by Matthew David

Do you want to know what kills more real estate investor's dreams faster than anything else? That, my friend, is having no clients to use their creative techniques on. Real estate, like any business, is 90% marketing.

"I have always believed that writing advertisements is the second most profitable form of writing. The first, of course, is ransom notes."
Philip Dusenberry

Unless you want to start writing ransom notes, you'd better stick with marketing mastery.

You'll see that not many people truly get advertising by taking a short look at online classified sites. Look at the ads and just see if it makes you want to open it to find out more. Odds are that the advertising hasn't exactly achieved its purpose–which is to get you interested.

Real estate investing is a business and the lifeblood of any business is marketing. You really need to be thinking of yourself a real estate marketer. Just imagine if other people knew how to market their homes effectively and how to write a creative contract. There would be no realtors for starters because people wouldn't require any assistance to sell and market their homes. Sellers certainly wouldn't need you, the creative investor. However, the reality is that probably over 95% of advertisements are not done effectively. You may even see huge companies with poor advertising campaigns. While their deep pockets may be able to sustain this loss, in real estate you won't do any business without incoming leads.

The first thing you ought to know is that if your headline doesn't grab the reader's attention then no one will ever see your ad no matter how well the rest of it is written. My advice to you is simple, have an attention grabbing or informative headline or don't write the ad at all because it isn't worth your time.

If you have a home under contract and you need it sold fast, which one of these headlines do you think will generate us more interest to get the home sold?

"123456 ABC Road - Lots of Amenities"
or
"Home Discounted $40k Below Market - Must Sell Fast!"

When you're building your wholesaling investor database, which one of these do you think is more likely to achieve the desired effect?

"123456 ABC Road - Needs Handyman"
or
"Investor Rehab Special - 17% Below Market Value - Won't Last"

We always need better results in shorter time. Marketing allows us leverage our time by having business find us. Make your ad stand out. First get the reader's attention and then tell them what to do after they read it. It needs to have a strong call to action at the end to either direct the reader to call this number, to email this address or to bring their coupon to this location.

Advertising in Any Business

Some people are so passionate about their business that it's too hard for them to look at things from the other person's perspective. Your reader doesn't yet care about your business, even though do. Not everyone is interested in hearing about what their company thinks they need even though they may sincerely believe that they have the 100 greatest products and services available. A lot of these real estate investors and individual business owners have the right motivation but they lack the knowledge to make their marketing accomplish meaningful results.

A motivated seller doesn't need to call you until they see that something about your ad is beneficial for themselves.

I use these companies frequently as examples to emphasize my point. Coca Cola and McDonalds are leaders in their respective fields. There are actually not a lot of people who love McDonalds as their favorite restaurant or there are not a lot of people who love Coke as their favorite drink when you actually compare it with their market share. They have huge market share without having insanely passionate customers about their products. However, they still sell the most of their product in their respective fields. The key to their success is their world class marketing machines rather than the products themselves. If you have a great business in every aspect but marketing, then you don't have a business at all.

The single biggest determining factor in long term success in real estate investing is marketing. When you learn to be a successful real estate marketer, you'll be able to make almost any business successful even without detailed financial or product knowledge.

Your business is like a tropical island where marketing builds the bridges, roads and airports that enable people to discover your island. Without those inlets, your island doesn't exist to the rest of the world. Would you build a great website and then never send it any traffic? I doubt it. So why do so many investors learn techniques to apply to sellers but then don't generate sellers to use those techniques on? Probably because they undervalue what is most important to their business.

With this in mind, here are some of the things you should and shouldn't do within your advertisements in any business. Yes I understand that some of these may be obvious points but look at various advertisements. Although they are obvious, they are often not adhered to.
DO DON'T
Have an enticing offer List all 250 products/services you offer.
Get the reader's attention immediately Design your ad so that they must see the whole ad to fully understand the offer
try multiple mediums–including non-traditional ones Advertise using only the same mediums that everyone else uses.
Target your specific product for a specific audience only Make your marketing try and appeal to everyone at once (i.e. jack of all trades, master of none)
Avoid deception by clearly stating what the offer is Have fine print or subject to clauses. This only works for corporations like utility companies that have minimal competition in the marketplace
Create demand by advertising even when you don't need the business. Develop a waiting list Advertise only during the slow periods of your business.
Be unique and catchy with your advertisement. Be identifiable where others are not. Look to everyone else for what they do. Most businesses are terrible at marketing, are you going to copy that?
Provide incentives for customers to join with or refer your company Provide negative consequences for customers to leave your business
Have joint ventures and partnerships with outside businesses that provide useful related services to your clients. Take on the world yourself by not leveraging your time with other established businesses.
Test your marketing strategies in small niche markets before launching a large scale campaign Spend your advertising budget on something big before testing it to see that it even works.
Get employee input to get valuable ideas before putting the advertisement out. Decide you know what's best and don't consider other sources of input
Promote what you're willing to do for your customers. Make yourself the obvious choice. Slander the competition as a means to provide an alternative. Politicians do this and none of them are perceived to be any good. This is not coincidence
Have specific goals for your marketing targets. Put your ads out there and see what happens. Stir up natural curiosity about your company and its products/services. Figuratively, show all the cards you have so that the client can make a purchasing decision without meeting you. Demonstrate why your service is the best. State that your product is the best without demonstrating it. Which will come across as insincere.
Continually commit time and effort to successful marketing. try it a few times and see if you get a response. If you don't, quit and don't re-evaluate.
Provide a thank you to past customers. It is word of mouth marketing gold. Forget to market to your already existing customer database.

If you're going to be the marketing leader in your field, you're going to have to stop copying what everyone else does because most businesses don't correctly comprehend marketing. Instead, look to their ideas to further build on them. It's going to take consistent effort in the beginning to build a strong marketing campaign.

However, when it's all said and done, you'll have an automated stream of steady business that does not take your active participation. The concept of a successful business and successful marketing simply must co-exist.

Develop some marketing goals and find a way to hit those targets. Remember, this is meant as a guide to build on not the 10 commandments of advertising. Grab the good ideas and build on them. Real life works when you make your own marketing objectives and you set the guidelines.

If you're willing to become a master at marketing, your success in your real estate business is inevitable.

by Richard Roop

There are no magic bullets in marketing, but I have developed a system which comes pretty darn close. I reported in the last issue of this eLetter about my new postcard campaign. Here's an update:

I mailed 10,000 oversized postcards to one zip code. I saturated every home with my message. The total cost was less than $3,000. We received about 35 calls, only .35% response. But I bought 5 houses out of 35 leads on the first mailing! The response rate should remain the same or improve as I remail to the same neighborhoods, allowing them to see my message multiple times, giving my self increased credibility. Plus some the postcards will be saved, and I'll get more calls from this initial mailing down the road.

I bought one out of 7 houses for sell. I usually buy one out of 10 to 15. The increase in closing ratio, I believe, was a result of targeting the right neighborhoods and getting my entire sales message (my famous "advertorial") in their hand… and my new headline. These sellers were much more prescreened than if that called on a sign, classified ad or a regular smaller size postcard.

** $145,400 IN CASH AND EQUITY IN ONLY 6 WEEKS FOR $3,000 **

Here are the actual results:

House #1: This house valued at $134,900 fixed up. It needs carpet, paint and some trim items. Seller owed $89,000 plus $6,000 in back payments. I purchased for amount owed (subject to) plus $500, or $95,500. We have it under contract with a tenant/buyer for $132,000 "as is". We got our buyer in with the first month's rent, $3,500 non-refundable purchase plus some repairs to be done prior to occupancy. We have a positive cash flow. Equity gained: $35,500

House #2: Seller owed $106,000 plus several back payments. I bought for what the seller owed (subject to), about $109,000 with $3,000 down. The seller used the money down to get the loan current. House needed carpet, paint, sod in front yard, roof (unexpected.oops!) and some misc. repairs. The house did not sell quickly "as is" so we are fixing it up. It is offered for sale for $144,500 fixed up. The repair costs are $12,000. Because of roof, this is a tight deal on a fixer upper. Equity gained: $23,900

House #3: Seller owed $94,000 on a first, $10,000 on a second and $6,000 in arrears. We purchase for the $110,000 owed subject to. After repaired value is $159,500. It needs $15,000 in repairs. Currently being offered at the after fixed up price, "accepting offers as is". We made up the back payments and paid off second with cash generated from buying house #5 below. Has not sold as is yet so we are about to rehab. Equity gained: $34,500

House #4: This house is in great shape and valued at $157,500 with terms. We took over a nice $110,000 first mortgage subject to, put $2,000 down and the owner carried back $20,000 with no payments or interest, due in 5 years. We held a "round robin" open house for one hour and found a tenant buyer with $5,000 down plus the first month's rent. We had it cleaned and the carpet stretched. We also spent $500 fixing up the front yard. Because of the $20,000 (deferred down payment," we have a nice positive cash flow. Equity gained: $25,000

House #5: Valued at $165,000-$170,000. It is on the market for $179,500 with terms. My office may have sold it yesterday for $10,000 down to a tenant/buyer. House is in great shape, nice neighborhood. Owner bought for daughter and it had been vacant for 4 months without being marketed. He owed $18,000 on a first mortgage. I offered him $63,000 cash and $90,000 in 5 second mortgages secured by 5 different properties including his house, 3 of the houses above, and one of my "keeper" rental properties. Terms on his equity is 6% accumulated interest, no payments, 5 year call and the right to substitute collateral. He is a retired military officer and did not need income but wanted interest on his equity. I got a new hard money loan for $123,000 at 11% and walked away from the closing table with $60,000 cash(!) less closing costs. Equity gained: $26,500

Total equity gained on 5 houses: $145,400
Cost of mailing: $3,000
(Better than the stock market?)

The cost per deal for marketing is $600 per house, higher than my average $350. But I spoke to less sellers, saw less houses and can EASILY repeat as often as I want, anywhere in the country!

by Mike Butler

Protecting your assets should be a critical part of your investment program. Years ago, we had several reasons not to worry too much about it. Here were some of my excuses:

1.) The old “can’t get blood out of a turnip.” If you don’t have any assets, there’s not much for them to get. When getting started, I usually didn’t have much cash and not much equity. Not much there means not much for them to get. It felt safe.

2.) Insurance was labeled as the first line of defense in the asset protection arena. Buying good insurance and a lot of it was considered an acceptable way to “buy” protection.

As a real estate investor, it’s easy to focus on the “deal” and the “numbers” involving the performance of our properties. Capture another deal and you’ll feel great and share the details over dinner and with your friendly competition. Put a few of these in your pipeline and before you know it, you’re one of those folks with something others might want to go after. Simply allowing yourself to be known as a “landlord” or real estate investor implies you have a lot of assets, deep pockets, and plenty of cash.

Before you know it, you might have become a bigger target than you could’ve ever imagined, all from the result of your work, effort, and continued education and knowledge. Protecting your assets becomes a number 2 quadrant activity of “not urgent, but important.” We all just procrastinate. There’s not much excitement in figuring out how to protect your self. It’s not as much fun as doing a deal, cashing a big check, or collecting payments every month. It’s b-o-r-i-n-g and usually involves having conversations with boring professionals who have their meter running charging you to talk with them. Ouch! Developing an asset protection plan is about as much fun as going to the doctor or dentist.

Let’s try it using the KISS method.

First of all, let’s try a simple comparison. Let’s use a good sharp fast sports car. This sports car has the best and biggest 12 cylinder engine with the most horsepower. It’s powerful. It can go from 0-60mph in 3 seconds. This sports car has the best and smoothest transmission. It’s just a well-built and very fast and sharp car. Sounds good so far, right? What if you put 4 different size tires on this car because they’re cheaper or somebody told you to do it this way? Wouldn’t this affect the performance? What if you failed to keep the proper air pressure in all four of your different size tires? What if you never changed the oil, air filter, anti-freeze? What if the car called for high octane fuel and filled the tank with diesel fuel or kerosene because it’s cheaper?

I don’t know much about cars and really don’t plan on learning anytime soon; however, I hope you can see how your high performance sports car could be turned into junk in short order without proper preventative maintenance. The same applies to protecting your assets. When gathering information to learn about something, learn from somebody who has been there and done that. Would you want to learn how to be a millionaire from a guy who speaks well and works at a temp service making 20k annually? Would you go to a veterinarian for brain surgery because they’re your buddy and will do it cheaper?

It urks me to see investors start off wrong with bad information from a trusted friend who happens to be a professional. Be careful. Yes, I’m picking on attorneys and CPA’s because this happened to me too. These “friends” meant well and really truly were trying to help; however, they were not experts in the real estate investing arena. Protecting your assets involves several factors. Just like the sports car, there are many parts to make this work properly. Proper tires, fuel, driver and other parts all combined properly = good sports car. There is no one button to push fixes everything. It just doesn’t happen so easily.

For starters, many folks say “I don’t want to own anything. If I don’t anything, I have no liability.” boloney! The only way to remove all personal liability on your part is to get off the planet. You could own absolutely nothing and if you’re driving your neighbor’s car to the grocery and run over the little old lady pushing the buggy in the parking lot, guess who’ll get sued? The owner of the car and the driver…you! So, bite your lip. You can never remove all liability. This kind of exposure will be called the “back door.” When you get sued from the “back door,” and they win, they get insurance money first. Then they’ll get the things you own or have an interest in to satisfy a judgment. It’s just plain ugly.

Protecting Your Assets Involves 3 Concerns

1.) Liability
2.) Tax Strategies
3.) Estate Planning

These three concerns each have unique and effective strategies for each benefit; however, as shown in the drawing above, they overlap each other. They don’t always compliment one another. This drives us absolutely bananas. When discussing protecting your assets with your CPA, they will almost always defer some questions to your attorney and vice versa. The point is, if you structure everything for the simplest and best tax strategies, it’ll probably violate and may not be the best for asset protection and/or estate planning. If you get a super aggressive estate plan put together to make things easier for your heirs, I’ll bet you’ve made things worse for your tax situation right now. (I did).

After a lot of research, expense, and growing pains here’s the simplest plan. Take title to property using a land trust. A land trust simply hides the beneficial interest from the public record. It does not exist for tax purposes. It should not cost you a penny extra in closing costs.

Use “Single Member, Manager Managed LLC” (limited liability company) for ownership of investment property. If set up properly, these entities do not exist for tax purposes. They exist only for liability purposes. Treat them like a business for liability concerns including a bank account for each LLC, but everything gets combined and reported on your personal tax return as if they didn’t exist.

As a rule of thumb, multi-member LLCs aren’t good. They cause you to file another tax return. More tax returns equal more expenses for you. The same benefit of the multi-member LLC can be achieved using a land trust with a 50% beneficial interest for each single member LLC to replace a multi-member LLC with two members. With a 3 member Multi-member LLC, simply have each beneficial interest of 33%. The Single Member, Manager Managed LLC gives you the best of both worlds. Used properly, it gives you the benefit of the old limited partnerships without the added expense of another tax return.

In-House Property Management Company

Depending on the number of properties and your activity, you may consider a LLC to be your own property management company. This entity can be used to wholesale property and will be your “dealer” entity for tax purposes. Caution: The management fee paid to your own management company will be earned income and not passive. Earned income pays more income tax. This entity should not own assets. It’s your out front entity with all the exposure, risks, and owns nothing.

Insurance

Have a policy for each property. The old-timer’s strategy of a good asset protection plan is to simply have good insurance, and a bunch of it. Good insurance might not be the best protection and is not the cure all today. Today, insurance companies are bailing out and backing off all kinds of coverage. They’re dumping mold and mildew, lead based paint, acts of terrorism, war, and radon. Investors and homeowners are getting policies canceled because of certain species of dogs, trampolines, and even macaroni and cheese in a pot on the back porch. The list is getting longer and longer. Insurance is something you gotta have, but you better not use. If you file a claim you’ll get on the nasty list and your rates will go up if not canceled first. Save insurance for tragedies such as major fires, tornadoes, hail damage. Do not use insurance for vandalism, thefts, and bad cooking.

Deductible

Increase your deductible to $1,000 or $1500. If you file a claim, your rates will go up or you’ll get cancelled. There is one type of insurance coverage that does not gig you personally. Weather related tragedies such as hail, tornadoes, hurricanes, etc. are labeled “catastrophic” by the insurance companies and are not a reflection on your risk as an insured. If you go overboard on your deductible to lower premiums, and raise your deductible to $5,000 or more, you’ll miss the boat on hail damage and other catastrophic weather incidents.

Liability Coverage

Pay attention to your liability coverage. All the attorneys on TV are looking to help somebody sue somebody. Good insurance with good liability coverage and an umbrella policy as a back up plan are good front line defenses for you in the liability department. As an investor, your liability coverage should be a minimum of $1,000,000 or more.

Loss Of Rents

This highly promoted coverage is okay in the beginning with a just a few units. It’s great if you have a multi-family building with 4 units or more in ONE building. For example, a building with 18 units would be a good candidate for Loss of Rents coverage. A fire or major casualty loss could cause the whole building to be vacant overnight…. This coverage would be a great lifesaver here. On single-family homes as rentals, you need to do the math. When you have 20 units or more, look at the added cost of the loss of rents coverage for each and multiply it by the number of single-family homes. The benefit to the insured is usually up to 6 months of rents paid. You’ll get to a point where the added cost to your premium exceeds your 6-month rent benefit. When this happens or gets close, whack it. I learned this from my insurance agent. Don’t confuse with multi-family.

Umbrella Policy

Also called “excess liability” coverage. This can be an ugly monster if not understood. Remember, insurance agents usually work on commissions. They want to sell, sell, sell. Umbrella Policies got their name by the way the policy operates. An umbrella policy does not cover everything and all of your loose ends. It covers what is only under the unbrella. If you have a policy with insurance company A, and you have an umbrella policy with Company B, odds are your umbrella won’t cover or stand behind company A’s coverage, especially if you fail to tell them about the Company A policy.

Agent / Company

Having one competent agent for your insurance concerns can be a huge benefit for you. Sure, they can go belly up, lose your business, and you can switch companies; but you’re less likely to hiccup, hit a pothole, or forget something like those umbrellas. It will eliminate the need for two or more umbrella policies and the added stress of making sure all of your properties and activities are included under the two or more umbrellas.

Imagine for a moment you have two or more insurance agents and companies. Insurance Agent A, B, and C. Each agent has policies covering some of your properties. Each has an umbrella for their policies. You are an aggressive real estate investor and you buy and hold with tenants, and buy and sell some to feed the machine. What a mess! Odds are you will get gigged on extra premiums and you must always remind your agent A, B, C to add / delete properties on regular insurance and each umbrella. Now, suppose you have one agent with Company A. Easier for me, easier for them. You can structure your umbrella to cover all policies with Agent A. No need to worry here. If you choose not to use an umbrella policy, you better load up real good on the front policy. I suggest again, a minimum of $ 1,000,000.

Separate Policies

You can argue this one all day long. It’s absolutely easier, safer, and more efficient to have a separate policy on each property. Do not get a commercial policy adding more units, buildings, and etc. all on one policy. This makes it easier for the agent and horrible for you. It actually reduces your coverage!

Benefits

•Each property stands on its own policy and it’s own deductible.

•Each property with its own policy covers you better.

•Provides you with greater privacy protection. Lenders receive only proof of insurance for the one property listed. If you have a hard money lender or a seller financed property requiring proof of paid insurance, they receive only the policy for the property. If you use the agent friendly commercial policy, they will receive a list of everything you own.

•Allows you better control, especially on jumped loans. (subject to)

•Lawsuit Time: not if it happens, but when. When it does happen, one of the first things the attorney asks for and will receive without your consent is a copy of the insurance policy. Once again, the dirtbag attorney may receive a list of all your properties.

•Houses and garages may be listed as individual buildings. It can be cumbersome keeping track of building 36 and 37 in relation to addresses, especially if you sold some of them.

•Better Coverage: with each property having its own policy, each has a deductible and a liability limit. The liability limit usually has 2 numbers. The first is the limit of each occurrence. The second is the total aggregate for the policy. In simple terms, if you get sued they may pay up to the first limit for each occurrence. If it happens again during the same year, they may pay again providing it does not exceed the second number. With the commercial policy listing all of your properties, you still have a first number and a second number, all on one policy. So if you get sued, they may pay up to the first number for the first occurrence. If it happens again during the same year, it could totally wipe out your liability coverage on all of your other properties.

•Payment of Premiums: with individual policies, premiums are usually paid a year in advance. You’ll have staggered premiums due throughout the year for better budgeting. A commercial policy zaps you one time annually and properties added and deleted throughout the year have pro-rated premiums based on your effective date. It’s a mess if you’re busy.

Jumped Loans – (Subject To)

Investors have been told “add your name to the existing homeowner’s policy.” Dangerous! We’re real estate investors, not homeowners! Remember, agents make their money by selling, and earning commissions. How many homeowners’ policies have liability coverage of $1,000,000? The policies I’ve seen have jewelry, boats, minimum liability coverage, and all kinds of garbage you don’t need. plus, it usually costs more.

If you’ve jumped or bought subject to on a property with a delinquent loan, odds are they’re in a “forced insurance” plan at the direction of the lender. Super expensive, their forced insurance is usually 3 times the cost of good insurance with absolutely no liability coverage. None. Why in the world would you want to continue this policy and add your name as additional insured? Crazy and Dangerous!

Again, use your agent and get your own individual policy for the property adding the seller(s) names to your policy as “additional insured” to satisfy the lender. Don’t try to argue and say something like, they have good insurance and it’s being paid from escrowed funds. As investors, we’re tightwads, but the purpose of insurance is for tragedies. So what, the worst-case scenario is you may pay for two policies the first year you bought the property. After you get everything squared away with the lender and correspondence coming to you about the loan, if insurance is paid from escrowed funds, cancel the existing policy purchased from the sellers and replace with your policy. They’ll do it most of the time as long as the borrower(s) name(s) are on the insurance policy.

This simplified version of protecting your assets should not cause more expense from additional tax returns. Protecting your assets doesn’t address any issues regarding estate planning; but, make yourself aware of how each of the 3 concerns overlap and violate each other if each is done properly. So there is no one simple plan to fix everything. Just like the fine tuned sports car, protecting your assets involves several pieces and parts all working together properly.

by Lou Castillo

The other day I had a call from an investor friend who asked how I determine values in this crazy market.

The first thing to do is to pull the comparable property sales. Comparable property sales are properties that are as close to the subject property as possible. I know that an appraiser would say that you could take properties from as far away as a mile but we know a mile away is a long distance and neighborhoods can change significantly in a mile. I look for properties as close to the subject property as possible. The best would be on the same street, block or neighborhood.

You want it to be similar square footage. If you are talking about an 1800 versus a 1900 square foot house your average buyer is not going to see that hundred foot difference. If you are talking about between 800 square foot and 900 square foot obviously your buyer would see the difference between those two houses. There should be similar bed/bath configuration.

Similar in age; age is something that is relative. If we are talking about a ten year difference between a house that was built in 1996 versus a house built in 2006, then yes buyers would see a big difference between those two houses. If you are talking about the difference between a house that was built in 1959 and a house that was built in 1969, still a ten year difference, your sellers won’t see a difference between those. You are looking for houses that are essentially the same in your buyer’s eyes.

Now assuming you have that, what are the comparable sales? What are you seeing that has sold? In this crazy market it is no longer enough to know the value of the houses that have sold in the last six months. What you now have to do is look more at what is happening. Look at the trend. Break down those comparables and find what has been selling each month of the last six months so that you can see a trend. Yes, six months ago they were selling at this, five months ago they went to this, four months ago they went to this, and so forth. Instead of just saying overall they are selling at this level you want to see if they are going down. Are they going up? Are they staying flat? And if they are going down, at what rate are they going down? How fast is that decline occurring and is it picking up speed? Is it slowing down? What is happening with it?

I also want to know are there buyers on the market buying or is the market stalled? My investor friend said there had been no house sales in the last four months. Well if there have been no house sales, none, zero, in that area that concerns me. I can take a house and I can make it the best house out there at a favorable price and I will attract the buyers that are in the marketplace but if there are no buyers it really doesn’t matter what I’m doing, I’m not going to get it sold.

You have to look at buyers. If there are no buyers I would definitely not be purchasing that house right now. If you are seeing an area that nobody is buying in then that area must be an area of town that nobody wants to live in. Not an area that I would necessarily want to buy in. Generally, that is not the case. The case usually is that houses are selling. For instance, there are 200 houses on the market and in the last 6 months 15 of them sold. Okay? That means 1 out of 10 houses are selling. That just means the market is slow. It doesn’t mean it has stalled out. Now a slow market I can deal with because I can take those 15 buyers and make my house the most attractive deal to them to get them to focus on my house. I’m not scared by that. The only thing that scares me off is if there are no houses selling at all.

The next thing is looking at what is listed on the market in the area today. What’s your competition? And how do those prices compare to what is sold? In other words, if you look at everything that has sold, it was $200,000, but everything that is listed on the market right now is at $180,000. It tells you that the prices are dropping. Nobody is going to list their house at $180,000 if realistically you could still get $200,000. It must mean that they are dropping their price because they are getting beat up by the marketplace.

Which leads to the next question, what are the days on market? How long have those houses been sitting there? If they are well under what houses have sold for in the past I’ll bet when you look at the days on market and how long they’ve been listed they are starting to exceed 60, 90, 120 days. The next thing to look at is how many rehab dollars is it going to take to make the house the nicest house in your price range. I am not saying to go crazy in your rehab and build a palace when everything is on a lower income level. That’s not the point at all. The point is to make it the nicest house in that area. Sometimes making it the nicest house simply means that it has brand new carpet, paint, fresh landscaping, just looks all clean and fresh. Then I want to be able to price it right.

The next thing is to be able to determine how long it is going to take to get this house on the market given the rehab needed. Is it going to take me a month to get it back on the market? Is it going to take me six months or more? The further out obviously the more risk there is. That is why right now most renovators are looking for properties with minimal amounts of rehab so they can get in, get out and not risk being in the marketplace too long. What you want to do is project out when this house be on the market and figure out what the prices will be at that point. If they have been declining at a rate of 2% per month and you are not able to put this property back on the market for three more months, then estimate a 6% decline on the market. Given that this is going to be the estimated value of the property at that point. You will build into your deal the right sale’s price and the right rehab dollars so you are buying smart. If you buy with your profit built in on the front end you will make money on the back end of the deal.

What you want is to price your houses in the middle of the pack. Don’t be the highest priced house. Right now is a buyer’s market. If you were in a seller’s market then you absolutely price it above the marketplace. Give them a great product and then charge them. If you do your research then it will feel like you have this crystal ball that you know what your house is going to sell for and you can buy feeling comfortable that you are going to be able to sell this property. The bottom line is that you have to build your profit in on the front end of the deal.

by John Cash Locke

I used ‘U-Haul’ money to purchase a really great house ‘Subject To’. It was 4bd, 3ba, 3 car garage, 2 fireplaces, tile roof, 1/3 acre lot house and only one year new. I guess the buzzword is it was a ‘Pretty House’. However as with any house I only give the seller a small sum for their equity, then it is ‘Gorgeous’ to me forget about ‘Pretty’.

The time period was December a few years ago. Those that remember it was very slow for home sales. It was the 15th of the month close to Christmas and I had only bought and sold 4 or 5 properties. The home was advertised for $15K down in the local paper. No calls were coming in; the Grinch was staring me right in the face and laughing. It looked like Santa wasn’t coming this year. I called a friend of mine in the used car business and asked him if he had any “sexy” used cars for a good price. He said he had an ‘84′ Corvette in super condition. This was a bad year for Corvettes so it kept the price down, but fit right in to my plans. It was a decent car but not in super condition. You know how those used car salesman are even if they are friends. I purchased the ‘vette’ for $3,400.00.

My New Ad Read:

$20K down – No Qualifying
4bd, 3ba, 2800sq.ft., 3 car gar.
1 year new, close to shopping,etc.
FREE CORVETTE W/Purchase
Call owner 555-1212

You noticed I added $5K to the down payment to cover the cost of the car plus a little extra for Christmas shopping. When the ad broke in the newspaper the phone did not stop ringing, one call after the other. I sold the home the same day the ad came out and probably could have sold a dozen more, if I had them.

Every house we buy has a personality of its own, much like you and I. This home looked like it was built for a Corvette owner. If the buyer did not own one he would when he bought the home. There are basic amenities plus copy I place in my ads. However, I use marketing techniques using the personality of the house to match the personality of my potential buyer.

You can get top dollar for the home you have advertised if you use the proper ad copy. Be creative in your marketing efforts. I am not saying to go out and buy a car for every home you sell. But, I am a firm believer that the home sells itself. Just envision who would buy the home, then be creative in your ad so that it fits the person or family reading the ad.

by Lou Castillo

It is a lot of work getting your direct mail pieces out. What happens is that if you are trying to do everything yourself you finally get to a point that you don’t want to do it anymore. Mail houses are very inexpensive and here’s why. The United States Post Office offers a presort discount. If you will bundle the mail according to their specification and bundle it to the first three digits of the zip code USPS will give you an even better discount. If you will do all 5 digits of the zip code, they will give you the best discount. If you will do a zip plus 4 presort, in other words sorted all the way down to the carrier route, USPS will give you the best discount.

A mail house will sort it for you and apply that discount to your fee. What that means is if you are at home trying to do it yourself you will pay full postage. Not to mention the hours lost. The savings that you get from the postage will almost pay for the mail house. Let me give you an example and a resource. Alliance Productions, Inc., talk to Mike and tell him you are one of my students and he will give you special pricing. He will print up your postcard, presort, and charge you 24 cents for the preparation and 24 cents for the postage if you are using the half sheet postcard. The half sheet postcard is the best size because it stands out in the mail and it is big enough for you to get plenty of advertising copy on it. The post office is going to charge you regular first class postage as if it were a letter, currently 41 cents. With the presort discount the mailhouse is only going to charge you 24 cents. A 17 cents savings that is then applied to the production of the piece. You are saving 17 so each piece is only costing you 7 cents.

When I say that he is doing the production that means that he is doing all the card stock to go out, the cutting of it, the ink to go on it, because if you do this at home you are going to spend an awful lot of money on ink in your printer. And then he applies the stamp and takes it to the post office, all of the production for 7 cents each. It is well worth it. There is no way that you can do it for that price at home. If you are interested in doing direct mail call him.

You can use a mail house near you as well. I did a lot of research and found him to be one of the cheapest and he understands our business. You can send him a download of the addresses you want it to go to, send him a download of the marketing copy you want and he will merge those two together and create the postcard, print it up, bundle it, get the presort, and take it to the post office.

Mail houses are a much easier way to get your marketing out the door. Let other people do it. Outsource it so that you have more time to put into your business. All you have to do is send him your addresses, send him your marketing file and you are done. That marketing piece is done and off your books. In fact, you can get so good you have five different pieces that you normally send out. You can give all of those to him in advance. Send those to him and say this is mailing one on such and such date, mailing two on such and such date, etc. This is how you want to set up your business so that you are not being consumed by all the individual tasks. Your focus should be on getting more sellers in, negotiating with them, negotiating with buyers and answering the calls that come in from your marketing. That’s where you are going to make your money.

by Bill Bronchick

As of April 1, 1997, all fifty states have adopted the Limited Liability Company or “LLC.” The LLC is relatively new to the U.S., and most states have adopted LLC laws only within the past few years. Essentially, the LLC is a cross between a corporation and a partnership, with all of the bells and whistles of both.

The IRS Has Cleared the Way

Most conservative attorneys and CPAs (including myself) shied away from LLCs because it was not clear how the IRS would classify such an entity. However, the new IRS rulings make it clear that an LLC will be treated as a partnership, so long as it has at least two members. A single-member LLC will be “disregarded” for tax purposes. This means a single member LLC is still valid under state law (and thus affords lawsuit protection), but no additional tax reporting is necessary at the federal level.

Lawsuit Protection

The LLC, like a corporation, provides “lawsuit protection” for its owners. The owners (called “members”) of an LLC are not personally liable for debts or liabilities of the company. Thus, an LLC which holds real estate will protect its owners from personal liability for lawsuits. In addition, a foreclosure against the company will not create personal liability for the members (unless, of course, the members signed personally on the loan).

Favorable Tax Treatment

Like a partnership, the LLC provides “pass-through” tax treatment. This means that the company is not taxed on its profits; all profits of the company “pass-through” to its members. A regular corporation (called a “C” corporation) is taxed at the corporate level. The shareholders are taxed again on the income they receive from the company.

Asset Protection

For many years, the “Family” Limited Partnership was the preferred vehicle for estate planning and creditor protection. The popularity of the FLP was that a creditor could not take partnership property or attach a partner’s interest. This limited remedy would force a creditor to settle with a partner for pennies on the dollar.

The problem with limited partnerships for holding real estate is that the general partner has personal liability. This problem was often solved by using a general partner which is a corporation. This, of course, creates added expense and paperwork. An LLC afford its members the same creditor protection as a limited partnership, but no member has personal liability.

Another interesting feature of an LLC is that the IRS does not consider a single member LLC to exist for tax purposes. Thus, the single member still has lawsuit protection in state court, but the member continues to report his rental income and expenses on schedule “e” of his personal income tax return.

An example of this simple, yet effective protection is shown below:

In this scenario, Larry Landlord does not need to file separate tax returns for each of his three LLCs. However, if a tenant in his apartment building is injured, he will not be personally liable, nor will he risk losing his other rentals in a lawsuit.

As you can see, the LLC can provide excellent protection for landlords, with little paperwork hassle.

Estate Planning Features

The LLC can provide a vehicle for passing wealth to younger family members without having to re-title the real estate. Once real estate is transferred into an LLC, the members’ interest is converted to personal property, which is represented by their LLC “shares.” These shares can be transferred incrementally to children as tax-free gifts ($10,000 worth per year). The process for transferring LLC shares is very simple compared to filing a new deed each year. The parents can still retain control of the property during their lifetime by acting as “managers” for the company.

As you can see from this brief discussion, LLCs can play an important role in your overall asset protection, estate planning and tax strategies.

by Lou Castillo

Here’s another short tip in my success series. I have always said that marketing is the cornerstone of your business. If there is one place that you really want to place your best efforts, it’s in your marketing. But the question I hear most often from my students is, “How do I write great ad copy?”

Writing great copy is a state of mind. It’s really just about you talking to your potential sellers about why they should contact you to buy their house. No one knows you like you know yourself. And no one can communicate who you are and what you have to offer better than you. It is best, therefore, if you write the ads yourself so the true you comes out – the one that the customers are going to meet in person when they call. Here are some tips that will help:

1. Determine what type of customer you’re trying to attract. What is their situation? What are their immediate wants (remember we always seek out what we want, not necessarily what we need? Put yourself in their shoes. What are they thinking?

2. Write down who you are. Why should someone call you? Are you a friendly person? Do you focus on service? Are you easy to talk to? Do you have a lot of experience?

3. Have a USP – Unique Selling Proposition. What makes you better than all of the rest? It can be that all your phone calls are answered by a real person. Or that you will always make an offer within 24 hours. Whatever it is that you do that makes you unique to the competition.

4. Compare the two lists and the USP. Write down some phrases that match what you have to offer with what they want. For instance, they’re intimidated to call and talk to anyone about their situation. They’re afraid of being judged. You feel that you are a nice person who is easy to talk to. A phrase you might use is: “If you’re looking for a down-to-earth person who will take the time to make you the best offer on your house, then call me now at _______.”

5. Since composing the copy is difficult for most people, consider just talking it out into a tape recorder. Just talk to your customers in everyday English. Tell them what you can do for them. Then re-play your recording and write it down.

6. After that, put it away. Come back a day or two later, and read what you wrote, and make revisions that make it a stronger message. You may want to repeat this step a few times.

7. Be confident and proud of what you have to offer, but don’t let it become cocky, and do not over promise. It is much better to under promise and over deliver.

8. Be excited when you record your message, and allow that excitement to come through in the writing. You want your target customers to feel that excitement, and know that you are the person to call.

9. Test. Test. Test. Don’t feel that you have to get your copy perfect before you can send it out. Test it. See what kind of results you get. Then make improvements, and test again. Keep which ever version pulled the best results. Then test again with a new message, always keeping the best one as your control piece.

If you feel that your advertising is not pulling the number of leads it should, you may have one of the following trouble spots with your marketing. Critique your marketing and see if any of these apply. Or ask someone you trust and respect to review your marketing and provide their feedback.

1. You are not working in a good farm area for your service.

2. Your message is not clear.

3. Your headline does not grab their attention.

4. You are not building credibility & rapport with the readers - Do you have testimonials?

5. You have not clearly communicated the WIIFM - What’s In It For Me.

6. You have not made it easy for them to see your phone number to call.

7. You do not have a live person answering the phone and you are losing lead calls - most will not leave a message.

8. You have not differentiated yourself from the competition.

The key is just get started. The hardest word is the first one, after that, each one is much easier. Just follow these steps and you’ll write some killer copy.

by William Tingle

Is there anyone in your town that doesn’t know that you buy houses? If so, you aren’t doing as well at marketing as you should be. I hear investors saying all the time that they aren’t getting seller calls and subsequently aren’t getting the leads they need to find deals. I say step up the marketing and the sellers will call. Not only that but if you are shouting to the world that you buy problem properties, eventually you will be known for what you do and sellers will call you strictly on your reputation. THAT is cost effective marketing.

I was in Home Depot a few weeks ago and passed a couple of guys in an aisle. As I walked by, I overheard one say, “That is the house man”. Now I had never seen either of those guys and have no idea who they are but that experience lets me know that I must be doing my job at letting the world know my business is buying houses. There are many ways to let the world know what you do. Some ways are cheap and some are more expensive. You are going to have to try many things and get a feel for what produces for you best in your area. I have tried many kinds of marketing techniques and have come back to a few that constantly produce enough results for me to buy the 2 or 3 houses I want to buy every single month. They are as follows:

Classified Ads

The classified ad in the largest paper in the area is by far the largest producer of leads I have found. I know it is expensive and I know there are times it doesn’t generate calls but if you are going to stay in the biz just put it in there and leave it. Get used to it being part of the cost of doing business. I pay about $300.00 a month for my 4 line ad and that is the commercial rate. I run it 24/7, 365 days a year.

Over the past 3 years I have seen many “investor” ads come and go. Most folks put them in for a couple of weeks and then pull them or try just putting them in on the weekends. IT AIN’T GONNA WORK! Put it in the paper and leave it. It will more than pay for itself, believe me. If you are worried because there are several in there, don’t be. They are there because they are getting calls. Just be sure and actually answer your phone.

When a new ad pops up in my paper, I will always call. 9 times out of 10 I get a message. This is a big turn off to someone who needs a solution now. They want to talk to someone who can qualm their anxiety and tell them everything is going to be alright. Your answering machine won’t do that. As for what to put in the ad, you will have to work on this one. I have tried several and the one I have now hasn’t changed for over 2 years. I haven’t changed it because I get calls. My ad is:

CASH FOR HOUSES
In 48 Hours!
Any area, price or condition
Call xxx-xxx-xxxx

Now I have had other investors jockey for position and change their ad copy to be ahead of mine in the column but it hasn’t made any difference. Don’t worry about those things, just get the ad out there and leave it. It may take a few weeks to get going but sellers will call! Once you have your classified ad running than start working on your other ideas. If you only implement one idea a week, within a couple of months you will have a tremendously powerful real estate buying machine.

Ads in the “Freebie” Papers

I also run ads in the freebie papers here. These are the “Thrifty Nickel”, or the “Green Sheet” or whatever they are called in your area. I run both a column ad and a display in this paper and spend about $150.00 a month for these. They pull in seller leads fairly well and have always justified the costs. Remember that these guys are usually open to negotiating on your rates and you can probably get a better rate if you commit to a longer contract.

Bandit Signs

Bandit signs are great. They are some of the best lead generating tools around. I have yet to put out a bunch and not be bombarded with calls right after. I just don’t put them out that often. I might put out 5 or so a month and the ones that stay continue to pull in calls. At an average cost of less than $2.00 apiece, they are one of the best values around. Check the internet for sign companies for cheaper prices. I use 18 x 24 signs and place them at high traffic intersections around town. I also place one in the front yard immediately upon buying any house.

I have bought several homes in the same neighborhoods as a result of this. You can either use contractor stakes or the wire stakes with your signs. I like the contractor stakes because they don’t bend like the wire ones, in addition, they are cheaper. Just nail the sign to it with the roofing nails with the orange or green plastic tops or you can use screws. There are many variations on what your wording on the sign can say. Keep in mind that traffic will be moving so you want to keep your message short and sweet so it can be read. My signs say:

I BUY HOUSES
Cash in 48 Hours!
Any area, price, condition
xxx-xxx-xxx

Notice that it is the same as my newspaper ad? I like to brand my advertising because I think that helps with recognition. My signs are white with dark blue letters. Some folks swear by black on yellow or black on orange. Again, I say it’s not what or how you say it but the fact that you DO say it that counts. When dealing with bandit signs, be sure that your local code enforcement laws are tolerant of them. In my area, the City of Macon is very lax on them but a few miles down the road in Warner Robins they are super strict and will fine you in a minute.

Flyers

Flyers are another inexpensive way to get the word out that you buy houses. Just create a flyer telling people what you do and how to get in contact with you. Make copies for $.05 cents apiece and you have some really inexpensive advertising. It really is that simple. Then place these flyers on every bulletin board in your town. I also place some of them in those plastic sheet protectors so the rain won’t destroy them and put them up on telephone poles around neighborhoods I like to buy in. While not as large as the bandit signs, on poles actually IN the neighborhood they still attract calls. I carry a file with me in my truck and place them up whenever I stop at a grocery store or Wal-Mart. Some other places to put them are:

* Laundromats

* Taped to the inside of Pay phones

* On the counter of any business that will allow you

* Bulletin boards at Wal-Mart or K-Mart

* Grocery store bulletin boards

* Fax to Mortgage Brokers

* Fax to Real Estate Agents

* Take them Door to Door in target neighborhoods

* Employment Center Bulletin board

* County Courthouse Bulletin board

These are just a few examples. Any place that will allow you to put one is a good place. You can never let too many people know that you buy houses!

Promotional Items

These are some of my favorites and most fun. While they are not the top producers of leads or the least expensive, they will sure set you apart from the average investor.

Pen Knives – These tiny Swiss army knives are the coolest. They are actually key chains engraved with your message, mine being: WE BUY HOUSES- All cash or take over payments within 48 hours! Xxx-xxx-xxx I guarantee if you give one of these to someone they will keep it and if they think of selling, they will think of you. They are about $1.50 apiece.

Key Chains – I give these to all my buyers with the keys to their new house on them and leave them all over the place. They come in the shape of a house or #1 or whatever style you like and have your message on them. You can guess what mine says. Cost – about $. 25 cents apiece.

Pens – I use these all the time. Whenever I sign a sales receipt or anything I leave my pen. I can’t tell you how many calls I have gotten off of these things and since I always need one, I always have one to give away. My attorney even has a supply on his closing table. Mine are the “click” type and have my message repeating around the barrel. I have two types printed. One for sellers says “We Buy Houses!” and one for buyers says “Everyone Qualifies”. Cost – about $.21 cents apiece.

Coin Holders – These you hardly find anymore so everyone is surprised when I have them. I leave these things everywhere. Mine are bright yellow with blue letters and my message. Cost – about $.30 cents apiece.

I leave all of these promotional items everywhere, on the top of gas pumps, on end-cap displays in grocery stores and in department stores. I look at it this way, if I give away 100 pens, 50 knives and 50 coin holders a month, that is only a little over $100 bucks a month. That is still cheap advertising. You can get any of these promotional advertising products at National Pen. Their website address is www.pens.com or you can call my rep “Madison” directly at 1-888-672-9810. Always ask for her specials and tell her William sent you.

Business Cards

I order business cards by the 1000’s and you should as well. They are cheap, mine are about $50.00 for 2000, and I pass them out everywhere. I leave my cards everywhere, in pay phones, on restaurant tables, my kids even have their own supply to pass out. Try to get a box a week out. The card doesn’t have to be fancy, in fact the simpler the better. My card is bright yellow with blue letters and says:

WE BUY HOUSES
Foreclosure? Need Repairs? Bad Tenants? Divorce?
CASH IN 48 HOURS!
OFFERS MADE ON ALL CALLS!
XXX-XXX-XXXX

Car Magnetics

Magnetics are one of those things where you spend once and get use for a long time. Mine cost about $75.00 and are yellow with blue letters. They say:

WE BUY HOUSES!
FA$T CA$H
XXX-XXX-XXXX

I have gotten several deals from these signs. Remember to order a smaller set for the back of your car/truck. People have more of a chance to read the message when they are riding behind you.

Clothing

I like golf shirts and oxford dress shirts with my logo on them. There’s plenty of advertsing houses that will help you design a logo if you don’t have one or use the one you already have. There is no charge for set up and all items ordered include your embroidered logo free. They also have cool baseball caps and other stuff there as well. They have specials for new customers at great prices.
I pass my hats out to everyone I know who wears one and have given away many shirts as well. They really look nice and present a nice image for your business.

Other Advertising Tools

There are many other forms of advertising, some I have tried in the past such as billboards, door hangers, yellow pages, television and radio advertising. I even have a traveling billboard, an old SUV painted bright yellow with blue WE BUY HOUSES! and my phone number that I drive around and park overnight at different places. It gets the calls! Get the marketing going and let the world know who to call when they have a house to sell. If that phone isn’t ringing, you aren’t making money!

by Mike Butler

It’s amazing to still see many investors who aren’t using land trusts at all, along with investors using them improperly. On top of this, there’s a boatload of investors who are victims getting abused with every property purchased. Somewhere out there, somebody knew somebody who had a friend who did this or that and the investor becomes a victim. Although hard to believe, some investors go to their local veteran attorney and amazingly have been told they’ve never heard of a land trust.

What Is A Land Trust?

A Land Trust is a simple fill-in-the-blank document to “hide” or keep the real owners name off public records. It’s nothing more than 6 pieces of paper detailing an agreement between the “trustee” and the “beneficiary”. Plain and simple, it’s an “instrument” (piece of paper) to hide or shield from public view the “beneficial interest” (you or your entity). A land trust does not have a Tax ID number. The “beneficial interest” has the tax id number. The Land Trust name or agreement has absolutely nothing to do with your taxes. The beneficiary of the land trust agreement reports all of the taxable events involving the property. Many times bankers and attorneys get land trusts confused with perhaps estate planning trusts and insist or demand each land trust must have it’s own tax id, it’s own bank account, and must file it’s own tax return. Wrong. They want to sell you more stuff. That is NOT the right kind of trust. This is the simple Land Trust started in Illinois with the intent to simply hide the real owners from public record.

Okay, let’s try it another way. Picture this in your mind. A whole bunch of nosy farts including ambulance-chasing attorneys, nosy competitors, nosy family members, co-workers, and so on. Many folks become very curios when they learn you are a “real estate investor.” They want to see what you own and control. In today’s high tech world, there’s a world of information available to anybody if they find the right website. It’s scary to see how much personal info is available letting your fingers do the walking.

Perhaps I’m a tad bit overkill on this privacy issue due to my previous life as a undercover cop doing long term serious investigations. A public record paper trail leading to me, my residence, or my family was absolutely forbidden. Initially, the concerns were safety and privacy. As your wealth grows, asset protection strategies became part of these concerns too. My bottom line was to have nothing in my name personally. This method allows me to control everything and own nothing. Some may argue it’s overkill. That’s their opinion and we can agree to disagree. Ultimately, you’ll have to make this decision and you should have all of the information available to make your decision wisely.

To wrap up what is a Land Trust. It’s about 8 pages long spelling out the details of responsibilities, duties, and fees of all parties involved. The parties involved are basically the trustee and beneficiary (grantor). The Trustee has full authority to act on or for behalf of those who have a beneficial interest in the property. The Trustee has full power of sale.

The Land Trust agreement identifies the name and address of the trustee and the name, address, and the percent of beneficial interest of each of the beneficiaries. Don’t let this blow your mind. If you are the Beneficiary by yourself, then you become the Beneficiary with 100% interest. If you’re married, and you have a single member llc, and your spouse has a single member llc, you could have two beneficiaries naming your llc with 50% interest and your spouse’s llc with 50% beneficial interest. Depending on how your local public records are set up will determine how you name your trust and who is the trustee. For example, in my town, there is only one field in the public records computer for the owner of record. Therefore on all of my deeds, the owner of records will read in the following order:

“The (Land Trust Name) With (Trustee’s Name) As Trustee With Full Power of Sale”

This forces the data entry person to enter it in this same format shown above and the trustee’s sometimes never makes it into the field because the name of the owner is so darn long. Years ago the owner’s name field accepted only 32 characters so many of my properties never had room to enter the trustee name because it was Aafter the land trust name. Some towns like Birmingham, Alabama have an additional field in their public records just for a Trustee. If your town’s public record system is set up in this manner, you need to be careful here and create a battle plan just for this situation. Here’s a couple of ideas. How about using your real estate attorney as Trustee? Odds are, they’re trustee on a lot of other stuff anyway and your stuff would be mixed up in their stuff on any search by some nosy person. This is good.

Here’s the simple version. Suppose you own a rental house at 123 Main St. The owner of record is your unique land trust name with you as trustee. A nosy person could get on the internet and find the owner of 123 Main St. If the owner of record lists your land trust as the owner followed by the trustee name in the same field, you’re probably okay. In Birmingham, you’ll see an additional field for the trustee name. The nosy person could then enter a search the Trustee Name to see what other properties list the same name as trustee. This is the bad part. Therefore, in this situation, you should perhaps come up with different trustee names or the best method would be to use your real estate attorney name as trustee. If you’re doing your real estate closings with your attorney and referring other investors to them, your attorney should do this for free as an added benefit to you for your business. This would be perhaps the #1 recommended solution. If you have just a few properties, (say less than 10), you may simply jumble up different versions of your names and initials and do the same with your spouse if married. You should be able to create 10 unique names tied to yourself to use as trustee.

Who Does the Land Trust?

You prepare your own land trusts. It’s a fill-in-the-blank form.

When to Do the Land Trust?

Each and every time after you buy a property, you prepare your new land trust agreement for each property at the same time you enter your closing statement.

Where Is the Land Trust and Where Does It Go?

Keep it on your computer or make copies and have them ready to go just like a rental application or a rental agreement. Once completed properly, your land trust agreement should be placed in the same file folder with your deed, your closing statement and your purchase and sale agreement. It should never leave your office. It never gets recorded. This would defeat the whole purpose of the land trust. The only way for anyone to find out who has the beneficial interest in the land trust is to travel to your office and find the land trust agreement in your folder in your file cabinet.

TIP: If you live in Birmingham or a town where you can search by a trustee name, take your land trust agreement to the closing so your attorney can sign as trustee and get it notarized with the least amount of inconvenience to you. Do not leave the land trust agreement with your attorney. It never leaves you. You take it back home or to your office.

Why the Land Trust?

I recall several years ago, a local real estate attorney thought my use of land trusts was overkill. In fact, he told investors asking about land trusts they really offered no protection. His exact words were “land trusts are just a bunch smoke and mirrors. LLCs and good insurance are your best protection.”

WHAMMO! – check this out and see what you think. Before speaking at a big investor conference last fall, we attended a nice dinner banquet for all attendees and speakers. I had the opportunity to be seated at the same table with an attendee that had this amazing story. He proceeded to describe how after implementing many ideas picked up from attending one of my weekend boot camps, his real estate business was booming back home. This guy was rocking and rolling and loving it. He discovered true wealth grows with ownership, and not just wholesaling and retailing properties. Ownership = tenants. Here comes his nightmare.

John Doe investor goes on to tell everyone seated at our dinner table he should’ve implemented what he learned from Mike about land trusts; however, he never got his “round 2 it”. His tragic story begins with a tenant moving out of a rental unit. They both did the move out inspection properly and a disagreement over the dollar amount of repairs resulted. John held firm to his position of money owed for repairs. The ticked off tenant proceeds to track down one of those free attorneys and files a lawsuit to get their security deposit money returned.

John gets his summons to go to court and as a real world investor, he’s prepared for the worst and hoping for the best. He takes his checkbook to court with him. As expected, the tenant friendly judge makes a judgment in favor of the tenant. John loses. No need to drag it out and make it more painful, John chooses to settle up, write a check for payment in full on the spot and get back to business. Put this one to bed. John returns to his growing real estate business and has several deals pending across the board, including several refinances on properties. Now keep in mind, John is an aggressive real estate investor. He’s pretty active and has several closings each week. John already had plans for the money he was to receive from his pending refi’s to pay cash for purchase contracts pending in his pipeline.

Here comes John’s bomb. A day or two before the scheduled closing of his pending refi’s, he gets a phone call. Bad news. His lender has cancelled his loans. Why? His credit score took a nosedive. Perfect credit, never missed a payment, what’s the deal? John was devastated and went into the panic mode. He needed the cash from the refinances to buy the houses he promised to pay cash for next week. His reputation as a strong cash buyer, his word, all are in jeopardy. What’s going on?

Here’s the deal. John’s credit score took a nose dive because of the lawsuit and judgement against John. John explained the entire story to the lender; however, the story didn’t fix the problem. When the judge made a final decision to see who wins, it’s called a judgement. The judge ruled in favor of the tenant and against John, this becomes public record. Therefore, John had a judgement against him in the public records. It showed up like it should on his credit report. It doesn’t matter that it’s paid in full. It’s still a judgment against John. Ouch!

John’s damage now includes a lower credit score. He can’t qualify for good rates for his refinances and is stuck with higher priced B and C lender products for his investing business. Lesson learned for John. On his rental property deeds, his personal name was listed as owner of record. John had his own property management company managing his tenants and collecting the rents. (this was good for the number of units John is driving). The attorney for the tenant did their job properly and named John’s property management company and the Owner of Record of the rented property. Because John had his personal name on the deed as owner of record, he was named in the lawsuit. When he was named in the lawsuit personally and he lost, he got a judgment against him personally.

If John had used a land trust for the owner of record, the tenant’s attorney would have named John’s property management company and the land trust as defendants or parties of the lawsuit. John would not have been named personally and when he lost the case, the judgment would have been against the land trust, not John personally. Perhaps a bit more powerful than “smoke and mirrors?” This true real life story is proof of just one of the many powerful benefits for investors. John immediately got the ball rolling to make sure the owner of record on every deed was an individual land trust for each property he owned.

A Shorter War Story, What Not To Do

Donna heard about land trusts and discovered this was a great tool she needed to incorporate into her investment program. She failed to gather all the specifics from a competent expert and for some unknown reason, chose to follow up on specifics of using land trusts with her local banker. Her banker listened to Donna, was a little dumbfounded, and had to check with his bosses to see how they could “help” Donna.

After a week or so, her banker called her back with “great news for Donna”. His boss “approved” Donna’s request or application for using land trusts for her properties and invited her to schedule an appointment to go over the details. Donna was actually excited and was looking forward to implementing this newly found asset protection and privacy tool into her investment program. Long story short, they set up her on a program with her bank as trustee charging $300 per land trust along with forcing her to have a bank account with small monthly fees for each land trust. Looks like the bank wins here.

How To Use The Land Trust?

STEP 1: After you capture a deal meaning you have an agreement to buy a property, contact your closing attorney or title company and tell them to make the owner of record on your deed to read:

“The (Land Trust Name) with (Trustee’s Name) as Trustee with full power of sale” of

STEP 2: Attend your closing, buy the property and return to your home or office with a copy of your deed and closing statement. Enter your closing statement properly in your Investor Books made. Next, is your land trust. If you don’t have a computer, you could use your land trust agreement just like your rental agreement.

Fill in the blanks for:
1. Address of the property
2. Name of the Land Trust
3. Trustee Name
4. Beneficial Interest (1 or more persons or entities)
5. Legal Description of property (easiest way is staple a copy of your deed to the land trust agreement)
6. Notarize Trustee and Beneficiary signatures.

STEP 3: Hide it in your filing cabinet with your closing statement and deed. You’re done.

STEP 4: Let your insurance agent know the Owner is your land trust. Your policy will list insured as your land trust name c/o Trustee or your property management company name at your mailing address.

If you’re pretty good on computers, you could have your land trust agreement in your computer as a Microsoft Word document and fill in the blanks and hit the print button. (this just looks prettier instead of handwritten fill in the blank.) I promote doing things right, but at the same time you should have all the information. There are many investors who never fill out a land trust agreement. Many investors simply take title to property using a land trust and sell property the same way and never fill out a land trust agreement unless they need one to sell. I’m not telling you this to encourage this tactic. I’m only trying to show you how simple they are in your investing program. Please do properly complete a land trust agreement for each property you purchase for the peace of mind for you and your family. Imagine the mess you’d leave behind if you shot from the hip.