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My advice to you with respect to the steps for starting your mortgaging-out career is:
• Start with single-family homes when you have little, or no experience in real estate. You’ll quickly get to know the ins and outs of the business and then you can move on to larger properties.
• Consider multi-family dwellings only after you’ve successfully mortgaged-out from several single-family home deals. At this stage, you’ll have cash to invest and you’ll have a much better understanding of how to do big deals.
• Get one or more partners for construction and development mortgaging-out deals. Why do I suggest you do this? Because construction and development involve larger sums of money. So you must know what you’re doing. With experienced partners you can safely mortgage out with lots of cash in your pocket.
Now That You Know the Where, Go to the HOW
You now have the WHERE of mortgaging out. The HOW is five steps, given to you by your good friend, Ty Hicks:
1. Look in your local Sunday paper’s real estate section for singlefamily homes for sale. In highly populated areas you’ll see hundreds of single-family homes advertised. Search for ads saying “0 Down....” These houses have real mortgaging-out potential because the seller is highly motivated. Some of my readers find zero-down properties the first week they look. Others have to look for 12 weeks before they find a suitable deal. And some dedicated readers look for 20 weeks before finding the deal they want. Remember this: in some sections of the country having a high divorce rate, couples who are splitting just want to get out of their monthly mortgage payment. So they’ll often be glad to give
Bootstrap Your Way to Your Real Estate Cash
you the house or condo for zero down if you’ll take over the payments. Many are bitter and “just want out,” as they say. You can help them while helping yourself.
2. Call the advertiser and get the location of the property. Visit the property. Do what we in real estate call a “Drive By Inspection.” Look at the house carefully. Really see the house with all its good points and its not-so-good points. Make copious notes on the location of the house, its distance from stores, schools, and houses of religious worship.
3. Check with your local paper again to see what the typical rents are for 2-bedroom, 3-bedroom, or other houses. Call local real estate agents to get additional numbers on rents being charged today.
4. Work out the income you’ll have from the house. If you can’t do this yourself, fax the Price, the Income, and the Expenses to your friend Ty Hicks and I’ll analyze them free for you. You must have a positive cash flow from every property!
5. Talk to the seller. Explain that you’ll have expenses when you take over. Such costs can be clean-up, painting, redecorating, ads for tenants, or other items. Tell the seller you need 3 percent of the price of the house for repairs. Ask for this amount in cash— to be given to you at the closing. Where the house is being sold because of divorce, death, loss of job, or other reason, many people will be happy to pay this amount to get out from under. This will give you your mortgaging-out cash for your single-family home which may be a stand-alone home, condo, or other home.
Try Your Mortgaging-Out Luck on Multi-Family Buildings
Here—quickly—are the five steps you can take to mortgage out with multi-family (apartment houses) buildings:
1. Consult your local paper’s real estate pages, as given in the previous Step 1. Look for multi-family houses for sale. Don’t expect to see “0 Down . . .” ads. Most such building sellers expect to see down
payments of 5 percent to 25 percent of the selling price. But don’t let this discourage you! You can always wheel and deal to mortgage out.
2. Inspect the building. If you’re really interested in the property, check the city or town records at the Building Department. Today—in many large cities—you can check these records on the Internet. For example, New York City has a web site—www.nyc. gov. Go to Services and click on Housing—which allows you to check any violations that may exist on a building.
3. Contact the seller. Try to work out a zero-cash deal, using the techniques and approaches given in the letters and text earlier in this chapter. Be alert for anxious or motivated sellers. Estate sellers of property are often in a big rush because the survivors want the money—not the responsibility of running a building. Point out any deficiencies in the building (almost ALL have some!) to the seller. Tell the seller you’ll have to spend money to correct these problems. Use these costs as a lever to reduce your down payment and be paid cash at the closing!
4. Be certain to have a competent real estate attorney at your side to advise you on every step you take in getting your zero-cash mortgage-out multi-family property. Why? Because you can run into problems with motivated sellers who might want to foist a problem-ridden property on you. I can tell you lots of stories about such deals but I won’t bother you with them. Just remember: ALWAYS HAVE THE GUIDANCE OF A COMPETENT REAL ESTATE ATTORNEY!