How To Talk To Sellers In Real Estate Investing With Seller Financing

Basic Sales Tactics that Work in Real Estate Investing

First off, there are some subliminal things you have to learn how to do. When I say subliminal, there are some basic sales tactics that work in any type of sales environment, especially in real estate.

One of them is association. You have to let your sellers know that people do this. This is a regular thing. It’s not this big unheard of thing for someone to sell with seller financing. If you have done this in the past, talk about this. Mention about doing this in the past. People also want to do what other people do. If they know other people are doing it, they will feel good about doing it. Let the seller know that people do this all of the time, lots of people do it, then they will be more likely to do it. Unfortunately, we have a herd mentality. A lot of times we have to see that someone else did something first, then we have permission to do it.

Also, you want to have some fear of loss, indirectly, in the tone of your voice. You want to make it sound like this is the only way you can do this deal. In a lot of cases, this is the truth, so you’re not lying to anybody. Let them know that. Be indifferent about it. You have to have an attitude about you that there are other houses you can buy, especially in this market. Make them feel that they are going to lose something if they don’t go ahead with the sale with you.

Offer the Seller with a Good Interest Rate

Now, let’s get into the topic itself. There are some things you can do to sway the seller into going your way. One of them is to offer them a good interest rate. In most of these cases, we are buying these houses, not for a long-term deal, maybe to have it for a couple of years with a lease-option tenant in it to pay it off, or just looking to buy it for a short period of time to fix it up and maybe sell it. Or perhaps, we are just looking to get it under contract to sell it to someone else. So, offer a nice interest rate. Offer an interest rate that makes it attractive to the seller to give you seller financing, to trust you. You are not going to have it that long. That extra 2, 3, or 4, percent is nothing. I’ll pay 15 or 20 percent interest if I have to if the deal is right, just to get the deal under my belt and make some money on it. If you are only going to make 3 or 4 payments on it, what’s the difference if you are paying 20 or 25 percent on it? It’s only going to be an extra couple of hundred dollars. If the deal is good enough to take, it’s good enough to take with a higher interest rate. Don’t make the mistake of financing at the same rates the banks give.

Offer the Seller with a Good Balloon on a Mortgage

Another tip for you if someone is uncomfortable is to offer them a balloon. A balloon on a mortgage means that the mortgage is going to be paid in full by a certain amount of time. So, a mortgage with a 3 year balloon guarantees the seller that in 3 years or sooner, we are going to pay that mortgage off and they will have all of their money. It also allows them to defer their taxes. If they sell their house today for cash, and they get their HUD, and they go to closing and they get that full amount, they are liable to pay taxes on the full amount of their profit. (Make sure your accountant double checks this for you on an individual basis). When they sell you the house with owner financing, they don’t have to pay taxes on the whole amount, because they don’t get the full amount. It allows them to defer their taxes for a year or two, or until you pay the loan off in full.

Also, they are acting as a bank. I have told sellers that the people that are making money in selling houses are usually the banks. I tell them that they will be in a position like a bank, and they will earn a lot of interest on their property. I add it up and tell them how much profit they will be making on the deal. For example, it’s a $200,000 house and I’m giving them 8% interest. That’s a $1,467 dollar a month payment. Let’s say I make that payment for 2 years. At the end of 2 years, on that $200,000 house, I’m going to owe about $197,000 or so. So, I will show him in a year, it equals $17,000 that I have paid him. If it takes me 2 years to pay you off, I will have given you $35,000 on your house, and I’m still going to owe you $197,000. Let him know that he will end up selling that house for $237,000 because of my monthly payments and the amount due at payoff. Not the original $200,000 on the contract. Explain that that is how the banks make their money. Point out to him the real dollars that he will be getting over a period of time.

On an interest-only loan, you will be giving them interest every month after month. At the end of the loan, you will still owe them the full amount. If it’s a $250,000 house and they are giving me an interest-only loan on the house, I still owe them $250,000 whenever I pay it off. So, everything I give them up- front is money in their pocket. Make sure you tell them that the whole payment every month goes right into their pocket no matter when I pay this off, I will STILL owe you the full amount of the loan.

It’s a good deal for a seller. And it’s the truth. That’s how the mortgage companies and banks make A LOT OF MONEY! That’s why some investors quit investing after a period of time when they put a million dollars in their accounts and become hard money lenders. They become private lenders and make a lot of money for NOTHING!

Go with Owner Financing

In a lot of cases, you will have a seller that will go with owner financing, but needs some money NOW. Point out to them that if you give them $20,000 now, and pay off the difference, they are going to have to pay taxes on that $20,000 (again, double-check with your accountant about this). Suggest this to them if the home is paid in full: So they can save money, they can instead go get a loan/mortgage on the house for $20,000. You can put that $20,000 in your pocket right now. I will then make the payments on that loan until we sell the house and I pay you off in full. And right now, you don’t have to pay taxes on that $20,000. This is a great way if they want some money now.

Here’s a tactic that works and will continue to work. Once you get a deal on seller financing for a house that is selling for $300,000 and it has a 5 year balloon, tell the seller that within 5 years or sooner I will pay you off. If in the near future, I have someone ready to buy that house, I’ll call the seller and tell them that you have some extra cash, offer to pay about $250,000 for that home RIGHT NOW. Guess what. That $250,000 today is better than $300,000 in 4 or 5 years, and you have just make $50,000! If they make a counter-offer for a little more, tell them you will think about it, wait a day or two, call back and accept their offer. There are lots of ways to make money in this business.

Just Make an Offer

The bottom line is: MAKE AN OFFER. You have to believe that people are going to accept your offers. Don’t think for a minute that just because maybe you don’t own your house outright, that a lot of other people don’t. I own a house outright. I can borrow money against it, I can rent it. In any case, make an offer. There are many people out there that own houses that are paid for, and they are just sitting there. Make the offer, look them in the eye, pitch them high, and watch them buy. Believe in yourself!

Free Ways To Build A Buyers List In Real Estate Investing

There’s nothing in the real estate business that is better than getting a house under contract by sending out one e-mail or making a few phone calls and having that house sold in a few hours or a day or two.

There are different types of buyers’ lists that you might want to build. There are retail buyers’ lists when you are selling those pretty houses that you have an option on. There are also lease option buyers’ lists. But that isn’t what we are going to cover here. We are talking about how to build a wholesale buyers’ list so that when you get a contract on that junker down the road, that ugly house that you got a deal on, you have somebody to flip that house to quick.

There’s a lot of different ways to build a buyers list. Some that cost a lot of money. I will teach you how to do it for free.

Make your Own Website
First off, I do suggest that you have a website. It can be a one-page website that introduces you as a professional house buyer and seller. Many times I find houses that I can’t rehab myself. Therefore, I like to give others opportunities to buy these houses at a great price. I let them know on my website. They just fill in their information and it comes right back to you on your list. So, when you come up with a new property that you are selling, all you have to do is send out one e-mail that automatically goes to your whole list. I know that it costs some money, but doing it yourself is very inexpensive.
Online sources are a great way to get your list started using free classified websites. Every day, I would post an ad there saying you are selling houses. You will put “Wholesale Properties Available”, or something more creative on there. Maybe something like “The Other Guys Talk, We Walk the Walk”, or something flashy like that. How about “Are you a rehabber? Do you renovate houses for a living? We’ve got the deals”. Direct them to your site or a phone number. You want to do this at least a few times a week so people know that you have houses.

Take Advantage of Online Classified Ads
When you post on these classified sites, you want to use good keywords . You want to put lines in there like, “We Buy Houses”, “Handyman Special”, “Sell Houses Fast”, or “Fixer-Upper”, and you want to put the area you are working in so that when people put the location in and a keyword, your ad could pop right up! So many times I put a search in with the area and up comes a classified ad in the 2nd or 3rd item that pops up. So, go to the sites and let the world know that you sell houses and have the junkers and you have the ugly houses at the right price.

Remember, you are looking for investors who you can assign your contracts to, who will buy those houses from your Seller and you make the spread in between. Make sure your web address, e-mail address, and phone number in there.

Also, put in that ad that you buy houses too. You might have a homeowner or investor who is browsing online who hits that site, and they might have a house for sale. You should always put “We Buys Houses Too” in your ads. It could double the effectiveness of your ads.

Look for House for Sale in Newspapers

Here is the cheapest offline way to build your buyers list. Get the newspaper and go to the House For Sale section. If you see a house that says, “Just Rehabbed”, you know that’s it’s probably an investor who just rehabbed that house and is selling it.

When you are driving down the street and see a sign that says, “We Buy Houses”, go ahead and call them , introduce yourself as an investor in the area, ask them if they do buy houses. Explain that you are a wholesaler and that you get houses at a good price, and you are looking for other investors to take deals that you can’t handle yourself. Find out their price range or area they are working in. Ask them if you can send them properties via e-mail. Find out what type of properties they work with. Or go ahead and add them to your list anyway, because you never know if their needs will change.

Having a buyers’ list could make the difference between you taking a couple days to flip a house or a couple of weeks. Let them know that you also buy houses. Be honest with them and let them know exactly what you are doing. Don’t be dishonest because it could bite you back in the end. I have been let down in the past and will now no longer accept phone calls from some investors in my area. Don’t lie, be honest. Word gets around. Good luck!

How to Do A Short Sale in Real Estate Investing

A short sale starts out like any other type of deal. It starts out by you just finding a property. In this case, we want to find a property that is in foreclosure. It should be a couple of months behind, maybe even 4 or 5 months behind.

One of the beauties of a short sale is that it lets us deal with numbers from our seller that are unrealistic. Any time that you can get an unrealistic edge in business, it’s a good thing. And when I say unrealistic, it’s because we are getting the bank to discount that property. So, if somebody has a property that is 4 or 5 or 6 months behind on their payments, the bank is ready to take that property back. They are ready to foreclose on it, they are ready to put it up in auction. In todays’ market, that house probably isn’t going to sell at auction and that bank is going to be stuck with another house. These banks own so many houses, they could make a small city if they picked them all up and put them in one place. In any case, these banks do not want these houses, they are overloaded with them, and it affects their ability to loan. The more houses they own, the less money they can lend.

So, find a property that is in foreclosure. Note that this isn’t a technique to use for someone to save a house. This is for someone that wants to move out of their house, are ready to move, and they don’t want that foreclosure on their record. They just want to get it sold and get out. They are willing to do whatever it takes to get out of that house. In most cases, they are willing to just sign the house over to the bank and give that house back.

We are going to then pursue a short sale. What happens is when the Seller agrees to sell the house to you (and you have to have a Contract to buy house), for whatever the best deal you can get from that bank is. So, for a $200,000 house, the Seller is not going sell it for $200,000. I would shoot for about $115,000 or $120,000. Nowadays, you want to go as close to 50% as you can, but it may be unrealistic in some instances. You really want to shoot low, though.

The houses that work the best for short sales are houses where there are 2 mortgages. And the bigger the 2^nd mortgage, the better. What happens, is if a house has 2 mortgages on it (let’s say a $200,000 house has a first mortgage for $150,000 and the second mortgage is for $50,000), when that first mortgage forecloses and takes that house back, that second mortgage for $50,000 goes away and the bank loses it altogether. So, the best prospects you can get for a short sale are when there is a high second mortgage on that house. That bank knows whey will get nothing if that house goes in foreclosure.

A house that needs some work is usually a little better too. The bank is going to take back a house, but they would rather take back a house that needs no more work. If it needs some work, you might have a better advantage.

If you are going to get a Contract to buy that house, the Seller has to be willing to sell it to you for what he owes, or what you can get from the bank. In a lot of cases, you don’t even put a price on that Contract. You get that Contract or the option to buy that house from the Seller, and you leave that blank. There is a clause in there that says that the Seller will sell the house for whatever the Buyer will negotiate with the bank. So, whatever the price the Buyer and bank accepts, that is what the Seller is willing to take for the house.

The seller then walks away with nothing. They don’t get anything. If the bank is going to take a loss on the house, they don’t want the Seller walking away with any cash. The Seller has to be ready to just walk away.

You have to have a Seller that is really ready to work with you. They have to provide a letter explaining why they can’t make payments. They also have to provide a short sale package of paperwork for the bank. The bank will want the last 2 years tax returns, last 2 months bank statements, and if they have a job, the last 2 paycheck stubs. The first time you go through this paperwork it might seem like a lot of work, but after you get that first $50,000 check the paperwork will seem like nothing.

Now you are going to negotiate with the bank. There is a department at the bank called the Loss Mitigation Department. They basically mitigate loss. They help to not have foreclosures. You will contact them and discuss this with them. Try to get the price down as low as you possibly can. These negotiations usually take a few months. They will try to get as much as they can and you try to get as little as you can. They might even tell you they don’t do short sales. Yes, they do. That’s why they have a department. Stick to your guns and act professional. Find a program to help you out.

While negotiating, you are going to start selling this house. Our preferred method is to do an auction or just put it up for sale with a Realtor, or do it yourself. We are going to offer a discount. We are not going to try to get the highest dollar we can. We got a sweet deal, we want to offer a sweet deal to a buyer that wants to move their family in. Our goal is to find that buyer before we settle with the bank.

Then we will do a double close. You will find your Buyer, the bank is going to take $120,000 for a $200,000 house, you will have the Buyer maybe pay you $160,000 or $165,000. Again, you have to learn the numbers and feel out your market. Then you do the double closing back to back, on the same day. The first closing is when you buy the property from the bank. Now, you own the property. The second closing is when you sell it to your buyer. You buy the property from the bank for $120,000, then 10 minutes later, you sell it to the other guy for $160,000 then you have a $40,000 check. There is more to it than that though, but it does get easier with time.

You might be wondering where you can get $120,000 to buy it from the bank? There are services that will do that. There are places that will lend you the money for one day, for as little as 3 or 4 percent. You borrow it for one day, (they don’t even check your credit), you buy it from the bank. The same day you sell it to the other guy, you keep the difference, and it’s a sweet deal for you. Good luck!

The basic steps to a short sale:

• Find a property a few months behind, with foreclosure looming
• Make an offer to buy the property for whatever the bank will accept
• Complete the short sale package that the bank or the short sale negotiator you outsource to sends you
• Negotiate with the banks “Loss Mitigation Department” and get the price lowered well below retail
• Find a company to loan you the $ for ONE day, so you can buy the property
• Set up a double closing at the title company
• Close and buy the property from the bank
• Immediately afterwards, close again and sell the property to your buyer
• Cash the check for the difference between what you paid, and what you sold for

Real Estate Investing Phone Skills

Learn the Basic Phone Skills in Real Estate Business

You have to learn great phone skills in this business if you want to get anywhere. I’m going to give you some good information, and I’m going to talk about telephone magic. There are certain things you want to do, certain things you don’t want to do, when you are talking to Sellers on the phone.

Put Them On Hold: The first time you are talking to a Seller, and sometimes they are very aggressive, asking too many questions, not letting you get a word in edgewise, and he’s trying to take control of the call, that kind of thing, there’s a little hold button on your phone, and if you don’t have a phone with a hold button, maybe you can switch over to the other line or just pretend they are on hold. Go ahead and put them on hold. If you get somebody that is asking too many questions, or questions that you aren’t ready to answer, just put them on hold. Every time you put them on hold, they will lose their train of thought. So, if they start asking you questions that you aren’t ready to talk about yet, and if you are still getting your info about the property or details of the sale, just say “excuse me” and put them on hold.

And then you come back and take off where you left off. It’s a way to take control of the call politely. For all they know, you have another call coming in and you can let them know that. But it is a good technique to use if you have someone that won’t let you get your point across. Or, they want to keep talking and talking and talking. If they keep talking, just put them on hold. It sounds silly, but try it. Once you get your timing down, it will help you take control of your calls.

Ask “Yes” Questions: Here’s another one: Ask “Yes” question before you ask a couple of tough questions. When you are on the phone, you want to get your potential seller in the habit of saying “yes”. One of the things they say about live sales is that when you are talking to someone, keep shaking your head “yes”. It gets them to subliminally keep thinking about “yes”. I have a Brett Favre bobblehead that reminds me of this. Ask “yes’ before tough question. At the beginning of the call, here’s a scenario to use: “Hi this is Nick ,can you hear me okay?” Then, the seller will answer, “Yes”. “Are you calling about the house you have for sale?” And then the seller will answer, “Yes”. Every time you know you’ve got a property and you have to ask a tough questions, like asking them to drop the price a little bit lower, get them to say “yes”, first. You just really want to get them in the habit of saying “yes”. It’s going to more likely make the call go in your direction.

Say “If” A Lot : Here are some examples of how to use the word “if”. “IF your property is one we decide to work with.” “IF your property is at the right price and my partner is interested in it .” “IF there are not too many repairs and it’s something we want put in our program.”

Especially with todays’ buyers market, there are so many deals out there, so many cheap houses out here, use the word “If’ a lot. You want your seller to be afraid you are going to say “No, I’m not interested”, and hang up the phone. You want them to really believe that they need you a lot more than you need them. And it’s true, we’re helping them out in a jam. By saying “If” a lot, it puts doubt in their mind that we are going to actually buy their property and help them out. It’s much less likelier for them to turn on their sales talk. You are not trying to convince them to sell, they need to be convincing you to buy. Once you get that atmosphere on that phone call, you will have a lot more successful calls.

Mirroring: You also want to use mirroring when you are talking to people on the phone. Mirroring. You want to reflect back to them the same personality that you sense they have. So, if you are talking to someone who is talking really fast and asking a lot of questions, you want to talk really fast and ask a lot of questions. If you talking to someone who is kind of old and they are talking very quiet and they are talking very softly and slowly, then you should talk very quietly and softly and slowly as well. If you are talking to someone who is talking kind of “street” and they are cussing a little bit, be careful, but you might want to cuss a little bit right along with them. People want to do business with people they feel are like them. People they have something in common with. Subliminally, if you mirror their personality and reflect it back to them, they are more likely going to want to work with you. They are going to like you and trust you more and you are going to get the deal over someone else.

Last Question Dropped: Why do I say “Last Question Dropped”? Whenever you are negotiating price, you talk about the price and get the rest of the details. This works best over the phone, although it can work at the home too. The main goal of your phone call is to get an appointment to go see the house. After you have asked about the price, you have asked if they can do any better, you have already talked price. One of the last things to do before you hang up that call is to try to get a couple more thousand dollars off. You have already talked price, you know what their bottom line is. “Okay, thank you very much, I’m going to discuss with my partners or I am going to do my homework and check the market in your area and I’ll get back to you soon. By the way, when I talked to my partner-can you cut off a couple thousand dollars if that the difference to us taking the deal or not? “ It’s a last-ditch pitch, I call it. Sometimes that last 10 second sentence will make you 2, 5, or 10 extra thousand bucks, just for flapping your lips-so don’t be afraid to say it.

Pet the Goldfish: Here’s what I mean by Pet The Goldfish. In conversation, different things come up. Maybe they will talk about their kids, or they’ll say they need to make the call quick because they have to pick up their daughter from ballet. Anything you can catch about their life, their personality, or family situations. Something personal about them, by talking on the phone, you want to bring it up. “Oh, your Son plays hockey, gosh my Son plays hockey too, or I used to play hockey”. Don’t go overboard and lie. It goes back to mirroring, creating rapport over the telephone.

Answer A Question With A Question: Another thing that’s really good in a lot of cases is to answer a question with a question. Sometimes, they are not giving you as much info as you want. You want to use techniques to make them talk more. So, they ask you a question and you repeat the question back to them. They say, “Would you be interested in a house that needs quite a bit of repairs?” And you say, ”Your house needs quite a bit of repairs?” And they keep talking. And they say, “What type of timeline are we on? Is this something that could be done fast?” And you say “Well, would you need us to get this done fast?” Or they say, “I’ve never heard of anybody doing a deal this way, don’t take it personally, but it sounds illegal. Is this alright”? And you say, ”Does this sound right to you? Why does it sound illegal ?” Ask the question back to them that they gave to you and you’ll get a lot more info on what they are thinking and their train of thought.

Return Calls: Another thing that is going to help you when you need to call someone back is to set a time to make that call. Make an appointment. Don’t just say “I’m going to talk to my partner and call you back”. Say, “Okay, I’ll talk to my partners, look at the area and see what the values are, and I’ll do my homework and research your property”, whatever that might be. Instead of saying “I’ll call you back tomorrow”, say, “I’ll call you back tomorrow at 3:15 in the afternoon, is that good”? Set that appointment. By setting an appointment, it makes you seem important, it makes your time seem valuable. Plus, if they have that appointment, if you ask them to write it down, you are more likely to get through to them. How hard do we work to get people back on the phone? We leave message after message, they call us and we’re not here, and we call them back. Don’t be afraid to set an appointment for a phone call at a specified time and date. It’s really important.

Other Deals: When you are talking to people, also talk about other deals you are doing. Talk about other properties you’ve bought and sold in the area. And don’t seem desperate. Seem like you don’t care if you get the deal. Again, it goes back to them trying to convince you to buy the property, more than you convincing them to give us the deal. Be indifferent, pretend like you don’t care at all. I know some of you are so desperate, you want that deal so bad. Air is not as important to you today as getting that deal. You can’t let THEM know that. If they sense any desperation over the phone, the deal’s dead. So you have to act like you don’t care, you have plenty of deals, there are all kinds of people calling you, you’re just picking and choosing the best. This way you’ll get the best deal, and you’ll more likely get them to do something less traditional, or differently than what they had planned.

I hope these are some great tips that you can use, I use them all of the time, I TEACH these to my people all of the time. Here are some tips to succeed and get the deal:

Take control by asking questions. The person asking the questions is the person in control.
”Mirror” the seller/prospect. If they are talking slow and quietly, or fast and loud, do the same.
Put the Seller on hold often if you feel they are trying to take control, or won’t let you talk.
Listen more than you talk!
Don’t be afraid of dead, “silent” spots. The seller may get more uncomfortable and give you more info.
Repeat a Seller’s statement back to him in the form of a question. He’ll elaborate.
Set a specific appointment time for a return call. Don’t just say “I’ll call tomorrow”.
So here are some goodies to make you a better investor. Now go make an offer!

How to Get Good Comps in Real Estate Investing

There are some ways to figure out what price you should offer on your houses to get a deal, or to give someone else a deal. I will also show you how to maximize your investment.

Comps are basically the true value of a house. You can look at the price of houses for sale, but that doesn’t tell you the true value of a house. The true value of a house in an area is based on how much houses are SELLING for, not how much the houses are listed for.

So, if you look in a neighborhood, you may find houses listed at high prices. They don’t sell at those high prices. They get made offers, they also come down before they sell. It’s the selling price of the house you want to go by to make a decision on how much you want to get for your house, or how much you want to offer on your house. It’s also known as ARV (average retail value, or after repair value). The comps let you figure out what the ARV is.

Comps also need to be similar houses of a similar age, in the same location. Now, when I say the same location, you want them to be less than a mile away, the closer the better. You want them to be sold, if possible, less than 60, or even 30 days ago. With this volatile market, you really want to make sure that those comps are done on homes sold recently. So, the closer to your subject property and the more recent those homes were sold, the more accurate your comps are going to be.

Now, we’ll talk about where you can get your comps from. First off, you can get comps from a Realtor or the MLS. If you are a Realtor, you already know how to access them. If you are not a Realtor, you can befriend a Realtor, and usually for about $20 or $25, you can get a Realtor to run comps for you. Realtors are good for getting comps because they are professionally trained to do so. Note that sometimes when they are working with a Seller, they MIGHT want to bump their price up a little bit to maximize their commission. Sometimes they might even do it for free. It’s give and take, do them a favor, give them a listing now and then, you’ll find a Realtor that can do it. The problem is, a lot of Realtors, they won’t do it over and over again. They’ll do a couple, but they don’t want to be your source for comps. Sometimes you can need 5 or 6 a day.

You can also get comps online, but be leery. Some companies are good resources, they list sold house prices, but don’t trust them so much when it tells you how much your subject house is worth. You can use them to see how much houses sell for in your area, but when it comes to finding out how much your house is worth, I have seen as much as a $50,000 spread up and down. $50,000 low, to $50,000 high. Those online free sites are not very accurate, unfortunately. I suggest against that. The worst thing you want to do is buy a house for even as little as $15,000 more than what it is worth. Then, you will become a motivated seller, and you don’t want that.

You can also go to the courthouse, though it is tedious for only one comp. You can contact them and get all of the records for all of the homes that sold in one area and find out what they are selling for.

I personally use a service online that runs comps for me. I put the subject address in and it gives us all of the recent sales around there, it tells us how much they sold for, how much loans are for on present houses too. But, not everybody wants to pay for it. If you are a true investor, it’s worth paying for, because you want to sit down, push a few buttons, and get your comps. Please research these companies before signing up with them. Now, you can move on to make your offers and talking to sellers are buyers.

Now, how do you evaluate? It’s easy if all of the properties are the same where it’s the same model home over and over in the same subdivision. It makes it a lot easier that way. When you get a few of the sale prices, average them out, then you can figure out how much the house is worth. It’s real easy with condos because it’s the exact same unit, right across or down the hall. Make sure that the time is there. If three identical units sold 7, 9, and 11 months ago, they are not good comps. You have to adjust for the time in which the market changes for that period of time.

If they are different types of houses, you have to go by different things. You have to do more research. You have to look at the size of the houses, the age of the houses. If one house is 50 years old and one house is 5 years old, the value is different. You have to look at the condition of the houses. You have to look at the extras on the house. Maybe one house has a 3 car garage and one house has a 1 or a 2 car garage. One house has a pool. You have to adjust for that. If one house has a pool, that house is going to be worth more than the home without the pool.

In a lot of cases, you can ask your seller what they feel the house is worth, which is always high. Ask them how they came to that price. Maybe they will tell you that they had a Realtor who gave them a CMA. Always double-check on that. You always have to run comps. Never take a seller’s word for it. Always do your own research.

There is also a square footage method. Let’s say you have eight different comps for homes that are all different in a certain area. I toss out the top one, which is always a lot higher. I then also toss out the low one. Then, I figure out how much a square foot the other houses are selling for. I take the square footage, the selling price, do the math, and figure out how much per square foot each of those houses sold for. I write it down, then I average it out and that will give you a good idea. So, what you do is figure out the average price per square foot is for homes that sold recently in that area, and then you multiply that by the square footage of the house you are looking at. That will give you a relatively decent comp. Again, it’s not an exact science. It comes with a little bit of experience.

It also comes with learning the territory. A lot of you are working only in one area. But, there are certain parts of Chicago here, that you can tell me it’s a one-bedroom, one level garage in Country Club Hills, and I can tell you how much it is worth, then adjust it for condition. It’s because I have dealt with that area. But, if you are investing all over the country, or if you are in a big city, you have to run your comps. The easiest way for me is to use a service, instead of doing all of the square footage work.

Now, there are things that you have to look at, that you have to adjust for. Sometimes you have to throw out homes that sold for very low prices. You might have 8 or 10 houses all that sold within a twenty thousand dollar range and one that sold for thirty thousand less. You have to find out why it sold for thirty thousand less. Did it have a foundation problem? Was it a foreclosure or short sale? Right now, there are so many foreclosures and short sales going on, you have to be aware of that. When you look at your comp list and one or two homes look way high or way low, you either have to throw it out or you have to find out why. These foreclosures are lowering the prices in areas.

Now, when I am selling a house, this is what I do. When I have an appraiser come in, or when I’m pricing my house, I use the highest comps in the area. When I am buying a house or negotiating with a seller or I’m doing a BPO and that BPO Agent is coming in, and I’m going to give him some comps to help influence his BPO on a short sale, I’m going to give him the lower comps in the area and will tell him that we are basing our offer on these comps. So, use the higher comps when you are selling, use the lower comps when you are buying.

Once you have your comps and know the prices that houses are selling for, use these tips to evaluate them:

• Only use sold house prices, never listed ones
• Do not use these comps for properties over 4 units, those are commercial, and done differently
• Try to use comps as close as possible to the subject, hopefully less than a mile, and closer
• Comps should be as “fresh” as possible, 30 days old or less
• Compare “apples to apples”, not 3 year old homes to 60 year old ones
• If a property is priced substantially higher or lower than the rest, find out why
• If the comps are extremely varied, figure out the square footage price for the area, and use that
• Use high comps when you’re selling, and lower comps when you’re buying, in negotiations

How to Get Started in Real Estate Investing

Let’s face it. If you’re reading this, you either ARE an investor, or want to get started investing in Real Estate, but SO many people, say SO many things… some is great advice, and some is “garbage”, so I’m going to try and get you off on the right foot!

There’s NO doubt about it… if you want to learn this business, you need to INVEST. The question… is “what” do I have to invest? No, it does “not” have to be MONEY!

As a new or beginning investor looking to make money fast with a real estate deal, you have to be educated, but there’s “More Than One Way to Skin a Cat”. (or flip a house!) If you have the financial resources, there’s nothing wrong with spending a few hundred for a program, paying a few thousand bucks and going to a bootcamp, or even spending bigger money to get an experienced real estate investing coach.

But the truth, is most rookie investors couldn’t even come CLOSE to forking out that kind of “jack”! I certainly know I couldn’t, when I got started! So how “do” you get started in real estate investing then?

Investing Time and Money

You have to invest either TIME, or MONEY, to become a creative real estate investor!

But before you do, decide what “niche” of investing you want to invest in! Do you want to be a house wholesaler? Want to learn how to do short sales? Are you into subject-to buying? Are you handy, and love to renovate or “rehab” houses? There’s dozens… or possibly hundreds of ways to earn and make money with creative real estate investing… even as a beginner!

Once you’ve “done your homework”, and know what type of investor you want to be “when you grow up”, then it’s time to get educated! If you have money to spend, get a GOOD training program from a good real estate trainer. For $300-$1000 you can get a program consisting of CD’s, DVD’s, manual, books, and other tools. If you have more to spend, you can attend a live “real estate bootcamp”, where for 2-5 days you can be personally trained. Even higher up the ladder, and more expensive, you can hire a coach, or real estate mentor.

If you’re like I was when I started in real estate investing (WAY in debt) you can start by reading everything on the web you can find about your niche.

Yes, at some point you’ll HAVE to spend some money to learn this business, but it can be kept to a bare minimum, and it shouldn’t “break the bank”. Save your pennies, and start off with a $300-$500 program. “It’s hard by the yard, but a cinch by the inch!”

Don’t be in a hurry… start carefully, and consider making $500-$600 by finding a “seasoned” investor a deal, and getting paid for it, as a “bird dog”. Put the money towards a $500-$800 training program, and do ONE deal. Put that money into a bootcamp or real estate investor seminar, and get the training you need. Good luck!