Planning Produces High Profits “We buy ‘distressed properties’ at 70 percent, or less, of the fair market values in ‘as-is’ condition for cash. Most of the time there is no real estate agent or broker involved because the property may not be on the market when we buy it. ‘Distressed properties’ in our definition are: Properties in disrepair, properties with tenant problems, or other emotional dissatisfaction with the property on the part of the owner. “We look for sellers forced to liquidate their real estate to solve a cash need. And we look for sellers who are anxious to unload their properties that are ‘in crisis.’ This can result from many factors, such as tenant problems, tax issues, natural disasters—fire, flood, and so on, management or cash-flow problems, or vacancies. We’ve found this demographic group prefers ‘peace of mind’ instead of ownership problems. “We have made ourselves proficient in three specific skills:
1. Finding deals—how to find real estate bargains.
2. Funding deals—acquiring money to fund transactions.
3. Flipping deals—reselling property quickly, profitably.
“One of the most difficult and critical components of our purchase strategy is the elimination of, or minimizing of, the down payment required to obtain the property. Quite often, the down payment represents a significant portion of the transaction. That is, the less money invested to turn the property, the higher the rate of return on the purchase. Here’s our strategy to take advantage of a below-market purchase price: “When a home owner signs a real estate contract to sel l their property to us for 70 percent of the fair market value ‘as-is’ for cash, one of the ways we finance the deal is with a hard money lender that lends up to 75 percent of the fair future market value—that is, after fix-up. Most of the time we don’t have to put any money out to buy the property (zero cash). Even money for the renovation is lent as long as the total loaned is not over 75 percent of the future fair market value. “We are presently working with other entities anxious to join us as ‘silent’ investors. This wil l allow for massive Get Into, and Profit From, the World’s Best Borrowed-Money Business 9 growth while at the same time we wil l grow incrementally to protect all our investors. “The terms of our financing are: Lenders (the hard-money funder) provides a one-year loan. The cost of the money is 4 points (4 percent of $100,000, or $4,000) and 10 percent, interest only for the first six months. After that the rate goes to 14 percent and it is due in one year. We are currently working on raising capital without the need to make monthly payments. “The reason we use Lenders for financing is: Proactive closing of cash financing and escrow closure, which is so valuable to al l the parties involved. We’ve found that sellers want to sel l fast and we deliver. The average time for us to close a deal is six business days, or less. To accomplish this, our staff works zealously with the title company on a daily basis by pushing them to close in a rapid manner. “ Lenders does not use credit or income for their approval. This al lows us to buy an unlimited number of properties. Al l Lenders requires is the collateral—that is, the property we want to buy. How does this work?
There is no appraisal of the property required.
We work with the fastest closing firm to get a title report.
“Banks and mortgage companies wil l typically be considered as a last resort. This is because of the long delays in processing mortgages. There is an estimated closing time of 30 to 45 days for these lenders. This precludes our ability to be proactive to all and that is why we try not to choose this avenue. “Our investment strategy includes renovation of every property purchased. Homes that can be bought wel l below (continued) market value with very little repair are our best investments. But such houses are difficult to find. So we anticipate that every home wil l require at least cosmetic improvements to bring the home up to maximum value and allow it to be sold quickly. “Over the last three years we’ve been in business our purchases and holdings show these results: Year 1: 4 properties bought; Cost = $376,000; Value = $1 million Year 2: 11 properties bought; Cost = $1,887,000; Value = $3,594,000 Total cost for two years = $2,263,000; Total value = $4,594,000 Gross Profit in two years = $4,594,000 − $2,263,000 = $2,331,000 “Now that you have the numbers of our organization, here is information on our location and market: It is, and has been, our goal to provide a unique service to our growing and diverse community in northern California. Our company’s mission is sound. It is fostered with the highest standard of excellence, dedication to quality, service oriented, detail attentive, with the goal to rebuild our neighborhoods. “We have surrounded ourselves with the ‘best and brightest’ of professionals in diverse areas to address any contingency that may occur. What we provide is unique. We buy properties from others who wish to sel l but do not have the capital or liquidity necessary to fix up their home and then sel l it. This service is provided to sellers of homes, investment properties, and apartment complexes in ‘as-is’ condition. We use in-house project management and the best of contractors to restore the property to one that transcends anyone’s dreams. “The area we chose to invest in is one in which we can buy properties for 70 percent, or less, of the future fair Get Into, and Profit From, the World’s Best Borrowed-Money Business 11
Focus on the Elements of Your Business Plan
Using this letter (which was sent to me in the form of a Business Plan) as a guide, let’s extract the elements you’ll use in your Business Plan—which I often call your Success Plan. These elements are:
1. What you’ll do to acquire your million dollars in market-value real estate in one year. In this Plan it is: Buy properties at 70 percent, or less, of future fair market value and fix them up for resale at a profit.
2. Select the area in which you’ll work. In this Plan it is: A city in which owners of lower-priced homes need to get cash to take the next step in their lives. These, the letter writer calls his “targeted neighborhoods.” market value and resell within one month while on the market. This area has had a 40+ percent appreciation of housing prices. Further, there is recent demand for homes for firsttime home buyers, our target market. Also, we know the area, as do most of our associates who work with us. “We developed our strategy around the purchase of homes in the under-$150,000 range. This price represents homes on the lower end of the spectrum in the targeted neighborhoods. A price differential of at least 30 percent between our purchase price and the typical sales price is a requisite to each purchase. This allows us to absorb a renovation and acquisition expense of about $5,000 to $10,000 for each property and still net a minimum profit from each sale, with the potential of garnering six figures on the investment sales price. And our target neighborhood is wel l populated with significantly motivated sellers who wil l take cash in exchange for a substantial discount for a minimum of 70 percent, or below, of the fair market value, after fix-up.” —California
3. Choose the price range you’ll focus on. In this Plan it is: Homes in the under-$150,000 price range. These are at the lower end of the spectrum of prices in the targeted neighborhoods.
4. Find suitable financing sources. In this Plan it is: A hard-money lender that charges points with an interest-only grace period and then a higher interest rate, with a one-year term limit on the loan.
5. Specify who will do the needed work. In this Plan it is: Experienced outside contractors, plus the company preparing the plan, are responsible for doing the rehab work.
6. State other important aspects of your business. In this Plan they are: —Estimated rehab cost for each property. —Acquisition price range for each property. —Market for sales—that is, first-time home buyers. —Condition of properties to buy—as is. —Rehab of each property as a business strategy. —Stated closing time for each purchase—six days. —Known interest-rate conditions for financing. —Specific type of seller targeted for purchase strategies. Now I know you may regard writing as a chore. And writing a Business Plan may be even more of a chore to you. But please hear me, as your friend and mentor, when I say: Your Business Plan can be your most valuable tool in building $1 million in market-value real estate in one year, starting with little, or no, cash. Your Plan will outline what you intend to do. Then all you have to do is follow your Plan. Trust me, Business Plans do work for you. I have nothing to sell you but your success!
Your Real Estate Road to Wealth Is Easy
Earning your fortune in real estate is easier today than ever before. And you can get started sooner than you think.Why? Because, in income real estate you:
Don’t need a college education to start. You can learn as you build your wealth. This book gets you started on little, or no, money.
Your race, gender, age, religion, and location will not hinder you from starting, and succeeding in, owning income real estate of any type you like.
You have a friend in your author, Ty Hicks. I’m ready to help you in every way I can. If you contact me, all I ask is that you submit your needs in writing because I take your request very seriously and I want to give you the best advice I can. A 60-second phone call is really not long enough to get the needed facts to give you a sensible answer!
Your Key Ideas for Acquiring Large Real Estate Assets
Real estate is the world’s best borrowed-money business.
You can borrow money to build $1 million in market-value real estate assets in one year.
While you build your real estate assets you will improve your financial life and your credit score.
Smart thinking will help you build your real estate wealth faster, and with less work on your part.
Real estate assets are respected by all lenders. Hence, you can use your real estate assets to borrow money to buy more real estate.
You can build real estate wealth working just a few hours per week in your free time.
Financing for your real estate business can easily be arranged in your free off-hours time via telephone or Internet. If you’re employed, your employer never need know about your offhours real estate investing because it’s your business, and yours alone!
No real estate license is required of you as a property investor.
Hundreds of good, reliable loan programs are available to you to finance building your real estate assets on borrowed money.
Acomprehensive Business Plan can guide you to acquiring $1 million in market-value real estate in one year on little, or zero, cash down.
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