Minnesota Real Estate Investors Association, Inc.

Something peeked your interest in real estate. Maybe it was the Flip this house, or flipping Vegas or any other the other 100 reality TV shows that have nothing to do with reality but makes for entertaining TV.  Maybe it was a radio ad from some national guru looking to build their business in your market and they want you to join their team.  Maybe it was an ad on Facebook telling you that it is so simple to make $30k a month without even getting out of bed.  Maybe it was a friend that really did flip properties or a relative that owned several rental properties.

Whatever the reason is that you decided to give real estate investing a try, you soon realized that there is a lot to know and the real estate business can seem overwhelming when you are first starting out.  I know because I felt that way in the beginning and now I mentor students through the minutia all the time.

In one of my early mentoring sessions with my mentor, he said something to me that I just laughed at, at the time but later realized how profound that statement was that he repeated to me over and over until I finally got it.

He said; if you want to get to where I am, you need to KISS your way to Riches.  Keep It Simple Stupid.
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There is a lot of confusion out there with newbies and some seasoned investors as to what exactly Wholesaling means.  The easiest way to describe this is to look at the Minnesota State Statue: 82 REAL ESTATE SALES REGULATIONS Sub 55 Definitions. Condensed Version: You cannot sell a property for another for a fee without a real estate license.  So the question is, as a wholesaler, what are you selling?  If you have a property under contract, you can sell your rights to the contract, not the property.  This is done via an assignment agreement which allows the assignee to step into your place as the buyer.  That is the basics of wholesaling. 

Some states actively go after real estate investors for incorrectly wholesaling.  These investors get themselves into trouble because they can’t explain legally what they are doing and therefore say the wrong things, like I am trying to find a buyer for the seller.  That shows intent, and as the previous FBI Director James Comey famously explained, it comes down to intent.

The problem is that your true intentions may not reflect your stated intentions because you don’t understand the legality of what you are doing.  If you just change what you are saying, to reflect your true intentions, then you will avoid a lot of aggravation and harassment from the state.
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We live in uncertain times.  After the mortgage meltdown and the almost collapse of the financial industry, the real estate market has been going through several ups and downs.  The median sales price in my area went from its peak of $238,000 in June 2006 to a low of $138,500 in February 2012, back up to $210,000 in June of 2013 and we are on our way back down, currently sitting at $179,850 for January 2014.

There have been some wild swings in the past few years and the people that understand that and have kept a close eye on the trends, and have not been afraid of the market have made a lot of money the past few years.  However, I have seen most people sitting on the fence and haven’t done anything.  I can understand the feeling of uncertainty and being afraid to make a mistake, but let’s face it, if you’re afraid to make a mistake, you will never make it big.

You’re probably thinking right now “That’s easy for you to say Mike; you’ve been at this for a long time and have more experience than I do”.  While for many of you, that may be true, however, for your info, I have probably made more mistakes than most of you ever will, and I am still making mistakes.  But that is not holding me back.

That is one of the most common traits I see from those who are successful, even in this wild and uncertain market.  They are not afraid to make a mistake, and often do, but they don’t let that hold them back.

Everyone wants to minimize their risk of making a mistake and losing money or damaging their credit, myself included.  However, I see way to many people with paralysis of analysis and never do anything.  So what’s holding you back? 
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I know you have heard about Land Trusts and you know that you should be using them. But I know you and you haven’t gotten around to using them yet. You believe that Land Trusts are too complicated and you just haven’t had time to learn and completely understand them, but you will get around to it one of these days.

Trusts have been around for centuries and there are tools that the rich use regularly to protect their assets. Land Trusts are a very special type of Trust that was created to protect your real estate investments, whether you are a landlord who holds real estate for the long term or a wholesaler flipper who only owns the property for 5 minutes.

There are several reasons why people use Land Trusts, but the most important one to me is the Privacy. No one knows what I currently own or what I have owned in the past and that is comforting to me to know that no one will ever be able to find all my assets if they get the bug to sue me for any frivolous reasons. 
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Many Real Estate Investors start out rehabbing properties to resell for a profit. Many of these investors eventually migrate to wholesaling or become landlords, but some become experts and just keep on rehabbing. Most rehabbers build a system and once they have it fine tuned, don’t deviate from that system. If they build a system rehabbing rental properties for landlords or for first time home buyers, then that is what they always do, because it works for them.

However, a few rehabbers make the leap from rehabbing properties in low to middle income neighborhoods to rehabbing properties in upper middle class to affluent neighborhoods. But very few move beyond that and take the step to rehabbing extremely expensive houses. And even fewer are true visionaries.

A close friend of mine, which many of you already know, Robyn Thompson, the Queen of Rehabs started out rehabbing multi-families in firs time home buyer neighborhoods in Connecticut. She then took a huge leap in faith in herself and her abilities and now rehabs multi-million dollar mansions in Florida. That is something that I hear a lot of people say is too big of a rehab, and to those people I say, you are just not thinking big enough. 
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On our Monday night Training Webinar, I was asked a question from one of our students about driving traffic to their free website that everyone receives with their free account at Real Estate Promo. I gave them a suggestion to find another investor who has a property for sale right now and get their permission to market that property(s) on their websites. Then start creating ads on craigslist, kijiji, backpage and other online / offline marketing medias. This sparked a lot of interest and questions, so I decided to post a blog about the idea for everyone.

One of the struggles new investors have is activity. They spend all their time learning how to invest in real estate, but they don’t take a lot of action right away. This is probably due to fear and their misconception that they need to learn everything before they take any action. I am sure a lot of you seasoned investors can relate to this feeling of a newbie. Our Free Weekly Webinar Training is designed to not only to educate the new investors, but also to encourage them to take action, even if it is just small little baby steps to get started.

One of the struggles for seasoned investors is selling/renting their inventory. Personally from my own experience, my biggest struggles is when I have a property for sale, I spend all my time trying to fill the property that I stop doing what I am good at, which is locating and negotiating good deals. After I have that property filled, I then get back to finding more deals. All that time I have been marketing and driving traffic to my website. But if I don’t have any properties for sale on my website for a month or two, I am wasting good traffic from buyers, so I occasionally will market properties from fellow investors, just so that I have activity on my website. 
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Ok, ok, I know, flipping has never been illegal, but with recent changes in the mortgage industry, the lenders are coming back around and asking for our help again. Wells Fargo was actually the first major lender to change its stance on seasoning, but because FHA is a government program, this is huge. First, let me give you a little back ground so you understand what the hoopla is all about over FHA temporarily suspending its 90 day title seasoning rule.

Several years ago, when all was right with the world, some investors were taking advantage of a unique situation in the mortgage industry. The federal government wanted everyone to be able to take advantage of the America dream. So they lowered interest rates and loosened up the required mortgage qualification guidelines for Fannie Mae and Freddie Mac backed mortgages, including down payments. This actually made it cheaper and easier for people who normally would never have been able to qualify for a mortgage, get one with little or no money down.

These changes actually made it cheaper for a tenant to get a mortgage than it was to rent a property, because they could finance the entire purchase price, including their closing costs. If they were to rent a property, they would at least need the first month’s rent and a security deposit. But if they bought a house, they didn’t need any of their own money up front and their first payment wasn’t due until after they had lived in the property for one month. Plus, with a mortgage, the lender only pulled their credit report, and since most of these tenants never established credit, they didn’t have bad credit. Note that a credit report doesn’t show eviction notices or criminal history, which is where many of these tenants had records.
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May 1, 2003 HUD imposed a 90 Day Title Seasoning requirement for all new FHA loans. This was their big idea to help protect the consumers from the Big Bad Flippers. It only took 6 years and a housing market crash to show the elitists the errors of their ways. Now they need our help to fix their mess.

They finally came to their senses and temporarily suspended title 24 CFR §203.37a(b)(2), which is the 90 Day Title Seasoning Requirement. This is only a temporary suspension. Starting February 1, 2010 and expiring on 1/31/2011, First time Home Buyers who apply for an FHA loan will not have the 90 Day Title Seasoning Requirement. However, we as investors will still need to follow a few guidelines in order to Resell (Flip) our Short Sales / REO’s and Flips to First Time Home Buyers who are applying for an FHA loan.
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