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“Why there are No Deals on the MLS” – ASK the P.I.G. [VIDEO]

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QUESTION: Can you find deals to flip on the Multiple Listing Service (MLS)?

The simple answer to this question, one that I receive all the time, is NO, you can’t find deals to flip on the MLS.  Whenever I post something on my website or Facebook about the lack of deals on the MLS, I always get some goober who wants to tell about his massive success story from an MLS property, but the fact is that deals RARELY are found on MLS.  Yes, I have also purchased a very profitable deal on the MLS….1 house in 12 years.  And so, if I relied on that deal source for my real estate investing, I would have been out of business a LONG time ago.

If your definition of a “deal” is a rental property that has a 10-11% cap rate, then of course, you can pick those up by the handfuls on the MLS.  However, you will have a very difficult time finding deals you can rehab or wholesale, like most “active” investors are looking for, on a public website with inordinate amounts of web traffic.  New investors always follow the path of least resistance, and so when they want to find houses, they go to the MLS…because that’s where they’ve been told to go find houses for sale.  But the deals that fit the standard 65-70% rule that most investors use, must be found OFF the radar, the hidden gems that no one else knows about.  And the reasons are simple:

1.) Competition – It only stands to reason that if you have a lot of people (the millions of people with access to the MLS) looking at a few properties (how many houses are priced even close to what an investor would need to buy it at), that the price of those homes will be driven up to the point that MOST investors will be priced out of the market.  It’s a basic rule of supply and demand.  I just experienced this same phenomenon when I listed an old refrigerator on Craigslist.  I listed it LOW ($50) because I just wanted it out of my garage, but I receive SO MANY phone calls, that I ended up selling for $75…and could have gotten more!   There was just ONE cheap refrigerator, with a LOT of people interested, and so I had the luxury of raising my price.  Had I gone 10 days without a call, and someone called and offered me $25, I would have taken it without a hesitation.

2.) Realtor Pricing Strategies – Realtors are trained to get top dollar for their client’s houses in the shortest amount of time.  So, when they do their research to determine the listing price for a home, they are not researching what price will create a stampede of bargain-hunting, bottom-feeding, low-ball-offering investors.  It’s their fiduciary responsibility to that seller to price the property at highest price that is realistically attainable in the open market.

3.) Bank Loss Mitigation Strategies – As most of you know from your experience with banks, they are not an investors friend, unless it’s an investor in their company who is looking for a good return on their stock purchase.  Real estate investors will always find themselves beating their head against a wall in trying to get a “deal” from a bank-owned REO listing.  After eating as much as $25,000-$50,000 in the foreclosure process, the bank is now out to get as much as humanly possible for their new acquisition, and to mitigate their loss as much as possible.  They will typically have an AS-IS BPO or appraisal done, list it at the full current market price with a high-octane Realtor, and then WAIT…as long as they have to in order to receive top dollar.  They are NOT emotional and they are NOT in a hurry.  They are much more likely to make small, systematic price reductions than to consider a low-ball offer by you.

4.) MLS sellers are TYPICALLY not motivated – Of course, that’s not always the case, because on a rare occasion I will make lowball offers on the MLS, and have found some sellers who are extremely motivated and will consider lower offers.  However, in general, most motivated (or desperate) sellers will try other ways to sell their home before they have to go through the process of listing with a Realtor.  Those who have met with an agent, and signed a contract to list, are usually a little more patient and looking at trying to maximize their profits on what is typically their most valuable asset.

You might be asking yourself, then how in the world do we find these “deals” that you are always talking about flipping?  Well, that my friend might be for another blog post.  If you are a member of the Professional Investors Guild, go back and watch the “Guerilla Marketing” videos in the archives, as well as the “Treasure Trove of Motivated Seller Leads” bonus video for tips and tricks to generating a deluge of motivated seller leads.

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“Is it Better to Buy Foreclosures or From Distressed Sellers?” – ASK the P.I.G.

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James, one of our subscribers, recently posted the following question on our website: “Would it be better to purchase homes from distressed sellers, or to buy foreclosures?” As always, an excellent and insightful question, which is why I chose to answer it as a part of this month’s “ASK the P.I.G.” series.

This is definitely an easy question in my book, because I think it is undoubtedly far and away better to purchase from motivated sellers, and NOT homes that have been foreclosed on. The biggest and most compelling reason is because purchasing from motivated sellers gives you so many more options in regards to both purchase and exit strategies.

When you find homes with distressed sellers BEFORE they have gone to foreclosure (a.k.a. PRE-foreclosures), you have a litany of options that you could pursue. If it’s overleveraged, you could do a short sale, which allows you to have influence on the appraisal and gives you a 4-6 month time frame to try and find another buyer. If the seller is only a few months behind on payments, another option could be taking it subject to the existing mortgage, making up the back payments, and either renovating for resale or renting it out for cash flow. If there is equity in the property, you have the option of wholesaling for an assignment fee, or negotiating partial or full owner financing, a lease option, and the list goes on and on.

However, when you purchase an REO property from the bank (typically listed by a Realtor), you basically have one option, and that’s to buy it or not buy it. They will perform a BPO and/or appraisal, and will set the price at the current market value, which leaves little to no equity for most buyers. You also typically need to have cash, because you are oftentimes competing with other cash buyers, and the Realtor will require a proof of funds letter AND an earnest money deposit. That’s not exactly what you call creative real estate investing.

Another key benefit to dealing with motivated sellers is the lack of competition. Even the neophyte entrepreneur understands the basics of supply and demand, and so if you have hundreds or thousands of buyers looking at a small supply of good deals on the MLS, the competition will inevitable drive up the price. However, if your marketing has generated a motivated seller lead that no one else knows about and isn’t on a public MLS website, it gives you a great deal of control to structure the deal in a way that is most advantageous to you and your investing business.

To check out my full response to James, watch the video above…and then leave your thoughts or comments below.

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From Fab to Flab in No Time Flat!

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old-arnold-schwarzenegger“Best (& Worst) Beach Bodies of the Year”. That was the headline that grabbed my attention a while back as I stood in line at the grocery store.  And it wasn’t for the most obvious reason that a 30-something year old man might be tempted to take a peek. In contrast, this was much less of a temptation and much more like the experience of approaching road kill on the side of the interstate. You know you’ll regret looking at it, but as the mangled creature moves closer, you just can’t seem to keep your eyes off of it.

Undoubtedly part of “the worst” category, the beach body being burned into my retina was none other than the Governator himself, Mr. Arnold Schwarzenegger. The object of my disgust was standing there proudly in his Speedo, the magnificence of his former self but a mere memory. The former Mr. Olympia, 7-time world champion, and star of countless action movies, now looked as if he had never stepped foot in a gym in his entire life. A man who once boasted an incredibly low amount of body fat now looked as if he had traded bicep curls for cheese curls, and leg squats for tater tots. To put it bluntly, he was a lot less buffed up and a lot more A.Y.C.E. “buffet-ed” up.

I must admit that I was extremely saddened by the image on the magazine cover. I try to hit the gym about 2-3 times a week, or at the very least throw up a few push ups and sit-ups each morning as I get ready for the day. I had always hoped that one day I would get my body sculpted the way I liked it and then I could just lay back a little, take it easy, and coast into my latter years with a body that at the very least didn’t repulse my wife. However, in one fleeting moment at the grocery store check out line, my dream was effectively terminated (get it?). Arnold has indeed proven that regardless of your level of achievement, even if you’ve reached the pinnacle of success in your sport or industry, you can’t let up for even a moment…or you will lose it all. The fall to the bottom is certainly a lot faster than the climb to the top and in business, as inLottery-Mega-Millions exercise, the moment at which you stop giving it your all is the moment that you will certainly fail.

One of the biggest differences that I see between the “haves” and the “have-nots” is in their view of success. Poor or unsuccessful people are always waiting for some once-in-a-lifetime opportunity, a strike of lightning, the invention of the century. They think that prosperity and wealth are achieved by winning some kind of “success lottery” and they’re always sitting around waiting to hit the lucky numbers. However, those that achieve greatness in life are those who understand that success is a process, not an event, and they commit themselves to that process until it produces their desired result.

I’m committed to the process.  How about you?  Let me know in the comment section below! And then write this on your mirror so it’s one of the first things you see every morning…“Success is a Journey, Not an Event!” Once that sinks into your mind and heart, you will be that much closer to achieving the life of your dreams.

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How to Find Real Estate “Hot Spots”

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I received a great question from Charles, one of our guild members, a few days ago…and I thought it was the perfect choice for this month’s “Ask the P.I.G.” video.  Charles wanted to know what is the best way to find real estate “hot spots”, or the highly desirable neighborhoods in your area where homes sell quickly.  That’s a great question, and an important thing for any investor to know, so that they can target their marketing or direct mail campaigns to the areas where they can find homes to flip rapidly.

The first piece of advice I would give you is to ask a local Realtor who is ACTIVE in the business.  Don’t ask just any old dope who has never sold a house and is a Realtor in name only.  The barrier to entry is extremely low to become a Realtor, so there are a lot of people out there brandishing a license who have no clue what they’re doing.  You want to find a high-octane realtor on steroids who’s out there beating the streets each week to make a living.  Those Realtors will have their pulse on the market, and will be able to guide you towards the neighborhoods or areas that are particularly desirable in today’s market.  They typically have information at their finger tips regarding the popular school districts, proximity to local hospitals and other services, which can be valuable in determining where buyers will want to live.realtor logo 4

The second strategy is to ask a Realtor with access to the MLS, even if they’re not a top producer, to pull some hard data for you to confirm what the other agents or local industry experts have told you during your research.  We always want to “trust but verify” in business, so it’s important to get some numbers to back up what you’re hearing.  The key statistic you want to look at is the “Days on Market” or DOM for a particular neighborhood, which paints a pretty good picture of how desirable an area truly is.  If most of the homes sell in 30-60 days (or significantly less than the average DOM in your market), then you know it’s a “hot spot”.  However, if it’s taking much longer than that (over 180 days  or so), it may be a neighborhood you want to avoid.

***A WORD OF CAUTION***  Make sure you look carefully at the data behind any anomalies, where one house sells significantly faster or slower than other homes in the neighborhood. Check out the video above for more on anomalies, and what to look for to see if they’re a cause for concern or something to be discarded.

OLYMPUS DIGITAL CAMERAThis understanding of “hot spots” and knowing what to look for has made myself and many other investors a great deal of money over the years.  In fact, there’s a neighborhood in my neck of the woods called Mirabelle that fits the “hot spot” criteria perfectly.  It’s not a particularly huge neighborhood (50 homes or so) and it’s not near a bunch of other residential neighborhoods. However, a unique  combination of price, quality, location, and neighborhood dynamics have made it extremely popular.  Most homes in the neighborhood sell in less than 30 days (even without being renovated) and the majority of the buyers pay CASH because the neighborhood appeals to an older demographic.  The last renovation we did in there sold after just ONE DAY on the market, for full price, to a cash buyer…and it wasn’t the least bit of a surprise.  Oddly enough, because of our market research before we purchased it, the result was somewhat expected.

What are your thoughts?  Do you have anything to add?  If so, let us know in the comments section below.  And don’t forget to grab your free investing resources, including our audio teaching on how to find motivated sellers with equity, and our free report entitled, “Top 10 Foreclosure Mistakes (and how to avoid them)”.  Just click here, fill out the form, and we will rush them to your e-mail box!

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Transactional Funding vs. Hard Money Lending

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Check out the above video for my answer to J. Paul’s question, “What’s the difference between transactional funding and hard money lending?”  They are completely different forms of financing a property, and so it’s important to know the difference between the two, and which deals would require which type of funding.  So, check out the video above and then feel free to leave us your comments below!

Not a subscriber yet?  CLICK HERE to join our e-mail list, and grab 2 free resources in the process, “Guerrilla Marketing for Real Estate Investors” and “Top 10 Foreclosure Mistakes and How to Avoid Them!”

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