Reorockstar Ebook

Copyright MMIX by Preston Ely. All Rights Reserved.

1 Copyright MMIX by Preston Ely. All Rights Reserved. In Other Words … Please Don’t Steal My Stuff

Introduction

Up until now, REOs (bank-owned properties) have been near impossible to wholesale for beginning investors. Reason being? The contracts are not assignable. Meaning whoever is on the contract as the buyer is the one who must show up at closing with the cash. And let’s be honest …

You don’t have any of that. : - )

Most people don’t. I used to be broke. The REO Rockstar used to be broke …

Until he learned the secret.

Let’s face it … the banks have their hands on the biggest inventory of pennies-on-the-dollar, cheap, wholesale houses in the world. They are a motivated seller times a million. They won’t just sell you one house … they’ll sell you as many as you want, as often as you want, and in as much quantity as you want.

How would you like to get access to all these properties, control them with absolutely no money or risk whatsoever, and flip them to rich people for $5,000-$20,000 in as soon as 30 days? I thought so.

Who is the REO Rockstar and why is he the one teaching you this instead of The King of Wholesaling?


Good question. Quality question. You’re an excellent questioner. Keep up those amazing inquisition-like reflexes. I like it.

The reason is because whereas I have flipped a handful of REO’s, the The Reo Rockstar has flipped HUNDREDS. As a matter of fact he flipped 14 of them just last month. Lucky for me, he is a close friend of mine here in Tampa, and we do business together often. He is currently training our staff at Real Freedom Properties to do the exact same things you are about to learn for free (if you are the 1 in 10 person who actually reads things all the way through).

The way Rockstar goes about doing this is nothing short of AMAZING. So amazing in fact that I immediately put together this e-book to share it with you. It will blow your mind for sure. There is no chance in heaven that you have ever heard these strategies before, and you will most likely start hearing them all over the place after this as people start to copy The Rockstar left and right.

My suggestion? Get going right now while this technique is still totally and completely underground. REO’s have scared off newbie investors since the beginning of time which has kept all the best deals for only the rich who had the cash to close. The playing field is about to leveled for you.

Are there ways around the “non-assignable” contracts of the banks besides what we’re about to reveal to you? Yes. But they are complicated and totally annoying, involving arduous tasks like


setting up LLC’s for each new property, complex trust agreements, so on and so forth.

The strategy we are about to show you is a walk in the park compared to those. A short walk in a cool breeze on a sunny days with hot women all around you at that. Or men (if you’re a woman … or gay).

Admittedly, this e-book is nothing more than a transcription of an interview that I recently did with the Rockstar himself. People paid $100 to be on the call and listen in. It was so well received, and the response was so over-the-top, that we knew we had to share it with more people. Is there more to learn about the REO Wholesaling process than what is taught in this particular e-book? You better believe it. And of course I’m going to be selling it to you in the very near future (like … next week : - ) But this will get you started for sure.

Please be the rare exception and read this entire book, put it to action, and email a Success Story to me at [email protected]. I’m so sick of people half-stepping in everything they do. You have to take action. Learning is not enough. Real education comes through experience.

There is an abundance of practical, step-by-step guidance in this e-book to get a deal under your belt in the next 30 days. But you have to take massive action.


mailto:[email protected]

I know you’re going to do it. You’re going to make it happen. I can feel it.


Preston: I want to introduce you to everyone. I have a friend of mine on the line with us, Lee Kerney, who I’ve known for quite some time. Lee, how long ago did we meet?

Lee: It’s been about three years ago. I got one of your emails that said I want to meet all the different wholesalers and I was so intrigued by your email that I responded and said I want to meet you too. So we got together at Starbucks, shot the breeze and that’s how our friendship began.

Preston: He was hustling in real estate, he had just bought some seven-unit apartment building in Ybor City in Tampa and we kept in touch. As the market turned, people that didn’t know how to adjust their sales, at least in Tampa which is more difficult than other places, they dropped by the wayside.

It’s depressing for me to see that happen to people, I don’t like it at all. Lee was one of the few that kept sailing and in my eyes, from what I can tell, is doing better now than he was doing even back then.

The last time I checked in with him he had literally flipped 15-16 REO houses in one month. That may sound hard to believe, but it’s true.

How long ago was that Lee?

Lee:Yes, it’s been about two months ago and it was 17 properties.


Preston: Everybody asks me about REOs, so I figured I’d bring him online with us to pick his brain and see what’s going on. So Lee welcome, everyone is giving you a standing ovation. How does it feel?

Lee: It feels great. It’s wonderful I’m loving it.

Preston: Why don’t you briefly tell everyone your story, where you’re from, how you got into real estate, whether your family is broke, poor or rich? Was everything handed to you on a silver platter and that type of thing, fill them in?

Lee:How much time do you want me to condense it to?

Preston: A few minutes, I have a bunch of questions for you.

Lee: I’m originally from Ireland. I was born and raised there. It’s interesting, not only are we talking about nationally, but this is internationally, I actually flipped my first house in Ireland. The boom was going on there seven or eight years ago and I was still living there at the time.

I bought a condo and the real estate market was so hot I put it right back on the market and sold it for 50,000 Euro more than I bought it for while I was living in it. I moved out in a couple months, so for me that was a life changer.


I’d been working 10 Euro and hour jobs, which back then was like $15 U.S. an hour then suddenly I made $50,000 in one day. For me that was life changing and that’s when I said I have to get into real estate.

I ended up saving that money and moved to California to finish my Masters. Then I decided, why work a job when I’m at school, when I flipped a couple houses. So I found a mentor out there, someone I attended church with so I talked to him because I heard he flipped houses and I asked him about flipping houses.

He said you need to find something below market value. You need to calculate $5,000 to $10,000 for just cosmetic repairs. The market then was hot, so you knew what you were going to sell it at, so he said you need to minus $30,000-$35,000 off it and you’ll make $20,000 hands down every time.

I said that’s easy enough, so literally I sat on the MLS for four months every day looking for a house. Every time I was out of class I was looking for a house. I went back and forth between class and looking at the MLS until I found my first flip.

I was scared to death, but I put down my deposit, things closed and actually I took down a hard money loan. I’d saved the money from the condo flip and had enough money to put down and get a hard money loan.


It’s a funny story. I moved into this house, which was located in San Bernardino, California in the worst neighborhood you could imagine. The first night I walked outside there was a guy with tattoos all over his chest right outside my door. I thought, oh no what have I done?

Preston: You attract thugs.

Lee:He ended up becoming a good friend of mine, as it turns out, he was an ex-gang member and not a current gang member, which goes along with ‘don’t judge a book by its cover.’

Anyway, I flipped that house in about three months. I put it on the market in June when the summer school term was about to start, got 50 people to go through it the first day and in four hours I had the thing sold. I ended up making $40,000 on that house.

Preston: This was in California?

Lee:Yes. Things were hot about six years ago out there. This is where I made mistake number one. I got too big for my boots and ended up moving to Tampa. I said I’m that good I’ll flip a house from Tampa and do one in California.

So I rehabbed a house in California from Tampa that turned out to be a complete disaster. It was only because the


market was good that I scraped out a $10,000 profit and I got out of there. That was right before the market tanked.

So, back in Tampa, five years ago I was wondering what was going on here?

Preston: Before it tanked in California right?

Lee:Yes, their market tanked about six years ago. It was just topping off and then started to dip. We were selling stuff in the hood for $200,000 it was insane small houses and other crazy stuff.

So I came to Tampa and again, I met someone from the church I attended and found one of my friends father’s bought at the foreclosure auction. I asked him to teach me about the foreclosure auctions. He said, I only go once in a while, but he gave me the address and that was good enough for me.

It was all I needed to get started. I started going to the auctions, sat there for two weeks straight, watched what was going on and if you’ve never been to a foreclosure auction…it’s just a poker game with houses…that’s it.

Everybody there is playing a big game. It ends up where most of them know each other. It’s a big setup and it’s like playing a game of poker.


Preston: You used to do a lot of stuff at the auctions right?

Lee:That was all I did for two years that’s it.

Preston: Didn’t you…?

Lee: I know what you’re going to say and the answer is yes.

Preston: Didn’t you and stick boy, the short sales kid have a run in at the auction? Isn’t that how you all met?

Lee:Yes, that’s true let me jump into that story. How I met Nathan the short sale kid, I ended up buying a second mortgage– this may be high level stuff– at the auction and he had already bought the house, but had only paid off the first and third mortgage.

He hadn’t paid off the second mortgage and that was the one I bought at the auction. Long story short, I get to the house, I’m drilling out the locks with a locksmith and he’s calling the cops on me as well as his attorney and the whole thing became a huge mess.

My first meeting with stick boy was in court over a huge claim. We’re talking nearly six figures and that’s how I met Nathan.

Preston: I’m glad you all kissed and made up.


Lee: I actually ended up winning the case. We did and it was interesting, because I won the case and he didn’t like me for a while, but then he met me at the auction a few months later and realized I wasn’t a jerk.

I didn’t know him from Adam, we’d never actually met until we got into court and at that time he was just a name on a piece of paper.

So I flipped houses for two years and then I started getting into the pre-foreclosure stuff, because again there was still equity in it.

Preston: Lee, real quick comment about…I met with some guys the other day, because we were looking at possibly putting a big auction site together. What they do is they go into counties and take all the foreclosures off the steps and run them all online.

They have a ton of counties throughout Florida and southeast where the counties no longer hold auctions, it’s all online.

Have you heard anything about that trend?

Lee:No.

Preston: According to them, within the next couple years there will be no more courthouse auctions.


Lee: I can see it heading that way, because even the tax deed sales, all the information is online and you can do a lot of stuff that way, so it doesn’t surprise me that it could be heading that direction.

I actually only got out of the auction game about a year ago, because there were a bunch of duds, nothing actually sold. It was over leveraged and that’s when my eyes were opened where I realized the best deals are after the auctions.

Preston: You were telling me once the guys at the auction and I know many people listening don’t know a lot about it, but might be tempted to try it at some point, didn’t you tell me something about a good ole boy network. Most of the regulars down there all fix prices and stuff like that?

Lee:Absolutely. I’ve been to auctions from California to Florida. I’ve been in two states on the opposite end of the country and I can tell you it’s the very same.

In fact, the circle was so small in California I couldn’t even butt in. They all knew each other. It was like these guys with Hawaiian shirts you see at 3:00 am that was all those guys at the auction.

Down here in Tampa, everybody knows each other, yet they pretend like they don’t which goes back to the poker game thing. You’re basically swimming with the


sharks. These people know each other. They send in dummy bidders. They bid up properties to try and screw people over.

For any of you out there who think you’re hot stuff and want to go to the auctions, make sure you get a mentor or someone that can teach you about what’s going on. You can lose your shirt at an auction.

Preston: Interesting.

Lee: I can give you 10 reasons why I stopped going to the auctions when we get into this, it’s because REOs are so much better. I get excited just talking about them, because they’re so much better than auction properties that there’s no comparison.

It’s great.

Preston: How so?

Lee: I did foreclosure auctions and got into pre-foreclosures making a couple good deals and quite a bit of money where people were in foreclosure and had equity. I said I’ll stop your house going to sale, give you (x) amount of dollars, give me a deed we’re done and that was a good gig.

Then, even that began to dry up a little bit. I couldn’t depend on my paycheck each month coming from just that. One


of the biggest mentors in my life, which is a guy who lends me money said Lee– actually before I got into buying REOs I was buying from other wholesalers– he said to me one day you’re an idiot.

That hurt me. This is my hard money lender talking to me now, my greatest mentor telling me I was an idiot. I said, what do you mean I’m an idiot? I said I’m making plenty of money. I’m doing great. I’m buying all these houses from wholesalers.

I’m doing well and he said you can buy them straight from the bank. I asked him what he meant. He said, these guys aren’t doing anything they put these things under contract and call people like you, make $5,000 or $10,000 grand and go on to the next deal.

He said why aren’t you doing that? I stood there and said I don’t know. He said you might want to think about that. This guy is brief, to the point and then he’s on to the next call. He’s a multi-bazillionaire so when he talks I listen to every word. I said I have to think about that.

Then about a year ago Preston I went back to the drawing board and said, I need to analyze what I’m doing. I found that auctions weren’t that good anymore. They’re good sometimes you might get one deal a month. Pre-foreclosures are tough because no one has any equity


and I said these wholesalers are charging me more for the same property I could buy myself.

That’s when I decided to get into the REO game.

Preston: Did you get into short sales at all or no?

Lee:Absolutely. I get into short sales. I actually kicked off the REO game and short sales at the same time. Nathan was actually my mentor in short sales. He taught me all about it. Having the short sale kid hold your hand and show you how to do short sales is awesome.

I started both of those businesses at the same time and it’s been the best decision I’ve ever made in my life.

Preston: You mentioned 10 different reasons why REOs are better, were those the reasons that you just listed there?

Lee:Sure. I’ll give you the reasons right now.

1. You buy something at an auction you don’t know what condition the title is in.

For those who don’t know what I mean, you could have liens, back taxes, prior claims; when you buy something at auction, you can have someone come swipe it two weeks later. I had that happen to me.


In the middle of the night these attorneys would put together a case that I didn’t even need to show up to. They’d swipe the property from me, I would realize two weeks after the auction that I didn’t even own a property. If you want to talk about a cutthroat game, try to buy properties at auction.

It was ridiculous. If you buy a property from a bank you get title insurance and everything is clear. If there is a problem you can always see the title company, which is why you have title insurance.

2. The seller pays all the closing costs.

When you buy from a bank they pick up all the closing costs. For those of you who don’t buy in bulk, by the end of this year I’ll have done over 100 houses.

So, if you’re saving $2000 to $3000 on each house on closing costs do that times 100 and that’s the kind of money you save by buying bank owned properties over auction properties.

3. You get to go look at the house before you buy it and you get 30 days to close.

At the auctions, you’d have 50 properties go on the auction block and only three would sell, so until we got the last update two hours before the sale, I wouldn’t go look at any houses until two hours. So I would look at a


house for five minutes, then buy it and not know if I have clear title on it.

It was a ridiculous thing. I was lucky I didn’t get killed.

Preston: That’s crazy.

Lee:With a bank owned property you go look at it, put it under contract and you have 30 days to close, so that’s another reason for REOs.

On top of that, you have time to sell it.

At an auction you have to pay cash for the thing the next day. Again, with an REO you have 30 days before you have to shell out any money, which is plenty of time. Preston, you know as well as I, 30 days to wholesale a house I mean, if you’re buying something right, could you sell anything in 30 days?

Preston: What happens if you don’t find a buyer?

Lee:There are a couple different options. You have to weigh short-term versus long-term. It’s easy and I could show anyone how to get out of a contract; there are multiple loopholes, but the best one is the closing date. Banks never close on time.

So what you want to do, if you pick up a dud, the day before closing you email the bank, let them know you’re ready,


willing and able to close. You’re not asking them for specific performance you’re just saying if they don’t close tomorrow that you want to be released from the contract.

Then you send them another email at five minutes to five on the day of closing saying, I’m ready willing and able to close, I’m no longer asking for you to close I’m simply stating I want out of the contract.

That is your ticket to getting your money back every single time, because banks never close. They’re so disorganized Preston. I would say nine times out of ten the bank doesn’t even close within a week of when they say they’re going to close.

Preston: Really!

Lee:Absolutely.

Preston: Interesting.

Lee: I’ve done enough properties I can tell you, on average that’s about it, nine times out of ten whatever my closing date says isn’t when they want to close because they’re not ready.

So you have 30 days and if you pick up a dud you can still get out of it.


Preston: I think the majority of my subscribers and people listening to this call, while many have never done anything, but the people that have I think they would be coming from the perspective of wholesaling versus REOs.

Lee: I don’t think it’s a, versus it’s just another subset of wholesaling, but it’s a double niche.

Preston: It’s another avenue…we’re even trying to do REOs now. I’ve been strictly regular wholesale for years now and because the market has turned we see the value in doing and trying these different things.

Lee:Right. When you have a seller that doesn’t care about the value of their house they’re simply dealing with an asset and a piece of paper. So, when you’re looking for a wholesale deal you’re looking for a motivated seller right? Well you got one.

Everything you look for in a good wholesale deal the banks have, because you pick and choose the house you want and you get it at the right price because the banks are so motivated. Every day they’re more motivated than they were the previous day to get rid of these assets.

So it’s the perfect storm for someone getting into real estate.

Preston: I think the big thing I hear out there as far as reasons why they steer clear from REOs is more perceived risk.


You mentioned one way to get out of a contract, which I think is one of the big things.

Give the listeners a couple other ways to get out of a contract if need be. Do you use inspection periods…?

Lee: Inspection periods are the biggest thing. Plan ‘B’ is the closing dates and then plan ‘C’ is just eating your deposit, but we’ll go back to plan ‘A’ and talk about that.

Most banks, even if you write zero inspection period, what happens for you that are unfamiliar with this process is you send in an offer and if they’re 99.9% sure they’re going to take it the real estate agent will send you addendum’s.

What’s funny is, the addendum’s clearly state that they override the contract and nine times out of ten, the addendum will say 7 to 10-day inspection period.

So, even when you put zero to get your offer accepted they’ll send you an addendum that overrides your offer and tells you that you have 7 to 10 days to inspect it.

Preston: You sneaky little…hold on let’s not go off topic, is that one of the tricks to getting your offer accepted is by not having an inspection period?


Lee:Absolutely. I can run down several things that will get your offer accepted every single time.

Preston: Let me make a mental note to come back to that, so we can continue with the ways to bail.

Lee:As I said, inspection periods and closing dates are the biggest ones. There’s another one, which I’ve actually developed a couple myself, just thinking out loud in what way I could do this.

The big thing is vandalism.

Folks you’ll find out that again, 90% of the time, the property will be vandalized in some way shape or fashion, especially in Tampa.

If the property is vandalized, although you’ve said as is where is, as long as you take a picture the day you put it under contract you can find something different.

Usually it doesn’t have to be materially different, but different in some shape or fashion and that’s another way to get out of a contract, because it’s not the same property you put under contract. That’s more of a technicality and a bit of a gray area, but it can give you a legitimate reason to get out of a contract if you need to.

It’s like having a tool belt you don’t use the same tool every time. You pull out a different tool depending on


when you need to bail, but the key with REOs is to look at the property or have someone look at it.

In my case, I have someone that I’ve trained to look at the properties and you don’t have to pay them very much.

Preston: So you have a checklist of things for them to go through?

Lee:Absolutely. They look at the street, the neighbors and when I say neighbors I’m talking about five houses.

The one directly across the street, the houses across the street on either side and the houses right beside, so I look at the five neighbors, which is an important key to whether I buy and sell a house.

Preston: What are you looking at with them? Do you talk to them?

Lee:Yes I do. A lot of times my people will talk to them or if I’m out there myself I will talk to them myself. What you’re doing is evaluating whether they’re all rentals; because again, you can buy the same house on the next street over if it’s surrounded by owner occupied houses.

You can pay a $5,000 or $10,000 premium because the person who buys it from you isn’t going to keep it as a rental they’re more than likely going to flip the house.


If you’re surrounded by rentals your buyer will be a landlord, so you need to buy it at a price where you can flip it to a landlord.

That’s a big decision if you’re buying. A lot of people don’t think about doing that, but that’s huge. You can buy literally the same zip code, less than 100 yards from each other and depending on the street you can pay a completely different price then what you would for the next house just by the street.

Preston: How could you possibly know that just by looking at the comps without going over there?

Lee:That’s where you have to train someone you know that’s motivated and you pay them for every successful deal you buy.

You can pay them a little gas money to keep them going, but you always want someone in your corner who’s working for you and with REOs you have a two to four week turnaround.

So as soon as they’ve been working a month they’re going to start getting paychecks. You always want to look at this stuff, unless it’s a killer deal, which may be contradictory.

But, if it comes up – and you’ll see when you get into this – about once or twice a week you’ll see a property


come up for half the price of every other property you’ve seen in that area come up.

Those yes absolutely put in a blind offer, but what you always do is call and get the lockbox code first.

You might wonder why you would do that and the reason is if they see a blind offer do you know what they’ll do? They’ll use your things as basketball practice in their trashcans, because they know you haven’t looked at the property and they won’t submit to your offer.

So once you call for the lockbox it legitimizes your offer, because they believe in your mind, even if you haven’t looked at it that you have looked at it and they will accept your offer as being a legitimate offer.

Even on a killer deal always get the lockbox code then submit your offer about 30 minutes later, so at least they think you’ve looked at the house, even if you haven’t. So there are a couple more tips for your listeners.

Preston: What’s one more way you could get out of a contract, if there are any?

Lee:Depending on how the contract is written you an actually sneak in a contingency like, you could hand write in something but that’s just being a little dirty.


Think about it. How many deals are you going to do with that particular agent if you threw something extra into the contract that no one knew about?

Yes, you can get your money back, but is it worth getting $1,000 back and giving up $100,000 of business with one agent that you get along with really well.

My top agents are worth $100,000 each, so for me it’s not worth it.

Preston: I happen to know that most of the deals you do, if not all, end up going through.

Lee:Do you know why they go through?

Preston: I’d like to know.

Lee:Well, unlike other people, if you’re getting into a game where you’ve got lots of competition, the key is to do something one-step better than everyone else does it.

Preston will go along with that because he’s doing what a lot of people do, the difference in what Preston does and what other people do is, he’s taking wholesaling to another level. He’s systemized it. He’s thought about it.

He’s gone back to the drawing board on wholesaling 101, saw the stuff other people do and thought about how to make it better and that’s what I did with REOs. I


said what aren’t people doing? People are sending in blind offers.

I watched all these wholesalers they would never look at a house. They’d never see what they were buying.

Think about it, if you’re a real estate agent and you got a buyer like me who closes about 98%...there are only two houses I’ve backed out of this whole year out of 100…so if you have a 98% closer and you have a 20% closer whose going to get your deal?

Me, every time; every time hands down you can’t compete with me and that’s how you create a competitive advantage, because you do what you say you’re going to do.

So although you can get out and everyone is allowed to screw up, you don’t want to screw up on a continual basis, especially with a big heavy hitter REO agent.

Preston: There’s a bit of delay with this software that we’re talking on, so I’ll think you’re done many times and we’ll cross each other in talking. Go ahead.

Lee:All I wanted to say, was you don’t want to get on the bad list with an REO agent that’s a heavy hitter. You’ll find in any city, the heavy hitters are going to work for a select group of brokers. So you may have two to five heavy hitters working from one office.


If they say Preston is a jerk, Lee Kerney is a jerk and you screw them over on several deals than you could be out in the cold, but I can also teach you how to get back in.

Preston: Before we get into that, how to get into the realtors inner circle and everything I want to make sure we cover all the objections anyone could have to flipping REO properties. I know what they are.

Lee:Give them to me.

Preston: One would be, Lee I don’t have that much money I can’t afford to lose deposits. I’ve heard REO deposits are non-refundable.

Lee:Again, I just gave you four reasons to get out. If you’re new at it and you realize in the first 10 days whatever your inspection period is that you can’t sell the house immediately, call in your inspection and say I can’t buy the house.

Preston: So those give you your deposit back?

Lee:Absolutely, no problem. However, even before you do that Preston, what you have to do is evaluate what your buyers want. You’re trying to eliminate screw ups, so you have to go back to the beginning of your process.


In other words, I could put 10-$400,000 houses here in Tampa under contract that, are worth a million dollars. Do you know how many of them I’ll flip? Maybe one.

You have to know what your buyer wants to buy. You have to analyze your market, see who’s buying cash and what they’re buying.

Here in Tampa it’s three/two’s and four/two’s for rentals. Now that I know that I’m already buying a product that I’ve got a demand for, so I know it’s sold before I even buy it.

That eliminates the fear and you’ll become more confident, because you’ll know you’re buying a product that people want and that’s the key.

Preston: I think I forgot to mention to everyone listening that Lee does a majority of all this and it could be 100% if he wanted it to be that way without any money, credit or anything.

We’re not just talking about wholesaling REOs. What we’re talking about is flipping REO contracts. We’ll get into the technicalities of it, but my point is that it’s the rare occasion where you actually close on these deals with your money, correct?

Lee:Absolutely. The times I do close on it is if it’s one of my heavy hitter agents, even if it’s not the greatest deal in


town, the key is you always want to buy property you can do something with. In that case, I’ll call my hard money lender, which is very rare and say I want to do this one.

I might have to throw in a few dollars or sit on it for a few weeks before I wholesale it, but if you have a relationship with someone it’s worth closing on those properties. Again, that’s very rare.

As you get more proficient at this and if you’re learning from the mistakes I’ve made you won’t screw up like I did. The first month I was putting offers on everything, getting everything accepted and I didn’t know what I was doing.

Once you realize what your demand is and what your buyer actually wants you’ll be buying, so all you are is a middle man between the seller and your buyers.Therefore, you know what they want every time. You’ll be calling them every week or your assistant’s calling them, what are you guys looking for this week? They tell me what I want and I go buy it. What could be easier than that?

Preston: I get this question a lot, how do I flip REO contracts? How do I assign an REO contract…what they’re really asking is how do I flip an REO deal? What they’re saying to me is how do I flip an REO contract, because they know the banks don’t allow assignment contracts?


Lee:Absolutely.

Preston: If you’re listening to this and for some bizarre reason you don’t know what it is I teach people to do it’s to put property under contract and then assign the contract allowing someone else to close. Banks won’t let you do that in the typical standard way of doing things.

It’s kept a lot of wholesalers out of the REO market. Lee you’ve somehow figured a way around this, so how do we do it?

Lee:Yes. You want the nuts and bolts; you really want to know the down and dirty, how I actually do it from start to finish?

Preston: Yes, where someone should be able to hang up the phone and give it a whirl tomorrow.

Lee:Okay I’ll run through it from start to finish. I’m going to give you two ways to do it. I’ll call the first one… ‘adding a party to the contract’ and then I’ll give you the double close way. Let’s start with the first way.

Adding a party to the contract

What happens is I’ll get the contract. Let’s say it’s my personal name, which is no problem. So it’s Lee Carney and the seller is the bank, so after five days I’ve found a buyer; Preston is my buyer. So I say to Preston,


normally I sell these deals net and it’ll cost you $1,000 in closing costs.

Then after I agree to a purchase price with Preston I’ll say, how about we split the difference? You pay me $500 more and I’ll get the bank to pay all your closing costs? So Preston will be like, cool.

So I call the bank/title company and say I need to add Preston to the contract. I’m not removing my name, I’m not releasing myself from liability, all I’m doing is adding Preston’s name to the contract. You’ll find more than half the time they’ll let you do that.

Then your next question would be why would the buyer want your name on there if he’s buying it? You do a quick claim deed at closing, so you buy it in Lee Carney and Preston’s name, I sign a quick claim deed to Preston at the closing table and then Preston owns the property by himself and got the bank to pay his closing costs.

Preston: In all honesty I was expecting to hear something completely different. As I’m sure you know there are a couple other ways to do it, but honestly I’ve never heard that way ever.

Lee:That’s the way to do it and I’ll tell you something else.

Preston: So you’re saying that works 50% of the time?


Lee: I would say more than half the time that works, but it’s not 100% of the time.

Preston: Is that your preferred way of doing it?

Lee:No, that’s what I do on high-end houses. Think about it. You could have $6,000 of closing costs on a $300,000 or $400,000 house and if you can get your buyer on there and save them that cost or split the difference then you can add $2000 or $3000 to your bottom line.

Why wouldn’t you want to do that, for a phone call or sending an addendum to the bank, it’s as simple as that? The bank still wants you to sign, because they don’t want to release you from liability, because they want to hold your deposit that’s why they won’t let you assign a contract.

You can always add someone on. Again, more than half the time in fact, I’ve heard of other people that haven’t been able to do it, but I personally have never had a problem adding someone’s name. Again, if there are a couple thousand dollars to be made it’s worth doing, if not you can do it another way.

My preferred method is the double close, which I’ll run through, because there’s a lot of misconception about simultaneous and double closings, so I want to explain this because you said you want folks to get off the call and understand just what I’m saying.


The Double Close

This is not a simultaneous close. Again, some people might say you’re an idiot or you don’t know what you’re talking about, but I do. There’s a big difference. A simultaneous close is not disclosed.

In that transaction, the party you’re selling it to does not know their funds are being used for the first closing.

Again, state by state you may have to tweak this a little bit, but here in Florida I can tell you specifically; I’ve even had attorney’s review this, my contract in the way I do business is quite legitimate.

Preston advised me, before you get on the phone with all these people I want you to tell me stuff, in other words if you have to keep it a secret don’t tell the folks, because you shouldn’t be doing it anyway.

I made sure to double check everything and it’s all legitimate, but here’s what happens.

I have the contract with the bank. We’re take a simple example of $50,000, so at the closing table I actually get the bank to email me their closing docs and here’s what you need to do.


Do not meet a closer from the bank. Tell the bank you can save the $150 you’ll pay a mobile closer and email me the docs. Let me tell you, every time they will email the documents to you.

There’s actually only one bank I’m aware of that won’t and that’s either Fannie Mae or Freddie, because they like to sending out a closer and in that case you just have to tell the closer beforehand that you’ll be wiring in the funds.

This is important! You’re wiring in the funds you’re not giving them a check, because you can’t do a double close if you have to give them a check, because you can’t do your closing with your buyer until you’ve closed with the bank.

You want to know from start to finish how it’s done, if the bank emails me the closing docs do you know what I do? I click the forward button and send it to my title company. Therefore, my title company A to B docs, which is the bank to me and then my title company prepares the B to C docs, which is me to the end buyer.

So what happens is, I come in, I sign the bank docs with my title company, because remember the bank emailed them to me so they don’t care about the closing they just want their money.


Then I turn around and sign the ‘B’ to ‘C’ docs and my title company gives my end buyer; we’ll call a title commitment, which is like title insurance insuring the title and on that policy it clearly states your funds are being used to fund your sales transaction with the bank.

Preston: Do you go out of your way to tell them that?

Lee:Yes, I go out of my way to tell them that. I make it a point to tell them that, because there’s no fraud involved this is full disclosure. My title company has them highlight and initial the paragraph that says what we’re doing with the funds.

That way there’s no misappropriation and what happens is, I sell it for $60,000 so $10,000 goes to me and $50,000 from the second closing goes to my first closing, which is wired in and as long as the bank get’s their money by the next day or even the day after then they won’t even question the deal.

When you wire in the money, which is another tip people don’t realize, you can buy up to three days by wiring in your money. You can close on a Friday, wire in your funds by Tuesday and still be okay, which is Friday, Saturday, Sunday and Monday, Tuesday almost five full days.

That’s another tip for you all and I know I’m jumping around a little bit Preston, just remember it’s always good to close on a Friday because you can buy yourself an extra


few days if you need them, if for some reason you can’t line up your closings within a day of each other.

You can have you ‘A’ to ‘B’ on Friday and then do your ‘B’ to ‘C’ with your buyer on Monday. That’s another tip for your listeners, always line up your closings for Thursday or Friday.

That’s pretty much it Preston, there are no big secrets.

Preston: Let me ask you a question then. What are your thoughts, because obviously there are two other ways to do it, so what are your thoughts on, some people will set up an LLC that whole thing and then they’ll sell ownership of the LLC, what are your thoughts on that?

Lee:Obviously, Preston I’ve known you for a while and…

Preston: Explain to them briefly what the process is and then you’ve also got putting it into a trust and selling the beneficial interest in that.

Lee: I’m going to tell you what’s wrong with that.

Preston: Run through exactly what it is and why you would or wouldn’t do it.

Lee:The two methods I’ve used guys are the only two methods I use. I’ll run through the two Preston suggested. This is Lee Carney’s personal opinion of why I don’t do them.


First, Preston suggests you could set up an LLC and that’s correct. First of all, time and money, you’re probably talking $150 to $200 to set up an LLC.

Then on top of that you have to wait for a Tax ID number, which by the way you don’t get straight away, so typically you have to do it a week or two in advance.

A lot of times they won’t issue you your Tax ID number straight away. Then what Preston’s saying is, you buy it into XYZ Corp, LLC and it never leaves that LLC, because you change ownership of the company from you to your buyer.

So it’s like a trust in that – basically, it’s a cloak that covers the property– then the ownership changes hands within the company.

Two things about that; one is it makes buyers a little sketchy and two you’re going through a whole lot of work and I don’t think the results justify the work going into it, which is why I don’t personally do that.

Preston: So you all have to understand why it is that all these strategies exist in the first place. We’re trying to get around the fact that the banks won’t release the buyer on the contract. Whatever name is on that contract they want to see that person close.


These are just different ways you could possibly go around it, but I like what you’re saying in that we’re going to pick the easiest way out of all of them, because as you know that’s how we do.

So too much work... too much hassle, not efficient because you have to wait and we don’t like waiting.

Lee:Let’s talk about in reality Preston can you imagine my situation that would mean me setting up 100 LLCs this year? If you want to put it in reality that’s what I would have to do.

Preston: There ought to be some weird tax implications in all that too.

Lee:Absolutely. Think about it. If you ever wanted to get audited by the IRS go ahead with your social security number and set up 100 LLCs and shut them down or change ownership in them that’s a sure way to get audited.

Preston: Okay, scratch that one. What about the trust, the idea that people will contract in a trust and instead of assigning it they would sell their interest in the trust, etc. why don’t you like that one?

Lee:The reason I don’t like trusts is because; you’ve seen it over the years Preston, you get these buzzwords in real estate like flipping, wholesaling, rehabbing and wholesale has been around forever.


What’s funny is, until you came out and started telling people about it, everyone else was doing it in the background and they were making so much stinking money at it they just didn’t tell people what they were doing.

Trusts have been around forever, but then everybody started using them and then do you know what happened with trusts? Banks started scrutinizing them.

Preston: Really?

Lee:Absolutely. So you buy the property in ABC Land Trust, you sell to your buyer in the ABC Land Trust, when your end buyer goes to sell, a lot of time banks are going to scrutinize the deal up and down when it’s a land trust selling it.

So what’s going to happen is you’re going to end up castrating your end buyer, because they’ll buy this thing in a land trust and then have trouble selling the property on their end sometimes, because their land trust is being scrutinized and they’re not going to buy properties, off you.

Preston: Then you have to think there are a lot less buyers for the land trust, because a lot of savvy buyers will know they don’t want to do that?


Lee:Yes. Land trusts throw up a red flag and that’s another sure way to get audited. The short sales kid will tell you that as well, because when we started doing short sales, trusts were rampant.

We were all buying and selling in trusts and that will pretty much put the nail in the coffin for land trusts, because it throws up a huge red flag.

So you all want to try and stay under the radar, try not to ruffle any feathers, do your deals, have them go through every time and not have any bumps in the road.

My personal opinion is that by sticking a land trust in the middle of it you can certainly change ownership 50 times within it, but when you’re going to sell to a buyer that’s got financing, because eventually all these properties are being sold in some shape or fashion to a buyer with financing.

Most properties it may take a week, a month or even a couple years, but they’ll eventually end up in a finance buyers hand and land trusts complicate the deal.

Also, from a liability standpoint you’ve got a trustee and again, without getting too technical Preston, you have to have a trustee of your land trust.

So let’s say you use Pete, the ninja as your trustee, when you go to sell that to someone else, not only do you have to


change the interest of you being the person who gets the money out of the trust, but you have to change the trustee as well.

Then what happens is it shows up in public records, you’ll have to flip it; do you think your end buyer wants Pete being their trustee? Do you think they want Pete calling the shots in their trust? No.

Then you have to change the trustee and again, when you do that in public records it actually shows up as a flip, because the property is actually recorded under the trustee, so even though it’s the ABC Land Trust, whoever the trustee that’s the name that shows up on public records.

Therefore, as soon as you change the trustee you flip the property and – I’ve had this happen – so I’m not talking out of context, the Treasury Department will actually come after you for selling the property and not paying dock stamps on the transfer.

They’ll come after you for tax on that, because they consider that change of ownership. That’s why I don’t like land trusts. That’s two reasons why I don’t like them– throwing up a red flag and the trustee issue.

Preston: Let’s back up for a second, how are you setting the offers in the first place? How are you determining what


to offer? What’s your strategy there? You have a lot of competition, which is one of the things with REOs.

If I had to guess I’d say you have a lot more competition on an REO deal than a probate deal, so how do you get the offer…okay give me your thoughts on that as far as competition goes?

Lee:Competition isn’t a numbers game. Numbers don’t necessarily mean competition. You can have a quantity of competitors but not have a quality of competitors and that’s what you’ll find in the REO market.

You have to understand, when these agents get offers in from the same 20 people every day that never close and never come through with a deal, do you know what they do? I’ve talked to these people Preston they throw them in the trash, they have fun.

They have games where they throw them between each other and play a game where they’re throwing them in the trash can. They don’t care.

There are people in this town that send in 20-30 offers a day and none of them, not one get accepted. So don’t ever be afraid of your competition. It’s developing a relationship and this goes back to sales 101.

If you all want to get into REOs, which you should and you’d be dumb if you didn’t, what you need to do if you’re not


from a sales background, I would absolutely recommend getting a good sales CD. Learn about sales, because 80-90% of what I do is just being genuine, getting along with people and selling myself.

When REO agents like you they’ll sell you the property, so when the competition that Preston is talking about, when 10 other people send in an offer price goes out the window. The REO agent is supposed to work for the bank, but they deal with people. It’s people dealing with people.

Even if you’re not the highest offer you’ll get accepted and I’m here to tell you, not every offer that gets sent in to the REO agent get’s put into the computer so the bank sees it.

You might be shocked and think that’s horrible it shouldn’t be like that, but that’s reality. If you don’t think there’s favoritism in REOs then you’re not living in the real world.

There is absolutely favoritism going along in this and oftentimes, the one offer will get accepted while the other 19 offers are sitting in their fax machine.

That may shock you but that’s the truth.Preston: I want to get back to this question about how you

compute your offer price, but since we’re here now, why


don’t you lay it on us. What are the ways to get your offers accepted?

Lee:There are several items on your offer. Again, the inspection periods and I told you that trick, on your offer put zero days, but on the addendum they send you it’ll have seven or ten that’s one.

Preston: Why do they send you an addendum?

Lee:On the addendum it’ll actually have an inspection period…because every bank has their own paperwork, so you send in your regular realtor contracts, but they want it on their contract. They never change their contract it’s the most ridiculous thing I’ve ever seen in my life.

Preston: So whereas you put ten days on your contract they might throw it out, but in reality, no matter what they’re giving you ten days?

Lee:Yes. When we do this again I’ll actually upload some examples for you if we do a webinar and I’ll show you what I’m talking about; it’s pretty funny. You’ll see where I put zero and they sent me back ten days.

Preston: So tip number one put zero for the inspection. What else?

Lee:Don’t put $100 or $500, but a minimum of $1000 deposit.


Preston: What do you usually put?

Lee: I usually put between $1000 and $2000. If I think the competition is heavy I’ll put $2000 and at the stage I’m at now and again, you all aren’t here yet and I understand that, but if I’m really 100% hot on the property and I have capital built up I might put $5000 and be totally crazy.

Preston: At what point do you have to turn a check over to them?

Lee:Typically, you’ve got about– before they’ll start blowing the whistle on you and getting mad– you’ve got anywhere from one to five days.

Preston: After they accept it?

Lee:Exactly, but here’s what you do Preston, you don’t give it to the agent you tell them, give me the title companies info and I will overnight it to them. Then you’re controlling your money and that’s the key. You want to control your money, the closing when they email you the docs.

You can control this deal. The agents have their set way of doing it, but if you give them another suggestion, most of the time they’ll go along with it.

The ad agent wants me to give a check to ABC title company. They want to put it in a FedEx envelope and they want to send it off, but most of them don’t care.


You’re saving them $15 or $16 by doing it yourself.

Preston: What’s the difference?

Lee:The difference is, you go back out to look at the property, you find there’s a crack, a sink hole, something silly you weren’t aware of or you just find out you just screwed up on your comps. You had an off day and then you say I re-inspected the property and rather than waste your time and get a refund on my money I’d rather cancel the deal today.

You can even do it the next day too.

Preston: So you put in an offer, but you don’t have to put the deposit down with the offer obviously. You write $1000 into the offer, five days later they call you back accepting it then you’ve forgotten what the property is in the first place, so you look at it again.

They want your money right away, you say no just give me the address, I’ll overnight it which gives you a one to five day leeway, getting the money up there in the first place so that gives you a couple days to evaluate the deal.

Lee:Absolutely.


Preston: So that was one of the days you were not shooting crack. It looks good.

Lee:Basically yes, again you’re trying not to waste people’s time, because an REO agent is going to be less mad at you for canceling a deal and not giving them a bunch of paperwork to do.

As soon as you give a deposit Preston, you’ve got paperwork, because they’ve got to give you a cancellation, you have to sign it, they have to email it to the seller and they have to sign it. As long as no money changes hands you can say get lost I don’t want the house and they throw it in the trash then take the next one.

Therefore, there’s less time being wasted and REO agents hate their time being wasted they hate it.

On that note, when you screw up you’ll want to keep a little fund called the ‘I screwed up fund’ and what that entails is a nice gift certificate. There’s usually a nice restaurant and Preston is aware of this ‘Burns Steakhouse’ here in Tampa.

If I ever screw up on a deal I’ll give them a $200 gift certificate to Burns, no matter what, even if I haven’t put down a deposit.

Preston: You’re in the people business.


Lee:Absolutely and with Christmas almost here you have to be careful. You can’t give them money that’s bribery, but you can send them something nice and typically, my note will say sorry about the screw up; LK.

I don’t even put my name on there, but they know and they probably won’t talk about it, but believe me that $200 could net you another $50,000 in the next couple months, because it sets you apart from others. You’re doing something different than other people and they remember that.

I know firsthand these agents remember that, because they appreciate the fact that you know you screwed up and you get another chance, which is what it’s all about. It’s getting another chance, because everybody makes a mistake.

I don’t care how good you are; Preston, have you ever made a mistake?

Preston: No.

Lee:Okay Preston’s different, but everybody besides Preston has made mistakes so it’s good to buy yourself a second chance.

Preston: What are some other ways to get the offer accepted, to stand out from the pack? You’re dealing with an


industry where you’ve got other investors giving realtors boxed seats to the Bucs games for the season and all this other stuff going on, so how do you get your offers accepted?

Lee:You always follow up on your offer. I can tell you, if you send in an offer on fax or in email…another tip here; don’t fax them email them. REO agents check their emails much quicker than they check their faxes; 90% of them are like that so make sure you have a good scanner.

You want to get the stuff in quick and you get it right off to the agent. Always follow up, give it a couple hours, make sure they got it and at that point that’s how you assess your competition. Let me give you an example of a dialogue.

Preston you can be the agent…I’ll be like hey did you get my offer?

Preston: Yes.

Lee:How am I looking on this property? Did you get any other offers in on this one?

Preston: Yeah we got a bunch of offers, you’re looking mediocre.


Lee:Preston, you know I buy from you a lot and I really want this property. I’ve looked at it, I like it. Am I competing against myself or do I need to do a little better?

Preston: Probably a little better. There’s one that’s a little higher than you.

Lee:Okay, Preston what I’m going to do is send you this offer back in, because I can go up a couple grand on this one. I appreciate it. You know how much business we’ve done together, I’ll make sure this deal goes through because I really want this house.

Immediately then you go back and resend your offer, you’ve got the price and again you have to be creative on how to get the price. Am I hot or cold? How am I doing?

A classic is am I competing against myself? When you’re saying that to an agent you’re asking them whether you’re the highest offer or not, but you’re asking in a round about way, not directly?

Even the staunchest, strictest agents– Century 21 agents– and I apologize to any on the line not trying to be offensive, but you all seem to be the worst they will tell you…

Preston: I was speaking at the IREA connect in Columbus and I was talking about how people need to stop being so scared, I’m not scared of anything and I said I take that


back I am scared of one thing. I flipped to a slide of an army of Century 21 agents with their gold jackets.

Lee: It’s true those gold jackets are scary with their little badges. They have some army training or something.

Preston: I just decided I want to be a Century 21 agent for Halloween; but I just missed it.

Lee:Yes, you’d be good as that. That’s the key, assess your competition but I can tell you and again, when you get to know these people and you’ll be shocked to hear this, you get the properties before they go up.

I know it’s not right but it’s what happens. So I get to look at a property a day before it goes on the market; therefore, the day it goes on the market, the second it hits the market my offer is already at the bank.

It already gets accepted, 50 other offers come in and again, they’re all playing their throw it in the trash game having a good laugh and I’ve already got the property under contract.

Preston: How do you get the realtor to give you the day heads up?

Lee:You have to show an interest in the property. You have to personalize it. You know how to do this Preston. You


know how to make something exciting. You’re excited about life and this is what you have to do.

You’re like man I love this house. I want this house so bad. This house is the best thing since sliced bread I can’t believe how cool this house is. They might think you’re retarded but I guarantee you you’ll stand out in their minds.

Preston: It sounds to me like a big component to getting these deals is getting the REO agents to simply like you.

Lee:That’s exactly it Preston, you’re not buying from a bank you’re buying from a person. Once you understand that you understand it is personal and as much as people say it isn’t, it is, because you are a person who’s buying from another person.

The bank is just selling you a piece of paper, but the gatekeeper to the bank is the agent, so if the agent doesn’t like you then you’re out in the cold. You can forget about it, you’re not going to buy anything so you can be like one of those people I told you about earlier.

They’re sending 30-40 offers a day in they’re getting nothing and they have the personality of a wall, which is why they don’t get anything. They’ve got no personality no one likes them, no one dislikes them, but no one remembers them because they’ve got zero personality.


Preston: Everybody here needs to write this down. Get this book and read it called The It Factor. It’s something like, how to be the one that everybody knows likes and wants to do business with or something like that.

Lee:You’re right Preston.

Preston: You’re welcome. How do you get to the point where the REO agents are calling you ahead of time? Somebody out there who doesn’t know a single REO agent, he’s fresh in the game hearing this, he wants to get going, he wants to somehow get an edge and make offers.

How do you break into the circle?

Lee:A big edge for all you newcomers to the REO game; don’t collect commission, even if you’re a realtor. Let me break it down for you.

There might be six percent of a $50,000 house is only $3000, so think about it, if you’re using an agent…I’m a licensed real estate agent and I’ve never collected a dime of commissions on REOs.

So, on a $50,000 house if I collected $1500 the agent is going to make $1500 and on top of that they have to pay out what’s called referral fees, because they get their properties through referrals they’ll have to pay out anywhere from $500 to $700.


So if you take their commission they could make $700 in a deal, how motivated is an agent going to be to work for you for $700? Not very, you represent yourself as a cash buyer that never collects commission. I always say it to them like this; I will never take your money.

That’s going back to the ‘it’ factor and what Preston’s talking about. You’re personalizing and saying this isn’t some weird nemesis of commission out there in outer space.

This is your money, I know it’s your money and I’m not going to take your money. I, Lee Kerney will never take your money. That’s how you get your foot in the door.

Because these people who have been doing it for a while, the REO agent feels stupid if they ask them not to collect commissions. You might think I’m joking, but these buyers buy them seats at the Bucs stadium, but they’re skimming $1500 to $2000 off each deal from the agents.

Do you then think it’s hard, if you’re waving an extra $2000 per deal in their face to stop doing business with someone they’ve dealt with for the last three years?

Preston: What if you’re not a realtor then how can you play that card?


Lee: Just say I’m going to come to you direct I’m not going to come through my realtor because I want to work with you directly so you can keep all the commissions. It’s just a different slant on…

Preston: Would you recommend somebody who’s not a realtor to become a realtor?

Lee:That’s a great question I’m glad you asked. The only advantage to that Preston, because people are going to wonder well if you’re so successful as an investor why are you bothering being a realtor?

I hate realtors. I’m a realtor, I hate realtors. I don’t like showing houses. I will never show a house. Everybody knows where the bathroom and kitchen are. Let yourself in and show the house yourself that’s not what I want to do, but I get access to information and that’s the key.

As a realtor you have real time access, so if you’re not a realtor you’ll have to partner up with a realtor to get access to the MLS, but I know people doing this business that have developed good relationships with people that have never looked at the MLS in their lives and are flipping REO properties, because the agents call them every time they get something, so they don’t need the MLS.


So, whether you’re a realtor or not, you can start it both ways, but you’ll have to go back to sales 101. If you’re not a realtor you’ll have to go into their offices, find out who the heavy hitters are in the REO business, meet them personally and do a couple deals with them.

Every deal you do with them strengthens your relationship, because you become a more solid buyer in their minds, so my job gets easier and easier every month I’m doing this, because my reputation precedes me. It’s not like the last deal I did it’s the last 15 deals I did with someone or the last 20 deals I did with someone.

That’ show you have to do it. You have to invest in people in the beginning and you’ll get a lot of rewards at the end, because you’ll get preferential treatment. You’ll get those half price properties before they even go in the market, every time.

Preston: So you’re looking at a weeks worth of new REO listings, the new day’s listings or whatever, a bunch of REOs regardless. What would be some reasons why you wouldn’t bother or, do you not even search the MLS?

Lee:Preston, I’m glad you asked that and you’re right I never search the MLS. Do you know what I do?

Preston: What do you do?


Lee: I get the MLS to come to me. Do you know how you do that? Every MLS has a preprogram search capability. I preprogram my search capabilities and as soon as a property that meets my criteria hits the market it sends me an email. So all I do all day is check my emails.

Preston: How does somebody set their criteria? What should someone’s criteria be? Obviously, it’s going to vary depending on their market, but what are your recommendations for somebody out there – whose like– what’s my criteria?

Lee:That’s not as hard as it sounds. It might take you a week to do this, but you’ll have to figure out what investors are buying in your area.

The reason I say investors is, if you’re trying to do a double close I’ve done them with retail buyers but retail buyers will take all 30 days and it’s hard to coordinate the closing with a retail buyer on the same day.

On top of that, going back to the funds issue, you actually have to bring your funds to the first closing if you’re selling to retail. So knowing you want to sell to cash buyers you need to figure out what cash buyers are doing.

I know Preston has been working with some other guru’s in this industry that can teach you how to figure out who the cash buyers are in an industry. There are courses on


virtual wholesaling and others that teach you how to find cash buyers in a specific area.

Once you find out who the cash buyers are that’s your target range. Let me give you an example. Here in Tampa, the bottom of the barrel is $20,000 and the high end is about $70,000, so that’s my criteria.

Preston: The top end of where you want to be correct?

Lee:Absolutely that’s my target market. I told you I could buy 10 houses for $400,000 or $100,000, but they’re not easy to shift. You want to buy properties that other investors are buying and you have to get into the hot target area.

Your area could be different. You could be in Texas, California maybe it’s $100,000 to $150,000 that’s where investors are buying, but it goes back to what you talked about earlier Preston.

It’s funny they all talk to each other and they all bounce off each other, but you’ll find that investors in any given town are like sheep, because they all do the same thing. It’s amazing; I’m blown away and every investor in the Tampa area does the same thing.

Every investor in San Bernardino where I used to live does the same thing. Investors are like sheep, not that they’re dumb, but they get their ideas from other investors.


That’s their social circle so they keep getting ideas from each other, when they find out something works they keep doing it.

Preston: So their mirror neurons are going off in a big circle?

Lee:Going off, it’s amazing and you know that from your own wholesaling business. You’re pretty much buying and selling the same stuff, because you know what investors want and they all buy about the same thing, but that’s what you have to do. You have to figure out what the investors in your town are buying.

Preston: For you, I remember you saying you like three/two’s, block what else?

Lee:That’s the difference, because here in Tampa if you find out a certain kind of house is a dud, now in your town it may be a shotgun house, a house with no yard or a two-story house, a house with a certain type of roof; you need to interview some investors and figure out what investors don’t want.

If you talk to 10 investors in your town– it’s easy to find investors by the way– just look at those bandit signs where people say ‘we buy houses’. Ask them what they don’t want. Just say can I take a few minutes of your time or ask if you can take them to lunch.


Pretend you’re interested in buying a house I don’t know, if you get their name, number and email you’ll probably end up selling them a property one day anyway. Once you find out what they don’t want you can skip over them real quick.

So when I get 20 emails in a day Preston, I can knock out 15 of them, because I know investors don’t want them. All I have to do is look at the picture.

You’d love this, because you’re like me and you move onto the next thing real quick, but I look at it for two seconds and I know by looking at a house whether the investor will want it.

Therefore, if it doesn’t pass the visual test I don’t even go on to the other criteria. That’s key, you have to find out what investors don’t want; if you find out investors don’t want to buy anything with only one bathroom then that’s your criteria.

Maybe the investors want something with a carport or garage if you’re in a colder climate, so if your house doesn’t have a carport or garage you don’t want it. Every market is different, but I’ve established here in Tampa what investors do and don’t want and I can tell you, frame houses are duds.

Investors will buy them at almost half the price they’ll pay for a block house, so if you don’t know what you’re


doing or haven’t figured out what investors want, you may say I saw this property go for $40,000 and I can buy this frame house for $35,000 that must be a deal.

I’ll wholesale it for $45,000; no, because you didn’t understand your market and you don’t understand that frame houses are only worth half. We’re talking about wood frame houses compared to concrete block, go for half price and you screwed up.

The big part of not screwing up is realizing what not to do and that’s how I do it.

Preston: So you check your emails and you’ve got two houses– according to your criteria it has to be under $75,000– you’re only looking at things listed for under $70,000?

Lee:No that’s incorrect and I’ll tell you why. This goes on to the next thing in the criteria. I list everything under $100,000, but I don’t put in an offer unless I’m within $20,000.

Let me explain. If something is listed at $99,900 and it’s been on the market for a day do you really think the bank will take your offer of $60,000? No. You have to get within the range.

If it’s $50,000 or under I want to make sure I’m within $15,000.


If it’s $50,000 to $100,000 I want to make sure I’m within $20,000.

If it’s under $30,000 I want to make sure I’m within $10,000.

Again, I’ve developed this formula, which you can tweak to your own individual area. Bottom line is if you’re way off the bank won’t take it. In most cases, just so you’ll know, within the first five days banks typically won’t go less than 10%.

However, some banks will and I can tell you this is where you make a lot of your money Preston; this is where I make a lot of mine.

I actually have my pre-program search, not only to tell me when new listings come, but also when price drops come and the best bargain– you can keep a house on your radar– when you get organized with your spreadsheets you’ll say I like this house but it’s not worth $100,000 it’s only worth $60,000.

Other investors are thinking the same things, but 90% of investors have thrown that property in the trash. What you do is you have it in for a price change and as soon as the price drops from $100,000 to $80,000 the bank will take your offer of $60,000 because as soon as it goes over 30 days they’re a lot more motivated.


So by being patient you can have two sets of criteria, one for new houses and one for houses you’re keeping track of, for when they drop you’re the first one in with an offer. With a bank owned property don’t discount it for price, because it will come back around.

Currently, banks don’t just drop the $5000 they drop it $20,000 and $30,000. I pick up at least one-third of my houses on a price drop.

Preston: Wow. That kind of answers the question I really wanted to ask, which was how do you come up with the amount that you’re going to offer?

I suppose you could expound a little more – that answers the question of how you come up with the amount of offer that will get accepted– because even for mine and Pete’s business it’s a struggle sometimes trying to figure out where we need to be to have this thing get sold.

How do you feel comfortable making these offers knowing you’ll be able to sell it? How do you come up with that offer?

Lee:The easiest way to do it isn’t scientific, because to be honest comps have gone out the window. It might be shocking for you to hear, I’m supposedly an expert on REOs and I’m telling you comps have gone out the window, but they have.


They have from the standpoint that investors don’t care about what the comps are they care about what their deal is compared to the last deal they bought. They want to know it’s a bargain. They’re just looking for stuff that’s cheap.

So how I set a price point, now I can do it from experience, but for you just getting into it let me give you an easy way to do it. Find 10 wholesalers in your town, get on the Internet, look at bandit signs, get on their email list and track their properties for at least a week.

You’ll see some with three/two in this area $50,000 okay four/two in this area and what you do is wait for their email, call them one week after they send out the email. You ask why do you do that? You’ll then be able to see which ones they’ve sold.

When you figure out what people have sold– this is for newbies– when you’re experienced you know what the price point is and you know what to put in your offers, but when you’re just starting you have to figure out what your competition is doing.

Once you figure out what they’ve bought and sold you have a good idea, because if an investor lists something at $49,000 wholesalers don’t mark up stuff like crazy, you’re talking $5000 to $10,000 average. So you’ll know what price it’s sold at.


If I know this kind of property sold at $49,000 then I know when I buy that property in the $30s I’ll be able to sell it all day long.

For you, understanding what your competition is selling and they don’t know what you’re doing, you’re like I’m calling about this property and they tell you it’s sold, and you say when did you sell that thing?

They then say I sold it the same day I put it up and you’re thinking they’re really hot so you put a big star behind that kind of property.

They act like they just got a contract on it yesterday and you talk to these people, again its people talking to people, you ask how they did, if they got what they were looking for and carry on a conversation.

Tell them you were going to put in a full price offer and then you hear it in their voice that their ears perked up.

They’re like really, which will tell you they didn’t get very much and probably just dumped the property. You have to be a little creative, find out what your competition is buying and selling and that’s the easiest way to figure out what you need to buy.

Preston: You leverage other people’s experience.


Lee:Absolutely. Why make the mistakes yourself when you can talk to established wholesalers and figure it out in one week what’s taken me several years to perfect at this stage?

Preston: I like that. That’s a really good tip dude.

Lee:That’s how I got into the REO game. Just so you know Preston, what I’m sharing on this call is exactly what I did to get started. I put one of my competitors out of business in about two months by doing this.

People love to talk. People love to tell you about themselves. They love to tell you about what they’re doing and wholesalers love to brag about how many houses they sell, so let them tell you what they sold. Let them talk.

Preston: I just thought of something. There are probably a lot of people listening that are thinking to themselves why does anybody need you to do this? Why don’t these buyers of yours go directly to the banks or REO agents?

Lee:When you focus on something Preston, you do much better. These are passive buyers. Most of the buyers I sell to are landlords they’re not computer savvy people that want to sit on the computer every day and scan through the good deals.

They think it’s hard, but again as you get more experience I glance at the properties I don’t want for two


seconds and I only spend my time on the five or ten houses a day that I think are worthwhile.

So they pay you a premium for finding them a good deal. Everybody knows what I do. Every buyer I sell to knows just what I do. Nine times out of ten they know how much money I’m making so why hide it from them, because they’ll find out in public records two weeks later anyway.

The sure way to shoot yourself in the foot is to lie to your buyer and say I picked this up for $55,000 and I’m selling it to you for $56,000 so you’re getting a real deal.

They then look up public record and see that you bought the thing for $43,000 and you just liked to them so who care; no one cares how much you paid for a house; they just want to know what they can buy it for.

When you have buyers that do just steer away from that say it’s a good deal and that’s what you do.

Preston: What would keep you from making an offer on the leads that come in that fit your search criteria, what would keep you from making an offer on those houses? Is there ever a time when 10 houses come back that meet your criteria and you only make offers on eight of them? Do you ever not make offers on them?


Lee:Yes. If I’m looking at 10 deals that are the same, if there are a couple that look ugly I’ll throw them out. Unless the price is stunning on them I’ll throw them out because they look ugly.

Preston: Curb appeal?

Lee:Yes, because they’ll look ugly to someone else and that’s one way. Secondly, if you know the particular agent again, as I mentioned earlier, agents are the gatekeeper to the bank.

So if you know you’re dealing with an awkward agent in other words, if agent ‘A’ had this property at $50,000 you could probably get your offer pushed through at $35,000.

But, if agent ‘B’ has it then you know he holds all offers for five days and gives everyone a multiple offer contract then squeezes every last dollar from the property.

So you know you’ll never get it at the price you want it so you pass on it. Again, experience will teach you that. Your hit ratio will be much lower at the start, because you’ll be sending out more offers and not many of them will stick to the wall.

Preston I’m sending out a lot less offers every day and getting much more accepted. My acceptance ratio is off


the charts, because I only put in what I know I’m going to get.

Preston: What’s the secret to flipping 16 houses in a month as opposed to two? What’s the difference between the guy who does a deal here and there and a guy who does 10 or 15 a month?

Lee:Organization. This may sound old school to you all, but I have a big board and I track the buy price, the sell price, closing date, how long I’ve got and then every morning I get up and focus on which houses need to be selling first.

Let’s put it this way, if I have a house under contract today that doesn’t need to close for 30 days and I have another house that needs to close in seven days that I’ve had for three weeks, where do you think my efforts are going to go?

The seven days, so you have to be organized and make sure everything under contract within a week before it’s got to close, so you’re not down to the wire scrambling for a buyer. Prioritizing which properties to push is a big part of organizing.

If I send out 10 properties in an email what’s going to happen is people will look at your first one or two that’s just how people are. Nine and ten at the bottom won’t get a


look, so if you need to push nine and ten then you should send an email with only nine or ten.

Go into detail rather than saying three/two block $45,000; say three/two block looked at the street. Looks like an owner occupied street. Here’s a repair list and don’t ever lie to your buyers.

Tell them what’s wrong with the house, because people hate to be disappointed, but love honesty.

When it comes to the description of a house, go into detail about the house and you’ll find by putting a bit more detail, I might have sent out a property last week Preston with no detail, so I’ll put some detail in and I’ll sell it with my following email because I told them more about the house.

Always make sure you have a good picture of the house. I had one property that I’d had for three weeks and suddenly I realized the problem was that the picture had trees in front of the house so you couldn’t see the house.

I went back out, took another picture of the house where you could see it and I sold that property in one hour with the new photo.

Preston: Just from emailing it to your list?


Lee:Yes. That’s a true story. This was last Wednesday I emailed it out, got a contract on it and closed on it Friday, because I was at the end of my rope on that property and couldn’t figure out what the problem was. I bought it right. The area was great and the house didn’t need much in repairs.

I’ve been doing this a while, but even I screw up. I realized my picture was the problem that it wasn’t a good picture of it.

Preston: Is that how you’re selling most of your properties right now is to your buyers list? I know at one point you were leveraging everybody’s buyers list in Tampa just about?

Lee:Absolutely.

Preston: What’s your process for selling properties?

Lee:Let’s divide it into thirds and that would be fairly representative of how I do it. A third of them I sell through my email list. A third I sell through calling my VIP list.

When you get into wholesaling in any shape or fashion and Preston can teach you this, you’ve got to have a VIP list; your top 10 buyers.

Preston: For you is that people who have closed before?


Lee:Yes and I ask them what they want. I know this guy wants a certain area and certain price. Half the time, I’ll get a property under contract and I’ll call the buyer and say it’s done.

It’s as simple as that and that’s a big key, so a third from emails, a third from buying something you’ve already got a buyer from and a third from bandit signs.

This may seem elementary, but it’s the stupid stuff that people think is stupid that works. Bandit signs are fantastic. I have a person that I pay $1 a sign. They go out at night, let’s just say my formula is, if it’s a tough house to sell you put out 20 signs and if it’s an easy house you put out 10.

I surround the entire city block of where that house is with 10 signs late at night and if it’s five houses I’ll pay the guy $50, he’ll get it done in an hour and a half, but even if I don’t sell those people a house I get their emails and I sell them another house.

Preston: Are you still using Shannon to do that?

Lee: I was getting Shannon to do that. I actually have one of my neighbor’s kids that does it now. He’s a little more in need. His dad is in jail so it works out really well.

Preston: If I remember correctly your average flip fee is small, like $3000 to $5000 right?


Lee:Yes, I just ran an average and it was about $4500. That’s after paying out people too. I may get $6000 or $7000, but oftentimes I’ll pay out my partners, people that did work or people that marketed for me. In some cases and this is where you shouldn’t be greedy.

I sold a property last week. The wholesaler that sold it for me made $12,000 and I made $3000, but you know what you do? You keep your smile up say good job I’m happy for you and to be honest with you that was the only deal he did that month, so I blew him out of the water already by doing ten times more deals.

Don’t be jealous be happy for your wholesalers. When they make money who cares; if you have that loser mentality that you get upset when someone else makes money that’s a terrible way to be.

Preston: I agree.

Lee: Its negative energy and you’ll end up eating yourself up inside by what other people made on a deal. Be happy, enjoy it, flipping REOs is a great business probably half the time I partner with other wholesalers; we all make money and we’re all happy.

Always pay your wholesalers never have someone come chase you for a check. If they sell a house for you; I have my assistant call them the next day and ask where


they want their checks mailed to. It makes a huge difference.

Preston: You cover just one county right?

Lee:Every time you email about a property…two counties now…

Preston: You also have Pinellas?

Lee:Yes.

Preston: I know for a while you were religious; you were like if it’s not in this area of Hillsborough County forget it. I don’t want to hear about it. I don’t want to look at it.

Lee:Absolutely 80% rule. If you become an expert in an area and it depends too upon your city, Tampa is so large that you can focus on a handful of zip codes, because most of the investors, 80% of investors are buying in 20% of Tampa.

Once you get to know your city you’ll know where the 80% of your investors are buying. I do keep my eye on other areas, but I’m focused, everybody knows me as the crap king. I focus on the crap that no one wants, because if you get the crap cheap enough you’ll find a buyer.

Just to let you know, as a wholesaler flipping REOs I’ve noticed there’s a whole breed of new buyers coming in


the market. These are buyers who have lost their shirts on the stock market.

I would say more than half the properties I’m selling now are new buyers that I’ve never dealt with before that work 9:00 to 5:00 jobs and have pulled all their money from their retirement accounts and they’re buying houses.

Preston: What are they buying them for cash flow?

Lee:Keep that in mind. Yes.

Preston: Do you take that into consideration when you’re looking at a property you’re thinking about buying and figuring out what to offer? Do you take into consideration whether it’s going to cash flow or not?

Lee:Yes.

Preston: With a tenant?

Lee:Yes 100%, because every investment property I buy now does cash flow, so what you have to evaluate is if I’m buying something in a bad neighborhood I have to make sure it has mega cash flow, because that’s how I sell the property.

People don’t mind going into a war zone, even after they’re paying out their loan they’re making $500 a month.


Preston: Do you put that in your marketing?

Lee:Sometimes I do. That’s more so in personal calls where I work with individual buyers. What you need to do is find yourself some out of town buyers where you can hold their hands and teach them about cash flow and rentals 101.

Then you can get an actual premium with those buyers and let’s just say they want a 10% return on their money.

This is funny, because I have a good friend who does this. He actually hand holds each of his buyers; where I make $3000 to $5000 he makes $20,000 a hit because he sells them on cash flow.

So he’s doing the same as me, but he’s put a different spin on it so the price he buys it t has no bearing on what he sells it for.

Once he makes it fit into the 10% formula his buyers buy every single time. You all can make a lot of money at this, it just depends on whether you want to do large volume like me or do a little less volume holding people’s hands a little more; there’s plenty of money to be made in the market.

It all depends on your marketing. If you have a difficult one to market you may want to market them in cash flow.


Preston: Why don’t we end the call with a quick action plan, a couple bullet points or five steps they can take to put the machine into motion?

Lee:First, to avoid what I did find out what your buyers want first and I told you how to do that earlier.

1. Go out and find out what the investors are selling, find out what the wholesalers are selling and find out what the investors are buying that’s important.

If you spend a week or two doing that you’ll avoid the pitfalls I didn’t.

2. Get access to the MLS or start marketing yourselves to REO agents.

The preferable thing to do is get MLS access. You can either have a friend who’s a realtor or someone you say hey, for every property I buy I’ll give you (x) amount of dollars, but you don’t want them putting offers in, in their names because they’ll take half the commissions and you won’t get the deals.

Start putting in offers based on the criteria of knowing what your buyers want. Make sure you’re not only buying what they want, but you’ve screened the wholesalers and you’re able to buy it for less than what wholesalers are selling it at.


3. You want to network with other wholesalers.

When you’re getting started and Preston you know this from when you started out, networking with other wholesalers you can buy and sell their stuff and they can just as easily buy and sell your stuff.

Don’t fight with the other wholesalers work with them. You attract people with honey and turn them away with vinegar.

The way to sell your properties when you start out, when you don’t have a huge buyers list is to get along with the other wholesalers, make yourself easy to deal with and work with buying and selling properties.

Make sure you focus in on the agents you’re getting along with. If you get a property from agent ‘A’, make sure you begin putting more attention on agent ‘A’ and you’ll start getting more deals from that agent.

You don’t want to spread yourself too thin. When I first started doing this I was trying to be friends with every agent. Now I get along with four or five and they supply 80% of my properties.

That’s what you basically want to do. You may want to go through Preston’s course on wholesaling 101 if that’s what you need to read first.


Figure out how to get buyers. You don’t need to figure out how to get sellers because you’ve already got the seller, which is the bank, but you want to get yourself buyers so you can hit the ground with your feet running and have people sell these properties.

This is very important information.

Preston: Lee I’ve done quite a few of these calls and by far this has got to be the most informative regulatory content-packed coaching call we’ve done so far.

I really appreciate you coming on and taking the time frankly, just in pulling back the curtain to help these people, showing them what’s going on and how they can make this thing happen.

You all don’t realize this but we’re going to be working on a more advanced REO wholesaling course, which will resemble what you’ve heard on this call times ten with much of the other information that we haven’t had time to talk about tonight.

That will be coming to you very soon. Keep your eyes peeled for that.

I like to answer questions at the end of the calls, but I felt like we needed to get all this information in and we don’t have time to do that on tonight’s call. I knew you


needed to hear the information Lee was dishing out so I didn’t stop him.

We might print out all your questions and do a recording to answer those questions next week and get it to you because there were a ton of questions.

Be blessed. Keep your heads up. Make it happen. You’ll receive this on CD shortly, if you’re a member where you can listen to it several times and take action.

Lee thanks.

Lee: I appreciate you, no problem. Take care.

Preston: I’ll talk to you soon.


Epilogue

It’s only been a few months since I interviewed the REO Rockstar. Since then he has not flipped less than 10 houses per month. He sends me the wires all the time. I don’t know of ANYone who does more REO’s than this guy. And the good news?

You can do it too.

There’s a lot of great training just in this e-book that you’ve been so diligent to read (congrats on doing more than most). Enough to get you started for sure.

But if you really want to make this happen fast and are serious, I highly suggest you be sitting near a computer on May 13, 2009.

Why?

Because that is the day we open the door to your future. At 12pm EST on May 13, the doors opens to the 6 Week Tele-Bootcamp for The REO Rockstar. The goal of it being to quickly transform YOU into the next REO Rockstar and do your first deal by the end of the 6 weeks with our help every step of the way.

We are severely limiting the number of people we let attend in order to make sure we have ample time to work with everyone personally. If the door stays open to midnight that day I’d be surprised. Ya gotta be ready.


Here’s some stuff you’ll learn over the 6 weeks – - How to find, buy, and sell R.E.O. (bank owned) foreclosure houses without money, credit, or risk! And NO, it doesn’t involve complicated LLC’s, trusts, or anything else that even smells like work.

- Discover the secret to buying houses as cheap as $500! Imagine actually being able to pay cash for a house and have no mortgage payment! - See how easy it is to sell true wholesale properties with absolutely NO buyers list, no classified ads, and no online marketing! - How to force your competition to do ALL your marketing for you so they are not even fighting against you! It feels good to be running the show in your local market. Prepare to be envied!

Click Here To Be Put On The VIP Waiting List

- How to easily and effortlessly find out what types of houses investors are buying in your area so you can go snag them from the bank and give it to them! Details on knitting together your cape and mask included!

- 3 almost magical ways to entice local realtors to giving you first-look at REO listings! This is the key to the whole process that keeps all the riff raff out of the market and out of your way.

- When to back to out of a deal so you don’t get burned. And how to still get your money/deposit back so you don’t lose anything! - How to “rig” the bidding system with banks so that your offer is the best every single time! This one may actually be illegal. Use it at your own risk.- The secret key to tracking down the decision makers at banks and HYPNOTIZING them into being your best friend! Talk about an unfair advantage. They won’t even advertise the property for highest bid! They’ll simply give it to you! - Discover the REO Rockstar’s simple and easy plan to find the houses with other people’s contacts, buy the houses with other people’s money, and sell the houses with other people’s buyers! All while you lay out at the pool and work on your tan!

- How to quickly and easily determine the values of houses without using appraisers and complicated comp evaluation strategies! Saves you time, stress, and aggravation like you wouldn’t believe! This is the toughest part of wholesaling houses and we slice through the problem like butter.


http://reorockstar.com/bootcamp/


- You’ll learn brand new ninja-like strategies on how to sell houses before you even buy them! Talk about risk management! It doesn’t get any safer than this!

- How to get houses so freakin cheap that you literally have people in line fighting for them on every single one! The last house that Rockstar bought was $2,500. And he got it with someone else’s money.

And a ton more. We’re going to do one 90 minute intensive training session per week, homework assignments, and one QnA session per week as well. You’ll have direct access to the REO Rockstar, and, again, our goal is for you to do your first deal by the end of the 6 weeks. Home study courses are great. But your chances of actually doing a deal are about 75 times greater in a 6 week coaching program like this with us holding your hand through it all. Each week is carefully designed to move you progressively and logically through the process from beginning to cashing a check at the end.


Watch your inbox for more details as get closer to that date. We’ll have a ton of free bonuses that come along with the event as well. Until then …

Keep your head up, work hard, and make it happen.

- Pre$ton





Documents

Reorockstar Ebook