Death Plunge!

I met up with my twin brother and his wife at a water park in Central Texas last weekend. All was going well until I ALMOST DIED! Check out the video below. I’m on the left. Trent’s on the right. We weren’t even phased by our near-death experience … Yeah Right! We were screaming like little girls!

Seriously, I don’t recommend that you do this. Even though it’s supposed to be safe, I don’t think it really is. There was only 1 cable on each side holding us up. And minimum wage employees strapped us in. Next time, I need about 20 cables on each side and 5 engineers securing me in the harness. But maybe I’m just overly concerned with living!

But something good did come out of this. When I got back into town, I decided to celebrate life. And what better way to celebrate than by offering the Vault at a 36% discount. I call it the Internet Special. Read more and order before it’s too late at www.myhousedeals.com/thevault.

See you there!

Doug Smith
President
myHouseDeals.com

How to Analyze and Buy a Property to Rehab, Part II

(If you haven’t read Part I yet, please scroll down and read it first.)

During this time that you have the property under contract and you haven’t actually closed on it yet, have it inspected by a licensed inspector. And then you can also have your own contractor look at it in case he didn’t look at it when you first inspected the property.  This is also a good time to send out your foundation company. They will often give free estimates. And they can catch things even your licensed inspector cannot catch because they specialize in finding problems with the foundation.

So if everything looks good with the inspection and the house repairs are still in line with what you initially expected and you can make a good profit on the deal, tell the seller to move out … if it’s a motivated seller. If it’s a wholesale deal, tell the wholesaler to tell the seller to move out.

Then get your financing in place because you’ve already committed to buying. Get your private loan or your hard money loan. You’ll need to fax to the hard money lender the application they require, which they normally process in a day or two and often has nothing to do with whether or not your credit is good. And also fax your hard money lender your sales agreement so the hard money lender can analyze the deal. Then the hard money lender will go look at this property and they’ll make sure it’s a good deal. And if it is, they’ll grant you the loan and make sure your money is there at closing waiting for you on the day that you plan to purchase the property.

If they find out that you’re over paying for the property, they won’t say, “Oh we can’t lend.”  Nine times out of ten, they’ll still lend on the property. But it will be less money than you expected, which will require you to come out of pocket a little.

Now another thing the hard money lender will do is get their documentation to the title company. So you don’t have to worry about that. And then the title company is going to organize all these documents, all the legal documents that people often get so scared about. The title company actually takes care of most of that or all of that depending on how you look at it.  Go ahead and close on the property and the hard money lender will wire the money to the transaction the day of or the day after closing.

But like I mentioned earlier, if you’re buying at a low enough percentage, then most of the time you will not need to bring money to closing. And if you do, it may be $1,000 to $3,000. And if you don’t even have that much money, you should be looking at wholesaling in the first place and not rehabbing, which is a separate topic. You can find deals to wholesale in the Motivated Sellers section of myHouseDeals.com, assuming you’re a member.

After you close on the property. The seller should give you the keys to the property either the day of closing or the day after or often times the seller will tell you, “I left the keys under the doormat,” which is fine.

Well, that covers the basic steps for buying a property to rehab! Now you’re ready to buy your first or next property from myHouseDeals.com. Get a 30-day free trial to access the properties by goinig to www.myhousedeals.com/freetrial now.

Happy (and profitable) investing!

Doug Smith
President
myHouseDeals.com

Rocky, Rocky, Rocky!

Hello again folks. We’ll have to pick up on the buy/fix/sell steps next week because I just can’t help but share pictures of my new addition with you. Everyone please say hello to Rocky! (You can see his pictures below.) Rocky is a tiny french bulldog that I bought a couple of weeks ago from a breeder in Utah. His name is Rocky because of his black eye and his “get what he wants” attitude.

Rocky has many hobbies, but he mostly enjoys peeing in the hallway, pooping in the kitchen, and chewing on my shoes. His other favorite activities include eating poisonous plants and black mushrooms when I’m not looking. Lovely.

Rocky also enjoys putting his flat nose into ant beds to see how many of them can crawl onto his face before I rescue him. Putting frogs into his mouth is also entertaining. He also has fun playing with, no scratch that, CHASING other dogs, especially the ones that are about 10 times his size. (He’s a very confident dog.)

Some of his recent accomplishments include learning how to sit. It only took 15 minutes of training. I’m such a proud daddy! He most looks forward to doggie school, which starts on Tuesday. Once he understands the basics from doggie school, he plans to become a member of myHouseDeals.com. He’ll start with wholesaling and work his way up to rehabbing.

So what does this mean for you? You better get your 30-day free trial to myhousedeals.com before Rocky starts gobbling up all of the deals! Go to www.myhousedeals.com/freetrial to start today.

Happy (and profitable) investing!

Doug and Rocky

P.S. Click on any of the images below to view larger versions of these pictures…

How to Analyze and Buy a Property to Rehab, Part I

The other day, a new investor asked me, “What are the steps to buying a property to rehab?” I immediately let her know that there’s no simple answer to this. This is a huge subject that entire boot camps have been devoted to. But I decided to give a stab at answering her question. So today I’m going to give you a skeleton outline of how this whole thing works. I didn’t have time to type it out, so I spoke my answer into a voice recorder and had it transcribed. So if this seems sloppy, just understand that that’s just how I talk!  From the transcription…

If you plan to buy a fixer upper, one option you have is spending a lot of money on marketing trying to get sellers to call you, whether you’re advertising on the Internet or you’re sending postcards to, let’s say, out of state owners.  Or the simple way that works well for most investors is logging onto myhousedeals.com and pursuing the wholesale deals and motivated seller leads in the member’s area. You can call on these properties to buy them. You can get a free trial at www.myhousedeals.com/freetrial.

If you plan to fix and resell these properties there’s one set of steps, and if you plan to wholesale these properties there’s a different set of steps. Today, I’ll just cover rehabbing. When you see a property you like on the website, you’ll want to pull comps either on your own or through a Realtor to determine what the after repair value really is. Don’t just go by whatever the seller says it is.

Now, on to repairs. If you’re looking at a deal on myhousedeals.com, pay attention to the the pictures. If the house is falling down and they say it needs $3,000 in repairs, then you can save a lot of time by marking that property off your list and moving on to the next. Pictures often say a thousand words.

You also want to look at their repair comments to see what they’ve indicated the repairs really are. If you’re still interested in the property, you’ll want to call that investor. Let’s assume it’s a wholesale deal. Schedule to meet them at the property so you can look at it. Or sometimes they’ll give you a lock box code for you to go at your own convenience and look at a property.

Now when you’re at the property, you’re trying to assess the actual cost of repairs. And you’re also looking at the neighborhood. But you’ll spend most of your time on the cost of repairs. And if you’re inexperienced at estimating repairs, have a contractor meet you there to help you do that.

After you estimate these repairs, go back to your office or home and calculate an offer price. Your offer price should be based on a formula. The formula goes like this. Take 70% times the after repair value based on your comps minus the cost of repairs. So let’s say, you think the after repaired value is $100,000. Take 70% of that. So you’re down to $70,000. And if you think the cost of repairs is $10,000, subtract $10,000 from the $70,000. So you’re down to $60,000 as your maximum offer price.

If you’re planning to hold this property as a rental, then it’s much more acceptable for you to make an offer more in the range of 80% of the after repair value minus the cost of repairs. So long as it still cash flows.

You want to make this offer to the seller either verbally or in writing. It’s up to you. I’ve always made offers in writing. Make a lot of offers and get a percentage of those accepted. It’s really a numbers game. Even if they reject your offer up front, a lot of times they’ll even come back to you later and accept your offer.

Once you’ve come to an agreement with the seller, either you or the wholesaler will complete a full sales agreement. You can often get these from your state. They will vary from state to state, although there are some generic sales agreements that are available. And a lot of those are available in books and tapes that you see that different gurus sell.

Once you find a sales agreement, here are 2 or 3 things to make sure to put in there. Number one is to give yourself a 10-day option period so that you can further inspect the property during that time to make sure that you really want to buy this thing. And during that period, not only will you further inspect it, but your inspector will. If you’re new especially, pay an inspector a couple of hundred dollars to go look at it for you because he can save you thousands if he or she finds a problem that you overlooked.

With motivated sellers you can put down as little as $10 earnest money. Often wholesalers will want more because they’re a little more savvy and they want to make sure you close on the deal. But it’s very common for motivated sellers to accept $10. And in the special provisions, put that your purchase is subject to inspection so that if you have to back out of this deal, you can indicate that it’s because you found additional items in the inspection that you didn’t initially see.

And as a buyer, put your name or your company and/or assigns.  That way, you can assign your contract to another buyer later if need be. And for a closing date, it’s typically best to put a date anywhere from 20 to 30 days out unless the wholesaler specifies the closing needs to take place sooner.

At this point, you actually have this contract and both parties should sign. Make sure that both you and the seller have a copy of the contract. And then fax a copy of the contract to the title company or attorney’s office, depending on which state you’re in.  Make the earnest money check out to the title company. And deliver it to the title company either the day of or the day after you execute the contract by having both parties sign.

Now the title company will open title. This takes about one week. By opening title I mean they need to check with the court house and make sure that the seller really does have the right to sell and that there are no other liens or judgments on the property that were unexpected…

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Well that’s all for now. We’ll pick up on Part II of this topic next week. In the meantime, get a 30-day free trial to myHouseDeals.com at www.myhousedeals.com/freetrial, and get on your way to rehabbing your first or next property.

Happy (and profitable) investing!
Doug Smith
President
myHouseDeals.com