It is not how much they win rather it is how much they collect as I often state when referring to lawsuits.  Many real estate investors understand the distinction and take steps that involve the use of corporations, land trusts, equity stripping and limited liability companies to minimize their overall risk exposure.  The key to planning is understanding how these entities work in conjunction with one another to create an overall effective plan.

A good asset protection planner must know the difference between these entities from a tax and asset protection standpoint, where is the appropriate state to file the entity, and when one entity type should be used over another (this is not an exhaustive list).  For example, this past week I met a real estate investor in Orlando while speaking at an asset protection workshop.  This person, whom I shall refer to as Sally, was distraught over a lien that was about to be levied on her condo by the Condo Owner’s Association.  Sally was completely beside herself because she thought she made the right move when she transferred her condo into a LLC for asset protection.  Through conversing with Sally, she informed me that she had read and subsequently heard from her local REIA that rental property should be held by LLCs for asset protection.   Sally wanted to know why no one had told her that in transferring her property she would face a fine for implementing this strategy.  What Sally did not understand is generally speaking this is sound advice but not knowing the nuances of holding title will create problems as Sally discovered.

In Florida, it is very common for community associations to limit who may own property.  When these communities where planned the developer and subsequent owners did not want landlords buying up the property and turning the community into a rental pool.  To combat this, rules were adopted to prevent business entities from owning property within the community.  If Sally had consulted my firm we would have told her to first utilize a land trust (see Land Trust Part 2 for more information on land trusts and holding title to property) to hold title to her property.  After the property was recorded in the name of her trust, Sally could have easily transferred her trust into a LLC for asset protection and no one would be the wiser.

This post is not about land trusts but about not knowing or understanding the nuances of asset protection.  Many of the people I met last week planned to embark on their own asset protection planning without realizing that it is the details that can spell the difference between success and disaster.  Just because it sounds like the right thing to do does not necessarily mean that it will work.  In a prior post, Running your Real Estate Business out of Nevada or Wyoming, I addressed the use of a Nevada or Wyoming LLC registered in a different state to hold rental real estate.  Investors falsely assume that the charging order protections offered by Nevada or Wyoming will apply even if the investor is sued in the state where the LLC is foreign filed.  I explained how a court would most likely apply the foreign state’s law in deciding what protections will be afforded to its members.  In a recent Utah case, American Institutional Partners, LLC (“AIP”) v. Fairstar Resources LTD (“Fairstar”), this was exactly this issue.

In that case, Mark Robbins established AIP in Delaware then foreign filed it in Utah to conduct business.   Mr. Robbins was later sued in Utah court and a judgment was entered against him in favor of Fairstar.  Fairstar later reduced this judgment to a charging order against AIP and then sought to foreclose on Mr. Robbins interest in AIP i.e., Fairstar was seeking to take AIP from Mr. Robbins.

Unfortunately for Mr. Robbins, Utah’s LLC statute permits a creditor of a member in a LLC to foreclose on his interest i.e., the “charging order” is not the sole and exclusive remedy.  Mr. Robbins thought he held an ace up his sleeve because AIP was a Delaware LLC registered to conduct business in Utah.  Under Delaware’s LLC statute the charging order is the sole remedy therefore, he argued that Delaware law must apply.  The Utah court disagreed and issued an order that Utah law applies to all judgment execution proceeding including the creditor’s foreclosure of the debtor’s interests in limited liability companies whether such LLCs are domestic or foreign.  Only in internal matter of LLC business would Delaware law apply.

A different result would have been reached had Mr. Robbins not filed his Delaware LLC in Utah and instead chose to create a Utah LLC that was wholly owned by his Delaware LLC.  In a structure such as this, the Utah court would not have had any jurisdiction over his Delaware LLC because it was not registered in Utah.  MR. Robbins might have walked away with his assets in tact.

Had a group meeting with an attorney this morning and learned some very interesting information.  North Carolina senate passes “The homeowner and homebuyer Protection Act” In a nutshell, in order to do an option to purchase or a land contract in the state of NC there will be additional paperwork.  Before this act I would use the rental agreement that the tenant signed and dated and that would be enough to evict for non-payment to my company.  With this act in place that is no longer the case, here are the headlines that the act covers in depth.

47G Option to Purchase Contracts Executed with lease Agreements:

• Minimum contents of option contracts; Recordation
• Application Of Landlord Tenant Law
• Condition of forfeiture; right to cure
• Notice of default and intent to forfeit
• Effect of seller’s default on loan secured by mortgage or lien on property
• Remedies

47H  Contracts for Deed

• Definitions of terms
• Recordation
• Right to Cancel
• Conditions of forfeiture; right to cure
• Notice of default and intent to forfeit
• Periodic statements of account
• Title requirements
• Late Fee’s
• Remedies

If these headlines catch your attention read the entire Act.  I have put it down below as a pdf, again, this has just happened here in my home state make sure you know what your states legislation is also passing, this may not effect you in your business now however sooner or later something they do will.

Land contract & lease option (Click on the red sentence to the left to download NC ACT)

Due Diligence Prior To Purchase

1. Prior Appraisal
2. Current leases
3. Rental Applications
4. Gas Bills (Prior 12 months)
5. Electric Bills (Prior 12 months)
6. Sewer Bills (Prior 12 months)
7. Water Bills (Prior 12 months)
8. Cable TV Bills (Prior 12 Months)
9. Other Utility Bills
10. 10. Maintenance Contracts:

1. Lawn
2. Snow Removal
3. Elevator
4. Pest
5. Trash
6. Security
7. Other Contracts

11. Police Activity report for the past 12 months

12. Assessors formula for taxation

13. Prior Survey

14. Prior Environmental Survey

15. Advertising Costs for the prior 12 months

16. Deferred Maintenance Schedule:

1. What has been fixed and what needs to be fixed

17. Insurance Bill annualized

18. Management Fee’s

19. Current Management Duties and Responsibilities

20. Schedule E for the prior THREE years

21. Contractor Walkthrough with written estimate of work to be done.

This is a portion of your due diligence to get you started.

3 “MUST USE” Money Making Magnets for Marketing

1. Direct Marketing: If you do this correctly it can pay you huge amounts of money. It may be a little slower than some of you may like, but it will make you wealthy over time.  Consistency is key within the system, it will become a daily regime after a while.  I can never express the importance of Follow Up – its when you will actually get paid.  I have sellers call me 1 to 2 years after I have sent them a piece of direct mail, yes, years later…  This is where I use courthouse retrieval system and then implement it with click2mail to send out the mailers.  It takes some time to learn both, but be patient with yourself; you will be amazed how quickly you can pick up on everything if you take good notes.  (Need to have a little bit of a budget for this one, the needed follow-up can get expensive over time when you are sending multiple mailers.)

2. Bandit Signs: This has always been one of my biggest money makers in my local markets. I no longer put signs out in these markets due to costs.  This is how it works: the city(either code enforcement or police) will begin to give you or your company citations for hanging the signs.  To me this sucks; signs have made me a lot of money in the past. I still have about 200 signs sitting in a garage on a property I sold a few years ago that is still empty.  I have chosen for my company that the $500.00 to $1000.00 citation is a little more than I would like to cough up every week.  Look, I like pinching pennies like the next guy, however, there are tons of other ways to market to possibly motivated sellers.  I had to chalk it up to “ high a cost for doing business.” Actually, from this it made me really get into the internet marketing strategies a few years ago.  (I like the 12 x 18 one sided, my last bulk purchase was .98 cents per sign.)

3. Craigslist: Everyone and their brother have been trying to use this as a way of finding motivated sellers. It seems overwhelming to many, it surely was when I first began using it a few years ago.  There are a few tricks that I have come to find out that I have to do in order for it to make sense of spending time on this internet site or sites like it.  You have to be consistent -  make it a system, it must become a process.  You have to look at this for your specific market several times per day for the first 2 weeks.  After finding out when most of the motivated sellers put their properties online in your market you need to begin using feeddemon.com this will help you cut down on your keyword searching. Oh yeah, it’s free as of the time of this blog post. You need to start marketing on craigslist and also reading lots of the ads that sellers are posting.

Happy Investing,

Travis

Have a servants heart

There are tons of ways to build a buyers’ list, the challenge is finding those investors that aren’t tire kickers (tire kicker defined: investors that will never buy – it makes no difference how great the deal)  I am going to share with you my favorite and biggest money makers for finding my buyers of properties.  There can be two types of buyers 1.The folks that will be living in the house and it becomes their home OR,   2.  Investors that will hopefully want to buy in a market somewhere USA year round as long as it matches their criteria.

1. REIA (Real Estate Investment Association) Price: I have seen from $59.00 per year up to $400.00 per year dependent if you are joining as an Individual or Company

This is how I built my database of investors over night, if it wasn’t for the REIA so many years ago I have no idea if I would have ever gotten off the ground.  Let me tell you a quick story about my experience; this is also what I tell many of my clients and if I’m in town at the time of someone’s REIA we will go to it together to mingle and shake hands.

Here is how it went down over 11 years ago, I went in not really knowing anything except I knew nothing.  There were probably a hundred or so people at this fish house on the outskirts of Charlotte. I didn’t know anyone.  I’m a person that I love being on a stage teaching but other than that I like to people watch and listen, so trying to get to know all of these folks wasn’t any fun for me. Well, until I started helping others and making money -  then it became fun.  So here I was, wet behind the ears, possibly like you are today. I went around and handed out as many business cards as I possibly could before needing to go into my little cave.  It’s been so long I don’t remember how many cards I had received that night or how many I handed out. However, I was building a huge list from that night forward, that’s all I knew.

After a few years my list built to thousands of investors, but let me tell you where it really took off.  I was sitting there a few months later and started to speak to the head guys and gals, next thing you know I was volunteering to help do things before every meeting, then I was asked to became a board member…..  Now, let me ask you this, do you think I was a genius or a prodigy to become a board member? No, they asked me to do things and I took the initiative with starting projects for them and finishing them. It helped the group and everyone was always happy.  I was the head of the library, it wasn’t all that fun, but I had a chance to mingle with all the movers and shakers.  Then I had one gentlemen that had been in the business for years take me under his wing and he took me around to all of his rentals, he told me all of the good and bad stories of land-lording. In other words, he mentored me.  At that point I became one of the top wholesalers in my area. After doing several deals a few people noticed I had some skills, so they asked me to teach an hour long seminar for the REIA on how to wholesale.  That list was building like it was on steroids!!!

I am not telling you this story to make me sound better than anyone. I am telling you this story because I started with not knowing anything,  just like many of you.  I had to learn how to wholesale just like many of you to build capital to then be able to build wealth. I was able to do all of it because I built that huge database of investors.  Now I also have to reiterate, tire kickers, in my opinion, may be 10% to 15% of your list will actually be buyers when you are collecting random information from them.

Lesson learned: get to the REIA, volunteer your time and energy, do what has to be done, build your database!

If you don’t have a REIA you might want to start one.

2.  Section 8 (hud.gov or socialserve.com) FREE to get the list, you may have to go to the office but its well worth it…

This list can be a gold mine. Everyone that is on this list is not an investor though. You have to go through the list and determine who property managers are and who actual owners are.  This shouldn’t take very long to figure out. If it is a well know management company you have probably seen signs in the neighborhoods stating they are property management.  As for everyone else they may be an investor that is willing and able to sell, no assuming, until you call you don’t know, unless you’re a psychic.  I have been amazed every time  myself or one of my clients calls these folks with me or my client assuming they won’t sell- we are wrong on so many occasions.  For the time that it should take you to get the list from section 8 and the time that it will take for you to call each person on the list, you will be pleasantly surprised on the outcome.

3. Craigslist Ad

Put this type ad in your city area on craigslist or any other online classified “Looking for investors that need to buy properties 30 to 50 cents on the dollar, if that fits your criteria please contact me NOW!  My company is in the business of moving properties very quickly, if you like to move quickly and make CASH I need to speak to you NOW!  Contact me today by phone at xxx-xxx-xxxx or by Email at yourname@gmail/hotmail/yahoo.com

Hint:  Please make an easy, memorable email. It doesn’t matter if it means something to you, what does matter is that these investors will remember you and the email address. You need to have an email that is simple to remember and if you can also have a simple phone number you are several steps ahead of the game.

Reiblackbook.com helps cut down on time for this, it will send to over 30 different online classifieds for you…

The 3 ways above should help you in your journey of finding buyers for your properties, in this business you can never give up. It may take 10 phone calls before you get an investors criteria, you never know if they are a real true buyer until you have a property to present to them.

Investors we are looking for to add to Buyers List:

Contractors

Rehabbers

Wholesalers(they have lists, if you share profits with them you will make it over that mountain much faster than by yourself)

Lease option Investors

Etc.

Have a great week!

Buyer Beware: Purchasing a Property at Foreclosure Sale

Most people who have purchased a property at a foreclosure sale, or have thought about doing so, have heard that one who embarks upon such an adventure should heed the warning, “Buyer beware,”  but few truly understand the potential pitfalls of such a purchase.  The purpose of this article is to highlight one of the most common mistakes associated with purchasing a property at a foreclosure sale, and how it might be avoided.

First, it is important to understand that you can only purchase at a foreclosure sale what the trustee or commissioner holding the sale has to offer.  This may be clear title, or it may not be.  The trustee holding a foreclosure sale makes no warranties or promises of any kind as to what you are getting.  The trustee simply forecloses the interest the borrower (grantor of deed of trust) had at the time she executed the deed of trust.  That borrower could have been only a partial owner.  If the borrower only owned a one half interest in the property, that’s all the borrower could gave mortgaged, and therefore all the trustee is selling.  If there were prior liens on the property, such as prior deeds of trust, taxes, or judgment liens, when the borrower executed the deed of trust, then those liens will remain, unless satisfied, and will survive the foreclosure of the deed of trust.  Thus, the buyer at the foreclosure sale would take the property subject to these prior liens.

Here is an example.  Suppose you are interested in buying a certain piece of property at a foreclosure sale.  You look at the tax value and find that the property is valued by the tax office at $100,000.00 and there are no outstanding taxes owed.  You go to the sale and the opening bid is $50,000.00.  You upset the bid thinking you have purchased a $100,000.00 property for $50,000.00.  However, unbeknownst to you, there was a prior deed of trust on the property with an outstanding balance of $70,000.00.  Now, in order to have clear title, you must pay off the prior deed of trust.  As a result, you have now paid $120,000.00 for a property valued at $100,000.00.  Your great deal just became a big loss.

There is a solution to this problem.  You can avoid this by having a licensed attorney conduct a title search for you prior to placing your bid.  Find a local attorney and explain to her that you are a real estate investor who sometimes bids at foreclosure sales and you would like to retain them to conduct title searches for you prior to your bids.  Explain that, because you are bidding at foreclosure sales, you will need a quick turn around time on your requests – under a week – and get their confirmation that they can handle this time frame.  Also, ask the attorney if they would be willing to give you a reduced fee in exchange for repeat business, since you are an investor and expect you will need multiple searches in the future.

Hiring a licensed attorney to conduct a title search for you prior to your bid is an added expense, but it can help you avoid what may be a devastating outcome.  You should consider this a cost of doing business.  Remember, buyer beware.

J. Scott Flowers

Mr. Flowers is an attorney with The Law Firm of Hutchens, Senter & Britton, P.A., with offices in Charlotte, Fayetteville, and Wilmington, North Carolina.  He can be reached at scott.flowers@hsbfirm.com.  This article should not be considered legal advice.

I have a virtual assistant that does tons of things for my real estate business. Thought you might want to know for when you hire your own VA, here’s a list of a few things:

• Calling all home owners on craigslist. If no one answers she leaves our website information and 800 numbers, we get calls throughout the day.
• Call section 8 to see what the rent comparables are in the areas I’m working.
• Calling investors in the city that we have chosen and asking those questions from our investor profile sheet: We are building databases.
• Going through crappy emails that are just junk that we don’t need to waste our time on.
• Writing emails to possible sellers or investors – she is actually writing them herself.  Yes, we see what she is sending out before she sends them,  but it is much better  to just tell her what we need changed in 5 minutes, instead of spending  half an hour to an hour on building an email campaign.

These are just a few things that are making my and my partner’s lives easier -  something else that we can pay someone to do.

If you would like to save some time in your life check this site out. This is who I have been using for several months. I found my VAs there and they train them. Click Here Replacemyself

Happy Investing,

Travis

Types of Fears

From the start of my own real estate investment career, I have always carried something around with me just like everyone – Fears.  Everyone has them just some people are better at hiding them than others or overcoming them quickly.  I want to define and show you what fears are and how you can overcome them from education and knowledge.  The team here at real estate path to profit will help you best we can to break through any fears or hesitations that you may have in this business.  Through education you will build confidence that will take you down that path to profit you deserve and have always wanted:

Fears:   Two Types

What are the Two types of Fears? Does anyone know?  They fall under these two TYPES:

• Technical- “POWER TEAM MEMBERS cover these fears” (At REIA)

-Mentor- Evaluates market, and helps build your power team and should show you how to speak and deal with these power team members.

-Attorneys- cover Contracts, Entity Creation (ASSET PROTECTION)

-CPA/Accountant: knowing the newest tax strategies for tax purposes.(HOW TO SAVE MONEY FOR YOUR COMPANY THROUGH TAXES.)

-Contractor: Evaluates potential real estate deals that we are currently looking at. They should be able to tell us what our high end and low end costs would be. They should also be able to get us a written proposal on work to be done.  This will depend on your exit strategy you choose.

• Personal- Covered by “YOU”

Knowledge is Power: Education, Education and more Education

Personal fears are a bit different than the technical.This deals with you. This is about your mind set and what you think.

There is the fear of loss, which would be if you lose all of your material things in your life. How many of you would be able to build it back 10 times faster? I would guess everyone.

Fear of making mistakes. We all make mistakes -  I always learn the most during this time in my life.  I was at an event in Las Vegas to hear a speaker and he had a great line: “No Risk, No Reward”  There isn’t a more true statement.  Currently, I would guess that 50% of the people I know that are in this business are in hard times. Those are also the same people that I know that have been building their business to improve their life style and also help others.  Bad things happen to good people but good people always make it back, always, don’t ever forget that.  My quote today: “If you’re not making mistakes you’re not working the biz.”  Do you want to go around and talk a good game or do you want to actually be in the game.  Sit on the bench or play, you have to make the decision.  That’s why the next one is even more important.

Fear of Disappointing others, well, you have to get over it. I feel like I have the entire world on my shoulders sometimes, that’s a lot of weight to deal with. I know I’m not alone on this feeling.  We never want to disappoint, just remember, if they liked you or loved you when you didn’t have anything they’ll like and love you regardless of what you have.  I have also seen that the people that really care about you will never leave your side as  long as you were moral and ethical in what you did.

-F.E.A.R. Defined: “False Evidence Appearing Real” I truly think that the true definition:

“Fear” is “The Anticipation of PAIN or LOSS”

“Believe in yourself and you will overcome every obstacle that is thrown in front of you”

How to Drive for Dollars and What it Means

Many times I am asked what it means to drive for dollars. I explain it like this, “If you got in your car and drove in a neighborhood, what house would you be able to get at a discount, which would mean what home would give you the biggest dollar sign?”  This can be determined by many things. Here are a few clues that I use while driving in neighborhoods and I am literally looking for these things while driving around in my car or truck.  Tall grass, boarded windows and doors, electric or power meters are gone; snow hasn’t been shoveled in driveway or sidewalk, mail piled and many more things.  We are just looking for empty or ugly properties of owners that can no longer care for their property or that are unable to fix problems.

Tools that you will need in order to drive for dollars: First, you will need to pick a specific area that you would like to start driving for dollars.  I figure this out by going to my local REIA (Real Estate Investment Association) website. If you’re not sure how to find that Google “National REIA” -  this site will give you list of REIAs in your state and city, if you don’t have one it’s not a huge deal, you might think about starting one.  After finding the site for your local REIA you will want to find out where other investors are investing.  That is always one of my first starting points of a new area.

After choosing an area it’s time to pull the area up on www.zillow.com or www.trulia.com or www.cyberhomes.com.  These are three of the sites that I use to find sold properties, this will give me prices of an area.  Oh yeah, if you have a smartphone I would suggest downloading a few of the apps to it, I use the Zillow and trulia apps. While you drive around you can see what things sold for and also what property owners are asking for their homes if they have been listed with a realtor on the MLS.

How To Build a Strong Power Team For Your Real Estate Investments

Building a power team can sometimes seem overwhelming.  When I go into new markets I have to practically start back over every time, but I wanted to share with you how my partners and I or virtual assistant find good team members.  Here is what we do:

• REIA (Real Estate Investment Association)-Contact your local REIA and ask any of the board members who they use.  Most of the time they will give you several so make sure you have something to write on, always thank them for their time.
• Other Investors-I like to deal with other investors that are doing this business daily.  You need to find out what exit strategy they use most for their businesses, then ask if they have anyone good to add to your team.
• One member will lead you to others:  any time you are discussing business with a possible team member you need to ask who they use for whatever particular job you may need done.  As an example, if I’m speaking to an Attorney the first thing I want to know is if they are an investor themselves.  Hopefully they will have good power team members because we are shooting for the same goal, asset protection and now tax savings.
• Family and Friends:  I would not advocate using a family member as the person on your power team, it’s not fun firing them if it comes down to it.  Ask for referrals from your friends and family members. They may have someone that can help you and the business.
• Know that you will be firing 1/2 to 1/3 of your power team members every year.  Some people will drop the ball over and over again and you cannot be afraid of getting rid of someone.  I didn’t say burn bridges, there is always a good way of getting rid of someone.  Hint: Before firing someone make sure you get all personal information from them along with change passwords on accounts just in case.

Now it’s time to go out there and start building that power team. Good luck and make sure you have written out those questions before going and interviewing any of these new power team members.  Be patient when you go and build these teams, they don’t build quickly. Things that are worthwhile take time.

To get more tips visit my site: www.travishoward.me

Happy Investing,

Travis Howard