Overwhelmed by Real Estate and Don't Know Where to Start?

Sitting out on the balcony at a nice resort after a weekend of Real Estate Investing seminars is a very refreshing break.  After two full days of listing to people talk about how to be a better investor and talking with several people about their investments I am glad to just be sitting alone with my thoughts on the balcony.

Once in a while people will walk by and look up, probably wondering why I am not at the bar or out at the pool, but other than those few wandering souls it is pretty quiet up here.

Having been “investors” part time for nearly 20 years, my wife and I decided to step it up a little this year and put more money where my mouth is.  On Beach Street News, I called the bottom of the Orange County Market just after buying my current home.  From what I heard over the last two days, Phoenix and Las Vegas also appear to have bottomed.  This is great news for everyone.

We came here to learn how to “wholesale” property.  Wholesaling means that I find property really really cheap I do all the negotiating and get a contract on the property.  I find property that nobody else wants because they can’t figure out it’s value or it has been marketed wrong.  

Next,  I use my marketing skills to reach out and find buyers that want to make 15% on their money and have it secured by real estate.  I make somewhere between 5% and 12% on the deal.  My buyer is still getting a smoking cheap property, and I help them with the fix up, rental and maybe even find them a property manager.

If you are asking “How do I buy one of those deals from you?” the answer is simple, send me an e-mail with how much cash you can come up with and when, and I’ll build the deal.  No financing just cash.  As the old saying goes, “Cash is King”.  Banks and distressed owners don’t want any risk in the deal if they are going to let the property go at a 35%-50% discount from retail value.  You gotta have cash.

Many of the people here were seasoned investors so I learned some new methods I had never heard.  I also saw some wide eyed people who were totally overwhelmed by the whole idea of having to buy and sell a property in 14 days in this market.  Some didn’t even own their own home and had no idea about title, escrow, attorneys and agency fees.

The guy hosting the seminar was Dean Graziosi, the de-facto king of Real Estate Informercials.  As hard as Dean tried to cater to all levels at this event, there was a small group of about 15% who were totally overwhelmed and lost.  One lady even lost a small fortune using a competitors “system” which was a joke the way she explained it to us.  

I am sure at least one person is wondering why I would pay an infomercial guy to learn about investing in real estate.  I met Dean about a year ago at an event not related to Real Estate and was impressed with him as a genuine expert, and more importantly as someone who wanted to see the people who paid him succeed.  I felt like he was a guy who could help my wife and those who are close enough to me that I can’t teach them.  So I bought a small program that included tickets to the event which also let my wife start learning more on Dean’s website.  This afternoon, it was clear that Dean was a little disappointed to see how many people at this event had read the books and never “done a deal”.  

My wife is very keen to these things from her 18 years of class room teaching experience and introduced or pointed out several people who were clearly stunned over the weekend.  Noticing that isn’t easy in a room of 200 or more people.  I really didn’t want to speak at all during the event and was able to keep my appearances on the microphone down to one.

At the end of today I snuck out a little early to enjoy the resort pool and while I was working on my sunburn, I realized that I should have got on the microphone one more time.  I laid there thinking that I might be able to help the people who where still in shock.  They all had the same problem.  They needed a “simple” place to start.  Something that would take the pressure of the 14 day wholesale deal off of their shoulders.  To Dean and the other Pros, this was easy stuff.  Enough people got it to the point that it felt easy across most of the room, but not all of the room.

What I needed to say was this:

Keep in mind that every investor in here started with just one deal.  Wholesaling is not how Dean started.  I personally haven’t yet wholesaled a deal, and as an agent, I may never be able to wholesale a single family home.  Luckily the commissions are about the same as the “spread” on a wholesale deal, so I just need buyers ready to jump.

What I did, what Dean did and what many people in the room did, was start with one deal on one property.  In fact, I think we all started out purchasing a place that we lived in, fixed up and later rented.  Chad, the youth pastor with the “Buy and Hold” strategy started there and stayed there.

If you don’t own a home today, before you even become and investor, I would say go buy a home.  Find a Realtor like Kelly and go buy a government owned home in the 14 day window where investors can’t get it.  Start with a deal there.  If you own a home, even better.  Rent the house you live in and go buy another home with little or no down through one of the government foreclosure programs like Homepath.com.

Start with your house and your first rental.  Even if you get a Homepath house, you only have to live in it for a short while before you can go get another one.  When you have one home and one rental, you are learning lessons of business, property management and real estate investing the way Dean, Chad and I all learned it. 

The big difference is you can read about our headaches in Deans books so you at least know what to expect and how to avoid most of them.  With that experience, you are ready to come to a seminar like this weekend's E.D.G.E and start learning more advanced methods of presenting offers and doing deals faster.

Start with your house, and your first rental.  Use a Realtor As soon as you have done that, you are a real estate investor without any doubt.  You’ll know it, I’ll know it, Dean will know it.  You might not be any good at it yet, but now you have experiences to help you ask the questions and really learn from the pros here.  You can really step on the gas and accelerate your learning curve at an event like this if you know how to use it.  Until you do at least the first deal, it might all be jargon, gibberish and $2500 out of your account.

Read the books, buy a house, then buy another and rent the first, and you have just done what took me 3 years to do in less than a year.  Do that and next year, this event will be fun and you will learn a lot more, and be even better the year after. 

If you are dead broke, I mean really have no money, find someone in this room who lives in your city and intern with them on a per deal commission basis.  Learn how to “bird dog” one deal for them.  The first one will take time, and you won’t make much money.  The second will go faster, the third even faster.  After they have paid you for bird dogging three deals help them find buyers.  After you have helped them find 5 buyers.  GO DO IT FOR YOURSELF.

If you commit right now to doing one of those two things. Better yet if you commit to doing BOTH of them, when you get here next year, I guarantee you will be having a lot more fun, and making a lot more money.  

It is your choice.  What do you want to say when you are here next year?  “I did nothing” or “I helped Kelly with three deals, helped her get 5 buyers, bought a house and bought my first rental and now I make $200 a month more than I did last year.”  

You can’t even walk across the street unless you take the first step.  Start walking.

Maybe next year I’ll grab the microphone just one more time and say it, that is unless I am too busy making deals on my iPhone to leave the beach.

The Sub $1Million Bottom in Orange County Real Estate?

Lately we have seen a couple of interesting trends.  Homes that are below $1 Million and priced right are selling relatively quickly.  This  means banks are lending and closing.  This is a big difference after last year where 50% of the "Approved" buyers couldn't get funded and didn't close.  It was making agents crazy.  All that work and no commission.

Buyers were having fun either and many just gave up after one try.  Personally I had five "pre approved" loans when I made the offer on my house.  Three of the five cancelled my approval after the 17 day contingency period leaving me to lose my deposit.  Thankfully two kept moving forward, and yes I paid fees to all five of them.

At the very last second, the bank I was about to sign with backed out.  At the end of the day only one lender stuck it out and closed the deal.  My wife and I were not the listing or selling agents on the deal, and I can tell you that poor woman called almost every week to see if the banks were still going to loan.

The difference between me getting the house and the people that didn't close that month was simple.  I didn't quit when the first bank said "No".  Quitting isn't how you get a deal on a house, or any other kind of deal for that matter.

These days the above $1.0 Million homes are still soft, even if they are priced right.  When I say soft, they are closing more than last year, but they are sitting unless they are priced very low.  The spread between wholesale foreclosures/short sales and retail in the sub $1 Million home priced in Orange County and LA County is narrowing.  The $1.0 Million plus market is getting a little wider.  My guess is people are holding out longer and getting into more trouble, and banks don't want to dump those jumbo loans.

Sunday the L.A. Times had a pretty good chart that showed LA county was seeing a similar change.  Homes that were hit the hardest in areas like Lancaster were starting to see a little rebound.  The water front homes of Long Beach and Manhattan Beach were still falling although in single digits now indicating we are near a bottom.

I want to use a little caution here and say this isn't a "demand" bottom, rather it is an inflationary bottom.  What that means is that houses are just following the increasing prices of everything else.  While the Fed is still loaning money at record low interest rates, they are also printing it at record rates.  That is the real definition of inflation, more money available without an increase in supply of goods equals inflation.

That inflation is what we are seeing right now, and the benefit to the housing market is that the loans are worth less as the house prices follow inflation upward.  If the home market falls at 5% relative to the previous year and there is 5% inflation, the result is no change in home prices.  This looks good for the president in the short run, but sets us up for double digit inflation in the next couple of years.  Look back at the Carter-Reagan years.  Remember 18% home loans?

The second interesting trend reported by the National Association of Realtors last week was a significant drop in the number of "low ball" cash offers.  Another indicator that we have hit bottom and the cash buyers are looking for a different kind of deal.

Of course the banks still hold the wild card with over one million homes in the foreclosure process at some stage.  I don't imagine they will dump all of these homes at once.  Instead as the new foreclosure rates decline, they will start releasing a few homes for sale.  That is exactly what we are seeing in Orange County right now.

What is going on in your part of the state?