We know this is a long post but it is a key element in today's market that many home seller's are unaware of that could help them to sell their home faster.
The Benefits
You become a flexible seller when you carry back financing and this attracts many more potential buyers. You have the say, not some bank or lender, when it comes to who will buy your house and on what terms. This makes what you're offering more appealing than a regularly listed home for sale. The biggest benefit of carrying back the financing on the home you're selling is that you have more control over the major aspects of the sale: the sales price and the interest rate. You will be able to get a higher sales price on your home if you do seller financing instead of waiting for an all cash buyer - which, whoever you get a cash offer from will expect a deep discount. You will also not be able to sell as fast if you're waiting for someone that has a bank loan to buy your home. Banks have very strict guidelines these days and it is difficult for the majority of people to qualify for one of their loans. The interest rate will be determined by you as well. There are federal regulations that you'll have to follow, but you will have the ability to earn more interest on your seller financing note than if you were to outright sell your home and put the money into a bank account or CD.
Another great benefit is that you will be receiving monthly income that is secured by a property that you have in depth knowledge of. So in addition to not having the responsibility of two homes (your own residence plus another one that you are trying to sell), you will be adding to your income, which gives you more freedom. You will not be responsible for the maintenance and upkeep of the other property at all, so you will know exactly how much you will be making every month - there will be no leaky toilets, no phone calls in the middle of the night, no unexpected expenses - just profit.
What to Do
When trying to sell a home there are many things you need to take into account. The first thing you need to look at is how your home is being presented. Make sure you do a good cleaning - inside and out. Curb appeal is extremely important because it is the first impression everyone will have of your home, so make sure you mow the lawn and clean up the landscaping, powerwash the siding, clean the windows, etc. The atmosphere inside the home is just as important, people need to visualize themselves living there. Also be sure you take care of any fix-it projects you may have not gotten around to or are just now noticing. People want to buy homes that have the least amount of problems and you can easily avoid that by applying a little bit of paint, cleaning out the ventilation system, and generally making it move in ready.
Next, you'll need to think of how you're going to market your property. Now a days, there are some great free/inexpensive ways to let people know that your home is for sale such as posting it online on sites like Craigslist.org, ForSaleByOwner.com, Zillow.com, Trulia.com, and CyberHomes.com, not to mention some more traditional ways like a For Sale sign in your yard, posting For Sale signs at busy street intersections in your neighborhood, place an ad in the local paper's classifieds, etc. Any marketing is good marketing and the more the better. Using a Realtor can be a good idea because they know the local market, they have a pre-built marketing campaign, and they are able to post your home on the MLS - for 3-6% commission paid by the seller and a 30-60 day closing process. But you also need to look at the option of using a wholesale investor - a real estate investor that does everything a Realtor does (with the exception of posting on the MLS) PLUS all the above mentioned free/inexpensive techniques - for a negotiable commission paid by the buyer, NOT THE SELLER. Wholesalers also have access to all cash buyers which means a quick, clean closings in usually 1-3 weeks.
Just remember, the norm is not necessarily going to work in today's market so you need to start thinking outside the box to get the results you want.
Kelly & Jason
Wednesday, January 26, 2011
Sunday, January 23, 2011
Determining Fair Market Value (FMV)
When looking at potential properties to invest in, one of the most important numbers you'll need to figure out is the Fair Market Value or FMV. The FMV tells you what that property is worth and capable of selling for in today's market.
Steps to a good estimate:
1. Gather information: Sq. Ft., Beds, Baths, etc.
2. Use online Real Estate evaluation services such as Zillow.com, CyberHomes, eAppraisal, Trulia.com
3. Get statistics on at least 3 properties that have sold within the last 6 months within 1 mile(ish) of the subject property. Try to get homes that are comparable in terms of what kind of shape the subject property is in - i.e. if the subject property needs some rehab work done, don't pick a comp house that has just been fully redone and then sold - you're looking for something that's comparable not opposite extremes. You need to compare apples to apples, not apples to peaches.
You're using sold homes instead of currently listed homes because that shows what kind of money people are actually spending in the area, not what sellers/agents are hoping people will spend in the area.
Alright, time to do some math:
Let's say you're looking at a house that is 2115 Sq. Ft. with 3 beds, and 1.5 baths. So you'll go look up that property on the sites listed above and find 3 properties that are similar in size and find out what they sold for. Make sure the statistics (Sq. Ft., beds, baths, etc.) of the comp homes is as close to the subject property as possible.
Comp #1 - 2000 Sq. Ft., 4 beds, 2 baths, sold for $200,000
Comp #2 - 1900 Sq. Ft., 3 beds, 2 baths, sold for $188,000
Comp #3 - 1825 Sq. Ft., 3 beds, 1.5 baths, sold for $191,000
Next you're going to find the total Sq. Ft. and the total sold prices of the 3 comp homes.
2000 Sq. Ft.+1900 Sq. Ft.+1825 Sq. Ft.=5725 Sq. Ft.
$200,000+$188,000+$191,000=$576,000
Then you are going to find out how much each square foot is worth by taking the total sold price ($576,000) and dividing it by the total number of square feet (5725).
$576,000/5725 Sq. Ft.=$100.61 per square foot
So now you know how much a single square foot of property costs in the area of the home. This allows you to find out how much your potential investment is worth by taking the price per square ($100.61) times the square footage of the subject property (2115).
$100.61x2115=$212,790.15
This means that you have somewhere to start when considering your starting offer. If the home is worth $212,790.15 in today's market then you know that you want to make an offer and eventually purchase the property for this price or lower. That way you know that you're money is being strategically and smartly spent.
The key points you need to take away from this are:
1. That this is not an exact science, but it's at least a place to start when pricing a potential investment.
2. Make sure you look at the quality of the house as well. The numbers are helpful but may change depending on the shape the house is in.
3. Price can be adjusted for beds, baths, etc.
4. You can always get a second opinion - have one of the agents in your professional team to get you a Comparable Market Analysis (CMA)
5. Network with other investors to see what they would pay/are paying in a certain area (remember to protect your product though - don't give details!)
6. Remember that it's just an opinion when it comes to estimates - you need to take other factors into consideration and take the estimate for what it is - a guideline.
Jason
Steps to a good estimate:
1. Gather information: Sq. Ft., Beds, Baths, etc.
2. Use online Real Estate evaluation services such as Zillow.com, CyberHomes, eAppraisal, Trulia.com
3. Get statistics on at least 3 properties that have sold within the last 6 months within 1 mile(ish) of the subject property. Try to get homes that are comparable in terms of what kind of shape the subject property is in - i.e. if the subject property needs some rehab work done, don't pick a comp house that has just been fully redone and then sold - you're looking for something that's comparable not opposite extremes. You need to compare apples to apples, not apples to peaches.
You're using sold homes instead of currently listed homes because that shows what kind of money people are actually spending in the area, not what sellers/agents are hoping people will spend in the area.
Alright, time to do some math:
Let's say you're looking at a house that is 2115 Sq. Ft. with 3 beds, and 1.5 baths. So you'll go look up that property on the sites listed above and find 3 properties that are similar in size and find out what they sold for. Make sure the statistics (Sq. Ft., beds, baths, etc.) of the comp homes is as close to the subject property as possible.
Comp #1 - 2000 Sq. Ft., 4 beds, 2 baths, sold for $200,000
Comp #2 - 1900 Sq. Ft., 3 beds, 2 baths, sold for $188,000
Comp #3 - 1825 Sq. Ft., 3 beds, 1.5 baths, sold for $191,000
Next you're going to find the total Sq. Ft. and the total sold prices of the 3 comp homes.
2000 Sq. Ft.+1900 Sq. Ft.+1825 Sq. Ft.=5725 Sq. Ft.
$200,000+$188,000+$191,000=$576,000
Then you are going to find out how much each square foot is worth by taking the total sold price ($576,000) and dividing it by the total number of square feet (5725).
$576,000/5725 Sq. Ft.=$100.61 per square foot
So now you know how much a single square foot of property costs in the area of the home. This allows you to find out how much your potential investment is worth by taking the price per square ($100.61) times the square footage of the subject property (2115).
$100.61x2115=$212,790.15
This means that you have somewhere to start when considering your starting offer. If the home is worth $212,790.15 in today's market then you know that you want to make an offer and eventually purchase the property for this price or lower. That way you know that you're money is being strategically and smartly spent.
The key points you need to take away from this are:
1. That this is not an exact science, but it's at least a place to start when pricing a potential investment.
2. Make sure you look at the quality of the house as well. The numbers are helpful but may change depending on the shape the house is in.
3. Price can be adjusted for beds, baths, etc.
4. You can always get a second opinion - have one of the agents in your professional team to get you a Comparable Market Analysis (CMA)
5. Network with other investors to see what they would pay/are paying in a certain area (remember to protect your product though - don't give details!)
6. Remember that it's just an opinion when it comes to estimates - you need to take other factors into consideration and take the estimate for what it is - a guideline.
Jason
Building Your Team - And Your Confidence!
Building your team is like prepping for a test. You call hundreds of professionals to find the right people to work with and help you build your Real Estate empire. Talking to all these people may be a bit intimidating at first - they will ask you questions you don't know the answer to, throw terms at you that you've never heard before, and generally confuse you. But then you figure out the answers and learn what all the foreign terms mean. Now you're ready to take the test. Sure you'll still run into a few question marks every so often, but for the most part, you'll be ready to talk to other professionals on the same level. At this point you will be able to decipher between people who will help you with your investing and the people who are just blowing smoke.
Kelly
Kelly
Wednesday, January 19, 2011
The Good, The Bad, and The Ugly
In the beginning, I'll be honest with you, we made many mistakes and had the wool pulled over our eyes time and time again. You will learn that one of the most valuable things you need to incorporate into your endeavors is how to verify the people you're working with. There are a wide range of people that claim to be "Real Estate Investors" and there are many amateurs that haven't done their homework on what it takes to be a part of this industry. There is nothing wrong with being an amateur, every one has to start somewhere - but you need to be aware that you will run into amateurs that aren't taking their education and understanding of this business a seriously as you do.
The main point you need to draw from this is make sure the people you choose to spend your time working with are who they say they are and that they can do what they say they can do. I want to share these examples with you so that you can have some food for thought when you start making your own contacts.
LESSON #1: Protect Yourself
The first lesson we learned is that if a buyer is serious about working with you they will have no problem signing a Non-Circumvention, Non-Disclosure Agreement with you and providing you with a Proof of Funds letter. What we thought was going to be our first deal ended up being a pretty big slap-in-the-face wake up call.
We had found a buyer. We knew exactly what he was looking for. He sent us a POF. We found a great bank owned rehab property in the exact area he wanted. We were right on track! This was going to happen! The only snag in the plan was that our strategy was to lock this property up on contract with the bank and then assigning the contract to our buyer, but the bank had a contingency that an assignment of contract couldn't be done unless the end buyer provided a Letter of Intention (to buy) to the bank. This meant we had to give our buyer access to the all the information about the property without having any security for ourselves. We didn't have a contract with the bank, nor did we have a NCND with our buyer. We went on our buyer's word and put our trust in him and proceeded to send all of our hard work to him. After a few days he contacted us and told us that their investing money was tied up due to a family emergency and that he would contact us once he was back on his feet. We said we understood and looked forward to hearing from him, honestly believing that we would hear from him again - how wrong we were. Come to find out, shortly after speaking with us he proceeded to purchase the property that we had put weeks worth of work into finding and researching AND we had know way of proving our time and efforts put into this deal and were unable to profit from everything we had done for him.
Moral of the story - PROTECT YOURSELF FIRST - EVERYONE ELSE IS!
LESSON #2: Protect Your Contacts
Not long after the above example, a little worse for the wear, but still pursuing our dreams, we made a really good contact. He was a bulk buyer of single family homes. We had never worked in bulk before but saw it as a great opportunity to expand our business. The task was simple - him and his partner had $5 million allocated to purchase homes, they provided us with a POF, we were to find the homes, do our due diligence to make sure they were good buys, and they would buy them. Simple right? Only if you have the right team of professionals working with you. At the time were were using a Realtor that was fairly new to the game, but we liked his ambition and thought we would see how it worked out. Unfortunately, he required that we get an updated POF (even though the original one was only 2 months old). We trusted him and his professional opinion and contacted our buyer about providing us with an updated POF. He was willing to oblige but was out of state at the time so told us to contact him the next week. We did contact him to remind him and he told us he would have it to us in a couple days. But after multiple phone calls and emails (due to our inexperience and our Realtor pushing us to provide the POF), he ended up ignoring our constant requests and we lost our contact.
Moral of the story - KNOW THE CORRECT WAY TO CONDUCT BUSINESS - ONE SLIP UP AND YOU MAY NOT HAVE A SECOND CHANCE AT BUILDING THAT RELATIONSHIP!
Just some food for thought...
Kelly
The main point you need to draw from this is make sure the people you choose to spend your time working with are who they say they are and that they can do what they say they can do. I want to share these examples with you so that you can have some food for thought when you start making your own contacts.
LESSON #1: Protect Yourself
The first lesson we learned is that if a buyer is serious about working with you they will have no problem signing a Non-Circumvention, Non-Disclosure Agreement with you and providing you with a Proof of Funds letter. What we thought was going to be our first deal ended up being a pretty big slap-in-the-face wake up call.
We had found a buyer. We knew exactly what he was looking for. He sent us a POF. We found a great bank owned rehab property in the exact area he wanted. We were right on track! This was going to happen! The only snag in the plan was that our strategy was to lock this property up on contract with the bank and then assigning the contract to our buyer, but the bank had a contingency that an assignment of contract couldn't be done unless the end buyer provided a Letter of Intention (to buy) to the bank. This meant we had to give our buyer access to the all the information about the property without having any security for ourselves. We didn't have a contract with the bank, nor did we have a NCND with our buyer. We went on our buyer's word and put our trust in him and proceeded to send all of our hard work to him. After a few days he contacted us and told us that their investing money was tied up due to a family emergency and that he would contact us once he was back on his feet. We said we understood and looked forward to hearing from him, honestly believing that we would hear from him again - how wrong we were. Come to find out, shortly after speaking with us he proceeded to purchase the property that we had put weeks worth of work into finding and researching AND we had know way of proving our time and efforts put into this deal and were unable to profit from everything we had done for him.
Moral of the story - PROTECT YOURSELF FIRST - EVERYONE ELSE IS!
LESSON #2: Protect Your Contacts
Not long after the above example, a little worse for the wear, but still pursuing our dreams, we made a really good contact. He was a bulk buyer of single family homes. We had never worked in bulk before but saw it as a great opportunity to expand our business. The task was simple - him and his partner had $5 million allocated to purchase homes, they provided us with a POF, we were to find the homes, do our due diligence to make sure they were good buys, and they would buy them. Simple right? Only if you have the right team of professionals working with you. At the time were were using a Realtor that was fairly new to the game, but we liked his ambition and thought we would see how it worked out. Unfortunately, he required that we get an updated POF (even though the original one was only 2 months old). We trusted him and his professional opinion and contacted our buyer about providing us with an updated POF. He was willing to oblige but was out of state at the time so told us to contact him the next week. We did contact him to remind him and he told us he would have it to us in a couple days. But after multiple phone calls and emails (due to our inexperience and our Realtor pushing us to provide the POF), he ended up ignoring our constant requests and we lost our contact.
Moral of the story - KNOW THE CORRECT WAY TO CONDUCT BUSINESS - ONE SLIP UP AND YOU MAY NOT HAVE A SECOND CHANCE AT BUILDING THAT RELATIONSHIP!
Just some food for thought...
Kelly
Monday, January 17, 2011
Building a Foundation
Every new ambition needs to start somewhere - it's just a matter of determining where that is. When becoming a Real Estate investor there are a handful of questions you need to ask yourself before you can figure out what you need to ask of others. It goes back to the most basic questions they drilled into your brain in elementary school: who, what, where, when, why, how.
WHO are you going to be doing this with?
Are you going to be doing this by yourself, are you going to have a partner that you'll be working with, do you have a mentor that's going to guide you through the steps, is there a group of people that has decided to join together to do some investing, etc.?
WHAT are you looking to invest in?
Are you interested in residential or commercial real estate? Are you going to be a landlord, a flipper, a wholesaler, a note buyer, etc.?
WHERE do you want to invest?
Are you going to look for properties in your town, your county, your state, your country?
WHEN are you going to be investing?
How often do you plan on purchasing properties - every week, every month, every year?
WHY are you doing this?
Do you want to quit your job? Are you looking for a hobby? Are you looking for a way to put your kids through college? Are you looking for a way to put yourself through college? Figure out what is going to be the driving force behind your motivation.
HOW are you going to accomplish this?
Who's money are you using? How much do you have to work with? What do you already know? What do you still need to learn and what do you need to do it?
SET GOALS
If you're reading a book to expand your knowledge, give yourself a deadline for finishing it.
If you want to close your first deal in 1 month, write out an action plan of how you're going to achieve it.
If you want to make enough money to go on your dream vacation, set a time frame for it.
If you want to retire by a certain age, map out what you need to earn each year to do it.
If you want complete financial freedom, start your education now!
WHO are you going to be doing this with?
Are you going to be doing this by yourself, are you going to have a partner that you'll be working with, do you have a mentor that's going to guide you through the steps, is there a group of people that has decided to join together to do some investing, etc.?
WHAT are you looking to invest in?
Are you interested in residential or commercial real estate? Are you going to be a landlord, a flipper, a wholesaler, a note buyer, etc.?
WHERE do you want to invest?
Are you going to look for properties in your town, your county, your state, your country?
WHEN are you going to be investing?
How often do you plan on purchasing properties - every week, every month, every year?
WHY are you doing this?
Do you want to quit your job? Are you looking for a hobby? Are you looking for a way to put your kids through college? Are you looking for a way to put yourself through college? Figure out what is going to be the driving force behind your motivation.
HOW are you going to accomplish this?
Who's money are you using? How much do you have to work with? What do you already know? What do you still need to learn and what do you need to do it?
SET GOALS
If you're reading a book to expand your knowledge, give yourself a deadline for finishing it.
If you want to close your first deal in 1 month, write out an action plan of how you're going to achieve it.
If you want to make enough money to go on your dream vacation, set a time frame for it.
If you want to retire by a certain age, map out what you need to earn each year to do it.
If you want complete financial freedom, start your education now!
Friday, January 14, 2011
Real Estate - Not Just for Realtors!
Everyone talks about what a bad idea getting into real estate is just because it's in a down market right now. But they have not idea how wrong they are! A lot of people are uneducated about the real estate industry and people tend to be scared of what they don't know. Many people's personal housing experiences have left a bad taste in their mouths and they have slandered something they never took the time to fully understand in the first place. Many times people underestimate the difficulty of what they are undertaking and overestimate their ability. What we need now is more people to be educated about smart investing and savvy decision making when it comes to their investments. Now is the time to reset your thinking. Now is the time to look outside the traditional box.. Just take a step back, look at the bigger picture, and be open to learning.
It used to be that the stock market was the place to keep your investments, but within the last few years it has been one of the most volatile, unstable places to choose to keep your hard earned money. It lacks structure making it an easy place to make expensive mistakes. You're the only one that tells you what you're doing and how you're doing it - there's no guarantee that you'll come out ahead.
CD's are safe and insured, but what about if you need to access your money earlier than it's maturity date? You have to pay to have access to what is already yours. They don't give you the freedom to make your own decisions. It puts your money on a pedestal that makes it unobtainable without consequences.
Granted IRA's offer more options than CD's and the stock market and they're safe, but you still can't get access to what is already yours without consequences and you get extra tax penalties for being under 60? That's just crazy talk.
That's why we're so passionate about real estate investing and the reason we're creating this blog. We want people to be aware of the endless possibilities real estate offers! When most people think about real estate investing they think of being a landlord or rehabbing and flipping properties, but there is so much more out there. We are going to take the time to catalog all the options so you can see the broad spectrum of what's available to anyone and everyone!
It used to be that the stock market was the place to keep your investments, but within the last few years it has been one of the most volatile, unstable places to choose to keep your hard earned money. It lacks structure making it an easy place to make expensive mistakes. You're the only one that tells you what you're doing and how you're doing it - there's no guarantee that you'll come out ahead.
CD's are safe and insured, but what about if you need to access your money earlier than it's maturity date? You have to pay to have access to what is already yours. They don't give you the freedom to make your own decisions. It puts your money on a pedestal that makes it unobtainable without consequences.
Granted IRA's offer more options than CD's and the stock market and they're safe, but you still can't get access to what is already yours without consequences and you get extra tax penalties for being under 60? That's just crazy talk.
That's why we're so passionate about real estate investing and the reason we're creating this blog. We want people to be aware of the endless possibilities real estate offers! When most people think about real estate investing they think of being a landlord or rehabbing and flipping properties, but there is so much more out there. We are going to take the time to catalog all the options so you can see the broad spectrum of what's available to anyone and everyone!
Wednesday, January 12, 2011
Let Us Introduce Ourselves...
We are Jason Smith & Kelly Graham of Smith & Graham Investments. We have dedicated our lives to Real Estate Investing and helping others realize their full financial power through making educated and strategic investments. Please join us to learn investing methods and techniques, learn about what's happening in the industry, and some guidance on how to make yourself successful by exploring real estate investing for yourself.
All the Best,
Jason & Kelly
All the Best,
Jason & Kelly
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