Welcome and Get Ready!

You’re about to get a crash course in real estate investing from someone who’s been there and back, through thick and thin.  But let me warn you, what you’re about to read may also change your current view of investing and truly get you to think.  But don’t worry, there’s light at the end of this informative tunnel. Read to the end, it’s worth it.

No Fluff, Only the Facts

If you’re like me, you don’t want to be manipulated by reading only the mushy “sugar coated” stuff about getting rich quick, or how easy it is.  You want to read about what’s really going on and how it can personally affect and/or benefit you.

Have you noticed that as the economy changes, the gurus shift their sales pitch and roll out a new path to riches in real estate?

When real estate was booming from 1999 to 2005, people said buy and hold was the way to wealth; crazy notions like pre-construction were all the rage; and it seemed everyone and their uncle wanted to get into rehabbing and flipping. When things imploded, as they now have, the gurus are telling you that buying foreclosures, doing short sales, or making offers on REOs (Bank owned properties) is the ticket to riches.

Now, it is definitely true that a particular type of economy makes certain strategies work better than others. But the point is that there are tried and true investing principles that also work and are effective regardless of the state of the economy.

As such, I am not about to tell you about a new-fangled real estate strategy. Truth is, there’s nothing new under the sun. Things may sound new, or be presented as updated and cutting edge, but it’s all just a twist or a slight variation on things that have been used in the real estate market for decades.

The rest of this page will describe what you’re truly getting into instead of finding out through trial and error that there were too many obstacles you didn’t see coming. Too many obstacles that can not only hurt your pride, but your wallet too.

You’ll also be pleased to know that there is a better way, an easier way that just makes sense.  But before we can get to that wonderful place, you’re going to need a solid perspective in order to make an educated decision on which path may be better for you to embark on.

Disclaimer

Please keep in mind that you’re about to see real estate from the eyes of someone who practices it daily. Someone who knows what it takes to purchase in the right market and of course, someone’s memoirs of real world experiences from all facets of creative and traditional real estate investing.

And the best part about what you’re about to learn?  I’m not selling anything.  There’s no product, manual or tapes to buy, only knowledge of what goes on in the real world accompanied with an opportunity to beat the game.

So let’s get started …

Purchasing real estate can be a tricky endeavor.  It can take years of experience and some hard learned lessons from common (and not so common) failures in order to get it right.  It is mandatory you build a team of professionals and obtain the knowledge and experience to guide them towards your specific needs and desires.  Without this team in place you are destined to make mistakes that could cost you your career.

Most people think real estate investing is simple.  They think there’s nothing more than making a low offer on a property and then turning around, slapping a tenant in it and collecting a massive income check every month.  Nothing could be further from the truth.  There’s a lot that goes into it before you can get something out of it.

First off, there’s the necessity for knowing and understanding your exit strategy.  And it shouldn’t be something you just read in a manual.  It should be based on your experience, the property, the financing and the one who will be paying you for the opportunity to live in your property.

Let me give you some examples of things that can go wrong and some lessons I have learned from.  They say a smart man learns from his mistakes, but a wise man learns from the mistakes of others. Amen…

What to Invest In

First off, statistics have shown that some of the best investments right now are income properties or rentals. We’ll talk about this in a bit more detail later on. Suffice it to say for now that it doesn’t matter what kind of real estate you are interested in learning,  - short sales, foreclosures, rehabbing, house flipping, rentals, subject to, commercial etc.–you’re going to deal with the same issues I describe below.

This is simply because real estate investing almost always entails two things: actual buildings and/or houses and dealing with other people.

First, you must fulfill the basic criteria in order to obtain a deal.  The criteria can either be cash, knowledge or time.  With time you are working for someone else (think wholesaling or “bird-dogging”).  You may be running around finding deals with the minimum knowledge given to you by someone who is calling the shots and of course, getting paid the most.

If you have knowledge, you still may not have the time or cash to purchase and facilitate an acquisition.

And if you do have cash, you better be prepared to look out for yourself because cash is King and everyone wants to be the King!

One thing that you should also consider is that whatever you learn must be in alignment with your strengths and weaknesses. For example, if you want to fix up a property, do you have the skills needed to swing a hammer? To understand electrical and plumbing?

If you are working with a contractor, do you have the ability to be a tough negotiator in order to deal with them and all of the employees who could cause the job to get botched or delayed? Be honest with yourself, it’s not going to do you any good to delude yourself with overly positive thinking.  Positive thinking is great, but it doesn’t compare to a bucket with three handles to results.

Now let’s talk about another asset you may have that can be pretty powerful.  That asset is “Credit”.  If you have good credit, you’ll see that you have more options even if you don’t have cash.  But there’s a downside with today’s mortgage market that you should know first.

Let me explain …

Number one, having good credit is a must if you are going to take out a loan to purchase real estate.  You need money to buy a house right?  Lenders have made it more and more difficult by forcing people to put gobs of money down just to secure a loan.

And that’s if the property you’re trying to buy doesn’t need any work!  If the property does need work, then you may be required to obtain a higher interest loan from a private or hard money lender.

Why is it called hard money?  Because it comes with “hard terms” and they won’t lend to you unless the risk is all but removed on their side of the table.  In other words, the loan is usually for much less than you probably need accompanied with unfavorable terms to make sure it’s highly profitable for them.  And you STILL may have to put down some of your own money for repairs on top of this.

And that’s where the fun begins…

Now let’s put into consideration the rest of the deal.  If you’re going to invest with income property, then the purchase must be done right including the financing, the condition of the property, the inspection and its physical location.

Purchasing Real Estate

As mentioned above, there’s many ways to invest, but income property is incredibly strong right now.  There’s no denying it.  This opportunity has been created, first, because of the tremendous amount of people in our country who need a fresh start and cannot obtain a mortgage because of their credit issues.

These all-to-common credit issues have caused a flood in the marketplace of discounted properties and an abundance of people who need to rent them.

The second reason rentals are very strong right now is because in the real estate boom, all of the action and money went into the so-called “McMansions.” Now, as the market has collapsed, there is an over-supply of these massive properties that will take years to work off.

Whereas there is literally a 15 year back-log — that’s right, a long waiting list – for fixed up, bread-and-butter homes that the majority of the population can afford: the working-class, blue-collar, or whatever term you wish to go by. Of course, not all such homes will be in demand.

It also depends on the area, which we will shortly address.

Now that we see the opportunity for purchasing income property, what comes next?  What criteria do we need to fulfill with the financing if you’re not paying cash?  We talked about how hard it is to get a loan, but most people don’t have a ton of money to secure one.  We’ll look more into the financing in a minute, but let’s first talk about the property itself.

Is The Property In Demand?

The first thing to do is to make sure you’re buying in the right geographic as well as demographic.  Is the property in demand for people who want to live there?  Or is the property located where people “have no choice” but to live there?  Does the demographic support the price you’re offering to sell or rent?  Or are you buying something no one can afford, or worse, a property that no one wants to live in and can’t afford!

For example, if you are investing in an area where the average income is $20,000 per year, it would be hard to rent or sell a property worth $150,000.  And on the opposite end of the spectrum, do you think a $10,000 property is going to be attractive to a community that makes over $50,000 per year?  Heck no it wouldn’t, it would be an eye sore!

When I first started investing, I had an agent offer me a property that “she” thought was a good deal.  She showed me a picture of the house, which was nicely painted and seemed to be in good condition and told me I could get it for real cheap.  Without even going to see it, I made a low “blind” offer based on her suggestion.

I felt a little uncomfortable making the offer without seeing the property because it would have bound me to buying it the second the purchase agreement was accepted.  But a miracle happened (I soon saw it as a miracle) and they countered my low offer. This meant they didn’t accept my offer, but instead asked me to go a little higher on the purchase price, which voided the original purchase agreement that I had offered all together.  Thank God…

Before I accepted their counter offer, which was also ridiculously low and seemed to still be a good deal, I decided to at least take a drive by and see the property.  There I was, a little nervous but now entering into the neighborhood excited to see my first potential deal.  Boy, the dream was becoming a reality!  Can you hear the first crackling sounds of the tree about to fall?

Reality Bites

There I was driving on this beautiful and sunny Sunday afternoon towards the beginning of a blissful new real estate career.  Then reality set in, of course.

Like any other day “In that area anyway”, the cops had some guy pinned on his chest in the middle of an intersection.  There was a smashed car off to the side, people screaming at each other and a house was still smoldering from the local’s entertaining activities the night before.  Oh, and the good news?  It was the same street my soon-to-be “investment” resided on with all its glory.  Where the heck was this experience in the real estate manual?

As I approached it (with one foot on the gas and one on the brake) I realized that the pictures the agent showed me didn’t lie.  But they didn’t tell the whole story either.  Sure, it was in good shape cosmetically but sometimes when you pan out and take a look at the whole picture, it becomes all too clear.

The problem (outside of the intersection theatrics) was that every other house within a square mile was a crack house, on its way to be torn down or burnt down.  Wow, that could have been fatal right from the get go!  My foot came off the brake and both were firmly placed on the gas.  I couldn’t get the heck out of there fast enough!

Obviously I did not accept the seller’s counter offer and thanked my lucky stars they didn’t accept my original offer.  That would have been a much rougher start than I actually had.  And that’s another story altogether.

It’s Not Just About The Numbers

As you can tell by the lesson above, you can’t get a good deal by only looking at the numbers.  You have to look at the location and desirability of the property as well as your ability to implement a solid exit strategy.  If I would have bought that house I could have (at the very least) been on the hook for the taxes. Which were high because no one else in the neighborhood were paying theirs.

Can you imagine if I had to drive there on a Saturday night (let alone a Sunday afternoon) to fix a toilet!  I’d have to carry a rocket launcher just to make sure I could get out of there alive!  Wow, what a great business huh?

Keep in mind that purchasing right is one thing, but if you’re going to hold the property as a rental you’re going to need to know how to screen the tenant properly as well as the property. This is important because if you don’t, you’ll see your profit margins turn into new carpet every three months, new copper wiring for the air conditioner, a new hot water tank, a new furnace, the replacement of broken windows, repairs for holes in the walls, rent being late because they had to bail Johnny out of jail, (again) trash being piled up a mile high and…  I once had a tenant take the front door with them.

I think you’re probably getting the point…

But What About The Numbers?

Then there “is” the numbers.  Do you know about property taxes, insurance, management fees and vacancy rate?  Do you know how to configure ROI?  Do you know what ROI is?  Okay, let me come back down to earth for a second and explain this to you.

When figuring out your ROI (Return on Investment), there’s a multitude of things to look at.  You need to look at the property’s taxes, insurance, repair costs etc just to identify if it has the potential to even be a deal to start with.  Then there’s the average rental market rates (what the property will rent for on average) amongst other things.

All of this data must be presented into a formula in order to calculate a possible rate of return.  Yes, this can be a web of confusion magnified by the physical attributes of the property itself but if you want to purchase real estate and make money, it’s absolutely necessary you know this.

Renovating

Let’s say the property needs repair.  Renovating a property can be immensely challenging as well as rewarding if done correctly.  First off, if you’re not a trained or licensed contractor, it’s hard to see all of the things with the property that could become an issue.  It’s even worse if you hire someone that’s not looking out for your best interest and tells you everything is fine when it’s not.

I once had a partner purchase a property that the seller warned us “kind of” that the septic field would eventually have to be fixed or updated.  Well, he was right.  As a matter of fact, he was more than right.  Not only did we have to fix it (because it didn’t exist), we had to go the more expensive route and tie into the city sewer lines, which were conveniently located on the other side of the main road.  And yes, the road had to be torn apart, traffic had to be re-directed and the funny part?

The $30,000 bill.  Yes, that was REAL funny.

It’s your job to be able to identify these issues BEFORE you make the decision to purchase.

And if you’re going to hire a contractor or inspector to look at it for you, then you’re going to need to make sure you have solid contracts if they’re wrong.  This now requires an attorney (a good one), which you should have had in the first place.  I’ve had deals go bad when all I could think about was; thank God we had a contract.  This could have cost a fortune.  And of course, there’s deals I’m still kicking myself because we rushed the purchase and didn’t do our due diligence.

So there’s a lot to look at and the final question, do you have the time?   As discussed previously, I’m sure you don’t have time to be fixing toilets at night so how would you find the time to install one during the day?  Hum…

The Financing

Now let’s look at the financing.  Let’s say that you are able to secure a loan.  Let’s say you have a credit score of 700 or higher and have some money to put down.  You then start looking for properties in areas that you think are good.  You think these areas are good because you’ve been told by the local real estate agents who are looking to make a commission off of you.  Sound familiar?

Let’s now look at the financing involved with purchasing a property.  Obtaining an investment loan from a bank in today’s market is nearly impossible.  You have to put down at least 10-20% of your own money even with stellar credit and good assets.

Then the bank may scrutinize the property so critically that the loan may not even close in the first place!  And what if the property needs work?  You’re not going to get a traditional bank to loan on such a liability even if you have the guts of trying to do the project alone.

As mentioned in the beginning, most people will have to go to a HML (hard money lender), which costs anywhere from 5-10 points and up to 20% interest for your monthly payments.  And on top of that, a HML will usually only lend up to 65% of the property’s value.  And what happens if you can’t sell or rent the property to cover those high interest payments? Ouch!

The tough part?  All real estate requires financing.  Without doing loans the banks in this country would all fold.  Banks make money by borrowing at a low interest rate and lending at a higher interest rate and profiting within the margin.  In other words, they must continue to do loans no matter how hard they can be to acquire.

The Real Deal

I have been doing investing for almost 10 years.  Every day I look for something, anything that will make it easier.  The truth is that most programs, courses and/or systems don’t say anything new in their material.  It’s always the same; no money down, seller financing, lease options, take the deed and many other sketchy “do it yourself” strategies.  There are even people that will try to pass onto you “their” headaches and then allow you to go swim with the sharks.

Constantly I see wholesalers and rehabbers sell properties to new investors only to watch that new investor struggle to understand what they just purchased.  Then without help nor hope that new investor gets taught the harshest of all lessons.  They should have gotten better prepared or worked with someone who had the experience to know better.

So as you can see there’s a multitude of strategies, due diligence and experience that must be earned before you can start making realistic profits in real estate.  I could continue writing on for a solid year before I ran out of stories and lessons learned, but you would still need true real-world, in-the-trenches experience to be good at what you do.  In other words, before you could be self sufficient, you would have to be able to walk-the-walk, not just talk-the-talk.

But what if there were an easier way?  What if there were a way that could potentially and completely remove the learning curve and the majority of risks involved in real estate investing?  What if there were a way that could somewhat (or totally) shelter you from the trials and tribulations of going-it and blowing-it alone?  I promised you an answer didn’t I?

The Light At the End of the Tunnel

As mentioned in the beginning, there is light at the end of this tunnel.  And let me tell you; after almost 10 years of looking I have found this light.  And it is incredibly bright.

Please imagine for a second that all you needed was credit to invest in real estate. No cash required.

Let’s forget about all of the jobs, tasks and liabilities mentioned above.  Now let’s say with this opportunity that you didn’t need to put any money down, locate the property, inspect it, find a tenant for it, qualify them, manage that tenant or even have to evaluate the area that the property was purchased in.  Now let’s say that you didn’t have to negotiate this deal, have any uncomfortable meetings with the seller or direct a title company to close the deal.

Now let’s really push the limits and imagine that if you got this far and now owned this property, and it went vacant, that someone would guarantee your payments for up to an entire year and allow you to keep the cash-flow plus all of the potential equity profit.  Think I’m nuts yet?  Keep reading…

Now let’s imagine that this opportunity didn’t come from some no-name guy offering you a rickety shack with a tenant they just pulled in off of the street. But from a highly respected (and regulated) publicly traded company with a global reputation for being the best.

And licensed of course. And solid enough to be able to offer such a guarantee.

Now let’s imagine the ultimate.  Let’s imagine that this property (your turn-key, guaranteed investment) actually was a part of something much, much bigger. Let’s imagine that it’s not just there to make you money turn-key, but to better the community, create jobs and help empower the lives of underserved people as a whole.  Now imagine that you are taking what you just read very seriously.

Please continue…

This describes the most exciting, powerful and amazing opportunity in this country.  The program is called Socially Conscious Investing and is offered by the CEO of the publicly traded City Capital Corporation, Ephren Taylor.

Ephren Taylor has been preaching the concept of socially conscious investing for years to a select group, but it wasn’t until now that this wealth-producing knowledge has been available to everyone.

City Capital’s Vision

Part of City Capital’s vision includes initiatives to create affordable housing for working-class families by utilizing and creating unique opportunities for “Socially-Conscious Investing To Empower Urban Communities.”

This market is severely underserved, with some estimates showing as much as 15-year backlog of demand for homes the average blue collar family can afford.

As a result of their national Urban Wealth Tour and the high regard CEO Ephren W. Taylor II has in the national affordable housing picture, City Capital is often requested to come into a city and effect “community renaissance.” The company’s team meets and establishes relationships with government and community leaders, economic development groups, community development corporations (often owned by churches or other non-profits), contractors, property managers, financial sources and other service providers.

Together they identify target areas for revitalization, convenient to local businesses and shopping, business districts and corporate headquarters, and public transportation. The company negotiates available incentives such as property tax abatements, infrastructure improvements, block grants and other resources with city and community leaders. They also look for good, family recreational facilities such as parks and swimming pools, and select local programs to support, such as new homeowner training and at-risk youth programs.

City Capital puts as much as 40% of their profits back into the communities themselves in the form of programs such as these and other community initiatives. The company’s practical development and redevelopment programs employ local solutions, and return significant amounts of profit to the local communities. City Capital consistently delivers, and has been called a “Proven Market Maker.”

By literally “creating their own markets,” the company also generates significant returns for its cash and credit investors.

Private real estate investors naturally look only at how much profit they can make from individual home purchases, and not a long-term, bigger picture of community change.

City Capital believes that a for-profit corporation can and should do the kind of work that non-profits do, and that corporate profits along with individual client-investor dollars, can allow this on a much larger scale. Only by going in with the intention of completing dozens and dozens of quality, affordable homes for blue-collar, hard-working families, can an area undergo a true “community renaissance.”

Our client-investors are “Project Investors,” using cash, self-directed IRA or rollover funds to participate directly in large-scale projects on a profit-sharing basis per project. Each client is established in their own Limited Liability Company, retaining full control over their funding and participation decisions.

Projects are acquired at a deep discount, often directly from city, state or municipal government partners, and the company completes the renovation or development before reselling at a higher market value (or operating it at a profit). Investors may also direct a portion or all of their profits in a project go to their local church or favorite charity.

Another way City Capital accomplishes their Community Renaissance objectives is through their national Credit-Investor program.

Originally created in 1999 as an alternative program exclusively for the company’s client-investors, the program has gone through many changes and adaptations. It was originally merely a credit version of the company’s cash and rollover investing programs, with splits of profits.

In 2006, the program was modified to make it available for any qualified investor with at least a 700 FICO score and $70,000 household income. Credit-Investors are matched with fully-renovated properties within our Community Renaissance Initiative Areas around the country.

No upfront cash is required, and each property has 15-20% immediate equity and is fully owned by the Credit-Investor at closing.

In addition, a qualified tenant is provided, assuring cash-flow from the beginning, and the mortgage payment is guaranteed for the first full year if it’s vacant any month. And, the Credit-Investor keeps 100% of the net rental and net resale profits.

The company makes sure each home is renovated to it’s stringent guidelines. These include items such as new plumbing, green improvements such as new energy efficient furnaces or heat pumps water heaters and appliances, and energy-saving double-pane windows and insulated steel doors. Whatever needs to be done is done, depending upon the area and home, to make it right from day one for credit-Investors, tenant families, and ultimate homeowners.

The value of the home is based on the independent lender’s appraisal process.

Individual investors alone, without any baseline community or local government support or incentives, cannot create the kind of positive community changes required to sustain positive market changes.

There is no crystal ball as to future value of a particular property, but only a master plan approach such as this can effect the kind of dramatic changes described. Everything possible is done to ensure that, at resale, Credit-Investors have a piece of a much bigger vision, and get to share in the profits of our overall success along with the community and families involved. And then do it again. And again. And again.

For more information or to get involved, click here

Written by - Win-Win Real Estate Investments