There Are Experts Everywhere

I gave weekly talks related to Real Estate Investing topics. I call these RISE Talks to coincide with my other RISE products: RISE Boot Camp (my 3 day Real Estate Investor Transformational Weekend) and RISE Advisor which is this Blog. I usually talk about topics that I have a lot of experience in and that I am generally good at, or at least better than most people. I have given 3 RISE Talks on Lease Options and tonight was a topic on Nothing Down Creative Financing.

The interesting thing is that I learned something new from my students almost every night. One night I learned of a unique way to create motivation in a seller by getting them to participate in the profits of a Lease Option deal (thanks Greg). Another night, I learned another exit strategy for my Sandwich Lease Options. Rather than do a double closing, why don’t I just assign the contract I have with the seller to the buyer and they end up buying directly from the seller. This helps avoid some land tax problems that you may have with doing 2 closings on the same day.

Tonight I learned from a Mortgage Broker who was in the audience about an interesting product that is available to everyone. You can declare a second home as owner occupied (vacation home, relative, etc.). This reduces the amount of mortgage insurance you need. In conjunction with this 2nd home program, there is 100% financing for that property.

Teaching is also Networking,

Jim Pellerin

Investor, Advisor, Speaker, Coach, Writer

My Book: 7 Steps to Real Estate Riches
My Blog: The Realty Millionaire
Facebook: The Realty Millionaire
Twitter: @RealtyInvest

© 2012, JimPellerin. All rights reserved.

How to Sell Your Investment - 

Eventually, you may want to sell your Real Estate Investment. Of course, this will depend on the investment you own and the exit strategy you chose when you acquired your investment in the first place.

For example, if you are working with referrals or assignments, they already have a built-in exit strategy. You are looking at these investments with the intent to sell to an investor. When you are working with Lease Options, you are leasing the investment property to the Tenant Buyer who will eventually buy the property from you at the agreed to Option Price. That is, of course, should they be able to exercise their option and nothing goes wrong.

When you buy a property as part of a “Buy, Fix and Sell” strategy, you will want to sell at the best price and you will want to sell fast. The best way to do this is to hire a Realtor. A good Realtor will be able to market your property properly so you get the best return for your investment. They will be able to sell it faster so that you don’t end up carrying the property for too long.  The longer you carry the property, the longer it is on the market, the less profit you make because of all of your carrying costs such as mortgage, taxes, utilities, etc. Time is money.

If you own a rental unit as part of a “Buy, Rent and Hold” strategy, you should also consider using a Realtor. Sure, you may have more time because you have a positive cash flow from the building and you don’t have to carry your expenses. But just think of all the time you are wasting advertising the property, showing the property, etc. You want to focus on the things that bring you more money. You are selling for a reason and a good Realtor can help you sell fast and actually pay for their commission in the long run.

I try to always use a Realtor when selling any of my properties.

Happy Investing

Jim Pellerin
The Realty Millionaire
Making People Rich Using Real Estate

Investor, Advisor, Speaker, Coach, Writer

My Book: 7 Steps to Real Estate Riches
My Blog: The Realty Millionaire
Facebook: The Realty Millionaire
Twitter: @RealtyInvest

© 2012, JimPellerin. All rights reserved.

Property Management Problems

Some quick tips.

I have had several people tell me about their bad experiences as a Real Estate Investor. They bought a house as an investment and then rented it out. They typically have a history of bad tenants who caused a lot of damage. They couldn’t afford the repairs so they ended up selling and actually had to pay because the house sold for less than what they owed.

Real Estate Investing is a business and has to be treated as a business. You need to make sure you allow for certain expenses. If you are going to do all the work yourself then you need to get good at it and learn from you mistakes. The other option is to hire a professional. Here a couple of quick pointers to help ease the initial pain.

1. When evaluating a property as an investment, make sure you allow enough money for maintenance and repairs (typically 5% of rents). Also, make sure you build up a reserve fund to pay for these unexpected costs.
2. Get good tenants. Make sure you screen your tenants properly. Do a background check and a credit check. An empty unit is far better than having a bad tenant.
3. Hire a Property Manager. Make sure you allow enough money for property management. You want to make sure you get paid for your work or if you don’t want to do it you can afford to hire someone to do it for you.

Happy Investing,

Jim Pellerin

Investor, Advisor, Speaker, Coach, Writer

7 Steps to Real Estate Riches

The Realty Millionaire

© 2012, JimPellerin. All rights reserved.

Whenever I acquire Real Estate I always look at bringing in partners or investors. They help provide additional funding that I can leverage and increase my return on investments. One of the ways I can increase the return for my investors is by offering them my share of the partnership at a discount. They could buy me out.

For example, let’s say I enter into a partnership with an investor to purchase a property and Lease Option the property to a Tenant Buyer for 3 years. I usually get the partner to finance all of the purchase and then I do all of the setup and manage the Tenant relationship during the lease period. Let’s say, in this example, we would each end up receiving $10,000 as part of the eventual profit split.
At some time during the term of the investment, I offer the partner to buy out the remaining portion of my profit split. In this example, let’s say I have already received $2,400 ($200 per month for 12 months). I could offer to sell my remaining profit of $7,600 at a discount to my partner. Let’s assume I sell it to him or her for $5,000. This means they could earn $7,600 on an investment of only $5,000 over the remaining 2 years. That’s a profit of $1,600 on an investment of $5,000 or a 16% annual return on his investment. If 16% is not enough, maybe offer to sell it to him for $4,000 for a 20% annual return. The motivation for you to do this is to liquidate and to get some quick cash that you can use for other investments. This is very similar to selling notes at a discount. Of course, all this is dependant on the actual profit after expenses and that there is no additional major expense that impacts the profit.

A variation on this arrangement would be that you sell a portion of your profit and you continue to manage the property for them for a monthly fee of say $50 per month. This helps minimize their risk. Still another variation on this whole approach is that you buy your partner out instead of them buying you out.

Happy Investing,

Jim Pellerin

Investor, Advisor, Speaker, Coach, Writer

7 Steps to Real Estate Riches

The Realty Millionaire

© 2012, JimPellerin. All rights reserved.

Preliminary Market Assessment – A New Tool

Eliminate your risks when acquiring Lease Options

Probably the hardest part of Lease Options is finding the homes from motivated sellers. That is because the seller usually has many other possibilities before they consider Lease Optioning their home to someone like me. When we started out we weren’t getting a lot of people calling us with houses. So what we decided to do is put a house under Lease Option before we even have a Tenant-Buyer. The problem with that is that you end up having to “carry” these units if we don’t find a Tenant Buyer right away.

What we ended up doing was creating this Preliminary Market Assessment (PMA). A PMA is an agreement for us to start marketing a property without any financial obligation on our part. We spell out the terms and conditions that are to be included in the eventual documents, the Lease and the Option Agreement. Basically the PMA reduces my liability should we not be able to place a Tenant Buyer in this home. We usually market the property for 30 – 60 days looking for Tenant Buyers. If we don’t find anyone in that time period, we usually let the property go.

Happy Investing,

Jim Pellerin

Investor, Advisor, Speaker, Coach, Writer

7 Steps to Real Estate Riches

The Realty Millionaire

© 2012, JimPellerin. All rights reserved.

Lots and Lots Right?

A lot of times when I ask people how much money they want to make in Real Estate Investing, I get a response like “lots and lots”. Or sometimes they will say a million dollars or even millions of dollars.

The problem with this response is that it is not specific enough and it might be too far of a stretch for you. depending on where you are in your Real Estate Investing career at the time. If you are out of work, with no savings and no income coming in, your goals would be a lot different than if your were currently employed with $200K in savings and $150K in equity.

When picking goals such as “how much money do you want to make” you have to be realistic. You should also have short-term and long-term goals. For example, a $1M goal might be a revenue goal or a net profit goal. It might be a 3 year goal or a 5 year goal. You have to start small with your short-term goals and work up to your larger long-term goals.

For most people, $1M net profit is an achievable goal within a 3 year period, no matter where you are starting. To make $1M in 3 years means you have to make just over $330K per year. $330K per year works out to about $28K per month. If your investment strategy is Lease Options, this means you would then have to do 1 Lease option with a net profit of $28K every month for 36 months. Once you become more active in Lease Options, you would be able to do at least 1 Lease Option per month.

Happy Investing,

Jim Pellerin

Investor, Advisor, Speaker, Coach, Writer

7 Steps to Real Estate Riches

The Realty Millionaire

© 2012, JimPellerin. All rights reserved.

When Will You Become an Investor?

I know a lot of people who are trying to become a Real Estate Investor. They have attended a lot of courses and probably have more education than most people on the subject but they still haven’t taken the plunge. They haven’t taken that big step from educated person to Real Estate Investor.

People are always afraid of taking that big step. They are worried they are making a big mistake. They are worried about their financial commitment and the possibility of owning a property that may someday be vacant.  They have heard all the horror stories about property ownership and bad tenants and everything that could go wrong.

But, what if everything works out? There is a high probability that everything will work out. You were interested in Real Estate Investing because you heard what a great investment it was. You heard how so many other people have made lots of money and how they are now able to earn a living from Real Estate Investing.

Don’t second guess yourself. You know it works. You have the education you need. Now all you have to do is put the information to good use and take action. You will only regret the chances that you don’t take. And by the way, you are going to make mistakes. The highest form of education is that which is learned through experience. And the more mistakes you make the more experienced you become and the more money you will make.

When will you become an investor? It’s time for you to take the next step.

Happy Investing,

Jim Pellerin

Investor, Advisor, Speaker, Coach, Writer

7 Steps to Real Estate Riches

The Realty Millionaire

© 2012, JimPellerin. All rights reserved.

When Do You Sell Your Investment?

You sell your Lease Option property when the Tenant Buyer decides to exercise their option. If they don’t exercise their option, then you have to decide what to do next.

You want to sell your fix and flip investment as soon as you can, as soon as it makes sense. Usually, you would sell when the work is done. However, I did have one property that I sold “as is”. Somebody else wanted to buy it from me and fix it themselves. So I guess, technically, this was not a fix and flip, since I didn’t do any fix. When looking to sell your fix and flip, you don’t want to try to sell it prematurely. Don’t let your perspective buyers see what it looked like before. But then, you want to make sure that people see it as soon as it is finished so that you can get rid of it as soon as possible. Be realistic about setting your price because you want this property to sell fast so you don’t have to carry for several months which eats away at the profits.

When buying a Buy, Rent and Hold investment. You are usually not buying with an intent to sell. You may decide to sell later for a number of reasons:

• You are tired of being a landlord and you don’t want to manage the property anymore.
• You need the money due to some unforeseen circumstances (be careful you don’t become a motivated seller).
• The property has appreciated well and now is the right time to sell.
• You are selling because you want to buy bigger investments (e.g., selling your single-family home to buy an apartment building).

So when should you sell your investment property? It depends.

Happy Investing,

Jim Pellerin

Investor, Advisor, Speaker, Coach, Writer

7 Steps to Real Estate Riches

The Realty Millionaire

© 2012, JimPellerin. All rights reserved.

I have decided to revive my blog on Real Estate Investing after taking a couple of years off.

I spent the last 2 years or more growing my Real Estate Investing business. We grew too fast for me to be able to write this blog and to properly manage the business.

Hopefully you will enjoy the new content (and some old content) that I will be posting.

If you have any suggestions, please send me a note or add comments to any of the blog posts.

Happy Investing,

Jim Pellerin

Investor, Advisor, Speaker, Coach, Writer

7 Steps to Real Estate Riches

The Realty Millionaire

© 2012, JimPellerin. All rights reserved.

Are You Sure You Want To Be a Property Manager?

If you own rental properties, they will have to be managed. Before you decide to do your own Property Management make sure you know what you are getting yourself into.

Some things you will be responsible for are:

• Advertising your property when you have vacancies.
• Preparing the property to be shown
• Showing the property to prospective tenants
• Handling all calls from prospective and current tenants
• Arranging for repairs when needed
• Handling disputes between tenants
• Handling tenant complaints
• Dealing with and paying for damages caused by bad tenants
• Evicting bad tenants

Are you willing to take phone calls at any time of the day or night? What if someone’s toilet overflows and they call you? Do you have sales and marketing skills? You will have to convince any prospects to rent from you.

All of these activities take time. The more buildings you own, the more time it will take, and you will eventually run out of time. If you decide to do your own Property Management, make sure you allocate enough funds so you can hire someone else to replace you when the time comes.

Happy Investing,

Jim Pellerin

Investor, Advisor, Speaker, Coach, Writer

7 Steps to Real Estate Riches

The Realty Millionaire

© 2012, JimPellerin. All rights reserved.