What is virtual real estate investing?
Many people don’t believe that you can actually invest virtually. My definition of virtual investing is “Property that is purchased and added to your portfolio and that is never physically touched”. I combine this strategy with pure internet marketing to find leads, and also find hungry buyers to wholesale to for quick cash.
I do think it is important for everybody to beware of the fact quick turning real estate is a strategy that solves your short term cash flow needs, I also would advise that look forward in the future and develop a long term strategy for buying and holding after you have cash reserves so you don’t have to constantly be working.
I wholesaled 45 houses last year all without any credit and without putting down more than 10 dollars as a binder fee. Wholesaling or “Quick-turning” is the best way into the real estate investing business. Doing it online at home in your pajamas makes it ideal! My goal is to share with you how to do this simple, easy, duplicable system.
When I first got started, I used to invest only my area. But for many people their backyard economics don’t make any sense or they can’t find deals. My personal portfolio is spread out over 18 states, and I don’t have a one property that doesn’t produce a positive cash flow. I started with nothing, and I really understand that the biggest challenge for people is that they don’t have money or credit available to do deals.
I am going to show, how you can get big chunks of cash when you wholesale. I have never seen a business, where I have been rewarded in the way I have financially as this one. In this business, if you are willing to put in the time, the money that comes back to compensate your time is unbelievable. My goal is to deliver the plan in this manual that can do 5 – 10 thousand dollars easily every month. This is a very easy duplicitable system and I you can follow along exactly what we do on daily basis, to make money.
I want to reiterate that everything is done virtually via the Internet, Fax and E-mail. I use an online faxing service as part of my voice system at www.RealEstateTeleCenter.com (but you can start with a free service such as www.J2fax.com) , from which all my faxes come as e-mail. So I don’t really use a fax machine any more, everything is done through my PC. So there is e-mail and phone, and any docs for me. They send it to my mail address. And I then FedEx the documents back. So we can say phone e-mail and FedEx, as fax is a really obsolete these days. So that’s why we said virtually. In all the properties I ever purchased, I never put a foot in any of them. This works for single family homes, duplexes, and fourplex’s. These are the property that I buy and sell virtually. I am going to teach you how to do this for.
You are probably wondering, HUH? How do you buy property without looking at it?????
Well come on, we don’t do it alone. It’s a team business. You don’t make two million a year alone. Donald Trump has a multi-billion dollar portfolio and also has a small army of people. You will need a team. People that belong on that team are: Realtors, REO Managers or Asset managers, Lenders of all types, Inspectors, Property managers, Handyman, Contractor, Appraiser, Project manager.
One of most powerful members in our team is the virtual assistants. We have been using virtual assistants for years from now. It’s really a great time saver. I have 5 full time virtual assistants, my cheapest virtual assistant, I only pay 2 dollar an hours. People say, where do you find these people??
These people do the research and the numbers on the property. They then only bring me the deals that only make sense. Start by hiring someone a few hours a week and see what happens. Your time as an investor should be spent MAKING OFFERS above all else. See what having a virtual assistant can do for you to decrease your work load. Your time is valuable. If the Virtual Assistant can help you make $5,000 dollars and you only paid him only a $100 dollars, it’s a great ROI for time. Your time is way more valuable than you think it is. For me it was nothing but godsend. So get yourself a power team and get going
Now, here are the 10 steps to investing wholesaling and investing virtually
STEP ONE – LOCATING PROPERTY
The cheapest and fastest way to locate property can be done using the internet. Some of my favorite sites to find deals for free are:
- www.FirstPreston.com , an asset management company.
- www.HomeSteps.com – Freddie Mac Database
- www.lendersreo.com it’s a REO site. This means its own by the bank that foreclosed upon the property.
- www.premierreo.com, an REO asset liquidation company.
- http://www.duncanwierman.com/content/bonus-course-materials/bonus-government-grants-available-with-application-forms/– Gov Seized Property
- Then there are all the bank REO departments. (follow this link to the bank REO list in the bonus section )
Then you simply go to their web site, (type in real estate owned or reo) in the search bar, and you will be directed to their real-estate listings. You will see some of the best deals now. You may be able to buy a house 10 to 20 cents on the dollar. Banks are very motivated. There is more inventory than the know what to do with. So, the name of this game is making offers. . It doesn’t matter what, just make an offer to open negotiations. The concept is simply find the deal and the money will follow. This is a great time to buy, now you can click you mouse and buy a house, and also click your mouse and sell your house. We are in a classic Phase One buyers market!
Just go to one of the above mentioned websites. Locate your property, and get started!!
STEP TWO – RESEARCH
I am going to give you website that we use to research the market. If you are curious to where I invest from my own research: St Louis MS, Spartanburg SC, Greenville SC, Charlotte NC, Kansas MS, Wichita KS, Brownville TX, McGowan TX, Birmingham AL, Raleigh NC, Winston Salem NC, Huntsville, GA, Gaffney SC,
We find this information from two different sources: (Don’t worry that these talk about commercial properties, YOU WANT THE MARKET RESEARCH for the area.)
1. www.hpapts.com (Henderson Partners)
2. www.mmreibc.com, Marcus and Millichap Real Estate
3. www.realtor.org, they do market studies in 50-60 cities in the US.
I don’t follow the leader, I just follow the money
TIP: If everybody is talking about a city to invest in, then you are too late. You need to be head to the curve; follow the money!! You have to know where to go. You will want to look at the demographics and population growth. Determine if there is any new company moving in the area as there will be new people coming into town. These people all need a place to live, so then go buy wholesale houses you can buy and flip or hold a house for rental and rent it to that community. Here are some of the best sites for research:
- www.city-data.com
- www.Census.gov – Census Data
- www.HousingMaps.com
You don’t have to reinvent the wheel, somebody has done it all. You can access that information for free. You never need to wonder ever again where the next “hot” area is!
The second portion of your research is getting the comparable values. . Only use comps from SIX month’s back and up to ½ mile away. Take a look at tax information and the sales history, mostly all that information is gathered from couple of places:
There are many other sites available, just do a simple search on Google for sites in your area. It’s important to draw your own conclusions. I have given you the information that I use most. You can also get this info from your Realtor.
For getting some quick comps, there is:
You can also get your county assessed value online. You don’t have to go to courthouse to get information. There is a county recorder directory online, and it’s called www.netronline.com
The last portion of the research is: What is the property is going to rent for? Determining the market rent rate we use the following sites:
You can also go to www.newspaper.com , where you can find any newspaper in the United States, then go to the classified ad section. See, what the other landlords are demanding for. That will give you a pretty good idea of the market.
One of the most obvious ways to find the market rent is, call a local property manager. Look through the national association of rental property managers found at www.Narpm.org Call them up and say, “I am looking to buy this house on Main street, how much can you rent it for?” And they are going to give you a fair market rent.
Another good place to get information is provided by the US Gov Section Eight Rentals Program. You can also make a lot of money from this government program. You can use www.socialserve.com to find out what other Section 8 land lords are paying. You can also use www.gosection8.com
Learn to harness the power of the internet to do your own searching for your city. You can always search in Google for the fair market rents and then simply look at the first page that comes up.
My favorite is to use HUD Fair Market Rent Schedules :
http://www.huduser.org/portal/datasets/fmr.html
This table is a great tool to use. Print it out and highlight the areas you want to invest in. This tool makes me very efficient in selling houses. I can basically print money. When I go to a buyer, I can say, “this is the market price this is the rent, and this is the money you can make from it.” That’s how I can sell so quickly.
STEP THREE – INSPECTING THE PROPERTY
There are two sites I recommend to help you do this:
These are really good websites. Mostly everyone is very internet savvy and has web cams and digital cameras, when they inspect the location they can provide complete information to you. One big piece of advice is never hire an inspector without them sending you a sample report first. If you never find out the difference between a good inspector and a bad, ask for a sample report, or you will have to learn in the hard way. Please make sure they take digital picture and have e-mail capability, if they say I don’t take digital picture or I don’t e-mail don’t hire him. If he is not sending you pictures than that’s not a report you want, that’s not an inspector you want to work with. You want to know see as many pictures as you can. That’s how I find out what’s wrong with my property and I decide how it’s going to be fixed. I would rather see it than read about it. So, make sure that you get a sample report from your inspector before you hire them
STEP FOUR – FINANCIAL ANALYSIS
I have learned this financial formula from the best in the business. I use it every time I run numbers. This formula is called “Cap Rate Analysis” It is a basically a formula that works this way. A capitalization rate (or “cap rate”) is a measure of the ratio between the cash flow produced by an asset (the original price paid to own the asset) or alternatively its current market value. The rate is calculated in a simple fashion as follows: annual cash flow / cost (or value) = Capitalization Rate For example, if a building is purchased for $1,000,000 sale price and it produces $100,000 in positive net cash flow (the amount left over after fixed costs and variable costs are subtracted from gross lease income) during one year, then:: $100,000 / $1,000,000 = 0.10 = 10% The asset’s capitalization rate is ten percent.
Anything for me above 11.5% is great, and this is how you determine a great deal from a good deal. My virtual assistant helps me doing this. She shows me the Cap Rate on properties all day long. There are so many deals to have right now, so I am only picking the great deals. You can afford to be picky.
Tip: When you are buying a vacant property use a 6.5% factor to figure your NOI. I have my virtual assistance do this work for me and submit them to me all day long.
STEP FIVE 5 – Negotiating and structuring the contract for the the most profit!
Three things are important. Even if you are wholesaling or holding, whatever you are doing, three things that I want to know:
1.What is the ARV? Obviously I get the ARV from the Realtor, I also get the ARV from my appraiser and I also pull it up on my own. I check 3 sources. Then I compare the information.
2.The estimated number of repair is the second thing that you are going to need. I get that from a contractor and a handyman about an idea. Ask them what do you think it is going run. Always get an estimate for the repairs, from a contractor or a handyman so you know where you are sitting … Even if I wholesaling the deal. If you don’t do this, it’s going to make it harder to market the property. Your deal can be sold very quickly if you get ALL the information out.
3.The third thing you need to know is how much the property will be rent for. ( see previous)
These 3 things, ARV, estimated cost of repairs, and how much to rent for are the three important things making me determine how much I’m going to offer and then ask for the property. I keep the ones that make me a large chunk of change upfront, and usually rent out the ones for best cash flow.
One thing you should know in negotiating the contract. You only need to use ONE Contingency. See my sample Purchase and Sale contract in the document section. There are many contingencies you can use, i.e. Inspection, financing, partner approval etc.
Tips on negotiating:
1.Always ask for owner financing
2.Always ask for seller to pay closing costs
3.Always say that the escrow money is sole remedy for default
4.Always pay more than wholesale – ARV x 65% – repairs, holding and profit required.
Step SIX : BUYING IT RIGHT!
Always make your money UPFRONT! When you buy it right, you win, but if you buy it wrong, than you loss. So make your money when you buy! DO NOT GET ATTACHED TO THE HOUSE. I could care less about how cute a house is. All I care about is what will the numbers look like. Numbers don’t lie; it’s all about the numbers. So if you buy it right you are going to win. Right here at step 6, if you are a wholesaler, Skip to Step 10
I want you also to think about your long term plans. Here is the scenario… What if you have one deal that would provide $5,000 dollars now to wholesale it, BUT if you keep it, it may provide $600 dollars of positive income per month. Which is better? IT depends on your income goals. I love wholesaling and it’s great for fast cash checks, but if I stop, I have to still make money. So if your goal is not to work at all, keep some of the good ones for monthly income. Every once and awhile you are going to find large cash flow properties that pay you over and over again! I have properties that I bought for 29,000 dollar, and it gives me $1,850 a month. If you get 10 deals like this, you can score big and then you can kiss wholesaling goodbye. Then you retire or go on a month’s vacation, you don’t have to worry about money, and getting back to work. It’s really a long term wealth building strategy, and my goal this year is to buy 100 houses, sell 50 and save the other half for monthly cash flow. Passive income is GREAT.
Step SEVEN – REHABBING
When you are going to do your renovations use a “Rehab Bid Comparison” form. You have to make sure that the contractors are comparing apples to apples.
What improvements can a Contractor make that is the best value?
I rehabbed lots of houses. Any time you add a bedroom or a bathroom, it adds lots of value to the house. Exterior and interior painting, floorings are standard improvements. Something that many people miss is the landscaping. I spend the a bit more on this for this reason: The first thing the investor, buyer, appraiser, the loan underwriter sees is the picture of the outside of the house.
Mow the grass, clean the gutters, paint the front door or add a screen door, and replace the shutters. These are some simple things that you can do for less than $500.00 that can make all the difference in the world. First impressions are everything. It’s a professional opinion. You don’t have to go expensive, you can use do little things. Repairs can be done before replacing everything first.
The appraiser on his return will surely see that the house looks much better and give you an increase in value. The underwriter does the same thing, and it might be the difference between him giving you $40,000 and then after for $80,000. It’s huge difference.
You may be asking where do I find a contractor?
Referrals always work best, but there are some web sites that I use:
- www.angieslist.com is social network that basically gives each contractor a grade, A, B, C, etc. I look for guys who have at least 20-25 ratings of good feedback.
- www.HomeAdvisor.com
- www.everycontractor.com
- www.renovationexpert.com
- www.nahb.com – National Association of Home Builders. There are about 400 contacts on this site.
- www.Local.com – Here you can type in painter, roofer, etc. You can find just about anything that you need. This is the one site I like and use frequently.
STEP EIGHT – APPRAISING
Now we need to get the house appraised. Nine times out of ten, your broker or banker will have their own that they recommend. You can also use the following sites to find your own:
When you are hiring an appraiser, work with one that works with investors so they understand what you do.
**** You also want to make sure two things:
1.Insurance – E&O ( Errors and Omission) insurance or it may not be a valid appraisal
2.You have to confirm with the lender you are using is that the appraiser is not on a black list of any kind. Or else your lender might say, sorry this is not a valid appraisal.
The appraiser process at this stage of the game is for increasing the value of any property. You can say we have done these improvements so this is our new value how much it’s worth now.
STEP NINE – REFINANCE FOR TAX FREE PROCEEDS
When you refinance a property it is not taxable. Let me repeat… Loan proceeds are not taxable! How cool is that, you can write you own paycheck this way. I don’t have to pay tax because all of my money comes from refinancing. You also got to have taxable income as well because you want to have lots of expenses to deduct. This is why I love wholesaling and flipping and that’s why I do this method.
STEP TEN – SELL IT, FLIP IT OR RETAIN IT
IF you did not wholesale it, you can do many things with the property. Protect your equity or upgrade for more monthly cash flow. There are a great websites to help you:
Selling your deal and wholesaling your deal can be done on sites such as:
- www.looboo.com
- www.ebay.com more real estate was sold on eBay than any other real estate website!
- www.craiglist.com
- www.backpage.com
- www.oodool.com
- www.Postlets.com
So let’s make a final recap of the steps
1.Locate
2.Research
3.Inspect the property
4.Financial analysis
5.Negotiating and Structuring the contract
6.Buying it Right
7.Rehabbing
8.Appraiser process
9.Refinance for tax reprocess
10.Selling or Retaining
Now you know the process, get started today!