A:  To answer your question, Kristal, we need to understand a real estate term known as "Procuring Cause." It means "the effort that brings about the desired result." Or in real estate terms, the person who is responsible for a buyer's introduction to the property. If you "cross the threshold" with a real estate agent, that is to say if you find out about the property from a real estate agent, then you are ethically obligated to transact through the agent. However, if you find the property on your own and later learn that the property is listed, then you are not ethically obligated to go through the agent. (But do so if the owner asks you to.) Now with respect to the property in question, regardless of who is procuring cause go through the agent because of the foreclosure situation and corresponding Maryland law. If you buy residential property directly from an owner-occupant (not an investor,) you open yourself up to certain liabilities. (Take the Foreclosure Course at IU for details; until then, trust me.) So here are your next steps: 1) Find out what is owed on the mortgage. Can the owner be flexible on price? Unless the property is newly rehabbed, he will have to come down from $170k. Hopefully, even less than $150,000. 2) If he will be flexible, then schedule an inspection to ascertain the condition. I'd be happy to come with you as your partner. 3) Make an offer, then buy and lease it, or turn it over prior to closing for a profit! Let me know if you need a partner. Cheers!

A:  When making offers on active listings, it is okay to ask that seller be present. Although the seller may have hired an agent to bypass involvement, bringing all parties together can shortcut the back-and-forth offer/counteroffer process. If the seller is not willing to grant your request, perhaps they would be willing to sit down at a later date to finalize an agreement - remember to bring a contract.

Inspecting a given property before making your offer takes time, but pays dividends in the form of knowledge that can be used to negotiate terms. Making your offer before inspection (“sight-unseen”) is often called the “Shotgun Approach” because of the ease with which offers can be made and because of the lack of precision with respect to price. Generally such offers are tendered with the intention of simply opening negotiations, and are contingent upon an approved inspection within a given period of time. Either method can be used effectively.

A few thoughts about your offer itself: If you are not able to arrange a face-to-face meeting to ratify an agreement, then be sure to set an expiration date on your offer (a few days to a week) to discourage the seller and/or agent from “shopping” for a better one. Also be sure to obtain a response one way or the other from the agent. No response could mean rejection or that your offer was not received. To make it easy, I use a fax cover sheet with boxes for “Accepted,” “Not Accepted,” and “Suggestions” that the agent can fill out and return to me.

You can accelerate your investment endeavors by retaining a Buyer Broker to handle due diligence, inspections, photos, and even drafting offers. The small commission you pay may be worth the free time you create.

Let me know how it goes, Rose!

A:  Real estate investors fare best by avoiding competition; but in times of recession, overbuilding, and abundant inventory, typically competitive real estate sources such as the Multiple List can offer excellent investment opportunities.  To prosper in the "Retail Real Estate World," investors must know how to govern themselves accordingly.

In the Retail Real Estate World business is conducted in a conventional way, on conventional forms, with conventional financing arrangements, and conventional terms.  Investors who try to apply creativity to solve real estate problems are often met with resistance or even hostility.

Of the 16 real estate purchase offers I made last week, five were tendered through real estate agents.  One agent told me (incorrectly) that my straightforward two-page offer was illegal and refused to present any offer other than the conventional 30+ page "standard contract" (which would weaken his client’s position by giving me a financing contingency I did not ask for!)  Another agent interrupted me mid-sentence to refuse a creative financing idea that I am certain she did not understand.  I had to laugh when a third agent returned my offer by fax with the word "REJECTED" written diagonally across the page in capital letters, underlined twice!  The other two agents did not offer me the professional courtesy of any communication whatsoever regarding my offer.  Typical, sadly.

Rather than working to facilitate an agreement, these agents worked against me.  I could better understand their reactions if I were a tire-kicker or the type to make wild, low-ball offers, but I am a polite, experienced real estate buyer and I make reasonable offers.  So why the attitude?  Let's put ourselves in their shoes…

Here comes Robbie Retail.  He needed to pay some bills, so he took a real estate licensing class.  Two weeks later, he passed the test, joined a big brokerage, printed up some business cards, and now he calls himself a "real estate professional."  After some time in the business, solving problems, chauffeuring buyers from house to house, dealing with people who never return his telephone calls and investors who waste his time, Robbie Retail gets frustrated.  He thought he had all the tools to be successful.  Now, even if he does sell a property, he'll see very little money after his commission is split four ways.  And if he makes a mistake by stepping outside of his conventional box, it could cost him everything he’s worked for.  It's not easy; and in about 18 months, he'll blame "the market" and move on to find another way to put food on the table. (Amway?)

For real estate investors, the key to successful transactions through agents is to take the time to develop a relationship.  Introduce yourself, share some background, and communicate your intentions.  Deliver a copy of your Financing Pre-Qualification letter so the agent knows you’re for real. Remember to listen.  When you reach a point that is out of the conventional box, explain the point carefully to assuage their fears.  If you encounter resistance then “ABC:” Acknowledge the concern, create a Brainstorming environment, and then Commit to explore ideas together.  Knowing my “ABCs” helped me move past each of the problems I described above.

Investors must also remember that relationships are about give and take.  If an agent is hung up on using the “standard contract,” however illogically, then speak their language.  “When in Rome..”

With particularly rude or difficult agents - like the ones who take perverse pleasure in writing and double-underlining the word “REJECTED” on your offer - take a breath and be positive.  At least they responded!  Next, calmly remind the agent that you are a qualified buyer and request that they work in their client’s best interest to facilitate an agreement.  Consider reminding the agent that according to the Realtor Code of Ethics (free on the Internet) they must present all offers, they can not answer for the client, etc.  If the agent makes progress impossible, including not returning phone calls promptly, simply conduct your business with the broker of record.

With a little patience and understanding and a firm grasp of the real estate business, real estate investors can be successful transacting in The Retail Real Estate World.  For even better results, including multiple list access and commission sharing, consider taking the real estate licensing class yourself.  More information can be obtained from the Investors United Admissions Office: admissions@investorsunited.com.


(Ian Charles Parrish is a licensed real estate professional.  He has only one client and he is not involved in networking marketing.)

A:  The decision to hold or to sell real estate should only be made after examining considerations including:

     1. Your long and short-term personal goals
     2. Your long and short-term financial goals
     3. The present physical and financial condition of the property
     4. Opportunities such as installment sale, lease option, redevelopment, etc.
     5. External factors affecting the property
     6. Investment alternatives
     7. Tax consequences

Ultimately, the purpose of a financial investment is to create maximum return in minimal time with minimum effort and risk.  You can stick with the property and watch your equity grow, enjoy the income, and take the tax benefits.  You can hold title and sell it on a rent-to-own basis for income and tax benefits without the obligation of maintenance.  Or, you can enjoy 15% on your money risk-free as a hard money lender.  Invest in tax liens and watch your money grow by 18% or more (also risk-free.)  Get into "Freehabbing" and your return will often tip triple-digits!

So ask yourself, Lev, "Could my money do better somewhere else?"  And, "Is it worth it?"

A:  My Dad and I developed "The Control and Roll Wholesaling Method" to create short-term income by 1) identifying a cash flow or equity opportunity, 2) controlling it with a contract or option, and 3) assigning it to a buyer for a fee before settlement.  But how short is "short-term?"

A successful Control and Roll transaction can put a smile on everyone's face in less than 60 calendar days.  Once an agreement is ratified, the timeline begins with three to four weeks of advertising, usually by Public Reserve Auction - the fastest way to realize true market value.  (See AuctionBrokers.net)  Should the property sell at auction, the assignee will have 30 days to settle.  Investors should strive for contract periods of 90 banking days (and at least 45 banking days) to allow for a second round of advertising in case their assignee fails to close.

Notwithstanding typical Control and Roll periods, investors with an attractive real estate opportunity and an active Buyer's List can assign contracts in a matter of days if not hours.  My students have earned $50,000 an hour using this methodology.  Even more amazing are my students who have executed assignment agreements subject to ratification of their purchase agreement; in short, they sell and then buy.  Now that's leverage.

Control and Roll transactions are fast, but sometimes prospective sellers are not willing or not able to wait the requisite four weeks to secure an assignee.  In such urgent cases, I recommend either purchasing the property outright if the numbers work, or referring the seller to an investor-friendly real estate auction firm such as Auction Brokers (410.426.2622).

The Control and Roll Method is a win-win-win.  The seller can convert their property into cash without bothering with details, the investor can walk away with a profit in exchange for their investment of time, advertising, and negotiation, and the assignee can enjoy their new real estate asset.

A:  Under the Recession of 2008, grants, incentives, and former well-springs for real estate funding have run dry.  Conventional ways of doing business are no longer working, and many first-time home-buyers, non-profit leaders, and even investors are suffering.  The financial drought has left them empty-handed and relief will not come in time.

Now, home-buyers and investors must create their own relief.  Real estate-related non-profits can no longer afford to wait with their hands out; they must learn to stand on their own two-feet.  It is out of necessity that people are turning to Creative Financing to bring their real estate endeavors to fruition.  Clearly, those who know how to structure real estate transactions in multiple ways have an advantage over those who only understand the conventional down-payment-plus-bank-financing method.

In the conventional world of novice real estate agents and mortgage brokers, Creative Financing may be regarded as some kind of prestidigitation or slight of hand, or sound like 2am infomercial babble.  In the conventional world, Creative Financing is not associated with high-finance, high-stakes real estate ventures.  But in reality, Creative Financing is at work in most large-scale real estate transactions; it is why professional real estate investors seem to be recession-proof, decade after decade.

Creative Financing refers to the funding or controlling of real estate using methods outside of the norm.  It is a body of knowledge employed by real estate investors when conventional financing is not desirable or possible.  Investors use Creative Financing to conserve capital, to lower risk, to increase leverage, to minimize tax burdens, to maximize return on investment, and to overcome financial or credit shortcomings.

Some examples of Creative Financing include: tax credits, seller-held annuities, participation loans, performance clauses, self-directed IRAs, 1031 exchanges, front porch clauses, step-up/down and rollover option agreements, subject-to agreements, and so on.  In fact, there are more than fifty Creative Financing methods that are covered in the Contract Engineering course at Investors United School of Real Estate in Baltimore.

Now to answer your question, Nick, the easiest way to avoid any 2009 DPA cut-off is to buy now.  As an alternative, try a Front Porch Clause.  Virtually every property needs some kind of repair, so negotiate the completion of that repair by the seller; then, agree to perform the repair yourself in exchange for a down-payment credit.  Have the seller write you a check, endorse it back to him or her, and get a receipt.  In short, any flaw in the property can become your down-payment!

You can also try the "Seller Refi. For Takeover" method.  Ask the seller to refinance the property for the purchase price subject to a one-time qualified assumption with release of liability.  You assume the seller's refinance loan just as soon as it is approved, and the seller walks with cash.  I used this method just a few months ago to acquire a million-dollar personal residence with no money down.  It can work for you too!

"Uncertainty" is the word of the day, but with knowedge of Creative Financing it does not have to be.  Real estate is a recession-proof investment for those who understand how to invest outside of the conventional realm.  Increase your knowledge and you'll soon learn to make the best of tough times.

A:  Everything begins with Inspiration; verily, one definition of the word is "the drawing of air into the lungs."  Like inhalation or inspiration of air, fuels the bloodstream with vital life-sustaining oxygen, inspiration on a personal or spiritual level is the fuel that motivates us to take action.

As a boy, I was inspired by the ideal of freedom - the ability to do what I want to do, when and how I want to do it.  I abhored the idea of limitations on my time and ability, and I knew that money could solve many of those limitations.  Thanks to my Dad, a successful real estate entrepreneur, I also knew that real estate investing is the best way to obtain the money I needed to achieve my vision.

In time, I realized that my vision was not unique, it was as simple and selfish as a cell's genetic instructions to divide and reproduce.  I realized that virtually everyone strives to be free, and suddenly my inspiration changed.

I believe that every person deserves to be happy and prosperous, and has an obligation to give something back.  Today, I work not only to have the things I want in life, I work so that my family, my friends, and my community can have those things too.

Success is available to anyone, but you must be willing to work for it.  Just like pulminary "inspiration" is a repetitive action, so too must our inspiration be regularly reaffirmed.  First, define what inspires you.  What is your vision?  Your passion?  Your raison d'etre or reason for being?  Accept your vision as the only possible outcome.  See it not as a goal, but as a reality that is about to happen.  Next, pen your vision on an index card and laminate it.  Keep that card in your pocket, separate from your wallet.  Carry it with you at all times so you can never forget why you work.  Work hard and work smart, and your vision will become reality.

So breathe and inspire your lungs with air; mediate upon your own personal inspiration and the actions you can take to achieve it.  Life - and living - begins with inspiration!

A:  "Location!  Location!  Location!" bellowed one of my fellow presenters at a recent real estate event at the University of Baltimore, his fist syncopating on the lecturn.  The gentleman represented the Maryland Department of Economic Development, but he misunderstood a basic tenet of real estate investing.

Location determines the price of real estate, in part, but cash flow and/or equity determine one's return on investment.

Whether in a "bad" neighborhood or a high-income neighborhood, the presence of cash flow or equity means that a real estate investor can profit.  Investors who understand this lesson have the ability to create income (and positively affect neighborhoods) anywhere, while investors who aren't in the know follow a herd mentality and end up over-paying for properties in trendy areas, hoping for appreciation.

So, "where are the hot areas to flip?"  Anywhere - as long as there is cash flow or equity.  To answer the question "where are the best areas to buy and hold?" begin with cash flow and/or equity.  Also consider your strategy - do you intend to hold and "rent" or "rent-to-own."  It makes a difference.  Being a landlord in a low-income neighborhood can be difficult and even scary.  As for me, I prefer to lease my commercial and upscale properties and sell by installment sale my properties low-income areas.

By implementing the rent-to-own (installment sale) option to the low-income tenants, I enjoy regular income, help the tenant become a homeowner (which low-income neighborhoods need,) keep the tax benefits (because the property stays in my name until 40% of the purchase price is paid,) and pass on the costs of taxes, insurance, and maintenance to the tenant/buyer.  It's a beautiful thing for everyone.  Now that's "hot!"

A:  Dear Sara, with a story like yours who needs horror films?  Fortunately, there is good news - a silver lining to this storm cloud you're in!  You have options.

Cash Out Option
One option is to try to cash out.  How can you sell for retail in a buyer's market?  Public auction.  Auctions draw crowds because, unlike real estate agents, auctioneers have a marketing budget to attract qualified buyers.  Because of the urgency created by public auctions, buyers take action; and because of the competition between bidders sellers often obtain market value or better - faster.  Plus, auction properties sell for all cash, with no commissions, no closing costs, and no contingencies, within 30 days.  The only thing you pay is advertising.  You can reach out to Lorraine Parrish, my wife, at Auction Brokers for more information and advice.  (410.426.6000 Ext. 15)

Installment Sale Option
An easier way out of your situation is to use an Installment Sale, subject to your existing mortgages.  This is not to be confused with a Lease Option wherein a tenant leases the property with an option to buy the property outright in the future.  An Installment Sale is a real estate purchase and sale agreement wherein a buyer purchases a property from a seller in monthly installments.  This arrangement presents key benefits.

Installment Sales are wonderful because 1) you can sell for higher than retail.  There are many buyers who have money but cannot or prefer not to get a bank loan.  Such buyers are often willing to pay retail-plus if they can finance their purchase through a seller.  How happy would you be to sell for $225,000?

And since your mortgage is reduced faster than the buyer's debt to you, you end up earning more money as time goes on (Benefit #2).  How long is typical for closing?  You want it to be as long as possible - say, 10 years. 

Another benefit of the Installment Sale is that 3) you can stop your financial hemorrhaging now.  You have probably found that prospective tenants are not willing to pay the amount of your mortgage as rent.  You are literally subsidizing someone else's housing!  However, you are likely to find someone who would be willing to pay a little more than rent each month in exchange for the ability to buy-like-rent.

A big benefit presented by the Installment Sale is 4) your ability to collect up-front cash.  In exchange for selling your property on a month-to-month basis, you will collect a non-refundable down payment.  That's MUCH better than the refundable security deposit you are holding on to now.

Benefits 5, 6, and 7:  Your buyer pays taxes and insurance (to you) and is responsible for maintenance.  Benefits 8 and 9: you can keep the tax benefits AND maintain control over the situation by keeping the deed in your name.  Transfer title when 40% of the purchase price is paid (MD law).  If the buyer fails to pay or keep the property in good condition, then your Installment Sale Agreement simply reverts to a Lease Agreement (which you sign up-front) and the Buyer becomes a tenant - to be evicted.

Finally, Benefit #10 is the philanthropic satisfaction that you will get by helping someone own their own home.  Isn't it grand when you can earn (or prevent loss) AND help others at the same time!?

Call Investors United to reach me, Sara, and we'll put it all together.  Until then, stay positive.  Help is coming.

A:  What makes a "good deal" is usually simple math.  The bottom line on any real estate investment transaction is cash flow or equity.  Let's look at each with respect to your transaction, Jim.

Regarding the potential cash flow, your numbers are correct - the deal does not work.  If you can lower the payment by asking the owner to take back an annuity, or if you can increase the rental amount (perhaps by offering a rent-to-own situation) then you might be able to make it work.  Otherwise, you will want to renegotiate the price.

But wait!  The deal is not dead yet, because we still have to look at the equity potential.  What is the retail value of the property?  If it's more than $320,000, then you might consider my "Control and Roll Method" (C) of creating income.  Control the property with a contract with a delayed settlement, right to market, right of entry, and safety clause.  Let the owner know that you intend to flip the property for a profit.  Advertise and sell the opportunity for a small $10,000 - $25,000 profit...and repeat!

Our brief discussion of cash flow and equity is only part of determining a "good deal."  There are actually 4 generally accepted methods of real estate appraisal:  The two most reliable ones are 1) The Comparable Sales Method, and 2) The Income Method.  The first is simple - just compare and contrast nearby properties and examine their selling prices.  This method is used more often than not on residential property.  The Income Method of valuation is used when comparable properties do not exist - often in the commerical world for example.  This method examines the income using a spreadsheet we call an APOD - Annual Property Operating Data.  In short, add up the Gross Income, and subtract the expenses to arrive at the Net Operating Income (NOI.)  That's your income before debt service.  Now take the NOI and divide it by the Purchase Price and you will get a Cap Rate - the higher the cap rate the better the deal (8% or more.)  A Cap of 14%, for example should make you begin to salivate!  Here's to 14% Caps; may you get there soon.

Cheers!