Jim Fleck Real Estate Article

Jim Fleck

Wow…I feel like the world changes every month. New laws, new war, new politicians, new layoffs.

I know lots of people need checks. So I’m going to dedicate these next few issues to getting checks quickly. You’ll be getting the nuts and bolts of my Cash Now system that will be made available on TV beginning in July.

Also, to reduce costs to you, the newsletter will now be delivered by email. But of course, you should know that because that’s how you got this one. So let’s get started making some money.

Fast Flipping for Fast Cash

What is “Flipping”?

A lot of money can be made by “flipping” houses.  There are a lot of different definitions.  Some people call it “rehabbing,” others call it “wholesaling,” which is the term I like to use.

In the world of real estate, flipping is a strategy you can use to make money without spending any of your own money – or using any of your own credit.

This strategy is one that you can implement with virtually zero risk.

You may have heard of people who flip a house that they have also “rehabbed” meaning they buy it, fix it up, and then flip it to a homeowner for a substantial profit

however there are a lot of risks that come with the “retailing” approach. This is retail flipping.

I do not recommend you take that approach until you are more experienced, especially now with real estate markets not yet appreciating.

However, I’m doing one right now. I purchased it for $122,000, I put $10,600 into the rehab and I just listed it with my agent on the MLS for $189,900 which is priced to sell fast!

For our purposes, when I speak about flipping a house, I am talking about:

In other words, you as an investor are basically selling your contract to another investor and letting them finish closing on the property.

At that point, the other investor may choose to fix up the property and sell it for an even bigger profit.  They may even choose to keep it and then rent it out.

How I do this is I find a bargain property that an investor would want and you take a small profit for finding the property.  The point here is that it does not matter what the other investor does with the property after they buy it from you.

Basically… we work as “middlemen” by wholesaling a property.  We find a property at a discounted price, assign it to another investor or rehabber for a fee, and let them finish closing on the property.

The other designation I mentioned before was “retailing” which is when you buy a house, fix it up, and sell it for a big profit.  We are not retailing. Not yet anyway. The example I mentioned above is retailing and you can see how much profit there is. However, I do have some money wrapped up in that property. We’ll discuss funding later in this issue or some of the next few issues.

“Equitable Interest” = A Fast Check

Once the seller signs a contract with you, the property is “under your control” because you have established what is known as “equitable interest.”

Be clear — if you have not established equitable interest and you try to sell the property, you will be acting illegally just as if someone was posing as a real estate agent who did not have a license.

With equitable interest come several options.  Among them are:

•           You have the right to sell the property

•           You can assign the contract to someone else, or

•           You can flip the property to a first-time home buyer

The purpose of this newsletter and all my future ones is going to be to get you a very fast check, as I focus on flipping. Flipping wholesale deals, REO’s, Foreclosures, you name it, we can flip it.

The best way to accomplish this is to flip the property to another investor at a higher price then you had contracted to buy it from the seller for and you keep the difference.

In essence, the new investor will actually take your place in the agreement you signed with the seller.  It is now the new investor’s responsibility to complete the agreement and purchase the property.

The new investor may choose to fix up the property, they might keep it, they might rent it, or they might even try to sell it to someone else.  They assume all the responsibility and risks; therefore you “should” leave most of the profits for them. You will simply take a small finder’s fee.

Do not get me wrong about the small finder’s fee which will not necessarily equate to a small check for you.  I have flipped properties for as little as $3,000 and on the other hand, the week I’m finishing up this newsletter I’ll be flipping a property for about $20,000!

This Is Clearly the Best Risk-Free Strategy  in Real Estate to Create Quick Cash!

Are you concerned about out-of-pocket costs like earnest money which is the deposit that is typically made when you make an offer on a property?

If the answer is yes, just know with this strategy, you will usually not put any money down at all and even if you do, it might be only $10 or $100.  In my world of real estate, this is considered virtually risk-free.

Remember, you are only at risk for the amount of the earnest money deposit.  If you put zero money down, you have zero risk.  No one can come and force you to buy their house.

Quite often these days, I will put down $1,000 – $1,500 in earnest money on a property.  Why?  Recently the “sellers” which in my cases have been banks lately, have been requiring more earnest money than $10 or $100. I am fine with putting that kind of money down also because I know I have a list of buyers lined up and ready who will buy the property. I also know that I always have an inspection period after the bank accepts my offer to get out of the deal and get my grand back.

Use your best judgment because there are situations where it may take more money to secure a great deal.  Just make sure you know what you are going to do with a deal (the property) before you put any more than $100 down.

The contract will simply state you have the right to buy the property at whatever price you establish with the homeowner/seller.  If you fail to perform or fail to execute the contract, then you forfeit your earnest money deposit. That is it.

Having this type of clause in the contract should give you some comfort.  New students often feel uncomfortable thinking, “Oh, no!  What if I cannot find the money or what if I do not find a buyer?”

Again, remember the worst-case scenario is you will only lose your earnest money deposit and if you didn’t put any money down, you have nothing to lose!

Not putting any money down is not the only way to make this a risk-free venture.  There is language that can be added as an addendum to the contract that states the “deal is subject to partner’s approval.”  So that in the event you do not find a buyer, you can return back to the seller and inform them that, “You know what?  My partner did not approve this deal.”

This phrase won’t work with all types of deals, such as REO’s but you can usually use it with a regular homeowner.

With these strategies, you will have the knowledge of how to flip properties… get quick checks… pay off those credit card balances… pay off your loans… build your savings and clean up your credit, in addition to assisting you in furthering your real estate investment career.

Past Three Months

A couple months before writing this newsletter, I flipped three properties for approximately $5,000-$6,000 each for a total profit about $17,000.  Not a bad month.

I also bought a fourth property that month, which I rehabbed; the one I mentioned above. potential for profit in that property is about $70,000,  If I discount it for a quick sale, I will still probably make a fast $50,000 to $60,000 on that deal alone.

You can make very good cash, just like I did.  That $17,000 cash helps pay the bills.  It pays for the nice cars and the big house, funds private school for my three kids, and the toys.

The point is, when you do not have any limitations, both real and self imposed (a topic for another newsletter) you can do as many of these deals a month as you can find.

The following month after that I devoted a total of 60 minutes to put together four deals and I made a fast profit of approximately $35,000 flipping properties.

For sixty minutes of work I made $35,000, that is $35,000 per hour!  Not too shabby for an hour of work in one month.

Once your system is in place for example and you do just one of these deals a month for an average of $10,000 which is very doable; you can make $120,000 a year!  Even if you only made $5,000 per deal that would still be an extra $60,000 a year.  Imagine what you could do with that kind of money.

Increase that to 2 deals a month at $10,000 per property (at 15 minutes per deal, 24 deals would take approximately 6 hours); now you are looking at $240,000 a year, or $40,000 per hour.  This is why buying and selling real estate makes millionaires!

Concerned about the economy?  Housing “bubbles”?  Don’t be because these types of deals can be done in any type of market; it does not matter whether the market is at a peak, at a bottoming out, or simply flat.

Remember the key is there is no risk because you are in control of the deal, and you never take possession.

Let’s say you live in an area that is going down, even steeply.  Given that you are not going to take possession and actually own the property yourself and you are going to assign it to someone else, the condition of the market will not affect you.

Here is a “worst case” scenario example:

You find a property worth $100,000.  You purchase it with a contract for $70,000, and you assign it to another investor for $75,000, basically adding in a $5,000 finder’s fee for you.  For purposes of this discussion, by the time the deal is ready to conclude let’s say the value of the property has now dropped and the property is only worth $90,000 and the investor determines he no longer wants to buy the property at $75,000 and does not close, what’s the worst thing that can happen?

Before I answer this question you must remember that you probably have no money or perhaps you have $10 or $100 in earnest money that you put down (I normally do not put any money down with sellers); which means you basically have no risk and will not lose anything except for maybe the $10 or $100 earnest money (which in my mind is the same as losing nothing, especially when you make so much money when deals do close).

Using this technique alone is the single greatest reason you can make quick Cash Now in real estate with no risk, no limitations, and with unlimited potential.

In addition, if you collected an earnest money deposit from your buyer like I do for $1,000-$2,000 and the buyer does not close, you could possibly keep their earnest money deposit and then turn around and even though the property is only worth $90,000 in the current market sell it to another buyer who might want that property.

The other thing I like about this strategy is that sometimes when I am buying properties to hold or rehab and then sell, I might decide I do not want to keep the property for various reasons after all and in those cases I can always wholesale the property to another investor with no risk.  In those instances, wholesaling can be used as an exit strategy to not have to buy a piece of property.

FINDING BUYERS

One great source is the Internet.

For example, Yahoo! Groups? are people who form a group based on similar demographics or to talk about a specific topic of common interest.  If you visit www.yahoogroups.com and type in “real estate” in the search box, you will find numerous groups of people who are looking to buy and real estate and may be interested in your geographic area.

EBay.com sells more real estate than any other single source in the world I’m told.  At www.eBay.com you will be able to find buyers and have the ability to sell property using this wholesale flipping method.

Networking and Saying the Right Thing

Networking is a critical element in your success as a real estate investor and in finding buyers.

Attending real estate investor meetings is a must, even if you have to drive an hour to get to them.  Visit the National Real Estate Investors Association website, http://www.nationalreia.com to find links to real estate investor clubs in your local area.  Check out the links for local groups and find out when and where the meetings are.

Begin to network with the people you meet at these meetings and ask who is buying wholesale properties and what they are looking for.

Networking will help you find investors to buy your properties… Not only that, but other people will find you as well.

When you are networking for buyers, focus on the fact that you are doing an investor a big favor.  Do not just focus on the amount of money you are going to make.

Remember you are essentially being paid a “finder’s fee” because you are being paid for the work of finding properties and not taking any of the risk.  For that reason there is only a smaller amount being made by you compared to the big profit that is available in the deal for the investor that is taking the risk to “rehab” the property.

If you focus on attempting to do something good for an investor and bring them really “juicy” deals, this give you the opportunity to have the ability to move your properties very rapidly because the investors will continue to come back to you and buy more and more properties.

At the end of one year, you could easily have 20 investors buying a single property from you each month which is 240 properties a year.  At $10,000 a piece that is $2,400,000.

When you are speaking with a potential buyer, it is important to find out what they want.  Write down what kind of deals they are looking for, being sure to get their name, phone number, and email address.

It is always nice to know you have a buyer lined up for a property.  In other words, if you already have a property then all you have to do is find a buyer, right?  Just know there can be pressure to find the right buyer for the property before possibly losing the deal.

Ideally, the best way to look at this situation is to already have a buyer from a long list of potential buyers and already know what they want, and then the only pressure is to find a property for them and then complete the deal.

On the next page I’ve listed a list of questions you could ask while networking. Either memorize a bunch of them or simply carry them on a clipboard and fill it out while talking to someone. Feel embarrassed doing that? Then get over it, or get a job.

Questions You Should Ask

While Networking Checklist

•           Is there a price range you prefer?

•           What is the maximum percentage of the market value you will pay?  (Based on the ARV – After Repaired Value – the fair market value after a property is repaired, up to its maximum value.)

•           What type of properties would you like?

•           How quickly can you close when I have that type of property for you?

•           How will you pay?

(You are looking for whether they will buy with cash, finance with a hard money lender, or finance with a traditional lender)

•           Are you pre-approved? (If financing)

•           Will you need an appraisal? (If financing)

•           Will you be able to provide a proof of funds letter once I find a property?

•           How many properties have you purchased in the last three months?  How many properties are you planning to buy this year?  (This gives you an idea of whether they are really a player or not)

•           Do you have any references?

(This is an optional question and is asked if I am a little uncomfortable with them and do not feel they are a self-assured investor)

•           Do you have any other investor friends I can speak with who might be interested in the extra deals I get that you do not want?

The answers to these questions will allow you to create a virtual database of information that will need to be continually updated.  This way you are always looking for a property someone wants, and conversely, you will always have a buyer to match the properties you already have found

Having these tools available to you they will allow you to secure properties much more confidently when you know you have a buyer waiting in the wings.

I also like to send an email to my buyers every other week.  I write a little newsletter teaching different strategies buyers can use to make money with their real estate.  Other times I may fax them an article I wrote or something I have just read in the newspaper that I think they may be interested in.  I may also pick up the telephone and call them, or even send a “voice blast” that calls their phone and leaves a recorded message from me.

All of these methods serve to keep the lines of communication open.  It also keeps me in the forefront of their minds so when I send them my deals they remember who I am which will result in a lot more sales.

There are always new investors who get started with me who do everything right:  they find an investor, talk with that investor, ask all the right questions, then those new investors go silent with no contact whatsoever until they have a property that needs to sell immediately otherwise they will lose it.

Do not make the mistake of letting your network get stale.  Keep talking with your buyers.  Keep finding out what they want and what their situation is on a regular basis.  Soon, you will grow a list of buyers who can make you very wealthy.

Jim Fleck

Jim Fleck Real Estate

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