Now, we’re going to get into the specific properties themselves and what type of owners to look for. I’ll actually give you the scripts—the cheat sheet I created—that allowed me to represent investors, and execute 110 transactionsin a single year. And I had no assistants helping me. I did it all by myself. This system absolutely works, and that system was based on what I did myself as an investor to buy 250 units in five years.
Right now, the economic environment we’re in is well into recovery from the greatest recession since the Great Depression.We have inventories just starting to loosen up like traditional inventory. These are not necessarily all bank-owned properties and REOs—those are still out there in various degrees. The counties who burned through their inventory are recovering faster than the areas that still have a lot of bank-owned inventory.
Areas in Georgia and Texas, even parts of Florida and North Carolina, even Hampton Roads, Virginia, down around Virginia Beach, Norfolk, Chesapeake, Hampton, the seven city area, there is still a lot of bank inventory down there. So in any case, it’s an odd market right now, but an awesome opportunity because prices are still low relative to historical averages, and interest rates are as low as they’ve been in 50 years. Interest rates have simply not been this low since the 1960s.
If you’ve ever thought about buying properties, now is the time. I’m telling you! Use this strategy. Don’t use other strategies. Use this one, which is exactly what I did to accumulate 250 units.
Five years ago, I could do a search in the Pittsburgh area and find 3,000 properties in foreclosure. Now I could find maybe 300and that’s good. In Hampton Road, Virginia, their arm’s-length inventory is pretty tight, but there is still a lot of short sales there. In Southern California and Phoenix, Arizona, property values are escalating as high as 15% annually—in certain areas like La Jolla and San Diego—while Laguna Beach is shooting through the roof.
Whether you’re a seasoned investoror simply on your way to becoming one, you really don’t care so much what the inventory is like. You just want to find the best deal for you. But that’s all relative to your market, so you need to understand your individual market. You need to understand the rules of engagement.
At this point, I should describe the pros and cons of the different properties so you understand the rules of the game. Everybody who’s ever mastered any game must first learn the rules before they can go on to create new and creative ways to play. Like any other business, you have to learn the rules of the game so you can perform profitably and more competitively.
We’re going to focus on good old-fashioned common sense in blocking and tackling. Let’s start off by talking about the different types of properties you can buy and get the good deals.
The first one is REO. That stands for real estate owned. It’s an accounting term that’s used in banks. They’ve got to categorize properties they’ve taken back in foreclosure.
Five or ten years ago, you could have had your choice of REO properties. There were so many it was crazy. I was going out and buying, sometimes three to seven properties at a time. You know, there were lots of them out there, and banks would take almost any price as long as it was reasonable. I mean, you could get properties for half price. It’s hard to do that right now.
Typically larger banks will hire a real estate broker to sell their properties. Some of the smaller banks will actually sell their own, and sometimes they even have a licensed broker on their staff who will sell properties for them.
In Module 1, I gave you a tool. It was Investigative Reporting. It was a website created by American University for you to look at any bank in the United States of America and see how they’re doing in terms of default assets.
Of course, I was an investor first, before I got a real estate license, and I eventually formed my own broker’s company. I was a good candidate for these banks to hire, as an independent contractor or broker, that is. I serviced a lot of them: HUD, VA, Fannie Mae, and Freddie Mac.
I sold literally thousands of those properties, but I used to be a banker so I spoke their language. Even though I hadn’t worked in the lending division it didn’t matter. But as an investor, I knew what other investors were looking for. I knew how to sell those properties, and that’s why I was able to sell so many.
As the economy began to improve, we started burning through the inventory.Banks started changing the rules because they wanted fewer investors and more owner-occupants to buy their properties.
I understand their logic, but I don’t agree with it. I think investors provide a valuable service to the economy. We take properties that are not producing—nobody’s paying property taxes on them, they’re an eyesore—and we fix them upand rent them.We bring families in who conduct business in the community, and generate revenue and commerce. Investors pay the property taxes and everybody wins.
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