Prosper Newsletter: April 2006 > Real Estate

You understand that the following information is educational in nature and is not intended to be legal, accounting, or tax advice. You are responsible for your own financial decisions and should consult your own legal, accounting, and tax advisors before making your financial decisions.

Patience Helps First Investment Property Materialize, Then RE-Materialize!!!

After putting offers in on five homes I finally had one accepted. Although this home is not in my "Target" area, based on comps. Watching the market, this is definitely a good investment neighborhood. It's a four-bedroom home on 1.1 acres with a fantastic running brook that borders the property. Don't worry I didn't fall in love with the home - just the deal. I estimate this home needs approximately $20,000.00 in updates. It was used as a summer home for a couple that lived in NYC and only came up on weekends. This house was listed back in August of 2005 and even in a very strong market it was grossly overpriced at $329,000.00 considering the updating it needs, when I found this home it was down at $275,000.00. With the owner already dropping the price $54,000.00 I knew there probably wouldn't be much room for negotiating but I gave it my best shot. Based on the formulas we were taught I should not have offered more than $261,000.00. I took into consideration the fact that I would be doing about 50% of the rehab myself and paying to have the other 50% done. So I placed an offer of $260,000.00 only to find out about a week later (they were very slow) that they had an accepted offer in place. This house was a perfect rehab home because it really didn't need any major repairs or structural work, just mostly cosmetics and a kitchen. Oh well, there goes another one I said, but patience has always worked for me and once again it paid off. About four weeks later my realtor informed me that that house I really wanted was back on the market- the deal fell. So I sent back my offer of $260,000.00- No good! She's holding strong at $270,000.00. I went to $265,000.00 and tried to get the realtors to kick in a couple of grand each. Yeah Right! I tried- I ended up at $267,000.00 and she accepted. The funny thing is that there was still yet a better dollar offer on the table but they had what I like to call "Baggage", they had to sell their home, and me who never goes on vacation, has no baggage (a little New York humor - sorry). So the owner sacrificed probably a grand or two for a much stronger deal-A quick closing.I secured an 80-20% loan for the mortgage and while we're waiting for the closing date I opened a Home Equity Line of Credit to cover the closing costs and the updating. I expect this home to be back on the market within two months and based on comps. For the area this should bring me a sale price of $340,000.00 to $350,000.00.

I have a long way to go to becoming a professional investor in my eyes but the knowledge I've gained by taking Dolf's course and working with my mentor have already propelled me to a much higher level then I could ever have expected in 14 weeks. Thanks Coach, more stories to come- I promise you.

- Jack O.
Westtown, NY


Tip of the Month

Keep a photo album with before and after pictures of properties that you fix up. Also be sure to keep careful records of all your expenses in rehabbing each project. Not only will the picture be gratifying for you to look at as you see how all your planning and hard work has paid off, but it can also be used to impress individuals and institutions that you try to borrow money from in the future. If you can show a potential lender the quality of work you do through the pictures … and you can show them the profitability of each of your past projects through the spread sheets, they'll see you as being well prepared, experienced, and a much lower risk borrower than most.

Your photo album may also come in quite handy when you ask a seller to finance part of the purchase price for you. Your album could help to convince them that their collateral for the financing (the house) will be growing in value and that you will be investing substantial funds into the property … even if you aren't putting in a lot in the form of a formal down payment. Sellers who are carrying back financing often feel much better knowing (and seeing) that we, the buyers, will have some "Skin in the game". This simply means that they want to see us put something into the deal, though that doesn't have to be in the form of an upfront formal down payment. The money you ultimately put into fixing up the property may be pulled from savings, a partner, credit cards, etc.

Your photo album can also be helpful in showing sellers with emotional attachment to the home they're selling that you'll take good care of it and improve its condition substantially … which may make them feel better about selling to you.

My Prospect Pro

Features:

My Prospect Pro is a property prospecting tool for real estate investors. It contains a database of leads throughout the United States, as well as several other tools for use with their investing. Leads in the database include FSBO properties as well as bank owned foreclosures properties. Once the student's account is activated they will be able to specify up to 300 zip codes in whichever markets they prefer to invest. They can then search and call on as many leads as they like. The leads within the database are free to call on and available to everyone who has access. Premium Services The system also contains advanced features including the "On Demand Assistant" and "Property Profile" tools. These tools are features which will cost points for students to use. These tools will give the student the ability to further qualify the prospect with little effort on their part. They can have a personal real estate prospecting assistant that will work on their business when they can't.

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