“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