Down markets are without question one of the best times for real estate investors. Down markets contain the best opportunities and the greatest ability to make money. Any truly successful real estate investor will tell you that they do more deals and make more money in down markets than they do in up markets.

Here is what Billionaire J. Paul Getty had to say about investing in down Market:

“If you want to make money, really big money, you do what no one else is doing. Buy when everyone else is selling and sell when everyone else is buying. This is not merely a catchy slogan. It is the very essence of successful investment.”
J. Paul Getty – Billionaire

While the opportunities are great in down markets, investors need to be aware of some of the deadly mistakes that can occur.
Here are the Top Three:

1. Not Getting Cash Flow
Cash flow is king, especially in down markets. It’s harder to get cash flow in seller’s markets, and even in some areas of the country, in a buyer’s market, because the prices are still too high for area rents. In down markets it’s very important to make sure your properties provide cash flow. You can’t count on appreciation in the short term in down markets. If a property cash flows, you can hold it forever, no matter what the market does. So, if it stays a down market for a while, you are okay because it cash flows. If the market goes back up, you can make money off appreciation too. Sell it then if you choose. The choice is yours then, because you’ve got the cash flow. CASH is KING!

2. Making Excuses
I touched on this before. If you want to succeed in real estate, you have to set aside the excuses and do it. Excuses are typically hidden in reasons why you can’t do it now. “I’m too busy.” Or the fear to take action by over analyzing every deal, “This property makes $5 less per month in cash flow than I really want.”
You’ve got to take action now. Picturing in your head all of the money you’ll make and the better life you’ll have with real estate investing is only fantasizing. If you want to make money in real estate; get started, take one step and then another. No one expects you to do it all at once or even do everything right, just get started.

3. Not Using a Proven System
There are some things in life we have to learn for ourselves. Making every mistake possible in real estate, just to learn the right way to do something is not one of those times. If you try that route, it will take you so much longer to get anywhere. You will literally be years behind, if you don’t give up entirely. A proven system is someone else’s road map that you can use to learn a real estate technique.
Proven systems give you the opportunity to skip the “getting lost” part. They move you forward at a much quicker (and safer) rate than if you tried to do it all on your own. It doesn’t matter what type of investing you want to do; short-sales, rehabs, or lease options, they will save you tens of thousands of dollars in mistakes, legal fees, etc.

If you could pick up a $100,000 home for 10 bucks, would you do it?

REGISTER HERE

Two-Day Seminar on Lease Options and Subject Tos
with Wendy Patton and Kris Kirschner

Dear Fellow Real Estate Investor,

If you want to crush your competition…pull in the BIG Money…and can spare just one weekend – then I have some terrific news for you today…

Because on February 27th & 28th, I’m inviting you to learn – quite simply – the best techniques for Super-Charged real estate investing in this beaten down market.

Discover how to easily create winning deals every time with Lease Options and Subject Tos…

If you let me, I’ll show you how to score a $300,000 home for $10 bucks…or even nothing at all.

You see, motivated sellers are all over the place…pouring out of the wood work in this admittedly weak market. And how you move through this market could mean the difference between the Big Money and NO money.

I should know – I learned the hard way…

But that’s good news for you because I’m willing to share all of my Insider’s Secrets with you on February 27th and 28th.

And as an added BIG bonus, I’ve invited Kris Kirschner to join us…

Kris is one of the most in-demand, knowledgeable real estate investing speakers in the country today…he’s trained over 50,000 people – just like you – both here and abroad

REGISTER HERE

ONLY 57 SEATS LEFT!!!

Because if you register today you will get it all – everything I told you about and much, much more for the price of a cheap dinner…just $59 dollars. And I’ll go you one even better…

If you register in the next 7 minutes, I’ll let you bring a guest…absolutely FREE.

A lease with an option to buy involves leasing a home from a seller who might not be able to sell it or rent it otherwise. It allows the investor to rent it and then buy it, without having to use money or credit. I was able to do this over and over again. I have bought and sold over 600 lease option (rent to own) homes. The technique of lease with option to buy is what helped me get going “full steam ahead” in the real estate business.

Investing using the subject to technique involves having the seller sign the deed of their home over to the buyer “subject to” the existing mortgage. The seller keeps the mortgage in their name, but the buyer/investor owns the home and is responsible for the payments of the mortgage. The investor does not have to qualify for a new mortgage using this method. The technique of subject to allows the seller to move on and get out from underneath their payments and the investor the ability to buy many homes without using his or her own cash or credit.

Both methods, when done properly, should result in a win/win situation for the buyer and seller. I only teach my students how to use these two methods in a fair and ethical manner. When all parties are treated fairly everyone wins and things work out for the best. I truly believe this is the only way to invest in real estate!

The biggest controversy for a subject to is the violation of the ‘due on sale’.   The due on sale clause is a provision in the mortgage documents that says if the home is sold or transferred, the mortgage will be paid in full or the lender could call the loan due in full.   This means that when the sellers deed the home to you, the lender could say, “Seller, we want you to pay off that mortgage in full – NOW!”   If you or the seller don’t pay it off, the bank could foreclosure on the property.    Most lenders will never know the seller transferred their title to you if the payments are paid on time.   Most lenders are really concerned with getting their payments on the loan, in full and on time.  Some lenders, for whatever reason, can and do choose to foreclose on a property transferred subject to, instead of continuing to receive payments from an investor.  Such events are rare, but do occur.  You should disclose this risk to a seller, or better yet, be prepared to refinance the existing mortgage in the unlikely event a lender calls the seller’s loan due.  There is some speculation in the industry that many due on sale clauses have not been called because interest rates are currently low, but if they go up, then lenders will have a reason to call loans due.  They will want to get the higher rates.  Right now the lenders have little incentive to call loans due, but that may change in the future.

In my personal opinion, the best and most ethical way to handle a subject to deal is to be totally honest.  Let the lender know you did it.  Send the lender a certified letter informing them of the ownership change.   Keep proof of the letter and return receipt in your files.  If they don’t respond (most won’t), then the law may hold that they have accepted the change by ignoring your letter.   If they actually try to foreclose, then you may need to pay off the existing mortgage and refinance the property into your own name.  If the property doesn’t have enough equity to justify refinancing into your own name, then it probably was not a worthwhile deal to begin with.

To learn about other risks when dealing with Subjects Tos and how to avoid them you can read my Investing in Real Estate with Lease Options and Subject-to Deals book.

A Subject To is getting the deed to a property without getting a new mortgage.  Instead, the seller signs over the deed to his home ‘subject to’ the existing mortgage. The buyer makes the mortgage payments on the seller’s existing loan, but does not take out a new mortgage to acquire the home.

Knowing when to use one is very important.  Many times, investors try to fit one technique into every situation.  That can be a very dangerous approach.   You must know which technique – Lease Option or Subject To – to use with each seller, to protect not only yourself, but your tenant/buyer as well.  Knowing which technique to use for your seller and their situation can save you tens of thousands of dollars in profit. There are many advantages of Subject Tos (some are the same as an option)

1.    Minimum or zero down.  Usually you only need to pay the seller a small amount to sign the deed over to you.  If they owe more than you are willing to pay, then there are times that they will pay you to take the deed from them.

2.    No financing required. When you do a subject to you don’t need to get a mortgage because you are taking over the seller’s mortgage payments.  Technically, you are not assuming the seller’s mortgage.  You are just making the payments on their existing mortgage.

3.    Ownership. The day the seller deeds the property to you it is yours.   You are the true owner of the home.

1. No income or credit checks.  Not once has a seller ever asked to look at my income or check my credit.  They are more worried about their situation and how to get help from you.
2. The Seller will love you!   You will be making a positive difference in someone’s life.

Look out for my next blog.  We will be discussing Subject Tos-The Risks and How to Avoid Them.  To learn more about Subject Tos and the advantages you can read my Investing in Real Estate with Lease Options and Subject-to Deals book.

Motivated sellers are out there in every city, every town, and every state.  Finding them isn’t as difficult as it might seem – if you know which techniques work for attracting the attention of a seller who wants to work with you on a lease option or subject to.

There are different circumstances and situations in the lives of people that motivate them to need to sell their home.  These reasons can include a job transfer, bankruptcy, foreclosure, divorce or upgrading to a bigger home.  The final factor likely to affect sellers’ level of motivation is the state of the real estate economy itself. You have to know what’s happening in the real estate market in your area or in the area where you are interested in finding your investments, and the best place to begin is at the official website for the National Association of Realtors.

The kind of motivation you are looking for is not someone just wanting to sell their house but someone who either is motivated to get rid of their good debt or their bad debt. Here are 3 out of 16 techniques listed in my book Investing in Real Estate with Lease Options and Subject-to Deals that have worked for my students and me over the years:

1. Tear-off flyers in local drug stores, convenience stores, party stores – wherever you can get them posted.   These tear off flyers can say the same things as the signs and ads.  The tear off parts should have your phone number, website if you have one, and a short statement – We Buy Houses.
2. Out of state owners – There are services in many cities that allow you to find all out of state owners, or owners where tax bills are sent to addresses not at the property (non-owner occupied).    Out of state owners are far away from their property and many times want to get rid of the far away headache and move on with their life.  Also, they may not really know what the current market is anymore and many may not even care.  They may simply want to get rid of that unwanted home in a far away place.
3. Real estate investor clubs always have other investors with homes that they haven’t sold or want to sell.   Network and let others know what you do.  I have bought several very good deals from other investors, either because they had their hands full at the time with their own deals, or they were out of their area.  Some investors only wholesale their properties.   Wholesalers buy low and then resale low.  You should be a member of a local real estate investor club and be regularly attending meetings.  It is one of the best places to network.   Check out  The National REIA website for a group of local real estate groups in your area.

You can learn all 16 techniques to finding motivated sellers in my book Investing in Real Estate with Lease Options and Subject-to-Deals.

November 19-22 I will be holding the “Soft Market Investing” Boot Camp. This is four days of intense Real Estate Investing training during which you’ll learn:

• What strategies work best right now in today’s market
• How to maximize your profit potential when using these investing strategies.
• Strategies you’ll be able to implement the very next day!

The training offered at this event will be, without question, some of the best you have ever been a part of at any real estate event. You’ll walk away with the ideas and concepts that can put tens of thousands of dollars in your pocket! This Boot Camp will also be saturated with strategies and concepts that work in today’s market. As most of you know, I specialize in Lease Options and Subject To’s. Both of these strategies will be covered in detail during the Boot Camp!

And, given the current real estate market’s condition, this couldn’t be a more perfect time to attend the “Soft Market Investing” Boot Camp.

The first Boot Camp was held June 26-29 and was sold out! Hurry up and Register….Seats are filling up fast!!

Click Here to Register

If you missed my webinar with Kris Kirschner last night you missed out on some super powerful information about what to expect from the real estate market from now until 2013.  Kris shared information from top economists and I was blown away.

What was clear from last night is that the way we invest in real estate needs to change for the next few years.  The old strategies of buy and hold won’t work.  As a real estate investor you need to be focused, for the short term, on strategies that minimize your risk and minimize using your own cash and credit.  Lease options and subject to investing, like I teach, are 2 great ways to do just this.

The fact of the matter is that expert economists are predicting that real estate is still several years away from recovering and many areas will still decline.  You can’t just buy and hold real estate because you’re going to be upside down.  Kris talked about 3 great strategies for real estate investing, from the short term to the long term for retirement.

If you missed last night don’t worry!  Kris Kirschner and I will be doing a 2 day training event November 7th and 8th in Livonia Michigan. We’ll be training you in how to invest in today’s real estate market.  These strategies we’ll be teaching you apply to our current real estate market as well as our coming real estate market.

If you want to keep investing in real estate you need to know the right strategies.  And with a price of only $59 for both days of training you can’t afford to miss this.  I don’t know if Kris and I will be repeating this event so you definitely want to attend this one.

To learn more or to register for this 2 day training on November 7th and 8th go to http://www.wendypatton.com/schedule/nov2009event.php

You must pre-register for this training to get the $59 price and space is running out so don’t delay!

When it comes to real estate investing and contracts, whether it is lease option investing or subject to investing or any other type of real estate investing, it’s always good to use contracts that include clauses giving you additional levels of protection.  Standard real estate contracts were never really meant for special real estate deals.

For example, one of my favorite clauses to include in my subject to contract is this seller acknowledgment:

We understand that the purchaser is a real estate investor and intends to resell the property at some future date and expects to make a profit.

I make certain that the seller writes their initials next to all of the special clauses in my contracts indicating that they understand the deal.  Lay it all out there. Yes, you are a real estate investor.  Yes, you intend to resell the home later and make a profit.  This is only right and fair, you aren’t running a charity.  Your goal is to help the seller and make a fair profit.

In subject to investing I do not advocate taking advantage of a seller or trying to make an obscene profit.  The deal should be a win-win for everyone.  By having the right clauses in your contract, like this one, the seller is acknowledging that they understand that you are a real estate investor and will be making a profit from this.  There is no point in hiding that.

Real estate investors across the country right now are buying up as much property as they can.

Why?

Because we are having a fire sale on real estate right now.  There are some areas in the country where prices have dropped to 1994 levels!  Investors are buying up everything they can because you want to buy low and sell high – and believe me prices are low right now.

If you are interested in real estate investing now is the time to act.  But most investors right now can only qualify for a few mortgages before they hit the cap.  A few investment properties just isn’t good enough for me.  That’s why lease options and subject to investing deals are such excellent choices.  You don’t need to get a mortgage.  Lease options and subject to investing deals are also excellent because they require little to no money down.  This makes them a great choice for beginning and seasoned investors alike.

I’ve been a real estate investor for a long time now.  I have never seen opportunities like the ones going on right now.

This is not the time to dream about getting into real estate investing.  This is not the time to make excuses about why you can’t do it now.  This is the time to act.  Get started by learning how to do lease options and subject to investing deals.  Take action and change your life for the better!