Make Six Figures Solving Other People’s Problems – By John Carlson

Here are a couple of real estate investing tips for beginners that will get you started in the right direction. You can do a no money down deal with no cash, no credit, no income, no nothing, except some general knowledge backed with a desire to succeed by going out there and taking ACTION!

The key to finding a lot of deals in this game is to look for the motivated sellers. Forget about looking for houses; that’s a waste of time and requires way too much work. Narrow it down to dealing only with motivated sellers and make fewer offers that result in getting more offers accepted.

What is a motivated seller?

Motivated sellers are those that have been trying to sell, but haven’t been able to for one reason or another.

  • They may be facing foreclosure.

  • They may be in a divorce situation.

  • They may have been transferred with their job and need to move.

  • They may have lost their job and can’t afford the payments.

  • They may have purchased another home and are now stuck with two mortgage payments.

  • They just need to get out from under their mortgage payments.


What is a motivated buyer?

Motivated buyers just need someone that will sell to them. They can’t get a bank loan, or some just “think” they can’t get a bank loan. Motivated buyers only care about two things: How much down and how much per month?

If they can afford the payments and have enough to put down in order to allow them an opportunity of owning a home, price doesn’t matter to them as much. They just want to be able to buy a home.

The way most people make money in this game is by using creative techniques to solve problems while being able to structure the deal to make a profit.

Be a problem solver

Your job is to find the solutions to fix someone else’s problems. Sit down with these people and find out what their problem is. Once you figure out what their real problem is, you now know what they need.

They all WANT an all cash sale, and they WANT full price. But your job is to find out what they really NEED. Once you determine what they really NEED, your job is to come up with the SOLUTION, get them what they NEED, and SOLVE their PROBLEM! That’s how good deals come together.

Get the motivated sellers to call you

The best way to find the motivated sellers is to get them to find YOU. Get the word out that you buy property: any property, any condition, any price, any time. It doesn’t matter. Just present the property to you, and you will figure out a solution to solve the Sellers’ problems to get them what they need.

Get a bunch of business cards printed up. Put them out everywhere you go. Hand them out to everyone you meet. Get flyers made up. Post them everywhere you can. Put them in Laundromats, bowling alleys, advertising boards in supermarkets, car washes, etc.

Then get some poster signs made up. Post them anywhere and everywhere you can, like telephone poles. Nail them to a stake and post them in the ground on every intersection in town. Let the world know that you buy houses for CASH. Just give you a call!

Eventually people will start calling you. Most won’t be motivated, but some will. When they call you, that’s when you screen them over the phone first and determine their motivation. Then you go visit them and get face to face with them and build a relationship with them.

You want them to get comfortable talking to you. They may want to talk about their dog for all you care. Let them! Get comfortable with them. Let them build some trust in talking with you. Whenever they talk, you SHUT UP and just LISTEN!

Listen, listen, listen

Listen to everything they say. The more they talk, the more information they let out. The more information they let out, the more you learn about their problem. The more you learn about their problem, the more you will be able to find out what they really need.

Once you got that information you can now figure out a solution that will solve their problem by being able to give them what they need. Your solution to their problem gets them what they need, and you make a profit for your problem solving skills. You’re a problem solver. You are the doctor of solutions, Dr. Buyer, the master of problem solving!

Example

Let me give you an example on buying a house for full market value, with no money out of your pocket, picking up a quick $5k up front, some positive cash flow every month, and a nice payday on the back end. Plus, we’re talking about dealing in NICE homes. No junk properties!

Mr. Seller has a newer home he purchased about two years ago. When he purchased the home, he put about 5% down and was able to qualify for 95% financing. After closing cost he had hardly any equity left.

Mr. Seller ended up buying a new home a couple years later. He’s been trying to sell this home before he has to close on his new home. He can’t even afford to list the home with a realtor because he doesn’t have enough equity in the property to even cover the 6%-7% commission he would have to pay a real estate agent.

Now the seller’s new home is finished, ready to be moved into, and he needs to close on it. He closes and figures he’ll sell the old home soon, but soon enough doesn’t seem to be coming.

Now the seller is starting to have some financial problems because he has to start paying two mortgage payments until someone buys the old home. The seller has a problem now because he can’t afford to make two mortgage payments.

If something doesn’t give pretty quickly, he’s going to fall behind on the payments on the old home. He’s going to pay the new homes mortgage first. But he doesn’t want to be late or get behind on the payments of the old home either. The Seller is worried about damaging his credit if he misses any payments.

I come along to solve his problem

I can put a stop to the seller’s worry and stop the bleeding today. All the seller needs to do is agree to my TERMS and I’ll even pay him what he owes on the property, which is pretty close to full market value.

The seller knows he wasn’t going to get any money out of it after paying off his mortgage and closing costs, so all the seller wants, and all he needs, is to get out from under his mortgage payment.

I agree to take over the seller’s mortgage “subject to,” which means I assume the seller’s loan without even qualifying through the lender that holds the seller’s mortgage.

The seller will deed the property over to me. I now own the home. The seller is still on the loan that has the lien against the property. The seller remains responsible to the lender for that loan until I pay it off, usually within a few years when my tenant/buyer ends up exercising the option that I will give to them under a lease option agreement.

I won’t be liable to the lender for the loan on the property. The seller’s bank can’t come after me if something where to go wrong. The loan is in the seller’s name, not mine. However, I will be liable to the seller to perform on our contract agreement to make his payments and pay off that loan eventually, but my liability is to seller, not his bank.

The seller deeds the property over to me. The house is worth $150k. The seller’s loan balance is about $145k. I agree to start making the payments in 30-60 days from today! Now I have 30-60 days to market the property before my payments start. The payments are $1400 PITI.

Selling the property

What is the FASTEST way to sell a property? Sell on terms. So I run an ad in the paper.

NO BANK QUALIFYING!!!

RENT TO OWN

NICE! 4bd/2ba House

Call xxx-xxxx

The phone starts ringing off the hook!

I find a potential Buyer that has $5k to put down and says he can afford to pay $1700 per month. I agree to give them an option to buy the home for $165k in one or two years.

Similar homes in the area would rent for $1200-$1400 per month, so getting $1700 a month on a $1400 rental when offering an option to buy is premium rent. People will gladly pay it because no one else will even finance them because of one reason or another. You get a premium on the sale price because you’re offering TERMS.

What’s in it for me?

I collect the $5k up front as “Non-Refundable Option Consideration” and if they exercise the option, the $5k will be deducted from the purchase price of $165k, leaving my Tenant/Buyer with a balance owed of $160k. If they don’t exercise the option, the option money paid is non-refundable and is lost.

I get the $5k up front, plus first month’s rent of $1700. Since I was lucky and found this tenant/buyer in the first week, I get to keep 100% of the first two months rent since my payments won’t start for 60 days.

So I collect $5k + $1700 first month rent up front, for a total of $6700. The following month I collect the full $1700 for rent and the 10 months after that I collect $300 per month positive cash flow.

At the end of the year, IF the tenant/buyer exercises their option, they will pay $160k. After paying off the underlying mortgage of $145k remaining on the Seller’s mortgage, I’ll collect another $15k at closing.

So lets see, that’s….

$5k option money up front

$1700 first months rent

$1700 second months rent

$300 x 10 months rent = $3k

$15k at closing ($160k – $145k = $15k)

That’s $26,400.00 over 12 months total PROFIT!

My tenant/buyer won’t exercise the option?

WONDERFUL! Now I get to start all over again. I get to collect another option fee, raise the rent after a year for inflation, and get a higher selling price for the option the next time around. I just keep repeating the process over and over again until someone eventually exercises the option.

Assuming all the tenants exercised their options in the first year, how many deals like this would you have to do each year to make $100k? Just FOUR deals like this one and you’re making $105,600 per year!

How many hours would that work out to be to find and structure a deal like this and get a Tenant/Buyer in the property? Not very many! How many hours per week would you have to put into working at your job to make $105,600.00 per year?



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