WW

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“People are always blamingtheir circumstances forwhat they are. I don’t

believe in circumstances.The people who get on in

the world are the people whoget up and look for thecircumstances they wantand, if they cannot find

them, make them.”

George Bernard Shaw

Feature StoryLet’s Make a Deal:The All-Cash Formula forBuying a House

As we move forward into the business of buying and sellinghouses, we’re going to start looking at how we make

offers. The marketing is in place. You’re getting leads, and youknow how to pre-screen them by asking three questions:

(1) Is the house pristine or neglected (pretty or ugly)?

(2) Can you buy the house with immediate equity builtin the day you buy it, or can you create equity?

(3) What is the degree of the seller’s motivation? Theway you can answer that is by looking at theWWOW:

What is the propertyWORTH (value)?

How much do theyWA�T (asking price)?

How much do they OWE (the loan balance, if any)?

WHY are they selling (their motivation)?

Let’s say a lead comes in on a property estimated to beworth $100,000 (after the house is fixed-up) by a certifiedappraiser, but the seller is asking for $75,000. They owenothing on the house, and the reason they’re selling it isbecause it was inherited.

“People are always blamingtheir circumstances forwhat they are. I don’t

believe in circumstances.The people who get on in

the world are the people whoget up and look for thecircumstances they wantand, if they cannot find

them, make them.”

George Bernard Shaw

Continued on page 5

1

IN THIS ISSUE…

Feature Story—Let’s Makea Deal

2 Inner Game—When inWinter, Hibernate

3 Student Success Story—TheEasiest $16,000 I’ve Ever Made

4 Tim Taylor’s Deal ofthe Month

Think back to a time in yourpast—five, 10, 15, 20 years

ago. You probably envisioned ahappy future making moremoney, having fun, enjoyingromance, or living in a biggerplace than you did previously.

Although few things turn outperfectly, or even the way wethought they might, chances arethat at least one area of your lifesaw some growth and improve-ment out of desire if not necessity.The standards of a 30-something-year-old adult are going to benecessarily different than those ofa late teenager. In that sense, mostof us have undergone economic,social, and career upgrades.

Given today’s economic super-storm, faith in the future can seemfanciful. The realities of thecurrent climate are pretty harsh.People are losing their homes,losing their 401Ks—losing faithin their prospects for security andprosperity. “Positive thinking” isoften the last thing they want tohear when they’re months behindon their mortgage, the job markettightens, and their retirement is inquestion.

But our lives mirror the cycleof everything that ever was andever will be—nature and theseasons, governments, bear andbull markets—the world itself.Anything that involves lifeand/or people is going to gothrough seasons. We will experi-

ence a spring-like bloom, thereaping of summer, the prepara-tions of fall, and the chill andseverity that winter brings. Thisunavoidable cycle occurs in ourindividual lives and in society asit does in nature.

We are certainly in the midst ofa severe economic winter.However, if we can rememberthat we’ve all experienced timesof growth and improvement inour individual lives after a periodof lack and want, we can re-adjustback to a mindset that focuses ona future we can look forward toagain. That starts with acceptingand embracing the now.

This wintry economic seasonprovides opportunity to hibernate,recover, and start planning for thenext spring ahead—the same kindof spring that gave us relief beforeand will bring us relief again. Youcan do this by:

1. Defining what you want tocreate

Be specific. Sometimes luckhelps, but there’s no way to getwhat you want until you’vedefined what that is, and, justas important, why you want it.Your motivations will steeryou through this winter storm.

2. Controlling your focus

Worrying does not make direcircumstances better. Theproblem isn’t going to change

any faster by obsessing over it.Focus instead on finding solu-tions, and focusing on the lifeyou’ll be living once you’vefound them.

3. Taking inventory

List those attributes thatenhance the quality of your liferight here and now—family,friends, the network ofcolleagues who might help youtake that next step; resourcesthat are helping you get byeconomically, mentally,emotionally, and spiritually.You might be surprised at justhow many resources are atyour disposal.

4. Being grateful

For every “negative” thing thatmay be happening to you,someone else is undergoing

2

Inner Game

When in Winter, Hibernate

Continued on page 3

“When in Winter, Hibernate” — continued from page 2

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Irecently completed Tim’s 12-week Real Estate Investor

Mentorship program. Within 30days of finishing the course, I hadpurchased three homes, turnedthem around, and made a 5-figureprofit with minimal out-of-pocketcosts to me.

These deals came to my attentionfrom bandit signs that I had placedin my market area that said:

Each owner informed me that thehouses they were selling were inneed of repairs, which was my firstclue to employ the all cash buyingstrategy for not-so-pretty houses. Iput each house under contract with

all three sellers individually—onefor me to buy for $40,000, thesecond for $52,000, and the last for$70,000. I signed sales andpurchase agreements to buy thosehouses all cash within 30 days—meaning I’d have to sell them asquickly to an investor in I didn’twant to lose the deals.

Under normal circumstances, itwould never occur to me topurchase $162,000 property byoffering all cash, particularly in thistroubled market. But with Tim’sexpert training and guidance, Iknew I’d be able to unload thosehomes quickly and turn a profit,which is exactly what I did.

Especially given current marketconditions, I knew that there wereother investors out there lookingfor “handyman specials”—fixer-uppers that they can buy cheap,rehab, and turn around for sale.That’s how I marketed the homes

that I bought, and that’s whatattracted Investors to me to buyeach of those three houses.

So instead of me rehabbing thosehouses and selling them myself, Isimply assigned my contracts that Ihad signed with the original home-owners over to the wholesalers andcollected an assignment fee foreach house. So for the first andthird homes, I charged an assign-ment fee of $5,000 for each, and forthe second home my assignmentfee was $6,000. The wholesalerspaid me the assignment fees, andthat was that. No haggling withcontractors for rehabbing, noclosing costs—by far the easiest$16,000 I’ve ever made in my life.

I attribute this “straight out of thegate” success to having simple yeteffective marketing in place and toTim’s experienced mentorship.

Matt, Florida

Student Success Story of the MonthThe Easiest $16,000 I’ve Ever Made

more pressing challenges. Gratitude has a way ofdispelling fear, anxiety, and a self-defeating atti-tude. You can’t focus on what you don’t havewhen you’re grateful for what you do have.

No matter what the conditions, we’ve all madesome kind of improvement before, and the truth isthat we can and will do it again. How we progressisn’t solely dictated by what we don’t have, or whatwe might’ve done or not done in the past. It’s abouthow we use what we do have now, sowing seeds ofgrowth that we can reap later.

If we can recapture the hope and faith that helpedus grow throughout our lives, we position ourselvesto not only survive this winter, but come out of ithappier, healthier, and wealthier than before.Winters are sometimes long, but they don’t lastforever. And they aren’t pervasive. Somewhere,right now, someone is enjoying summer. That’s astrue for the world as it is in our individual lives. Usethis time to hibernate, re-focus, heal, enjoy yourblessings, and start planning your next spring now.

I n Volume 3 of the MillionaireInvestor Report, we featured a

number of marketing strategies toget potential deals rolling intoyour real estate business—including newspaper ads, roadand car signs, and hiring people tolook for abandoned houses; whatI call the “Bee Hive” process.

Quite often, though, people willthink that they just don’t have thebudget for their real estatemarketing to really proliferate,particularly having enoughmoney to pay people to takepictures of uninhabited housesand bring those pictures andaddresses back to you for furtherinvestigation. No worries, though.For the cost of a few miles worthof gas, you could end up pock-eting thousands of dollars withnegligible additional costs to you.

Instead of hiring “bees” oneweekend back in Ohio, I becamemy own bee, driving around alower income neighborhood typi-cally associated with first-timehomebuyers. Mind you, I’m nottalking about war zones whereyou’d be afraid to get out of the car,but rather more borderline areas.

After about an hour and a half, Icame across a vacant house on acorner lot—bungalow style, about1,250 square feet—in need ofexcessive repair. And when I sayexcessive repair, I mean this placedidn’t have either a front or back

door on the house, and debris wasstacked chest-high throughout thehouse. It needed a new roof, siding,paint, carpet, kitchen, bathroom;the works. But I estimated thatafter about $30,000 of repairs, thehouse was worth about $95,000.

When it comes down to it, thebiggest obstacle was finding outwho was the owner of the placesince no one obviously lived there.So I researched county records andfound the owner’s name. However,there was no contact information.The next, most expensive step inthe process was to hire a skiptracer—a kind of private detec-tive—to find the owner at a cost of$99. The key is that the tracer findsand confirms the location andcontact information of the owner,or you pay nothing. In this case, theinformation was confirmed and Icalled the owner.

“Hi, I’m Tim Taylor, a realestate investor,” I said. “I noticedyour property on Orkney Roadand was wondering if you had any

interest in selling it.” He told methat he and his wife got divorcedand they moved out of the house,still owed $19,200 on the mort-gage, but couldn’t sell it.

I said, “If I could pay you allcash and close quickly, wouldyou be willing to sell it to me?” Itwas a no brainer. The house waslittle more than a burden to him,not a potential cash cow that itwould be for me. We signed asales and purchase agreement forthe $19,200 that he owed on it.

I immediately went to a privatelender of mine and borrowed$49,200: 419,200 to purchase thehome and $30,000 for the repairs.I rehabbed the place over the nextsix weeks while marketing theproperty at the same time. At justabout the same time that the rehabwas wrapping up, I found a buyerwho was already pre-approved fora loan. Thirty days later, theybought the house for $95,000. Intotal, I owned the house for about2.5 months.

I paid off my private lender the$49,200 that I had borrowed, plusinterests on that loan, and pocketedalmost $45,000—all stemmingfrom a few miles worth of gas, lessthan two hours of my time on aSaturday afternoon, and a hundredbucks to hire a P.I. This deal is theepitome of my all-cash buyingstrategy—no money out of yourpocket, with thousands in profit.

4

Tim Taylor’s Deal of the MonthAll Cash buying strategy, little money down, $45,000 profit

You’ve now got clues to answerall three of the questions above. Tothe seller, that house is little morethan a free pile of money gifted tothem from a relative. Not only arethey not emotionally attached to it,but they are telling you by theirasking price that they are willing togive up $25,000 worth of equity.That immediately answers ques-tions two and three. You knowyou’ve got them leaning in theright direction. Their motivationsare in your favor.

By looking at the average houseprice in the market of the lead, youcan tell whether it’s a pretty houseor an ugly house. In this case, let’ssay the market average in that areais $200,000. With this house beingbelow market average (because it’sonly worth 100k) we would leantoward this probably being an uglyhouse, most likely needing somedegree of repairs.

Now there are really only twobuying strategies when it comesto buying ugly houses—eitherAll-Cash or Split-Fund!

We’ll explore the details of thedifferent buying strategies later,but for now let’s focus on whatstrategies are available to us in theabove example.

The other four buying strategiesare for pretty houses only becauseyour exit strategy for getting ridof a property that you get a deedon, for example, is to owner-

finance or lease option that prop-erty when you sell it. You’retaking over someone else’s mort-gage and then you’re going tocreate financing with your buyerthat wraps around the mortgagethat you took over. You are onlygoing to do that with prettyhouses because you’ll be sellingto a higher-end buyer—they’reusually more responsible and canpay bigger down payments.

Even if you can get a super dealon a house buying all-cash, younever do it on a pretty housebecause there are only two ways tolose money in real estate—writinga big check to buy a house orsigning your name to a big bankloan in the process of buying.Even if you could get an $800,000house for $500,000 all-cash, youdon’t violate those rules. Not thatit’s out of the question that thiscan turn out to your benefit, butit’s rare—it’ll happen maybe onceor twice in your entire career as areal estate investor, if at all. As arule, it’s a safer bet to take anoption on a pretty house ratherthan risk your cash.

So we’re going to focus on theall-cash strategy in this example.Since we’ve determined that it’san ugly house, we have toconsider that it will need repairs.You don’t have to be absolutelyaccurate about what that estimatewill be. In fact, you can underesti-mate and still not get hurt badly

because when you’re using theall-cash formula, you’ll be guar-anteed to turn a profit. Based onwhat the owner says the houseneeds—new paint, carpets, minorupgrades as such—we can make aballpark estimate that repairs willcost about $10,000. So what canyou offer based on this scenario?

The maximum offer for an all-cash purchase is 65% of the ARV(After-Repair Value) of the house.

That leaves a 35% profit, hedgefactor, cushion, whatever you wantto call it. For this example, let’s saythe ARV, based on legitimatecomps, confirms that the house isindeed worth $100,000. Multiplythat by .65, then subtract the$10,000 in repairs, and yourmaximum offer would be $55,000.

The reason why we buy at 65%is because we leave open one of

“Let’s Make a Deal” — continued from page 1

5

Continued on page 6

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Start Making the Dealsof a Lifetime…

Visit Tim on the web at:www.TimTaylorSuccessCoach.com

You can contact Tim at:858-454-0504 or

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Start Making the Dealsof a Lifetime…

Visit Tim on the web at:www.TimTaylorSuccessCoach.com

You can contact Tim at:858-454-0504 or

TTaylor@TimTaylorSuccessCoach.com

6

“Let’s Make a Deal” — continued from page 5

our selling strategies—whole-saling. When you wholesale thehouse to someone, you’re typi-cally selling it to an investor whois going to buy it in cash fromyou, then rehab it and sell it again.When you buy at 65%, you cantypically sell it fairly quickly toan investor at 70%, turning a 5%wholesale profit.

This formula only changeswhen you write a check and paycash for a house when you currentreal estate market conditionsdeclining in value. In such cases,you may want to lower yourbuying all-cash formula factordown from .65 to .50. Before youmake the offer, make sure youhave reliable comps on the houseand include a repair estimate, aballpark number that’s reasonablyconsidered. Also, when making

an offer, you don’t wantto come out of the gatemaking your MAO(maximum allowableoffer). You might wantto start out around$48,000 in this case, orwherever you’d like, butyou know that the mostyou will offer is yourMAO of $55,000.

If we’re writing a check foranything, we’re either getting it ata great discount or we’re notdoing it. As long as the ARV iscorrect and you factor in repairssomewhat accurately, you willnever get hurt using this formula.

In the next edition of theMillionaire Investor Report, we’lllook at another strategy forbuying houses but this time on the

pretty-house side of the business:Lease/Options.

To learn more about the TimTaylor Real Estate Mentorshipprogram, visit the Web site atwww.TimTaylorSuccessCoach.comand click on Free Consultation.Fill in your name, e-mailaddress and phone number toreceive a free 30-minute sessionwith Tim. Or for immediateattention, call 858-454-0504.