Turning Trash Into CASH!

Transcription

1 Turning Trash Into CASH! A Guide to Creating BIG Checks By Buying, Fixing, and Selling Real Estate! -From the Desk of Jason Loucks Would you like to know how you can use very little money, to leverage houses that once you re done fixing them will be worth far more than what you paid for them? I m talking about rehabs. I ll show you how to do it inexpensively, and how to do it for maximum profit and with minimal risk. I m going to show you step by step how to find them, how to negotiate once you ve found them, and where to get the money to buy them cash. most people forget, is there are a lot of costs involved in selling properties for full retail, and I want you to see what kind of profits you can really expect if you decide to do these types of deals. I m showing you the next step in your real estate career, once you get started in the wholesale business, you get a little time under your belt, and you get a little comfortable; I m going to show you how to start making those big profits that you ve been wholesaling out to other investors. I ll also cover how to fix them quickly and inexpensively, and how to sell them. In fact, selling properties is the hardest part of this business when you don t know what you re doing, and the easiest part of the business when you do know what you re doing. What For most people, for the vast majority of people, (myself included) finding the key to making quick money in real estate really made the difference. Without those wholesaling checks coming in on a regular (at least monthly) basis, I couldn t get and stay in Business. I would have

2 had to cash in my chips and get a job- and I wouldn t wish that fate on anyone! First and foremost; Those wholesaling checks, that $5,000 minimum check coming in, (I m going to try and get you to increase the size of that check with a little training) each and every month (or even week) is really what allowed me to make my real estate investing career skyrocket because I could afford to stay in the business. If you want to know more about the fastest and easiest way to get in and stay in business, check out the Fast CASH Quick Start Workshop. It s the manual for starting your own highly profitable Real Estate Business, without cash, credit, or partners. And once you re in business and you have your bases covered, the next logical step for you to take, once you get used to making Fast Cash finding bargains and passing them on to bargain hunters, is rehabbing them for big pay days. I like to call it Buying and Fixing, because I think the word rehab has some connections to it that a lot of people don t really like. Things like a lot of time and effort, and too much money out of pocket. On top of that, most people can t or don t want to fix anything. Well guess what, you won t be. I absolutely forbid you from fixing any property yourself. Replacing busted up wood, replacing or fixing water damage, painting houses, these are just not things that a successful Real Estate Business Owner does. If you like to do those things, great, get a job doing it, and then in your part time real estate business, make real money by getting someone else to do it for you for a lot less than you re willing to work for. Remember, this is the next stage of your real estate career after you get wholesaling taken care of, because without the foundation of how to find these great deals, without the foundation of how to pick up properties dirt cheap because you know how to negotiate, without knowing what kind of property should you be looking at, and in what areas, none of this makes any difference. How to find properties How do you find these Junkers, how do you find these great low prices on properties that make sense for you to buy them?

3 Here s what I want you to do, take your camera, if you are lucky enough to already have a camera, if not go to the convenience store and get one for about $7. Then drive to an appropriate low priced neighborhood. Here is what I mean by that. You don t want to be where the people are trying to sell you drugs. Not one of those really bad high crime rate areas. You just want to be in the low end neighborhoods, the pickup truck neighborhoods, is what I like to call them, where people who can qualify for loans to buy houses want to live. quickly sell, and the fastest market is houses with a price tag of about $180,000 and less. That being said, you can be in the $80,000 market or you can be in the $180,000 market and make twice as much money for the same amount of work. Which do you think I prefer? There are some very specific reasons why I picked that price range, not the least of which is that the FHA loan limit is about $160,000. Now what that means is borrowers can borrow $160,000 towards a house. Doesn t just make sense that if that s what the majority of borrowers can qualify to buy, that s where you should be rehabbing? Right now in South Florida our median home price is about $240,000. So what I like to look for is properties under that price when they are in perfect condition. In fact, I prefer properties that will retail for $180,000 or less in perfect condition. It makes sense to me and it s made some fat profits for me to. So I want you to look in neighborhoods where the perfect house, the best house, the nice fixed up house, sells for around $160-$180,000. This is how you get started quickly. When you get into rehabs you start to see the tremendous opportunity, and a lot of those opportunities are on much higher dollar houses. But when you re starting out, it s very important that you buy houses that you can quickly fix, and Get in your car and drive to that neighborhood, better yet get someone else to get in their car and drive through that neighborhood for you. What you want to look for is two things. First of all you want to look for any houses what need significant work, and when I say

4 significant, I don t mean that the lawn is a little long, although that could be a good first step. I m talking about a house where the front porch is caving in, or a house where there is serious water damage on the outside of the house. A house with a bad roof or cracked foundation is great! If there is water damage on the outside of a house you know that house needs your help! What you re looking for are true Junkers. You want properties that have some sort of serious reason why no one (except you) is interested in buying this house. Let me tell you-if you ve never been the only person making offers on a vacant, ugly house, it s a whole new ball game, you ve got a seller who for one reason or another has let the property get into disrepair, and if it s also vacant, you ve got a great, great lead on your hands. For us, rotten wood or nasty smells equal Dollar signs, but for that home owner, it s trouble. Maybe the roof is old and ratty, maybe the lawn might be three feet high, maybe the house is boarded up. If so, great! Boarded up houses are a goldmine! Some of the best deals you ll ever find are vacant houses. In fact when I send my bird dogs out, when I send people out to take pictures of neighborhoods for me, any vacant house gets my attention. I ve found that vacant houses almost always have motivated owners, and a lot of those motivated owners have already packed up and left. On top of that, if a house needs significant work, none of your so-called competition can get a bank loan to buy it. You ll be the only game in town. The easiest way for you to buy houses is to find vacant ugly houses, contact the sellers and start making offers. Making this BIG Business The best and easiest way to take your rehabbing business to the next level is to have someone else go out and take the pictures for you. If a person is willing to pack up and leave a house, don t you think there s a great opportunity for a deal there? Hire someone else for $7 or $8 an hour, somebody with a camera, to drive around and take pictures of vacant ugly houses for you and just jot down a few notes about the condition of

5 the house. Teach them to take a picture and a few notes about the houses- the address, and if possible the owner s name. Check the tax records to find the Owner of the property, and call information or check the phone book to get their phone number. Call them and see if they d like to sell their house. Simple, huh? Let s say your bird dog went and found 25 houses for you in one day. That s 25 addresses and phone numbers of 25 sellers with 25 vacant ugly houses. If you have to put out $50 or so to your Bird-Dog, and you only make $25,000 or $50,000 (your minimum profit on a rehab is $25,000 each), is that really so bad? Here s an idea- what if your bird dog did this for you once every week, or even every single day? Just a thought When you re negotiating with the Sellers of Junkers, the number one choice for buying properties is cash offers. Cash offers with no contingencies. Cash offers with none of that goop like and/or assigns, subject to appraisal, or subject to partner s approval. After making your calls, you will get down to about three who have all the pieces of the puzzle, and are ready to sell right away. The rest will come around to your way of thinking if you give them time and stay in touch. So focus on the best three for now and let the others cook a while. I ll cover follow up in an upcoming article. Now you re probably not going to close all three, at least not yet. I haven t taught you how to negotiate, but you will have a great chance at closing one or two. That s a bunch of seminar CRAP! Don t do anything to give your Sellers the idea that you re trying to back out of the deal, or that you need an escape clause. You will kill your deal before it even starts. I want you to make cash offers. Cash on the barrel head, where you walk in and say to your seller, I know the area already, I m comfortable with the value of the house, and I can pay you $X cash for your house

6 You don t have to be to the T exact on your value estimate, because your offer is going to be low enough to leave you a little bit of flexibility. You want to be upfront with them, and if the price on the house doesn t make those little hairs on the back of your neck stand up and get you all excited, don t do the deal. If you re not excited by the price, and even a little embarrassed by how low your offer is, it s not worth it anyway. It s just going to be more headaches. Chasing after deals that aren t really deals is a nail in the coffin for the vast majority of real estate investors. Negotiating with a Motivated Seller is really simple; it s just a simple back and forth. Whatever number they come at you with first, simply take 10 seconds and think about it. Try it out- you ll see that silence is uncomfortable. When the Seller hits you with a price just take 10 seconds and let them think about the price they just gave you, before you even respond. Maybe scratch your head a little bit, look down at the floor, whatever you need to do, but just keep your mouth shut and nine times out of ten that price comes down. It may only come down $2,000 or $3,000 right? That s ten seconds to make $2,000 or $3000. It s probably the most productive thing you ve ever done in your whole life. I can t even imagine the hourly rate on $2,000 or $3000 on ten seconds. Once you ve negotiated a good price, you have to be able to fund your deal, right? And you ve got to be able to conserve as much of your own money as possible, for contingencies or because you don t have any money. Relax! Lots of people do this with none of their own money- it s normal. It doesn t make business sense to put all of your cash into a deal. How many deals could you do with $100,000? Well if you re doing a deal with little or nothing down, you can do a lot of them. But if you do one $100,000 all cash deal, you re done. Until you get that house sold you can t do any more business! So where do we turn? No bank is going to give a loan on a house that s in this type of condition right?

7 You ve got two choices- find a Hard Money Lender, or get your own Private Lenders. Hard Money lenders are Investors who love to lend money on houses that need serious fix up. There are a lot of them. Check your local newspaper under Money to Lend. They only lend 65 or 70% of what the house is going to be worth, once you fix it up. What s important to remember is that they ll lend to the After Repaired Value, NOT what it s worth in it s present condition. It cuts down significantly on the capital you have to put in, and if you re buying this house for 65 or 70 cents on the Dollar, what s your investment? Nothing. You re going to have to pay some pretty steep interest rates, right now I think it s about 12 or 13% interest, plus 3 points (each point is 1% of the loan amount as an upfront cost). But if you re only paying that interest for a couple of months, what difference does it make really? Two months is one sixth of a year, and one sixth of 12% is 2%, so what if you pay 2%? You only had to pay that interest for two payments. Even if you have to pay for the repairs, you re talking about a $5000 investment to make a $30-$40,000 profit. Not bad. But I prefer your second choice. With Private Lenders, it s much, much better. Private Lenders are just regular people who, instead of putting their money in a CD or Mutual Fund and making tiny little returns, choose to lend you their money to buy, fix, and sell houses. There is only one stumbling block to Private Lenders- you have to ask! And you have to ask the right way! But the rewards for your bravery are many fold- 1. As soon as you pay them back, the money is ready for you to use again! 2. The interest rate will be whatever you can afford to pay that will also get them excited. Rates of 6-8% are not unheard of, but I like to offer my lenders at least 10-12%. (The difference is minimal to me, but I just love when my lenders get all excited and beg me to borrow their money! Try getting that from a bank! To make it even better, after they ve made money off of me a few times, they tell everyone they know, and I

8 have tons of people who want to give me their money!) 3. There are no rules! As long as the investment is safe, you can use Private Money however you like. I like to use a Private Money Second Mortgage when I take over existing loans Subject-to. 4. No approvals. As long as the deal is a fit for the investor, you re good to go. You can close deals in Days, not weeks or months. This gives you the unprecedented ability to get great deals. You can borrow against homes in good or bad condition. Getting your own group of Private Lenders is top priority for anyone serious about this business. To learn more about how to get all the money you could ever need in your Real Estate Business without ever going to the bank, make sure you attend the upcoming Rehabbing/Private Lending Workshop. It will put you in business overnight, and set up a lifetime of profitable and low risk investing. Now that you know how to find and buy these houses, you need to know how to price repairs. You can t make an offer until you know that. It must take some college level education, must be some kind of intensive four semester thing you could probably pay someone $20,000 to learn, right? I mean you gotta call your accountant don t you? No. If you are working on a median price range house, just about everything costs the same from house to house. If you pick one really nice bathroom vanity over one that s not so nice, you re talking about a $20 or $40 difference. If $20 or $40 is the difference of you making or not making a $30,000 profit get the good one! Here s how I price repairs. It s going to take me the whole of about 30 seconds to tell you every price on a property. Number one, carpet and tile: Pricing Repairs How much does carpet cost? With pad, installed, $1 a square foot. ($1 a square foot for the carpet) X (how many square feet of carpet is

9 in the house) = how much it s going to cost to replace the carpet. Tile is $3 a square foot, not for the whole square footage of the house, just for the part that s tile. If you want to replace tile that s how much it s going to be, $3 a square foot, it s just that easy. If you need to redo a bathroom, it s $1,500. That s it. I m not going to price out every little tiny thing. If I don t have to replace the tub great, maybe it ll come in at $1,000 but I can t bet on that, so $1,500 it is. That includes a brand new roof installed, new soffets, new fascia, new vents, everything brand new right down to the plywood. It s that simple. $3 per square foot is what it costs. That s a really easy way to get in and figure out what your repairs are going to cost to get the house in top shape. Remember, all you have to be is close. There s no chance you ll ever be right! Don t be Cheap! You need to get the work done as quickly and economically as possible. And I don t mean cheap! Need a new kitchen? $1,500 gets you all new cupboards, new sink, all new everything, except for the tile of course and any appliances. You might have to price those separate. I don t always put appliances in my houses. New kitchen: $1500. One of the things I will warn you is: NEVER DO A CHEAP REHAB JOB! You ll MORE than pay the difference in headaches when you try to sell the house! Need some light fixtures? $50 each. Count them, how many are there, six? $300. For a new roof, use $3 per square foot of the house. If you have a 1,500sf house, it s $4,500 for the roof. Never skimp on the little extras that your buyers are going to notice. I have some great techniques on how to save you money on rehabs that won t compromise the quality of the work. Let me give you an example. Have you ever gone past Home Depot and seen the gallons

10 of paint that just weren t the right color? The oops paint? They have them in every type of hardware store. I get the whole interior of a house worth of paint for $45. And I don t care what color it is as long as it s nice looking and neutral. I have eight jugs of oops paint, and I don t even know what house they re going to go into. The reason for that is whenever I find a color that would be a lovely color for a house, I pick it up for a song- usually $5-$15. So I have these jugs of paint that I bought for $15 (that s 5 gallons of paint for $15). If I pick my color what color am I going to pick? Well gee, I don t know, I haven t bought the carpet yet, I haven t bought the tile yet, I don t know what color it should be and more specifically I don t care! So I take all the neutral colors like the tans, off whites, maybe a little bit of pink, colors that I think would be nice, and I ll figure out how much it s going to take to paint the whole house (usually a whole interior will be about 10 gallons). Since it comes in 5 gallon jugs, it s going to be 5, 10, or 15 gallons. I ll use a little extra to be on the safe side, so I ll take three of those and mix them together. Now if I went and picked a color and I matched it, it would cost me about $100 per 5 gallon bucket. Money saving tricks like these separate the wealthy from the struggling in the Rehab business. In fact I ve rehabbed houses that people told me were going to cost $40,000 for as little as $10,000. It doesn t happen every time, but it s not rare either. Remember, I love structural work, I love having to put a new roof on, because I m the only game in town when it comes to buying that house. In the upcoming Rehabs course, you can learn; how to prep the house, what you have to do to sell quickly, and where we spend the money and where we choose not to. It s really that simple. I ll share with you all the tips and strategies I use to cut my rehab costs in half. Selling Your Deal

11 When you go to sell that house you have to understand that there are a lot of costs involved on your end to sell it. They break down into three categories. First of all, you have to set the price correctly. That s not much of an issue, because you re pricing a house that s in great condition in the perfect neighborhood and your house is now the nicest house on the block because everything is new, everything is painted, and everything is clean. Your price can be a little bit above the other houses in the neighborhood. You can t go crazy with it, but I like to go about 5-10% above whatever the comparable sales are. Whatever price you use, assume 6% of that figure is gone. You ll either sell through a Realtor, or sell it yourself and pay the same amount in headaches from helping your buyer with closing costs, getting low ball offers from every idiot, or just having to cut the price to get some attention on the property. My side of the closing costs are going to cost about 3%. Remember I said 1-3%? Well I don t bet on one, I go right to three. So right off the bat 9% of the value of my house is gone in the efforts to sell it. You should also have 3 or 4 months worth of payments on underlying financing- the Private Money or the Hard Money loan you got to buy the house. So in addition to your rehab costs you ve got 6% off the price for sales costs, 3% to close it and 3 to 6 months worth of loan payments, plus electricity, water, and any other utilities like Swimming Pool Cleaning Service or Lawn maintenance. Make sure you remember to add these costs when getting the money to buy the house. In order to get the most money out of my house and to get my houses sold fast, is learn the ins and outs of all the low and no down payment programs like FHA, VHA, and sub-prime lending to get my house sold fast. I can simply run a classified ad that says; Most often I ll use a Realtor, so there s my 6%. If I don t use a Realtor, there are times when I ll throw in some closing costs for my buyer, or whatever. So I just figure 6% is the cost of selling. 3/2 with Garage $129,942; $0 down XXX-XXXX

12 and if you don t think the phone rings off the hook then you haven t been in this business very long! Then, once you re comfortable with how the business works, turn Trash Into Cash, and create for yourself a Real Estate Fortune! There s a long list of things that can go wrong when Retailing a house for top dollar to an A-Credit buyer. If you increase your Real Estate knowledge to be able to include other ways to sell your Rehabs, you ll expand the size of your business, and the size of your paychecks! Remember that rehabbing is the next step in your real estate career. Get into the business first, before you start rehabbing. I highly recommend finding great deals and passing them onto other investors or rehab buyers- wholesaling. You ll get in the business, you ll be able to find the properties, you ll start making fast cash, and you ll get to maximize your real estate experience because you ll be maximizing your exposure to sellers, to the market and to the Real Estate Industry. For more information on how to get started on your way to creating a Multi-Million dollar Real Estate Business including Wholesaling for Fast Cash Profits, and Turning Trash Into Cash by Rehabbing and Selling, check out or call Home Financing Options at , and ask for the Trash Into CASH Power Weekend. It s a step by step guide to creating fast profits thorough quick turning Real Estate. Or, Call now!