Tag Archives: strategy

If it’s 99% True, Then it’s a Lie

She sat across the desk from a master.  This real estate broker was about to be grilled by one of the best question askers I have ever met.  Mark Saenz sized her up quickly.  With a twinkle in his eye he fired the first shot.  “How’s business?” he asked.

She told us that business was great.  How couldn’t it be?  “I’m finding houses on the multiple listing service for .50 cents on the dollar” she claimed.  “Really,” Mark said.  This unsuspecting Realtor just stepped into his trap.  She shook her head confidently, “Yes, I am.”

Mark told her he would buy every house she could find for .50 cents on the dollar.  This, of course, made the agent very happy.   She was grinning from ear to ear.  “Okay, I found a condo in Phoenix you can buy for $140,000.  It’s worth about $210,000.”  A puzzled look came across Mark’s face.  “I’m no math expert, but that doesn’t sound like .50 cents on the dollar to me” he answered.  The Realtor said, “You’re right, but it’s in turnkey condition, no repairs needed.”

“But you just told me you were finding properties for .50 cents on the dollar” Mark insisted.  He told her if she found any to call him.  Then we wrapped up.

This meeting took place in September.  2008.  Here we are, more than two years later, and poor Mark is still waiting for the Realtor to call.

Mark Saenz taught me a lot about the art of asking questions.  Before I met him I would accept what most people had to say at face value.  I would give them the benefit of the doubt.  Why would they lie to me I thought.  Besides, they said what they said with such authority.  They must be telling the truth.  If there were a few holes in their story I would fill in the blanks myself.  That was the polite thing to do right?

Like me, many people just fill in the blanks – especially when desperate.  Back in 2007, l was a struggling real estate professional.  My net worth went from $8 million to negative $2 million practically overnight.  I would listen to any sales pitch and consider any investing strategy imaginable if it meant I could improve my financial situation.  I wanted to believe these opportunities would work so I didn’t ask too many questions.  It was like I didn’t really want to know the truth.

Fortunately, I learned from Mark that questions are like a shield.  They protect us from the smelly stuff that my daughters always complain about whenever we drive by the dairy farm near our house.

If you’re thinking about paying someone to teach you how to invest in real estate then I advise you ask a lot of questions.  Here are my top three suggestions:

  1. How many deals did you do last year?
  2. Can you show me HUD settlement statements for those deals?
  3. How many properties do you own right now?

If the sales person fidgets, fusses, stutters, stammers, sweats, delays or tries to change the subject then your shield worked.

My business partner Manny Romero likes to say that “if it’s 99% true, then it’s a lie.”  The problem with the real estate business is that many of the investors and educators you hear about or see on TV leave 1% of the story out.  Why?  Because that 1% will make you, and your checkbook, run for the hills.  The truth hurts doesn’t it?

 

Advertisements

Leave a comment

Filed under Investing

Seller Financing Strategy an Oldie but Goodie

Last week I tuned into the oldies station here in Phoenix.  Huey Lewis and the News’ 1985 hit, The Power of Love, was playing.  You may recall that this song was the title track from the movie Back to the Future.  It’s memorable for me because the main character was named Marty McFly (I was often called McFly in high school after this movie became popular.)  The other reason I enjoyed this flick was the time machine they used – a 1981 DeLorean.   It was a very cool car made of stainless steel with winged doors.

After my stroll down memory road was complete I came to the stunning realization that a song I love and identify with was playing on an oldies station!  I’m only 38.  How could that be?  Oldies stations play the Beatles, Elvis, and the Beach Boys.  This got me wondering –  when does a song officially become an oldie?  My local station believes 25 years makes a song old enough to play on their airwaves, however I’m told there is no official industry standard.

Last month, I closed the sale of one of our properties using a seller financing exit strategy.  The buyer put 15K down and our spread is 29K.  The term of the loan is three years and the ROI to our group will be 30%.  After I got the first interest payment of $877 in the mail a few days ago it occurred to me that this exit strategy is a real estate oldie but goodie.  The last home I sold with seller financing was in 2001.

With loose lending criteria and stated income loans the norm who needed seller financing from 2001-2006?  Rent-to-own, lease-option, lease-purchase and seller carry back transactions virtually disappeared like 80’s rock bands.  If you could fog a mirror the bank would lend you money during this time. 

With the collapse of the real estate market in 2007 millions of homeowners with stellar credit histories began walking away from their underwater mortgages.  And while industry experts and moralists continue to cry foul, seasoned real estate entrepreneurs smell opportunity.  These former homeowners, many with steady income and cash reserves, got burned by a bad real estate market and deserve another chance.  The banks can’t lend them money to buy a house again because of draconian government and self-imposed regulations.  But private real estate investors can and will.

Since I started offering a handful of our properties for sale with seller financing my phone started ringing off the hook.  In less than two months I have built a list with more than 70 prospective buyers.  Most of them don’t have two nickels to rub together but I’m working with several that have solid incomes and significant cash to put down.

So I’m thinking of a few requests my local oldies station can play.  For the musical equivalent of the real estate market from 2001-2006 how about ‘Easy’ by the Commodores?  From 2007 to the present I dedicate ‘These Boots are Made for Walkin’ by Nancy Sinatra.  And the future…I can’t think of a more appropriate band or song then REO Speedwagon’s ‘Roll with the Changes’.

Leave a comment

Filed under Finance, Homeownership, Investing