Nu Way Real Estate Training Guidelines

Author: David Neese

What is the primary reason for success most people have that seems to elude unsuccessful people? Goal setting is the primary reason for success. Lack of proper planning is the number one reason for failure. Proper goal setting involves setting a business plan in place for your life. Too many people this doesn’t sound fun or sounds tedious. In practice though, goal setters have more time freedom, more money, and more success in all areas of their lives than those who don’t. Well it’s no different with real estate investing.
Real Estate Investing must be treated as a business and it requires planning that anyone can do. Much like an airplane pilot who goes through a pre-flight checklist, the real estate investor must go through many steps for every real estate deal. You must market to find the deal, do your research on the property to establish a value, have your contracts ready, make your offer, schedule a closing, have title work done, prepare your financing, get property insurance, etc. The reason the doers make money is because so many people aren’t ready to make money. Real estate investing seems like pie in the sky until you put your plan down on paper and it starts to crystallize. The planning process itself should give you renewed energy.
Before I daily setup my plan I didn’t want to get out of bed each day, but now I get up ready to work on knocking out my plan every day. Set your plan up into baby steps that you can review and knock out every single day. Your daily plan must include marketing to get motivated sellers to contact you. Regardless of the deals you have in the works, if your marketing stops, you will go through long dry spells. Even with consistent marketing you will have periods with few leads and periods where you are just swamped with sellers offering you great deals.
Constant daily review of your goals is critical. This is why so many suggest taping your goals on your bathroom mirror so you see it when you wake up and again before you go to bed. You can even buy giant poster sized post it notes that you can write your goals on and stick them on your wall. Reviewing your goals before going to sleep at night causes your brain to dream about your goals and program them into memory. So put your goals down on paper and start putting your real estate investing plan into action.

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Author: David Neese

In his interview with me, John Paul Moses, who is the founder of our Local Memphis Investors Group, was willing to give us some tips about how to start as a real estate investor. After reading ?Rich Dad, Poor Dead” by Robert Kiyosaki he decided to start as a real estate investor. The book says to do this you need some preparation, so he went to the Internet and stocked every bit of information from the articles, news groups and discussion forums. By that time he started a long term friendship with Matt Scott who runs a great website called dealmakerscafe.com. That’s how he learned the meaning of the word ?escrow” and what the difference was between a mortgage and a trust and real estate basic terminology. The Internet might be one learning ground. If you buy a real estate course you have to be very careful. The first course John Paul bought was in his opinion the worst real estate course and never did a deal from knowledge gained in that course. But at least he learned real estate terminology and spending $400 on that course proved to him that he was willing to invest in his education.
John Paul started by making an announcement in a Sunday paper just saying ?real estate investors group starting, for information give me a call” and he put a cell phone number there for people to contact him. At their first meeting they were about 16 people. He stood in front of those people telling them that he never done a real estate deal but he was there to learn and make sure that they had those meetings. They needed a leader and he took the initiative of being their 1st president. Since then the organization grew to over 500 members. Now they are a full fledged non profit real estate investors association with over 150 members in the Memphis area and since 2002 John Paul has been a real estate investing guy. He stepped down as the president and he is now serving as the executive director of the group. Most of the deals he has done in some way involve somebody from the real estate investors association, whether they were a buyer or a seller, money partner or whatever the case might be. Start working with people in your club because they are real people. You need to think who the buyers are if they have real cash or if they have access to the hard money. So, what you have to do is to pick only those motivated persons and build yourself a great network of successful people to work with and the investor groups are great places to find those people.
His advice for somebody who’s looking for the structure of an investment group in another city is that you need to join the national real estate investment association; you need to get small groups of people together and join the National REIA (www.nationalreia.com ). They serve as an umbrella organization that supports the local REIA group. Another benefit of these groups is the availability of hard money lenders or private lenders within the group itself. You need to know what your resources are and just capitalize the costs or hard or private money in that part of the deal. For example they visited the National Group and invited some of their board members to have dinner together. That’s the second thing John Paul recommends for everybody who wants to start a group: model yourself, don’t try to figure out on your own!
Another thing a person should do is get those magnetic We Buy Houses signs for their vehicle. For John Paul they were worth the $87 investment as they brought him $12,000 profit from transactions altogether on wholesale deals. Nobody should be embarrassed of using them on their cars because the one who’s embarrassed is letting money pass by.
John Paul’s piece of advice for the new real estate investor is to not to be afraid to act, do not let yourself become paralyzed by fear and over-analysis. You need to take some time so don’t panic. Give yourself six months and just consume information. A good way is to listen to tele-seminars or find information on the Internet or pick some books from the library.

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Author: David Neese

Every real estate investing deal is an opportunity for both profit and education. Well my first deal was a good combination of both. When I decided I wanted to get involved in real estate investing it took me eight months to decide to do my first deal.

This particular deal came as a result of networking in my local real estate investor group. A local Memphis investor found a deal on a 3 bedroom, 2 bathroom home in a moderate to lower income area where people still like to buy homes. This was a wholesale deal for the other investor and he assigned his contract to me to close on the deal. I was buying the property for $58,000 and $5,000 of that went to the investor for assigning the contract to me and $53,000 went to the seller of the property. I had the cash available so I paid all cash for this deal and for $4,000 in repairs this property needed. The after repaired value of the property was approximately 95k.

I had decided I wanted to do a rent to own or lease option deal with this property. I put a yard sign out with property flyers and had links to a website with inside pictures of the property. At the time I was doing this a more experienced investor told me I should try to retail the property and take the quick cash and go on to the next deal. Well as a new investor I wasn’t sure how long it would take for me to find my next good deal so I wanted to get the maximum out of this property. After about a month(and about $800 in ads) I found a tenant I considered suitable and agreed to take a $2500 option fee plus $875 per month and a sales price of $99,000. If the tenant pays the rent by the first of the month then $100 counts as pay down towards the purchase price. If I had sold the property quickly I may have sold for $89k and paid $5k in selling fees and netted about $20k and would have paid about $7k in taxes on that income. Instead by going after lease option it may take 2-6 years to sell and I should get a $99k or better selling price with much less selling costs and should net about $35k of which about $5k will be taxed as capital gains. The lease option method will net me about double what retailing would have done, however it would have been nice to have access to that cash for doing more deals. I think the $15,000 profit quickly would have been better than $30,000 in a couple of years plus the things I could have done with the $62,000 in cash I put into the property.

The tenant I chose has not once in the first nine months paid the rent on time so he hasn’t earned the $100 monthly rent credit, and has on average had to pay an extra $100 each month in late charges. I don’t expect this tenant will be able to refinance, however his job status and income have been going up while he has been in the property, and the current market value is now $105k. The tenants father is a mortgage broker and if I get to the point of evicting the son the father has told me to let him catch up the sons rent before filing for eviction so that part is really in my favor.

From a humanitarian perspective I like lease option deals as I am really helping someone who could not rent otherwise. I will only do a lease option to someone I believe is improving their credit and job situation and should be able to buy the house within 24 months. With 12 months of on time payments verified by copies of checks many mortgage brokers can get your tenant financed as a refinance type of deal.

In the event the tenant doesn’t buy the property within the first 2 years I can either lease option to another tenant or just try to outright sell the property. Even though the property provides great cash flow I would rather sell it and get a big check and use the cash to go after the next deal.

Some things I learned on this deal that you can use: 1. We had a yard sign with flyers in a flyer tube plus links to view pictures on a website. Before we would show the inside of the property we insisted any prospects should view the pictures online first. We ran ads in the major local newspaper and we got 20 times as many calls from the yard sign than we did from the newspaper. However this street had decent traffic, other properties I have are more secluded. Always use a yard sign and flyer box and have pics online with good descriptions and always highlight the kitchen and bathrooms. 2. If I had the deal to do all over again I would have retailed the house and tried to sell it quickly. I could have rolled this deals cash into more and more deals and made much more money. My opinion now is that every investor who isn’t already financially well off needs to go for the quick income first and progress to long term deals second. 3. I probably should have waited a little longer for a stronger tenant. 4. You can not do this type of lease option transaction in Texas now due to some strange laws that got passed in 2005. However I live in Tennessee and we don’t have any anti-investor state wide laws yet. We do have a bad local one related to trash left over from evictions but that is minor in comparison.

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