Suncoast Real Estate Investor's Association

What you missed September 2007 Meeting
by Robert Davis

Andy Heller gave us some insights into the foreclosure business. He said there are three keys to becoming and staying a successful investor. They are to buy low, rent smart, and sell high. This was basically the simple truth to his method of becoming rich.
            One of the entities he buys from are banks. Bank officers tend to be very structured, and do not know what to do with repossessed houses, as far as rehabbing them. A bank will have little if any emotional hook to a house they have, as opposed to an owner who is being foreclosed on. He said we need to build a relationship with those that handle the REO’s to get a good deal from a bank. The key is to buy way below market value. This is not as hard as it sounds especially if the house is in major disrepair. Once we have the house and fix it up, the next step is to rent it in a smart way.
            His method of renting smart is to find a motivated renter. This would be a renter who really wants to buy a house, but can’t afford the down payment, or someone who has bad but fixable credit. He wants someone who has a realistic chance of home ownership. He locks in a three-year lease/option for a fair market price. He allows a part of the rent to be a credit towards the renter’s down payment if they buy the house. They are to treat the house like their own. This gives Andy three benefits. They have a 3-year lease, they are responsible for repairs, and every 3 or 4 renters will eventually buy the house.
            When a lease is up and the good renter cannot buy yet, he will extend the option to buy. As we know, the longer a tenant stays and pays, the better off the landlord is. When they move out, we usually need to do at least some minor rehabbing, and sometimes major fixing before we can rent the house again. However, if they decide to not buy and leave, he will do whatever repairs are needed and then re-evaluate the property and probably will offer it at a higher price than before.
            There are six ways to profit from real estate Andy said. They are buying at a discount, getting cash flow every month, tax benefits, building equity, appreciation, and option money. Also, Andy believes the rents will go up because it has become difficult for people to get home loans. These are not bad people, just ones who can’t afford the prices or can’t get a loan at the time.
            The number of foreclosures has about doubled over last year and may get much worse before the housing market recovers. This should be a great opportunity for the entrepreneurs, however Andy says a lot of the competition has gone away. He used to be upset over people paying too much for houses, but those people have dropped out of the market. If we set reasonable goals now is the time to start. One thing all investors have in common, including Donald Trump, is at some point they bought their first property. He said it’s time to start now. We had an entertaining and informative evening with Mr. Heller.