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Getting a RE License

Question:

Do you recommend getting RE agent license? If not, what is best way for newcomer to get direct MLS access vs. just getting listings emailed to me?
    
-Student

Answer:

1. Real Estate License – YES!!

2. Get friendly with starving buyer’s agent and get approved as assistant. Get password for access.

3. Money talks – make it worthwhile for someone to cooperate with you and give you access – usually an agent.

NO BRIBES!! What’s wrong with having them work for you? Regardless if an agent does research for you – you must get your own access and learn to do research yourself!

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Finding Vacancy Rates

Question:

How do I find a vacancy rate for a particular neighborhood? I have found vacancy rates on city websites, but they don’t have it broken down by neighborhood?

-Student

Answer:

There are various ways to get vacancy rates both free and paid

1) Internet Resources Include:

Free:
www.rentbitz.com (info, not broken down) www.redfin.com (info, not broken down)

Paid:
www.loopnet.com
www.costar.com
www.grubb-ellis.com
www.marcusandmillichap.com

2) The best way to get free LOCAL information is basically doing what appraisers have done for years; it’s called a Rental Survey. This includes first calling your local newspaper for rental ads and calling on individual landlords and interviewing property managers that rent in your area and then driving your chosen neighborhoods, writing down information on rental signs and inquiring on the rental as if you were a tenant.

-TA

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What is a “wrap” transaction?

Question:

What exactly is a “wrap” transaction?

-Student

Answer:

A wrap transaction means you’re buying a property that typically has an existing first loan. The seller carries a second loan and you wrap both of them to make one payment. That is a simplistic explanation of a wrap. Wrap around loans are used in many different creative way. Creative financing is a world unto itself. Back in the 80’s it was just about the only way we could get deals done. I suggest if you ever have a chance to listen to Bill Tan, Shawn Watkins or Aaron Mazzrillo, this is exactly what they attempt to do every day.

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Original Owner regaining ownership

Question:

Does the original owner reserve any rights of regaining ownership?

-Student    

Answer:

Whether an Owner/Seller has actually reserved any rights has to do with how the actual sale was consummated and whether the law was violated in the process. The law that governs how to approach a seller in default in California is extremely specific and detailed and if you intend on pursuing sellers in default I strongly urge you speak with an Attorney who specializes in this area before attempting to do this on your own. The California Association of Realtors CAR) has a purchase offer form called, “The Notice of Default Purchase Agreement” which highlights the items that must be addressed. Also Tuesday Forms sells a an offer form that is also customized for this specific use.

Having said all of THAT, I must warn you, this is a highly sensitive area of real estate especially inside this real estate storm we are experiencing. government agencies, as well as, lenders are extremely sensitive to protecting Homeowners’ rights because it is being perceived as being politically correct. Their regulations, restrictions and (protectionist) laws are going way beyond anything we’ve ever seen before in the real estate industry. Keep in mind that just because something is legal, it may not be perceived as fair and prudent by controlling government agencies or by the courts.

-TA

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Being a licensed realtor & flipping

Question:

Since you are a Licensed Realtor, are you restricted in any way when you are flipping and profiting from a property that is a Foreclosure or Short Sale?

-Student

Answer:

This question is somewhat difficult to answer because it’s a lot of questions in one. So I will break this down as best I can.

The first part of your question assumes that I function as a licensed realtor. First of all, I’m not a realtor. Not all agents and brokers are realtors. The title realtor simply means you belong to an association, such as The California Association of Realtors (CAR), and agree to follow certain guidelines and code of ethics that are recognized as being somewhat more strict than the norm. While I do hold a broker’s license in the state of California, I have never represented any other individual or entity except those controlled by me. Therefore, the question of potential conflict of interest is moot.

I am only required to disclose that I am a licensed broker in the state, in addition, I include that I am purchasing the property as an investor with the intent for profit.

Typically, real estate agents and brokers functioning in that capacity (representing buyers and sellers) are restricted from buying their own listings or participating in profiting from a seller in distress as they owe that seller a fiduciary obligation. This is a highly sensitive area in the real estate business, especially in today’s volatile market with such a high number of individual owners in default.

-TA

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ARV or Cash flow for REOs

Question:

Tony, what is the highest percentage of ARV that you will offer for an REO? Or, do you strictly look at your cash flow?

-Student

Answer:

I look at my cash flow. Each case is different. I’ve paid probably as high as 70%, but it depends on what I’m going to do with the house. If I know it’s a house that I don’t want to keep as a rental, but I’m not going to have to fix anything, I can just turn around and flip it and make $10,000 after all is said and done, why would I say no to that? People sometimes think “oh I don’t want to waste my time with that.” GET OUT OF HERE! Listen, if I can do $10,000 on a house and do $50,000 a month, I’ll take 3 of those a month. The rest of you guys can keep the rest of them. So, yeah, I’ve done as high as 70%. But again, everything is in line, if you look at the way I calculate numbers on my stuff, I’ll pay a little more if there’s less repair. I’ll pay less if there’s more repair. If there’s no carrying cost, if I have no hard money loan on it, I adjust the numbers so that it makes sense, because that’s what makes the difference between someone who will walk around complaining that he can’t find a deal or someone like myself or Mike Cantu or any of the successful people that you’ve had an opportunity to meet that understand that it’s not about finding a deal. Once in a while, we find deals and they land right in front of us and we trip over them like a rock. But most of the time you’re making deals, ok? It’s creating deals. You’re looking at something and asking yourself, “How can I tweak the numbers or something on the property?” It’s about being creative in the way that you see real estate. If I only had a dime for every time I heard someone who would walk a house with me and go, “my god why would you even touch that? Why would you buy that thing? Are you crazy?!” I was so happy to hear that because I knew this is why I’m making the money I’m making because most people cannot see that and they get stressed out.

-TA

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Referrals from Trustee’s Sales

Question:

Can you elaborate on getting leads from “referrals from guys at Trustee’s Sale” on 119 of the course book? Thanks

-Student

Answer:

Lovely, yes! You got a bunch of guys out there buying at the trust deed sales. The more remote your area is, the better they love to do this. If you’re in some area, they want to know they got a sure thing to sell something. Sometimes they have what’s called “drop bids.” Where they find out that morning that some property that was going to sell for $195,000 has now been dropped bid down to $100,000 or $110,000, whatever it is. They want to be able to get on the phone, be able to call you and say “Hey, Tony, now I got a house on Lancaster West now here’s the address. Go check it out. They just told me I got 15 minutes.” And I’m telling you, I am not exaggerating some of these are like 15 minute deals. But I can go there, knock on the door, see if the property is vacant, see if there’s a person living inside, and find out quickly. I try to find out if it’s the owner or not. And there’s little ways you can use to get your foot in the door. If it’s worth buying or not buying, I’ll tell them on the spot. I have Sabrina doing the comps, immediately, and I say “okay, here’s what I’ll give you. I’ll give you $65,000 max.” So now, he knows what he’s got to add to that so he can get that to the price I’m willing to pay. And trust me; I just had another meeting with two guys in my market that do this. And over the course of time, I don’t work with a lot of different people doing anything. I’m very specific about who I use. But I use people that are very good at what they do and people that I can trust. That’s the whole thing for me is trust. If I can get some money where I can rely on them and I can trust their word, I’m in!

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Does Tony make loans to Students?

Question:

The Norris Group is now offering 9% loans, that have 2yr prepayment penalty, 8 years amortization. Do you make loans to students?

-Student

Answer:

I do not make loans to students. What I do is, on occasion, I will go in on a deal or I will participate, I will facilitate, I will do all those kinds of things. But I don’t make loans to students; I make loans to real estate. And it really has to do with a lot of different elements. To be frank with you, I consider The Norris Group to be the best bet for loans.

If you get into a weird situation in the future where you need to twist and bend things and try to figure out deals that don’t make any sense, Bill Tan is one of the best people for things like that. I’m talking about people that I trust. I don’t suggest names just because they’re out there doing stuff. I don’t accept money from anybody for anything except for what I do. And so when I give you advice on something it’s because it’s solid. The Norris Group, I think is a wonderful company and they’re a no-nonsense company. Bruce is a no-nonsense kind of person. When he makes a decision to make a loan he makes it because it’s a solid loan for YOU AND THEM. So if they tell you to walk on a deal, it’s because they realize you’re going to hurt yourself. So, I recommend them.

I get involved, but first and foremost is the stuff I’m doing. I have people bring me deals where the numbers make sense and yeah I bite down like a pit bull, why not? But, I have to be working closely with people to really understand them and trust them. More times than not, I’ll be honest with you, I’ll show you how to do it so you don’t need me, or you can have someone else involved and pay them. Here’s the reason, I don’t need the money.

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Conflict of interest

Question:

On page 88 [course manual] Raising Capital you state using a RE agents be careful not to create a conflict of interest, can you elaborate?

-Student

Answer:

You have to be careful when you work with agents because you get very close to working with listing agents and the agents that are going to hand you the deals. It could be a conflict of interest for them if they’re getting too close to you, in other words, if they’re going to lend you money because sometimes those agents have a ton of money and they want to participate in the market, but they don’t know how to do these deals, believe me. And I know some of this may sound silly. I borrowed money from some and used it on another agent’s deals. NEVER use it on the same deal they’re selling you. You have to be careful with stuff like that, that’s what I mean by conflict. You get a smoking deal from an agent and the agent calls you and says, “Hey, you know I want to be on this that’s why I’m giving you the deal,” WALK AWAY! Tell them thanks, but I can’t do that. It’s a conflict of interest for that agent but believe you me when the mustard hits the fan, you’re both getting handcuffs and free food and living arrangements for a while. So, you have to think before you do stuff, just do what’s proper.

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Repair Costs for Comps

Question:

 Where do you get the repair costs for the comparables?

-Student

Answer:

We just estimate that from the information we get from the MLS. If you can estimate repair for your own property, you can simply do it by looking and it’s not going to be the exact thing, but what you were looking at was an exercise we put together [in the course manual] pretty much fictitiously. As far as the numbers are concerned, we just created those numbers for the exercise.

But if you ever want to estimate what repair costs are like if you’re looking at comparables and something in your area sold low, you must get the MLS information and you must get to that listing agent and get as much information out of them as you can. But you can usually tell when you go to a house, if you look at pictures in the MLS, you can interview that listing agent and then you can drive by and see what it looks like after. And this is one of the reasons I tell everybody to stay on top of your market as best you can because as you’re working in an area you’re developing information.

We’ve been holding information in our area that goes back all the way to 1993. We’ve been warehousing statistics on spreadsheets. So, we want to know anything about our area and we want to graph it. I mean, come on, it’s not difficult!

We’ve been in markets; we’ve seen them change from one thing to another. This is why it doesn’t matter if you’re starting out. Don’t compare your stuff to mine because that’s nonsense. You may learn ten times faster than I do. Okay, you may be college educated. I’m a high school drop out, but you have to start at some point creating data, putting together information for your area. You’re not going to get past the first step if you don’t take it. So, if you’re out there and you’re looking at houses everyday and you’re following my instructions and taking my direction, you’re out there looking at houses ALL THE TIME until you get to see houses you won’t end up buying. By this time, you know what the condition is so that the guy who does end up buying it, you know what he must do to that house to make it market ready. Then when he’s all done fixing it up, you go back and see what he did, see what he sold it for, and from there you can extract whether any of the repairs he made made sense. You can find out what he paid for central air conditioning, for new windows, carpet, and paint, but that won’t vary too much from what you end up paying for it things like that.