained how you get OPM. They also talked about passive income with rental units and having section 8 tenants live in the property. If you are not familiar with section 8, read below:

Section 8
The Section 8 program is designed to increase the housing choices available to very low-income households by making privately-owned rental housing affordable to them. It provides rent subsidies, either rental certificates or vouchers, on behalf of eligible tenants. These subsidies usually equal the difference between 30 percent of the household’s adjusted income and the HUD-approved fair market rent (for certificates) or the PHA-approved payment standard (for vouchers).

What this means for landlords is that majority of the rent will be paid by the Section 8 program and not the tenant. It also means that your rent will be paid on time each month. That was the major advantage explained at the seminar. To get more information about the section 8 program, click here.

The last 30 minutes of the seminar was spent talking about the boot camp and courses they offer for real estate investors. The boot camps lasted on average between 3-7 days and the cost was roughly $2000-$6000. They were selling different learning material at the back of the room as well as books and pamphlets. They also said they would show people who bought their material, how to write it off on their tax return. It was very tempting because of their strong sales pitch to charge something on my credit card but I did not. I suddenly saw why the seminar was free. It was a way to get as many people there as possible to sell their information/products. The little information I received for free was enough to get me wondering about my next step. When I walked outside to my car, there was a flyer on my windshield for a real estate investment club. The flyer said I would get in free if I presented it. I instantly found my next plan of action, go to the club!