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Posts Tagged ‘trustee sales’

246-TNG Radio – Sean O’Toole 10-8-11

Friday, October 7th, 2011

Sean O'Toole

Sean O’Toole

President of ForeclosureRadar

(Full Bio)

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On October 14th, 2011, The Norris Group returns with its award-winning event I Survived Real Estate. An expert lineup of industry specialists join Bruce Norris to discuss current industry regulation, head-scratching legislation, and the opportunities emerging for savvy real estate professionals. 100% of the proceeds support the Orange County Affiliate of Susan G. Komen for the Cure. This event would not be possible without the generous help of the following platinum partners: Foreclosure Radar and Sean O’ Toole, Housing Wire, The San Diego Creative Real Estate Investors Association and President Bill Tan, Investors Workshops and President Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobbie Alexander, San Jose Real Estate Investors Association and Geraldine Berry, Real Wealth Networks, Frye Wiles Web and Branding, MVT Productions, and White House Catering, who will provide the 3-course meal for this black tie event. Visit iSurvived2011.com for more details.

Bruce is joined this week by Sean O’Toole. Sean is the founder and CEO of ForeclosureRadar.com. Prior to launching ForeclosureRadar, Sean successfully purchased and flipped more than 150 residential and commercial foreclosures. Leveraging 15 years in the software industry, Sean used technology as a key competitive advantage to build his successful real estate investment track record. Prior to that, he was involved in software startup companies.

Back in the late 80s and early 90s, Sean ran a homes and land real estate magazine in the Hawaiian Islands. He spent time taking a break from his software career to run this magazine and to buy and sell his own houses, which played a part in his real estate business career prior to buying at trustee sales. He became attracted to trustee sales after the .com bubble when he was trying to figure out what to do with his life. They were trying to take public company he had started and raised money for about the time that the bubble imploded, bringing it to an end. He was trying to figure out what he was going to do next when he was thinking of starting another software company since this was really all he had ever done. He was introduced to a friend who was buying foreclosures, and he said he should give it a try and if Sean helped him write some software to run his business, then his friend would teach him the rest of the business. At first Sean did not think this was very interesting; but then his friend showed him the kind of money he was making, and he became a lot more interested. Sean started buying at the trustee sales in 2002, which was an interesting time to be involved in something like this. During the era from 2002-2006, Sean was often surprised on the high side. He bought a property, and if it was a hassle to fix and get people out, he was bonused money along the way for the time delays.

One of Sean’s most profitable deals was where he had a gentleman fight him on the eviction for a year through multiple bankruptcy declarations to the point where the judge said he could never file bankruptcy again for the rest of his life. It seemed like a real headache until he went to sell the property, and it had gone up nearly 50%. It’s a very different world today. You would not want to have delays; if you can get to the finish line, then you would want to get there.

When Sean first started in the trust deeds business, it was tough to access information about properties and liens. There was a decent little service up in Northern California that later changed their business model and didn’t have as good of information as Sean had first used from them. After they changed their business model and stopped collecting the data directly, he had to find out how to collect the data himself. He was pulling data from the assessor’s office and the recorder’s office. The biggest thing was you would show up at the sales from everything that had been in the paper, and you would have a list of about 20 properties. They would then call 100 properties because the other 80 had been postponing for some period of time. Unless you went back years and went through all the notices, you had no idea what was still coming up for sale or not. You would have to play catch-up, which would be an awful lot of homework. People don’t realize unless they are in the business that each property entails a full-blown title search, an appraisal, and you have to determine if the pursuit is worth your time. Fortunately, from 2002-2006, there was natural equity most of the time. You wouldn’t have been following a lot of trustee sales that did not have equity; whereas now it is completely different. Back then, term “drop-bid” was unheard of at the time. It was very rare that the banks discounted the bid from the amount owed on the property and was unnecessary. The nice part about having inflation was that their loan was probably below what it was worth and therefore attractive to trustee sale buyers even though the number of trustee sales was way down compared to now. The amount of properties that had equity had to be very high in percentage.

Since Sean’s father is a logic professor, to him he needs things to make sense for him to understand them. So one of the hardest times he had with trustee sales was none of the deals sold on the courthouse steps made any sense. They had equity, and the person could have sold the house. It should not have gone to sale; they should have taken care of their problems, paid their mortgage, or refinanced. This was when he had learned that there were some basic reasons for foreclosure which had happened even in the best of times which were called the 5 D’s: drugs, divorce, death, denial, and disease. These things were not fun to talk about and made the business not feel very great on that side, but back in that period of time these were the reasons properties were foreclosed on. We still have foreclosures for those reasons, but the vast majority of foreclosures happening today are due to negative equity. We have an additional category that is really raining a lot of properties into the system. Back then when you were checking up on sales, you were on the phone and trying to get information to see if it was going to be worth going to the sale.

Sean’s website has really changed the process for someone wanting to be a trustee sale buyer and made it simpler. The person who taught him the business would take a Polaroid of each house and then write down the postponement dates. He had a shoebox organized by date of all the properties that could come up for sale, and literally each time a property came up for sale he had to put a new date on it and put it in a new spot in the shoebox. Other people would keep spreadsheets, and you really had to have somebody down at the sales every day to track everything. One of the big goals for ForeclosureRadar was to get people out of the really tedious sale tracking business. This is one of the areas where they have been very successful. Sean’s website is much more accessible and understandable, and it has made the competition greater. There are definitely new people that can go from novice to acceptable much quicker these days. Sean and his team was definitely in the right place at the right time, but he thinks the transition still would have happened if they were there or if somebody else was there. They launched in May of 2007, and it was towards the end of 2008 that banks began dropping bids and people began making a lot of money. At the same time, they had a lot of contractors and commercial real estate folks who suddenly saw their business go away and needed to find something else. Trustee sales were the right thin at the right time for a lot of people, and Sean and his team benefited from being the best tool at that time. However, he still thinks the transition and the competition would have heated regardless of whether they had been there or not.

Sean’s customer base is dominated by investors and realtors. Just in Sean’s little hometown of Discovery Bay, there is about 85 properties listed for sale; but there is 200-300 in some stage of foreclosure at any give time. If you want to call yourself a market expert, it is pretty hard to do if you don’t have a clue about the all the properties in some stage of foreclosure. If you’re listing a property, and two days later a bank-owned listing pops up next door, there is no excuse for not having known about it ahead of time. At ForeclosureRadar, they can give you months of advanced notice that is potentially coming, so you can work with your customers to be ready for it. The volume of dollars in sales as far as trustee sales in California is in the billions. Typically, the third-party investors are buying 20%, about half a billion dollars worth of property, a month. ForeclosureRadar’s peak month was around $8 billion at original loan value, not at current market value. The $8 billion encompassed the properties that would go to third party and to REO, anything for when someone has lost their house to foreclosure. The two categories combined, REOs and third-party bidders, is a resolution.

In California, there are currently 95,000 properties scheduled for sale, which is down quite a bit. A year ago, there were 120,000 properties scheduled for sale. Out of that, between homes sold back to the bank and sold to third parties, about 14-15,000 sell in a month. Last month, about 24,000 were added. If you take the 95,000 with 24,000 new added, you have 15,000 taken away. This means about 15% or more of the properties are bought by people that are investors to fix and resell. This is one of the reasons they don’t use trustee sales when talking about market sales. When NAR or CAR talks about the number of homes sold per year, they’re not including what happens at the trustee sales. The vast majority of things purchased at trustee sales are resold. Almost all the investors at trustee sales flip the property, and then the banks largely relist the properties as REOs.

Investors are the ones who tend to get rid of properties quicker. Right now in California, it takes banks on average 237 days and 131 days for third-party investors. Investors are a lot better at disposing of properties than banks. Investors are pretty motivated in terms of the fact that it is their money on the line and not a shareholder or tax payer. They also know the local markets better, and they invest in and fix up homes. The people who are fixing up properties put in new paint and carpet, and they are getting them ready for a first-time buyer or a landlord to turn them into a rental. Therefore, they usually try to make them really nice. The banks, usually because of the servicing agreements, try to do a little more than clean out the properties. You will have a lot of properties that are trashed that end up going as REO sales that first-time buyers simply can’t afford to buy, fix, and clean up. You also have some that are so trashed that you cannot get loans on them. The banks not fixing the properties is a big part of it.

When they first started talking about shadow inventory at ForeclosureRadar, it was prior to September 2008 because at that point the banks were taking on huge inventories of REOs that were not listed. Shadow inventory is described as bank-owned homes that were not listed for sale. After September 2008 when they really slowed down the foreclosure sales, at the time when the government made some changes that really slowed down the foreclosure sales, the bank-owned inventory came down to the levels where it really should be. Several folks that had been talking about shadow inventory changed the definition to now include the folks that were now in foreclosure and not-yet-bank-owned. Later, it was changed again to also include delinquent properties and not yet in foreclosure. Depending on who gives the term these days, Sean has even seen some people expand it to those who have so much negative equity they will eventually be delinquent, lose their home, and pay inventory. Sean even had someone the recently tell him that you also have to include all the people who like to sell their home, but not at the current prices. Pretty much most of the country is shadow inventory. Nationally, there are about 4.2 million properties that are between the stages of 90 days late and the bank already owns them. Of the folks that are in foreclosure, you have 134 that are at the default stage plus 94 scheduled for sale. You also have another 100 that are currently bank-owned. NODs are usually filed at the 13-month mark, although this has gone up a lot. Traditionally it was at the 90-day mark, and now it is at 13 months, which is roughly 398 days. The other 300 days, between 90 and 398 days, included defaults and delinquencies. Delinquencies in California are usually around 9%, so that is 30 or more days late. If you take 9% of homeowners with a mortgage, that is another 650,000. All combined, you have close to 1 million.

There are some problems that are going to have to be resolved one way or the other, which will be discussed with the group on the panel at I Survived Real Estate on October 14. They will be discussing possible resolutions since there seem to be conflicting goals. One document says it wants the country to save between $2 and $4 trillion so we can pay our bills, and we have an industry that almost needs more support. It will be interesting to see how the discussion comes about.

The percentage of owners that are over encumbered in California is unknown right now, but a lot of the larger properties are more over encumbered. They have not yet seen the declines in the upper end. There have certainly been declines in the Bay Area and in Newport Beach, but they have not been as traumatic as the declines in San Bernardino, Riverside, Central Valley, and Sacramento. This would most likely be attributed to the bulk of the inventory that is for sale being a foreclosure property. The other reason could be it was a different loan type that did not have the biggest problem as early as its subprime. Also, wealth plays a part. Higher end neighborhoods tend to have more wealth. In addition, data shows that the banks are taking a lot longer to foreclose on higher end homes where the losses are bigger, so part of the reason we have seen less in that area is because the banks are trying to delay losses and remain solvent.

Sean O’Toole will be on the panel for I Survived Real Estate 2011, taking place on October 14th. The Norris Group would like to thank their gold sponsors for the event: Adrenaline Athletics, Coldwell Banker Pioneer Real Estate, Conaway and Conaway, Delmae Properties, Elite Auctions, Inland Empire Investors Forum, Keller Williams of Corona, Keystone CPA, Kucan & Clark Partners, LLC, Las Brisas Escrow, Leivas Associates, Mike Cantu, Northern California Real Estate Investors Association, Northern San Diego Real Estate Investors Association, Pacific Sunrise Mortgage, Personal Real Estate Magazine, Realty 411 Magazine, Rick and LeaAnne Rossiter, Southwest Riverside County Board of Realtors, Starz Photography, uDirect IRA, Wilson Investment Properties, Tony Alvarez, Tri-Emerald Financial Group, and Westin South Coast Plaza. Visit isurvived2011.com for more details.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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239-TNG Radio – Rick Solis and Andrea Esplin 8-20-11

Friday, August 19th, 2011

Rick Solis

Appraiser/Investor

(Full Bio)

Andrea-Esplin

Andrea Esplin

Appraiser/Investor

(Full Bio)

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This week Bruce is joined once again by Rick Solis and Andrea Esplin, both investors in Southern California.

Rick first noticed when things went from an up market to a flat market to a free dive in the summer of 2006. It was getting harder sell, there were less offers, and the excitement was beginning to fall off. He noticed the free dive in 2008 when things got really bad. Bruce said prices were dropping about 3-4% a month. You could buy things 30% below market value, and only 10 months later all your equity was gone. We were not in the buy and hold, but sometimes you almost got there because it was tough to sell, so it was a scary time. For business at the time, Rick and Andrea bought two rental houses in 2008. Although Andrea wanted to buy a lot, Rick was not buying as much because he saw what was coming, and in 2009 he sat out the whole year and didn’t want any part of the market. In 2009 Andrea was buying from all REO inventories, so it completely changed from where she was chasing the deal before with absentee mailers. Now she was building relationships with agents. She wants to build relationships to where she can have repeat business. She quit going to lunch with her investors and started going with realtors. This is the advantage of being around for a few cycles in that you realize the skill set you know how to do, in her case meeting with people, really does not play a part in the current cycle as much as it does building a relationship that is repetitive. It’s almost like having an account where you call on a store that you own where you have a product, and you would be able to only show up once in a while and take an order. This is what this cycle, this quadrant 2, is like. You are building relationships that have legs, which is very different from a one-call closing skill like in 2003 and 2004 that you would need. You want long-term relationships. For people who are in this business for the first time now, the assumption is that this is how it works.

The Norris Group just had a boot camp where two people were doing short sales. However, the word short sale was not even understood for a decade at a time in California. They have a business model that is working perfectly until it doesn’t work, and then it will be nonexistent for a long time. This is what is tricky about what The Norris Group does. You really have to have different skill sets for whatever phase you’re in at the time. Rick said it seems a lot of the investors are good at one thing and not the rest, so people like those in short sales are only in it for a few years. Either they have to change or find a new job because short sales are going away at some point. It’s like saying you’re really good at attending HUD auctions, but the last one they had was back in 1997. Even trustee sales are going to be very slim. In 5 or 6 years from now, there will not be as much trustee sale business. It will be interesting since the Norris Group does this now, the margins are very tight. The quantity of people interested in it is very big, but Bruce said they used to fund people, who were doing it before, and their margins were good but there were fewer people and fewer properties. Therefore, the ratio actually turned out to be fine. What has changed, especially in the REO business, is the accessed information is so much easier and quicker to come up with an intelligent decision that they have people walking in to a business that don’t know very much that become close to 80% capable inside of two months. This is hard to compete with. Even for the ones that leave, there is a whole new wave showing up that only needs two months of training and are then pros. It doesn’t mean they are coming to accurate conclusions, but they think they are. It wouldn’t be hard to do an appraisal if you think just pushing a button and getting an opinion off of a site like Zillow that’s accurate. Oddly enough, the flatter the market is, the more accurate Zillow is. Bruce just pulled ten recent sales because he wanted to see, and it was only 1 out of 10 properties that were wrong by 10%. Most of them were within 2%. In a flat market, even the assessed values are pretty tight. It gives somebody a false sense that they know what they’re doing, especially if this is all they have seen and they think Zillow is correct all the time, whereas a few years ago it was not even remotely correct.

The type of inventory that Rick and Andrea are buying and holding is different from the buy/sell inventory in that the buy/sell inventory can include much bigger houses, houses with pools, two story houses, or nicer areas. This is absolutely necessary because this is what the retail buyer really wants. Because of the interest rates, if he is going to buy he is going to be able to afford the inventory that he wants. If Rick and Andrea tried to sell inventory they have in Victorville they’re renting, even if the price per month would be nothing, they said it would be a challenge.

There is a huge difference between buyers with the two properties Andrea has in Anaheim and Rialto. The Anaheim property is a single-family house that Rick flipped to her. The house originally was a mess and needed a lot of money to fix, and this is what has changed as far as what they sell and one of the reasons The Norris Group shifted to the trustee sale inventory. 75% of what they have is newer than 2000 and bigger than 2000 square feet, and this is really the sweet spot for the retail buyer. This would not make a good rental. For most of their rentals, they have less than $100,000 tied up in the rehab and the purchase price. If you’re over $100,000 and you’re getting hard money financing, it’s hard to make that pencil out. You have to end up with the farther out and older things. You’re not going to get a lot of Ontario, Upland, or Rancho Cucamonga rental houses right now unless you’re putting a lot of money down or you can be one of the very few people in the United States that can get an investor loan from a bank. Bruce thinks a lot of this is going to change; and he got a sense of this when he was back in Washington. They’re trying to figure out how to make it palatable to whoever they have to make happy. However, it has probably dawned on them that they’re not going to fix anything by selling things one at a time to owner occupants. Rick said he is positioning himself to take advantage of that when the financing becomes available. In Victorville, for example, one of the charts Bruce has shows that 76% of the people are over encumbered from either 10% to over 100%, which means that they’re either stationary, going to be in REO, or they’re going to be short sale. If you go up and look at how many percentages of the transactions are REO or short sale, it’s probably 80%. This means that 80% or more of the time, a buyer does not emerge from the sale of that property. Those people are going to buy. You have an extra family looking for a rental or to move in with themselves, but they don’t produce a buyer. This means that at a ratio of 4 to 1 you have to have another occupant buyer move in to their Victorville property. This is not going to happen.

In their Victorville property, the aforementioned situation is perfect for rentals, and they are getting the best renters they can. The tenants are people who just lost their house, and they think very much like a homeowner, which means they are used to taking care of things themselves. A lot of the tenants they have come in contact with are solid, hard-working, blue collar families that don’t make a huge amount of money but make a good living and can get by. They also happen to end up in a first-time buyer situation where they’re paying $400,000 for a house that’s worth about $125,000. Everybody would walk from that situation. You’re paying three times your mortgage than for what you can rent the house next door. You can understand the rationale between to know when you can’t continue to doing it forever.

Both Andrea and Rick manage the properties, although Andrea does about 80% of the property management. Rick said he doesn’t really enjoy the 20% that he does, so he is really looking forward to buying rentals. Also, when you have the thought of creative financing, you never get rid of anybody. You’re buying with a wrap, you’re selling with a wrap, and everybody is still with you. One guy who worked out in the desert used to have a $100 spread on 100 houses. This was his $10 grand a month. This would be perfect if everybody pays. He was showing Bruce this, and Bruce was thinking that if 10% of the people would pay him, he’s gone. Bruce likes the spread and buying at a discount, but he also likes being by himself and having a great life. This he said is cleaner.

Andrea and Rick were more aggressive with their purchases in 2010, but not so much in 2011. Rick misread the market and thought that with the way things were taking off that demand was coming back because of the government stimulus. He really thought the government was going to keep rolling this out, so he thought they had bottomed, making the houses cheaper and there being plenty of inventories. At the time he wanted to load up on as many as he could at that point. Once he noticed that property values were dropping, inventory levels were shrinking, and every investor and their brother was entering the market, he started losing motivation. When he notices we are bottoming again and can get good financing, then he said he is in with both of his feet. But it’s not clear how long this is going to be.

Rick and Andrea usually draw the same conclusions and are on the same page with a lot of things. All the rentals they have gotten have been from forming relationships, although now most of their inventory would be down as well as far as the REO agent themselves. They have one in particular they know will call them on a weekly basis. They’re calling now with things that don’t make sense, but they’re desperate. When Rick is appraising, he usually gets a sense of areas that are either going up or declining in different price bands or different counties. If you’re selling something over $500,000, in almost every market where you have something like this the market just seems like it’s gone. Even the really good areas like Glendora, Upland, or Claremont seem to have so little demand for the product that it’s tough. Rick doesn’t really see any areas that are going up in value, although he is mostly in the Inland Empire. He doesn’t really know about areas like Orange County or West LA County. Rick said it seems like things are gradually declining in most areas. The listings are usually higher than the sold that closed a couple months ago, and it seems like they’re dropping on average about ½% a month. Sellers are also kicking in a lot of closing costs, which translates into another 3% you’re paying out that you weren’t a year ago. Andrea has not had any appraisal issues when she was selling the property, but she doesn’t really try to squeeze it for everything. She wants it to be well-priced from the get go. She put $100,000 into her Anaheim property for repairs alone, something she knew about going in as it was a big rehab. Right now it’s listed at $485 for its resale price.

Rick believes rents right now are pretty stable. You can usually get a good tenant within a month. There are a lot of landlords that are renting to lower quality tenants and getting higher rent, but overall they have a lot more evictions, vacancies and problems that it balances out to the landlords that are pricing them at market rents. Rents are only down about 5-10% over the last 3 years. Andrea and Rick usually put their rents a little lower than market, and they try to fix their rentals as best they can, even a lot better than some landlords do. Rick sees a lot of landlords that do terrible work from missing screens to broken appliances and heaters that don’t work. These are usually the landlords who end up with the problem tenants. Rick and Andrea try to fix everything so everything is working. They want to attract the best people they can attract. The Norris Group did the same with a lot of the rentals they had in Moreno Valley. This was an area that got hit like Victorville, so you would have a fair amount of people looking at it, but you would have only one house that had repairs The Norris Group did, so it was kind of easy to pick the best one. They have not had challenges of kicking people out or with people who have missed paying their rent. One of Bruce’s thoughts was when he resold the house, he would not have to do a major rehab again because things like the granite were still going to be there.

Similar to Mike Cantu, who was on the show a couple weeks ago, Andrea finds her reading time very important to her and something non-negotiable. In addition, she also works out on a regular basis. It not only keeps her in shape and a time for her to be alone, but it is also the time she comes up with good ideas. She can decompress and think clearly. Bruce does something similar. He will have his headset on during his workout because he uses this time to think. It’s a good diffuser for him. Andrea will keep a notebook with her during her workout because she will think of things that she knows will immediately go away. It’s amazing that the ideas don’t stick around, and these are usually the best ideas.

Rick doesn’t really have anything non-negotiable. He has to have 7 hours of sleep a night, which is really the only thing non-negotiable for him. Although, he said he has offered to sell this to people. If they need a rush appraisal and are willing to pay a couple thousand dollars, he will give up a night’s sleep. When he was younger and more motivated he did read a lot, so this was non-negotiable for him back in the day.

When asked about Rick’s best quality, Andrea said he is a really great guy and has good integrity. They have been through good times, and it is easy to go through good times because of his integrity. They started out with nothing, and they had a lot to overcome. It is during moments like this you really find out the kind of person with whom you’re working. He always had her back, and they would figure things out together. It is very important to know who you’re working with especially during the tough times. Bruce has often talked to people who assumed something was in place, and he would then ask them if they had been through tough times together. He and Mike were at lunch, and Mike told Bruce he had seen a lot of people’s character change in the last couple years. Bruce replied he didn’t see the change, he saw the change revealed. This is what shows up when bad times hit.

Andrea’s quality is she will never give up. She will fight to the end to get to the finish line. A lot of the time Rick will look for the quickest and easiest solution, but Andrea will look for the best solution. No matter how bad things are, she will get to the finish line, and it usually works out a lot better than the way Rick would have gone.

Rick read a book by Dan Kennedy called My Unfinished Business, which told the story of his life, all the business he had done and how he carried out the business. He told about his failures and how he would get back up again. Reading is something you get into the habit of doing, and it becomes hard not to do it. Andrea’s bed is full of books, while Bruce has about five he’s reading all right now. What is interesting is all of his books are wrapped together. There is not one real estate book amongst them, but they are all connected tissue. One of them is about how people get to be great, and you find out you don’t have to be the most gifted person in the room. You can be the person who finds out they can try harder, work harder, and end up with the best reputation. He enjoys reading these books because he can relate to them as most people can. Most people have average skills and often ask themselves how they can become excellent. Bruce has talked with someone who has been a karate master for 40 years, and he told him the people who were the best students were not the ones who came in already gifted in karate and could do 70% of what he was going to end up doing naturally. These people very rarely have the character to take it to the level of somebody who has to struggle with every piece of it and finally emerge. This is usually how it is with investing. Starting out not having much is probably the best favor in the world because then you’re not putting too much emphasis on the things.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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175-TNG Radio – Bill Shipp 5-22-10

Friday, May 21st, 2010

 

Bill Shipp 

Bill Shipp, California Real estate Investor

(Full Bio)

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This week Bruce is joined by Bill Shipp. Bill has been investing in Riverside real estate for many years. Bruce thinks Bill is Riverside’s best kept secret.

Bill believes it is important to be true to your word when doing business. Bill has been working with his contractors for 10 years, and he has never had a bid on a home repair. These contractors know that if Bill hires them, they will get paid at the time he specifies. This is even more important than having people skills.

Bruce has taught many real estate investors. Some of them have great people skills, and that is what gets them business. There are also people that are trustworthy, and that is also attractive to business partners.

In the last segment, Bill said that he is willing to do his job every day, and that attitude has allowed him to accumulate a wealth of knowledge. Bill’s knowledge of his market place allows him to live in Utah while still making good investment decisions in Riverside.

Bill has never closed an escrow with a person in it, and he has never bought a house at the steps. Bill does not want to deal with those hassles. This is why he uses the MLS and agents who know what they are doing. Bill gets over 50 percent of the houses that he makes offers on, because his realtors know not to call him unless a home shows promise. Bill works regularly with two realtors, but he receives calls occasionally from other REO agents as well.

Bill has a specific skew number for the paint which he uses on all his houses. Because he uses the same paint for his houses, it is easier for him to calculate how much repairs will cost when buying a new home. This also makes it much simpler for his repair men, because they know exactly what to do for every new job.

Bill discourages investors from traveling to see their investments. Do it for the first two properties, so you can figure out how to do the job. After the second, you should know what kind of property is worth your time, and trust your contractor to do his job. Traveling to your investment homes will cost you money and time. Also, Bill suggests that investors not bring their wives. His wife always has minor problems with his investments, such as the amount of flowers in the yard.

The typical repair cost for Bill’s investment houses is $15,000 or less. However, he has had home repairs that cost $100,000. In the early 2000s, he bought older homes. The oldest home he ever bought was developed in 1828. The house was so old that the home began to dissolve when the repair man tried to pressure wash it. Bruce once bought a home in 1898. Bruce had a termite investor inspect the home, and the inspector told him that there were no termites because the wood was petrified.

Bill does not have a construction background, but he has learned some things about that trade over time. When you buy a lot of older homes, you have to be creative to find a style that people will want to buy. In the late 1980s, Bill only bought homes that were 5 to 10 years old and did not need work, but Bill now only works with fixers built before the 2000s. Bill does not like to compete with home owners. When you are flipping new homes, you are not creating value. Bill thinks that working in the trustee market requires too much work. This is what Bruce’s company does, and Bruce agrees that the trustee market is too much hassle for Bill’s business model.

When reselling a property, Bill uses the listing agent that found the home for him, and he only uses two agents to keep the process simple. Using a large number of agents makes it difficult to determine whether or not those agents are doing their jobs correctly.

When Bill is selling his properties, he tries to control the escrow, but he never controls which lender is used. Bill’s buyers are always cross checked with the lender. Bill’s agent will not tell him that he has an offer until the buyer has been cross checked, and until he can know if he will get a good offer.

Bill is constantly educating himself in real estate. He reads many books, he has attended Bruce’s seminars, and he has been trained as a certified financial planner. Bill believes that many people know how to make a lot of money, but they do not know how to spend it. People do not often plan for downturns in the market, and their lack of planning ruins their financial health.

In the early 1990s, Bill had 40 rentals. It took 8 years to get those homes sold, and it was very frustrating because the market kept going down.

Bill began investing in Texas during 1989. He bought homes for $10,000 each and he owned them free and clear, but he was receiving negative cashflow every month because of property taxes. Repairing one roof could wipe out your positive cashflow for a year. In the end, he only made money on one of those homes. Do not buy real estate in other cities and states if you do not know what you are doing.

In 1986 Bruce was asked to speak on a panel of real estate experts. There were two well known attorneys on the panel, and all of their claims regarding out-of-state property ownership contradicted Bruce’s practical experience. When Bruce asked those attorneys how they came to their conclusions, he discovered that they had no out-of-state investment experience and were relying on theoretical knowledge. When people come from other states and tell you to buy homes in their areas, be careful. Why would someone travel across the United States to encourage you to buy their property if they cannot even get the people from their own state to buy?

If there are more listings in a region than sells, you should be nervous. On the other hand, if there are more sells than listings, then you should be happy. This is all Bill looks at when predicting whether or not he should be investing. Bill does not pay much attention to economic forecasts. He only pays attention to Riverside’s market, so he does not have to worry about general market forecasts.

The best deal Bill ever had was a wholesale in Corona. The property sold in 2 weeks and he earned over $100,000. If you want to find deals, you need to be watching the market every day. You never know why a seller might want to get rid of their property quickly. An agent once called Bill and told him that the seller was offering five houses and two lots on one street. The seller was the chairman of a bank who had stock options which were about to expire. The banker needed the money for those properties quickly, so that he could buy his stock. This deal shows that you never know why and when a great deal is going to show up. Bruce once bought a house from an agent once who was getting into the plastic extrusion business. The agent needed to buy an extrusion machine for $10,000, so Bruce bought two of his homes for that amount.

Bill has been approached with bulk buying opportunities over the last few months. The people offering these bulk buy deals told Bill that they have had bulk buys in the past that sold quickly. When Bill asked for an example of one of these bulk deals, he never received a response and he still hasn’t. Bill received a bulk buy opportunity from a company in Los Angeles as well. Because the company seemed professional, Bill had his agent check out the properties. The agent discovered that all 20 of the properties for bulk sale were short sales.

Bruce will be a moderator for Fannie and Freddie in June. These companies are putting together bulk sale divisions, so perhaps bulk sale opportunities will be available in the future.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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