When I started as a real estate investor, my main fear was that I would say something stupid to give away the fact that I really didn’t know what I was doing. I had read almost every course on the market, and probably picked up a little from each one, but I still didn’t know what the “rules” were when I entered the living room of the seller and started to discuss making a deal. Thankfully, your seller won’t know what the rules are either, as they don’t sell their home to investors every week.

When you have done this business for some time, you will realize that a house is a house. In other words, you’ll know the common problems that most houses face, how to fix them, and what it will cost. For example, on houses older than 40 years, you can usually count on at least some floor rot underneath the bathroom and kitchens because of small water leaks over time.

Remember that the seller WANTS TO TALK TO YOU. They have responded to a Magnetic Letter Mailing that you sent, and they are eager to get their real estate problem resolved. Furthermore, the reason they are having a real estate problem is that they have problems in other areas of their lives. If you come across as friendly and polite, they usually will open up to you and tell you their problems. Think of yourself as a real estate therapist. I’ve had many deals where a good foundation was formed between the seller and myself by spending time listening to their problems, and working to come up with a solution that would benefit them and give us the profit we needed to make on the deal.

I have prepared a loose script (in the following section) to help you understand what I am saying to my sellers when I go into their homes. This script is not from one particular deal, but many deals, though I tend to follow the same formula. As I am writing this, I just returned from a seller’s home, where I presented a written offer on the spot. This meeting is still fresh in my mind, and I think that this section should benefit those investors with “stage fright.” Note that the script examples are not meaningless hypotheticals. Rather, they are all based on conversations that I’ve had with sellers.

I dress casually, but not too nicely. If the neighborhood (or my seller) is more working class, I may wear jeans, but usually I’ll wear tan pants and a short sleeve polo type shirt.

Smile. “Hi, my name is Dave. I have an appointment to meet with Russina Wy.”

They’ll smile and invite you in. “Thanks for taking the time to meet with me today. You mentioned that you work during the days, and I know it must be hard to get away during the week. I really do appreciate you taking the time to meet with me, and I believe that I really can be of assistance to you” This is basically just a comment to let them know that you appreciate and honor their time, and that you are not trying to come off like a big shot investor. I would lead straight from this sentence into a general question that might lead to more conversation. Your next comment should be aimed at something that they have in their home, or a photograph of an interest (sky-diving) that you also have an interest in and could bond for a few minutes. I used to have a stock back up plan in case I froze up. Usually, they will have something on display that you can comment on.

For example:

“What an interesting painting, did you do that yourself?” or “Those are great miniature houses, do you collect those… (they respond etc.) …I have an aunt that is crazy over those. She goes all over the state to shows to find them” or “You must love to garden. You have some really wonderful plants in the front yard …(they respond etc.)… My wife and I are planning on putting in some butterfly bushes this spring. Yours are really thriving out there.” or “You have a nice looking family there in that picture, 4 boys? I just had my first, a little girl, earlier this year.”

Kids are the best thing to talk about. Even if you don’t have any, talk about your neighbors kids, or your sister’s kids etc. This is a subject that people like to talk about. If they are military, always ask them where they were stationed, if they had to travel much, and what their favorite places to travel to were if they were in Europe or outside the country. This brief interlude of casual conversation before business shows them that you are a regular kind of person, not a cold-blooded weasel-like real estate investor that is out to steal their home away from them.

After several minutes (usually 3-5 at the most), begin to go to work. By this time, you have established with them that you are not a cold-blooded weasel, you have some similar interests with them, and you are a decent and kind person.

“About 5 years”

2) “I noticed a lot of stores and things on the way in which must make it convenient to be in this area. When you sell your home, do you plan to stay in the same area?” (This is a good question because it often will get them to tell you their future plans, which are key. They may be leaving the state, or moving in with a boyfriend/parent or whatnot).

“No, I’m moving to Maine.”

“Wow, beautiful state from what I hear.”

“Yes, I grew up there.”

“Really, what brought you to Georgia, if you don’t mind me asking?”

“A bad marriage. I was divorced 4 years ago, and received the house as part of the divorce settlement. It has bad memories for me, I want to sell it and move back as soon as possible.”

Hopefully, the above question gets you to the point of where they are going, and why they want to sell. Right now, we can tell that the seller is not thinking rationally about the house (bad memories), and that they are in a hurry, which means lower sales price.

3) When are you trying to get this closed by?

This is a good question, because if they have a super-specific date, this may tell us more about their financial or personal situation. For example, “I need to close by January 14th so that I can pay my federal tax liens against the property.” Or, “I’m wrapping up my husband’s estate, and want to be out as soon as the probate is finalized, in around 6 weeks.” If they say, “No real date, I just wanted to find out what I could get for the house, or what the market would bear,” they may not really be motivated enough to strike the type of deal we need.

4) “I sell properties by putting my final and best price on the home. This seems more fair to my buyers, and makes the transactions I engage in stress free. Do you have a bottom line price on this home?”

Questions like this bring it down to a point. You can find out quickly what the seller is thinking on price, and whether you are close to making a deal.

5) After getting a price, if you can, ask how much they owe on the house. Then ask if they would be willing, if you could give them their price, to let you assume payments on the house for a period of a year, or two.

Also remember to be genuine and real. While all people are different, we are also alike in many ways. Even if the seller is from a totally different background from you, you are bound to have some similar interests that can create a bond and make them want to deal with you, and not your competition.

Nothing happens and nothing matters in real estate until you find a deal. You cannot put together a deal without a motivated seller and you can only convince a motivated seller to do something creative or that involves a discounted price. A motivated seller is one with a very good and pressing reason to sell below market.

The most common problem new investors face is finding bargain properties. Many who start out in real estate investing quit without ever buying their first property. They go through the motions of looking for deals for a few weeks or months and then decide it doesn’t work. They forget that finding motivated sellers is similar to the salesman finding his first customer . . . it takes persistence and hard work.

The truth is, you can find deals in ANY market. Real estate legend A.D. Kessler once said, “There are no problem properties, just problem ownerships.” The definition of a motivated seller fits squarely within Kessler’s idea. A logical person knows that time, money and effort can solve virtually any real estate problem. However, some people are too emotional about their real estate problems or have other motivating issues to deal with.

Some of these issues include:

• Divorce
• Lack of concern
• Inexperience with real estate repairs
• Time constraints
• Death of a loved one
• Job transfer
• Landlording headaches
• Impending foreclosure & other financial problems

1. Drive the Area

Spend a few weekends driving around the area. The goal for you at first is to learn about the area, the style of houses and the average prices. Over time, you may expand your farm area, but stick with areas that contain the type of homes you plan to purchase. It is not necessary to begin your investment career by learning every square mile of a large metropolitan area; it is important to learn the value of “typical” homes in your target areas. This knowledge will enable you to make quick decisions about whether a particular prospect is a bargain.

2. Attend Open Houses

Visit open houses and “for sale by owner” (FSBO) properties on weekends. Speak directly with owners and their agents. Pass out your business cards. Make friends. Word of mouth and referrals are a big part of any business.

Part of the process of finding a deal is to know how to recognize one. Take a good look at the property and its physical features. After viewing a couple of dozen open houses in the neighborhood, you will get to know the value of the properties and the different styles of houses. When someone calls you about a house in that area, you will know the value by its description.

3. Look for Ugly and Vacant Properties

While you are driving around neighborhoods, look for vacant, ugly houses. How can you tell if a house is vacant? Look in the window! Of course, this practice may get you shot, bitten by a dog or arrested. First look for the obvious signs of vacancy - overgrown grass, no window shades, boarded windows, newspapers, garbage, mail piled up, etc. If you are not certain whether the property is vacant, knock on the door. If the owner answers, be polite, respectful and ask if he is interested in selling. In many cases, it may be a rental property, so ask the occupants for the name and telephone number of the owner.

If the property is vacant, ask the neighbors if they know the owner. Most neighbors are helpful, as they know “ugly” houses hurt their own property values. In addition, ask the mailman - they know all of the empty houses on the block. Leave a business card and write down the address of the ugly or vacant properties. When you get home, look up the name and address of the owner. Finding the owner of a vacant house can be difficult, which is why the persistent people who find the information make the most money. The name of the owner can be found by calling your local tax assessor’s office or by looking up the deed recorded with the County land records.

If you want to contact the owner, it takes a little more digging. Try speaking with the neighbors or asking the post office for a copy of a change-of-address form on file for the property. Online services, such as www.infousa.com, will search public databases, such as the Driver’s License Bureau and the Department of Motor Vehicles.

Some cities, towns and counties will “tag” a house with code violations. This is often a sign of a neglected or vacant property. Ask your city if you can obtain a list of such properties or find where this information is publicly recorded.

Weight loss isn’t easy… ask anyone who has tried it. However, the concept of weight loss is very basic - burn more calories than you ingest and your body will react accordingly. Unless you have a medical disorder, this formula works for just about anyone. Simple as it may be, the formula is HARD, meaning it takes a lot of DISCIPLINE AND HARD WORK. So, the weight loss industry has offered us thousands of ways to make it easier. Many of these solutions do work, but they only work if you put forth effort.

Now, let’s start with the premise you don’t need any of these “solutions” to make real estate OR weight loss work for you. You can eat less calories, go walking or jogging every day and you will lose weight. But, having knowledge of the caloric content of different foods is relevant. Also, for many people, knowing the carbohydrate content is relevant. Having the advice of a physician, dietician and personal trainer will help you prevent injuries and maximum your effort.

Same principle applies to real estate - you can go out and make hundreds of offers to motivated sellers and find a good deal. However, having information about how to solve the seller’s needs and construct an offer will help. Having an attorney, real estate agent or “guru” to assist you with constructing the offer and the paperwork will make it easier. Having advice from other people who have already done hundreds of deals will also make it easier for you to learn from other people’s success (and failures).

However, whether it’s weight loss or real estate, the bottom line is not just knowing, but DOING. You can’t blame the diet if you don’t stick to it. Many people have successfully lost weight using the ZONE, WEIGHT WATCHERS, ATKINS and other similar plans. Many people have succeeded with the famous “guru” plans, but many have failed, likely because they didn’t give the required effort, NOT because the plan isn’t effective.

Both real estate investing business and weight loss are simple, but neither is easy. It takes a lot of work. Having a proven “system” or plan helps, but only if you stick to it. If the diet plan says, “exercise 3x times per week”, you can’t be sloppy about it and expect results. It’s like the people reading a book on the treadmill at the gym - if you can read a book, you’re not working HARD ENOUGH. Likewise, people call newspaper ads and say “hey, you wouldn’t want to sell me your house cheap, would you?” This is not DOING it is TRYING. You have to give 100% to a particular plan or formula before you say, “this stuff doesn’t work.”

Many people who are interested in weight loss join a gym or hire a personal trainer. From personal experience, I can say that both are great for weight loss. But, the weeks I didn’t show up, it was a BIG WASTE OF MONEY! The same thing goes for a real estate training system or mentor program - if you don’t put forth any effort, it won’t work! And, of course, you’ll likely get bitter about all the money you spent and blame the guru. After all, it can’t be YOUR fault!

That brings us to another topic - the “scam” side of the real estate and weight loss business. Sure, the “magic pills” that melt off fat are probably a scam. These snake oil salesman are offering the lazy and desperate people a solution - no work and results. Hah! If you bought into this scam you deserve to be parted from your money. Likewise, any real estate guru who promises riches with no work is also a scam. My favorite promise is “no selling involved” - that’s the biggest lie ever told.

No business can be successful without a certain amount of selling of their product or service to customers - period! So, while there is a dark side to the weight loss and real estate investing information businesses, I assert that most people fail at both because of their own lack of action, not the fault of the “systems.” If you aren’t willing to work, another weight loss program or real estate seminar won’t get you any more results than you are currently getting - save your money and take MORE CONSISTENT ACTION with what you are currently doing.

However, if you are willing to work hard and take a lot of consistent action, a guru or program will likely give you more results. If you bought a book, course or program and already have results, another program, course or book will likely give you tools to get MORE RESULTS. I often hear about successes people have with my real estate programs, but a lot of them are not FIRST TIME successes. They are most often people who have already been successful, and, using my tools, became MORE successful.

If someone asks me whether my program will make them successful, I ask, “what other programs have you bought?” If they have already spend thousands on other programs and have done NOTHING, I discourage them from buying mine. These people are looking for the elusive “holy grail” that all the other programs left out. More than likely, the missing element is lack of action on their part.

If you aren’t willing to take action on a massive scale, you won’t get more results by buying more products. If you have the discipline to work hard and take consistent action, then products and services will help you get there faster. Whether you are looking to get rich or lose weight, the bottom line is YOU!

This report is going to explain or attempt to give the stock market investors a basic one-on-one interview with a real estate portfolio manager who has consistently made a profit on 100% of the investment products that were actively chosen and managed. Never a loss, always tax advantaged and sheltered.

This report will not contain any high-tech, gobbly-gook, stock market charts, graphs, trends, analyst picks, projections, company reports or insider tips. In real estate, you personally have the power to develop and create all of those things yourself and I for the life of me could never trust other people’s second hand opinions or publicly disseminated information to get the jump on the herd.

Now if I were a company officer, or majority voting shareowner, or a paid agent of those individuals, I might think differently, for the simple fact that I am getting the jump and I can make some dinero if I know something the majority does not. Overall, people are told to build companies so they can sell it to the public through offering pieces of their company to the public in the form of stock. So I know from the very beginning that the owners of companies are selling me a piece of paper which they say is worth a certain amount of whatever value a dollar is worth at that time.

Let me see if I understand this. I transfer my hard-earned cash and I pay a fee and/or commission to do this, and you give me a fancy certificate and a promise that this represents a solid investment decision. No way!

I’ve seen people lose their life savings counting on other people’s paper promises. I am not comfortable sitting on the sidelines rooting for everyone else to make money for me. Who are we kidding? I would be last in line and get paid after all of them. And just how are they getting paid? Well, I see it as this: They get me to buy more fancy certificate paper, backed by more promises, while at the same time encouraging me to hold onto the previous certificates. All the while, the value in those is slowly liquidated to pay salaries and expenses of the inside corporate raiders of my blind faith and trust.

Boy, am I a skeptic. Let me shift gears here and take everything back I just said because often what I just said is dead wrong and two words will prove me wrong quite often. Those two words are “Blue Chips.” Many companies do provide value, dividends and growth opportunities. Who am I to talk bad about the stock market? Don’t get me wrong. It’s an awesome institution and a complex and intricate financial function of the world’s economy. Everyone feels the effects of this juggernaut and many people are afraid to upset the world powers by saying anything that will get the ire up of the kings of Wall Street, so they just clam up and slump into obscurity.

To heck with that attitude! Take control people. Actively manage your own hard assets and get off your *#!, and quit rooting for the other guys out there to make money for you. I’m not saying if you’re 60, 70 or 80 years old, that I expect you to go out and start swinging hammers and saws. That’s not necessary.

Use your brain at any age to control directly the events that are going to add to the bottom line. With real estate, you can use relatively simple math and your two eyes to see the whole picture. No charts, graphs, prospectuses, opinions or guesstimates. You invest less than ten miles from home in your own neighborhoods so you know all about market activity and current local economic conditions. You know prices and demand for your investment, as the local classified section of your newspaper is an instant picture of your markets fundamental outlook. Your competition advertises its position and you react immediately.

I’ll tell you this: I don’t stay up late reading small print, trying to find all the loopholes in company reports and federally mandated quarterly and annual filing and disclosure documents. That is a total waste of my time because in the end, nobody makes any promises to anyone. You in the end invest at your own risk; that is made clear.

Even when they catch the bad guys that use fraudulent accounting procedures and cook the books and shuffle assets and count them twice or commit some other white-collar crime, the fact remains that the money is gone and your out of luck.

Well folks, I’ve never been out of luck and I never will because I decide what is a good deal. I buy my houses below market price, add value to them in a hundred different ways and capitalize on those assets in many different ways. It’s hands-on, eyes and ears open, active, direct control. There’s no guessing, no hoping, no cheering, voting or scanning for loopholes in incomprehensible legalese boilerplate.

I circulate, select and direct. I negotiate and use my own strategies and tactics. I rehab valuable hard assets and use them to generate income, build equity, access tax-free cash, shelter other income from taxation and lower my tax brackets. Almost everything in my real estate business is deductible, so my gains are my gains. I can defer paying gains with 1031 exchanges and a host of other legal and ethical, easily understood ways to secure my future profit picture. You don’t need a license to do this, just a pulse.

If you feel real estate investing is more difficult than stock market investing, I believe you are wrong. It’s much safer to the average individual who doesn’t have all kinds of crazy options, puts and calls, true insider tip-offs or hours and hours of time to hopefully understand more than the next guy in order to sell your stock to the next person for more than you paid for it. Unless you’re accredited, you should be institutionalized.

With real estate, if I buy my investment property with owner occupied, 10% down financing, I am using 90% loan-to-value leverage. I don’t suggest you do that in the stock market. If you make a little timing error, your investment career could be over.

So to put it in general terms, $1,000 controls $10,000 and $10,000 controls $100,000. Now if I buy a house that costs $100,000 and I put $10,000 down to control it and the market appreciates 10% the first year, I get my $10,000 back and keep the asset. It becomes a perpetual money machine and I don’t have any of my own money at risk.

There are closing costs but they are deductible as expenses. Here is another point. My rich Uncle Sam wants me to provide housing for his citizens to live in, so he let’s me take depreciation on my investments to encourage me to rent them out to others. This explains a tax benefit in real estate that helps us common people who actively participate in the management of the investment who are not making over $150,000 a year in adjusted gross income.

For example, if you pay $100,000 for a house, Uncle Sam says that this house will slowly disintegrate to dust in 27.5 years and for non-residential real property, 39 years. The land will always remain so they say 20% of the purchase price was land. So you only depreciate the house’s value. In this case, that would be $80,000 and $80,000 divided by 27.5 years = $2909.09 per year for 27.5 years. That benefit can get you in lower tax brackets by reducing your taxable income on other income, such as your regular job or other investments.

Thus, you save today’s dollars, and when you sell the house years later Uncle Sam recaptures that amount but it is later on, after your investment has increased in value and the dollar hasn’t. Believe me, it helps you a lot more than it ever hurts. A good C.P.A. will use it to make you money now. Note: A 1031 tax deferred exchange can delay repayment of capital gains indefinitely.

Here’s how to play a decent game of real estate investment! Buy something at 20% below its market value. This is not hard to do. It may take you, as a new investor, 3-6 months to find it.
You’re learning curve will let you acquire under market value property at faster and faster rates from months to weeks to days. It takes practice. Use the book, Magic Bullets, to move fast.
So you find a $100,000 property and you put down 20% (investor rate) as the down payment plus $2,500 in closing costs. The bank loans you $80,000 to buy it. If you’re getting older, then pay someone to clean it and paint it. Get the bank to reappraise it for its true value of $120,000 or more. Take out an equity line and get all your money back, tax-free. Now let the tenants pay it off for you while it goes up in value and throws off positive cash flow, and shelters itself from taxation. This is not hard to do – www.magicbullets.com will walk you through it.

I personally believe the hardest thing to do is to hold on to the real estate investments that you do acquire. What people tend to do is get tired or itchy and they sell the goose. When you sell, you do get a lump sum of cash but now you have to go out and find more. This can become like a revolving door. You have to keep going in and out of the market buying and selling again and again. Sound familiar?

If you just buy and don’t sell your investments they will grow in value through inflation, appreciation and equity accrual/mortgage reduction. Eventually, you will own them free and clear, and with 4 or 5 houses throwing off $1,000 or more each month, you will have approximately $60,000 a year in retirement income. I know my parents could live on that…how about you?

Then as you get older, sell one, preferably the one you have spent two of the last five years in as your primary residence. The reason for this is because Uncle Sam says that you don’t have to pay any capital gains on the sale of your primary residence until you have exceeded $500,000 in sheltered gains.

For example, lets say you just sell one home. You’re in your early 60’s and you have had the house for 25 years. Lets assume you paid $100,000 for it and it has appreciated at a moderate rate of 5% each year on average. For those 25 years, its present value now would be $338,635.31. That is a capital gain of $238,635.31. You pay zero, nothing, in taxes on your profit, using your exemption up to a $500,000 lifetime cap for married couples or $250,000 for single folks.

The entire $338,635.31 is yours to do with whatever you please. It is 25 years later, so your buying power as a result of 3% inflation has eroded your buying power but think about all the people who have no real estate to fall back on. Ouch! That’s no way to live.

No surprises here. You can actively manage your own properties for years and if you do it right and use my methods of acquiring tenants, you just might get lucky and get a lifetime tenant. I’m not going to let you say that it’s impossible because I’m going to agree with you that it’s probably not going to happen.

Here’s what the statistics say (no charts or graphs). People move on average every 5 years so you should reasonably expect to have at least 5 different sets of tenants.

That’s fine because every 5 years, you can update your properties appearance and raise the rent to match current market conditions. Long-term tenants always seem to keep you from achieving a true market rent if they stay for 10-15 years, and they do stay. I see it all the time and I still get market rent…you’ll see!

The figure that says people on average move every 5 years applies to you too. If you get itchy to move or sell, then do the following: Don’t sell anything! Just use equity lines to acquire your next, nicer house and don’t move further than 10 miles away from your investments. Even the pros blow it on this one.

If you pay attention to what I just said, you should retire comfortably, with more money than the average person ever needs. You have a choice.

I will use a true story to illustrate my point. My wife’s uncle bought 2 ½ acres, in what his buddies from his telephone company job used to say was no man’s land. He bought it for $15,000 in 1972. He financed his 3 bed/2.5 bath/2 car garage, ranch style, block home construction for an additional $32,000, for a total of $47,000.

Well, he sold that house in 2001 for $365,000. He paid no commission (I showed him how) and he paid no capital gains. That’s a real life story of a $318,000 tax-free gain or profit on a $47,000 investment. He did hold it for 29 years but he has no money worries and lives a life of ease and comfort.
So my point: Collect a few houses and don’t sell them. That is the Magic Bullet of this story!

I’ll admit to you that I’ve shorted the stock market a few times and never lost on stocks either, but there are way to many closed-door conversations that I’m not allowed to listen to. I have a feeling that there is a reason for that. Can you guess what it is?

I learn more, make more, have more, do more and help more by actively managing my investment from less than ten miles away. I know all the players and there are no closed doors. My business associates are true friends, who help each other make money by providing excellent value for our customer’s dollar, and that customer is my tenant.

My rentals are superior to my competition, to the degree that my wonderful tenants remain tenants for life, or they buy it from me if I decide to sell.

Rental real estate is a rewarding investment. It is not just the money; it’s the value that you personally deliver.

I choose to live with purpose, passion and desire. I can’t do that in the stock market. How can I help you personally by investing in stocks?

When people hear the word “list”, one of the first things that come to mind is that hundreds of investors with deep pockets are needed to make a buyers list. Although having a large active list would be ideal, it’s not likely for most investors nor is it necessary. Your list should include both investors and traditional home buyers. In my first 24 months as a short sale investor my buyers list consisted of just a handful of investors and traditional buyers. A few were individual investors who were interested in acquiring 7-10 rental homes each and some were investors seeking wholesale deals. In addition, I had several first time homebuyers that I sold property to at huge discounts.

Within my first 9 months, I sold 4 properties to one investor and 8 to another. I kept 6 for myself that I either held as rental property or wholesaled within 6 months of purchasing them. My days were spent finding deals that fit mine and my buyer’s needs and speaking with potential buyers that I could add to my contact list. So in reality I worked for 3 clients (my 2 investors & myself). Yes, I started doing short sales mainly for the long term investment opportunity. Buying and holding is one of the best strategies to use if you want to acquire large amounts of equity with the least amount of adversity.

I share this story with you to say that a quality buyers list is not soley determined by the quantity of investors you have, but rather on how many “ready-to-buy” investors you have on hand. You will know your investors are willing and able when they’re being proactive and calling to see what you have available or when they are trying to grab the deal from you even before the ink dries.

Once you have a list that resembles something like this, you can now go out with confidence and find short sales that you will not only successfully negotiate but make a profit on as well. What’s the use doing all of the work to get a short sale accepted and not being able make a profit? Let me answer that for you, there is none! Building your buyers list now will reduce the possibility of your deals falling through due to not having an effective exit strategy.

For example, think of people who you’ve spoken to recently that mentioned buying a house or investment property. Also, think about people you know who are risk takers. You should also focus on people you know that have lots of friends and associates. In other words, let your mind stretch as far as possible to come up with a large list of rough prospects. I know that I said that it is not necessary to have a large buyers list, however, it is helpful to start off with lots of prospects to give you the greatest amount of potential investors to begin working with.

The reason you will want to start off with you circle of influence is because many times the people who will buy or lead you to those that do will be someone you know. The two investors I spoke about earlier were both referred by former co-workers.

The next thing you need to do is print up a stack of Buyer Information Forms (this form is included along with the legal forms and documents disc in the course). Then, start speaking to the people on your list and use this form as a guide to gather necessary information. You do not have to ask the questions as they appear; instead ask the questions in a conversational form so it does not seem obvious that your questions are predetermined. Begin speaking to the people on your list that you feel the most comfortable with so that you can develop your flow. You can now keep a record on all of your prospects for easy access. The form will tell you what type of property your potential buyer is looking for, how soon they will be ready to purchase, their price range, are they looking for a residence or investment property, how they will fund the deal, and so forth.

After you’ve made contact with everyone on your circle of influence list, you will then need to expand your list to others outside of people that you know personally. I highly recommend joining a real estate investors club or at least another business networking organization. Many of the people that you meet at these types of settings will be looking for their next profitable investment. If you can offer other investors real estate deals at huge discounts with minimal risk, you’ll attract a pool of reliable buyers with deep pockets just waiting to snatch your deals up.

1. Hot - Your hot buyers are those investors who know exactly what type of property they want and have the immediate resources to close a deal within the next 15-30 days. They are risk takers. Many of these investors have in the business for a while.

2. Warm - Your warm buyers are those investors who have somewhat of an idea of what they want but may also be open to suggestions if you have something worthwhile. They are your moderate risk takers. These investors are also financially able to buy but may be 2-4 months away.

3. Cold - Your cold buyers are those investors who have an interest in investing but may not be sure what they are looking for and may not be willing to assume much risk. If an absolutely great deal comes along at the right time they may jump on it. However, they are probably 6 months to a year away from making a purchase.

Once you have compiled and categorized your list the very next thing you will want to do is begin locating short sale opportunities. Begin putting out signs, posting internet ads, using car magnets, and posting flyers to create your initial buzz. As a result of you doing these things consistently, you’ll most likely get several calls from other investors inquiring about the deals that you have available. These investors should be added to your buyers list and categorized accordingly. Many of the investors that contact you will be “hot buyers”. I have several buyers on my list that contacted me initially after reading one of my signs or internet ads.

Your list is a continuous process so you’ll want to add new buyers and investors to your list on a daily to weekly basis. The more depth and qualified buyers you have for your short sale deals, the more money you will make. Do not make the mistake of going out and negotiating short sales without having a buyer or workable strategy to find one. Having buyers for your deals will make your job so much easier and give you the confidence and ability to put more deals in your funnel.

Brokers can be a valuable asset. Remember, when I started I had no credit. I had no choice but to use whatever funds where available, so I found a broker who would loan 50% of the appraised price regardless of my financial condition. The cost was high, but the rewards made it worth it.

He charged me 10% of every loan I made, and I paid 18% interest. I know this sounds high, but I soon learned it wasn’t the cost of funds that count, but the availability of them. Because I had access to these funds, I simply bought up junkers with them and made thousands of dollars in profit on each house.

Let me ask you a question. Would you rather pay a mortgage broker 10% of your loan or pay a partner 50% of your deal? Tough choice, isn’t it?

Mortgage brokers work on a commission. They do not get paid unless you get paid. If you use private money, get used to the idea of paying high points and consider it a cost of doing business. We can get a high interest loan and still make money. Remember, it’s not the cost of the money that matters. It’s the availability that counts.

When I first started, I borrowed on 76 loans at 18% interest, 50% loan-to-value ratio (LTV), 6 months interest prepayment penalty, 7 year balloon payment and 10 points up front to the broker. And I still made money on every single one of them!

We know we can get a loan from a private investor for 50% the fixed up value of the property.

Value After Fix Up
$45,000

As Is Value
$35,000

Repair Estimate
$ 4,000

Maximum Loan Amount
$22,500

Cost of the Loan
$ 3,000

Net From Loan
$19,500

The problem is that the loan is based on the after repaired value. The broker will write the loan for $22,500. You’ll pay the cost on $22,500, and you’ll start paying interest on $22,500 as of that day. But the broker will escrow 50% of the difference between the “as is” value ($35,000) and the “repaired” value ($45,000).

The escrow amount would be 50% of the $10,000 difference because it is a 50% LTV loan. So $5,000 will be held in escrow until the work is completed. After the work is done, the mortgage broker will send an appraiser out to look at the finished house and, if all the work is completed, he will give you the $5,000 held in escrow.

In the above example, we needed $15,000 cash to buy the house and $4,000 to repair it, for a total of $19,000. But we are only going to get $14,500 from the loan at closing, so we would construct our offer this way:

Q: “Mr. Seller, I’m going to give you $15,000 for this house. I’ll give you $10,000 at closing and $5,000 within 60 days. Will that be alright?”

A: “Yes. That would be OK.”

To ma ke this work, the seller will hold a second mortgage for 60 days because we obtained the first mortgage from a private investor through the mortgage broker. This is known as “subordination” and is a useful tool for any investor.

This way, we are fully protected. We would get $14,500 from the loan proceeds, give the seller $10,000 of it, and still have $4,500 left over for repairs. Since we only need $4,000 for the repairs, we get to keep the extra $500.

Generally, the money mortgage brokers find comes through private individuals. A private investor is very different from a bank. There is none of the usual verification ordeal. The only verification is the value of the property.

You do not need good credit, these loans are not reported on your credit report, and there is usually no qualifying. They don’t care about your personality or personal history. Their only consideration for the loan is the loan-to-value ratio. The length of the loan may vary but, generally, they will amortize the loan for 15 years and call it due in a balloon payment in 5 years or less. Private short term money like this is very valuable to us as investors. This is the kind of money that can make you rich!

The seldom-admitted truth is that most of the time, markets exist in some indeterminate state!

The main thing is that you cannot trust consensus and you cannot rely on the “Establishment.”

You can’t find refuge in the herd and you must resist the urge to join the crowd.

Your passion of the moment will most certainly create a disaster over the years!

On the other hand, if you do stick with the following five essential truths, you do stand a better than average chance to invest profitably!

1. Markets are unpredictable and ill-suited to forecasts.

2. Long-term fundamentals are key.

3. Investor emotion leads to volatility.

4. Valuation discipline should guide investment selection.

5. Perspective and patience are always well rewarded.