Justin B. McClelland

It’s been a while since my last post and a lot has gone down.  I’m going to change my Accountability Mondays to Accountability Tuesdays.  Mondays are just way too busy for me.

So to address the “40 offer/week” goal that I’ve had for the past 4 weeks.  I still haven’t reached it.  HOWEVER, next week it should be reached.  This is quite a lofty goal that is definitely obtainable, but not easily however.  I’ve almost perfected the process that I have in place to efficiently make these offers.  I definitely could’ve made the 40 offers in a manual fashion, but that’s just not my style.  I HATE to work HARD and NOT SMART.  That’s just plain dumb!  I’m sure you’ve heard the Abe Lincoln quote:

Give me six hours to chop down a tree and I will spend the first four sharpening the axe.

I couldn’t agree more.  Spend the first four hours sharpening the axe and you could probably chop down 3 additional trees with the last two hours that you have to work.

I spoke once before about the system I’m creating for my offers to expired MLS listings.  I got hung-up for about a total of 8 hours on an Excel spreadsheet that would recognize my VLOOKUP function (if you’re an Excel pro, get at me, I’ll pay you).  I think there’s a bug in Excel that’s preventing me from doing what I want, so I’m transitioning towards the use of a SQL database.  I’ll then be able to write some queries that will spit out my data to a spreadsheet and then, I’ll get my mail-merge on.  *The geeks that are reading this, know what I’m talking about.*  If you don’t know, I suggest finding someone who does so you can work smart too.  So anyway, I say all of that to say, “I haven’t reached my 40 offer goal yet, keeping the same goal for next Tuesday”. Broken record I know.  But if you’re meeting ALL of your goals everytime, their not set HIGH enough.  There, I just made myself feel better.

Onward an upward. So on a positive note, I’ve progressed quite a bit in other facets of my business.  I’ve acquired an additional Realtor to include in my inner-circle.  This is actually a big-deal, because she is a Realtor that has numerous ties to investors in California.  I mentioned a while ago, my efforts to obtain cash-buyers that invested in a new condo construction near the U of I campus.  Well, this Realtor actually sold about half of the units in the complex and still corresponds with many of the out of state investors she sold to.  Her and her brokerage has a working relationship with the Marshall Reddick Real Estate Network in California.  We met on Saturday and discussed ways that we can work together in the future.  Basically, if she can bring me a cash buyer from her network, we’ll split deals down the center.  This is good.

Also, I met with one of the sellers from the everlasting wholesale deal #1.  I could tell that he was beginning to avoid my phone calls, so I got him to agree to a meeting with me.  Preparing for this meeting took an entire Saturday morning and the meeting went down Monday evening.  It turns out, he was just severely confused about the entire situation.  Confusion leads to frustration and  speculation.  Not good.  I explained all of the details with his liens and all of the options that he (doesn’t) have with this property.  I inundated him with information and had an answer to each of his rebuttals.  Following the meeting, I could see the defeat in his face.  He now really realizes he’s not going to see any money from this deal because it’s essentially a short-sale.  I meet with his Sister Wednesday night.  Once I explain everything to her, I should be able to speed this thang up and avoid any possibilities of legal action (specific performance suits, i.e. more time sans check).  By the way, I feel like a Realtor with all of this hand-holding.  It SUCKS to be one of them! I’m not holding your hand, I don’t know you like that!  In the future, I’m going to avoid these types of small, complex deals like people with halitosis (you thought I was going to say the plague, right).

And lastly, I met with the distressed landlord who wants to short-sale his rental.  I picked up 90% of the paperwork today and will return on Thursday to get the rest.  This guy is the epitome of a distressed seller.  And since he is an investor, I barely had to explain anything to him.  He pretty much knows how it works and is educated about what a foreclosure can do to his FICO.  His main motivation is to preserve his credit.  I wish all sellers could be like this.  Hopefully, I can get many more short-sales in the pipeline.  This is the second short-sale lead that I “stumbled upon”.  I can’t wait to start marketing to pre-foreclosures with a REAL effort.

And lastly (for real this time), I had my second meeting with a future business partner for a Tax Lien investing company.  I’ll reiterate that the Tax Lien/Tax Deed investing game is supremely slept-on.  Most investors who invest in these most likely don’t tell anyone and keep it a secret.  But, I don’t care, I’m going to start sharing it all.  After watching a fellow Champaign investor write a check for $560,000 at last years lien sale, I know this is something worth exploiting.  Me and my biz partner are going to create money out of air.  The plan is to borrow money and invest the borrowed money into Tax Liens.  We’ll profit the spread between the cost of the money borrowed and the net proceeds from the lien penalties whether redeemed or foreclosed.  Simple as that!

- Peace Out

Liens, Real Estate, Short Sale cali, excel, Short Sale, Tax lien

I just have a quick question for this post.  Hopefully someone out there can point me in the right direction.  I’d like to know if property blue prints are typically archived by each county.  It would make sense to me if that were the case, granted one has to obtain county approval for major alterations to a property’s exterior.

I’m curious to know this because having a property’s blue print available to me when advertising wholesale deals will be beneficial.  In addition to photos, a property floorplan will be included in my ads.  I’m set on using floorplanner.com for my plans too.

- Peace Out

Random blue print

Sooo, it’s Tuesday evening and I’ve been working hard the past week to meet my “guaranteed” goal of 40 offers from last weeks’ Accountability Monday.  Let’s just say, I won’t give any more “guarantees”.  That 40 offer business is kicking my ass, I’m not going to lie to you.  That’s a lot!  I don’t give excuses, however I will say that I had some hindrances outside of my control which held me back a bit.

These hindrances were primarily related to only making offers on MLS properties and using an agent.  The agent I was using became reluctant to represent me as a buyer due to my wholesale strategies, he feared that he would become stigmatized due to the low nature of my offers.  Honestly, I can’t blame him and if I was strictly a retail-Realtor, I’d probably feel the same way.  I’m sure black-balling occurs amongst Realtors when one goes against the grain. I actually heard that this happens to Realtors that offer flat-fee MLS listings in town.  But it looks like using an agent isn’t going to be the best route for me and what I’m doing, so from now on I’m going to make offers directly to the listing-Realtor.

I did get in 15 offers over the past week, so I wasn’t a complete failure.  However, I just couldn’t come up with another 35 worth offering on and I was sort of road-blocked by my Realtor.  Now that I’ve cleared that hurdle, this shouldn’t be an issue any longer.  And I literally just came-up with a new idea that will help me dramatically in my quantity of offers.  And that is….drum roll….the submission of offers on expired MLS listings.  I already have it figured out in my head, how I can make this happen with a MS-Word mail-merge and a MS-Excel spreadsheet.  Since the properties aren’t listed, no need for complete contracts, I’ll just send a detailed “Letter of Intent”.  This will save beaucoup time by allowing for some automization.  I’ll hand-address the envelopes, send them off, and it’s a done-deallie.  I should get some interesting results from this approach.  Just the other day I was scouring CraigsList for some old ads to make offers on.  I saw that another local investor picked up a property for 16K when it was listed and expired just a month earlier at 35K.  So the proof is in the puddin’.

So I say all of that to say, “I’m keeping the goal of 40 offers/week”.  No more guarantee’s, no more roadblocks that won’t get demolished in a matter of minutes.  I’m getting to that goal and once I do, I’m going to double it.

On another front, the wholesale deal is back in the ICU.  I informed the heirs that they’re not going to receive any proceeds from this house due to all of the liens that were on it, yesterday.  I have a feeling that they won’t want to sell it now, despite being contractually bound.  The phone conversation didn’t go so well.  However, since the property is in pre-probate and they’re not the owners on title, I’m not certain that they don’t have an “out” of this contract.  I’ve brainstormed for a while and put myself in their shoes, either way they look at it (sell to me, or keep it) there is absolutely no money in this house for them (I may go into details later when the deal is officially closed or dead).  I plan on having a meeting with them as soon as we can schedule one, at that time I’ll make the numbers really clear and at that time they better trash any slick ideas that they’re brewing.

On yet another front, I received a short-sale lead today.  An extremely hot one at that!  Long-story short, this guy is a retiree and is extremely frustrated with being a landlord.  He has a property that he initially put Section-8 tenants in and they “tore it up”.  He then put non-Section-8 tenants in it and they “tore it up” too.  But not only that, they also aren’t making their rent payments and instead of ‘eating’ the mortgage costs for the last 5 months, this landlord is now in pre-foreclosure.  Since he’s a landlord, he knows the rules of the short-sale game, so this should make things easier for me.  We meet this Saturday, I plan on getting the entire short-sale package completed on-the-spot, so hopefully John Michailidis and I can have a go at a JV again.

Damn, this was a long-ass post.

- Peace Out

Marketing, Real Estate CraigsList, John Michailidis, MLS, Short Sale

I’m running into a bit of a hiccup.  This 40 offer a week thing is quite the task.  I’ve got 10 down and 30 to go.  However, I’m kind of running out of properties to offer on that fit the category for which I have buyers for.   Thus far, I’ve been targeting some properties that are listed on the MLS and others where the owners respond to my ads.

I need more…I’ve got to find more properties that are “below radar”, that’s where the deals are, I think.  I’m talking about properties that are in pre-foreclosure, probate, tax delinquent, etcetera.  The catch is, it takes some capital to target these types of properties.  So until I have that capital, I’ll just have to go after the above-radar properties and see if I come across some motivated sellers.

What are you all doing out there as far as mass offers?  I need some more ideas…

Marketing offers, probate, tax delinquent

I’ve got good news and that is the latest wholesale deal is coming together like butt cheeks.  I received the completed appraisal today from my appraiser via email, I then forwarded it on to the head guy at the DHFS. I waited about 3 hours and I gave him a call.  I didn’t expect it, but he was ready to wheel and deal right-then.  He saw the CMA that I had submitted to him in my short-sale package came in at about 9K and the appraisal came in at 11K, he offered to split the difference at 10K.  I countered and asked if he could knock 1K off and take 9K, he agreed to only if I ate the cost of the appraisal (which initially he offered to cover).  We had a deal.

So long story-short.  I now have the 65K DHFS lien, with other Champaign city liens, reduced to the sum of 9K!  The pros are that it looks like this deal will close after all and all of this learning will come with an added bonus in the form of a check.  The cons are that I’ll have to eat the tax lien, appraisal fee, title work fee, and seller lawyer fees.  So instead of the planned 6K, it looks like I’ll net around 5K.  That’s better than zero.

All I need now is to get the seller to an attorney so that an “Affidavit of heirship” and a “Personal Undertaking” can be composed.  These documents are needed in addition to copies of the owners on title death certificates, to close.  Since the owners of the property passed away without wills, probate can be avoided since their are only 3 members of the family left and they are all in agreeance with selling the property.

So, I’m not going to consider it a done-deal until I have my check…but this one’s pretty much in the bag.  So, I’ll part with this video for your viewing enjoyment.  I think I’ll feel like Bill Cosby in this video when I get my check, but I won’t make it rain on ‘em yet…5K ain’t enough, that’s just a drizzle.

P.S.
If you are not laughing at the video above, you have absolutely no sense of humor!  I can’t stop laughing at it, just focus on Cosby, not the booty.  Let the booty stay in your peripheral view and enjoy.

Liens, Real Estate, Wholesale CMA, Death certificate, Tax lien

I’m still in ROBOT mode and plan on being there indefinitely. Since I’ve ramped up my offers, I’ve got 1 more potential deal in the works. Just to give a brief synopsis of it, it’s a property that’s literally 2 blocks from the wholesale deal that I’m currently working. This property is listed and has been for a long time and for a price that’s way too high. Way too high when you have the intel that I do. And that is, after some research, I know the property is just a few months away from tax foreclosure. It’s been tax delinquent for 3 years and in the state of Illinois the owner has a redemption period of 2.5 years from the date of the first tax sale. Translation: this owner’s redemption period runs out by April 2010. Once tax-foreclosed, it’s a wrap for them. I hope to get in and seal a deal that get’s them a few bucks for moving expenses and that’s it. I’m not the type to take advantage of people, but this property location and it’s condition won’t allow me to do more than that. Hopefully, I’ll have some good news about that one soon.

Also, the current wholesale deal is moving along…still on life-support however. One decision by one person can make or break this deal. That person is the head-honcho in the liens department of the Illinois Department of Health and Family Services (DHFS). He received my short-sale package earlier this week and we spoke about it. He wasn’t satisfied that I only had a Realtor-prepared Comparative Market Analysis done on the property, he wanted an official Appraisal. He claimed that the CMA wasn’t good enough because “the Realtor could be your friend”. He wanted a bona-fide appraisal by a licensed appraiser who would by default be “putting their license on the line”. So that’s what I did. The appraiser did his thing today and reported to me out of all his houses that he’s ever appraised, this was the lowest. Music to my ears! So now, I’ll just get the appraisal to the DHFS and it will be time to talk business. One good thing that I learned from my most recent conversation with the DHFS is that they’ll most likely reduce their lien to compensate for the liens held by other government entities (City of Champaign Neighborhood Services, Champaign-Urbana Sewage Department, etc). That means that I need only worry about the DHFS. Hopefully, we can begin negotiations as soon as tomorrow, if not early next week I should have a yea or nea to report. Once I get the nod, I just need to get the seller to an attorney (that I might end up paying for) so he can get the (heirship) docs he needs drafted for the title company to close.

On the short-sale front, the homeowner that John Michailidis and I are currently working isn’t looking so good. This lady keeps getting cold feet about committing to the short-sale process. I have a feeling that she is going to wait too long and end up getting foreclosed on. Oh well, we can’t say we didn’t try. Hopefully she makes the right (prompt) choice. There are many more people to help. And now that we have our team in place, it’s game on.

Real Estate DHFS, Foreclosure, John Michailidis

I’ve got a lot done since last week. The big thing was that I sent of the “short-sale” packages to the DHFS, the city of Champaign, and the Urbana-Champaign Sewage department.  I emailed the packages and sent tangible copies of everything via USPS as well.  I spent a good amount of time preparing all of the docs sent and crafting a custom letter explaining my intentions and why it’s best for their liens to be reduced.

I know it’s Tuesday but I got an update regarding Accountability Monday.  I literally fell asleep yesterday in the middle of things with my laptop in lap (typical).  So I’ll call this Accountability Tuesday.

1. Submit a total of 40 offers on properties. FAIL

I’ve been failing to meet my goals for the past few weeks.  And in regards to the 40 offers, I just realized how many offers that is!  Damn, that’s a lot.  But I know this is what it will take.  The bad news is that I failed to meet that goal.  The good news is that I did at least get 5 offers out.  But this failure won’t happen again because I spent the greater part of Sunday tweaking my system (“work smarter” is the motto) that will allow me to spit out offers in a rapid fashion.  So for the last-time, I’m going to leave that as the goal for next Monday.  Actually scratch that, the new goal is to make more than 40 offers by next Monday!  I guarantee a PASS next to that item next week.

I’m starting to operate like a ROBOT now, I’m getting my processes ironed out and systems in place.  The snowball effect shall begin.

- Peace Out

Real Estate accountability monday, systems

I’ve started receiving responses from the Capstone Condo owner direct-mail campaign.  These letters went out last Tuesday so it’s still a bit early yet to tabulate all of the results.  Using this yellow-letter method, I was hoping to get a higher than normal (3-4%) response rate.  Yellow-letters typically get a 10-15% response rate.  I’ve only received 4 responses thus far, so that’s about 2% of a response rate since approximately 200 pieces were sent out.  And all 4 of those responses are owners from Illinois.  I need for some of those Cali buyers to give me a call!

Here is the letter that I sent.  I used the same process that I wrote in detail about a few months ago.

Marketing Advertising, Advertising mail, Marketing

The latest wholesale deal is still kicking, I haven’t lost it yet.  Let’s just say it moved off of life-support but it’s still in the ICU.  During this week among other things, I spent some time wrapping up the details for getting this thing closed.  I now have a CMA from my Realtor, plenty pictures, and a rehab cost estimate.  These documents, along with a letter describing my motives for wanting to purchase this property (assign) and revitalize the neighborhood starting with this house, will be sent to the appropriate parties.  The appropriate parties being the 3 parties that have liens on the property.  There are a total of 4 liens on the house.  One being a tax lien.  The others by DHFS, the city of Champaign, and Champaign sewage.

Let me state a few facts so you can see how my deal came back to life.  Originally, I was very concerned about the 65K DHFS lien.  I’m not anymore.

Here are the facts:
1. The property has been vacant for about a year the two owners on title are now deceased. It will continue to be vacant as the heirs want nothing to do with the property
2. The property is tax delinquent and the taxes were sold to an investment company in October 2009.

Cover via Amazon

*Tangent*  Buy the book “Profit by Investing in Real Estate Tax Liens” by Larry B. Loftis.  This is the one of the most slept-on real estate hustles in existence.  You can thank me later.

With the facts being what they are, let me tell you how “I have the juice”.  In Illinois tax liens are by default 1st position liens.  This means that all other liens are subordinate and if the property goes through a tax foreclosure ALL SUBSEQUENT LIENS ARE WIPED!  Granted that it takes approximately 3 years of real estate tax delinquency to be foreclosed on, this means in the inevitable will happen in 2 more years.  After which, the DHFS, City of Champaign, and Champaign Sewage will walk away with ZERO!

So, now do you see where I’m going with this?  When I lay out the facts and the probabilities of events to the subsequent lien holders, it would be in their best interest to drastically reduce their note and get SOME money this today versus NO money in two years!

So the mission at hand is to develop a “no-brainer” (short-sale) package that even a 4th grader could understand.  This way, I’ll hopefully post again soon about how I got the deal closed.  However there are no guarantees in this crazy real estate world.  I’ve heard of some just-plain dumb decisions being made by mortgagors before, so we shall see.
- Peace Out

All of this work for a measly lil check.  But either way this deal goes, I’ll just consider the lack in compensation as a tuition fee.  It’s coming down to the wire now, I feel like Eminem in 8-mile.

Real Estate Foreclosure, Property tax, Tax lien

Accountability Monday once again.  And I didn’t accomplish my goals.  This accountability stuff is embarrassing when you don’t get the job done, but I guess that’s the point!  I’m going to keep the same goals for next week as I had last week.  But, I’m going to make it 40 offers instead, I need to make-up for lost time.

1. Submit a total of 40 offers on properties. (NEW GOAL)

*Tangent*, it felt extremely strange typing the title of this post.  That’s the first time I wrote the date since the new year. 1/4/10….for some reason when I look at that, my mind thinks 1910, but anyway.

I’ve had a lot going on and have learned very much from this wholesale deal while in the trenches.  I’ve learned enough from this deal to write an ebook, I’m not kidding.  And the deal isn’t over with yet.  I don’t feel like delving into great detail right now because it’s 2am and I need to get up in 5 hours.  So I’ll give the cliff notes in chronological fashion.

1. Seller contacted me
2. I checked out the house
3. Made offer and put house under contract on spot
4. I found buyer
5. I assigned contract
6. I ordered title search
7. Beaucoup liens appeared on title
8. I checked out liens at County Recorders office
9. All seemed well as they were minimal liens, hundred here, thousand there (sum of which are less than contract sales price)
10. The last lien on title didn’t have an amount, I had to call the Department of Health and Family Services to obtain the dollar amount.
11. The DHFS lien is 65K!!!! The house isn’t worth half of that as-is!

So now my wholesale deal turns into a short-sale if I’m going to make this work.  I spoke with the rep at the DHFS and he said that I’d need to obtain an appraisal and the appraisal would help the DHFS determine how much they’d be willing to discount their lien for this sale to happen.  Considering that I negotiated the contract price to be a bit less than what an appraisal may come in at, this deal lies in the hands of one guy at the DHFS.  I already have an idea of what I will need to do to push this through, I won’t go into detail about it now, but I’m fairly confident it will get the job done.  I’ll report about it later.

So as of now this deal is officially on life support with the aid of an African-American heart monitor.

Business, Real Estate Department of Health, DHFS, Monday, Short