Buying a House for Pennies on the Dollar

Can you really buy a house for Pennies on the Dollar?

Yes, you really can, and I have. And yes, there is a catch!

Recently a partner and I purchased a home that is worth about $300,000 for just $140,000. In case you don't have a calculator handy, that is 46 cents on the dollar.

This is a nice house in a nice neighborhood. So, what is the catch? Well, actually there is more than one.

Catch #1) ALL CASH and QUICK CLOSING

When you find a house that you can buy at a price significantly below the market value you must have access to a large sum of money that is available immediately. We had to close in less than three weeks from the time we found this deal.

Three weeks isn't enough time for traditional lenders to even finish determining if they think you will pay them back. Then they need to spend several more weeks scheduling and evaluating the house you want to buy. The bottom line is, a fast close for a traditional lender is six weeks and most won't get done in less than twelve weeks.

So, if you cannot get the money fast, then the deal will get away from you.

Catch #2) Lenders Will Only Consider the Purchase Price

When you find a deal like ours, most lenders will look at the contract price of the property and will only lend a portion of that value. This will still leave you with the need to come up with anywhere from 5% to 20% of the contract price in order to make the deal happen.

Catch #3) Lenders Will Decrease the Loan Based on the Property Condition

When you find a house at a great price, in most cases it is going to require some repairs. If the repairs are too significant, the bank won't lend you anything, regardless of how low the purchase price is. They don't want to end up owning it in case you walk away with their money. If the repairs are within reason, they will decrease the stated value of the home by the amount of the repairs and lend you a portion of the decreased value.

Catch #4) Fixing the Property Requires More Cash

With very few exceptions any house you can buy for 46 cents on the dollar is going to need some repairs and some updating. To do the repairs and updating will require more money.

Our deal was no exception. We had to put on a new roof within days of closing to make sure we didn't have the inside get damaged from rain that would have come through the old roof. Then we had to clean out the house and make several other repairs. Lastly, we had to update the tiny kitchen by expanding it and improving it.

All of this requires a lot more cash, in addition to what we paid for the house at closing.

Catch #5) You Have to Pay While You Wait

When you get a loan to buy and fix a house, you have to keep making payments on the loan even though you aren't living in the house. If you get a loan that doesn't require payments, then you are just deferring payments while the interest is piling up. That is what is known as the cost of capital.

Catch #6) If the Repairs Aren't Done Right It is Still Your Problem

When you are doing it yourself or even having others do it for you, if the repair or upgrade is messed up, you are still on the hook. You will suffer more for it than anyone else in terms of money, time, and frustration.

Conclusion

Every week my team and I find and buy homes for pennies on the dollar. We work with a group of investors who make money with us by lending us the money to buy and fix these homes. We pay cash and close quickly. Then we fix up these homes and make sure they are done up right. When we are done, we want to sell them fast, so we put them on the market at a discount price. That way you save m0ney even while we make money.

While it is true that you can find and buy houses for pennies on the dollar, there are a lot of hidden downsides to doing this for yourself. We know and understand the problems with doing this. We do it every week.

If you buy a home from us, you will save yourself the time and frustration of trying to find one of these deals and you will save yourself the aggravation and disappointment of trying to buy and fix up one of these homes.

Why bother when instead you can let us to all the dirty work and you still get a discount on a beautiful home?

Tom ~

Why Buy Retail?

http://www.buyahousebelowmarket.com/

See my latest blog about what we do at The Gold Seal Homes Group: http://www.youtube.com/watch?v=ACJx3wpKezQ

JT Foxx's First Million in Real Estate

How to Become Wealthy

A very wealthy octeganarian recently told me the secret to his amazing wealth. We were chatting at a social event and after we had been talking for some time he leaned toward me and asked, "Do you want to know the secret to how to become wealthy?" When I nodded in anticipation, he told me, "Watch what wealthy people do, learn what they do, and do it."

On July 11 and 12 I spent two days with JT Foxx learning how he did over 500 real estate deals and how he does his deals today. Because JT is an active real estate investor when he teaches he is sharing methods that work today. Unfortunately a lot of real estate investment courses are taught by folks who made a killing in real estate a few years ago and they are teaching what worked for them back in the day. And, although that "day" may return, the real estate market continues to change and anyone investing using yesterday's tactics is likely to find themselves in legal trouble, financial trouble, or both.

In the interests of full disclosure, I have to tell you that I am a mentoring student of JT Foxx. That being said, you need to understand this: I have been investing in real estate for many years now and I have attended hundreds of hours of training from dozens of different companies and investor/instructors. Of them all, I have found JT's instruction and materials and support programs to be the most comprehensive and practical when it comes to investing in single family homes.

I will also disclose that I did not always want to do business with JT. When we first met, a couple of years ago, I found him to be abrasive in a number of ways. Since I don't have to do business with people I don't like, I took a couple of classes from him and then I went on my way.

Early this year JT called me up and invited me to attend his Mega-Partnering event in Los Angeles. Yes, he called me personally - this was not a voice-blast, teleconference, or webinar. I decided to check it out and I am glad I did for two reasons:

1. JT is a true student. He practices what he preaches. He teaches that we all need to keep educating ourselves and getting the coaching we need to improve and lift our game to new levels. The coaching he received since the last time I had seen him had really taken hold and he is a much better man now than he was then. His integrity is as intact as always, but he isn't the abrasive guy he used to be. This is someone I can do business with.



2. His Mega-Partnering event was phenomenal. I don't want to take up space here talking about it, but if you get a chance to attend one, you should make the time and go. You will meet more people who can help you in your real estate investing business in two days than you could in two years. The next one will be held in Chicago in September 11 and 12 (http://www.megapartnering.com/).

So, about the course in LA I just came back from... and why it would benefit every investor I know.

Some of what JT taught is what he has done right. He also taught what he has done wrong, which can often be even more valuable. If we can learn from our own experience that is good. If we can learn from others' experience, that is best.

One of the things he taught is the importance of approaching our real estate investing like a business. This includes understanding the need and uses of bookkeeping, accounting, and management reporting. I have to confess that this is something that I wish I had heard and done years ago. Nearly every investor I know tends to approach real estate more like a hobby than like a real business.

A real business knows every month how much money was made or lost.

• Bookkeeping is entering the data and


• Accounting is making sense of the data.


• Reporting is making sure you can see what is going on in your business. There is an old axiom in business, "what gets reported get improved."
  

I had several other "ahaa" moments during the two days. I would love to tell you more about what he taught, but that would be giving away his content. So, I will have to leave it at this.

If you have a chance to attend one of his classes, I encourage you to do it. If you are serious about investing in real estate I encourage you to get involved in his coaching and/or mentoring programs.

On this last point, I have met most of his coaches. Like JT they are active real estate investors and are living by what they are teaching. As a point of reference, many coaching programs are focused just on helping you overcome the attitudinal and behavioral roadblocks that are preventing your success. While that is worthwhile, it does not give you practical knowledge of how to conduct your real estate investing business and how to buy, manage, and sell your real estate. In fact, many of the coaching providers are coaching companies, subcontracted out by the big-name instructor and they are contractually prohibited from helping you or giving you concrete instruction regarding real estate investing. JT's coaches and mentors are not subcontracted out and they deal with the motivational roadblocks and with the practical instruction in real estate investing as well.

If you would like more information on:

1. How to be a private lender see the Investors page of http://www.buyahousebelowmarket.com/


2. How to become an equity partner, contact me directly at tsheppard@adbproperties.com


3. How to become a successful real estate investor, keep reading these blogs or contact me directly at tsheppard@adbproperties.com
   

Tom ~

Why Buy Retail?

http://www.buyahousebelowmarket.com/

4 Things to Determine Market Value of a Home

DISCLAIMER: The author does not intend to offer any form of legal or financial advice. All real estate sales involve substantial risk. Consultation with a qualified attorney is recommended. Also, there may be significant tax consequences. Consultation with a qualified tax professional is recommended.

It may sound pretty basic, but before you try to buy a house at below market prices, you need to actually know what the market price is. To understand the market value of homes you have to look at several factors.

1. What is happening in the broader market? All of these factors will have an effect on how much a home is actually worth.
   
   a. Are home prices in your area going up, down, or sideways?
   
   b. Is unemployment going up or down, or have there been any recent announcements of layoffs or hiring?
   
   c. How many houses are available all over the area?
   
   



2. What is happening in the local market?
   
   a. Is the neighborhood going up down or sideways?
   
   i. Do you see vacant houses?
   
   ii. Do you see unmowed lawns and signs of repairs that haven’t been made?
   
   iii. Are there any developments happening near or in the neighborhood?
   
   iv. Is there easy access to commuting, shopping and schools?
   
   b. How many houses are available in your neighborhood and in adjoining neighborhoods?
   
   i. Do you see lots of “for sale” signs?
   
   ii. How many “for rent” signs are there?
   
   



3. What is the condition of the house you want to buy and the homes immediately surrounding it? How much will it cost to buy the property, repair it, and pay for it while making the repairs (taxes, insurance, mortgage payments, HOA dues, etc.). If you fix the house up to make it your dream home, or just habitable, will it outclass the rest of the neighborhood? If the answer is yes, then you probably shouldn't buy this house. Even though you may plan to live here for the next 30 years, things happen and you could need to sell right away. If your house looks like a jewel in a pig's nose of a neighborhood, you won't get full value for the house because of the neighborhood.
   
   



4. How much are comparable houses selling for?
   
   a. To be sure a recent sale is truly comparable to the house you are looking at,
   
   i. Make sure you look at three to six home sales within ½ mile, within the last six months.
   
   ii. Take note, foreclosure sales are almost always well below market value, but they pull down the resale value for all houses in an area. This is usually a false deflation because they usually need lots of repairs before they are ready for occupancy. Unfortunately the cost of repairs doesn’t show up in the sale records.
   
   iii. After you know the values and compute the value of the house you are looking at, drive by the comparable houses to make sure they actually are comparable in size, finish, features, and neighborhood with the home you are looking at.
   
   

Using all the information you have gathered above, figure out what is the going price for houses in the area where you want to buy. Now, you can begin to look for a house you want to buy. At the Gold Seal Homes Group, our team of experts examines all the factors above for every home we buy and sell. We do this for two reasons:

1. We don’t want to pay more for a home than we should, and

2. We want to be sure when we sell you a home, it is already priced below market.

You can spend a lot of time studying the market, studying the neighborhood, finding comparables, looking at comparables, driving neighborhoods looking for a home and then trying to buy it. Or, you can come to the Gold Seal Homes Group, tell us what you are looking for and where, and then sit back while we do all the hard work and bring a home to you for you to buy.

When we find a home, in addition to all the hard work above, then we check out the home itself to determine the quality of the home. Because we actually buy these homes and resell them to you, we are taking on the risk of buying, just like you. We don’t want to own a house that isn’t a quality home anymore than you do. That is why you can be assured when you buy a home from the Gold Seal Homes Group it is a quality home at an affordable price, below market. That gives you peace of mind.

Whether you are looking for your first home, another home, or you are looking for real estate investment properties, we can find what you are looking for and sell it to you at a price which is below market and affordable.

Contact us today at igottasellmyhousetoday@gmail.com



Tom ~

Why Pay Retail?

http://www.buybelowmarket.com/