The tip I am talking about is called “Farming Markets”.

You may have heard of this, but let me break it down for you. The gist of farming markets is to canvas a neighborhood or area that you are interested in, look for signs of sellers, and try to make deals. But I want to take you beyond that today. I want to show you more than just looking for signs and other propaganda in a neighborhood that screams homes for sale. I want to show you how to create something out of nothing.

The idea is simple, once you have scoped out an area that you are interested in, and made sure that the homes are priced closed to what fits your particular style of investing, do a direct mailing. If possible, hand write the mailings, or hire someone to hand write them, and hand write the envelopes as well. People are always more likely to open a hand written envelope, and read a hand written letter, than they are to open a typed envelope and letter.

In the letter, simply let them know that you have seen there home, are interested in it, and/or have cash and can close very quickly. Ask them to give you a call for details. You may even tell them you specialize in helping crisis situations like divorce or job relocation and that you can bring a speedy conclusion to a tough situation. This will ensure that you get motivated sellers, and lets them know that you are wanting to help. And in truth if you are able to buy the property from them, you will be helping them to solve their problem.

Once you receive the phone calls, screen the sellers, and find out what their motivation is. If they really don’t need to move and are just wanting to make some money, let them go. But if they do have a problem, and are motivated to sell, setup a meeting to walk through the house, and find out if it needs any repairs, etc.

So there you have it, simple, yet highly effective and cheap to implement. And you will be guaranteed to be the only one competing for the property. Cool, huh?

If Possible, Leave the Agents Out

If you can, search out for sale by owner, government owned or bank owned properties. Agents, brokers, and other professionals understand that these properties typically go for less than market value. And with the case of FSBO (for sale by owner) properties you have the opportunity to talk with the owner directly. So to reiterate, realtors are in the game to make money, and since they get paid a percentage of the final sales price, it is in their best interest to get the highest price possible. Avoid them if you can.

Get the Real Estate Negotiation in Writing, Fast

If you choose to negotiate over the phone or in person (which isn’t a bad way to go), be sure to back it up in writing immediately. If you are in person, have the contract papers with you. If over the phone, get a fax number from the other party, fax it over to them immediately, and do a follow up call to make sure they received it, and as them to immediate send it back. If you really want to cover it, ask the other party if you can drive over a pick up the signed contract. If they ask for a time, say “how about now?” The point is, the sooner the better. You want to finish the paperwork while the other party is hot. Don’t let them cool off. People have a tendency to back out of deals if they have too much time to think about them.

Counter Quick & Often

Regardless of the offer or counteroffer you receive, buck it. Make sure that the ball ends up in their court for the decesion, unless you are completely happy with the offer. Even if you are happy with the offer, many times it is worth it to send one more offer, just to see what happens. For the buyer, you should set a high number, and make your first offer significantly less than your established high number. Work back and forth with the seller until you reach your high number. Once you reach your high number, you are finished negotiating. No acceptions. If you don’t stick to it, you will end up paying way more than you originally set out to pay.

For the seller, before you even put the property on the market, you need to have carefully considered the selling price, and a low number that you are willing to accept to sell the property. Stick to that low number as long as you are able. Typically, if you are within reason with your pricing structure, you will be able to sell the home. If it isn’t selling, see if there is some work you can do to the place to make it more attractive. Simple things like paint, carpet, etc. can really help a seller in the negotiation.

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Before I begin, I just want you to understand one thing. When you are negotiating any deal, you must detach your emotions from the negotiating process. You see, if you get rapped up in emotions while negotiating, you’ll either end up paying way to much for a piece of property, or you will end up selling at too much of a discount. Regardless of which side of the fence you are on (buyer or seller), you need to be aware of the negotiating process, and some tips and tricks that can increase your bottom line.

Knowledge is Power

This isn’t a TV commercial, however it is a power precept to understand when negotiating real estate, or anything else for that matter. You see, to effectively negotiate real estate, understanding things like what motivates the seller to sell, what the property’s market value is, what renovations are required, etc. are all valuable pieces of information that can dramatically change the end price and terms of the negotiation. So here are a few things you can do to gain the advantage when negotiating real estate:

1. Search Out the Market Value of the Property

Talk to your real estate agent, and ask them to generate a list of comparable properties in the area. Ask them to include the last 6 months to 1 year of data, and get the selling prices of the homes, how long they were on the market, bedrooms, bathrooms and age of the homes. This will give you great insight into what the property should sell for, and you can then use that information to scale your negotiation.

2. Find Out How Long the Property has been on the Market

Longer times on the market means a greater opportunity for a buyer to negotiate the price down. In general, I might look for properties that have been on the market for 6 months or more, and offer significantly less for the homes, just to see if a seller really needs to sell. On the flip side, if a seller has only had the home on the market for a little while, he could contend that there is a lot of interest in the home, and if the buyer doesn’t like the price, someone else will be along shortly to snap up the property.

3. Find Out the Tax Roll Value of the Property

Finding property tax appraisal values isn’t hard, and often can be found online. If you can’t find the tax appraisal district online, contact information and ask where the county clerk’s office is located. Once you locate the property on the tax rolls, look at the trend over the last few years. If it is a downward trend, that is great news to the buyer, and you can use it to suggest to the seller that the property is decreasing in value, thus your lower priced offer is justified. For the seller, if the property is increasing in value over time, then you can use that to substantiate your unwillingness to lower the price.

4. Get the Property Inspected

An inspection is a good idea for both the buyer and the seller. For the seller, it alerts them to any potential problems that need to be addressed. If there aren’t any problems, or very few, minor problems, then you can use that information to hold the price up. For the buyer, it protects them against unforeseen expenses after the purchase, as well as giving them a position to negotiate if there are lots of repairs that are necessary.

5. Find Out what is Motivating the Other Party (***this is the most important bit of knowledge***)

For the buyer, understanding why the seller is selling can give you a great chance to come in with an extremely low offer. Things like divorce, moving away for a job, pending foreclosure, etc. put the buyer in the driver’s seat. For the seller, if you have a high paying job and aren’t in any rush to sell, then you are driving the negotiations.

Stay tuned for Negotiating Real Estate, Part II…

Why? Because after you complete the most important part of the real estate investing process (finding property below market value), the next step is financing that deal. If you cannot get the financing, the deal crashes and you lose your time, and potentially any earnest/option money invested in the project.

So let’s look at some of the key points in establishing a solid banking relationship:

1. Keep to Local Bank Relationships

This is the most important point I can make. If you want to have a close relationship with someone, they need to be within driving distance. I mean close enough to have a lunch appointment with them. It may seem obvious, but someone outside of your region or state may not know all the ins and outs of your location, let alone trust and like you enough to finance any difficult deals.

You see, if you build a real estate investing business, you are going to run into times where your deals require creative financing, and you will have to have someone that knows and trusts you, before they will be willing to do a creative financing deal with you.

2. Make Contact with a Decision Maker at Your Local Bank Branch Office

Now that you understand the importance of staying local, you will need to “interview” a few of your local banks, to pick out the one that will be best for you. But here is the difference between what everyone else will tell you and what I will tell you - don’t shop for banks based on offers, shop for banks based on people. You see, offers will come and go, and banks will compete. But what you really need, is to find a Vice President or other high ranking local branch office representative to take care of you.

The best way to do this is to walk in to the bank, and ask if you can speak with the branch office manager, or other highest ranking employee there. Sit down with them for a few minutes, explain to them what you are trying to accomplish in your business, and how they have a wonderful opportunity to become your first source for loan shopping. If you have previous projects, tell them a little bit about them, how you financed them, and maybe some issues or problems you overcame while working the project.

3. Foster the Relationship

After you have done your “interviews”, make your selection. Through your conversations, you should know which bank is going to be the easiest to work with, which is the most important thing. Rates, terms and conditions, etc. can all be negotiated, but dealing with someone who is rigid and difficult is not what you want to do.

Once you have your selection, build the relationship by offering to take them to lunch or dinner. Ask them what they look for in a client, and maybe share some resources like contacts you have in other industries that would be beneficial to your bank contact. Anything you can do to increase your value in their eyes will help (just don’t bribe them or do anything illegal). Before you know it, you’ll have a great relationship and your bank rep will leap to help you finance deals!

The Importance of the Right Deal

Alright, so before I go on with the rest of the story, I want you to know just how important it is to know the key to real estate investing. You see, you can do all the real estate internet marketing and other types of advertising you want, but if your price is too high the property is just not going to sell. So you need to make sure you buy in at the right price. This is what I mean when I say that you need to have the “right deal”.

Now then, on to the rest of the story.

My Mobile Home Investment Project Renevations

So once I had closed on the property, I moved in, and began to work on the place. There wasn’t much wrong with the mobile home, it just had some holes in the walls where the previous owner had been careless with the place. Also, it had stained and dirty carpet. But the kicker was - there wasn’t any place for storage on the property. So I thought that this was the first item that needed attention.

So I had a friend help me build a 12 x 16 foot shed. We built it ourselves, and the total cost came out to about $1,300. That solved the storage issue. From there, we simply lived in the house as it was, until we moved out. Later, we repaired the walls at a cost of about $600, and added a chair rail to the living room. But to date, we still have not replaced the carpet. The house was in good enough condition to market, and I didn’t want to spend the extra money.

Marketing & Profiting from the Mobile Home

You know, marketing this home was easy. In fact, with a sign in the yard and one ad in the paper, we had this home rented within one week. One week! You see, for the area the mobile home was located in, $650 in rent is a great deal for a 3 bedroom, 2 bathroom home. A new tenant jumped on it almost immediately.

That is the power of finding the right deal. With a cheap enough buy in, you can afford to market your property at or slightly less than market value, and still realize a great return on your investment. With only paying out approximately $350 in total PITI, I am cash flowing $300 per month on this home! That is over an 85% return on investment (not counting the initial buy in and repair cost) each an every month!!

So here’s the bottom line. You must find a great buy on a piece of desirable real estate. Sounds tough - but I am telling you that you can do this in any market - whether real estate is booming or busting. Right now, it is easier than ever to buy real estate at a fraction of its fair market value. So get out there and make it happen, and leave me your comments below! I want to know what you think of this article, and how much value you are receiving from this blog.

Jeffry

The Real Estate Geek

Before I go on, I wanted you to know that you, too, can do this. This process is not very difficult in concept, but it does take diligence to follow through. If you want to be successful in real estate, you are going to have to reprogram your brain for real estate success.

How I located this Mobile Home Investment

One of my favorite online foreclosure websites yielded this deal. This foreclosure site allows you to search for listings in your area, as well as being able to submit your bid electronically (you do need your realtor to complete the bid submission, however).

So I simply searched for a property, found a mobile home in the area that was below fair market value, and placed my bid. After the bid period ended, I got my answer. HUD had decided to accept my offer! Now, I probably could have secured the property for even less, but my offer came in at $26,500 (this was my second or third offer, they rejected the other offers), and the list price was $27,000. This isn’t much of a difference, however the market said that this was a very good buy, as the market value showed to be somewhere around $38k-$40k. That’s somewhere around $11k-$14k, or about 1/3 off the retail value.

Financing the Project

Ok, so I had the accepted offer in hand, now it was time to finance the deal. With this property, my plan was to move in for a little while, fix the place up, and the move out and convert it into an owner finance property or a rental property. So I was able to talk to the bank, and secure financing for 90% of the contract price, for 10 years at 6 7/8% interest.

My payment (principle and interest) came out to 275.38. And when you add the taxes and insurance, the total was somewhere around $350 (I manage my own escrow payments, which are done annually and change every year, so that’s why I don’t have an exact number for you here).

So that is a total monthly payment of $350! A fantastic buy for an 1120 square feet, 3 bedroom 2 bathroom double wide mobile home on a 1/3 acre lot. No mobile home park either, I owned the land as well! Further, this was a 2002 model Palm Harbor home, so at the time I bought it, it was just 4 years old.

So here I am, with a new place to live, low payments, and excellent payout potential on the back end.

Stay tuned for the next part of this series, as I finish the story, and how I make money on this mobile home investment project.

It’s sad for me to see so many homeowners lose their homes. But there are two very basic, fundamental problems that have fueled this financial collapse - the lack of education, and greed. Combined, these two forces have created a whirlwind of brain dead decisions. Let me show you the trend:

The Downfall of the Residential Owner’s Market

It all started back during the Clinton administration. His administration attacked banks and other lending institutions under the guise of “redlining” (not lending to low income areas), forcing them to provide loans to people that did not have the means nor the credit worthiness to repay the loans. This eventually lead to the massive expansion of sub-prime loans. And those sub-prime loans began to fail around 2005. Later on, mainstream loans began to go into foreclosure as the realization of this failed policy came about.

You see, since the secondary market was forced into taking many loans that it had no business taking, unscrupulous mortgage bankers an institutions began to capitalize on potential homeowner’s lack of understanding, and desire for nice homes. They put them into ARM (Adjustable Rate Mortgage) loans, interest only loans, and other types of loans that had fluctuating interest and payments. These new homeowners did not understand what they were committing themselves to.

Of course, for the first few years there were no problems. Payments were low and homeowners could afford their respective properties. But when the adjustment periods came during those loans, these homeowners did not remember (nor did they previously think about) the potential for their loan to become overbearing. They did not understand why the payments were increasing at such a high rate, and did not have the money to make the payments. Having no way to combat the situation, they lost their homes to foreclosure.

What Foreclosure Means to the Residential Rental Market

The collapse of the mortgage market is upsetting. However, for the real estate investor and marketer, this creates a fabulous two-fold opportunity. Because foreclosures are rampant, we have the ability to buy in at severely reduced prices, while at the same time having a larger market of renters to pull from.

You see, these people that lost their homes have to go somewhere, and why not to one of your newly acquired rental properties? Do you see the potential that this market has created for real estate investors and property managers? It’s tremendous.

In fact, right now, I am getting new listings for property management without even promoting myself for more properties to manage. It’s great, people have heard of what I do, and are ready to hand over the keys to their homes for my care and management. So if you are looking to get started in real estate investing, or are looking to expand your current business, now is the time to buy.

Q. I’m afraid that if I invest in a mobile home, that it will lose value over time. Is this true?

A. In many cases it is true. Mobile homes do tend to decrease in value over time. But the point of investing in mobile homes is to create an income stream. Look at it this way - if you can charge $600 in rent, while only paying $400 on a mortgage, taxes and insurance, aren’t you making money, while letting the tenants pay for all of your equity? Over time, you might just see that the principle on the mortgage is less than what the property is worth - all the while, you are collecting a monthly check.

Q. I’ve heard that you will end up with nothing but bad tenants in a mobile home. Is this true?

A. This is no more true than getting a bad tenant in a house. Getting good tenants is a matter of screening and experience. Checking rental history and following up with past land lords is great place to start qualifying a tenant. I’ve had good tenants and bad tenants, but as you move forward, you begin to see what kinds of tenants have tend to be bad, and which ones tend to be good. If you are uncomfortable working with tenants in the beginning, or you simply don’t ever want to deal with them, hire a management company. It just means you will have to find a little bit sweeter buy in order to have the money to pay the management company, and still make your desired money.

Q. Mobile homes are cheaply built houses. Won’t they have more repair issues than normal houses?

A. No. In fact - I have had more trouble with some of my older on site built homes than I have had with mobile homes. Though they may be built with lesser materials - age and abuse are the major factors in the frequency of repair needs. So just be mindful if you are buying a 15 year old mobile home, as it may be in need of significant repairs. Just do your homework, and evaluate the costs before jumping in to a deal. It has to make money, or it just isn’t worth doing for me.

The bottom line is as long as you do your homework on the properties you are looking to invest in, you should be well prepared not only to manage the investment well, but also to make a good deal of money. But the specific advantage of mobile home investing is the significantly lower risks, and ability to leverage your money into more deals. This spreads your assets, while creating multiple streams of income. So compare that to tying up all your money in one nice house, and depending on one tenant to make your money.

I have to tell you that succeeding in real estate is a matter of ambition, not a function of a recession (or economic boom, for that matter). In fact, in a recessionary market like the one we are facing now only provides greater opportunity for you to succeed and find deals that you would not easily find in bull markets. Let me break it down to you this way:

“If you want to be successful in real estate, you must be convinced that you can be successful in real estate.”

Sound simple huh? Well it really is. But think about your past and how, perhaps your parents or grandparents, or other family members and friends have programmed you for failure. Sayings like “Money doesn’t grow on trees” or “You have to sacrifice for a long time before you can get what you want” or “Just do something right now, build up some cash and then do what you want” spew from the mouths of family and friends all the time. And these saying couldn’t be farther from the truth.

Listen to me, I had all the same things programmed into my brain growing up. But I finally came to a point in my life where I realized this - they were all wrong. All those things they told me just weren’t true. And I realized something else - if I followed their advice, I would end up in the same debt-ridden, enslaved to a job state that they are in, even today.

I am happy to tell you that I am job-free and virtually debt-free as well today because I finally made the decision and the commitment to my financial future, fired my boss, and went out on my own. It has been over a year now since I freed myself from the dead end job, and I am doing fantastic. I sleep as long as I want, I work in sweat pants most of the time, and I am on my way to making more money than I ever could at any job.

So what is my secret? It’s no secret. I dared to dream, and then acted on that dream. There are a lot of dreamers out there, and there are a lot of hardworkers out there, but there aren’t many people that do both. You have to surround yourself with like minded people - start by joining your local real estate club. Start reaching out to those people, tell them what you are trying to do, and get their advice. Before you know it, you will probably be setting up teaming arrangements with them to get business going.

So bottom line, you can make money in real estate (or really any other business as well) in any economic condition. Start with a dream, act on it, surround yourself with like minded people, and seek out ways to find creative financing to get your ventures started. One thing you can do right now is fill out your name and email below, and get on my REGA list to get updates on advanced automation tools to make you more effective in your real estate pursuits. Good luck to you and let me know if you have any questions by commenting below.

1. Property Management Fees Before Leasing

Often, management companies will have a fee structure for the initial advertising and contract procurement. The fees could be charged by the number of hours worked, a flat monthly charge, or a simple passing on of whatever advertising costs are incurred by the property management company.

2. Override on the Rent

This is the fee most often associated with what folks think about when they are looking for a property management company. Typical fees might be anywhere from 6-10% or more of the rental price. So on an $1,400 per month home with a 10% management fee, you would be paying the management company $140 per month, and ending up $1,260 in your pocket.

3. Fees for Repairs

Sometimes, there are management companies that charge additionally for any fees they incur while dealing with repairs on the property. It may be a simple as the same override style fee they charge on the rent. So if the repair was $250 and you were paying a repair override of 10%, that would be an additional $25, pushing your repair cost up to $300.

My personal opinion is to find property managers that charge a flat percentage fee. This is how I operate as a property manager, and it makes it really simple for the owner to understand what to expect when receiving a bill. My typical fee is 10%, and that includes all marketing, repairs and contract management. So this makes it really easy for my owners to know exaclty what to expect from me.

If I could give you any advice about shopping for property managers, it would be to look for a company with a good reputation in the community, up front and full disclosure of all fees, and ask questions! Now that you know the basics of how property managers charge their customers, you can ask the detailed questions about their particular fee structure. And asking questions will do more than just give you answers about their fee structure, it will probably give you a sense of how well the property manager knows their stuff, and what to expect from them.

Getting to know your property manager personally is a good thing. This is the person that will have access to your home, and who you are intrusting a very valuable assest to. Getting mixed up and under contract with a bad can be more than a headache - it can cost you thousands of dollars. So do your homework, ask questions, and don’t put too much emphasis on fees, a good property manager is worth paying!