Docstoc

By REO Mentor Tony Alvarez

Document Sample
By REO Mentor Tony Alvarez Powered By Docstoc
					By Tony Alvarez
Copyright The REO Mentor 2009
           Tonight’s Goal…

1. The practical side of the REO Business

2. How to attack a new “Target Market”
   & find the GOLD!

3. “Overcoming the Most Common
   Obstacles to Getting an REO Deal a
   Week”

4. The “ULTIMATE SOLUTION”
               5.   biggest hurdle
  Who am I & What did I do?

• Real Estate Investor 1980

• Cert. Gen. App. – Banks, Insurance, Feds

• Real Estate Broker 1999

• BK 1994

• Antelope Valley 1995

• Turned $6,000 to$7,200,000 in 7 years
                Copyright The REO Mentor 2009
        What gave me the edge?

• I was broke – Highly motivated, determined & Committed
• Action – I knew where I wanted to go & Went!
• Appraiser - Understood how to identify VALUE/DEAL Quickly!
• Knowledgeable - Understood TARGET MARKET THOROUGHLY
• Initial Cash - Found Investors/partners for equity portion
• Financing - Hard Money Lender – Interviewed & Informed
• Credibility - Partnered with experienced successful investors
• Relationships - Created an interdependent team of area Pros
• Systemized Operations- Simple, clear, repeatable
• Timing – Entered the market at the bottom
• Education – Sought true consultants, mentors & educators
• Focused – Acquisitions = REO Agents
                           Copyright The REO Mentor 2009
Over the past 28 years 90% of the
 properties I have purchased were
  bought working with REO Agent’s




            Copyright The REO Mentor 2009
 The Practical Side
of the REO Business


       Copyright The REO Mentor 2009
    Why work with REO Agents

When REO’s dry up you’ll still be getting deals
    delivered into your hands whether it’s
  problem properties or problem situations
•   Probates
•   Major & minor fixers
•   Divorces
•   Rental Houses
•   Pre-foreclosures
•   Short sales
•   Fire & water damaged properties
                 Copyright The REO Mentor 2009
      Broad Strokes




Or… Buy Hold & Rent Long Term

          Copyright The REO Mentor 2009
    Level I Investor

Chasing Deals = Short Term
                                         Thinking!




         Copyright The REO Mentor 2009
   Level II Investor
Develop long term relationships
with area PROS YOU TRUST!
                Then…
 Let the deals come to YOU!




          Copyright The REO Mentor 2009
     Relationship Requirements

•   Motion & Action
•   Be Consistent
•   Get Personal
•   Uniquely Communicate- BE DIFFERENT!
•   Diverse Contact & Interaction
     Important, Informative, Friendly
Email, Friendly phone call, Snail Mail (cards
  or notes), Office Visit, Common Interest
                 (gym, sports)
                 Copyright The REO Mentor 2009
         Foundation & Fiber

Building long term business
  relationships/friendships…
   – Common interest
   – Trust
   – Honesty
   – Interdependency
   – Mutually beneficial
   – Equally highly profitable
                                                   X
                   Copyright The REO Mentor 2009
     #1 Benefit
$ Consistent Income $




       Copyright The REO Mentor 2009
     Why do MOST Investors reject
         this kind of thinking?
•   Looking for a deal NOW!
•   Want cash NOW!
•   Too time consuming
•   Not a people person
•   Not relationship oriented
•   Too difficult
•   Do not believe they will succeed

    Fear based thinking on false beliefs!
                    Copyright The REO Mentor 2009
        3 Important Steps
1. Decide what you want to do?
 - Buy to rent, sell retail or wholesale?

2. Choose a specific target market
 - Friendly to your specific needs

3. Load your GPS = Set achievable
                 ®

 destination

         Commitment & Action!
                     Copyright The REO Mentor 2009
  You have to understand the details of
      your specific target market…

- Supply & demand
- Available financing
- Investor capital & sentiment
- Available work force
- Cost of labor & materials
- Local Gov. Attitude
- Rental market statistics

                Copyright The REO Mentor 2009
     Load Your GPS !!!                      ®




• Goal
• Plan
• Systems

  Without it you’re lost!
            Copyright The REO Mentor 2009
Program Your GPS® For Success!




           Copyright The REO Mentor 2009
         My Goal - 1995
When I headed to the foreclosure capital of the
        United States – Antelope Valley
– Equity= $1,000,000

– Monthly $= $10,000

– Paid off= 10 houses

                  Copyright The REO Mentor 2009
               By 2002

- Equity (before taxes) $7,200,000
- Monthly Income $53,000
- Total Houses Owned 83
- LTV 70%

By this time I was ready to call it quits!
                    But…
                 Copyright The REO Mentor 2009
10 words from Bruce Norris

   “Hang in a bit longer,
 your area isn’t done yet”
       10 words
    3 more years…
      $3,000,000
           Copyright The REO Mentor 2009
Started liquidating in 2005 for
        $10,000,000




     Thanks Again Bruce!
          Copyright The REO Mentor 2009
 Short Term Goal 2009

- Equity $1,500,000 ???
- Monthly Income $20,000
- # of Unit Purchases 30
- LTV 0



            Copyright The REO Mentor 2009
       Long Term Goal 2021
•   Equity $20,000,000
•   Monthly Income $100,000
•   Total houses 330
•   Rentals Held 200
•   30 houses a year until 2021
•   LTV 65%


                  Copyright The REO Mentor 2009
       Acquisition Strategies

A. Buying REO’s: MLS
1. REO Brokers/Agents – Relationship Driven
      - Broker Call – Prelisting
      -Broker Call – Pending Dying Deal
2. AUTO PILOT= Preset searches on MLS
   - Auto Prospecting – Search by Agent/Office ID,
     Property Details, Area or Price
      - First day listings – Rare- I DON’T COMPETE!
      - BOM (Back on Market)- Contingency Active

3. Shot Gun Style (Click Here to View Example)
                    Copyright The REO Mentor 2009
     Acquisition Strategies                              (cont.)




B. Short Sales= SLOT                      D. TD Sales
  MACHINES                                   – Loan funds
• First day (Listing                         – Buy from TD Buyer
  Agent)                                     – Partner with TD
   – Pending                                   Buyer
   – Non MLS= We hand
     to favorite agent to
     complete.

C. FSBO                                   E. HUD
   – Cash                                    – Offers = Agent
   – Seller financing
   – Subject Too
                        Copyright The REO Mentor 2009
                Financing
• Local Banks
• Credit Unions
• Home Path (Fannie Mae 10?)
• Home Steps (Freddie Mac)
• Hard Money (The Norris Group)
• Private Investors (401K, IRA)



                  Copyright The REO Mentor 2009
        Financing Techniques
Financing: How do I finance my REO deals?
   – Retail (LOCAL- SMALL- NEW Banks) Relationship driven!
      • 75% LTV, 6 1/2% Interest, Amortized over 30 years due
        in 5 years
      . FNMA 10 LOAN LIMIT- Home path/ FREDDIE MAC
        Home steps

   – Private Money( LOCAL)
      My favorite source = REO Brokers & Agents!!!
      • Private Investor Capital (Pay 8 to 10%) NO POINTS!
      • Pay people to help me find Investor capital = Financial
         planners

   – Hard Money- Norris Group- Or Local
      • Interest Rate= 12% Points=3.5 Term-36 months
                         Copyright The REO Mentor 2009
      Type of Repairs We Do
From minor repairs at around $5 psf to complete remodels
    at around $20 psf.

1.   Minor Repair – Paint, carpet, appliances, cleaning

2.   Medium repair – Minor maint., & A/C & heat repair,
     paint, carpet, appliances, cleaning

3.   Major Repair – Complete remodel. New kitchen, bath,
     floors, lighting, windows, roofing, fixtures –
     Everything upgraded & replaced.
         Bonus to Contractor or Crew Leader for early
             completion or under budget paid from
-    Home Depot discounts & holding cost reserves
                         Copyright The REO Mentor 2009
               Repair Model
•   Employee’s
•   Independent Contractors
    1. State of California states that if an
       Independent Contractors does not have any
       employees, they do not need workers comp.

    2. MAKE SURE EVERYONE HAS WORKER’S COMP.
       & liability insurance.
            This way you’re covered no
              matter what happens!
                     Copyright The REO Mentor 2009
        Exit Strategies

• Sales (MLS driven market)
  – Relisting with REO Agent that got us the
    deal

• Rental (Declining rental market)
  – Renting at 10% below TRUE market &
    offering an incentive (Free Rent)

• Wholesale
  – Seldom
                Copyright The REO Mentor 2009
           Selling Obstacles
Low Appraisals
- Lack of remodeled comparables
- Out of area appraisers
  -    “Geographic Competence”
- Capital improvements not fully recognized
- Financing Restrictions
- Inspection Requirements
  -   Lender
  -   Appraiser
  -   Property Inspector
  -   Termite       Copyright The REO Mentor 2009
           Appraisal Solutions
 Hand the Appraiser the File
• Cover letter – Who you are, what’s in file
• Rent comparables – sold, pending, actives
• Capital Improvements (detailed list,
 remodeled repairs)
• Additional backup offers
• Copy of accepted offer
• Market Update
  – dqnews.com, Latimes, Local, MLS
                    Copyright The REO Mentor 2009
     Spanking the Appraiser
• Get appraisal copy
• Rebuttal letter (you)
• Send to loan agent
• Use Local appraisers
• File complaint
  -www.OREA.ca.gov
  -916-552-9000
• E & O – small claims


• Never complain directly to Appraiser!
                       Copyright The REO Mentor 2009
Deal Review Time



     Copyright The REO Mentor 2009
 Recent Deal Review

We started buying in August 2008
 To date we have purchased 35
           properties
           Sold 10
         In Escrow 3
           Active 1
          Rented 20
           Rehab 1
          Copyright The REO Mentor 2009
        Our Average Rental is



           3 bedroom, 2 bathroom, 1224 Square Feet
                    Lot Size 6497, Built 1974
        Purchase Price - $65,626, Repair Cost - $10,798
                 Gross Rental Amount - $1,163
   Net $698 (Minus 40% for taxes, ins, maint, mgmt, credit loss)
If we were to utilize financing of total investment:
   Source       LTV     Int. Rate   Fee’s      Payment   Net Rent
    TNG        60%       9.9%       $3,617      $378      $320
  Local Bank   75%       6.5%        $995       $310      $388
              Our Average Sale
              The last 5 properties:
 3 bedrooms, 2 bathrooms, 1085 Square Feet
 Lot Size 6438, Built 1960
 Purchase Price - $37,200
 Repair Cost - $16,004
 Net Profit - $25,095
If we were to utilize 100% financing of total investment:
  Source      LTV Int. Rate          Fee’s             Payment Net Profit
    TNG       60%   12.5%           $3,875               $554    $21,112

 Local Bank   75%    6.5%             $934               $288    $23,585
                       Copyright The REO Mentor 2009
      Ugly Duckling
3+1 w/garage conv. 1438 sq ft, 1954
               Sale Detail – J-7
How did we get this deal?
Agent called us before it hit the MLS (Pre-listing)
Rehab Cost:
Original Estimate ($13.90 psf) $20,000.00 Actual Cost ($14.63 psf) $21,043.52
Complete rehab, new kitchen, bath, flooring, paint, roof, built carport,
landscaping, new swamp
Escrow closing challenges:
Very smooth, appraised at listing price & closed as scheduled.
Ratio’s for # of offers to purchase:
(3:1)
Profit analysis & Breakdown: * With hard money loan
 Purchase     Rehab Cost Holding    Sales Cost Sales Price            Net Profit   Rental
   Price                  Cost                                                      Amt
$32,000.00   $21,043.52 $1,698.34 $8,000.00             $80,000.00   $17,258.14 $995.00
                        *$4,398.34                                   *$14,558.14
                                 Copyright The REO Mentor 2009
          Kirkland
4+2, 2 Car Gar. 1573 sq ft, 1957

     -1



           -1
      Sale Detail – Kirkland
How did we get this deal?
Agent called us before it hit the MLS (Pre-listing)
Rehab Cost:
Original Estimate ($6.35 psf) $10,000.00 Actual Cost ($7.85 psf) $12,246.00
Medium rehab – Paint, flooring, kitchen countertops, lighting, bathroom vanities,
new swamp cooler, landscaping
Escrow closing challenges:
Very smooth appraised at listing price & closed as scheduled.
New swamp cooler was stolen from roof (no damage to property)
Ratio’s for # of offers to purchase:
(4:1)
Profit analysis & Breakdown: * With hard money loan
 Purchase    Rehab Cost    Holding     Sales Cost   Sales Price    Net Profit    Rental
   Price                    Cost                                                  Amt
$46,000.00   $12,246.00 $1,894.02 $10,000           $100,000      $29,860.00    $1295.00
                        *$3,816.46                                *$27,938
  Overcoming the 14 Most
Common Obstacles to Getting
   an REO Deal a Week


         Copyright The REO Mentor 2009
Copyright The REO Mentor 2009
             The Obstacles

1.No Cash!
2.No Financing!
3.No Contacts!
4.No Experience!
5.I don’t know how to identify a deal (value)!
6.I don’t know how to analyze my target market!
7.I don’t have a plan and I don’t know how to
  create one!
                    Copyright The REO Mentor 2009
            The Obstacles                             (cont)




8. I don’t have enough time to do this business!
9. I don’t know how to structure an offer that gets
   accepted!
10. They don’t call me back!
11. I don’t know any normal contractor or repair guys
    I trust!
12. I don’t know how to budget & estimate repair cost!
13. I don’t believe this works!
14. I don’t believe I can do it!
                      Copyright The REO Mentor 2009
The best solution that solves
 most of these obstacles is


PARTNERING!!!



          Copyright The REO Mentor 2009
   $ The Odd Couple Make Bank $

                      Andrea & Rick




        Batman                               Robin
 Met in 2002 @ Bruce Norris Seminar
 Andrea knew nothing about Real Estate – People Person
 Rick was an appraiser & bought discounted notes
 Each started with $50,000 equity & borrowed from Rick’s
  IRA
 First deal 2003 sold in 2005 for $140,000 profit
 Exit strategies wholesale, retail & hold long term rental
        Made over $1,000,000 EACH in four years
                 Determination!



 Started 14 months ago
 No formal real estate education – No seminars
 Ken used to be in SFR new construction
 Steve owns a computer business
 Chose an area near their home
 Chose specific properties to target
 NO FHA, Fannie Mae ok - 3+2, only specific areas
 Learned the market by “Getting out there & looking at properties”
                          Copyright The REO Mentor 2009
                   NO FEAR!!!

    Erin                                             Joey
From: S. Africa                                 From: Wash. State
   Prior Job:                                    Prior Job: Comm.
     Waiter                                      Fishing in Alaska



 Met @ job interview December 2009
 Got their 1st deal in May 2009
 Started with $1000 from credit card & $1000 borrowed from
  girlfriend.
 Financed a mobile home on credit card
 Done 8 deals since May 09 – Net approx $200,000
 Finance 100% of the deal through Private Party or Hard Money
 Goal is the retire by the time they are 30 years old
        What’s the Lesson?

The right compatible partners can and will solve
all of the obstacles you believe are keeping you
from participating successfully in today’s Real
Estate Market

Start creating & nurturing relationships.

Take action now. Do something today!
You’ll create a small change & that’s all you need
to start the ball rolling in a new direction


                  Copyright The REO Mentor 2009
What if I came to Orange County?




                        Orange County FAQ’s
Geographic Area: 789 square miles             Population: 3,010,759 (2008)
Average household income: $75,078 (2008)
1. Identified 33 cities, 131 zip codes, 3 Major Sectors
                                    (North, South, Central OC)
                          Copyright The REO Mentor 2009
    Orange County MLS Stats
Area      Average      Average     Average        # of       # of MLS      # of      # of     % of    # of   % of
          Listing      Pending     Sales Price    MLS        Pending s     MLS       MLS      MLS     SS     SS
          Price        Price                      Active                   Solds     Active   REO’s
                                                                           (90day)   REO’s
Orange                                            5254       1688          4459      200      3.8%    1306   24.9%
County


North     708,044.5    529,797.0   664,117.70     1312       613           1870      83       6.3%    467    35.6%
Orange    0            0
County

South     1,713,339.   687,957.3   1,611,147.3    1404       212           1259      33       2.4%    319    22.7%
Orange    22           3           3
County

Central   980,936.2    633,365.6   920,255.67     1846       685           2480      67       3.6%    419    22.7%
Orange    5            7
County


                                           Copyright The REO Mentor 2009
       MLS Lowest Price Band
Area      Low Listing   Average     Low Pending   Average   Low Sales Average
          Price         Listing     Price         Pending   Price
                        Price                     Price
Orange    89000         1,393,471   129,900       559,382   90,000    672,013
County
Santa     129900        428,695     129,900       324,762   90,000    390,036
Ana
(All
SFR’s)
92703     160000        331,286     129,900       293,495   90,000    277,862
(All
SFR’s)
92703     160000        265,961     129,900       221,571   115,000   249,362
(2BD’s)
92703     185000        372,506     172,900       299,622   90,000    331,267
(3
BD’s)
92703     229900        520,980     200,000       381,063   211,000   401,897
(4
BD’s)
       Foreclosure: Heat Map




1 in every 221 housing units received a foreclosure filing in January 2010
                View interactive graph at www.realtytrac.com
                             Copyright The REO Mentor 2009
Foreclosure: NOD’s & Auction




Received notice of default or trustee sale within the last 120 days
                          Copyright The REO Mentor 2009
  Foreclosure Sales




Sold to Bank, Sold to 3rd Party, Cancelled
        within the last 120 days
              Copyright The REO Mentor 2009
Average Sales Price




      Copyright The REO Mentor 2009
Foreclosures by Estimated Market Value




               Copyright The REO Mentor 2009
Foreclosure Activity by Month




           Copyright The REO Mentor 2009
Orange County vs. Antelope Valley

  Statistics         Orange                      Santa        Antelope
                     County                       Ana          Valley
Geographical Area   789 sq miles                       27.1   199 sq miles
   Population       3,010,759                   339,130        284,298
 Average Income      $75,078                    $54,239        $52,570
     NOD’s             5957                            597       1712
  Bank Owned           1871                            269       1259
  MLS Listings         5254                            336        825
   MLS REO’s            200                            26         206
    MLS SS             1306                            124        164
 % REO’s in MLS        .04%                        7.7%          25%
  % SS in MLS          25%%                       36.9%          20%
                       Copyright The REO Mentor 2009
            Target Market

•   Any blue collar neighborhood
•   College student rentals
•   Section 8 neighborhoods
•   Inner city near supporting facilities




                   Copyright The REO Mentor 2009
       Specific Area’s

 Santa Ana
 Anaheim
 Garden Grove
 Fullerton
 City of Orange
 Buena Park

             Copyright The REO Mentor 2009
           Research Methods
• MLS
  – Tempo.socalmls.com
• Agents/Brokers
   – Called local Agents with listings
• Online websites
   – City-data.com (City Stats)
   – Chamberofcommerce.com (City Stats)
   – Orangecounty.net (County Information)
   – Quickfactscensus.gov (Area Info)
   – Ocmls.com (Search active listings)
   – Foreclosureradar.com (Foreclosure info)
   – Realtytrac.com (Search foreclosure info)
   – Rentometer.com (Rental stats)
   – Nrba.com (Search for Brokers & Agents)
   – Reobroker.com (Search for Brokers & Agents)
     The Ultimate Solution

Understanding the difference between:
1. Psychological Fear
2. Physical Fear




               Copyright The REO Mentor 2009
 Physical Fear




It’s ok to RUN!!!
    Copyright The REO Mentor 2009
Psychological Fear




     Copyright The REO Mentor 2009
Saving Private Ryan




      Copyright The REO Mentor 2009
The Brave




 Copyright The REO Mentor 2009
The Protector




   Copyright The REO Mentor 2009
The Unstoppable Spirit!




        Copyright The REO Mentor 2009
The REO Mentor
    1-800-276-7888 Ext. 201
      www.thereomentor.com
  Email: thereomentor@yahoo.com
       Copyright The REO Mentor 2009

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:9
posted:10/22/2011
language:English
pages:72
gjmpzlaezgx gjmpzlaezgx
About