Jan and Bill Leon

A while back, I shared with you an excerpt from the interview I did with Bill and Jan Leon, two very successful wholesalers in Florida. Well, today I have more wholesaling nuggets from the Leons.

Just a brief overview about the Leons: Since 1989, Bill and Jan (a husband and wife team) have owned and operated WJL Financial Group outside of Miami, Florida.  Together, the two real estate investors buy and sell 90 to 100 homes a year.  Bill and Jan are also the owners of the Broward Real Estate Investment Association.

Now on to the interview…

How do you sell houses once you have a contract on them?
We round up all our investors and have them all go look at the property at the same time. Since we tell the seller that we have no intention of keeping the property, that it is our intent to sell it, most of them are pretty gracious about having a lot of people come.

Then we set up an open house. Lots of times a lot of the properties are vacant. I send out an email that says, “Look, be there Saturday from 1:00 to 3:00 and you’ll get to see it.” Lots of times we’ll already have an agreement subject to the investor seeing it.

But again, you know, if you have a property and you advertise in the paper “Open house 1:00 to 3:00,” it creates a frenzy, which is good. In fact, many times I have a problem because a lot of people want the property. Generally, it’s the first one to come to the table with a check.

We would rather have all the investors show up at the same time than to come at odd times individually. Although it sounds crazy, I don’t care if they run across each other because everybody knows we’re wholesalers. They know exactly what we do, and they know how we do it. If there are a lot of people showing up, people are more inclined to say, “I need to make an offer before the next guy so I don’t lose out.”

Also, many times we’ll say to the sellers, “Look, the house is vacant. Would you allow me to put a lockbox with a key in it so you don’t have to travel 35 or 40 minutes every time I want to do an inspection?” We would indemnify the people; in other words, if something happened, we would take care of it.  But again, we’ll put the lockbox on it and people will go take a look at it and that’s how we do it.

How do you screen potential buyers to make sure they can actually close?
Generally, we don’t allow the investors to use conventional financing. The reason for that is the flipping rules that we are running into today. What happens is, you write an agreement to sell the house in 30 days, they apply for conventional financing, and three and a half weeks go by and all of a sudden you hear from the lender, “Oh, you’re not on title, so you’re flipping this house. We’re going to back away from the financing.”

So generally, that’s why we don’t allow end user financing. It’s not secure and the time frame is tight. Many times these properties have to close in ten days to three weeks and conventional financing just doesn’t give them enough time to do that.

What kind of financing do you recommend?
People who are looking to be investors in this business need to try to find hard money lenders in their area. Hard money lenders are great. Even if you have capital, it allows you to leverage the amount of properties that you can buy at any particular time. Now people say, “Well, hard-money loans are expensive.” In Florida, the rate is usually two or three points up front, and anywhere from 14% to 15%, interest only. They’re one year balloons. Most hard money lenders require a survey and insurance that covers the property when it’s vacant. It’s advantageous to take out a hard money loan and fix up the property. When it’s all brand-new and clean, you call up your conventional financing and the house is going to appraise at a much higher price.

I think it’s a tremendous advantage to have hard money lenders. If you really look at the cost of an interest-only loan that you’re only going to have for five or six months, it’s really not that much more expensive than conventional financing when you figure out all the upfront costs that you have through a conventional loan.

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To listen to the full interview with the Leons and to access our Hard Money Lender guide with a list of lenders in your area, sign up for a Premium MyHouseDeals.com account here.

Until next time, happy (and profitable) investing!

- Doug

Billy Johns is a real estate investor from Jacksonville, FL

Billy Johns has been involved in real estate investing for over 21 years.  He and his business partner buy over 150 houses per year and they collect rent on 100 units and 75 mortgages each month.  Billy has also originated over 1,000 mortgages and bought and sold over 500 mortgages during his career.  In addition, Billy has developed land, built new houses, modular homes, commercial strip centers, mobile homes and land packages and has owned 5 mobile home parks.  Billy has a passion for getting the deal done and truly is the king of negotiation.

I interviewed Billy for The Vault, and he shared some great information with me.  Here are some of the highlights from that interview in the form of 6 useful tips for landlords…

1. Visit the Real Estate Investing Clubs in your area – I recommend going to real estate investing clubs.  Most real estate clubs give you a tremendous push of knowledge since they are bringing in speakers and materials and you have a lot of different people there.  Some are landlords, some are private investors, some are passive investors, some do just commercial, and some do just condos.  You have a wide range of people there that you can gather knowledge from and I highly recommend that.

2. Be thorough. Run a background check – The best way to screen potential tenants is to do a background check.  In our area, we can get it all from one service; we can see what their credit is and their background, see if they had any felonies or anything like that.  However, in some rural areas you can’t get all this information in one place, so in that case I would recommend going to the local law enforcement.  Usually they’ll run a check on that person for you.

3. Never negotiate the deposit – Make sure your tenants pay their full security deposit up front.  If you’re going to give them any discount, give them a discount on the rent.  There’s not a place in this country that I know of that you can evict someone on non-payment of deposit, but you can evict a tenant just about everywhere on non-payment of rent.  So if I gave you an extra 30 days to pay half your rent instead of half your deposit and you didn’t pay it, I can evict you.  If you pay me the rent in those 30 days but the deposit is still due, I can’t evict you and I’m still missing money.

4. Plan rent increases carefully – Whether or not you want to increase rent each year or leave it the same is really going to depend on your market.  There’s no right or wrong answer or magical answer to that.  If you are going to raise the rent, you should try to increase it a little each year instead of waiting and making a huge increase a few years down the road.  It’s harder for your tenants to swallow, and you will probably lose good tenants because of the sticker shock.  It’s not that they can’t afford it, but it will make them start looking for a different place to live.  You don’t want to lose a great tenant just because you timed your rent increase wrong.

5. Protect your assets – An individual land trust per property is the best entity to hold rental properties in.  In regards to a beneficiary, you’ll have to get into tax structure and stuff like that.  However, we always like beneficiaries of our individual land trusts to be an LLC.

6. Be passionate! – The first step to having your own rental property empire is to go buy your first house!  Of course, you should also enjoy what you’re doing and have a passion for it.  If you don’t enjoy real estate with a passion, you won’t make it to owning 100 properties, I can assure you.  Start out buying them one at a time, stick to your criteria for each property, and make smart decisions.  Also, if you’re going to grow large, it really helps to have someone to work with.  You can always bounce stuff off of each other.  As the old saying goes, two heads are better than one!

Until next time,

Doug

When it comes to investing advice, there is not a more trusted source than Warren Buffet. Click the picture below to get the latest investing tips from the world’s richest man. He talks about buying stocks and businesses, but his advice applies perfectly to real estate investing…

Buffet’s Tips for New Investors

Until next time!

Doug

Have you registered for our live training and networking event in Houston yet? It happens tomorrow — that’s Thursday, Feb 25 — so be sure to register now by clicking here.

This event will already be jam-packed with content from Jim Goodchild and Brant Phillips. They’re speaking on “The near-term and long-term outlook for the Houston and National housing markets“ and “The Lazy Man’s Real Estate Investing System.”

But in addition to the training sessions, we are going to deliver on what everyone at the last event listed as their favorite thing – Networking! And we’re taking things to the next level by not only bringing back the Speed Networking session, but also adding time for informal (but powerful!) networking through the evening.

And in addition… Trade Show!

Vendors will be setup in booths that you can visit and exchange information. Best of all, they’ll have special deals for you that you won’t see available anywhere else. We are still reaching out to businesses that we think you would enjoy networking with, but so far we have amassed an amazing list of companies.

To attend the event and network with some of the most active real estate investors in Houston, you MUST register. We only have so much space, so register now to claim your chair. Once you register, you’ll get info on the exact location of the hotel. Register for free now!…

http://www.myhousedeals.com/HoustonLive

See you soon!

Doug

Stephen Rivers

Doug: Stephen Rivers has purchased 12 properties since he began investing, and 8 of those have been wholesale deals from MyHouseDeals.com. He has sold 4 of those properties so far. Stephen could you give us a little bit of information about your background in real estate investing. What kind of experience do you have?

Stephen: I started as a Realtor and got my license when I was 18. Then I was always interested in investing and a partner of mine that was a long time friend, I recently sat across the desk from him and told him, “Joe I want to learn how to invest. Find me some properties.” So I began to look for some properties and I ran into myhousedeals.com. I showed him what I was looking at, he had the money, he showed me how to rehab homes, what to look out for and basically showed me the ropes.

Doug: Now from these 8 wholesale deals that you bought, you said that you sold 4 of them so far. About how much have you made per property that you’ve sold?

Stephen: On average $25,000.

Doug: What about the 4 that you still own? Do you plan to sell or lease them? And what kind of profit do you expect to make?

Stephen: We plan to sell those. The profit should be about the same amount, $20,000 to $25,000.

Doug: How would you say that myhousedeals.com has helped you get going with your real estate investing?

Stephen: Wow. It has really helped me because I don’t have to do a lot of leg work. I can just log onto the website and scroll through the deals and see what would work out for me. I’m not a full time investor at this point. I don’t have the time to go look out and scout, do mailings and knock on doors. So really myhousedeals.com has cut my time in half and made it very convenient for me. It also helped me network with other wholesalers. So really it helped me start off with a bang.

Doug: These properties that you bought, you mentioned they were all wholesale deals, so is that where you like to spend most of your time as opposed to the motivated seller leads?

Stephen: Yes, I’m looking at some of the motivated sellers and I’ve seen some good deals but it looks like sometimes someone would get there before I did so I’m mostly spending a lot more time at the wholesale deals.

Doug: Some people see one or two wholesale properties that someone has posted with an inflated after repair value or a low cost repairs. And they get frustrated by that and they either cancel their membership or they just switch over to the motivated sellers. How have you handled the fact that some of the after repair values and repair costs on the wholesale side aren’t always accurate?

Stephen: When I see that number of an estimated repair I take that with a grain of salt because everybody has their own crews and I can do repairs different or maybe even cheaper or better. So I keep in mind that I might have to up that price by 20% or discount it 20% and I go out there and look at the property and see how much I can fix it for.

Doug: About how many properties have you found that you need to look at in order to buy one?

Stephen: I think about 6 to 8.

Doug: Is that actually going and visiting and looking at them or is that just looking at the numbers on the computer?

Stephen: I go by the numbers on the computer. Usually when I’ve actually looked at a property on wholesale deals, I can look at the numbers and say okay they match pretty good and I’ll do my comps with an agent of mine before I even go out there. So I do my homework. I’ve looked at the property, pulled out the comps, look at the tax records and crunching my numbers to see if it works and then I’ll go out there and look. And usually every time I went out and looked, it’s usually a good deal.

Doug: Do you typically offer the wholesalers about what they’re asking price is or do you go in and try to negotiate?

Stephen: I usually try and negotiate.

Doug: How much have you found that you can get off the asking price?

Stephen: I guess that really depends on the wholesale dealer. Some of them have been really easy to work with and some of them have been really firm. I really couldn’t give you a number.

Doug: Do you remember what the most was that you were able to get them to come off their asking price?

Stephen: Right off the top of my head probably about $8,000.

Doug: I found that a lot of times wholesalers will post a deal with a high asaking price to see if somebody will bite. And most investors don’t bite, so it frees up room for somebody like like you to go in and make a lower offer and get the deal. Is that what you found to be true?

Stephen: Yes, definitely. I’ve never been intimidated. I always go in and try to find out. I just say hey we’re really interested in that property, we have the money. Can you work with me? Usually when you come with that attitude, you’ve got the money, you’ve got the backing, then usually they’ll work with you to try and get that property sold because they want the money as much as you do.

Doug: They sure do. Now what kinds of houses do you focus on? Is it the lower end, the higher end, mid range?

Stephen: Mid range, we’re looking for at least 1200 square feet and up, 3 bedrooms, 2 bath brick home, so probably mid range.

Doug: Those properties are nice to hold on to for the long term. Do you have plans to start holding these properties eventually or do you just plan to continue to fix and resell them?

Stephen: At this point, we’re just fixing up and reselling them but we are going to be holding here pretty soon.

Doug: Very good. Thanks so much Stephen. Keep up the good work!