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Steve
09-23-2008, 12:18 PM
I can't stand to see these real estate scams go on. I would venture to guess that most of the times you see some kind of infomercial for a 'real estate seminar' it is some kind of scam.

Most of it has to do with teaching you how to buy real estate with no money down. Which is the reason why we are having such trouble with our economy now.

But the worst of it is taking advantage of people in financial distress and they even have seminars for this. Check out this story and what this guy does to scam home owners in distress. He even has a radio station show.

MILLIONS AT RISK OF FORECLOSURE FRAUD (http://redtape.msnbc.com/2008/09/post.html) - Angela Carter's family has lived for 46 years in the same small two-story home in Chicago, perhaps a 15-minute ride from Barack Obama's adopted Hyde Park neighborhood. But today a piece of paper says someone else owns the property, and a judge will soon decide if Carter and her mom get to stay in her home.

The reason Carter, 55, is facing eviction, she says, is that she fell for a high-stakes scam thatís sweeping the nation, preying on the 1 in 11 consumers who are either behind on their mortgage payments or already in foreclosure. Angela Carter's family has lived for 46 years in the same small two-story home in Chicago, perhaps a 15-minute ride from Barack Obama's adopted Hyde Park neighborhood. But today a piece of paper says someone else owns the property, and a judge will soon decide if Carter and her mom get to stay in her home.

The reason Carter, 55, is facing eviction, she says, is that she fell for a high-stakes scam thatís sweeping the nation, preying on the 1 in 11 consumers who are either behind on their mortgage payments or already in foreclosure.

Check out this guys website (http://www.jtfoxxshow.com) that is involved with this.

Do you see much of this going on in your area? Have you heard of this happening to others in your area?

b18bgone
09-23-2008, 01:43 PM
This is a topic I know quite a bit about, and most definately on the surface these deals look like scams, and honestly there are a lot of them that are full blown scams.

Its the "people/investor" that make the process a scam or a legit solution.

I dont know the details of the story you posted, but Ill just give a different view.

For sale signs are all over neighborhoods. They started sprouting up when the ARM's (adjustable rate mortgages) kicked in and adjusted. So, what's going on? Is it fair to profit from it? Doesnt that sound crass? Hard-hearted? Profiting from someone else's bad fortune? Let me turn that question around and ask, "What if you were the holder of an ARM, and your back is up against the wall because you are desperately struggling to pay your monthly mortgage and even though you were told you could refinance 2 years ago, now you are unable to, there are no government programs that can actually help you. Foreclosure is looking you square in the face. Wouldn't you be looking for an angel to come along with a solution that would make the problem go away?"

You bet you would! (and that doesnt meen taking advantage of anyone, although there are some that do, its the bad apple analogy)

Now this is illegal in some states because of the potential for someone to be taken advantage of. An investor weighs the risk/reward and offers to allow you to stay in the home and instead of move you would become a renter, they will now own the property (this is where someone/investor can be unscrupless and take all of someones equity). Typically what ends up happening from my experiance is that the investor pays the back payments owed to the bank, pays for back taxes, and often pays some debt or gives the owner some cash in turn for their equity/house to attempt to get the owner financially stabel.

Typically what happens is the owner is very greatful that they were able to find someone to help them out, then 6 - 18months down the road some type of financial difficulty arises as which typically does (if you have ever rented a property people pay late or need flexible payment due dates) not allow them to pay the rent. At that time the investor may or maynot have the income to pay the negative amount that wasnt paid and has little to no other alternative but to evict tenant (as sad as it may be) in an attempt to sell the property.

Is it better to file bankruptcy and save your house even though you can not continue to make the mortgage payments? Is it better to just let it go to foreclosure and be done with it? Is it better to sell it through an agent, even though the house is not worth what you paid for it?

Investors are looked at as scum of the earth in these situations, some are and human nature and the news is to exploit the bad. The reason this stuff exist is because there is a gap in the lending institutions and foreclosure. Of course theres bankruptys, but if you cant pay the mortgage now, you still must pay it in the BK. In my state the foreclosure process is 21 days start to auction block, nobody can sell a home that fast without selling it for a steap discount, although there was 4 months of late/non payments in which they could have decided to sell through a realitor in that time frame but often I have seen these houses are in disrepair which makes it so an end buyer would not pay for it.

Sorry about being long winded...

Steve
09-23-2008, 01:49 PM
That was a very insightful post!

Have you ever been to any of these real estate seminars? If so what did you think of them?

b18bgone
09-23-2008, 03:52 PM
Im not a fan of seminars, they are not totally forth coming with begining investors. They are not all like this, but most you see on TV are.

We have taught people how to invest, and never recomend the no money down deals, although there is money to be made they are the highest risk investment of all the real estate investments. Its not that the risk is in that you loss money, the risk is that you can not perform on a contract when a rent to own buyer moves out or stops making payments on the house you took over from someone that was desperate to just leave and let you take their loan over. The risk comes in when you break your agreement/contract, its the fastest way to end up in court, not to mention most all "no money down" deals have little to no equity in them to begin with. (bad risk/reward)

Seminars are ok to get a general grasp of how things work, but they're not good for state specific details, which is the important part to keep you from ending up in court. Court sucks whether your completly in the right or not, because people lie lie lie, and they have no money and are going after who they think is going to make them rich. Fighting these cases can run into the 100's of thousands, and when you win all you get is the destroyed house that you might make 20k on when you sell.

Like any business being a student of the game is what its all about, learn from those that have been there, done that. Its the easiest way not to get crushed.

Steve
09-23-2008, 06:54 PM
Very interesting.

What is your advice then for the lawn care business owner who is looking to invest in real estate. Should they buy a property for rental? Should they buy a beat up house to fix up and sell? Or what is your suggestion as to the best way to get started?

b18bgone
09-23-2008, 09:27 PM
The best way to explain real estate in todays market conditions is that real estate is like bubble rap, some markets have popped while others remain moderate to strong.

Stear clear of real estate agents, they are sales men/women by trade and typically dont know what a "true" good deal is, kind of like pricing a lawn care job at $35 dollars because the other guy is doing it. Now dont get me wrong there are good agents, and I use them all the time but even doing it for years sometimes we dont see eye to eye on deals.

I would strongly recomend buying and holding currently, buy in a good neighborhood, good/best school district (research this), minimum 3 bedrooms 2 full bathrooms. In the median house price range for your area, but of course you will buy it for 70% of the ARV (after repair value), ex; worth 250k fixed up, you buy at $175k. These properties will appresiate more rapidly when/if the market turns around and are more desirable in the long run.

Tax assesments can lend a hand to determining value, although not always spot on its a good start, another place is coldwellbanker.com they have a free property evaluation tool. After you get a good idea for the value, then its time to bring in the agent and get a CMA and a rental CMA (comparible market analysis), make sure you take a look physically at the addresses they used to compair (drive by).

Banks are looking for money down on rentals right now, but there are a few ways around that, ie; second home ext... Getting the seller to pay for your closing cost out of their equity/potential profit.

Like marketing in the lawn industry, marketing to the right area for a deal before it hits the market could be your best bet to find a true money maker, buyers (you) are in very high demand right now. Basically you can name your price, might not get it accepted on the first 15 houses, but someone will accept or counter offer.

Hope thats helpful, like yourself creating a software/spreadsheet for lawn care we have done the same for real estate and more importantly marketing material to find what the real estate industry calls "motivated sellers"
http://www.insaneleads.com (http://www.insaneleads.com)

buy a beater, fix it up, rent it!

Steve
09-24-2008, 12:38 PM
Wow! That is fantastic!

With all the experimenting you have done with real estate, what did you find you enjoyed most about it or liked least about it?

b18bgone
09-24-2008, 05:25 PM
The best part is being able to help people in difficult situations and being fair to them while receiving a nice amount of money.

There is something magical about finding a "good deal" and assigning the contract for a fee so someone else can do the actual work.

There is a great since of accomplishment when you take a piece of coal and turn it into a diamond, and someone pays you a diamond price for your efforts.

Im not a fan of renting although I have quit a few of them, I think its because rentals are slow/low money. I havent had any true rental disaster storys like so many others, thats from having specific systems in place to deal with everything, from collections to evictions.

Steve
09-24-2008, 07:06 PM
How much would you suggest a real estate investor have in savings before they looked to either buying a property to rent or to fix up and resell?

What type of costs are hidden that tend to catch the first time real estate investor off balance?