2011 Housing Shortage Nationwide

Brian Wesbury, chief economist for First Trust Advisors believes that America is going to have a “much bigger problem on our hands” if we don’t start building houses.  In Mr. Wesbury’s research he has found that by 2011 if we don’t start building homes there is going to be a major housing shortage in the United States.

According to Mr. Wesbury “We need one and a half million houses per year just to keep up with the population growth“. However, with property damage and properties that are in need of major renovation he estimates that number to be closer to 1.6 Million homes needed per year just to keep up with population increase.

So based on natural population increase the United States is going to need 1.6 Million homes to provide for the demand of buyers wanting to purchase homes.

What does this mean for Real Estate Investors? If you have been on the Fence, GET OFF NOW. Now is the time to buy homes, now is the time to fix up homes and now is the time to get the homes ready to sell. 2011 is not that far off and if the predicts hold true it would be a great time to have some homes on the market.  If you have been buying homes, you need to look at ways to buy more homes. The wave of demand is coming.

To Read the full Story you can go to: http://realestate.msn.com/article.aspx?cp-documentid=23505825

Boss Doesn't Get to PLAY!!

Well, it has been over two years since we finally decided to unchain our Portfolio Manager, Keith, from his desk and let him have a vacation.  When he went, Ryan (see the picture above) had to take over his position as well as others in the office taking up the slack.  We find that we are all very grateful for Keith as he makes the ball roll pretty smoothly here at DoHardMoney and we don’t want him to take another vacation for AT LEAST another two years!  Hopefully, his wife won’t read that part.

Anyway, some things we learned upon doing Keith’s job for a week:

1.  Some investors do not fill out their own application.  Now, why do you care about that?  This is a big deal for a few reasons.  One, it’s a contract.  I can’t believe anyone in this day and age would have someone else sign your name for you on a contract.  It is legally binding.  Whether electronic or not.  You are obtaining a loan, you need to understand FULLY what you are getting yourself into.  We pride ourselves on the fact that we state everything about our company, our policies and our terms on our website, however, many people do not take the time to read that.  So, as a last resort, we would hope that someone would take the time to read the application they are filling out.  Know that as soon as you submit your application, we are going to send evaluators out to the property and we expect the evaluators to be prompt with their services (24 hour maximum).  Also, we need to make sure that the subject property address on the application is correct.  It is difficult to pull information on a property that isn’t the property we are trying to fund on.  Lastly, access to the property, the more information you can get us about access to the property the easier it is.  If we cannot get the evaluators in, the more delay we have on getting this funded for you.  We don’t need you there for access to the property, and honestly it is preferable that you aren’t as we are looking for unbiased opinions from these third party agents.  A key box or real estate box is ideal with the code.

2.  We need to be doing a better job of keeping you, as the investor, informed of the progress.  So, with that in mind, we are going to come up with a simple method that you can have access to your file and see the progress day or night.  That way you will never be without the knowledge of how your file is being handled.  Sound good to you?  It would certainly make me feel comfortable if I were in your shoes.

3.  Obtaining the necessary documents for closing is easiest if you can start gathering them as soon as you submit the application.  We are trying to reduce our closing time even further.  Currently we can close a loan in about 7 to 10 business days.  However, there are such FANTASTIC deals out there, that we think we can help you obtain them.  But the only way we are going to be able to do that is if we can close on these deals faster.  So, in order for us to help you, we need you to help us.  We have a series of documents that are required in order to close a deal.  They are listed on our website at the CLOSING CHECKLIST, if these documents are gathered and presented to us at the time of application or 24 hours thereafter, we would be able to close a deal in under 5 business days or less.  Wouldn’t that be great?  We could do more Auction sales, Sheriff sales, Foreclosures, etc.  So, all the fantastic deals that you may have had to pass up because you couldn’t get the funding in time, we would be able to do.

4.  The last thing that we learned is how organized we really are.  Now, of course this isn’t something that you would be able to assist  us on.  However, while I am on the subject, let’s discuss how this would relate to you as the investor.  Organization will be a huge tool in your toolbox.  Once you have obtained the property that you are intending to do a rehab and resell on, if you are not prepared from the moment it is recorded to begin the rehab, then your profit begins to dwindle.  So, please, work on your organization skills and make sure that you have all of your ducks in a row in regards to your financing, handymen, supplies, timelines, contracts, and above all keep focus on what needs to be done.  That way when it comes time to gain your profits, you will be better prepared and organized to be your own boss, start the next project when it comes up and perhaps spend a LITTLE bit of time playing.

What Real Estate Investors Can Learn from Warren Buffett

This May I had the wonderful experience of attending the Annual Shareholder Meeting for Berkshire Hathaway.  This meeting is the opportunity for Warren and Charley to answer questions from shareholders as well as give a reporting on the company as a whole.

It was a great experience to be in Omaha and soak up the wisdom of Warren. I have to admit I am a huge fan of 90% of what Warren has to say, I completely disagree with his views on taxation. Frankly, he is not the “average American” or even wealthy American and I don’t think he understands or remembers what that is like. Stating that, I can now get off my soap box and on to the “Meat” of the discussion.

Warren has stated on several occasions his confidence in the United States and our ability as a country to be successful moving forward. In the Shareholder Meeting Warren stated:

“The World has a Bright Future”

That is my message for Today… The World has a Bright Future! I believe that to many investors are sitting on the sidelines and out of the real estate investing game. They have FEAR for the future and don’t know what to do next.  I think this simple message from one of the greatest investors and entrepreneurs of all time should be taken to Heart… The World has a Bright Future.

Frequently I visit with people that think the “Sky is Falling” and the world is going to come to an end. I simply disagree with this FEAR driven. I believe the media loves these stories because they draw attention to the Gloom and Doom Sales!

The Definition of FEAR

F             Future

E             Events

A             Are Not

R             Real

Future Events Are not Real!

Too many people believe that the future is already made.  That their lot in life has already been cast and they have no control over the future.

As Pepsi would say in their advertising of extra super caffeinated beverage:

“WAKE UP PEOPLE”

The Future is what we make of it! If you are a real estate investor that has been sitting on the sidelines in FEAR then get up and go make some deals happen. As an investor you should be actively going after good deals. No matter what type of market we are in someone is making money in real estate. This to can be done by you as well. We are not suggesting that you should buy bad deals. But we are saying you should be always looking and making offers on good deals. Now is the time when fortunes are made and we are seeing many clients doing just that. If you have been sitting in the sidelines for ANY Reason, WAKE UP PEOPLE, the future is what we make of it and as Warren Stated “The World has a bright future!”

What Real Estate Investors can Learn from Popcorn Sales

No, your eyes are not fuzzy. Popcorn… Like the kind you get at the Movies.  My mouth waters as I think about it. Changes in the market create massive opportunities and there has never been a better time to be a fix and flip real estate investor.

 Many of you are old enough to remember the days when Popcorn was only sold in two sizes… Small and Large.  If you can remember those days please, leave a comment on this blog. It will be fun to see how many people remember it. 

 When there were two sizes offered, the small would account for 80% of popcorn sales at movie theaters and the large accounted for 20% of the popcorn sales at the movie theaters.

Years later someone came up with the bright idea to have three sizes. The old small stayed as a small, the old large became a medium and then they introduced the JUMBO size (the new large).  You may be wondering how in the world would this help.  If it did not work they would have changed it back to the old small and large a long time ago.  The change to three options was remarkable. Popcorn customers did not want to be the cheap guy and buy the small, and most of them certainly did not need the JUMBO. So the medium became the most common purchased. The medium was really the old Large.

When the change was made to the three sizes, the old small that received 80% of sales declined to 20%; meaning that 6 out of every 10 customers that were buying a small now purchased a medium or jumbo. Think of that . . . Movie Theaters just increased the sales price for 60% of their popcorn customers. 

 Let’s look at the breakdown:

 20% purchased the small compared to 80% before the change

 60% purchased the medium compared to 20% before

 20 % purchased the new large (Jumbo) compared to 0% before

 This was a drastic increase in revenue for the Movie Theater in popcorn sales and the only thing they had to do different was to make the offer. Make it available.  This needs to be repeated it again JUST SIMPLY MAKE IT AVAILABLE!

 So what can Real Estate Investors learn from popcorn Sales? GIVE OPTIONS! That is all there is to it. When you are working with a seller on a home, give them options. You don’t want to only give two options - we can do the deal or not do the deal. You want to give three options to help the homeowner solve their problem. If a homeowner feels that they have options it takes away the question of if they should work with you or your competitor and it makes the homeowner think about what option is best for them. The homeowner can think about their needs and what is the best solution to their problems.

 Please keep in mind these options don’t have to just be about price. Price is only one of several factors a homeowner seller may care about. For example a homeowner seller may be motivated to get their credit repaired after a short sale. You could offer credit repair service for FREE if a client went with you versus your competition.

 A Homeowner Seller may be interested in getting a deal done fast and so offering a closing within 10 days or less may be an option for a seller. Typically if you offer a fast closing you could discount the price a little. You could also offer a longer closing at an slightly increased price. Or you could offer the homeowner to stay in the home after closing for a month or two. With this you may be able to offer a discounted price as well.

 There are several things that can be offered to homeowners when negotiating to find a good fix and flip property.  I recommend that you always offer 3 different options to a homeowner when you are trying to purchase a property.

 If giving three options works as well for you as it did for the Movie Theaters you could see a 60% greater close rate on homeowners looking to sale their home to you.  Think if you could buy 60% more homes this year as a real estate investor.

 I am off to the movies tonight with my wife. We will see if Eclipse is all it is cracked up to be… and we will certainly enjoy the popcorn.

From time to time as a real estate investor you will have the need for a double closing, or a simultaneous closing. A double or simultaneous closing is when you are buying and selling the home in the same day. So for example you as the investors have put the property under contact with Seller A and you are going to sell the property to buyer C.
Seller A > You are Buyer B and also You are Seller B > End Buyer C

You can sell a property in this manner but you need to have your own funds to complete the transaction. Meaning you cannot rely on the funds from the End Buyer C to be able to close the transaction. This is also commonly said that the transaction has to stand on its own and not rely on the End Buyer C. Because your obligation to purchase the property as Buyer B is not conditional on the End Buyer C purchasing the home. Therefore you need to have the ability to purchase the home even if the End Buyer C does not perform.

To do this you need to work with a transactional or simultaneous closing funding. Transactional funders are not looking to the value of the real estate, they are looking at the likelihood that the Buyer C will be able to purchase the home from you if they lend. So they are not looking towards property values. As you know here at DoHardMoney we look almost exclusively at the value of the property rather than the transaction. Transaction lender is doing just the probability. They are looking for the strength of buyer C.

Also Transactional funding is very short term. Typically term is 1-2 days and at most a week. So you need to be confident that the end buyer is really going to perform.

If you are looking for Transactional Funding I think that www.ShortFunding.com would be your best bet. I know Chris and Paul at Short Funding and I think they do a great job. Keep in mind you are going to want to work with them for quick transactional funding. They are not going to provide loans over a week or so.

I hope this shows our commitment to make sure you can be a successful real estate investor.