Planting Seeds of Wealth

A few days ago I mentioned my awesome experience in Phoenix AZ teaching my two day wholesale workshop. What I didn’t; mention was something which just came to mind.

In the audience were two young ladies, I mean one looked like a teenager the other a teeny-bopper. Both were brought by dear ole’dad. Dad’s explanation for bringing the girls was part humor, part serious, you know like seriously joking. He said he brought them to expose them to real estate so perhaps they pay their own college tuition in a few years.

No matter his true reason I thought it a great idea. Why not expose our kids to something they can use their entire lives? Planting that seed in a child’s mind early can result in unimaginable results years later.

I just read a book, a biography on J Paul Getty, America’s first billionaire. The richest man in the world during the 50’s to until his death in the 70’s. Mr. Getty regurgitated the story of how as a kid he wanted to be a writer and a diplomat. It was his father’s exposing him to the early Oklahoma oil fields during the turn of the 20th century is what planted that seed in young Getty’s mental garden.

Just a few years later at age 24 young Getty made his first MILLION as his own oilman in 1916!!!! He went on to become the Bill Gates of his time. Today Dec 15th would be J Paul Getty’s 114th birthday.

The same can be said of Donald Trump whose father developed small apartment buildings around NY and carried young Trump along to help inspect projects. We all know the rest of that story. The same can be said about many successful people, having been exposed, not forced, but exposed to an idea, a way of life which can have lasting financial effects.

Sadly enough most youngsters will never get that same real world exposure of business and finances. The public schools, although starting to realize the need, are still lacking in that area. Unfortunately, most kids are being exposed to scarcity minded, “me me me” ways of thinking about money.

A few years back when my son Marcel was in kindergarten his teacher Mrs. Meade asked me to come by and talk to the kids about what I did with houses. Man, that was one of the most rewarding experiences I’ve ever had teaching wholesaling. A room full of five year olds circled around me sitting legs pretzel styled on the floor.

They hung on every word I said, especially my slooooow, deliberately dragged out explanation of uuugg guulll-lee, sssstttiinkkky, houses. You know how kids do, eyes focused on your mouth as they mouthed your words at the same time? I had em hooked.

Going forward with using their new math skills we did some basic additions and subtractions to figure our profits. The kids loved it, hugging me after one by one saying thank you Mr. Wizard. Marcel beamed with pride; he wasted no time underscoring my description of the houses to his classmates by reminding me there was pigeon poop in one house that could make you sick.
Those kindergarteners got it! So did the teacher’s assistant who approached me later interested in being a private lender to my deals. Folks a seed was planted that day.

Marcel, I’m excited to report, is well on his way to thinking about real estate. He loves drawing houses. We watch the History channel’s Modern Marvels engineering documentaries. He understands load bearing walls, and attempts to figure which walls are holding up a roof in nearly every building we enter.

A good friend of mine Kenneth Edmonds has dedicated his real estate teachings to youth. Ken is out in LA and doing marvelous things with the youngsters. This past November he reported the progress of some of his young moguls. One report sticks out in my mind. A 16 year old young lady has amassed $2million worth of real estate (correct me if I’m wrong Ken) which is giving her positive cash flow. At 16!!!! Since she hasn’t reached the age of maturity her parent’s have to sign her docs. Hey! careful there now dad.

Another good friend, colleague and my favorite real estate guru Vena Jones Cox is also dedicated to exposing youth to this mighty business of real estate investing. Vena herself a 2nd generation investor was exposed early in life by her dad. At least once a year, she invites a bunch of gurus to spend a few hours with the youth aged 14 – 21years, during a multi day event, teaching their strategies.

I had the distinct pleasure of joining Vena and Ken, two years ago at such an event. It was one of my most worthwhile teaching experiences. Watching the slumped shoulders straighten up, sleepy rebellious eyes brighten up at the possibilities they just heard. What could be more rewarding?

The young people perk up when we start talking numbers and using the internet to search for owners. Driving for dollars also appeals to the newly licensed 16 year old. One kid said he could even ride his bike to find houses for his mom.

Sorry for my rant, but I get excited. I have the utmost faith in our youth. There’s much about them I don’t understand, but I assure you, they think differently than I as a PC generation. But they are more motivated than we realize.

The two young ladies in Phoenix, who looked resentful at the beginning of the day, lips poked out, heads in hand, straightened up when I got to the numbers and real world case studies. They acknowledged at the end they really enjoyed themselves.

Lets all plant those seeds of wealth. The mental garden doesn’t care what gets planted, be it the weeds of scarcity and limitations, or the seeds of positive possibilities. One thing is for sure, a weed and a rose can not occupy the same spot in a garden.

Much Success,

Go to www.thewholesalewizard.com for more information.

Why Do Sellers Discount Properties?

This past weekend I had the wonderful experience of teaching my favorite real estate topic “wholesaling” (www.TheWholesaleWizard.com) during a one day workshop in beautiful Phoenix Arizona. The majority of those in attendance hadn’t even done their first deal yet. Newbies!

I consider it a privilege to have the opportunity to transform minds and lives in mass. A privilege, mind you, I don’t take lightly. Oft times when I mount a platform to teach a workshop of beginners the majority have never heard of me. Many arrived with limited thoughts and ideas about the potential of real estate investing despite their paying to get in the door.

Call it lack of ideas from the lay person, cynicism from the pragmatic or just old fashion conventional wisdom casting a dark cloud of doubt over some. Nonetheless, it is my objective to not only convince, but prove without a shadow of a doubt that what I say is not only possible, but probable when the steps I provide are carried out.

My very survival as a trainer depends on my ability to do so. Personally, I enjoy the challenge, as I keep an eye on the most ardent cynic in the audience usually someone dragged there as guest against their better judgment. The arms folded, body tensed, nonchalant stares beaming my way, turns me on man!

After sharing many case studies of mine and my students success stories which are emphasized with HUGE figured, unbelievable to the layperson, checks as proof now come the gasps and looks of disbelief.

Ok, wait a minute says my skeptic. Hold on there Mr. Wholesale Wizard. “Why on earth would an owner of a property sell to you at such a huge discount if they know their property is worth much more?”

Casually and in a non defensive manner and tone, I simply ask everyone present to think back in their own lives. Have you ever owned something which overtime lost its value to you? Better yet, have you ever held a possession in your life where it became more painful to keep it than to let it go? Once when I asked this same question to a workshop group a lady shrieked “Yeah, my ex husband!”

Ok, in that case I ran with it. Sure your ex husband was the light of your eye at one point, until one day he became a burden in your life. Rather than keep the handsome dream hunk you were motivated to let him go to the next wholesale lover. “That’s it” she confirmed, with a few more inaudible mumblings.

It’s the same with houses. At some point in some people’s lives the American dream becomes a sleepless nightmare. Stress associated with the continued ownership can become unbearable until a time the person becomes extremely motivated to sell or just deed their property to the first savvy investor able to solve their problem.

I then follow up my statement with further proof with letters from sellers I and my students have helped out of a jam. Believe me, in many cases the sellers were happier to see us their savior at their door than we to see them.

This pain or frustration of ownership is NOT limited to the real estate world. Pawn shops have and still do thrive off this very concept. Today there are websites created for this very purpose to release steam from under the lid of a frustrated owner of a love lost possession.

I told my Phoenix audience to check out Craigslist.com to see all the ads from people selling cheap, while others are giving stuff away (no Craig is not giving me a cut). I have a friend who is self professed CS junkie, constantly selling, giving, buying and grabbing bargains weekly. Just this past weekend she scooped up a practically new box spring/mattress set from an owner whose back didn’t agree with the hard surface of the set. Both were happy about the outcome.
I think I changed the minds of most in that Phoenix audience. Those who cared to open their minds that is.

Let this be a reminder to you as you seek out motivated sellers, everyday there is another property owner looking, hoping, some praying that you find them to solve a problem they cant for themselves. As long as you treat em right, the money will flow into your life as a side affect.

Take action now to get started on your path as a real estate wholesaler.

Much Success to You

It’s the numbers, period!

This past week I decided to pull my offer on a huge Victorian single family house, with tons of potential here in Washington DC. It is an REO “Real Estate Owned” by a bank. For one, this listing comes as a sure sign that times have changed in the DC market. Over the past four or five years any foreclosure in DC was snapped up by frenzied speculators either before or during auction. Other times the banks themselves were the high bidders knowing all they had to do was give the property the once over, put back on the market over priced, to be scooped up by an overzealous buyer. Those days appear to be long gone.

Back to my deal. Agents, (can you believe it?) two real estate agents were fighting hard to convince the bank’s asset managers to accept my offer. That’s right, the listing agent knew this property which needed a ton of work would only appeal to a person like me who had the means to both purchase and rehab the property. My buyer’s agent whom I met recently was pushing hard to make the deal work as well. Much to her chagrin, I had my number and held tight to it.

I knew what I was comfortable with for a worse case scenario some five or six months later when the property would be ready for resale, I wasn’t willing to budge. I did at one point offer a little more than my initial price with a request for closing concessions, which really was a wash.

The bank’s asset manager had their number which wasn’t close to mine. The agents tried talking me into coming up a little higher to make it work. I sensed they both meant well, but surely their advice was driven by some self focused motivation of getting the sale. Nope! I wouldn’t budge. Either the bank came down to my price, or I walk.

My buyer’s agent, who is fairly knew, and never worked with an investor/developer didn’t quite get it. After verifying my private lender letter approving more funds than the bank’s asking price, I’m sure she thought that I could surely pay it.

Having the available funds wasn’t the point. There is no emotion for me when I make an offer. I learned this the hard way. It is the patient investor who waits for the low hanging fruit and the BIG bucks.

Finally, I pulled my offer, in the midst of the listing agent introducing other investors supposedly willing to pay more than my offer. God bless em!

As I drive around my downtown office neighborhood, I count many properties owned by investors who got caught up in the frenzied times. They over paid for properties which are now sitting like hulking brick ghosts. One nearby row house with gorgeous potential even has the dumpster and project fencing on the lot. The tell grass surrounding both dumpster and fence serve as a constant reminder of a real estate era gone by.

No surprise to me as I saw it coming 18 months ago as many of them were over paying for these now thorns in everyone’s side. I’d often scratch my head and wonder, “how in the heck does this guy think he’ll make money on that one he’s just over paid?”

This should come as no surprise to anyone, but real estate investing is all about the numbers. Period! Save your emotions for when buying your family’s dream house.

I can’t tell you how many times I’ve entertained investors during a Q&A session when someone utters out in frustration that they can’t find a buyer for their deal. I politely listen as long as possible as the person goes through a song and dance for why they believe their deal is not selling. All the while my inner voice is screaming “it’s the numbers.”

Finally, I share with the grieving investor that their problem is the numbers are wrong. That statement is usually met with immediate protest with emphasis on how nice the property is, the neighborhood, schools, huge back yard with picket fence, and so on and so on. All that stuff is great to know, however, they’re all emotional details. Important? Yes, but less so than the numbers.

Getting properties sold, assigned or rented boils down to one thing, and that is the numbers. Any property, anywhere, in any neighborhood will sell, in any economic cycle, if at the right price.

I have no love lost with the potentially elegant Victorian Queen. There’s nothing worse than being stuck holding a dead property you can’t move. I’ve had many sleepless nights in my days, counting not sheep, but carrying costs as I stared up at my ceiling.

My advice to you is to decide now, to tuck away all your emotions when it comes to making offers, place them on a rear shelf somewhere in your heart. Save those emotions for when you are deciding to build your dream house. Invest with your head not your heart.

Much Success

Folks, this is an email I received from a business associate. I haven’t verified the source of this statement, but who cares, the message is still good.

Bill Gates recently gave a speech at a High School about 11 things they did not and will not learn in school. He talks about how feel-good, politically correct teachings created a generation of kids with no concept of reality and how this concept set them up for failure in the real world.

Rule 1: Life is not fair - get used to it!

Rule 2: The world won't care about your self-esteem. The world will expect you to accomplish something BEFORE you feel good about yourself.

Rule 3: You will NOT make $60,000 a year right out of high school. You won't be a vice-president with a car phone until you earn both.

Rule 4: If you think your teacher is tough, wait till you get a boss.

Rule 5: Flipping burgers is not beneath your dignity. Your Grandparents had a different word for burger flipping: they called it opportunity.

Rule 6: If you mess up, it's not your parents' fault, so don't whine about your mistakes, learn from them.

Rule 7: Before you were born, your parents weren't as boring as they are now. They got that way from paying your bills, cleaning your clothes and listening to you talk about how cool you thought you were. So before you save the rain forest from the parasites of your parent's generation, try delousing the closet in your own room.

Rule 8: Your school may have done away with winners and losers, but life HAS NOT. In some schools, they have abolished failing grades and they'll give you as MANY TIMES as you want to get the right answer. This doesn't bear the slightest resemblance to ANYTHING in real life.

Rule 9: Life is not divided into semesters. You don't get summers off and very few employers are interested in helping you FIND YOURSELF. Do that on your own time.

Rule 10: Television is NOT real life. In real life people actually have to leave the coffee shop and go to jobs.

Rule 11: Be nice to nerds. Chances are you'll end up working for one.
I find every one of these items relevant and should be remembered by all. Take action folks,

To Your Success.

Is Real Estate Boom or Bust? Who Really Cares! Final Part in a 4-Part Series

The scales are balanced. Seller or buyer has no more leverage than the other. That’s good news for the real estate entrepreneur. After all one of the most challenging obstacles in the business over the past few years was finding a good deal. The sellers were arrogantly holding out for top dollar and sadly enough the day traders and retail buyers were racing to out spend each other. Things have certainly changed for the better as far as the entrepreneur is concerned. Sellers are beginning to sober up and come to the negotiating table with more realistic expectations. Buyers are still spending money on real estate.

Uh hum, are my wholesalers paying attention here?

With the scales balanced in most markets around the country, wholesalers should be making a truck load of money setting up the deal. After all, the wholesaler’s main focus is to solve problems for the seller (helping them get rid of their properties quickly without hassle) and the buyer, (bringing bargain deals).

I’ll end here with a provocative thought for you to chew on. With regard to the impact of media headlines, this a case of the market influencing the media or could it be….. the media influencing the market? Could it be possible that the media is giving real estate such a bum rap in effect, causing buyers to pump their brakes in panic, thus contributing to even lower sales? Now that deserves a scratch of the temple and a great big hmmmmm!

My FREE Tele-Call starts Tonight, August 17th at 8:30pm EST.

Here are 3 reasons you need to be on this call:

1. Its FREE to register
2. Its FREE to be on the call
3. Its FREE to listen to why this is the best time to be a real estate investor.

Click this link now to register www.nobsrealestatestrategies.com

Talk to you then,

Ken

Is Real Estate Boom or Bust? Who Really Cares? Part 3 of 4

Welcome back to planet earth!

A resale period of 60 days isn’t much time at all, relatively speaking. So where does all this adjustment downward leave the investor? Typically, the real estate investor has been the person jumping into the game with both feet and eyes closed. Their entire game plan was an attempt to time the market, hoping for a BIG hit. That game plan paid off for many. Some have gone on to teach their own seminars as the expert, yuk yuk! Unfortunately, others coming around at the tail end of the gold rush have gotten burned.

On the other hand the real estate entrepreneur treats real estate as a business. This person is in it for the long term. Sure they’re seeking wealth, but with a mindset totally opposite the typical investor from the boom. The entrepreneur understands true wealth is generated by time in the market, not in timing of the market.

The entrepreneur cares little about outside factors affecting the market for he is a transaction engineer able to handle most situations with a tool chest full of strategies. No matter the situation the real estate entrepreneur is ready and able to make a profit.

Good news is, contrary to the cloudy forecasts, most real estate markets around the country are still very healthy and balanced with a few simmering hot spots here and there.

That means the game is fair.
~~~~~~~~~~~~
Stay tuned for the Final Part in my 4-Part series on the Real Estate Market and its impact on Real Estate Investors....

Is Real Estate Boom or Bust? Who Really Cares? Part 2 of 4

In my local market in the Washington DC metropolitan area we’ve seen prices dip by 10 to 20 percent in some areas.

What’s happening is the market is adjusting from what was a feeding frenzy the past few years driven mostly by aggressive, uniformed speculators. These were the “day traders” of real estate who only came around when they smelled the opportunity to make a quick buck. As such many over paid for properties with the continued expectation of monthly appreciation.

Others placed deposits on preconstruction deals and are now pulling out of their contracts, even walking away from huge deposits. Estimated to represent 30 percent of buyers in some markets, these speculators caused a false sense of market strength, faking out builders who set out to supply more inventory for the mad rush.

Unfortunately this type of investor also faked out the consumer buyer who felt forced to keep pace with the rushing waters of the market or risk getting whisked out of the game. I’m not complaining here, because you better believe I benefited from the buying frenzy as a wholesaler and rehabber, sometimes beyond my own comprehension.

What’s left now is what we’re seeing today, which is a more realistic sales market. Instead of a property receiving multiple bids over asking price within hours of its listing going public, we’re now seeing properties sitting on the market an average 60 to 70 days before receiving any attention.

Stay tuned for Part 3....

Is Real Estate Boom or Bust? Who Really Cares? Part 1 of 4

If you’ve been reading the latest news headlines or catching the current financial news reports on television you may be falling for the hype about the doom and gloom surrounding real estate.

Real estate has tanked, according to the media, therefore no longer the investment vehicle of choice. That all depends on how you look at it. My point of view from the ground up is I see something entirely different from the media reporting the news from their cozy glass buildings.

Most such reports are directed at the passive investor looking for a safe place to park their money for maximum returns. Much to the contrary, savvy real estate entrepreneurs will make money regardless of economic cycles, interest rate hikes, recession, unemployment trends or ups and downs of the real estate market itself.

Today’s real estate sales have indeed slowed its pace from even a year ago in many of the once scorching hot markets around the country. There’s been reported nearly three times the inventory available for sale than a year ago.

What doesn’t receive much attention is the fact there are still many qualified buyers, money in hand, on the hunt for properties to purchase. Sure the inching up of interest rates has forced many retail buyers to spend their money more wisely. But, when you factor in the adjusted prices which have and seem to be on a continued slump downhill for now, it all balances out as far as how far a buyer’s money will go.

“Generate Cash” For Today’s Needs

Real estate investing is responsible for creating more wealth in this world than any other investment in the history of man. However, many never make it out of the gate and on to the road of prosperity for one simple reason. They never bothered with taking care of today’s needs prior to setting their sights on a distant goal. In real estate everyone seems to have the lofty goal of millionaire status. It’ll never happen unless you take care of first things first.

Hic-cup in cash flow

Whether beginner or seasoned Pro we all experience a “hic-cup” in cash flow from time to time. It could be because of personal finances or business overhead which knocks you right off the golden path to riches thus off course to your dreams. Unfortunately, many seem to lack the resilience to scrape through the bad times in their real estate career. They’d just assume give up on their dream of wealth and freedom and chalk it up to the business not being for them. Some will even blame real estate investing itself, as being flawed in some way.

The simple truth is that they never discovered a strategy to generate cash when needed to solve an unforeseen financial challenge. A strategy that will bring cash within a matter of days instead of waiting for those rental properties to appreciate, or that rehab to resale, or that lease option tenant to finally execute their option. I’m not suggesting you abandon those strategies, only that you supplement them with cash today.

Not flipping properties

What I discovered much later in my own real estate business is a much overlooked strategy called wholesaling. This is not the same as “flipping properties.” I hear many describe flipping as fix it and flip it. You’ll be pleased to know that what I’m referring to has nothing to do with fixing anything. It has nothing to do with tenants, toilets, and turnovers. Wholesaling is the art of selling deals to bargain hunting CASH paying investors.

With wholesaling for cash you fix nothing, rent nothing, and need no money or credit. Best of all it has the least amount of risk of any strategy in the real estate business hands down. It’s also the undisputed “king of cash.”

The savvy real estate investor stops wholesaling

The savvy real estate investor never stops wholesaling because they understand wholesaling is the mortar and any other strategies are the bricks. Wholesaling is not only the best strategy to get started in real estate but it’s the one strategy that will keep your business together during the ups and downs of cash flow.

Generate cash in 30 days or less

Once you learn this powerful strategy to generate cash in 30 days or less from contract to close you’ll be hooked as I and so many others have been. You’ll be able to quickly generate $5,000, $10,000, $25,000 or more per deal in a matter of weeks, sometimes even days. It’s like having your own private money making machine. Join me as I reveal my best techniques for generating cash now!

Ken Williams aka The Wholesale Wizard

http://www.thewholesalewizard.com/

The Beginner’s Plea! “Where Do I Start?”

“I’ve been to all the seminars and read all the books. I’ve even listened to the CDs, but I just don’t know where to start my investing career!” Ah...the all too common beginner’s plea for help!

Knowing how and where to begin investing is a valid concern. Though, I’m 12 years into my own investing career, I remember as though it were yesterday my feelings of uncertainty about how to take the first steps in what would become my livelihood. Anyone who was around 12 years ago in this business will tell you there was a scarcity of information about real estate investing compared to today. Investor clubs? I sure couldn’t find one in my area in those days. Also unlike today, where major book stores dedicate entire business sections to real estate investing, I had to scrounge the shelves of local libraries for real estate reading materials.

The person seeking a career as a real estate investor today is faced with a bombardment of information and strategies. This overwhelming information is the main reason so many become confused. Believe me, I’ve been there and I feel your pain!

Here’s my suggestion as to what you do prior to choosing any one strategy over another. First, go home or wherever it is you plan to invest and figure out what’s going on in your market. Too many “newbies” attempt to bring a supply of goods (strategies) where there is no demand.

Here’s an example of what I mean. Let’s say you’ve just returned from a workshop all about renovating houses only to find out that in your small town of neatly kept homes, there are few properties needing renovation. Instead, upon further research you discover there’s a bigger market of investors looking for rental properties. Your strategy is to supply that demand! In this case your approach should be to locate properties to either wholesale to other investors looking for rentals or keep a few for your own portfolio. Hey, you might even place buyers in your properties on a lease option program.

Here’s another example I learned two years ago in my own market. At the time the Washington, DC real estate market was one of the hottest in the country. Housing prices were appreciating monthly – sometimes right before your very eyes. The first time I heard the concept of “short sales” I was beside myself with optimism only to have my bubble abruptly burst.

In the situation of a property in pre-foreclosure with little or no equity, I was encouraged to believe the banks would be wise to reduce the amount of the mortgage payoff to prevent the property from going to auction, thus avoiding a huge financial loss. Well, this even made logical sense on the surface until I discovered the banks that held deeds of trusts (mortgages) on DC real estate were willing to play hard ball. You see, they (the banks) know about the outrageous appreciation of housing prices in DC. So, weighing in on their options most simply prefered the property to proceed to auction where the chances where great someone would pay near full retail price for it. Few of these houses even made it to auction.

There have been some successful short sales in my market, but they’re few and far between. I network with hundreds of investors in my area and very few of them are successful with short sales. And even fewer are interested in trying. I’m not knocking short sales, for I know it’s an awesome strategy to have in you investing arsenal if you plan to stay in the business. However, you must decide the time value and your opportunity costs with anything you do. In DC, CA$H is chasing the abandoned and rundown properties as the city has been making a comeback for the past 6 years. Unless you are familiar with the DC market, you wouldn’t know this about short sales. When things cool down a bit in the DC market, investors will regain some leverage with the banks.

It’s important to travel a path of least resistance especially when starting out in this business. If you spin your wheels you'll risk being discouraged.

That’s just two examples to illustrate my point. My intention is not to bash anyone’s investing strategy. The point here is it’s better to know your market before setting out on any one path. If you want to buy on lease option ask yourself, “Is it possible the market is so hot the FSBO seller can get his price?” You want to buy properties on land contracts? You may want to research this to find out if it’s legal in your city or state. Land contracts are illegal in Washington, DC. So, roll up your sleeves and get out of the safety of your cocoon and see for yourself what’s going on in your area.

Here’s another tip to get you started, join a real estate investors association. They’re everywhere these days. Be sure to look for an association where there are active investors doing real deals. Beware of the fakes and phonies who are only out to impress you with theory…oh, and also to collect your money with little training in return. You should be able to join a group where membership is less than $200.00 annually, per person.

Next, go out and take inventory of the housing stock in your area. Note whether there’s mostly new construction or 50-year old properties in need of their 2nd or 3rd major face lift. Then make note of the action you see such as how many renovation projects are going on in the area. Perhaps you live in a rural area where vacant farmland is beginning to receive the attention of out of state shopping mall developers and big box retail stores ie. “The Walmarts.” Whatever is happening in real estate there’s always a strategy for making money. You just have to know what to do in any given situation and in any market, especially your own. Even in a flat market there are strategies for making money. I made some of my best money buying houses in the slow resale market of the mid 1990s.

First, go out and conduct a reconnaissance of your market. Keep your ears and eyes open and the market will speak volumes to you. Remember, this is a public service we provide as investors. What we do, when done correctly, contributes greatly to the financial well being of our communities. And finally, be on purpose!

Ken WIlliams aka The Wholesale Wizard

He was a newbie, eager to get started in the business of making real estate deals! Along the way he encountered a seasoned investor who had many years in the business and was open to taking the new investor by the hand.

Beneficial arrangement on the surface

On the surface this seemed to be a mutually beneficial agreement for both parties. The eager beginning investor would be able to offer what the grizzled veteran wasn't willing to do any longer which was digging in the trenches for deals. The veteran was able to offer the newbie the obvious which was knowledge of deal making, and more importantly the vet offered strong financial backing. How could the newbie resist? In case you didn’t know deal funding is where most inexperienced investors get stumped, even those who have their own money.

From the inside out this seemed like a partnership made in the heavens of deal making. The hot, hungry, eager, and available, partner hooks up with the seasoned pro who could now lay back and direct traffic. Of course his role also included coughing up the dough when the cake was ready to stick in the oven.

Money producing machine

The arrangement went on for some time where both partners made huge financial gains for months at a time without any apparent hitch. The partnership matured and became more aggressive with its deal making. Mainly due to the fact the newbie gained steam in his confidence, developing an unflinching posture knowing his offers were backed up by heavy financial artillery. The match seemed like it was destined for infinite success. There was no end in sight for this steam rolling, money producing machine. That is until.........

Until that is, there came a time when this fast charging team over drove their headlights. They became too big for their britches. Greed and recklessness became a foundation of their "MO" (mode of operation), only the newbie was unaware of his own role in such a outfit. As it would soon be revealed he was an unsuspecting accomplice to some very shady practices.

Sensing from time to time that a few of their deal making moves were a bit on the edgy side, the newbie spoke up in inquiry. Each time his concerns were met by his veteran partner/menotor with reassurance their actions were in compliance with the way everyone was doing business.

Initial arrangement began to change

The initial arrangement called for the newbie to concentrate on deal finding and setting up sales contracts on properties for which he would assign to his veteran partner/mentor. He was supposed to be "in and out" quickly with no role on the back-end of the deal. That seemed simple enough, after all that’s wholesaling in it’s simplest of forms. However, the waters became a bit murky when the veteran employed an exit strategy which included allowing the owner of a pre-foreclosure property to remain in their property as a tenant after a deed was given to the investor. It was the newbie/mentee who was pursuaded to interact with the tenent/homeowner.

Anytime you try to get fancy with the consumer you're playing with fire! That is precisely how our rambunctious super heroes got burned.

(If you have any of my wholesaling materials you know I am dead set against allowing an owner to remain as a tenant in her property after our closing, except to allow a few days to relocate.) If you don't own my real estate wholesaling course then click now on this link www.thewholesalewizard.com , don't forget to return to read the rest of this article.

Purchase, Lease Back

Their troubles began when they set up an agreement allowing a home owner to remain as a tenant with the right to purchase her home from the investors after a year or so once she was financially on her feet. This is known as a “purchase lease back.” She would have to re-purchase her home at whatever the current retail market value at the time her execution period was due, say 18 months later.

That agreement appeared fair enough at the time everyone was smiling, hugging and signing. However, the market was appreciating 2%- 3% every month! Our super heroes had rescued this damsel in distress by bailing her out of a foreclosure situation by paying a small reinstatement of her loan in exchange for her deed. Had the investor not done so, she would be out literally on the street and financially ruined. Ever hear the saying, “no good deed goes unpunished?”

Feeling Abused

When time came to execute her option to purchase she felt more clear headed than at the stressful moment when she signed her home away 18 months previous. She soon decided she had been victimized during her time of financial vulnerability. Facing a significantly more expensive purchase of a home she previously owned for years, she became peeved! Resentment swelled within her every being when she realized the tremendous equity she gave away to that pushy investor. (Isn’t it something how the selective memory operates?) Encouraged by her family and friends and the rampant reports by the newspapers of illegal investor activity she sought legal advice.

The attorney she retained quickly decided he smelled a rotten fish when he looked into her signed agreement to sell, then rent her own property with an option to purchase at a higher price. His extended research led him to file a suit against the newbie investor, since he was the front man the homeowner had contact. Of course the old pro was soon named in the suit as well. Now it was the newbie who needed answers as to what went wrong with their seemingly smooth operation. It all seemed so innocent at the time, benevolent even. He thought to himself, “how could this lady turn on them like this?”

Openning a can of worms

The situation became ever worse for our super heroes. As the investigation progressed it revealed the old pro of the team arranged the purchase lease back strategy for many homeowners he bailed out of foreclosure. The investigation also proved in some cases he jacked up their purchase price to artificially high numbers. What probably sealed his fate are the few times he refused the sell back the home to previous owners who were late meeting their purchase deadline dates. To the consumers and their lawyers this whole procedure reeked of consumer abuse. The problems of our old pro spilled over into other jurisdictions as well when word got out about his abuse of homeowners. I'll even bet opportunity seekers jumped on the bandwagon.

Newbie let off the hook

It was soon determined by the courts the newbie investor was an innocent accomplice and was thus vindicated. However, the "old pro" “the mentor”, “the grizzled I’ll lead you by the hand veteran” was on the hot seat. It was also discovered that this old pro had an old past run in with the law related to real estate deals.

The newbie, though terribly shaken, has been let off the hook. He’s also been left with a bad taste in his mouth with regard to real estate and he's taking some time off from the business. Unfortunately, he must endure the occaisional summons as a witness in the ongoing case against the grizzled pro.

Moral of this story

The moral of this story is beware who you choose as your mentor. You could be sucked down the drain with the dirty, murky water by a less than thorough leader.

How to screen a Mentor or Coach

My friend and real estate mentor the late great Ernie Kessler offered some basic criteria for the members of our Washington DC Real Estate Investor Association, when choosing a mentor or coach to lead them by the hand in this business. Here are a few questions Ernie outlined for our members to ask a prospective mentor or coach: (questions I endorse and use myself)

1) Can you provide any proof/references of your experience? (ie. successful clients, attorneys, other industry professionals etc.)

2) Have you been in the business long enough to understand how to make money in all market cycles? (what’s their track record)

3) Have you any real estate convictions? (don't expect honest answers here)

4) How many different strategies can you lead me through? (beware of the one trick pony in a tight spot)

5) Do you have a network, and how will I benefit from this network? (a good mentor helps you get connected)

Some of these questions may be uncomfortable to ask, but by comparison they will be easier than you yourself having to answer uncomfortable questions later. I see many unsuspecting new real estate investors getting hooked up to a mentor who may be like the old pro in this true story, or even more common is the inexperienced mentor who unknowingly leads his flock down a treacherous path.

Beware! Always know who you're dealing with. When it comes to the so called experts, the proof is in the pudding!

To Your Success

Ken Williams aka The Wholesale Wizard