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Spring Texas Real Estate Investment Training
Finding Funding and Deals
Day One Monday, January 14, 2008
9:00 I arrived at Greg’s home office, and we spent the first hour visiting about his current business. I was surprised to find his office in a complete mess and disarray. We spent a few minutes clearing off a place for me to sit and boot up my computer, and then we started to discuss his current business, marketing, results, focus, and the current deals that he is working on.
Greg took a few minutes to discuss the four rehab properties that he is working on at the same. He also has six rental properties and two properties under option agreements. Greg’s primary focus for the week was four properties that were set to close on the 15th with funding coming from a $10 million, CD secured line of credit (from an outside investor). Greg had negotiated the properties at $400K a piece, with him planning to rehab/rebuild them into $1 Million homes (all within 3 miles of the up and coming HoustonMedicalCenter). The one thing he was lacking was the necessary $500K in points that the CD originator was charging for the use of the $10 Million CD.
I then asked Greg how he had financed his properties and he began to give me the numbers and loan balances. Over half of them were on his credit report (at an average of 65% LTV) and the rest were a variety of subject to’s.
10:30 I spent the next hour calling a few lenders and found some programs for him to refinance into after his $10 Million line of credit goes through. We discussed him offering to sell some of his properties with owner financing to help them cash flow a lot better without dealing with toilets and tenants. I then had Greg create a list of the email addresses from local investors that he came across. I also pulled a list of local Texas investors as well from my database and together we created an email blast out to the list trying to find an investor who would help fund the seed money. I also contacted several local hard money lenders and emailed them the scenario as well.
12:00 Greg and I discussed some other scenarios for using the rest of the money from the CD secure line (hard money lending, REO and note pools) and how he could possibly double his money for pure profit. Greg and I also discussed that his closing for the 15th would be extended by most of the parties until the 18th (Friday). I walked Greg through several forms and how he could market to attract borrowers and what he could expect to make and charge in points and interest to other investors. We also discussed how he was receiving from four to ten quality leads a day, but how he had no time to review them. We discussed how he should consider hiring a part time assistant to not only organize his leads, but his office, and his whole business. I mentioned to Greg that he would probably exponentially grow his business by giving up some control. He stated that he had a hard time doing this. He was concerned that he wouldn’t be able to afford an assistant and I discussed with him how if he was able to assign one wholesale deal a month, then he would be able to pay for an assistant. I also discussed with him that he try to focus on assigning more deals to help with his short term cash flow. I showed him how he could utilize the same email blast to email out wholesale deals and list them on Craigslist to help them move quickly.
3:00 We arrived back from lunch after receiving 2 calls over lunch regarding investors looking to gain more information. We spent some time answering each of their questions along with answering five email responses as well. We asked each individual to submit a Letter of Intent and a proof of funds letter or statement. While we were answering phone calls and emails, Greg and I talked about more about his business strategy. I stressed to him that while this deal was a big one, he should not stop working on finding deals that he could either flip quickly, assign, or cash out of. He seemed to brush the idea of wholesaling off as he seemed to enjoy flipping homes. I discussed with him how if he was receiving 5 to 10 leads a day, that he should focus on wholesaling some of them to help him with his monthly cash flow.
We discussed briefly how he should consider hiring an assistant to help with his leads, phone calls (as it seemed he was getting a phone call from his marketing almost every 20-30 minutes), and errands. Greg seemed frustrated that he couldn’t trust his contractors and that he had to spend a lot of time with them to make sure that they were doing the job correctly. He stated that he seemed to be running around in circles a lot. We discussed some things that he could do to help assist with (getting referrals from other investors for contractors, etc). We wrapped up the day by discussing some of the things to focus on the next couple of days.
6:00 Called it a day and completed daily journal.
Day Two Tuesday, January 15, 2008.
9:00 I arrived at Greg’s office and we began to work on answering some of the email requests for more information on the $500K private funding. We also received two LOI’s for $100K and Greg seemed to relax a bit. He also got on the horn to his attorney and the title company to help complete some of the due diligence that the lender requested. I also contacted a lady that Bob Leonetti had referred us to who had a four-plex in Houston that she could get the deed to. I emailed her and asked her to contact us. She (Michelle ?) called shortly, and we interviewed her about the property. She didn’t have a lot of information, but she said that she could get what we needed, so I sent her and SRO to have the owner/seller fill out.
10:00 Greg called his friend, Nico, who was willing to put up two free and clear properties to help him provide recourse to the private investors lending the $500K. Greg needed to get access to the properties to get his real estate agent out to provide BPO’s on the properties to justify their values. After visiting with him for a few minutes, he then called and scheduled the BPO’s.
11:00 I showed Greg a couple of mail pieces that he could use to attract privately held notes. I showed him on the Harris County Clerk’s website of how to pull Deed’s of Trust to find them and how to cross reference them on Prop Stream to get the rest of the information. Greg then went into a 30 minute complaint fest about how Prop Stream and PB Next were not living up to his expectations. He went on to state that he still had to rely heavily on the MLS to help answer questions as a lot of north Harris County (his market that he was focusing on) property information was not often available or up to date due to the immense amount of growth in the area. I tried to have Greg focus on the silver lining and the areas that it was working. We discussed his current PB Next and talking house scripts and he stated that he would like for me to review them and see if there was a way to make them better. I reviewed his current scripts and edited them for him.
2:30 We arrived back at his home office and began to review emails. Greg had received and email from the lending officer (Oscar Tijerina) with Wachovia Bank, who was supplying the $10 Million line of credit. Greg was a little concerned to read that Wachovia would not perform with this type of loan. I read the two line email and told Greg to relax. I immediately called a banking contact of mine within Wachovia, and was able to quickly get a phone call back from a Private Banking Contact. I also had Greg contact his source at Proof of Funds, LLC to get his contact within Wachovia. I explained the situation to my Renee Cunningham (Wachovia Private Bank) and handed the phone over to Greg. Renee asked a lot of questions and asked for Greg to send the lender package from Wachovia directly to her. Renee stated that she would get back to us sometime that day or early Wednesday.
3:30 Greg received a phone call from the title company handling the closing of his four homes, requesting that he bring in a earnest money check for $2500 on one of the properties, so we headed off to drop it off. After dropping it off, Greg took me around the areas that he liked to invest in and we stopped by to inspect one of the properties that he was taking over subject to. The home seemed to need little repair except for new carpet and some light touch up paint and landscaping, but Greg stated that he had been to busy (and cash poor) the last two weeks to get started. I suggested that the home was in good enough condition, along with enough equity, for him to possibly wholesale the deal and move on to the next property. Greg seemed to disregard the idea, but I stated that he should try and wholesale it to an end user, and not another investor, so that he could sell it at 80% instead of the customary 70%. He liked that idea, and we even discussed how he could wrap the existing loan, and sell the property with owner financing. He wanted to learn some more information on this, and so we headed back to his office to discuss.
5:00 We spent the next hour discussing some owner financing options. Greg discussed how frustrated that he was about having to run errands and not having enough cash to make his deals work. I mentioned that if he hired an assistant, not only would they help organize him (and his office which was a disaster), but that they would free him up to focus on deals and that he could have them help run his wholesale business. I sent him a wholesale deal spreadsheet that I have used to help sell a few deals off, and told him how he could utilize this to his list of investors to close more deals and have the assistant basically pay for itself. He told me he would think about it. I told him to quit thinking about it and that I would post a job offering on Craigslist and see what we could find. He stated that would be a good idea. We decided to wrap up the day, but that I would keep an eye on the response to the job posting and set up some interviews Wednesday and Thursday.
6:00 Called it a day and filled out Daily Journal.
Day Three Wednesday, January 16, 2008
8:00 I called seven of the responders to our job posting on Craigslist and was able to schedule a couple of interviews for later that afternoon.
9:00 I arrived at Greg’s home and told him of the response that I had received, and he seemed relatively excited. We discussed what he should consider starting the right person off at pay wise ($10 hour plus $500 commission per closed sale with their help on) and as far as hours (20 per week to start, with that increasing to 30-40 within a couple of weeks). Greg seemed comfortable with that. We spent the morning answering a few replies to some of our ads along with contacting a few home owners who were offering to sell their home with owner financing to see if they would be willing to sell their private notes. We also spent some time on the phone with Renee Cunningham with Wachovia, who had some more questions for us. Greg was extremely stressed out as he informed me that not only was he supposed to close that deal today, but that he also had bills, and contractors to pay as well (over $6,000 in bills within the next seven days) and the only way that he had that money was to take out cash advances on his credit cards. We discussed with him some options and I just told him to keep focused on getting things done and not dwelling on the no’s. We wrapped up the morning by heading to our appointment for lunch and then on to the interviews.
1:00 We arrived at Starbucks for our first 30 minute interview. We had four scheduled, back to back, and only one out of the four showed. Josephine Agular, had just moved back to Houston from California and was extremely interested in the position. She was extremely organized, prepared, and had some insightful questions for Greg. She seemed a good fit, and we promised to get back with her. Greg was impressed and stated that it had been years since he interviewed someone. We spent the time in between the interview slots reviewing other resumes (another 10 candidates had emailed their resumes) along with restructuring other owner financing strategies.
4:00 We left Starbucks and headed home to Greg’s to review the day. Greg shared with me that he had purchased a Investor Business Plan from San Antonio Investor Lee Salinas, and we spent 30 minutes reviewing and editing the plan to better fit Greg. The plan seemed a pretty good tool for him to present his skills and hopefully attract some private money. I recommended to Greg to attend some of the local real estate clubs and to contact his IRA custodian to pass on his name to anyone who might be interested in lending him some money. Greg liked that idea and promised to focus more on creative financing, versus the traditional methods.
6:30 Called it a day and headed to dinner at Salt Grass Steakhouse
8:00 Arrived back at Hotel
Day Four Thursday, January 17, 2008
9:00 Greg and I met at Starbucks to interview a Jennifer Jennings, Realtor, for the opening for Greg’s part-time assistant. Jennifer has been a realtor for seven years, but is a stay home mom who just likes to dabble in real estate. She seemed pretty bright, but not really motivated and only really looking for a part-time position. We asked her to email us her references. Our 9:30 interview did not show up.
10:00 We headed back to Greg’s home office. Greg received a phone call from Bob at Proof of Funds, LLC who gave Greg some contacts at other lending institutions where they have closed other similar transactions. We discussed some of the advertising, newspapers ad, and Craigslist postings driving business his way. He asked me to review them and tweak them as I saw fit, especially his owner financing ads on two of the properties. I took some time and discussed with him how he could structure the financing and how to track payments in with an excel amortization table. We also spent quite a bit of time tweaking his scripts for his “talking houses” through PB Next.
12:00 Called in and listened to Lee’s Conference Call.
3:00 We arrived back at Greg’s home and wrapped up the day by completing the Daily Journal, Mentoring Evaluation, and wrap up.
4:00 Ended the day.
Spring, Texas is located just north of Houston, Texas and is a growing suburb of the Houston metroplex. The area has experienced a large number of new homes being built within the last five years along with an increased small commercial build out. Spring has also experienced its share of foreclosures. Lying in northern HarrisCounty (largest county in Texas), the area’s foreclosure rate was at 1 out of every 60 homes. With the median home price lying in the $120-160K arena, and the majority of home owners commuting to nearby Houston for work, homes were staying on the market for an average of around 90 days. Spring’s home values have remained at a steady appreciation rate of 3-5% over the last few years and that figure is expected to stay pretty close to the same level over the next few years. We found that there was a large number of REO’s on the market locally, as foreclosures were taking the normal course of action, with lenders negotiating some, but still holding out for top dollars. We did notice that there was a decent level of investor presence with bandit, auto signs, and other local advertising for buying homes and attracting home owners. Spring would not be a bad market to invest in as long as investors stick sharply to their numbers and budgets.
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