Thursday, November 12, 2009
Saturday, July 25, 2009
Marketing ideas
At our recent lunch here in Utah we were knocking around marketing ideas. Here are some things we talked about:
1. Have a prepared flyer to leave on door steps, car windshields, laundromat bulleting boards, grocery stores etc. (one for buying, selling, and for attracting renters depending on your business plan) so that you are always prepared to do some "farming" as you are driving around town. They should be small (about 4x6 max) so they don't take up alot of space.
2. When one of these people call, offer to host a FREE real estate "roundtable" discussion for 5 to 10 people to get their needs and wants. This will help them get to know you.
3. Sign up for LOCAL events that allow you a space or a booth (strawberry festival, founders day etc.) to promote your knowledge. Have a bowl of treats to attract the kids and the parents will follow. Offer a give away (like a Home Depot gift card) that they have to enter to win. You may not sell them at the event but you will create a great phone list.
4. Magnetic car signs on your vehicle to promote your business. An interesting point about this one... A particular investor said he wasn't sure if he had gotten any business from the signs but he said... "When I come out to my car and see the I BUY HOUSES sign on my car it definitely puts ME in the right mindset.... almost like a challenge to myself"..
1. Have a prepared flyer to leave on door steps, car windshields, laundromat bulleting boards, grocery stores etc. (one for buying, selling, and for attracting renters depending on your business plan) so that you are always prepared to do some "farming" as you are driving around town. They should be small (about 4x6 max) so they don't take up alot of space.
2. When one of these people call, offer to host a FREE real estate "roundtable" discussion for 5 to 10 people to get their needs and wants. This will help them get to know you.
3. Sign up for LOCAL events that allow you a space or a booth (strawberry festival, founders day etc.) to promote your knowledge. Have a bowl of treats to attract the kids and the parents will follow. Offer a give away (like a Home Depot gift card) that they have to enter to win. You may not sell them at the event but you will create a great phone list.
4. Magnetic car signs on your vehicle to promote your business. An interesting point about this one... A particular investor said he wasn't sure if he had gotten any business from the signs but he said... "When I come out to my car and see the I BUY HOUSES sign on my car it definitely puts ME in the right mindset.... almost like a challenge to myself"..
Monday, June 8, 2009
Buying a foreclosure with Tenants in place
So I have a broker in Arizona that I used to work for. She is very sharp. She has had her attorneys review the act (I pasted it below in it's original form). READ ALL THE WAY TO THE BOTTOM because I have posted her attorneys interpretation of this as well.
TITLE VII—PROTECTING TENANTS AT
FORECLOSURE ACT
SEC. 701. SHORT TITLE.
This title may be cited as the “Protecting Tenants at Foreclosure Act of
2009”.
SEC. 702. EFFECT OF FORECLOSURE ON PREEXISTING
TENANCY.
(a) IN GENERAL.—In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date ofenactment of this title, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to—
(1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and
(2) the rights of any bona fide tenant, as of the date of such notice of foreclosure—
(A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or
(B) without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90 day notice under subsection (1),
except that nothing under this section shall affect the requirements for termination of any Federal- or State-subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants.
(b) BONA FIDE LEASE OR TENANCY.—For purposes of this section, a lease or tenancy shall be considered bona fide only if—
(1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant;
(2) the lease or tenancy was the result of an arms-length transaction; and
(3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit’s rent is reduced or subsidized due to a Federal, State, or local subsidy.
(c) DEFINITION.—For purposes of this section, the term “federally related mortgage loan” has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).
Her is the opinion of her attorneys on HOW this will be applied:
***ATTENTION***
NEW LAW REGARDING FORECLOSURE PURCHASES
On May 20, 2009 President Obama signed a federal law which is intended to govern the rights of tenants subsequent to a foreclosure. While we have been unable to obtain a copy of the final language that was signed into law, it appears that the drafts of the statute give certain rights to tenants (not the former owner) of properties that were foreclosed. (There are several copies available by completing an internet search; however, the statute is unavailable on a governmental website). NOTE: we are giving you our understanding based upon a consensus of drafts of this new law. We will continue to post what appears to be the most current version of the law at Federal Law.
Under the new law the following rules apply if you purchase a foreclosed property where there was a "Bona Fide" Tenant in the property before the Notice of Sale:
1. You have to honor the Tenant’s lease, unless you are purchasing the home to occupy as your primary residence then 90 day notice of termination required.
2. If the Tenant has no lease, but is month to month or otherwise, 90 day notice of termination required.
A "Bona Fide" Lease or Tenancy is one where the Tenant is not the mortgagor, or his/her child, spouse, or parent, is an arms length transaction, and the rent is not substantially less than fair market rent.
Prior to this enactment, in Arizona, purchasers of property at trustee’s sale took the property subject only to higher lien holders and terminate the rights of any tenants pursuant to A.R.S. § 33-811 (E). The new federal law intends to override the state statutes and govern the rights of purchasers of property after a foreclosure. Therefore, as provided therein, a purchaser may not be able to obtain immediate possession from a tenant in a foreclosed property.
A legal analysis of the new law raises several concerns: 1) that this federal law impermissibly impedes on the rights of the States, the real property rights of individuals, and therefore the new law is unconstitutional, and 2) that the federal law is inapplicable to properties purchased at trustee’s sales because in Arizona "Foreclosure" is a term that refers to Judicial sales not Trustee Sales. However, it will be many months until we receive court decisions on these issues.
For now, you need to understand that if you purchase a foreclosed home which is occupied by a "Bona Fide" Tenant, you will likely have to honor the lease, or at a minimum give the tenant a 90 day termination notice. Therefore, if you file an eviction against the former owner (mortgagor) based upon a demand for possession, your case may be dismissed if the court determines that a bona fide tenant occupies the property and the 90 day notice has not been given or if the tenant resides in the property pursuant to an unexpired lease.
This information is intended to give general information regarding a change in the law, it is not intended as legal advice in any specific matter.
TITLE VII—PROTECTING TENANTS AT
FORECLOSURE ACT
SEC. 701. SHORT TITLE.
This title may be cited as the “Protecting Tenants at Foreclosure Act of
2009”.
SEC. 702. EFFECT OF FORECLOSURE ON PREEXISTING
TENANCY.
(a) IN GENERAL.—In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date ofenactment of this title, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to—
(1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and
(2) the rights of any bona fide tenant, as of the date of such notice of foreclosure—
(A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or
(B) without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90 day notice under subsection (1),
except that nothing under this section shall affect the requirements for termination of any Federal- or State-subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants.
(b) BONA FIDE LEASE OR TENANCY.—For purposes of this section, a lease or tenancy shall be considered bona fide only if—
(1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant;
(2) the lease or tenancy was the result of an arms-length transaction; and
(3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit’s rent is reduced or subsidized due to a Federal, State, or local subsidy.
(c) DEFINITION.—For purposes of this section, the term “federally related mortgage loan” has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).
Her is the opinion of her attorneys on HOW this will be applied:
***ATTENTION***
NEW LAW REGARDING FORECLOSURE PURCHASES
On May 20, 2009 President Obama signed a federal law which is intended to govern the rights of tenants subsequent to a foreclosure. While we have been unable to obtain a copy of the final language that was signed into law, it appears that the drafts of the statute give certain rights to tenants (not the former owner) of properties that were foreclosed. (There are several copies available by completing an internet search; however, the statute is unavailable on a governmental website). NOTE: we are giving you our understanding based upon a consensus of drafts of this new law. We will continue to post what appears to be the most current version of the law at Federal Law.
Under the new law the following rules apply if you purchase a foreclosed property where there was a "Bona Fide" Tenant in the property before the Notice of Sale:
1. You have to honor the Tenant’s lease, unless you are purchasing the home to occupy as your primary residence then 90 day notice of termination required.
2. If the Tenant has no lease, but is month to month or otherwise, 90 day notice of termination required.
A "Bona Fide" Lease or Tenancy is one where the Tenant is not the mortgagor, or his/her child, spouse, or parent, is an arms length transaction, and the rent is not substantially less than fair market rent.
Prior to this enactment, in Arizona, purchasers of property at trustee’s sale took the property subject only to higher lien holders and terminate the rights of any tenants pursuant to A.R.S. § 33-811 (E). The new federal law intends to override the state statutes and govern the rights of purchasers of property after a foreclosure. Therefore, as provided therein, a purchaser may not be able to obtain immediate possession from a tenant in a foreclosed property.
A legal analysis of the new law raises several concerns: 1) that this federal law impermissibly impedes on the rights of the States, the real property rights of individuals, and therefore the new law is unconstitutional, and 2) that the federal law is inapplicable to properties purchased at trustee’s sales because in Arizona "Foreclosure" is a term that refers to Judicial sales not Trustee Sales. However, it will be many months until we receive court decisions on these issues.
For now, you need to understand that if you purchase a foreclosed home which is occupied by a "Bona Fide" Tenant, you will likely have to honor the lease, or at a minimum give the tenant a 90 day termination notice. Therefore, if you file an eviction against the former owner (mortgagor) based upon a demand for possession, your case may be dismissed if the court determines that a bona fide tenant occupies the property and the 90 day notice has not been given or if the tenant resides in the property pursuant to an unexpired lease.
This information is intended to give general information regarding a change in the law, it is not intended as legal advice in any specific matter.
Wednesday, June 3, 2009
Shawn Watkins teaching a Title Class
SATURDAY JUNE 27TH- LANDWOOD TITLE AND INVESTORS WORKSHOPS PRESENT- "TITLE RECORD RESEARCH AND UNDERSTANDING THE HUD-1"
Shawn Watkins has a background in real estate investing and title insurance. He has been a real estate investor for 14 years and held real estate licenses in California and Arizona. While working for Landwood Title Company as a title examiner, Shawn was responsible for handling over 550 files per month. Each file represented an insurable transaction that had to be thoroughly researched prior to the close of escrow and issuance of title insurance. Shawn was then put in charge of agent training for all of Tarbell Realtors’ agents. Teaching the agents the secrets of solid negotiations, contracts, title and escrow became a passion for Shawn and he launched Investor’s Workshops in March of 2003, a real estate investors club that is considered a genuine source of quality real estate education.
TIME: 8:30 TO 4:00 PM
LOCATION: EMBASSY SUITES, 1325 East Dyer Road Santa Ana CA
Register
Shawn Watkins has a background in real estate investing and title insurance. He has been a real estate investor for 14 years and held real estate licenses in California and Arizona. While working for Landwood Title Company as a title examiner, Shawn was responsible for handling over 550 files per month. Each file represented an insurable transaction that had to be thoroughly researched prior to the close of escrow and issuance of title insurance. Shawn was then put in charge of agent training for all of Tarbell Realtors’ agents. Teaching the agents the secrets of solid negotiations, contracts, title and escrow became a passion for Shawn and he launched Investor’s Workshops in March of 2003, a real estate investors club that is considered a genuine source of quality real estate education.
TIME: 8:30 TO 4:00 PM
LOCATION: EMBASSY SUITES, 1325 East Dyer Road Santa Ana CA
Register
Crucial Conversation with a seller
I have pasted an email conversation below that transpired between Chris Carlson (a friend of mine from California) and the owner of a duplex in Ogden, Utah. Start at the bottom and read up from there. This seller wanted $129,000 with 10% down and the balance payable at 6% amortized over 360 months due in 120 months. This is the real email that when back and forth.
Dear Wanda:
I appreciate your consideration. We are always in the market. Call us if your terms/price change to reflect the economic realities I spoke of in my last e-mail.
P.S. If cash Is what your father needs we have plenty, but we would need to talk about putting several of his holdings together in a package deal in order for us to give you more cash.
Chris
Thanks for sharing your concerns. We have talked about it and right now these are our terms. Maybe we can do business in the future when the market does rebound. Thank you for your interest.
Have a good day
Wanda
Dear Wanda:
I have no problem signing a QCD provided I am convinced of the neutrality of the title company holding it. Put yourself in my position. Would you want to have the Seller and note holder in possession of a QCD if you were the Buyer? Based on your security concerns, I doubt it. I also have no problem with using a collection company for the payment and impounding the taxes and insurance.
A $15,000 down payment is doable so long as your father understands that we must revisit the sale price and interest rate which I did not negotiate at all because of the terms. At the current time there is almost no liquidity in this multi-family market in Ogden so any cash I put into a deal is not going to be coming back into my bank account any time soon. It is invested for the long haul. This means I must be very selective as to how it is allocated since I do not have a bottomless supply of cash. My cash is worth more than gold these days so it has to buy me a lot of equity or cash-flow in order to convince me to part with it. Since $15000 seems to be the magic number there is an appropriate sales price and interest rate which accompanies that down payment. It is not $129,000 and 6%. I already had a conversation with your father relaying this concept but no numbers were discussed.
We recently acquired a similar property on Adams, 2 houses one lot, rent was similar, down payment was $8750 sales price was $87,500. I’m not suggesting that you need to match that price and terms for me to be interested but we have some work to do to make this come together. All my offers are based on economic realities that are present i.e rent, debt service, vacancy factor, maintenance, taxes, insurance, property condition, and current tenancy.
Cash is limited and my opportunities are many. I will do everything I can do to make a deal but I have to keep safe as well. Too much money has been lost by us not being careful. I’m the only one in this transaction that can lose money because I’m the only one with money.
It would be helpful if you could speak with your father and show him the original paperwork and get a bottom line price and interest rate so we can say yes or no and be done. I know this is an inconvenience for you. I appreciate all your help.
Chris
A downpayment of $15,000.00, a QCD from the buyer back to seller in lieu of default, the payment would also include escrows for house insurance and taxes. An escrow company in the area would collect the payment which would be an additional charge of $14.00 per month paid by the buyer, QCD held by the escrow company and they would disburse.
Thanks
Wanda
Dear Wanda:
I did not negotiate the price at which is more than this property is worth in exchange for a modest down payment and terms that allow it to cash-flow. If you have any questions do not hesitate to call.
Dear Wanda:
I appreciate your consideration. We are always in the market. Call us if your terms/price change to reflect the economic realities I spoke of in my last e-mail.
P.S. If cash Is what your father needs we have plenty, but we would need to talk about putting several of his holdings together in a package deal in order for us to give you more cash.
Chris
Thanks for sharing your concerns. We have talked about it and right now these are our terms. Maybe we can do business in the future when the market does rebound. Thank you for your interest.
Have a good day
Wanda
Dear Wanda:
I have no problem signing a QCD provided I am convinced of the neutrality of the title company holding it. Put yourself in my position. Would you want to have the Seller and note holder in possession of a QCD if you were the Buyer? Based on your security concerns, I doubt it. I also have no problem with using a collection company for the payment and impounding the taxes and insurance.
A $15,000 down payment is doable so long as your father understands that we must revisit the sale price and interest rate which I did not negotiate at all because of the terms. At the current time there is almost no liquidity in this multi-family market in Ogden so any cash I put into a deal is not going to be coming back into my bank account any time soon. It is invested for the long haul. This means I must be very selective as to how it is allocated since I do not have a bottomless supply of cash. My cash is worth more than gold these days so it has to buy me a lot of equity or cash-flow in order to convince me to part with it. Since $15000 seems to be the magic number there is an appropriate sales price and interest rate which accompanies that down payment. It is not $129,000 and 6%. I already had a conversation with your father relaying this concept but no numbers were discussed.
We recently acquired a similar property on Adams, 2 houses one lot, rent was similar, down payment was $8750 sales price was $87,500. I’m not suggesting that you need to match that price and terms for me to be interested but we have some work to do to make this come together. All my offers are based on economic realities that are present i.e rent, debt service, vacancy factor, maintenance, taxes, insurance, property condition, and current tenancy.
Cash is limited and my opportunities are many. I will do everything I can do to make a deal but I have to keep safe as well. Too much money has been lost by us not being careful. I’m the only one in this transaction that can lose money because I’m the only one with money.
It would be helpful if you could speak with your father and show him the original paperwork and get a bottom line price and interest rate so we can say yes or no and be done. I know this is an inconvenience for you. I appreciate all your help.
Chris
A downpayment of $15,000.00, a QCD from the buyer back to seller in lieu of default, the payment would also include escrows for house insurance and taxes. An escrow company in the area would collect the payment which would be an additional charge of $14.00 per month paid by the buyer, QCD held by the escrow company and they would disburse.
Thanks
Wanda
Dear Wanda:
I did not negotiate the price at which is more than this property is worth in exchange for a modest down payment and terms that allow it to cash-flow. If you have any questions do not hesitate to call.
Tuesday, April 21, 2009
Multi Unit financing
I have to give credit and thanks to Jeremy Peterson for the chart that he created. As you can see, conventional financing is not the preferred method of taking down multi family units. I have to say that I was surprised at the level of FHA buyers buying units. In order to qualify they have to occupy one of the units as their primary residence. Let's hope we don't see rampant lender fraud with investors stating that they will live in one of the units and then never actually do it.Monday, April 20, 2009
Book Review
I was given this book by my friend Tony Alvarez. Once I started reading it I finished it in 3 days. The author has a very "readable" style and I liked the fact that he was able to bring real life examples from his time with the Coca Cola company and not just catchy sayings. (although there are lots of those too)As the name implies there are Ten commandments for business failure but you also get a "bonus" Eleventh commandment which is "Lose your passion for work/for life." This chapter ties the whole book together with the following quote from George Bernard Shaw, "The reasonable man adapts himself to the world. The unreasonable man persists in trying to adapt the world to himself. All progress therefore, depends upon the unreasonable man."
What I have found throughout my entire real estate investing career is there has never been a shortage of people that wanted to tell me just how wrong I was for doing what I was doing. These people were usually the ones stuck doing something they didn't like for someone they couldn't stand. Of course they call themselves "realists" but like to call them cynics. I have a real passion for what I do and I think it is obvious to those that work with me.
Commandment three-Isolate Yourself. It can be really easy to get some success underneath you and think you are at the top of the food chain. When that happens the tendency is to stop paying attention to what got you there in the first place. To me that means making sure that you stick with the basics and don't get stuck trying to run your business from the top down but from the bottom up. As a real estate investor I NEED to be on the front lines talking with prospective sellers and buyers everyday. They have to be able to reach me.
Commandment six-Don't take time to think. Time to think is not a luxury. It is a necessity. It only takes one bad buy to wipe you out in the real estate game. The game changes so fast and sometimes I have seen investors "hoping" so hard that they try to make a marginal deal out of a nightmare. This can work the other way too. Once you have thought it through then take the right action to make it happen.
I definitely enjoyed this book. If you read each chapter and try to apply it to your business it should help give you some insight. It helped me do just that.
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