Personal Finance Resources

Should I have a realtor license? Is it expensive? In this edition, I would like to answer these questions, and further illustrate why I have and maintain a realtor license. I remember reading an article stating that 1 in 52 people in the state of California have a realtor’s license. That’s about 2% of the population. Rather unbelievable to some, but to me, seems quite appropriate. Especially in very high housing costs areas, such as California, New York, Florida, Chicago and other areas, the expense of paying a realtor to sell your house is insanely high. A quick bit of math, if you owned a $500,000 house, and hired a realtor for the typical 6% fee, that would be $30,000!

Now let’s take that figure home (bear with me, I live in Texas), where I obtained a realtor license for less than $800. But Jeffry, realtors are professionals, and I don’t know anything about selling a house! Who said the typical realtor knows anything about selling a house?! Many don’t, and furthermore, the ones that do know how to sell a house are the realtors that know the most people.

The realtor game is simple, put a sign in the yard, add the house to the local MLS (multiple listing service), maybe run an ad in the local paper, and wait for a buyer. The good realtors will fax an information sheet to all the other local realtor shops, to fish for another realtor that is under contract to work with a potential buyer. Another thing a good realtor will do, is advertise and run an open house, to get some activity going with the other realtors in the area. Sounds difficult doesn’t it? Not to me.

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Ever heard of a lease-to-purchase-house? Most of us would say we have. But many folks would say that a residential lease purchase agreement is simply a rent-to-own contract. While this is true, it only describes a brief overview of what a lease purchase contract is all about. Although the real estate market remains strong here in Texas, lease purchase agreements are still a highly viable way to buy into properties, as well as sell them. But lease purchases are not limited to Texas only, they can of course be done in other states. Let’s take a look at a typical scenario revolving around the lease purchase contract:

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Ever wanted to sell your home via a lease option? Houses that are sold in this manner are a low risk, high gain scenario. I am going to give you an example of how great this residential sales strategy is, but before I do that, I want to cover just exactly what a residential lease option is. The basic premise of lease options are a “rent-to-own” strategy. A typical buyer would contract with the seller to rent for a certain period of time, in exchange for a set price to buy at the end of the lease period. That doesn’t sound very good for the seller, but in exchange for guaranteeing a certain selling price in the future, the seller collects an option fee. It is kind of like earnest money, except it is earnest money for a future purchase.

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Using a seller financing agreement to sell your house can attract an unbelievably larger number of buyers in today’s market, over conventional mortgage buyers. There are so many people out there, especially with a burst in the sub-prime market, that have marginal credit, and little or NO cash. But a word of caution before we begin - make sure you are comfortable with their credit, don’t just take the first person that sends you a contract, scrutinize them as much as possible, and check their income sources, as well as their rental and employment history. With that said, let’s look at some possible scenarios to negotiating a seller financing agreement:

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Renting out your house, or houses, can be challenging. But I want to give you some pointers on how to effectively market your house, and some documents you can use to manage the property. I want you to understand that you can manage your own rental property, and that realtors do not provide that much value (most of them, anyway). I believe that most people think that the paperwork portion of renting out your house is something they do not understand enough to do on their on own. So I will help you with that, but first, let’s look at what I have found to be effective methods to marketing a house for rent:

Other Articles in this series:

• Passive Income in Real Estate
• Property Rehabbing
• Seller Financing Agreement
• Residential Lease Option
• Residential Lease Purchase
• Business Plan for Property Management

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Continuing our series on RE Passive Income,  I am going to show you my approach to property rehabbing. Rehabbing properties is probably the hardest (manual, if you do it yourself) labor portion of acquiring passive real estate income. However, to me, rehabilitating investment properties is probably the easiest (mental) labor step to passive RE income. In the handful of properties that I have fixed up for investment so far, I have done some of the work myself. I think it is important that an investor do some of the work himself, just to have an appreciation for the process, and the pitfalls to home repair. I have learned much about methods and styles to utilize, and what works with a potential buyer / renter. So let’s get into the guts of property rehabbing:

Other Articles in this series: 

• Passive Income in Real Estate
• Renting Out Your House
• Seller Financing Agreement
• Residential Lease Option
• Residential Lease Purchase
• Business Plan for Property Management

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Anyone that knows anything about business, wants to make passive income. Many folks would like to have a primary, or secondary source of passive income in real estate.  I am one of those people. Currently, my passive income in real estate is around $500-$550 per month (including signing a lease agreement just this past Tuesday). Not much, huh? Well what could you do with an extra $500 per month? Today, I would like to present a high level overview of my plans for passive income in real estate. But first, let me define “passive” as I see it, for you.

There are lots of definitions out there, but to me, passive income is “hands off” or “almost hands off” income streams.  The real estate investing that I do, coupled with property management, has great potential for current and future benefits. However, investing in real estate takes a lot of initial work, with some additional work down the road. Likewise property management requires a lot of startup effort, with a lot less in the future. I don’t believe there are too many highly lucrative, true blue, do nothing type income streams, unless you are planning to hire someone else to manage your businesses (BE CAREFUL!).

Bottom line, the income streams I am building should prove to be low maintenance in the future. So now, I want to give you a guide that I am using to create passive income in real estate:

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The real estate analysis spreadsheet presented at the bottom of this post is an extension of the spreadsheet provided in the Simple Guide to Real Estate Investment Property Evaluation. As noted in that article, I did not provide a space for you to enter any repair or holding costs. In this version of the real estate analysis spreadsheet, I provide the spaces to enter this information. But before I give you the link to download the information, I would like to give you a few pointers on how to estimate repairs and holding periods:

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Previous Articles in this series:
Buying a HUD Home Part 1: How I Acquired 4 Homes in Under 2 Years

On to Buying a HUD Home Part 2: How I Acquired 4 Homes in Under 2 Years:

1. Knowing the HUD Listing System

You must understand that, like most government systems, there is no emotion or logic to the process. HUD has a process for buying a home, and you will not change it. The key advantage for the investor is, HUD doesn’t care about how nice the house looks, or what memories were made there, or any other bologna that most retail sellers use to not sell their house for the price we need to buy it for.

On that note, we understand that it is only a matter of time and market conditions for buying a HUD home at the right price. HUD is systematic in its approach, and uses a timeline for each and every listing:

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Buying a HUD Home can be a daunting task. There is a lot of red tape surrounding anything that involves a federal agency. In this post I am going to reveal the exact method I use to effectively buying HUD homes at significantly discounted prices. In less than 2 years, I have effectively acquired 4 HUD homes for between 60% and 80% of their market value. If you are just beginning, I would recommend that you read the following posts before continuing:

1. The One Key to Real Estate Investing
2. Picking Partners for Real Estate Investing
3. Simple Guide to Real Estate Investment Property Evaluation

Pay particular attention to the last article listed, as you can download the xls spreadsheet and use it to help you produce a bid that may seem low, but will allow you to estimate your offer price per your desired profit ambitions. If you have read and agree to “The One Key to Real Estate Investing“, than you will not think that your offer is too low. However, what has frustrated me in working with sellers that privately own real estate is that they think that they should get an offer that is very close to their asking price, and are unwilling to negotiate. I have submitted countless offers to sellers attempting to acquire a property at a price I know I will make money at, all to no avail. Even if you are able to find a home where a seller is truly desperate, you are often faced with many more road blocks that will derail your contract and drive you bonkers; which is why I turned to HUD home buying tactics.

A quick example of a would be deal I had with a woman who was going through a divorce. I came up with an offer that would work for me, and the seller, but the realtor killed the deal. She knew that the owner’s note was greater than my offer amount, and did not want to put in the work necessary to foster a short sale.  While I am a realtor myself, I must say that most realtors out there are worthless, and provide no value while charging a ridiculous 6%. All that most realtors do for you is list your property in the multiple listing service (MLS), stick a sign in the yard, and wait for another agent to bring them a buyer. The real power is in the MLS, which is the second reason why I became a realtor myself (the number 1 reason is to keep most of the sales commission myself).

OK! Enough ranting about why most realtors aren’t worth throwing peanuts at. Let’s look at the method I use for buying a HUD home. There are 3 basic steps to buying a HUD home for less:

1. Knowing the HUD Listing System
2. Timing Your Offer
3. Don’t Worry about the paperwork

Go to Buying a HUD Home Part 2: How I Acquired 4 Homes in Under 2 Years…

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