Ran across this post this morning on another blog, where they are slamming on Bank of America for being absolutely retarded about completing short sales.  I couldn’t agree more, and have yet to talk to anyone that has had a good experience with them.

Bank of America is to be Highly Commended for their complete willingness to give so many intellectually challenged people jobs as executives.  Sure, year in – year out, most other banks have always been willing to hire a few people who couldn’t think straight.  But those other banks aren’t getting any awards for what they did for one simple reason: what they did was so darn common.  Now any buzz kill who cares to can go look and find some other division of Bank of America / Countrywide that isn’t being run totally by retards (for example, their REO loss mitigation department).
Please read the whole post and comments!

It is amazing to me that BofA can be so callous to its clients.  I know the way they have handled short sales and general lack of care has prompted me to move my checking account that I have had with them for 15+ years.

Shows like ‘Flip this House’ and the dozens of others that it spawned, made house flipping look like a no brainer and everyone and their cousin started buying fixers and trying to make a quick buck.  A lot of those “would be” real estate investing, fast flippers learned the hard way how not to flip a house.

Let me quickly hit on some of the items that will ruin your flip.  Missing these will teach you some great life lessons, but they will be expensive!

Flipping a house rule #1 – Get an inspection!

Your buyers are going to get an inspection.  Getting an inspection from an independent 3rd party will help you catch items that will bite you in the butt later.  Plus, an inspectors report will give you some leverage for shaving some more money off of the asking price.

Flipping a house rule #2 – Don’t be afraid to walk away from a bad deal!

Too often in the excitement to get a deal going, flippers will pull the trigger on a deal that is questionable. Don’t get caught up in the emotion of the moment. The numbers are what the numbers are, and no matter how much you love a house or want to do a flip, the numbers have to be right!

Flipping a house rule #3 – Hire real contractors!

This doesn’t mean that you have to hire the most expensive crew in town, but hire real professionals that know what they are doing and will show up every day.  Don’t pay them all the money up front and be sure to get all the necessary permits.  Getting flagged on a job or having a contractor go AWOL is not good for the profits!

Flipping a house rule #4 – Price your flip right to sell fast!

Another of the most common mistakes I see flippers make is pricing their homes too high, hoping for a big score.  Remember, having a flip sitting on the market costs you money every day, and interest will eat up profit margins in a flash!  Get good comps and price your finished flip aggressively!

Flipping a house rule #5 – Where is the emergency exit?

Obviously the primary plan when you are doing a flip is to get in, get it fixed and get cashed out.  But what is the back up plan?  What if you wind up not finding a buyer?  What if you hit an unexpected problem and the cost to repair the property comes in too high?  Do you have a plan B and a plan C?  While we should never focus on what might happen to mess up a flip, it is essential to plan for what to do if something goes wrong!

Flipping a house rule #6 – Work with a great real estate agent!

A good real estate agent, much like a good lawyer will make you more money than you will ever have to pay them out.  Good solid advice on pricing alone is invaluable, but us agents that are on top of our game can find some great fix and flip deals as well!

In the Seattle?  Want to know more about flipping homes or real estate investing?  Need a great agent to work with?  Call me at 425-773-3149 today!  I can help you get started in real estate investing, and help you locate flips and get them sold when they are done!

For all you real estate birddogs across the nation and particularly here in the Seattle area, I want to share one of the better articles I have ever read on being a birddog for real estate investors.  For those of you that are sitting here wondering what a birddog is, they are people that go out and track down properties that investors buy.  For a fee of course.

7 Steps to Getting Started as a Real Estate Birddog

Let me throw in this caveat.  Birddogging is a grey area.  Technically only licensed persons are supposed to get paid from a real estate transaction, HOWEVER, real estate investors have been paying birddog fees for years.  One source I found found has this to say on it.

RESPA, a federal law ("Real Estate Settlement Procedures Act"), dictates that any payment made to another settlement service provider (except a licensed broker or agent), in direct exchange for a referral, is prohibited. The definition of "settlement service provider" seems to be broad enough to include unlicensed, third parties. Nevertheless, payment of referral fees to friends and past clients is a practice in which many agents engage across the country. It does not appear that HUD prosecutes agents for this practice.
It may be that HUD does not prosecute real estate agents for the payment of referral fees to third parties because, like the Department of Licensing, HUD believes there is no harm to consumers from this action. Or, it could be that HUD’s prosecution resources are dedicated to other violations and HUD will prosecute agents for these payments when resources become available. If HUD has reason to believe that such payments result in a higher fee to a consumer, HUD will be more likely to prosecute. If a REALTOR chooses to offer referral fees to unlicensed third parties, REALTOR should consult with their broker and! or legal counsel and determine to proceed only in conjunction with broker’s permission.
Full Article

I don’t want to scare you with that, but make you informed.  Always do your best to cover your backside legally!  There is my disclaimer, so if you get in trouble no blaming me! 

Back to business though.  The reality is that if you find a hot deal, there is an investor sitting out there waiting to pay you for finding it.  If you need to get in touch with some honest real estate investors with a hot deal you have found, give me a call or send me an email and I will put you in touch with some!

Well, holy crap! 
Anyone want to start playing ‘Another One Bites the Dust’

It just came across my desk that Taylor, Bean & Whitaker Mortgage Company, one of the major players in residential home mortgages has bit the dust.  Apparently FHA has barred them from doing loans for them, and that was the rock to the side of the head that brought this Goliath down.

Taylor, Bean & Whitaker Mortgage Corp., one of the largest independent home-loan providers, closed its mortgage-lending operation Wednesday, an event that further consolidates an industry increasingly dominated by a few big banks.

The failure of the privately held Taylor Bean, based in Ocala, Fla., came a day after the Federal Housing Administration barred it from making loans insured by the government agency. Taylor Bean was the nation’s 12th-largest home-mortgage lender for the first half of the year, and the third-largest originator of FHA loans in June, according to Inside Mortgage Finance, a trade publication.

Taylor Bean said Wednesday that it wouldn’t be able to complete or fund any mortgage loans in its pipeline of unfinished mortgages. Mortgage analysts said the failure of Taylor Bean could be a blow to hundreds of small banks and brokers that sold their loans to Taylor Bean and now will have to scramble to find new partners. That would lead to fewer choices for consumers.  Source: WSJ

I can only imagine the pain that is going through agents hearts today as they have to tell their buyers that their deals are shot to hell because their lender is dead.  Big companies going under like this have a huge ripple through the market, and I expect there will be a lot of tears and broken hearts out there this week as buyers try to come to terms with not having loans.

This comes after a raid on Taylor Bean’s Ocala offices on Monday by Federal agents.

"I can confirm for you that our office, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), has executed two search warrants today in the state of Florida," said Kristine Belisle, communications director. "It’s our investigation. It’s our agents that have executed search warrants." Source: Ocala.com

My heart goes out to the 5000 or so people that were fired with no notice from Taylor, Bean & Whitaker as well as buyers all across the country, that are now left in Limbo with transactions scheduled to close but have no loan to do it with!

For those of you not on BizNik, members there routinely schedule networking events, talks and so on.  These are generally really great get togethers and I will be attending this one.  The Power Chicks Networking event is Monday August 24th from 12-2pm.

To quote from the event description:

Are you committed to women, so committed your business is devoted to serving them? Would you like to build a strong, supportive network with other entrepreneurs who share your passion?

Power Chicks Networking is a monthly event designed for those who want to network with women. Like the Power Chicks group itself, it’s based on my belief that we can support one another in unique, positive and powerful ways.

Together, we can make connections that will enhance both our professional and personal lives.

You’ll come away with:

• New relationships sparked & established ones, renewed
• A sense of community with women who share your passions
• Connections to help you grow your business

Take a minute and sign up to come and network a little! 
While you are on BizNik be sure to add me as a connection!

When you are preparing to make an offer on residential investment real estate, usually defined as properties with 6 units or more, NOI (net operating income) is a very magic number.  NOI is the basis for calculating a lot of numbers associated with an income property, but most importantly it is one of two factors that determine price.

As you can see, estimated market value is the net operating income divided by the cap rate.  This makes the property’s cap rate also very important, but I will save that for another day.

As an investor what does this mean to you?  Well, on the buying side, you want to bring that NOI down as much as possible when you are justifying your offer.  Sellers tend to paint a rosy picture of the NOI on a property with phrases like “It is always fully rented!”  Which of course we know is never the case unless the rents are under market.  Which still works to our advantage.

Lets look at an example.  Lets assume that we are buying a 6 unit apartment building with rents of $700 a month and with a cap rate of 8.5%.  Expenses round out at $20,160 for the year giving us a NOI of $30,240 for the year.  So plugging it into the formula above, we get:

$30,240/0.085 = $355,765

Simple enough, but what if the owner wasn’t quite telling the truth?  Owners of property never fib about numbers do they?  Lets assume that they have ‘forgotten’ that two units are turning over every year.  That costs the property $1,400 in lost rent, plus another $200 in advertising and another $350 per unit in cleaning and repairs.  What does that mean to you? 

Those added expenses bring our NOI down to $27,940 and change our formula!

$27,940/0.085 = $328,705

A small change in NOI has magnified to a whopping $27,059 reduction in the price!  This is why getting accurate financial information on a property is absolutely critical when finalizing an offer on a residential investment property.

When you get ready to make an offer on an investment property, never take the sellers work on the NOI.  Look at the expenses and income for yourself.  Often times the owners won’t let you have access to their full information until after you have an offer on the table, but you still need to go over every detail!  Some expenses to look at are:

• Actual rent receipts
• True vacancy rates
• Cost of acquiring new tenants
• Maintenance
• Who pays utilities
• Taxes
• Property repair set asides
• Management fees

These will all eat into the NOI and lower the market value.  Of course once you have the property, these will also be the items you are going to want to look at minimizing to increase your NOI and market value.  Remember, a small change in NOI is greatly reflected in the market value of a property. 

Good luck with your investing and if you need any help analyzing a property, or locating a solid residential real estate  investment, I am just a click or call away! 

Want to learn more about investing in real estate? 
I can point you in the right direction there too!

It is no secret that I am actively looking for real estate investments and working with a great group of real estate investors.  However, recently someone posed the question, ‘why is it you are investing in real estate?’

This is a great question!  Many times our first answer is that we want more money, stable income, retirement money or so on.  That is more of the nuts and bolts of what it is we truly want.  For example, you might tell me that you want to buy enough rental units to generate $1,500 a month in positive cash flow.  But the real question is WHY?

What is it that that $1,500 in cash flow will do for you?  You need to drill down and get to the core of why you want that money.  What will that money change in your life?  Who will it help, what will it allow you to do?  It can be a tough question to answer sometimes.  Your true motivation will almost always have an emotional reaction in your core.

Why is it important to know this?  Because there will come a time when you need motivation.  There will come a time when things will get hard.  You may have just had a seller kick you out for making a tough offer.  You may be needing to go talk to a seller that you know is about to lose their home and are nervous.  There may come a day when you are burned out and want to quit.  That is when you need to have your true motivation clear in your mind.

Do your digging and write down your true motivation for investing in real estate on a card.  Put a copy on your mirror in the bathroom, one on your desk, and one in your car.  You could even put one in your wallet or purse.  When you are wavering and wondering what you are doing, look at that card.  It will give you the push you need to keep going.

This will keep you up and going when other people would have given up. That is often times the difference between those of us that succeed and those who fail.  Write down your true motivation for investing in real estate and use that to keep you driving forward!

It looks like the path is clear for Marysville to expand its borders and become the second largest city in Snohomish county.  The city and county got together Monday and approved a plan that would increase the population of Marysville by almost 20,000 people.

The prime reason for this is a tax incentive from the State that runs out in 2010.  Many cities in the county are scrambling to expand their borders, particularly Lynnwood and Mill Creek which are squabbling over the land that is wedged in between them.

I was surprised to see this in the news today.  Apparently the numbers are out and the average time that a person in the Seattle area spends commuting has gone down in recent years!

There is a lot of conjecture in the article as to why, citing gas prices, the economy and so on.  What is your opinion?  Has traffic around Seattle been better lately?

This seriously troubles me because I have several of Robert Kiyosaki’s books and have found them to be really good motivators to get up and out of the rut that most people are in.  But to feature Carleton Sheets in a book on real estate is definitely not a way to add credibility.

Review of Carleton Sheet’s Products

For those of you that don’t know Carlton Sheets, he has been selling real estate training courses since the stone age.  The problem is that his material is considered by most people to be worthless and a scam.  If you would like some validation on this simply Google Carleton Sheets Scam and look at the results.

It actually saddens me to see Robert throw in with Carleton.  I love his Cash Flow game, and play it on a regular basis.  I haven’t signed up for his mentoring classes and I am hearing mixed reviews about them. Throwing in with Carleton Sheets is a big red flag for me!

Personally, I am signed up with Nouveau Riche and it has been an amazing experience for me.  The real estate education has been phenomenal, the community is a powerful tool and it definitely has brought more money into my life.  I don’t know that I have heard such statements about Robert’s or Carleton’s programs. 

If you are looking for an awesome real estate training course taught by people that are actually practicing what they preach, give me a call at 425-773-3149 and I will put you in contact with the Nouveau Riche school!