Jan 2014 SEIREIA Meeting - Brief Summary of Our Monthly Meeting

WAHOO!! We had a great showing of NINE people at our meeting last night! I'm told that it was because I sent the reminder out last Friday giving them more time for it to make it onto their agenda. Someone else told me Friday was too early because by the next Thursday they've forgotten about the meeting already. So I guess I'll need to send three reminders: one on the Friday before, another on the Tuesday before, and one more on the day of just to keep it in the front of everyone's mind. Feedback is wonderful! It helps me know what I can do better at getting the word out to you all. Thanks!

We learned about what projects each investor was working on and how it was improving their  understanding of real estate investing. Some of the highlights included:

Barbara Zitzman-Smith was working on a Tax Lien purchasing project on a property in Ohio. Seems like she's going to foreclosure on a house in a great neighborhood that she bought for $5k in taxes. What a coup!

Shane Hayes is cultivating some contacts for some exciting funding opportunities and he's been doing some Probate Prospecting. He's promised to tell us all about it in an upcoming meeting.

Dennis Leonard updated us on the saga of the intransigent gentleman from Boise with a vacant house in Idaho Falls and gave us some thoughts on prospecting using real estate agents.

Michael McGuire cheered about the sale of his Partnership's sale of their house on Falls Dr and shared with us what it's like to have discovered a renter that DIED in one of his apartments. We determined that we should all make sure we have a place in our rental/lease agreements that asks for "NEXT OF KIN."
Oh yeah!

Dennis Warr was excited about finishing the rehab on our flip house on Spratt. The carpet goes in on Monday! Yay! He mentioned that we are working on some other projects around town and out of town.

We had a new investor join us from Blackfoot named Mike Fresh. He's got a couple of SFR rentals and is looking to really go to town down in his neighborhood.

Rob Empey shared what he's learned from the two flips he and his partner did last summer. He's realized that in this climate area, it's best to buy and fix in the Winter so you can sell in the Spring and Summer. I heartily agree!

I talked about how important it is for RE investors to think "OUTSIDE the box." Case in point: our duplex in Rexburg where we are working on a Reverse Subject-To Contract where we may sell our house with a basement apt to our renters who need some time to fix their credit while we figure out a way to pay off the amount that we are upside down on the 2nd mortgage. It's a mess, but our knowledge of RE investing and thinking outside-the-box may just get us all out of this situation without destroying our good credit with a short sale.

Lastly, but certainly not least-ly, Dorothy Swiesz joined in by telling us of her many investments, which she is waiting to pay her back with lots of interest. She is excited for them to come back in so she can turn right around and reinvest them again!

Everyone had so much to share and we learned many things from each other.

EDUCATION SEGMENT
For the edu-segment of the meeting, I shared another RE Investing strategy that I had learned about the week before from reading a LinkedIn post and comment thread. Joe Villaneuve was the commentor that talked about his system called the RECapSystem for what he calls his Flip to Hold strategy. You can find more about it on his web page where he invites you to take his classes (www.recapsystem.wordpress.com). The most important points that I learned was that an investor can look for un-lien-able funds that are not attached to a specific property (e.g., equipment leasing, hedge fund partners, etc.) with which to purchase and rehab your flips. That way you can use the same funds over and over again by purchasing/rehabbing with cash, then getting a bank loan to refi out 80% of the ARV, which you can then use to buy and rehab another house. Meanwhile, he puts a renter into the first property to pay the mortgage payments on the bank loan.

You can only do this 10 times by yourself (until loan(s) are paid off) because the banks will only allow 10 loans per investor at any one time. But with a Joint Venture Partner,  you can use the JV partner's money and do it 10 times again. With 10 or 20 or however many cash flowing properties, the investor uses the cash flow from all but one property to pay off the property with the smallest loan. When that one's paid off, you can go buy another property with that JV partner. That's a possible 20+ properties for you and one JV Partner that are all working to get each house paid off one at a time at a very quick pace AND you did it using the same dollars over and over. This strategy has the potential to create not only additional invest-able funds, but to create cash flow for you to live on while building your million-dollar real estate portfolio.

Thanks for reading this very long post. I hope to see you all at the next SEIREIA meeting next month for SEIREIAs investors only.

Merry Christmas! Education Subject Poll - Response Needed

I'm preparing for the next SEIREIA meeting upcoming this Thursday at 5:45 pm. I'm pondering what information would be the most helpful to present during the Education segment for the meeting.

I'd like to get some feedback from the SEIREIA members as to what questions you have or information you need to help you move forward with your Real Estate Investing business. Please feel free to ask your questions and/or give me that feedback in the comments below. Here are some topics that I'm considering...

1) How to avoid over-rehabbing, one of the biggest pitfalls for new investors.
2) How to market your FSBO property
3) Where to find funding for your real estate purchases
4) Setting RE Goals for the New Year

Please let me know if one of these or some other topic suits your fancy.

Thanks,
Marti

2 Important Reasons Why Attending a Real Estate Club Is A Good Idea

Build Your Investing Team Through Your Local REIA

A very important group of players for your power team are other real estate investors. One way you can find these investors through Investor Forums, through local real estate clubs, or through web-based real estate clubs.

1) We might use these investors as mentors, but more importantly, they are used to aid in your exits. While attending real estate clubs or chatting with other students, you might find out that one investor is interested in buying beat up homes to rehab and sell. You might also find another investor that likes to buy raw land and develop it.

2) Knowing investors in the area can be powerful because you can invest with those investors in mind. For example, you could speak to the one interested in land and find out where he or she likes buying land and find out specifically what he or she likes or avoids. And then you can find property specifically for him or her. Call the investor up and show images of the property and information on the property including historic values and the neighborhood and then work the deal before you make your investment.

Having other real estate investors can provide the investor with a constant buyer for investments. The investor can reach out to relationships and invest with the end in mind much easier knowing that other investors are anxious for the deals that [you] can provide. 

(Basic text from www.taxlienvault.com, edited by Marti Castle Warr)

Buying a HUD Home: The Ultimate Investor's Guide to Getting a Great Deal on a HUD Home

Hello everyone! Yesterday, 7/12/2013, was our monthly morning meeting for SEIREIA and we had a wonderful session on buying HUD homes. I combined a recap of my experience with buying from this organization as well as some juicy tidbits from an article of the same name by #Mark Ferguson on The BiggerPockets Blog (a place you should really check out for great real estate investing information). Mark had some really good tips to share and so I share them with you here in a very condensed version.

Things to Know About Buying HUD Homes

Before you find a HUD home that you want to pursue, you need to know the following:

1. If you are acting for yourself (no RE agent), make sure you are registered to submit bids on the HUDhomestore.com website.
2. If you are using a RE agent, make sure they are registered to submit bids on the HUDhomestore.com website.
3. Make sure your RE agent's broker has a NAID number. It can take up to 6 weeks to get one.
4. For an investor, do not depend on getting your Earnest Money back if you back out of a HUD contract. There are no contingencies for investors (though there may be 1 or 2 minor exceptions to this). You must be certain you can and want to proceed.
5. HUD does not pay for Title Insurance and closing costs.
6. HUD does not turn on utilities for inspections. However, the investor can and should, though HUD will not refund earnest money because of repairs discovered from the inspection. The house is being sold "as-is." You should know that going in. During winter, HUD will charge $150 to re-winterize, if you as the buyer turn on the water. However, HUD WILL pay for past owed balances and liens. HUD does an inspection on each home before listing called a PCR. (Look for it in the addendums tab in the HUDhomestore.com listings.)
7. If something happens and you need an extension to the closing, the buyer will pay HUD costs as follows:
1. If the purchase price is less than or equal to $25,000 -->  $150 ($10/day X 15 days).
2. If the purchase price is greater than $25,000.01 up to $50,000 -->  $225 ($15/day X 15 days).
3. If the purchase price is greater than $50,000.01  -->  $375 ($25/day X 15 days).
   In any case, should the whole 15 days not be required, this fee will be prorated and the unused portion refunded.
8. There are 2 types of HUD home offerings: 1) FHA Insurable or 2) FHA Uninsurable
1. FHA Insurable homes 
1. Have less than $5,000 in required repairs.
2. Are listed with a 30 day restriction on bidding for Owner-Occupied bidders (OOs) only. Investors may bid starting the day after this exclusionary period is over. 
3. Do NOT try to cheat the system!
   For those who may consider "fudging" on this exclusion, Mark Ferguson says the following, "There is no way around this rule as an investor, unless you are willing to risk committing a felony punishable by up to five years in prison and a $250,000 fine." He says further on "At the very least HUD will immediately cancel a buyer's bid and take their earnest money if they find out a buyer is posing as an owner occupant. If you don't think you will get caught, there are many investors who would love to bid on HUD homes in the owner occupant period who pay attention to who is buying them and would love to turn in cheaters."
2. FHA Uninsurable homes
1. Have greater than $5,000 in required repairs.
2. Are listed first for 7 days in a lottery for government and non-profit agencies to bid and may or may not be listed on the MLS during this period.
3. After the 7-day lottery period, there is a 5 day owner occupant bid period.
4. Investors may bid on the 6th day after owner occupant bid period starts (see tips below).
5. NOTE: HUD stops the clock on the bid period when a bid is accepted. A HUD home listed for 45 days on the MLS may not yet be eligible for investors if the home was under contract for 30 days.
9. Visit HUDhomestore.com and search the listings for State: Idaho, County: Bonneville. All the information is available for each listing to know what bidding period the house is in and who is eligible to bid.
10. HUD does NOT allow assignments, a wholesaler will have to buy the home before selling it.
11. HUD will require a proof of funds letter on cash offers.
12. You must send in a cashier's check from your bank with your initial contract for earnest money, which means you must have the funds available. If HUD doesn't accept your bid, they will refund your money.

Trick to Use as an Investor

1. Bid on FHA Uninsurable homes. You can bid on the 13th day of listing vs. the 31st day for Insurables.
2. Bid as early as possible. HUD's Asset Management Companies review all bids received on the next business day after the OO period expires.  If the property is still on the website, it is still available for bidding.  Some AMCs accept bids as early as 6AM after OO period expires. Soooo, Investors should bid just after midnight on the day after OO period expires. (Day 6 after the OO period starts.)
3. Mark bid as "Hold for backup" for 2 reasons:
1. HUD will not make buyers stick to a bid marked "Hold for Back Up" if HUD accepts their bid and they do not want to proceed. (This is one of those minor exceptions I mentioned earlier.)
2. If the property comes back on the market (because, for instance, an OO contract fails), HUD reviews all the back up bids before they put the property back on the market.
3. There is a high cancellation rate on OOs on Uninsurable HUD homes. OOs financing often takes weeks. By the time the first OO decides to back out, the other OOs have moved on, then in comes the back up bids.
4. Early in the bidding HUD allows AMCs to accept bids with a net price to HUD of about 11% below asking price. Net price = bid minus commissions and closing costs. If an investor does not ask for closing costs, then the AMCs can accept a bid of about 5% less than asking price. However, if the home has been on the market for 60 days or more and there are no other bids, the AMC can ask for a special bid approval for less, sometimes up to 20% below asking. 
5. Even if you think your bid is too low for HUD to accept, submit it anyway and have your agent mark "hold as backup". HUD will keep the bid in the system and if the price is lowered, HUD will review previous bids in their system before they look at new bids.

There you go! Please feel free to comment, forward, or share this information with anyone interested. 

Happy HUD House Hunting! 

Idaho Sawtooth Mountains