Archive for April, 2015

How to Make a Written Offer

Last Saturday, I took thirteen real estate investors from the Chattanooga Real Estate Investors Association door-knocking. Before heading out, we discussed how to make a written offer to a seller.

The group had a number of questions: 1) How do I find a property’s fair market value? 2) How do I discover market rents in the area? 3) How do I make a written offer right there on the spot?

The first thing to remember is that an offer is different from a purchase contract. A purchase contract is often a formal document written in legalese that no one – especially the buyer and seller – understands. On the other hand, an offer can be written in plain English on a Post-it note that makes sense to everyone! (NOTE: On North Georgia REIA’s Facebook page, you’ll see three of the written offers I made in Chattanooga.)

Randy Shelley is an investor who lives in that area. We spent the day knocking doors in his subdivision. Though he already knew the fair market values and approximate rents for his neighborhood, I asked him not to share this information with the group.

We talked to ten homeowners. From them, we learned that most properties in the subdivision sold for between $175,000 and $185,000, and houses rented for around $1,200 per month. When we compared these numbers to Randy’s, we discovered our numbers were right on target with his.

We made four written offers to homeowners that day, and do you want to know something interesting? Three of the four offers were to folks who did NOT have a For Sale sign in their yard, but were just thinking about selling. How did we find them? We simply knocked on their doors and they told us!

You’re gonna think that I’m making up what I’m about to tell you, but it’s the absolute truth: On one street, a homeowner ran out and stopped the last car in our group of four in which the fourteen of us were caravanning. Was she angry with us? Far from it! She was about to put her house up for sale, figured we were out looking for houses, and wanted us to look at hers and make an offer!

You may find one of the offers I made to be interesting – and a bit crazy. The property was worth $180,000; I offered to pay $2,000,000 for it. Yep, you read this right – $2 million! Of course, I don’t have $2 million, nor will a bank lend it to me, so my offer was a bit creative. I’d give the seller $20,000 down and make $500 a month payments to him for 330 years. Just think – when I’m 385 years old, Kim and I will own this home free-and-clear!

So was this a stupid offer? Not at all! The home would rent for $1,300 per month. Expenses (property taxes, insurance, vacancies, repairs and management) would eat up about 35% of rents, or $455. Now do the math: $1,300 rent – $500 mortgage – $455 expenses = $345 net monthly rental profit. In other words, if the seller accepts my offer, we’ll get $345 in mailbox money every month! Now run this investment through your financial calculator. I’d get a whopping 20.7% yearly yield on my $20,000 investment – plus gain the tax benefits that come with owning rental property! What kind of return are you getting from your bank – 0.3% interest? So who’s actually the crazy one?

By the way, too many realtors tell too many sellers that because I’m a real estate investor, all I do is make low-ball offers. Care to bet the ranch on this? Kim and I make million dollar offers on $100,000 homes all the time!

Hope today’s column helps you to become a wiser, more successful real estate investor!

Bill & Kim CookBill & Kim Cook are a husband and wife real estate investing team. They live in Adairsville, Georgia and have been investing in real estate since 1995. They specialize in buying single-family homes, mobile homes and mobile home parks. They also run North Georgia REIA and teach folks how to successfully invest in real estate.

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See It and Believe It

“Reality is merely an illusion, albeit a very persistent one.” ~ Albert Einstein

About a year ago, British Airways created an amazing billboard and put it near an airport. When an airplane would take off at the airport, the billboard would detect it. On the billboard, a little kid would follow the plane, pointing at it, until he ran past the end of the screen. When the plane was gone, he would run back into view. The billboard actually interacted with the world outside.

How did they do that? I have no idea.

If you’ve seen that billboard video, you’ve seen an example of “augmented reality.” (If you haven’t seen the video, you can find it by Googling “British Airways interactive billboard.”). Essentially, augmented reality adds digital content to real-life objects. The object could be an ad in a magazine, or it could be a famous painting, or it could be a house you just passed on the road. The essence is this: Point your tablet at it, and stuff happens. That stuff could be a link to a phone number, a video or animation you can watch, or other statistics about the thing you’re looking at. In the case of a house, it could tell you the price, square footage, and comps for the area. It could even give you a tour of the inside of the house.

If you want to get a better idea of what augmented reality means for real estate marketing (it’s almost impossible to get a good feel for it without actually seeing it), just search for “real estate” and “augmented reality” on YouTube. You’ll find some very cool information. I like James Dearsley’s videos – they’re short and very helpful.

Right now, augmented reality is in its infancy, at least as far as it’s used in marketing. It’s still a little clunky, and I’ll bet you that in ten years, what we see now will seem very crude. But things are moving along.

Is it time to dive into marketing your business through augmented reality? Probably not quite yet. There are sophisticated apps like Homespotting that are designed for real estate marketing, but availability is still limited. I would wait to buy expensive software. I would recommend, instead, that you begin experimenting with some of the simpler, less expensive applications like Layar or Blippar that allow you to create simple augmented-reality content for your real estate ads. The basic software is free, and you can experiment with creating ads for little or no money.  

In the meantime, here are some fun applications you can try – it’ll get you used to using augmented reality, and maybe you’ll get some ideas of how you can eventually put this technology to use in your business.

Layar and Blippar, which I mentioned above, are pretty basic. These apps allow you to view or add simple content to printed advertisements or products. Not all the content is inspiring, but you can learn plenty about marketing from ads that aren’t very good. The software is free, and both are available for both Android and iOS.

Google Goggles is another free app. This one allows you to point your phone or tablet towards an object, initiating a Google search for information about that object. Want to know who painted that painting, or what that historic building is called? Check it out on Goggles. You’ll get lots of misfires but sometimes it’ll give you just the information you want.

And here are two more, just for fun: SkyMap lets you point your smartphone to the night sky and identify constellations and specific stars. And SpecTrek is a game that gives you points for zapping ghosts in your surroundings.

Someday these apps will probably look like Atari Pong looks to us now. The next generation will wonder what we saw in it. But in its day, Pong was pretty close to miraculous. Augmented reality gives us a new chance to experience the impossible. Don’t wait until it’s perfect. Enjoy it now.

Don DeRosaDon DeRosa is recognized as one of the nation’s top 21 real estate investors in the New York Times bestseller “The Millionaire Real Estate Investor”. Don, who is a full-time investor, trainer, and mentor, is the first to offer his complete investing system on a mobile platform. Don teaches investors how to Make More and Work Less by being more efficient, productive and competitive, leveraging mobile technology and apps on the iPad, iPhone, Android and other mobile devices.

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