Size range in square feet
Range of age – Built from when to when
Zip codes
Price range
Extras
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Fireplace
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Pool
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Hot Tub
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Media, Game Room
Excluders
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Neighborhood
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Power lines
First of all what is your criteria? If you’re new to investing you need to think about this. What kind of real estate are you looking for? Hotels, apartments,
quadroplexes, duplexes, single family homes, empty land, you have to decide what it is.
In this book we will mostly talk about single family homes because I think that’s the best way to get started. In a single family home you have to decide how many bedrooms. I particularly like three to five bedrooms. A two bedroom home is harder to move unless it’s a duplex and even then I don’t like it. Most people want two or more bathrooms and a double car garage or a covered carport. If you buy a house and it has two bedrooms and one bath and no garage or a one car garage it will probably not be a very good investment because you’re going to have a hard time either renting it or selling it.
You need to come up with a range of square footage. I started out with about 1,200 to 2,200 square footage when I first started investing. Now it’s 1,600 to 3,000. You need to look at houses and decide what the range of square
footage is that you can afford and what the range you’re thinking will move in your area.
Decide on an average range. Are you going to buy houses that were built in the 1930’3, 50’s, 70’s or 2000’s? That’s very important. If you buy newer houses there will be less work to do. If the house is only two years old there’s probably nothing wrong with the plumbing or foundation.
You may just need some paint and carpet but if the house is fifteen years old then you’ve really got to look and if it is thirty years old you better have an inspector look at it because it is going to have a lot of problems.
Many times a good deal will look like it’s a great deal. For example I bought a house that appraised for $132,000 and the people were about to have it taken away because they hadn’t paid the taxes. I got it for $82,000. You’d think I would make a lot of money with that kind of spread. I thought it was a great deal. I ended up making $3,000 because I had to have the foundation repaired. When I was selling it the inspector for the buyer came in and it had to have a
whole new electrical system, so if you buy an older house you’ve got to be smart.
I buy newer houses now and I don’t have to be as careful. That’s something you have to decide for yourself. Come up with zip codes or a map and figure out your price range. When I say zip code or a map you’ve got to figure out what your area is.
Some people think they’re just going to buy houses in the D/FW Metroplex and I think that’s a mistake. That’s a big area when you have to drive forty or fifty miles to see your houses for minor problems so I keep mine to two or three zip codes. There are a lot of houses in those two or three zip codes so I have plenty to work with.
If there’s a $200,000 house and I can buy it for $50,000 I would probably go quite a few miles to buy that house but it would have to be that good for me to drive far and my crew doesn’t even like to go look and make a repair list if it’s too far away. That’s up to you to decide how far you want to drive. My
suggestion is not very far.
Your price range will probably be lower when you first start. You might just be able to afford $70,000, $80,000 or $100,000 for a house. But as you get
better at it and make more money you’re probably going to want to buy houses that are $150,000 to $200,000. Those houses are easier to sell because
serious people with serious incomes are looking at those houses.
What extras do you want in your houses? Do you want a fireplace, pool, hot tub, media and game room? Personally I like to have a fireplace but I wouldn’t buy a house with a pool because you’re buying an expense, an ongoing
problem. If there’s water in the pool the city is going to be coming around and if the water gets dark they’re going to fine you and they‘ll keep fining you until it gets resolved and if it gets dark again they’ll really fine you.
There are things as far as extras that you’ll always want to have and then there are things that you would like to have and things that you want to totally
exclude.
If the power lines are running over the back yard I’m not going to buy that house. I believe that a fireplace is added value along with three or more
bedrooms, large closets, nice kitchens and large bathrooms, appliances, brick, garage door openers, jetted tubs, patios and decks, anything that will make the house more appealing. Spend a few minutes and write down your criteria so when your realtor asks—you’ll have the information.
I want to tell you the story of my friend Keith. A few years ago when I was single there were three of us running around and going to dances and single clubs. Keith’s mother passed away and we all went to her funeral and that was sad but in about a week Keith inherited several thousand dollars. The first thing he did was buy a red Cadillac. He decided to invest the rest of the money in a business so he could make it work for him.
We would drive around in his Cadillac and he kept asking me if I thought certain businesses were good investments. I kept saying yes and he finally said that I was saying yes to all of them. I told him that if it wasn’t a good business it wouldn’t be there. That’s how businesses work, they all work, some people just may not like managing a bunch of high school students to make pizzas.
That’s how it is in prospecting or learning how to find good deals. There are many ways, they are all successful. What you need to do is try a few of them. I’ll cover a few of them.
Tactics
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Farming
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Running Ads
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Foreclosures
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Auctions
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REO
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Real Estate Agents
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Blanket Offers
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Short Sales
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Probate
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FSBO’s
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Distressed Property
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Calls on Ads
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Birddogs
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Options
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Wholesalers
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Networking
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Direct Mail
You can run ads. Foreclosures are a full time business in itself; you can do just foreclosures and make money in real estate. Bill Barnett has a wonderful
system. The letters are all written, the forms are all done and it’s in his book but it’s even better in his full system.
Go to auctions— most of the houses I buy are through auctions.
Real Estate owned: You would think a bank wouldn’t sell you anything. If you’ll visit a lot of little local banks you will find they have got a lot of repossessed
properties and they will sell them to you and they will give you a lot of good terms and try to help you buy them.
Real estate agents: I use several real estate agents all the time. I have one for buying, one for selling and some that are just looking for houses. I work with a lot of real estate agents and they bring me good deals and help me make a lot of money.
One of the ways to use real estate agents is blanket offers. Have you ever listened to the tapes “Rich Dad Poor Dad”? There is a technique on them that says you get a real estate agent to bid 70% on everything that has been on the market for so many days. I listened to that and thought it was such a good idea I did it. I bid on hundreds of properties like that. I never bought one but I almost bought two or three of them and I could see that if I could have gotten the realtor to continue working on it with me it would have eventually worked but you have to talk them into it and they have to believe it will work.
The hard part is convincing the realtor to make all those offers for you. Some new realtors are hungry and will do it and if that same realtor would have continued to work with me she would have made a lot of money but instead of her some of these others are making the money.
Short Sales: That is a whole program in itself too. You can just do that and make money.
Probate. Probate Real Estate is purchased from an “estate” following the death of the property owner. The key is consistently getting the list of new estates and contacting the administrators.
For sale by owners: When you are doing your farming you go around and look at signs and we will teach you how to call those people.
Distressed properties: Finding houses where the grass is grown up and the bushes are grown and you can tell they are not occupied.
Call on ads from the paper.
Bird-dogging. Giving people your business cards and telling them you will pay them $250 to $500 to bring you a good deal.
Using options: You can actually buy houses without any money—you just tie the house up. There are organizations throughout the U.S. that if you tie those houses up they will buy them from you. They will give you the criteria and you just call them and they will buy it immediately.
Wholesalers: Someone in one of my meetings had a good deal on a HUD home he purchased. It was 30 plus years old or I would have been interested in it. If that had met my criteria I would have been talking to him after the meeting. Be careful when buying from wholesalers. Be sure you look the house over before buying it.
Networking: Go to Real Estate Investor Meetings.
Direct Mail: Carleton Sheets talks about a woman that is blind. She can’t drive, she can’t even see that money, she makes money in real estate by doing direct mail. It can be done and any of those tactics will work.
Farming is the best way to get started investing in real estate. This is the way I got started and it’s the easiest and fastest way to go out and find a good deal. The first thing to do is get a map and draw a circle around your area or pick out some zip codes. You may want to drive around for a while to see if there are any houses before you make a decision and see if those houses are in nice neighborhoods and see if it’s one you would want to own or rent out. You really need to select your area first so you know where you want to look and then go driving around.
One thing that’s nice to take with you when you’re driving in your area is a voice recorder. I keep one in my car and when I see a house that looks like it fits my criteria and it’s kind of neglected I put the address on the recorder so when I get home I pull up the TAD and I know who owns it and you can use this for a lot of other things too.
If you’re playing your CD’s which I always recommend you do as you’re
driving— when you hear something that really stands out and you want to lock it in you just put it on your recorder and go home and put it in your reference file.