Financial Freedom Group Blog

Vacation

I am heading out for some rest and relaxation on Saturday and will be back on the 5th.  I am going to a resort powered by a generator.  You can check it out here.  So needless to say I am not going to be posting while I am gone.  I will give you a preview of some posts that are going to show up when I do get back.

• How to get started with your real estate investing
• The three buying strategies that don't take any of your cash or credit
• Negotiation Basics
• The 10 Characteristics of Millionaire Real Estate Investors
• Leave your suggestions in the comments area.

Here is a quote from Pablo Picasso:
"Action is the foundational key to all success."

What action can you take right now toward being financially free?

30 Ways to Find Motivated Sellers

I promised Ram that I would post 30 ways to find motivated sellers.

There are two different techniques to find motivated sellers.  First you can look for a specific quality of a seller that would make him or her motivated.  Living out of state would be one example of a situation that someone could be in that would cause them to be motivated.  If I own a property and live quite a distance from the property and there is a problem with that property (meaning it could be vacant, or be vandalized, etc) I could be motivated to have someone take this property off of my hands. 

The other way to find motivated sellers it to blanket an area for sellers.  If I put up 25 signs in an area my phone is going to ring.  One of our students put up 47 signs and had over 40 calls in less than a week from motivated sellers.  These signs were not put out to target any one group of people they simply read "We Buy Houses" and a phone number. 

So Here we go with the list.

1. No Equity - If they need to sell they can list it with a real estate agent and it will cost them money or they can sell to an investor.
2. Landlords evicting tenants - Can be very motivated and they are used to receiving payment over time.
3. Landlords that have owned the property for 3+ years (that is how long on average someone owns an investment property)
4. Landlords that own a property free and clear (you can take all of the management headaches off of their hands and still give them cash flow)
5. Property that is in probate - The heirs want the money
6. Referrals from other investors - Not every investor does every type of deal.
7. Home Owners Associations that are having trouble with a resident.
8. Owners that have owned the property for 7 plus years (the more equity the easier it is to put together a deal)
9. Mechanic's Liens - When someone doesn't pay for work that was done on their house you can pay that person that did the work a small sum for what they are owed and then try to collect.  If they don't pay you can force them into foreclosure and you can either buy the house or get paid what you are owned.
10. Recently Financed Property - You will find owners that need to get out of a house that they just bought or refinanced - You can find this into at the county recorder's office
11. Quit Claim Deeds - When a someone is given a quit claim deed to a property it could be a case where they don't want it or can't afford it
12. Divorce.  Many owners qualify for a property with 2 incomes and when one of those incomes moves out it makes it difficult to afford the payment
13. Multiple Property Owners - I have purchased three properties from the same owners and I have been to a closing with another investor that purchased 26 properties from one seller that couldn't wait to get rid of his properties.
14. Massive Equity - This allows you the most flexibility in putting together a deal
15. Out of Area Owners
16. FedEx, Postal Service, other Delivery Persons.  These people know the areas and which houses people have moved out of, been foreclosed on, have a divorce going on, or the owner has died.
17. Meter Readers - same as above
18. Process Servers - These people give the notices to people being foreclosed, evicted, etc.
19. Accountants - They are often times the first to know when someone is in financial trouble
20. Appraisers
21. Insurance Agents - My agent calls me when one of his clients is in trouble because he wants to keep the business and if I buy the property he keeps the insurance.  He probably calls me once a month.
22. Mortgage Brokers - When people can't qualify for a refinance you can buy their property from them.
23. Real Estate Agents - This is the first place people go when they have a real estate problem.
24. Handymen - When an estimated repair is more than the seller can handle, you can do the deal.
25. Bankers/Lenders - Once payments are missed they are going to call on you to bail out the seller
26. Bankruptcy Referees - You can purchase a property from someone that is being drug down financially by their property.
27. Collection Agencies - They are aware of the people with money problems.
28. Financial Planners - See accountant
29. Mortuary Owners - Handle this one with integrity and class. 
30. Bankruptcy Attorneys
31. Family Attorneys
32. Divorce Attorneys
33. Criminal Attorneys - It is hard to make house payments from jail
34. Probate Attorneys
35. Mold Problems - Mold has a terrible stigma.  I will buy a moldy house at the right price any day.
36. Code Violations
37. Builders
38. New Subdivisions - These houses are easy to sell and many times people get into the house and life happens.  They get divorced, transfered for work, etc.
39. For Sale By Owner Properties - Many times they are selling the home themselves because they can't afford to sell with an agent.
40. For Rent BY Owner Properties - Can be motivated because of no renters or bad renters.
41. Expired MLS Listings - Tried the traditional way and it didn't work.
42. Canceled MLS Listings - See Expired MLS Listings
43. State MLS Listings - Properties that have been on the market for many months usually have motivated sellers attached to them.
44. New Listings - Great deals come on the market all of the time.  You have to be quick though.
45. Tax Sales - If you don't pay your property taxes the government can sell a tax lien certificate which means that someone can take your house and any of the equity that is with it if you don't pay off the tax lien.
46. Bandit Signs - Great blanket marketing source
47. Postcards
48. Brochures
49. Bus Bench Signs
50. Newspaper Stands
51. Business Cards
52. Signs on Your Car
53. Cash Register Receipts
54. Classified Ads
55. Newspaper Display Ads
56. Door Hangers
57. Fliers
58. Newspaper Inserts
59. Post it Notes on Houses/Cars
60. Website
61. Yellow Page Ad
62. Google Adwords
63. Yahoo! Search Marketing

It looks like Ram got his money's worth.  I know there are at least 40 more ways to find motivated sellers.

[Update: fkj pointed out that I missed property management companies.  This are an awesome source for two reasons.  First if the seller is looking to sell are probably going to be the first ones to know about it.  Also the property management company knows personal details about the owner's situation and they can put you in touch with the owner to help them out.  Second if you find a property management company that does a terrible job you can find out which properties they manage and contact the owners of those properties to see if they are ready to sell.  Also the value of multi units is based on income and if the management company does a poor job you can instantly add value through increasing the income.]

Which of these techniques to find motivated sellers can you apply today?

Example of Creating Wealth

Earning: Work 10 hours at $15 an hour receive $150.

Creating: Work 10 hours to purchase, own, manage a home. Receive $5000 up front payment. $200 a month for a long time and have a huge equity position that grows as time continues.  The asset could in all reality pay you and your family for eternity. 

So, 10 hours of work could equal an infinite return as compared to $150 working a job. 

What action can you take right now to start creating wealth?

How to Buy "Subject to"

There is big money buying property subject to the existing financing. 

For example, this weekend students of ours, Proeun and Amy, signed up a deal subject to the existing financing that has about $25,000 in equity and at least $200 a month cash flow.  Oh yes, they also have 342 months (28 1/2 years) to pay off the loan.  The seller is selling the property for exactly what they bought it for even though they have remodeled the kitchen and added 2 bedrooms.  All of this for only $1000 down.    

What does it mean to buy a property subject to the existing financing?  Well, here are the details.

1. The investor gets the deed to the property.  She owns it.

2. The seller's loan stays in place.  The investor does not assume the loan or take any responsibility for the loan.

This is a great strategy to reduce your risk in investing in real estate.  It doesn't doesn't require much money down and you didn't sign personally on the loan.

So why is it called subject to?  Well, you are buying the property subject to the existing financing.  This means that you are buying it with the existing financing still in place.  If the statement "subject to..." doesn't make sense just replace "subject to" with "with".  So, you will be buying the property with the existing financing.

OK, now we are going to get into the "how to" part of the process. 

Step 1. Have the seller sign a purchase agreement that spells out that you are buying the the property subject to the existing financing.  This can easily be explained in the purchase agreement with the following language. 

"Approximate principle balance of first mortgage in the amount of _________________ which conveyance shall be made subject to, if any.  Mortgage holder is _________________."

Repeat this for any other mortgages or liens that you are going to be taking the property subject to.  You really want to have a good purchase agreement.  We have one that you can purchase in our forms CD that will also include all of the other docs that you would need to your investing from A-Z.

The rest of the steps would be considered the closing.  This can be at the same time you are signing the purchase agreement.  Typically you spend a few days doing your due diligence and then you close the deal when you know it is worth going forward with.

Step 2. Create a land trust that names the seller as the beneficial interest.  Name the trustee (someone that isn't going to spill the beans on who owns the property.  A lawyer is a good fit)

Step 3. You have the SELLER deed the property into a land trust.  Make sure the seller has the warranty deed notarized.  Record the deed Warranty Deed (or the equivalent in your area) that transfers the property into the land trust.  This is the only document that you need to record.  Don't record any other documents except the deed.  (The only exception to this may be the power of attorney, but that may not be necessary)  You put the property in the land trust so your name does not show up on title to the property.  This shields your identity from people that may want to sue you a wide variety of reasons.  A land trust does not protect your assets, the land trust just shields your identity.

Step 4. You transfer the beneficial interest in the land trust from the seller to you the investor.  This document does not get recorded, it gets filed in your filing cabinet.  The only people that know you own the property are you and the seller.  This document is what transfers the ownership to you.

Step 5. Have the seller give you a power of attorney so that you can deal with insurance companies, the mortgage companies, home owners associations and any other parties that you may need to contact with regards to the property.

Step 6. Have the seller fill out an authorization to release information about the loan.  Make sure you have one for every loan.  Next you want to transfer all of the statements that the seller receives to your address. 

Step 7. Get any and all paperwork that the seller has pertaining to the house.

These are the steps to buying a house subject to the existing financing.  It makes sense to check with a local attorney to find out what types of deed you use and how ownership is transfered into the land trust.  Both of these items can change from state to state.