Well, it’s that time of year again, when we look back to see how well we did, if we hit our chosen mark, and maybe take a moment and chart a new course for the coming year.
I must say, it’s been an interesting year. Changes kept coming, some good some not so good. Overall we are still headed in a better direction and it seems with more than just our heads above water. I’d say it’s hitting our shoulders now and pretty soon we should be swimming at full force with some broad strokes.
We did not do as well as we planned this year. Why? We got sidetracked and distracted, and off our core business. That was a huge disappointment and lesson well-learned. We found ourselves wasting our time putting out self-created fires, using outdated systems that just plain weren’t working any longer. Then sometimes responding to the news instead of taking our own advice and FOCUSING ON OUR NUMBERS!
Honestly, sometimes it felt like we were riding in L.A. peak day traffic – STOP & GO! One minute we were a full-speed-ahead-don’t-spare-the-horses-buying-machine, and the next we had our face plastered against our investor windshield and hitting those real estate investing buying-brakes for dear life. Typically due to some ROBO signing something or other article in the Wall Street Journal about some foreclosed and evicted property owner taking illegal possession of his prior residence (another responsible hardworking investor’s rehabbed property) and reclaiming it as his own once again (with his attorney’s help, no less). I almost sold every rental I own, overnight! Fear was rabid!
I must admit of all the years I have been an active student and investor in real estate, never do I remember being so apprehensive about buying houses at such low price points, with such low interest rates when conditions seem to make so much sense. Do you think it’s because it’s been so difficult to take advantage of either one for very long without some wild financial scud missile shooting out of the sky? This business has been more like riding a bronco in the past year than ever. However, we still did OK.
We’ll Keep Those 40+ Homes, Please!
Still we managed to get our rentals to over 40 while still buying some to re-sell. We added a bunch of new REO agents to our acquisitions team list, restructured our whole buying process to meet our new higher demand, changed our office to paperless, and outsourced everything, but breathing. Overall, we have had a pretty good year, indeed, and with all that has happened in the national, as well as, our local real estate market (not to mention the overall national and world economy) we have nothing to complain about.
The present looks good, the future still better. I know that there are many economic challenges still ahead for our country and for us as individuals as the coming year unfolds. However, I hold firm to an optimistic frame of mind, and look forward to another successful year of investing.
If I’ve learned anything this year, it’s this:
Value your Time above all else and keep your Focus exactly where you want it to be, and nowhere else! DO NOT BE DISTRACTED BY YOUR FEARS!!
Having said that, I look forward to a FANTASTIC year full of changes and mind twisting events. BRING IT ON!!!
A sincere heartfelt thank you and BIG HUG to Bruce, Aaron and Greg Norris, and to all at The Norris Group for their continued and unwavering support.
Merry Christmas and Happy Holidays to ALL!
From The REO Santa!
Tony Alvarez, The REO Mentor
http://www.thereomentor.com
What will the real estate market look like in 2011?
And how can you position yourself to benefit from the New Normal?
You know, there will be millions made and lost in the next 12 months. The question is on what side of this equation will you find yourself?
Who knows where the real estate market will go? Not even the most knowledgeable, most well-educated economists, financial experts, politicians or real estate gurus have a clue. They’re all confused; as evidenced by the conflicting articles and reports that come out daily in the Wall Street Journal, MSNBC, and the rest of the media outlets (liberal and conservative alike) proving that wearing a $5,000 suit doesn’t necessarily mean that you know what you’re talking about. Even Jim Kramer, the Host of Mad Money, put his mouth in gear before his brain was engaged when he called the “absolute bottom” of the real estate market a year ago. I believe it was a Wednesday. He’s still wiping egg off his face.
So would it surprise you if I told you that I don’t have a clue either? Or how about if I told you that I know exactly what will happen? Would you believe me then?
Like when I said a year ago that the HVCC would crash and burn, or that financing for investors would become easier, or that Bristol Palin would be a finalist in Dancing With the Stars… Okay, that last one, I just made up, but the other two are true.
By predicting what I think is going to happen only becomes valuable to you if it helps you to make a decision today that will yield you some financial benefit by the end of 2011. That things will change in 2011 is no great secret or revelation; that they will change for the benefit of real estate investors like me and you is a fact.
Here’s how:
1) A marked increase in supply, as in a TON of new listings of REO’s and Short Sales causing a serious downward pressure of listing and selling prices. This has become the White House’s NEW number one priority. “Kill the Mill” = get rid of the dead inventory as fast as possible.
2) A serious influx of cash available from lenders and private party investors. Where else can you get better than a 10% return on your money than in real estate these days? It’s a no-brainer.
3) Superior financing for real estate investors and homeowners alike from conventional lenders such as Wells Fargo, JP Morgan, Bank of America and various wholesale lenders. It’s already started.
4) More flexibility on the part of the lenders holding non-performing assets. Just check out the increase in failed escrows and the discounted sales prices when they finally close.
5) Less competition in the marketplace from tapped out wannabe investors. Most of these guys have already left the table, or will shortly be exiting bruised and battered.
Here’s how you can take advantage of the present situation.
As usual, the natural laws of the game of success never change. If you know me at all, you should know the following by heart.
First, here are the basics:
1) Decide what you want to do. Nobody can do this for you.
2) Choose a target market. Make it small, convenient and learn it thoroughly; better than anyone else.
3) Load your GPS (Goal, Plan, Systems)
Goal = your destination: whether a number of houses, monthly income or net worth
Plan = this is how you’ll get there: buy and sell (bird dog, flip/wholesale or retail) or buy and hold (rentals)
Systems = your daily measurable actions: (look at houses, talk to agents, make offers)
Remember, the two most important assets that you posses as a human being are your time and your focus. Time because there’s only so much of it (and what you lose you can never make up) and focus because whatever you place it on will expand; whether your waistline or bank account.
For those of you already in the business, focus on two things: 1) continuously find new ways of dissecting your local MLS and submit offers daily and 2) cut back on your overhead immediately.
Review anything costing you money on a monthly basis from fixed to variable expenses and cut out any non-essentials. Make every dollar matter.
Identify dead weight on your team, such as, agents, contractors, lenders, escrow officers, mentors; anybody and everybody who’s not doing their job and kick them to the curb at once! Basically streamline your processes and focus on your bottom line.
Don’t be frivolous with anything this year; your time, your focus, your money, or your trust. Ask for proof and evidence in everything you do. Do your homework. Watch out for pretenders. There are a lot of them in this marketplace right now and more are coming.
Regardless of all obstacles your mind can imagine, believe in your personal abilities to successfully take advantage of this once-in-a-lifetime opportunity. The evidence for your success is all around you. You’re on the precipice of financial independence. Choose to participate. Do not take “no” for an answer.
The bottom line is I have complete faith that this real estate market has begun to turn in our favor. I’m extremely optimistic about the future of real estate in 2011 and beyond.
I believe 2011 is a crucial year for real estate. It’s basically the first inning of the World Series of Real Estate for this coming decade. So step up to the plate and knock one out of the park… I dare ya!
And hey – who loves ya, baby?
For the past three years we all have been hearing this “new normal” term thrown around like a Frisbee. What exactly does this mean to you and me as investors? Well, for one, if you miss the value of clearly understanding that EVERYTHING in the real estate business has literally changed almost over night, then you’re setting yourself up to miss taking advantage of this “New World” opportunity.
Everything seems to be running along as usual, doesn’t it? Nothing could be further from the truth. No matter what anyone tells you, highly successful real estate investors know that there has always been and will always be only two tracks running simultaneously in business – the inside and the outside track. If you’re not on one, you’re without question riding on the other.
The following is one distinction at the core of how I made so much money so quickly in the last down turn: You must become a “financial information interpreter.” Not only must you be aware of the actual changes in regulations and policies as they affect the real estate industry, but you must also develop your ability to interpret what those new changes mean and how will they impact your daily business. The more you do this, the better you will become at identifying what the next change will be and soon realize not all changes are detrimental or permanent.
In fact, most restrictive policies and guidelines which appear to be new today are actually old reactionary, politically-tainted ideas that have been taken out of the closet, dusted off, slightly rehabbed and presented to us as something brand new and in our best interest. (Kind of like how we sell a rehabbed, fixer upper.)
Since the institution of The Housing & Economic Recovery Act of 2008 (HERA), pressure has been placed on Fannie Mae, Freddie Mac and other lenders to fall in line and comply with federal law. And now the federal government (through Fannie Mae and Freddie Mac) has begun to enforce laws that require contractors doing business with them to reflect the ethnic make up of the areas they serve when deciding who will receive contracts for providing REO broker and short sale processing services.
This will impact how they deliver their REO inventory to the marketplace.
Consequently, the number of agents being approved to provide these services in my area has effectively increased the number of new REO agents by more than thirty percent. This is a tremendous opportunity for new real estate investors interested in buying REOs that presently do not have relationships with top REO brokers in the areas where they invest.
Being a “financial information interpreter”, I recognize this change as the very first step signaling the coming of the inevitable increase in listings of REOs and short sales which we, as investors, have been (impatiently) waiting for in the past three years.
I suggest you check out your own area and position yourself accordingly. Get out there and meet these new agents who have already started to receive an increase in their short sale and REO listings. That’s what we’ve done and it’s already working.
And Hey! Who Loves Ya, Baby?
FNMA http://ofheo.gov/Default.aspx/cgi/t/text/webfiles/Local%20Settings/Temporary%20Internet%20Files/OLK7/webfiles/15705/18_Fannie_Mae.pdf
HERA
http://financialservices.house.gov/Key_Issues/110_289.pdf
July 2010
First let’s deal with this past year and the GPS® (Goal Plan Systems) we had in place and how it has all changed.
As many of you know, I typically get most of my deals from Top REO Brokers and agents I’ve developed relationships with along the way. Now, don’t get me wrong. That does not mean I exclude anybody who calls me with a decent deal; I will look at anything and everything that comes across my desk.
But let’s face it — most of my deals come as a result of answering my cell or office phone and after a brief one-sided conversation (usually the REO agent giving me the details on a specific deal) I respond with a simple and quick thumbs up or down; that’s it!
The rest happens after that deal is locked and loaded in escrow. Not very exciting, is it? I agree, but heck — I’ve been working with most of these people since 1995. What do you expect? We know each other’s families, favorite foods, movies, religious beliefs. There just isn’t much left to say except, “Hi, how ya doing? How’s the family? When you coming over for some gossip? And Yup, I’ll take it or no I’ll pass.”
Then there are those times when I’m dropping in on them unexpectedly, pestering them for a quick short interview on my Flip video on what’s happening. You know — anything that’s changed with FANNIE MAE or FHA regulations, insider stuff or any dirt they may have gotten wind of I didn’t. (I love making them famous and putting them on YouTube.)
Otherwise, I’m just sitting around waiting for that phone to ring…and honestly, I’m ok with that. Did I mention I’m a tad lazy?
However, my assistant Sabrina (whose bonuses are tied to our monthly acquisitions, sales and rental income) and my Grandson (whose fat Trust account I now manage) are not okay with it.
Hmmm… and I thought I was the head of this ship. Well, to make a long story just a bit longer, I’ve had to increase my acquisitions to satisfy their greedy little bank accounts.
I’ll be glad when I retire and they’re running the show.
Our Goal for 2009 was to end the year with 20 homes fully-rehabbed and rented bringing in sufficient rental income to support ALL the overhead in our office including salaries, lunches and everything else we could think of. We knew we had surely accomplished our goal when we went cruising by the 30th property we acquired somewhat early and with just one tiny little wrinkle.
You see, right around August my top REO broker and good friend Don called me and asked “Hey, Tony — you got anything for sale? The market is crazy and I’ve got no fixed up inventory; whatever you have that’s ready to go I can sell for top dollar.” Well, I never look a gift horse in the mouth (or anywhere else for that matter.) So, off to the chopping block went 10 of my precious little babies. The logic behind this was two-fold:
1. The rental market was softening in the area I chose to buy and hold in too quickly. I was seeing too many vacant houses and too many inexperienced wannanbe landlords renting to anybody with a pulse and cash. That’s the recipe for a ghetto and NOT where I want to be.
2. Because I keep a close eye on what’s happening in my market, I’m aware of the inventory that is presently vacant and soon to be available which I know will cause a downward pressure on selling prices. So why hang on to houses I can sell today at top dollar and buy back for lower prices tomorrow? Make sense?
It was a perfect match and one that increased our revenue by an unexpected $300,000 for the year. Now, don’t you be worrying about my short-term gains. Uncle Tony has that tiny issue under control. (Can’t tell ya; would have to kill ya.)
At the start of 2009, we had specific neighborhoods and specific types of inventory that we were convinced we would load up on until at least 2010; not so.
Not only did our neighborhoods change for the worse much more rapidly than expected, but so did the decline in rents. And the biggest surprise of all was the type of house we are presently focusing on as rentals; very different than what I ever expected it would be this soon in a market with this many foreclosures.
In the article I wrote for this same newsletter last year, I expressed the following:
“The most important lesson that I have been reminded of this year is that we cannot depend on what we believe will work today based solely on past performance. This is a new game, and the rules are being rewritten (even as I write these words.) So the name of the game is…BE PREPARED FOR CHANGE!”
I believe this year this statement will still hold just as true, but it will seem that the number of changes as well as the speed, severity and impact of those changes will increase by tenfold; eventually all in our favor.
I think we are about to enter the “opposing confusing” segment of the market. Here is where we will begin to see radical opposition to the restrictions and regulations that have been placed on buying, selling, appraising and financing of non-performing assets presently controlled by lenders and the Federal Government. By all means, be prepared for change and in all ways and from many different places. They will come rapidly and without regard for any prior framework. My only suggestion to you is do not waste your valuable time asking yourselves why or what is causing the new changes; just go straight to, how will they benefit me in achieving my financial goals? Then take action and don’t take prisoners. I think you will be much better off in the long run.
In addition to change, I would like to add SPEED as the catch word for this year’s action plan. Speed will be what you will see out of Washington in their resolve to undo what they have created. Speed will be what you will be reminded of when you see inventory start to appear on the horizon. SPEED… RELENTLESS SWIFT ACTION! And do you know why? Because it’s in their best interest to do so. Not for the poor people losing their homes; not for the deficit; nor for our foreign relations. It will be for their own GREED.
Thank God we can rely on something!
So what’s my plan for the year ahead? As usual, I’m keeping it simple.
Here are my goals for 2010.
1. To acquire 2 to 10 single family homes per month with an average purchase price of 50% of market value to support one of two exit strategies: (a) retail sale or (b) hold as long-term investment rental property.
2. To stabilize my monthly income by maintaining a minimum of 30 “free-and-clear” homes and consistently increasing my monthly income by adding to my keeper inventory; at least one additional property per month.
3. To continue teaching and mentoring new investors my specific method of investing and managing long-term investment rental properties in Southern California.
4. To increase returns on investment capital in Trust accounts by becoming more aggressive with participation in partnerships out of my local investment area.
One last thing…
I know for some this year will still pose a stiffer challenge, especially for those that have been in the business for less than 5 years. You saw mostly the last upturn and so for you this must seem like a total and utter mess. But, for those of you that are fresh and new in the business, that have no point of reference or preconceived notions, you simply just don’t know any better; this market is perfect you’re out there quietly doing deals right this minute. But for the ones that got in when the getting’ was good (easy) for you, it’s tougher; still doable, but tough. Please realize that although the limitations you see seem very real most are self imposed as evidenced by the fact that they apparently have absolutely no impact on the new comers that entered the real estate market over the past 12 months.
That one fact should shake you to your core and wake you up to the realization that your mind is not your friend. Often I’m asked what is the one thing I do that I credit with helping me succeed in this business time and time again. It may seem foolish to some of you, but my response is borrowed from another successful investor that I once had the chance to ask the same question to ” I stopped listening to my own BS” I would add only one thing, and that is- if I assume anything it’s solely “perfection in the market at all times”. Why would I do anything else? It is what it is.
Let us all pretend we are new and fresh, and forget what we used to be and know. Let’s all go forth into the market as all that has ever existed is what is directly in front of us right now, and let us not hesitate in making huge large tubs of lemonade from all these lemons before us.
Yes, it’s that simple. (For those of you that need more convincing please go to www.thereomentor.com and click Tony’s blog and view the first interview with two young guys in their 20′s that just started in 2009 and have done 8 deals and made over $200,000 with only $1,000 of their own money . Where? In San Diego, yes I know, where I’ve been told many times over by more experienced investors ” I can’t find a deal, you can’t do deals right now in San Diego” yes it’s true for all of you who are still stuck in the past you are without a doubt correct.
It is a strange time, it seems older wiser investors and younger newer ones appear to have much in common now a days, for many of the same reasons. We know enough to work with what’s in front of us not what our mind tells us it should be like before we jump. Stop questioning and start doing. Use what you know to make solid decisions and start making some real money in this business. Don’t let your fear keep you from taking correct action.
Although sometimes what I write or say to you may seem hard or too direct, what I’m hoping to do is shake you, rattle you make you think and remind you of your own abilities to make this happen for yourself. I love you all. It may be tough, but it’s still Love!
I sincerely hope I have helped you to see what is possible for you in this coming year; I wish you all success in all you choose to do.
My best to all of you and my sincere gratitude to the Norris Group; special thanks to Bruce and Aaron Norris for allowing me to participate in such a wonderful yearly event as this newsletter.
Good luck in the coming year.
Your friend always,
Tony Alvarez
And hey… who loves ya baby?
December 2009
Ok, so I am up in Smith River, Northern California fishing salmon a few months ago when my assistant Sabrina calls me and reminds me to be ready at 7 pm because she is going to be attending the Hudson & Marshall Auction in the Antelope Valley and there are a few properties that we decided we wanted to bid on. So that evening, she was at the auction and I was on my cell phone in Smith River, Northern California looking at the river.
Soon one of the properties I was interested in bidding on came up for auction we waited to see if anyone was going to bid besides us, and sure enough the bidding started. Within a matter of seconds the bid went from zero to $40,000.00.
I knew I wanted that house! And I was yelling on the phone to Sabrina to bid “Go $41,000.00”. But all I could here was a noise and Sabrina saying “what did you say”. I kept yelling louder and louder the reception on my phone started to go sideways. My level of frustration as well as my blood pressure shot through the roof. Finally, there was silence. I was yelling did we get it? Did we get it? Did we win the bid? Then I heard back from Sabrina “No, did you want me to bid?” Some guy got it a $40,000.00. At that point my head exploded, I fired her immediately and slammed my phone down on the desk hoping it would shatter into a million pieces. Nothing makes me more crazy than loosing a deal that I set my mind on buying.
The rest of the evening was a disaster. I obsessed all night about the fact that I had lost that deal.
But all was not lost. Maybe the guy wouldn’t close, maybe he would cancel. Maybe the Seller would renegotiate because he did not get a high enough offer. Maybe, maybe, maybe. I finally got to sleep around 4 am. And when I finally got up at 8 am I got in my car and drove for 11 hours straight back to California to 16th Street exactly where that property is located.
As I sat there in front of the house making my self more crazy about the fact that I did not get this deal; I could not help but notice that there were five other similar houses, some of them in even better condition for sale right on the same street. So, after writing down all of the information on each of the houses for sale I went back to my office and proceeded to put together what I call Gorilla buying shot gun style. This is one of the methods I use in similar situations. It is not very sophisticated, but it does tend to get me pretty good results as you will see.
So here’s what I did, I created a Letter of Intent (short & simple) which basically included all the pertinent info such as the property address the price I was wiling to pay ($40,000.00) and with all of the usual investor terms the ones that are created to remove all of the Seller’s objections. I also included pictures of the front of each of the properties along with a brief description emphasizing of the obvious inferior condition of each house.
We also included a copy of the deposit check for the full amount of the purchase price as deposit and attached to my check a copy of our bank statement with the same account number as the deposit check showing sufficient funds to easily cover the amount listed on the offer.
Attached to this little package I placed a cover letter which went on to explain the that the first property had recently sold at auction for $40,000.00 and that sale had established a new market value for all these similar properties and that I had also informed them that I submitted a similar LOI to each of the competing properties listed for sale on the same street.
The end result of this exercise was that although four of my offers were rejected two were accepted.
One three bedroom one bath at $46,500.00 that is currently a pending sale at $100,000.00 with an estimated net profit of $20,688.89.
And, a one three bedroom to bath at $42,250.00 which we sold at $105,000.00 with a net profit of $24,331.10 recently closed escrow on June 30, 2009.
And a third property from a nearby similar neighborhood which came as a referral from one of the Agents that represented the Seller from one of the rejected offers. Although the seller did not go for my offer she liked the way we presented our stuff and called us on a property before it was put on the MLS. That one is a three bedroom two bathroom home we purchased at $45,000.00 and went into escrow at $99,000.00 with an estimated net profit of $24,059.09.
And here’s the best part, remember the property that I thought sold at auction? The one that got me crazy & off my butt to make all these offers. Well, it did not actually sale for $52,500.00 four months later.
And one more interesting point except for the two properties we bought on that street all the properties are were available for sale still have not been rehabbed, rented or relisted for sale.
When I tell you that everything on the Performance side of this business is ALL about speed and accuracy you better believe it.
So what’s the moral of the story?
I guess sometimes loosing a deal can turn out to be a good thing.
Since we started actively making offers in August of 2008 we have purchased a total of 30 properties of which we have sold three. The remainder of the 27 properties have been kept as rentals. The monthly gross rental income is $30,328.00 with a net of $21,229.60 per month. The average purchase price per property is $61,960.00 with the average net income from each rental of $786.28 after expenses.
Yea I know, 1 out of every 4 escrows is falling apart and let’s not forget the new restrictive appraisal regulations HVCC and the FHA 90 day seasoning requirement and FNMA restrictive polices on lending to investors and on and on and on…
Regardless of the chatter we will endeavor to persevere…
Presently, we are purchasing an average of three to four properties per month. We will continue to keep at least two per month as rentals until we hit fifty properties at which time we will reduce our keepers to one per month.
It’s good to be a real estate investor these days.
My best to all of you and as always, a big hug with deep affection for Bruce, Aaron, Greg and all at the Norris Group family as they continue their unwavering commitment to keep a watchful eye from the tower for all our benefit.
And hey who loves ya baby?
July 2009
Phew! Man, that was some year!
I’ve seen some close friends do very well financially this year. On the other hand, I’ve seen others hit hard times, the likes of which they never expected. And to be honest, I have to tell you that I haven’t been immune from the recent downturn. Without a doubt, I have taken some hits myself this past year. Luckily, they have been manageable. Thankfully, I have gotten myself back on track and have my new goals, plans and systems in place. I’ve begun to benefit from the present turbulent market changes. 2009 will undoubtedly be the most challenging and exciting business year that I will ever live through.
I expect that it will be filled with unknown and unexpected challenges and opportunities that I’ve never experienced before, or possibly ever will again in my lifetime. I imagine it to be the equivalent of being tossed around on one of those professional fishing boats in the middle of a fierce storm with enormous waves and no visibility but in the end bringing in a HUGE CATCH!
The most important lesson that I have been reminded of this year is that we cannot depend on what we believe will work today based solely on past performance. This is a new game, and the rules are being rewritten (even as I write these words). So the name of the game is…
BE PREPARED FOR CHANGE! So what’s my plan for the year ahead?
As usual, I’m keeping it simple. Here are my goals for 2009.
1. To acquire 2 to 10 single family homes per month with an average purchase price of 50% of market value to support one of two exit strategies: (a) retail sale or (b) hold as long term investment rental property.
2. To stabilize my monthly income by maintaining a minimum of 20 “free-and-clear” homes and consistently increasing my monthly income by adding to my keeper inventory at least one additional property per month.
3. To begin teaching my specific methods of investing and managing long-term investment rental properties in Southern California.
As many of you know, it was during the last down market that I was able to go from bankruptcy to $50,000 a month income and $10 million dollars in net worth over a 7-year period. While there’s no guarantee that this market will produce the same results, it would be foolish not to participate, especially when you can purchase a home today for 50% of its replacement cost and cash flow like a geyser even with 100% financing. Hello??
One more thing. While you’re busy working to improve your own financial position, don’t forget that presently there are many families in our country experiencing very difficult financial times. Remember to be generous and understanding to everyone that you encounter in your business affairs. You never know what a few kind or uplifting words will mean to someone who is down. Give them your best!
How wonderful to have the opportunity to participate and benefit from such a historic time! This is a new time and a great day to be alive!
My best to all of you in the coming year!
A special thanks to Aaron Norris and all the folks at the Norris Group for inviting me to participate in this newsletter. And a big hug and juicy kiss to the big guy, Bruce Norris, for his unwavering dedication to continually provide us with cutting edge information.
HAPPY NEW YEAR!!
And hey — who loves ya, baby? 
December 2008