Real Deal REInvestor Network

Being in Real Estate, you definitely see a lot of interesting situations and properties. From doing walk through's on properties that were owned by Hoarders to seeing home remodeling projects that are equivalent Tim Allen's work. Last week though this was the first time I have ever encountered anything like this and talk about being in the right place at the right time. ( Or vice versa if they were actually looking for me :)

Well this is how the story goes, a few months back I helped one of my clients find a home for his family to purchase. This purchased happened to be a Short Sale that needed to go Freddie Mac in order to receive approval. When dealing with any government agency, you can bet your bottom dollar that it is not going to be a quick process. Luckily we got approval for this deal early last week, so next step was to schedule a home inspection. This is when things got interesting. Everything was going as it should, but then we heard a knock on the front door. Not thinking anything out of the norm, I figured it was the homeowners that came home early. I went to open the door to find there were two large guys standing there looking like they mean business. They turned out to be Department of Correctional officers and what was more interesting is that they asked for Alexander, which happens to be my first name. The first question I thought of was how did the find me. Just Kidding :) My buyers were right next to me looking at me like they just found out I was a criminal. I replied that my name happened to be Alexander, but I wasn't a known criminal in the State of Wisconsin. Luckily after I explained what I was doing there and that I wasn't the person they were looking for, we all started laughing. It turns out that person hasn't lived in the house for over 6 months, what a coincidence that I happened to be there during the time that the correctional officers came to find their suspect and my first name happened to be the same as his. Crazy! This just shows that Real Estate is never boring!

Thanks for Reading!
Alex Zokan

Realdealcommunity.com  

Here is an interesting article written about retaining your tenants and managing your cashflow. 

"It is impossible to be a landlord and not receive frequent requests to “help” your tenants. These requests normally revolve around payment of the rent – either to pay late or to pay a reduced amount. And the way you handle these requests has a huge impact on your business, and the life of your tenant.

First, let’s look at the request to pay rent late. Normally, the tenant has an excuse for paying rent late, such as a delayed check from an employer or social security. And sometimes the reasons are legitimate. However, you must never allow someone to pay rent late without consequences. The tenant who is paying late must pay a late fee, as should be standard with all of your customers. If you allow the tenant to pay rent late and not pay a late fee, you have set a dangerous precedent that will be spread by word of mouth throughout the park. Additionally, you must explain to the tenant that you will begin the eviction process as scheduled if the rent has not been received during the grace period, but still will stop the process as soon as the rent is received. For example, if the park sends out ten day demand letters on the 7^th of the month, then you should go forward with sending the letter, regardless of any advance request by the tenant. You can always call off the eviction process if the rent is received. However, you cannot afford to delay beginning the process as scheduled. That way, if the tenant is lying and is not going to pay the rent, you can kick him out in line with any other tenant who failed to pay the rent. Bear in mind that a lot of times the condition that forces the tenant to request to pay late is a structural change in the tenant’s finances that will eventually force him to leave the park. For example, the delay in receiving disability payments from the government may be the result of being kicked out of that program. Similarly, a tenant who claims he is getting paid late by his employer may actually have lost his job, or has been laid off due to lack of work. This problem is not going to go away in the near future – only get worse.

Requests to pay less than the required rent require the same proactive approach. If you agree to let a tenant pay less than the required amount, you will create a deadly precedent in your park. Nothing will put you out of business faster than receiving partial rent every month – none of your bills can be paid with partial payments. But the truth about letting a tenant pay less than they owe, including no rent at all, and not evicting them is that you are really setting them up for losing their home and putting them out on the street. You have become an accessory to the crime. The fact is, if you let the tenant get more than one month behind on their rent, they will never be able to catch up. It is very hard for the average tenant to manage their finances well enough to pay the existing month’s rent, much less an even greater amount. If you force the tenant to pay the rent or be evicted, then you force them to take immediate action to solve their financial problem. Maybe they need to get a second job, or change their payment priorities, or get a bridge loan from a relative. The sooner they focus on their finances, the faster they will get back out of trouble. By letting them pass on their rent, you are basically loaning the tenant money – a loan they will never be able to pay. Think sub-prime predatory lending, because that’s what it is. And the result will work for them as well as it has for the mortgage industry. When you don’t force the issue that very month, you are actually doing a disservice to your tenant. And their family and any other person living with them, who is soon to be homeless. In a mobile home park, the rent is relatively low – maybe $200 per month – and well within the reach of any person even earning minimum wage. It’s not a money issue when a tenant can’t pay – it’s a prioritization issue. They are testing you to see if you are one of the bills that can be rolled when that big screen T.V. is on sale, or there is an Aerosmith concert to buy tickets for.

So how do you respond to a rent request from a tenant. First, tell them that you have systems in place that do not allow for customization. Explain that you have to continue with the eviction process no matter what, but you will call it off once the rent has been paid in full, plus the appropriate late fee. It also helps to tell the tenant that you are not the owner (even if you are) and that your boss (even if you are the boss) doesn’t allow any rent deals. This is the type of response that the tenant is used to hearing from the more important bills he has (car payment, charge card, utility company) so he will immediately group you with the “have to pay” bills.

Nobody likes to be the “tough guy” with their tenants. However, when it comes to the rent, “tough love” is imperative. So do your tenant and yourself a favor, and don’t give in when tenants call you about rent."

By Frank Rolfe

This article sheds a lot of light on why trying to be the nice guy isn't a good investment strategy. In all actuality it is paramount to become stringent on rules for rent collection than risk being in the position for the renter to take the advantage. Also, if someone knows that they can pay their rent without consequence they also have the chance of getting so behind to the point that they aren't able to get current anymore, in some respects you are helping them develop a habit. Lets face it, things happen to everyone sometime where they might be in a crunch for a short time, but it is good to make sure they now there is recourse or a penalty for being late no matter what. Also word usually spreads in Mobile Home Parks fast! One little pass, could mean five other residents trying do the same thing. 

This book has some very important principles that if you want to save money and be financially stable you should live by them. The greatest lesson I learned from this book is to have your money work for you, not against you. The mentality is such today that you can buy things and pay later for them over time.  Barnum puts it well by saying when you have loans with interest payments you go to sleep your money working against you. Every hour that you have a loan, you are slowly getting poorer. The opposite of that is getting your money to work (obviously) for you. If you invest in a cash flowing piece of Real Estate, you will slowly build up riches. Whenever you are golfing, sleeping, or talking on facebook, you can rest assured that your money is work for you. Also, with this being said not all loans are bad. Acquiring additional capital to build a business or purchase a piece of real estate to accumulate wealth is fine and recommended. It is the things that are bought on credit like a big screen TV, or a house that you can barely afford.

Becoming Consistent with your habits

The other good principle I was reminded of was, that a lot of us are penny wise and pound foolish. So many people will go out of their way to save a buck, but then go out and spend money foolishly on pricey cloths or expensive drinks and dinners.  If you want to conserve your money, become consistent in saving. If you save in one area in your life make sure there is a budget in the others also. Just because you got a great deal on car, doesn’t mean that you can go out and by a boat. 

If you have been an investor for any period of time you are most likely to have seen those great deals that you CAN’T pass up on. Most likely though you passed up on it, why because you needed the cash now but you didn’t have it. How do you attain capital to start an investment portfolio? Well there are several ways to do this; you could win the lottery, get your foot ran over by a postal truck (not recommend) or find investors that looking for a safe return secured by Real Estate.  But aren’t Real Estate Investors are scary. That’s what I used to think too.

How do you effectively present yourself to an investor?

Have a very organized offering that you can professionally present to your prospective client. Remember you want to the investor to qualify themselves to you, not the other way around. I am all about working with people that qualify themselves out and integrating that philosophy more and more in my business.

The first step is to make a one page “product” offering. Show ways that clients can invest with you, different placement options and the deals that you specialize in. That last point is a VERY big thing, make sure you have a focus and be very knowledgeable about your market cycle! You want to make them your investor and more importantly a “go to” investor for life.

Another thing to keep in mind is don’t try to initially over deliver on you terms. Even if you can get your investors a 20% return on their money, don’t say that directly upfront. There are two reasons behind that, number one is most investors will not take you seriously and the second is that you want to give yourself room to over deliver on what they expected. See what other institutions are offering to their investors, for example have a guaranteed 5% return on their money, and let them do the numbers themselves on what they will most likely get. They will be a lot more surprised and excited once they find out the actual returns. Also depending on your investment strategy, if you were to say rehab properties and your usual turnaround time is about four months, tell your investors they will be borrowing their money for a year. There are also two reasons behind this also; the most obvious is if the project takes longer than expected. The second that your investors will be very impressed if you come in six months ahead of schedule and will be more likely to reinvest in another project immediately, because in their mind they have all ready borrowed that money for a year.

Summary of things to include in One Page offering

1.       Property Types you focus on. (Be Specific)

2.       Where do you do business.

3.       Ways they can invest with you. (offer more than one and make them qualify themselves for which suits them better)

4.       What percentage Loan to Value you work with.

5.       Your Turn-Key Solution for investing.

6.       Turnaround time (if applicable)

The way that the market is today, most investors are flocking toward stable properties with a steady return on their investment, but the question is what does that mean? With the crash in the stock and real estate market that can sometimes be a tough question to answer. There are various types of properties that can create an investor passive wealth and depending on your market cycle and what deals are available that will determine what types will provide a steady return. 

A property type that is catching more and more interest is Mobile Home Parks. There are several reasons why they are steadily gaining more interest and I will lay out the details to follow.

 

1.)    The first advantage of investing in MHP’s is because of the supply and demand. Cities are making it harder and harder to convert land into Mobile Home Parks and many are being converted into subdivisions. Each time a MHP is turned into a subdivision it leaves a lot of people displaced looking for another place to move their home. The nice thing about this property class is that in most areas it will be very tough for competition to pop up and steal residents, something that almost every other property class can’t offer. Also, in a down economy we realize the need for more affordable housing, we have found out that a lavish way of living isn’t always the most feasible. There also will always be a need for inexpensive places to live.

2.)    MHPs also have a very low turnover rate. The annual turnover of residents in community parks is estimated to be just 5 percent, compared with 60 percent for apartment rentals, according to a report prepared by the NAHB Research Center for the U.S. The cost of pulling up a home and moving out can make it very tough for this low-income population; moving costs can run from $3,000 to $8,000 for a double-wide.

3.)    Depending on the park most of them have a lot less maintenance issues to deal with compared to apartments. Unless the park owns all the mobile homes the only maintenance to keep up the parks infrastructure and enforce the rules so that the owners keep their home neat and tiddy.

4.)    They also have ways to generate multiple streams of income. Investors of MHP’s can offer rent to own options on the trailers, charge for sewage services, add onsite storage units, laundry facilities, and other services that can cater to the demographic. 

Everybody loves and dreams about a cool new car, house, boat, you get the point. While the newest and the greatest are the sexiest types of things to invest in and have, it may not only always be the smartest.

What the heck does this have to do with Real Estate? Nothing. Haha kidding. The point I am trying to make that if you buy the best expect to pay for it. But the real value and the best upside, is in investments that don't yet have there flash or appeal. If you are able to realize the potential of what an old run down office building can be, or what a dirty slimy mobile home park can turned into a clean affordable living option these are usually where the money is. Obviously, i'm not saying i'm going to go out and buy garbage, there has to be calculated and very promising upside. Out of the box thinkers are usually the ones who make the money. 

The good thing is a lot of the competition will be chasing after the next shiny object, when your quietly turning coal into diamonds. 

Wish you had a Crystal ball to predict your Commercial Real Estate Market Trend? 

It is very important as a Real Estate Investors to be very saavy on determining and predicting how the markets your investing in will pan out in the future. Determining the right time to invest in your market cycle can mean the difference of having a building with full occupancy that can fetch a high dollar on the market or one that is hard to lease and depreciating with the other buildings on the falling marketing with it. 

If your looking for a buy and hold strategy  its always going to be easier to make it through a commercial downturn if you had the opportunity to fill it in a bull market. For obvious reasons if you want to sell your building you want to be able time it right so that you have the opportunity to achieve a full occupancy during a bull market and be able to sell it before the market cycle turns down again. The ideal time to buy would be right when the market is going to transition for a bear to bull market.

Sounds all pretty logical right? Well I talked about having a crystal ball, but the truth is you can't have one!! But you can have the next best thing. A few days ago a good friend of mine Christian, led me onto a very useful resource for us commercial investors. The resource is made by Integra Realty Resources (IRR) and they assemble a very detailed report on the Market trends for every major market in the U.S and in different parts of the World. Split up in a very comprehensive way, listed by different Commercial Real Estate segments, show you all the trends and predictions that you need to stay on top of your game!

Check it out at www.irr.com
 

Hey Everyone,

Heres my next issue of my weekly blog entry. The other day while working on selling a restaurant for a owner, I had what I called an ephinany. The owner has ran the Restaurant for over 17 years now and what used to be a booming business has whittled down to barely paying the bills.

Is there something wrong with the food? No. Has the population decreased at all? No, its actually grown significantly. 

Today more than ever it is a challenge to get peoples time, because more people and things are competing for it. The other part of that is the same things that worked 15, 10, 5 and even a year ago might not work today. 

This caused me to have the idea that "If I can become good at marketing, I can be successful in anything." Ok, I realize it doesn't sound very flashy it doesn't sound very ground breaking, but it is 100% true. Marketing is a skill that we use everyday (not necessary well or enough) no matter what job, profession, or even if you don't have a job. Most of us just don't realize it, more or less utilize it. Is your business struggling, well I would suggest you take a look under the hood at your marketing plan, if there is anything to look at. If a business has a solid plan to market themselves that is put into action, can be altered to changing trends, and even when business is good still gets executed that will be one successful business. Most people are the biggested procrastinators in market, trust me I know one. ;) 

Would that restaurant have been able to keep its intial success over the years. Yes, it can be and it is done through marketing.

It all sounds good in theory, now I am taking the steps to turn it into reality. The foundational book that Danny Welsh recommends a well respected marketer is "Influence" by Robert Caldini. I am in hot pursuit of reading this and also working on compiling a swipe file. If you don't know what a swipe file is, its a compilation of ads or any type of marketing pieces that catch your eye that you can possibly use to help you with yours in the future. It can be completely unrelated to what business your in and be altered to convey your ideas. I have a long journey to go and I will keep updating everyone on it. Stay tuned. 

O yeah. Don't be afraid to be creative with marketing, make sure to make your material "Stand Out." (Unless you get to crazy and your parents threaten your life.) ;)  

Hey Everyone,

I am blogging today about my Business plans for the next 10 years. It took me a while to figure out what route I want to take and trust me I know it will be an ever changing plan. There are going to be opportunities and shortfalls depending on the different states of the economy and the availability of credit to business owners and investors. Unfortunately I cannot determine this, (Sure wish I could!! :) so I have a developed a plan for what my current outcast of where I think the lucrative side of the Real Estate Investing will be and what my plan will be to capitalize in it.

Phase 1: Residential 

I will continue investing, renovating, and selling single family homes for end retail buyers, that business will be ramped up to 10 a year by March 1st, 2010 of next year. This business will rejuevinate "tired" homes that are bringing down values of the homes in the area, these homes will be returned to the market in "like new" state with all necessary repairs and athsetics upgrades. The buyers will then be able to invest in a below true market value home that is a complete turn-key solution for them to move in their family. After all my residential listings on the brokerage side (retail homes) are sold, I will fully transition out of a Real Estate Agent into a full time Real Estate Investor. I plan to continue residential Real Estate investor for a period of three years eventually fully transitioning into Commercial Real Estate Investing.  

Phase 2: Commercial 

After I get some of the projects I am working on getting financing on closed, and the listings I have for sale on the brokerage side (being sold for Retail Clients) I will stop taking commercial listings on the brokerage side of the business. Starting in June 2010, I will start my transition into Commercial Real Estate Investing and learning more about the opportunities to be had in that side of the business. This will position me for the start of the Commercial Properties meltdown, that is projected to worsen in starting in Q3 of this year.

The start of my CREI career will be seeking after private money and investors to fund projects for teams like the HIS Real Estate Group. This will be away to build up creditibility and gain experience by being a part of large Real Estate Transactions. At about a year and a Half into this my Residential Rehabbing business will peak its capacity and start waning down to make the transition into full CREI. By this time, I will have the knowledge and the creditibility to start ramping up my Commercial Project and start taking on large commercial Project (i.e - Office Building, Strip Malls, Self Storage, and Mobile Home Parks)  In 2012 ( Im not talking about the movie :) my commercial business will begin to ramp up to replace my exsisting business in RREI, and by 2013 I will make an exit from the RREI and be full time in Commerical Real Estate Investing. 

This is just a rough draft, once I get more heavily in the business, I will find other enjoyable and profittable avenues to pursue. It will take me to have some experience with working with diffent property types to see which I enjoy the most. This plan also doesn't include future Joint-Ventures, I will be doing. 

Thanks for Reading! 

Alex Zokan - Billionaire in Training

Wow what an amazing experience we had at the last conference! Big Thanks to Rick Wheat and Jeff Kaller for putting on a content packed conference.  We all really enjoyed it, and were able to take home some great knowledge, that can be applied to our RE investing biz. The second thing was meeting a few of the MMM participants there. We all had a blast and here are the videos of our experience in Ponte Vedra, FL to prove it!

Will Duquette hypnotizing some of the MMM Participants!



Team Bonding





John C's video Testimonial from the Event, with a nice save.



Tour of the Marriott Sawgrass 



Cabo Dave Testimonial 

 

Cabo Dave and John C. making some Benjamins!



Hanging out with some new friends. 



Philip Sherman's Experience 



Paul Dengal's Experience 




Thanks for looking and be sure to attend the next up and coming events!!