Naked Lady Real Estate, The Bare Truth About Real Estate Investing

Is the tide is turning a bit?

For me it seems that many sellers are still in denial or they have just given up on wanting to be helped.  Case in point:  I had a seller that I was working with about 6 months ago.  He had a property located in Inglewood and was behind 3 months in payments.  At the time there was about $150-180k in "equity" (we all know that it's only equity if you actually get cashed out of the mofo.)  At that time, he wanted $60K cash and he would walk away.

Not a bad deal because I was going to stick in the Land Trust and hold if for many years.  The deal looked really good on paper - as many of them do (!).  He had an adjustable - but he would refinance it for me-check!  He was willing to hold the loan for 7-10 years-check!  I was going to give him the $60k once he refinanced-check!  Seems like a good deal if it all worked out.  But (there's always a but) he would not sign the Proposal Agreement!  I let him know that I would not move forward in the deal unless he signed, he simply refused to sign it  "right now".  He wanted to wait until I found my buyer/tenant to move into the house and then "we would do all the paperwork at once".   Of course the deal fell by the wayside and I moved on.  No ticky - No washy.

Now... 6 months later I just received an email from this fine fella and he is offering me the same deal - but now he only needs 30K to walk away for good.  It seems he has managed to hold on this long.  Wow.  So I guess he is one of the "lucky ones".  That is; he is still in his house and it hasn't gone back to the bank yet. 

We'll see what happens here. There are more deals that are not happening rather than happening and I am developing a "we'll see" attitude for now. Is it me or are there not enough deals popping here in L.A?  The only successful deals I am hearing about are Out of Area/State.  What about you?

I don't know about you...

Is it just me or is anyone else getting tired of reading and hearing about "the bad housing  market" in the media?  I'm starting to feel like I cannot be bothered to read one more story about it.  We all know it's here.  We all know it's going to get worse.  We all know it's not going away anytime soon.  The story is more or less the same every day. 

I have the kind of personality that once I have heard the same story for months and months I get sick of it and am ready to move on.  It's like when my best friend talked about wanting to breakup with her boyfriend - for over a year!  It's the same story over and over with not much new information.   Listen - the man is not going to change, so just shut the hell up and either leave him or make the best of the situation and accept the good things that he has to offer.   

I'm starting to feel the same way about the endless news stories about "the market".  We investors have known this market was coming for over two years now, so we have been talking about it for a long time already.  Now the media is starting to catch up and they think they have "breaking news" doesn't it? 

The traditional media always seems to be slow on the uptake and they're boring me. 

Let's talk about solutions.  I doubt we will see any kind of real life solutions for a long time if we keep going the "traditional" route.  But we investors can offer real solutions can't we?  What is your strategy for the next couple of years?  I know mine. 

1.  Buy at 65% of what I'm willing to sell for minus repairs and then retail the houses. (REO's) 

2.  Buy "subject to" using NARS Land Trust.  Hold for 7-10 years.  Help sellers out of homes they cannot sell, help buyers into homes they cannot get loans for.

Firstly, I believe that we need to quickly and loudly educate the public that there are  ways for many of them to get help with homes in foreclosure before it goes back to the bank.

(!)And not the old school way of sending them a letter telling them why I'm better then the 100's of other investors letters they have received. 

How about a educational seminar that will teach sellers how to sell their homes the non-traditional way and buyers how to buy the same way! Let me know if you would like to join in!

 

Happy Easter Everyone!

Eat lots of chocolate!      

Business credit is not as easy as it looks?

We have been trying to establish, raise, beg & borrow business credit for a month now.  Or rather - Business Lines of Credit.  It seems if you haven't had your LLC for 2 years - you can pretty much throw most of your options down the toilet.  Wow... it's not easy at all!

My friend Rikki has been turning over every stone and we have come up with about 2-3 options that will give us unsecured BLOC and boy - it's expensive.   It's gonna cost us 12% on the back end!  Wowee kazoweee.   It's might as well be hard money!  I wish it was, it would have been a lot easier to get by now.  We will be using it to build a Real Estate Business which will also include using it for the down payments that are needed for buying REO's with hard money!  We have found a source, but it's going to take 45-60 days minimum to get!  Wow!  Lesson to everyone of us who has an LLC.  Start establishing your business credit right away.  I think these BLOC will come in real handy for down payments.  I am going to hire a company to start establishing my business credit right away for sure!  I think I found a good one, and will let you know. Forgetta 'bout all this nonsense!

Additionally, I was talking to several other investors about the idea of being able to use a BLOC for our down payments. It seems that many of my investor friends have deals right now in L.A. but can't jump on them because they lack the 10% down and the 6-8 months of reserves that most hard money lenders are requiring right now.

Sooooo....I came up with the thought that maybe, just maybe, I should start a networking group that brings people with private money together to network with those who need it! I know that there are a lot of investors with money who would like to partner with those who need it.  Hhhhhmmm.

What do you think? Me likey...

Do folks really want to be helped out?

We had a great meeting training meeting this week for the "pacrats" land trust group.  Wow what a great turn out!  Over 50 people!  We were so fortunate, because not only did we get Joe Cain from NARS to come and train us on the Trust documentation, we also had Pete Mendenhall, land trust educator extraordinary! 

Actually, I talked Pete into coming with me because it was his birthday and I wanted all of us to take him out for a couple of drinkie poos afterward! 

I realized something very interesting that night.  I have been talking to Pete about this on our radio show "The Naked Investors", but I really saw it true for other investors as well.  Putting properties into a Land Trust is not a new concept by any means.  But what seems to be new is that we have a whole new market of sellers and buyers out there.  The last time the industry had this many problems getting loans or selling homes there was a different generation of people!  So now - even though investors may understand the concept of "owner financing" type of deals, the main stream public doesn't quite get it yet. 

So as these homeowners in trouble call us for help, we try to explain "leaving the loan in your name for a couple of years and put you home in a Land Trust concept", and they have no clue what we are talking about.  As a matter of fact - they get sketchy about it. Also with Buyers.  They don't quite get what a great deal it is for them to not have to qualify for traditional financing, but rather purchase one of our properties through a Land Trust.   

It seems that not only educating ourselves as investors is important, but also educating the sellers and buyers about this incredible strategy on how to sell & buy homes - The Non Traditional Way!  Creative financing is all we are talking about here. Of course - investors - we are not trying to teach them how to fly a plane here. We are just the travel agents showing them the different flights & hotels that are available for their trip.  As my grand pappy used to say: I don't want to know where the water comes from, I just want to turn on the facet and have water come out.  Actually my grand pappy never used to say that - I always say it.  But it sounds better coming from someone older and wiser doesn't it?

Anyway - it seems that Buyers & Sellers workshops might be in order ey? .... stay tuned!

Pictures and video from our fun filled Pacrat Meeting!

"Little Petey" as he is called on our radio show - goes over questions with Lisa Cooley a member of Pacrats.

 

Happy 22nd anniversay of your 21st B-day Little Petey!

Several drinks later...

This is what's wrong with this industry!

What's up with all the greed with some of these speakers?  I tell you what - I've just about heard enough from (some) speakers bloviate how they scan ebay all the time to make sure someone is not selling their product there.  What the heck is up with this anyway? 

First of all - I thought we lived in a free country?  Once you buy a product and no longer want it aren't we free to sell it to whomever we want?  What's next they start trolling the yard sales to make sure that Suzie Smith isn't selling your product too?

Lack consciousness begets Lack.   Don't they know this?  Why in sweet tarnations should they care if 10 out of every 100 people ends up selling their product at a garage sale or on ebay?  Seriously - do they need the money that badly?  Aren't they all supposed to be stinkin' rich from doing real estate deals anyway?  Jeez.  Also think about how stupid this is.  By their product being on Ebay, wouldn't it seem that this is a way their name might be getting out to people that don't know them yet? Hello - is this thing on?

It's all just so silly and petty.  I had a conversation with a lovely couple today who bought a famous speakers product from a friend who didn't want it anymore.  They liked what they heard in the product and decided to go see this speaker and person and ended up buying his $4000 bootcamp. And because they already had his "home study" course they bought from their friend, they got the bootcamp for $3000. The speaker then said they couldn't get that discounted price because they had no record of buying the product directly from the speaker himself!  Can you believe this?   I nipped that in the bud right away!

I ask you... what's wrong with this situation?  I know of many speakers who are proud of the fact that they have this policy of not "allowing" people to resell their product.  I don't care for those folks and I tell you what - they will never be promoted by me.  Ever. I will fight this ridiculousness as long as it takes. 

I will also say that there are some wonderful speakers who I've seen be so generous and giving.  I guess they are the ones that know the truth about "you get what you give in life" and they will be the ones you always see me promoting!

 

20 Questions for the Radio Show Today

Today is "The Naked Investors" Radio show and Pete and I are going to be answering the top 10-15 questions that we get asked all the time about anything... Well that is, anything real estate related! 

Even though it's not real estate, you can call in to ask where the best steak or martini is in Los Angeles, because those of you who know me well - know that I am just as passionate about bone-in Rib Eye and the perfect Martini as much as I am about Real Estate!

So if you'd like to call in and ask questions - by all means do so!  Yahoo! 

The show is on from 12:00 - 1:00pm PST every Wednesday and you can log into it by going to our radio show website at www.thenakedinvestors.com and clicking "Listen Here" on the right column.

Hope to talk to you!

"Paper Condos"

Pete and I talked about a strategy on our radio show the other week that has been the topic of my household.  For anyone that is getting ready to have a kid go off to college this might be something pretty interesting.   It's called "Paper Condos", which is basically a way to hold property in a land trust but taking it a bit further than just one family living in a SFR.   

What this strategy does is take that same SFR and put it in a Land Trust - but now for anyone that already has properties near a college or like us - who are thinking about buying in those areas, we can now give all the renters in that one home beneficial interest therefore giving tax benefits to the parents of those college students!  We take the property and put it in the NARS Land Trust.  Now anyone who is paying "rent" in this home, becomes a beneficiary of the trust, and now reap tax benefits.  This is way cool stuff here. 

Listen to the whole show which aired March 5th on our Internet Radio show The Naked Investors. 

Click Here to listen to show:

I like this idea a lot. Also, think about this.  You can go buy properties and then specifically, market to the parents of college students.  This is a complete strategy in itself!

Bulk sales or just good 'ol auctions?

Do you think that we will be able to buy homes at the auctions and from MLS for 60-65%  minus repairs here in So Cal?  And if so, will we be able to buy many?  Many for me is defined as 1-3 a month for now (might be more).  Or is my best bet to work with bulk REO's so that I can get them for "50%" which is what I am told (how long have we been hearing this?) 

I have been asked by some folks to "join their team" and manage their bulk REO deals "when they start to pop".  It is their position that I shouldn't waste my time on trying to work auctions or mls listings because I will get my best deals through the bulk buy.  After all, "the team" will get first choice at the 50% inventory. Let's look at this excellent offer:

First of all, we all know there are going to be great deals at auctions and the MLS starting this year (already going on in some areas).  The massive inventory is going to set the price- not the banks.  They will have no choice but to start dumping.  Of course they are hanging on for dear life - and are surely just trying to squeeze out every penny that they can right now.  I just wish that these silly folks who continue to buy these houses at the auction for 90-100% would stop the charade.  Half those houses can't possibly be closing.  If anyone has information on the close ratio - I would surely like to see it.   It would be shocking to see if most are closing. And if so - god bless them - but they better be retail buyers hoping to stay in that house for 7-10 years before trying to sell it with any hope of appreciation.   Opsey daisey.  I digress. 

Back to the REO 50% bulk deals.  Let's break this down. They say "I  should be smart" and choose to manage the bulk deals with them, which would then mean that I'm on "the team" (jealous? not so fast..)  The position I'm offered is I would be "managing" the team to make sure each of our "tasks" gets done -including my assigned task, and then also managing the sales process to all the buyers.  Most importantly, I would be reporting status of every house to the money investors in the deal, which sounds like I would have many captains on the ship. Basically a full time job if we are getting 20-30 houses at a time right?  Apparently we'll be buying at 50% and flipping to investor buyers at 60% with the exception of the houses that the team gets first choice at. A good deal for all I agree.

But here is the million dollar question... is all this worth 10%?  Let's be real here.  I am not interested in getting involved in houses over $300K (at 50-65%).  I just don't want to pay that high of monthly payment while I flip it or move it (or hold it).  So let's say I buy a 400K house at 65% on my own - at auction or otherwise. At that price point for every 5% I'm at 20K.  The question is - why in the hell would I want to get involved in having a full time "job" that I don't get paid for - (because after all - I am getting my houses at 50% off) just so I get my 1-3 houses a month at 50%?  Is it really worth the aggravated stress and hesteria that would surely be put through?  Imagine it people.  Having about 3-4 high maintenance people telling you what to do all day long,  calling you, emailing you, asking you "where are we at?", making sure all the tasks get done, and that's just with the team! Additionally, then dealing with all the buyers... Holly Schniekies. Call me a Crazy Dodo Bird, but this doesn't sound like fun at all. What pops into my pretty little head is...  NO FREAKIN' WAY BABY!   I don't want the money that badly. 

I would rather just step up my game and buy an extra house or two on my own to make up for that "loss" from 60% to 50%.  Or better yet, instead of going to the auction for the hope of 60% houses all the time, why not simply get a deal or two from their bulk REO's and just buy what they are selling to investors at 60%?  Batta Bing, Batta Boom.... Now you're talking.

Thank you for the generous offer - and at potentially 10% more profit per deal- it is a very  generous offer. One that I could have only dreamed about two years ago. But for me, I'd rather just manage my own dealings and not have the tension and hassle of dealing with so many head honchos.  It boils down to quality of life baby... In my old age, I am realizing that there is not enough cash in the world to make it worth working in a anxiety ridden environment. No can do my friend.

Life is too short and there're too many fulfilling ways to occupy my time. Like working with my fellow investors and running my own real estate business. Anyways, I have really grown fond of my 2 martini lunches (hic)and would miss them by having to work 50 hour weeks for someone else rather than be my own boss. Yeah Baby!

Rents will go down? Huh?

Very very interesting.  I learned something new yesterday!  Yahooo!! Of course this information came from none other than Mr. Bruce Norris. 

He said we are going to see more rental homes come on the market and that rents will go down.  Come again?  I have been walking around thinking that rents are going up since so many people are leaving their homes that are in foreclosure and they'll need somewhere to live.  BUT, that doesn't seem to be the case.  Bruce's position is that it is true that more people will be in the rental market- and it is also true that the many people who are trying to sell their houses - and are not behind in their payments will give up trying to sell and just rent their homes out.  Therefore creating more rental inventory! Simple supply and demand here.  More rentals available, lower rents. Hhhmm.

Now that we hear it, it sounds so logical- like- duh...  But until I heard this yesterday - not once did I even consider it.  This is really very interesting.  So for those of us who are buying properties using the Land Trust this is great.  When we get a home using the land trust, our tenant buyer gets to have tax benefits since they are now a beneficiary of our trust.  Now instead of the "renter" only paying $1000 rent, he can now pay $1300-1500 a month for our home because of his tax breaks.   

Pete and I have gone into great detail about this on our radio show The Naked Investors for the past couple of weeks.  As a matter of fact, Pete is so good at explaining this that over the past couple of weeks I have really learned this concept - and on my own show!

You can listen to all the previous weeks since they are all down loadable. Click on TheNakedinvestors.com Radio show in the right column on this blog for more information! 

No Money Down & No Credit… No-can-do my friend.

The days of no money down no credit seem to be gone.  I guess that depends on what your deal is?  Buying subject to and then doing "lease option/rent to own/land trust"- certainly works with this strategy.

But what about buying REO's?   

Easy money is no longer Hard Money.  Of course it is a lot easier than traditional financing, but nevertheless, Hard Money is a good name for it. 

Now - depending on who you use, some or all of these apply to each HM Lender (or at least the 3-4 that I talk to - and please, by all means, enlighten me if I am mistaken):

1. 10 % down minimum seems to be required.


2. 6-12 months of reserves in the bank.


3. Credit of at least 680 required.

This may not seem like a big deal to many, but to some of us (haaheem), it is not possible at this time. Of course unless we are buying properties out of state for under 90K.

For me - even though I may have 10% down - that might be all I have. And it just depends what is going on at that time.  Sometimes I have 30K and sometimes I have 8K in the bank. And I am not yet at the point in my career that I have cash reserves of 6-12months.  AND LET ME JUST SAY THIS - don’t be stupid - PLEASE do have 6-12 months in reserves!  Who needs the stress of not having it…!

Now as far as credit.  I have been rebuilding my credit for years.  Six years ago when I started my career in real estate investing (from someone who was "in the business for 30 years and going to teach me everything he knew and I was going to RICH!"), I basically went bust.  I moved to Palm Springs bright eyed and bushy tailed with my new home and gold American Exp Card and came back to L.A. one year later, broke, homeless and credit down the crapper.   After years of rebuilding my credit "the wrong way", by haggling with the creditors,  getting no where fast, I finally learned that I DO NOT PAY OFF things on my credit report - because that makes it worse! Since then I hired a company to fix it and I think my score went up a whole 10 points after 7months. Thanks for nothing.

So what's a girl to do?  You would think in my position, I would know the answer.  Sure I hear about all kinds of "great companies that are going to solve my credit woes", but who to trust?  Who is actually going to make it happen? 

I don’t care if I have to throw money at the problem!  I'll gladly pay whatever it costs to fix it.  Having a car payment, mortgages, and credit cards has helped a lot for sure.  But I'm still in the mid 5's (from mid to low 400's-so yahoo)!  But at this rate I'm going to be old and senile before it happens. 

True Story:  The other day my friend Joyce Carpenter told me that her friend and her husband had all kinds of toys like boats, cars, big houses and when they got divorced last year her credit plummeted to the low 400's.  With no choice - she had to do a BK.  One year later now her credit is 720!  What in the hell is that all about?  Are you kidding me?  I would never do a BK just to fix my past credit issues.  I don’t need to nor do I want to.  I just think this story goes to show you how screwed up our system is.

So what's the answer People? I get this question all the time from investors with the same problem and I wish I knew the answer for them and myself!

SO - do I just get a money partner for my first 5-10 REO's?  I'm ok to do that but I would like to stand on my own as well.