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Become A Private Money Magnet

By

David Lindahl


Become A Private Money Magnet by Dave Lindahl

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Creative Success Alliance

100 Weymouth Street

Rockland, MA 02370

978-982-5700


INTRODUCTION

First off, I would like to thank you for taking the time to read what I have to say in this book. I

always reach that taking action and continually educating yourself are the two things that successful

people do to separate themselves from unsuccessful people. Reading this book is a demonstration of

both of those virtues.

What I will be sharing with you here is what I like to call my Chunker strategy. My Chunker

strategy is the practice of buying and selling single family properties for a quick profit; the end result

being a nice “chunk” of cash. A chunk of cash which is yours to do what you please with; pay down bills,

take a vacation, buy a new car, or my favorite; reinvest it in real estate.

When I first started out buying small multi-unit properties I financed my deals using credit cards.

After I had a few deals under my belt and the experience that goes with that I was able to finance deals

using partners and hard money. Partnerships and hard money are great tools for extra financing but

they also mean that you stand to make less from the deal. Hard money lenders usually come with higher

rates and partnerships mean a percentage split of the cash flow and profits.

So the logic with chunkers was simple. I would finance my own deals using money from my

chunkers so then all the cash flow and all future profits would be mine and mine alone. So at first I was

also using that chunk of cash to live off of because my initial cash flow wasn’t high enough to cover my

living expenses. But as I bought and sold more single-family properties the resulting cash flow on my

multi-families was growing and growing. In the process I became and expert at generating profits

through single-family properties. To this day I continue to have a chunker business though it is managed

by my brothers Jeff and Danny. ll I really do at this point is collect checks, which is a beautiful thing. At a

certain point when growing your business you find that delegating tasks and responsibilities become a

large part of your job. You will need to be a quality delegator and surround yourself with capable,

trustworthy people.

So depending on the type of deal, whether it be a wholesale or a subject-to or a pre-foreclosure

there is a different system required to complete a successful chunker.

Read carefully as you will also pick up some helpful insights, mantras and general concepts. The

adoption of which will be critical in the success of your business.

Bad to be good

When getting into any new business it’s important that you accept one fact right away. You are

going to be bad. Relative to someone who has done this a couple of times, you will be bad. But that’s

okay; stick with me and you won’t be as bad as you could be. Then, after executing the systems a couple

of times you become good. It is inevitable.

Just remember that in order to become good, you will start out bad. And of course after you

become good it’s only a matter of time before you are an expert, master, the cat’s meow or whichever

title you choose to convey your supremacy. But to keep it simple, a good way from getting too down on

yourself if things aren’t all rosy at the start is to remember and repeat this sequence:


1. Be bad

2. Get good

3. Master

You will find that your time will be at a premium as you build your business. Don’t stress about

things that are in your control. The best way to control your schedule is to break your entire day out into

appointments or activity blocks. The smallest block being either 15 or 30 minutes. 9-9:30 – Research

Markets; 9:30-11 – Return Phone Calls. You get the idea.

I know people who for the sake of consistency and structure schedule their showers and meals!

You are basically making appointments with yourself. If you and I had a lunch date, under normal

circumstances, you would never break that date, right? Well, just treat yourself the same way. The

appointment is a promise to yourself and you should always keep self-promises. Write this little phrase

down somewhere; Always honor self-promises.

Sometimes the most important person to impress is you. You set these appointments and after

a few days or a week give yourself a review to see how many self-promises you honored. You will be

xtremely impressed and proud of yourself if you’re able to create, maintain and honor a schedule in this

way.

Once you’ve proven that you can honor your self-promises your confidence will grow. Your faith

in yourself becomes stronger and you will be cultivating that winning attitude so necessary to lasting in

this business.

There are 6 steps to the Chunker strategy:

1. Locate motivated sellers

2. Prescreen sellers

3. Create offers

4. Fund the deal

5. Resell quickly

6. Cash check

I will go into detail on just the first five.

Finding Motivated Sellers

To locate motivated sellers you will need to separate yourself from all of the other “we buy

homes” type business out there. You will want to implement a simple, inexpensive marketing strategy.

Two techniques that meet that criteria; signs and letters.

For your sign campaigns, you want the signs to say what you do and how you can be contacted.

Go with a solid color background and a complementing solid color text. Your message should be brief,

“We Pay Cash for Houses” and then you just include your phone numbers. You should include a local

and an 800 number. Originally, I included the 800 number because people out of my area code may be


more apt to call a toll free number to avoid long distance charges. Now, with the emergence and

prominence of cell phones, long distance charges are virtually a thing of the past. All the same, you

should still include the option for the 800 number. If anything it gives your business some credibility.

Your signs should be hung on telephone poles so passing motorists can see them. A tree can do

the trick nicely also if one of your desired target areas doesn’t have telephone pole. I recommend using

metallic signs that are 12x18 inches. I find that size is big enough to see and it won’t blow around or get

bent on a windy day.

Anytime my pipeline of deals diminishes and it’s time to drum up new business I always use

signs. You should start yourself off in the habit of putting up about 50 signs per month. If you don’t want

to do it on your own, then delegate. You could probably find a high school or college student willing to

do it for you at a rate of about 2 bucks per sign. Just give them the signs and a map marking all your

target points.

I have actually driven around with a sign on the back of my truck before. I got a call from

someone driving behind me and we actually pulled over and began talking deals right then and there.

Whenever I buy a new property the first thing I do is put my sign in the ground. I use the same

color scheme as my pole signs, remember, you want to brand yourself and your style of sign is part of

your brand.

Now anytime your speaking with a seller you can ask them, “Do you see those red and yellow

signs all over?”, they will say, “Oh, that is you?”. And you will have instant credibility as a business. So

signs work on two levels. They get your phone ringing and they give your business validity.

In addition to signs, your basic marketing plan should include a letter campaign. When mailing

letters you want to be sure to target out-of-town owners and pre-foreclosures. You can find a list of pre-

foreclosures at the registry of deeds or from a list broker. But for the freshest list of pre-foreclosures

check the legal notices in the newspaper every day. One drawback to hitting the pre-foreclosures early is

that the owners maybe in a state of denial at that point and just tossing away anything that reminds

them of their situation. That is why you must be consistent with sending multiple letters. The time

window on pre-foreclosures varies on the state, could be 2 weeks or 3 months. So you have to realize

that you will be sending out several letters in a relatively short time span. I wouldn’t recommend letting

two weeks pass without sending out another letter or postcard.

The obituaries are also a good source for potential deals. You write a generic “We Buy Houses”

letter and address it to the deceased. You don’t have to mail these letters for every entry in the

obituaries. You can narrow it down by identifying the ones with relatives who are all from outof-state.

These will be the people most likely to be selling the property. When the family members receive the

letter they will give it to whoever is in charge of the property now. There are many things that need

tending to upon the passing of a relative and you will actually be helping by presenting a fair offer and

being a good person to do business with.

Here are some other target areas for potential motivated sellers:

Divorces – You can get a list of divorces from the probate court


First-timers – Target the bread-and-butter neighborhoods where first time home buyers go. It is usually

a short time before they reach a point where they’re ready to move up and out or they go in over their

heads and need to scale back.

Shotgun Approach – Pick a neighborhood or zip code and just mail to everyone in it.

Vacant Homes – Identify vacant homes. You can usually find out who the owner is by knocking on

neighbor’s doors and asking them. Investigative work is a big part of this business! If a neighbor doesn’t

know the owner’s name, they can usually point you in the right direction.

FindTheSeller.com – This is a good website for identifying potential sellers. Another way to get your

pipeline overflowing with deals is to create an ant farm. When I first created an ant farm I had so many

leads coming in that I had to shut it down because it was too much for me to handle. Okay, so what’s an

ant farm?

Right?

An ant farm is a group of people that you have out on the streets or on the computer and they

are looking for deals to bring to you. You pay the members of your ant farm a small fee for bringing you

details on a property that you decide to look at. Then, should you actually buy the property, you give

them a cut after closing. Depending on the size of the deal I would give between $500-$1,000. So each

“ant” patrols a designated area. You take a map and grid out a city or town and assign sections to each

ant. Their job is to find potential deal properties. You don’t want them just running up and down the

streets taking pictures of everything they see. Dilapidated homes and vacant homes are their main

targets. They will fill out a property report detailing the address and estimating what repairs they feel

need to be done.

They will then email you the information or bring it to you directly. My ants like to come directly

to the office because I will pay them on the spot, $5 per property picture and $5 per seller’s phone

number. Sounds small, but it can add up for a busy ant. If your ants bring you properties where the

owner is unknown, how will you find them?

Well, you go right to the neighbors. You go to the assessor’s office. You go to the web sites. Most of the

assessor’s offices have their own web sites now. So you can go online and find out where the owners

are.

One efficiency that you will need to have in place is a list of “known properties”. These are

properties you are aware of, whether you aren’t interested or have already gone after, but you are

aware of them and you don’t need to hear about them again. Make sure every ant has a copy of this list

and it is updated every time you an ant brings you their findings.

It is a waste of precious time and money for ants to be writing up property reports for houses

you have already eliminated from your pipeline. A good place to find ants is at your local Real Estate

Investment Association (REIA).

You will find lots of people at REIA meetings who come all the time but aren’t really out there

doing anything. Usually they are scared to take the first step. Seek them out and offer them a spot on

your ant farm. They will feel like they are part of the game and they will be learning a lot more in the

process so it’s a win-win. Friends and family members are another good source for ants. I bet you could


even call up a couple of your sign posters and give them a promotion! One of the easiest ways and

quickest ways and least expensive ways to get deals coming to you are putting fliers in breadand-butter

neighborhoods and I usually do that on Saturday mornings, running from house to house. Be sure to do

it early too, like 5 or 6 a.m. I learned that if I did it at 10:00 in the morning people would stop me and

they’d ask me what I was doing or they’d get the flier and they asked me what it’s all about and they

weren’t really giving me deals.

They were just wasting my time!

So I would get up early and do it at 5 a.m. I found that I could put out about 100 fliers in one

hour. Not bad, and a nice little morning workout too. Always use colored paper for you fliers. This makes

them easily recognizable and quicker to pull out of a pile. Ideally, you should go with the same color

scheme as your signs.

Remember to always curl up your fliers lightly and slide them inside door handles. Do not put

them in mailboxes as that is illegal.

Also, check out costs at your smaller local newspapers. For relatively cheap money you can get a

flier added as a weekend insert and increase your circulation by thousands. Also, look into sharing the

flier with another business. Perhaps a local realtor or construction company can print their ad on the

opposite side of your ad.

That way you split the costs. Real estate agents and brokers are another source for deals. There

are not as many real estate owned properties (REOs) on the market now. But establishing good

relationships with realtors in your markets is key and it can bring you a lot of business with single-family

properties.

Realtors are so valuable because the have access to the multiple listings service (MLS). This is

the listing service where the majority of homes for sale can be found. The good part about it is they have

the MLS and that’s a good reason why you might want to get your license. I’ve had my license since

1986. It has not stopped me from going into a deal. Do I have to disclose? Yes, every time. So realtors

are the gatekeepers to MLS. A good relationship with a broker is key to MLS info.

I started my real estate brokerage business because I realized that there was such high turnover

because the majority of brokers weren’t holding themselves accountable and nobody else was either.

The reason that real estate agents fall out of business is because nobody keeps them

accountable. They are their own boss, but what happens when you are your own boss? Sometimes you

have no direction and that’s what happens in the real estate business so often. As a result, 75% of

agents and brokers aren’t

You want to create a relationship with a real-estate-owned broker if you can. The way you find

those is look in your classifieds for classifieds that say bank-owned properties or look for the signs on

the side of the road where they have the little sliders in there that say bank-owned.

Find out who those realtors are and work hard to get in with them because they’ll feed you a

lot. One thing about the experienced agents is they already have their list, so it’s your job to get on top

of their list.


The best way to get on top of their list when you’re working your local market is to take them

out to lunch. Take them out to lunch and pick up the tab. They will ask you, “Where are you getting your

financing? What are you using for your down payment?”

So be prepared. Be prepared for that question. Get your private money sources in line if you

don’t have any money right now. Get your partners in line if you don’t have money and then be

prepared to give a presentation on yourself. You know, you’re selling yourself during this luncheon.

You’re selling yourself and you’re also trying to build rapport. The more you can find in common

with this particular agent, the more they will want to do business with you. That’s what it’s all about.

People won’t do business with you unless they like you first and trust you second, so you must

get them to like you. That’s your job. Write that down. Get the agent to like you. You want to do it

honestly and by doing it honestly, you find out what you have in common. Some people you’re just not

going to get along with; some people you will. And then, of course, follow up, follow up, follow up.

You should be following up with these agents at least once a week. And always follow this rule:

When they send you a deal get back to them immediately. Don’t keep them waiting, especially if it’s a

crappy deal. Don’t feel bad about telling the broker you don’t like a deal they sent you. It’s part of the

business. By telling them right away you are establishing yourself as considerate and prompt. Also be

sure to tell them why you aren’t interested in the deal. You are now training them on what properties

not to send you in the future.

One good place to find agents is through the MLS rankings. The MLS has rankings or the local

board of realtors either one will have rankings on the top 10 or top 20 selling agents, top 10 or top 20

listing agents. Be sure to get the listing agents. Listing agents are the ones that will give you deals. Find

those agents and send them letters, send them emails. Get your name out there and create

relationships.

Don’t introduce yourself as a no money down buyer. That will turn agents off. Let them know

that you always have the $1,000 or so that it will take to hold the contract. The actual financing for the

deal is a separate issue, but let the broker know that you can handle what it takes to hold the contract

and get through the purchase and sales agreement.

When you’re at lunch with these people, do not give them no money down pitches – don’t –

because they won’t do business with you. They don’t want to hear that. You know, they want to hear

that you’re willing to put down $100.00, $500.00 or $1,000.00 as a – to hold the contract. Now after you

start to build their trust they’ll start giving you lockbox combinations and then you can go through the

property without them. How to blow it with an agent? Don’t close. You make a commitment to a

property, you sign the purchase and sale and you get about a week or two weeks before the closing and

you don’t close, that’s it. You blew that one. So to keep your credibility with brokers and keep that

pipeline flowing with deals, make sure to close on the ones you take from them.

Prescreening Sellers

The whole idea with prescreening sellers is that you don’t want to be endlessly answering

phones. Use websites and answering services to help you out. When I do answer the phone I aim to be

off in under one minute. I do this by asking 4 simple, but key, questions. “How soon do you want to


close?” – Now if they want to close within 3 months, that’s a good start to the conversation. “How much

do you think your property is worth and why?” – Now if they think the property is worth market and

they are asking market value for it, that is not a deal for you. “If I was to offer all cash and close quickly,

what is the least amount you would accept?” Always try to get them to answer this one on the phone.

The majority will, but there are always some that won’t.

If they answer on the phone they have now established a starting point. Your goal is to always

get them to come done from that starting point. So some people know this and won’t answer that

question right away. If they do answer then the obligatory follow-up is always, “Is that the best that you

can do?”

“Will you sell it to me for what you owe?”

If they want to close within three months, it’s typically a deal. If I was to offer you all cash and

close quickly, what’s the least amount you can accept? Always – and that’s what I learned at that Ron

LeGrand seminar ten years ago. If I was to offer you all cash and close quickly, what’s the least amount

you could accept?

You always have them answer that question on the telephone. Eighty-five percent of them will.

Fifteen percent of them just won’t. But once you get them to name price, 90 percent of the time, they’ll

come down from that price once you get to the property, so you need a starting point.

Not only that, you need to know whether or not it’s going to be worth your time to go out there,

so if I was to offer you all cash and close quickly, what’s the least amount you could accept? Follow that

up with, “Is that the best you can do?” And then, “Will you sell it to me for what you owe?” -If they say

yes to this one, again you’re off to a good start.

For answering services, I actually use two right now. I use PATLive and I use Protocol and they

both work well. All answering services have their good points and weak points. Protocol tends to take a

little longer to get the scripts up.

PATLive always puts you on hold, which makes me crazy, but they do everything else well. What

you want to do is you always want to call your service and check the number of rings and the hold time

at least once every couple of weeks. I called PATLive one time, 16 rings. Ouch. They shouldn’t be having

you on hold for more than 30 seconds and they should be playing music while you’re on hold. If there’s

no music while it’s on hold, you will lose most calls within the first 15 seconds – a lot. Yep, so you want

something with music on there.

All right and then your answering service should ask these questions. Give them the script,

similar to what you ask, but with one important addition. Always ask how they heard about you. That

way you can identify which marketing works and which doesn’t. Then you allocate more of your

marketing budget to what works and begin to tweak or discontinue the areas that aren’t working.

Now when they get somebody that’s ready to sell or they get a message in then how will they

let you know?

You want them to contact you immediately and they should do that by either a text message, a

fax or an e-mail. The text message and the E-mail are the most efficient. Fax is second. Obviously fax is

second because you’re not at the fax a lot, but what you’ll probably want them to do is to e-mail you or


text message and then back it up with a fax and then you want to call that seller back as soon as

possible. Because if you don’t, somebody else will, so that’s really important.

Have somebody else prescreen, you know. You want to spend your time talking to motivated

sellers. You don’t want to spend your time weeding your way through them. You want to spend your

time growing your business or enjoying yourself, one or the other.

Web sites. Oh, they’ve been out there for a while now. It has really been the big wave in the

industry transforming it altogether. You want to put your web site on all your advertising so you direct

them there.

You want to do Google AdWords. Write that down, because if you have a Web site and you’re

not doing your Google AdWords then there’s no sense in having the site because people aren’t going to

come to your site. They will come to your site if you put it on different parts of advertising.

Classified Ads. A great classified ad if you’re in a foreclosure market is “Stop Foreclosure” and

put your web site at the bottom. The best part about the Web site is that the sellers prescreen

themselves. You know, they tell you what their situation is, what the problem is. An email gets

generated to you.

You look at it and you decide whether or not you want to give them a call back or you want to

just send them a nice “Thanks, but no thanks” type of an e-mail. You don’t even have to talk to them if

you don’t want to and then you only call the truly motivated. Now when you get a seller that is hot and

you’ll want to call them right away. Repeat the prescreen questions. After those questions ask them

when would be a good time to come over, in one hour or in two hours? Don’t give them the choice to

say yes or no. For a hot seller you want to see them that day.

Just let them know, you know, I’m an investor. I see all types of different properties, the good,

the bad and the really ugly, so therefore I can come through and I can see that and I can give you a fair

price for your property.

Create Offers

So I’m going to go through exit strategies on wholesale, subject to, pre-foreclosure, lease-

options and rehabs. Wholesaling. Why would you wholesale? Because you need the money, because

you have a property with excessive equity, because the property is in an undesirable area. That’s

another reason you wholesale that I didn’t mention the last time, property being in an undesirable area.

Oh, that’s better. And then if it’s a rehab that you don’t want to do. Those are the reasons that you

would and then your exit strategy is to do an assignment or a simultaneous close.

So when you’re taking over the – when you have the purchase and sale agreement filled out,

you take it as the name of your trust or the name of your entity. A lot of times you can buy your single-

family properties in trust. It doesn’t cost you as much as an LLC and then especially if you’re flipping

them. You don’t need that amount of protection for that long a period. So you write the name of the

trust and then “and/or assigns” after your name, “and/or assigns,” so that means you can assign it out

to somebody, so who’s going to buy it? Other investors, sometimes homeowners and buyers.


Go to your REIA. Find out who’s buying what and then create – we have a book at home, a white

spiral binder book or three-ring binder and then we have who buys what in there, who does the type of

investing. Actually, we have who sells what ’cause we sell to end buyers mainly.

So how do you create a buyer’s list? Ad in the paper, network at the REIA, call other investors

ads and signs. Don’t put an ad in the paper for a buyer’s list until you actually have something to sell and

your ad should say something like “handyman special.” You know, the handyman special classified ad

will probably get you the most amount of phone calls.

And then subject tos. Who’s going to do subject tos? Well, when the seller needs to sell quickly

if they’re in pre-foreclosure, what they’re going to do is the seller is going to allow you to take over the

payment and it’s much easier and cheaper than creating new financing.

So the main reason you do it is ’cause it’s less – it’s more – it’s cheaper. You don’t have to go get

a loan. You don’t have to pay points. You don’t have your credit looked at.

You just take over that property subject to and when I first started on my Chunker strategy, the

majority of the deals that I was doing were pre-foreclosure deals and we continue to do that, but pre-

foreclosures and foreclosures will get you a lot of deals fast. Your exit strategy is to sell to the end user

or wholesale it out.

You could refinance it and take the equity out of the property and then you would be going with

a bank and cash out, but the one thing you don’t want to do is assign a subject to deal because if you

assign a subject to deal now you’ve just made promises to the homeowner that you’re going to make

that monthly payment month in and month out.

And when you say that you’re going to do that, you do it because the people that don’t do it are

the people that give the rest of us investors a bad name, so you do what you say you’re going to do.

But if you assign it, now you’ve just put that homeowner’s property or previous homeowner’s

property in somebody else’s hands, you know, and who knows if they’re going to do it or not, so it’s a

good business policy not to assign a property that you’ve taken over subject to.

The difference between assumption and subject to is the bank knows that you’re assuming the

mortgage with an assumption.

The bank doesn’t know that you’re taking over the mortgage with a subject to and a lot of times

they have what’s called the “due on sale” clause or an “escalator” clause. Very rarely do they actually

escalate, but there’s always the potential there when you take it over subject to.

Also, when you assume that mortgage, you usually need to qualify and pay the bank a point or

up to three points. Yep, if I say – because usually there’s a – if I’m in the deal it’s because there’s equity

in the property, so after they’ve left the property and it’s broom-swept clean, I make up the back

payments and I make the monthly payments for them.

You know and one of the big selling points is the fact that I’m going to make your monthly

payments. I’m going to repair your credit. You’re not going to have a foreclosure on your property.

That’s a big thing.


People don’t want foreclosures and you’re actually repairing the credit and, you know, probably

about 10 to 15 percent of your deals that you take over subject to that you hold, if you’re lease-

optioning them in a lease-option market they’re going to call you like a year later if you’re still on the

property and tell you that they want to be paid off.

And usually you’d tell them – you sign a piece of paper that says that you’ll pay them off

anywhere from wo to five years later, okay, and about a year later they call and they say they’d like you

to pay them off.

And when you try to find out why they say it’s because now that their credit’s repaired, they can

go buy something else and that’s what they want to do and when they do – when they come to you with

that, you say, “Well, all we need to do is create a lease.” Because the mortgage is still showing up on

their credit report.

That’s why they’re asking you to pay it off. We’ll give you a lease that’s going to be 125 percent

of the mortgage amount.

Write that down.

Give you a lease for 125 percent of the mortgage amount because the bank’s going to take 75

percent of that income, right, and use it for the homeowner which is going to wash out the lease. That’s

how you overcome that objection. Yeah. There’s a huge wave of pre-foreclosures coming, as most of

you know. The amount of financing that’s been happening over the last five years and the crazy

financing, the overpriced properties.

There are a lot of people that are already started getting into trouble and they will remain in

trouble. So being in the foreclosure, pre-foreclosure market right now is going to be your fastest ways to

start bringing in chunks of money into your house, so you want to learn as much as you can about all of

that and you always want to create a win-win situation with the people whose properties that you’re

taking over.

You know, give them something to leave with. You profit; they profit. It’s just a good way to do

business and if you do business that way it’s actually an easier way to do business.

You’ll get into more deals. Your exit strategy is to wholesale it out. Sell it to an end user which a

homeowner or a lease-option only in the right market at the right time, which is what? Which markets?

Buyer’s 2, Seller 1. That’s it and then you’re out of lease-options. All right, lease-options. Why?

Because you can do deals with very little equity in them. You can take over properties where they have 5

percent equity, zero percent equity, in a market that’s rising.

Only 40 percent of the people actually exercise those options and the values can continue to

increase, so not only are you getting an option fee, but the value of the property is getting higher and

higher and higher.

We had properties in our area in a Seller’s 1 when we were finally selling them off give us profits

of 80, 100, 120,000, two, three years later with them not exercising the option fees, but, you know, I

always gave the option fee back. I always felt guilty.


If I had $5,000.00 of their money, you know, and they were leaving 60 on the table, then I

usually gave it back to them and let them go unless they were bad tenants. You know what I mean? Rub

me the wrong way. Value continues to increase. We said about that and only done in a Buyer’s 2, Seller’s

1.

Your exit strategies are buyers with problems. What types of problems? Either credit problems

or no own payments. Those are the two types of people you’re looking for. You have to – they don’t

have enough for a down payment for a property.

They haven’t learned about all the 100 percent financing deals that are out there, so they’re

either aving up for a house or they are – or you’re helping them fix their credit, so if you put a person in

a house and, you know, they’re – what we do is we work with them so they can buy the house.

We probably have a higher transfer rate than most, but if we put them in there under the guise

that, you know, they’re trying to fix a problem and we can help them with their problem and they’re

giving us a chunk of their money as an option fee then we actually try to help them through the process.

We’ll refer them to a credit attorney. There’s a guy out of Phoenix. I got his number in my

Rolodex back at the office. If you e-mail me, I will e-mail it back to you, but he does it for $500.00 where

most people are at, you know, 3, 5, 7,000 to do it, so we refer him and – The higher the rehab, the

higher the risk. Write that one down. The higher the rehab, the higher the risk. That’s why you want to

get paid for that higher risk, so let’s say that it’s a $30,000.00 rehab. You want a minimum of a

$30,000.00 profit. Forty thousand dollar rehab; $40,000.00 profit.

You get anything that’s starting over $30,000.00 and you either better – if you’re not sure what

you’re doing, you’d better either partner with somebody or wholesale that deal. You gotta work your

way up to that.

I’ve got – I’ve had students that call me ’cause you know I have the rehab course, How to

Estimate and Renovate, and that was actually the first course that I came out with before I did the

apartments, so I’ve got a lot of rehab students. And I’ve had them give me a call and say, “Dave, I’ve

found the perfect deal. It’s a rehab. It’s $55,000.00.” And my next question is, “Is this your first deal or is

this your tenth deal?” And when they say, “Oh, it’s my first deal,” I say, “Don’t do it. Give it somebody

else.” They say, “Oh, but I want to do it.” I’ll say, “Well, this is what’s going to happen. That $55,000.00

rehab is going to turn into a $70,000.00 rehab very quickly and you may have it down that it’s going to

take you eight months to get it done.

Put down 12 because that’s what it’s going to be with your inexperience.” And somebody said

they now Marlene Green in the room. Who knows Marlene? Marlene Green, who’s a good friend of

mine and a student as well, she called me her first deal. Dave, I got a $72,000.00 rehab. I said, “Marlene,

don’t do it.” She said, “Oh.” She said, “But I think I can.”

A year and two months later, you know, I’d been talking to her back and forth trying to get her

out of the thing and she kept saying, “I wish I didn’t do it. I wish I didn’t do it.” She learned a lot, but it’s

a hard way to learn.

Your rehab exit strategy is to wholesale them or sell them to the end users, the buyers when

you get them done. All right, let’s talk about determining the after-repaired value because now we’re


going to put them back on the market. When you determine the after-repaired value of a single-family

property – you there? Let’s see. Now we’ve talked to the seller on the phone. We’re considering going

over to the property.

The first thing we want to do is get an idea of what the after-repaired value might be, so we’re

going to find property that were sold within the last 12 months in the same city or town. Now if you’ve

got a property that’s bordering another town, don’t use that other town as comps. They’re not good

comps – comparables. They have to be within the same area, within a mile radius, same style house,

same square footage, give or take 200 square feet on the square footage but no more, same number of

bedrooms. You want the same number of bathrooms, too.

For every bathroom, additional bathroom that a house may have, it’s a plus or minus $10,000.00

and for every bedroom, it’s a plus or minus $15,000.00 when you’re comparing but you want to

compare as close as possible. So how are you going to get this info? Well, you’re going to talk to

realtors.

This is another reason why you might want to get your license and have that multiple listing

service in your home because then you can just get on there and do your own comparables. Get onto

free Web sites like HouseValues.com. Anybody use them? HouseValues.com. Yep. Old and they’re only

listings. They’re not sales. The most important part of this process is you want the sales. Yes, some

agent’s trying to sell you a property and they give you the listings. Oh, this one’s listed for this. This

one’s listed for that. Great; doesn’t matter.

What did it sell for? That’s the most important question. So, okay, so we’re going to go to the

property. We’re going to determine the after-repaired value. We’re going to go to the property. We’re

going to use the safe island technique.

We’re going to go through each one of these steps. We’re going to use the safe island

technique.

We’re going to go through an income and expense sheet. We’re going to determine the rehab if

any. We’re going to produce the offer calculation worksheet and do it. We’re going to determine a

buying strategy and use the proper paperwork and get a signature and then we’re going to check for

clear title. That’s our process.

So let’s go step by step through this. Going to the property. The most important thing is to be on

time. If you’re a person that is constantly late, you’d better not be late for your appointments for your

business because you will not get as much business as you would be if you came on time.

When you don’t come on time, do you know what you tell the person that’s waiting for you?

I don’t respect you. That’s what you’re telling them. I don’t respect you and that’s how they feel,

you know. I’m – everybody knows in my office that that’s a pet peeve of mine.

You must be on time for me and when I’m on time and if you’re not where you’re supposed to

be, at like 30 seconds past when you’re supposed to be there ,I’m usually on my cell phone calling you.

You know, No. 1, if you’re not on time, it makes me crazy, but to know that you had time to stop

at the coffee shop and couldn’t make it on time, that makes me even crazier, so Rob said – I overhear


Rob saying to him, “Hey, you gotta come on time, because that’s one of Dave’s things. He wants people

on time.”

And he said, “Oh, Dave’s going to have to get use to it ’cause I’m usually about five minutes

late.” That’s what I hear as I’m coming around the corner. I said, “Dave’s not going to get use to it. This is

not going to work out. You’re fired,” and just kept walking and he turns around and he goes, “Is he

serious?”

He goes, “He’s serious.” And that was it. I don’t have time to waste with that. I have too many

things going on in my life, you know, so be on time. Tell people you respect them. Be on time.

If you can be consistently five minutes late, why can’t you be consistently five minutes early?

That’s what I could never understand.

You also want to drive a decent car, not a – you know, you want to be careful and not so much

drive up with a BMW. I’ve got two cars. I’ve got a BMW X5 and I’ve got an Explorer and usually when I’m

going to buy houses, I pull up in the Explorer. Yep, because I don’t want them to think, you know, that

I’m some shark coming to buy their property.

Always dress casual, usually business casual, khakis, polo shirt and remember, they’re watching

you from the window as you’re walking up and they’re already making a decision in their mind, a buying

decision whether or not they’re going to sell you their property.

They might not know it, but they are. Who’s read the word – the book, Blink? Anybody? You

want to read that book, the book, Blink. It’s all about how the mind makes decisions and it did this big

study on all these different scenarios and it turns out that the mind makes decisions within seconds.

So remember, when you’re walking up to that walk, they’re walking – they’re watching you, so

you want to be, you know, dressed nice and be trimmed and you want to be walking confidently to that

door.

Now when you go into a property, they’re not going to know what to expect, you know, so they

might e a little bit – did you know whenever – if you had to have an operation what the doctor does is

he’ll have you in the office a couple of days before or maybe a week before.

He’s going to tell you when the operation’s going to take place. He’s going to tell you what you

should at and drink the night before, what’s going to happen when you come – what time you’re going

to come into the hospital, what’s going to happen in the hospital, what’s going to happen right before in

the OR room, the pre-op, then the OR.

And then where you’re going to wake up, what it’s going to feel like when you’re going to wake

up and then when you’re going to go home and then what’s going to happen during the recovery. Yes?

So what he’s done, he’s taken all of your fears and he’s taken you out into a safe island and he’s told you

exactly what’s going to happen to help you eliminate your fears.

That’s the same thing we do here, all right? Because the homeowner doesn’t know you. They

think that you might be coming to either take their property or they just have no idea what you’re going

to do.


So their first thing that they usually say is – you know, they’re a little bit nervous and they say,

“Can I show you around?” You should say, “No. What I’d like to do is go to the kitchen table. Would that

be okay?” Get affirmations, and if they try to bring you to the living room, don’t let them. Kitchen table

because the kitchen table is where you do business. The living room is where you entertain guests.

I’ve helped them clean them off so I could be at that kitchen table. When you sit at the kitchen

table, you don’t want to be sitting across from each other. You want to take one of the spots, either the

top spot or the corner spot so you’re sitting angled at each other.

When you’re sitting across from each other, that’s a confrontation that you’ve just created.

When you’re sitting side by side, you create more of a friendly atmosphere, so what you say is, “What

I’d like to do Mr. Seller –.”

And this is when you take everything out of your – if you’ve got a backpack or you got a bag or

however you carry all your stuff, this is when you take it all out and you lay it on the table. You should

have your credibility kit in there. You should have your folder with all your forms. You should have your

calculator there.

And you take it all out now because what you don’t want to do is introduce something later. You

want to get them comfortable with the – with all your stuff at one time because this is what happened.

When I first started, I used to leave the folder where they were going to sign the offer in my

briefcase and I remember one time I was negotiating with this guy. We were going back and forth, back

and forth, back and forth, and I didn’t think I was going to get the deal and then finally I said something.

I can’t remember what it is now, but I said something and he said reluctantly, “Okay, I’ll sign.” I

said, Great.” I immediately whipped back to my folder. I whipped it out and I put it on the table and then

when I did that, he like – he backed up. He said, “Oh, no. No, no. I’m not interested.”

So that taught me. Don’t introduce anything new, even as far as your pen. Put the pen that

you’re going to have them sign with on the table so they see it all upfront, so you take out all your stuff

and you say, “Mr. Homeowner, what I’d like to do is explain what’s going to happen here during our

appointment today.

“The first thing I’m going to do is I’m going to tell you a little bit about my company. I’m going to

ask you home questions and I’m just going to reaffirm what you told me on the phone. I’m going to tell

you a little bit about myself and my company.

“And then what I’m going to do is I’m going to ask you to take me for a walk around the

property and you can show me, you know, the different features of the property, give me a couple of

reasons why you bought it and if you could tell me a couple of things that you’re having challenges with

the property, I would appreciate that.

“And then we’re going to come back to the table. I’m going to take some additional information

and then with all the information we gather here between you getting information about me and my

company and me getting information about you, your situation and your house, then we can probably

come up to some sort of a decision this afternoon. Do you agree with that?”


And then you shake your head yes, ’cause anytime you want a yes from somebody, do you

realize you always shake your head yes? Yes, so – and they say yes, but what you’ve just done is you’ve

just put them on a nice, safe island. Now they know what to expect, you know. They breathe a nice, little

sigh of relief and you’ve started building rapport with them. One of the things you want to do between

the kitchen door or whatever door it is and the kitchen table is find something that you can give a

sincere compliment about, whether it’s something of the landscaping coming into the house, new tile on

the kitchen floor.

Maybe you saw a picture of somebody holding a fish and you’re a fisherman, you know, or

whatever. Find something that you have in common with them and give them a sincere compliment

because you want to start building rapport as soon as possible and when they’re taking you for that walk

around the house, you want to build rapport as much as you can.

When you start seeing things on the mantles, pictures on the walls, even the furniture if you

have the same type of furniture, make comments about that.

People do business with people that are like them, so that’s really important.

So then as you’re going around the house, you’re going to determine the rehab and you should

have a list of items that are typical for – most houses are about 1,500 square feet, you know, so the

average house interior paint’s going to be about $1,200.00. Exterior paint is going to be about

$2,200.00, carpet 1,500.00. Get a ballpark figure in your head.

If you’re not sure what the rehab is going to be that would be a reason – well, No. 1, you want

to put it up higher than you think it was going to be, okay, so always go higher. You always want to get

something signed, but if it’s a bigger rehab and you’re just not sure, that would be a reason for you

come back and give them a different offer.

That would be the only reason because your whole objective is to get something signed before

you leave because if you don’t, you know what’s going to happen? I’m coming in right behind you and

I’m getting it signed before you leave, okay, so just remember that. Get it signed.

You want to have a checklist of buying documents with you, so these are the things that you’re

going to have with you when you go into the property or you’re going to ask the seller for while you’re

there and items for the seller to sign, so copy of the mortgage, copy of the bank collection, mortgage

statement, insurance policy, deed, appraisal if it’s available, a survey if it’s available, apartment analyzer

form filled out.

While you’re at that table and you’re doing the safe island technique and you’re asking them

questions and you’re reiterating what they’ve said to you, the next thing you do is you pull out your

credibility kit and everybody should have a credibility kit.

And that’s pretty much a presentation about you and your company and what you’ve done and

it should have testimonials in there about people that know you and the things that you’ve done and if

you haven’t done any houses yet, well then you put testimonials in there about – from people from the

community that know you that can say good things about you.


If you’ve got any bank loans or lines of credit, you get notes from your bankers and put it in

there as well. If you’ve got a good credit report, you put your credit report in there. If you’re going to be

doing the Chunker strategy, you want to be a member of the Better Business Bureau.

That will go a long way to having people trust you, so we always have a certificate of a current

Better Business Bureau form in there and they’ll send you something that says – the name of my

Chunker company is Results Home Buyers and it will say Results Home Buyers has not had a complaint

filed against it in the last three years, and that’s as far back as they go is three years.

So you put that out there and the reason you have a presentation book is because you will close

28 percent more sales with the presentation book. That’s a statistical fact, so whether it be in real estate

investing or real estate sales, you have a presentation book. It also keeps you on track as well, which is

good, and you know what?

Have a picture of you and your family in there, your kids, because that’s going to build rapport

as well and it’s going to make you more human to them, so put a couple of the human type of pictures

in there. All right, so then you’re going to do the offer calculation worksheet and let’s go over some of

these costs.

Your closing costs on a purchase is going to be about $2,500.00. Closing costs on a sale is going

to be about $1,500.00. Your insurance, you’re going to get a builder’s risk policy. That’s going to be

about $1,200.00, builder’s risk, $1,200.00 for six months. Taxes and water, you just take whatever the

taxes are and divide it by two. We’re going to assume that we’re going to hold this property for six

months, so the tax is divided by two and you’ll get – let’s assume it was $5,000.00 for taxes.

So it’s $2,500.00 and then I’m going to throw an additional $400.00 in there for water so that

would be $2,900.00. Utilities, again I put about $400.00 in there for utilities. Interest payments; just take

whatever the mortgage amount is – let’s say it’s $100,000.00. Do simple interest.

I assume that I’m getting into it either hard money or private money. If hard money is 15

percent then it’s $100,000.00 times 15 percent. It’s simple interest, so $100,000.00 times 15 percent is

$15,000.00. Divide that by two and that’s $7,500.00, so $100,000.00 times .15 divided by two equals

$7,500.00.

Broker’s commission. Even though I’m a broker, I’m still trying to save commissions. I still try to

sell my house before I give it to my agents to sell, but I always assume a worst case scenario, that I’m

going to have to hire a broker to sell it.

So whatever your going rate is in your area – let’s say in my area it’s 5 percent now for

commissions, so – and let’s say – let’s make this simple and say that the sales price is $100,000.00 after-

repaired, so the broker’s commission would be 5 percent, which would be $5,000.00. Now profit; I’m

not going to get into a deal unless I can make a $20,000.00 profit. It’s just not worth it for me and a lot

of times I’m making much more that that, so you add that right in. You’ll get all your total cost here and

then you’ll get a subtotal.

You subtract that from the purchase price and that will give you your maximum allowable offer,

the maximum that you can offer a property for. Now you can figure that out right there.


You may not want to – depending on how you’re negotiating, you may not want to give them the price

right there because the next thing you’re going to do is you’re going to make three offers and in making

those three offers, one of them’s going to be an all cash offer. Let’s say it was a $10,000.00 rehab.

Whenever you do your rehab, how much are you going to increase when you – if you figure it’s a

$10,000.00 rehab, how much are you going to increase it? Ten or 20 percent.

If you’re brand new, 20 percent. If you’re not and you’ve done a few, 10 percent. I always add

10 percent to my rehabs and I’ve been doing it for ten years, so let’s say that the 10 percent came up to

$10,000. Okay, so the max that you could offer for this particular property is $49,000.00. Now that’s a

little hypothetical but let’s just use it. We’re going to offer three different offers. One is going to be an

all cash offer. One is going to be a split-funded offer. One’s going to be 100 percent owner financing.

If I can offer $49,000.00, that’s going to be my max. The split-funded is probably going to be

about $10,000.00 lower and my all cash is going to be about $10,000.00 lower than that. Your all cash

should be the smallest amount. It should be low. It should be embarrassingly low.

Your split-funded offer is typically I’ll give you $3,000.00 to move or $5,000.00 to move and the

rest then I resell the property. They say, “Well, how long is it going to take you to resell it?” You know,

you say, “Well, it typically takes me about six months.” But you’re not going to sign anything that’s going

to say that you’re going to sell it in six months. Say it typically takes about six months.

Hundred percent financing; that’s when you don’t have to come out of pocket at all and that’s

when you can give the most amount of money, so let’s say that we’re dealing with a $500,000.00

property.

Go to the other extreme. Five hundred thousand would be the highest. Next, at about

$475,000.00 for my split-funded and $450,000.00 for my all cash. So my range has widened by about

$25,000.00 there. The reason you do three offers is because when you give them three offers, they

assume that they need to choose one. A lot of times, they won’t come back and haggle and 25 percent

of the time they’re going to choose this one and that’s why you always offer the low cash offer. If they

haggle at all, they’re going to haggle with you on that cash offer and try to get you up, so then you go

back and forth and work out your best deal.

Okay, let’s look at two pages later, forms and checklists. You’ve got to set up your systems and

in setting up your systems, it’s all about forms and checklists because if you don’t have forms and

checklists, you’re going to forget something and that something you forget is going to cost you money.

So you want to-dos, checklist for to-dos, forms to fill out, buying checklist, seller checklist,

lender checklist, and the property checklist. Those are your major checklists that you’re going to need.

I’ve been doing it for ten years and that’s about it.

So let’s go to the buyer’s checklist and that was the one that I had up a little bit earlier on the

next page. This is after you’ve got the property signed. You’re going to get from the seller a copy of the

mortgage, copy of the bank, all of this information. You want to check it off. You’re going to have two of

these.


You’re going to have one that you’re going to hand to the seller and you’re going to have one

that you’re going to keep in your file and you’re going to check off both of them that you requested

from the seller and then in your file, you’re going to check them off as they come in of what you got.

And then the items for the seller to sign.

This is what you need signed right there at the time when you’ve got the offer signed, the

contract signed, so you can either sign a purchase and sale or an offer. Some people go right into a

purchase and sale. I usually do offer and then purchase and sale. Statement of understanding. If it’s a

subject to, they’re understanding that you’re taking over their note, No. 1, and this is where some

people put in the unconscionable profit clause. Has anybody heard of that? It goes something like “Seller

realizes that the buyer may make an unconscionable profit on the resale of this property.”

Yes, so that – in case somebody says, “Oh, you know, he took advantage of me,” you’ve got this

form that says I didn’t take advantage of them. I told them that I was going to make a huge amount, you

now, an unconscionable profit, so that’s why you want to put that in there, especially if you’re dealing

with an elderly person, all right?

No. 1, you always want to deal fairly with the elderly, but more – in the cases where I’ve seen

investors lose, it’s when they’re dealing with an elderly person because that’s when the courts really –

you know, they just look at the elderly person. They usually rule in favor of them.

So that’s why you need to have something in there. You know, you want to explain to them

what’s going on and what’s going to happen. An authorization to release. That’s to release information

from their bank that you may need to follow through with the transaction. A warranty deed to the

trustee. You may or may not have that signed then. I usually do that on my second meeting with them;

same thing with the assignment of beneficial interest.

If you’re doing a subject to or you’re taking over pre-foreclosure, you may request that they sign

a limited power of attorney, especially when you’re doing a short sale. Write short sale next to this one.

This is really only when you need the limited power of attorney because you’re going back and

forth with that bank so many times and they’re sending you so much paperwork that you need the seller

to sign that you want to get a limited power of attorney that just deals with that paperwork. That will

save you a lot of trips.

An escrow letter of where the funds are being held, a bill of sale for any items on the property

that you’re taking over. You know, maybe you’re taking the furniture. Maybe you’re getting a

motorcycle, whatever. Put it in the bill of sale.

Property information sheet. That’s a sheet that you’ll have and it describes the property, its

address, any other pertinent information, maybe the book and page, and then the letter of the

mortgage company and that’s the one that we had mentioned earlier about sending it to the mortgage

company saying that you’re transferring it into the trust.

The next one is just basically what I just said. Okay. This is the Chunker strategy and these are

the steps involved in the safe island process. These are the steps, the next one. Ask the questions. Tell

about the company in the presentation kit. Tour the property. Determine the rehab.


Complete the income and expense report. We’ll get into that. Do the offer calculation

worksheet and get signatures.

All right, the income and expense report for some reason isn’t in here, but on the income and

expense report, this is how you set it up. It’s real easy to set up. You do it on your own computer on

Word.

It has all the income that they have coming in. It has all their expenses. It has all their credit card

bills, has any loans that they have outstanding, any debt that they have. Then you add in all the

household stuff.

You add in how much it’s costing them for food, how much it’s costing them for cable, how

much it’s costing them to gas their car, how much it’s costing them for kids’ clothes, school supplies.

You go right down the list and get everything that it’s costing them per month, all right, and

what you’re going to do is you’re going to take the total income and you’re going to subtract the total

expenses.

And about 80 percent of the time the people are usually upside down, all right, meaning that

they don’t have enough income to cover these expenses. That’s why they’re in the situation that they’re

in. Be prepared.

This is when the flood gates will open and tears will start coming out and when the first time it

happened, I wasn’t prepared for it and I had a man and a woman crying in front of me. The reason is is

because they have never done this before.

They never actually sat down and figured out, you know, what their bills are each month and

how much income they have and by seeing it, they realize that they can’t keep living like this and they’re

going to have to sell the property.

And if you’ve done your job properly and built rapport going through the property, the only

likely choice is you to sell it to in most cases, so two out of three times you’re going to see tears, so be

ready for it but that income and expense report, that’s probably the most powerful tool that you have in

your packet to get the sale right then and there.

Now if they are breaking even or they have their head above water and you’re going to try to do

a workout with the bank for them, try to – we always try to keep the people in their house. That’s their

No. 1 goal. That would be our No. 1 goal. Eighty percent of them you can’t keep in the house. Twenty

percent you can.

So what about with that – some people say with that 20 percent then, you know, you don’t get

anything. Oh, you get a whole bunch, you know. First of all, you get the satisfaction that you helped

somebody stay in their property, you know. The second thing is they write you this unbelievable

testimonial.

The third thing is, and it’s sad but true, but usually within the next 8 to 14 months they’re in the

same situation again and they’re going to call you back, so there’s a good chance you’re going to get

that property when that happens.


So create an income and expense sheet. Put it into your package and use it, but use it near the

end of your presentation after you’ve built the rapport up and after you’ve become the one to go to,

after they like you and after they trust you.

If the bank doesn’t do the workout and you have now, you know, helped them out and worked

with them and tried to get it done, then there’s only one place that they’re likely to sell the property to

and that’s you again, so by helping them out and trying to get it done, you’re the go-to guy for the sale.

So Step 3. Create and present offer. Determine the RV and the comps. Have an assistant do it.

Prepare the packages. Have an assistant do it. Meet with the seller. That’s you to begin with and then as

you get bigger you have somebody else go do it. You start having buyer’s agents. Create the takeover

file; assistant. The only time I now go to single-family households is when I’m training somebody,

training my brother or somebody else in our office as buyers as to the step-by-step process on what to

do. Otherwise, that’s not my gig. I’m out buying larger properties, much larger properties, but I still want

this Chunker system to keep going ’cause I like getting those chunks of cash coming in. Monitor the

takeover files. That’s you. You want to be monitoring those files because that’s your business. That’s

minding the store, so always be minding the store.

The title search is the closing attorney. So, the Chunker strategy is a combination of delegatable

systems, checklists and forms that allow deals to be done in the same way over and over again where

there’s little involvement from you so you can grow your business, create more income and cash more

checks so you can do what? What you want, when you want, where you want, for as long as you want

and who you want.

What’s a takeover file? The takeover file is the same thing I call the property file, so a takeover

file and a property file are the same thing. All right, let’s talk about funding these deals. How are you

going to fund them?

Well, you could take them over subject to, take them over by assignment. That’s when you’re

getting them with no money down. Simultaneous closes. You have to have a good attorney that will

work with you.

You have the buyer on one side; seller on the other side. When the seller finds out how much

the buyer is paying, which sometimes happens, it can get ugly, so you want to make sure those two are

separated.

Partners to fund your deals, equity lines. You also need a lender presentation as well and you

guys have that. She gave you those handouts. Be sure you have that when you go in. Lines of credit on

your properties.

When my properties started to create equity, I started taking that equity out and buying

properties and flipping it, but, remember, every time you flip a property, put the equity back into your

equity line. That’s a mistake that some people make. They don’t put it back in and then they’ve got big

lines of credit out.

Hard money, private money and bank financing. You know, for years I heard people stand up on

stage and talk about how never get bank financing, you know, never personally guarantee a loan and I


always thought, “ Why?” ’Cause, remember, I didn’t start going to seminars and I only went to one

seminar.

I went to LeGrand about a year and a half after I was already getting started, but I wanted to

learn single-family houses, but then – and Ron’s a really good friend of mine and I love Ron to death but

back then he wasn’t teaching like he does now and back then he had – he was only teaching what was in

the course that he had just sold.

So I’m thinking, “All right. I bought the course three months ago. I ripped it apart. I used it. I

went out and made some money.” And now I’m at the boot camp to get to the next level but he was just

teaching me the course and that’s what I thought everybody else did, too, so I stopped going to boot

camps until I realized that, no, some are the next level over and above the course.

So I heard all kinds of people saying, “Don’t do bank financing. Never personally guarantee a

debt.” And I thought, “Why?” You know, No. 1, I’m taking calculated risks, but No. 2, that’s where the

cheap money is. The banks have the cheapest money. Do you agree?

They do, so I never had a problem going to a bank and obtaining money. When you’re doing

multifamily properties, you’ve gotta go to the banks. On the single-family properties and my small and

multifamily properties I go to the banks and, like they say, at about ten mortgages they shut you off.

They do, so then you’ve gotta start working with mortgage brokers that will expand your

horizon and get you into other types of financing, which is very easy to do as well. A good mortgage

broker on your team is a key asset when you’re doing Chunkers.

And then eventually when you get your private money going you can start funding all your deals

with private money and then you don’t have to worry about where the money is coming from.

Yeah, it’s a little bit more expensive in terms of interest rates, but there’s not as much closing

costs and you know you’ve got the money to do that deals when you need do it.

The one key thing that’s going to get your business to take off like a rocket is private money.

Write that down because when you leave here, you should be going after private money, asking people

how much money they have, how much they would like to invest. Tell them what you’re doing because

you’re going to run out of money.

Some of you don’t have any money right now. Some of you have money. It doesn’t matter how

much you have. I’ve got millions and we run out of money all the time and we’re constantly looking for

money and as you saw two days ago when I asked you for private money, so always be looking for

private money.

So hard money. Typically, they arelooking for a 65 percent LTV, loan to value. They’re going to

charge you 15 to 18 percent. It’s going to be one to ten points. You can locate it at a real estate club. Call

your attorneys. Ask them who they know that have private – hard money because they’re the ones that

are going to record these notes.

A hard money source is RehabFunding.com, RehabFunding.com, and Brookview Financial out of

Connecticut, Brookview Financial. Both work extensively with investors.


Actually, it’s written at the bottom here, Brookview Financial and RehabFunding.com. Rehab

Funding is out of Pittsburgh, but I’m pretty sure they’re nationwide now and I think Brookview has just

recently gone nationwide as well.

All right, where are we going to get the private money? Word of mouth, direct mail campaigns,

family, friends, real estate clubs, attorneys, accountants, financial planners. You can do presentations

either one-on-one. I tend to like to do mine one-on-one.

I’ve done groups before. I’ve got a group presentation, but I like to do them one-on-one, take

people out to lunch if I know they have a lot of money. I’m not going to take somebody out to lunch if I

think they have, you know, $50,000.00 or $100,000.00, which I could certainly use, but, you know, you

start getting into the people that have half a million, a million, $2 million. They deserve a lunch.

And you need private money like you need oxygen. It’s just true. Bank financing. Again, it’s the

cheapest available. You’re taking calculated risks. You’re also creating credibility for your lines of credit

when you do that and you want to prepare your package properly.

So funding the deal. Taking over subject to, it’s going to be you and/or a buyer’s rep. When you

assign something over, you’re going to assign it. When you’re doing a simultaneous close, that’s your

attorney involved. When you do partners, that’s you and/or an assistant.

You’re going to get to a point where you’re actually going to hire a money person, which we just

put an ad in the paper for, somebody that goes out and solicits funds and they get paid usually either 1

or 2 percent of the amount of funds that they solicit.

Lines of credit, you. Hard money, get the assistant to find out who has the hard money. Until

you do get the assistant, you do it. Private money, you and the money man, and bank financing. Have

your assistant prepare everything except for your financials ’cause that’s not anybody’s business but

yours. Okay, five, selling them quickly, which is the key. You want to sell those babies quickly. How? The

five steps to getting the chunk is to prepare the property, attract the buyers, capture the calls, prescreen

the buyers and chunk them quickly.

So what are we going to do? How are we going to prepare these properties? We want a

property that only has a few problems. Oh, here are some problems that you’ll have if you get these

properties. No. 1, properties that are not bread-andbutter, that are either higher end, you know, luxury

type of houses.

Luxury – you can make money in luxury houses, but if you get – there’s somebody in the room,

and I can’t remember who it was, that told me that they bought a luxury house in another state and

they were told that they would be able to rent it out and they would be able to get a certain amount in

each month and cover and it’s not covering the mortgage and it’s a $5,000.00-a-month payment.

So that’s why you want to be careful when you’re doing higher end properties and the reason is

there’s less of a buying pool. Properties in a bad area or war zone or problem properties, you want to

wholesale those.


Properties where the rooms are too small. You know, whenever you go in – when you bought

your house the first thing you were doing is thinking, “Oh, this is nice. Is my couch going to fit here? Oh,

this is nice. Is my master bedroom set going to fit here?” Yes?

That’s what the buyers are doing, too, so you don’t want rooms that are too small. If you have a

property that has small rooms, put up mirrors. Yeah, put up mirrors. It’s very effective, creates size.

A property that’s far away from everything is harder to sell. Property where condo fees are too

high, that’s hard to sell, and properties that have environmental hazards.

Okay, to prepare a property, No. 1, you can sell it as is and sell it quickly, sell it at a discount, or if

you think you can get a lot more if you do a few repairs, do the repairs and remember when you’re

doing those repairs you want to create an emotion. You want to stage the property.

You want to have curb appeal. By curb appeal, I like to match the doors and the shutters

together. I’ll get the paint for the door or, no, I’ll buy the shutters because you’re buying the plastic

shutters and then

I’ll bring it over to the paint department at Home Depot and have them match the color with the

computer there, so then they match and that’s good symmetry.

The house itself, it should be a light color because light colors look bigger. If it’s a nice darker

color and it’s a big house that’s okay, but if it’s a small house and it’s a darker color, paint it. Paint it

light.

The mailboxes, the numbers and the lighting on the exterior should all match. I like to put brass

or gold or you can match them black, whichever, but match them up; looks good.

Landscaping. Use mature shrubs. You can buy them mature. Check the garage doors. If they’re

not looking good, change them and then I like to put all gooseneck handles on all my doors because the

philosophy is anything they touch, you want it to be extra special.

So – ’cause they gotta look at it first and they see it and they – ooh. And when you get that ooh

experience going throughout the house, it makes your sales a lot easier. In your kitchens, self-cleaning

ovens are a must. How many people cook in the room? Yeah. I love to cook myself. If it’s not a self-

cleaning oven, it’s not good.

What you want to do is you want to see what the high end appliances are now and the high end

countertops, you know, if it’s granite. Is it marble? You can go to Home Depot and you can get what’s

called faux high end. You know, it’s fake high end stuff that looks really good and that’s what you want

to put into your properties unless you have a high end property.

But most of the time we’re doing breadand-butter properties, so get the faux stuff. You know,

get the Better Homes and Gardens. Get the Kitchens and Bath magazine. Flip through it. See what the

latest stuff is. Go to Home Depot. Get the fake stuff and put it into your property. The fake stuff is

usually built really well.

Leave tags and stickers on all the appliances. Yeah, so they know that it’s new, you know. If

you’ve got a new product in there, let them know. Say, ooh, new stove; ooh, new dishwasher. Leave

those tags on there.


The kitchens and the bath should all be light colors. We like to put in air fresheners, the type

that plug in. It keeps it always smelling nice. Cinnamon’s really nice and then you want to put ornaments

all around the house, you know, cookie jars, knife sets, hand towels, silk plant, open a cookbook.

You’re creating an atmosphere. You’re creating a stage, you know. This is the presentation. It’s

the house talking. In the bathroom, the toilet, the tub and the counter should be the same and if they’re

harvest gold or avocado green, change them. They should be light, bright and clean.

You should put a shower curtain in, a nice one, some towels in there. Again, we’re staging it.

Fancy toothbrush holder and a drinking cup.

On the property itself on the interior, we do two colors. We do off white. It’s Benjamin Moore

Navajo on all our walls, Benjamin Moore Navajo, and then on the trim we do semi-gloss white, Benjamin

Moore. On the ceiling, they have a paint called Ceiling White.

So what you don’t want to do is you don’t want to use contractor grade paint. Now we get the

paint in the five-gallon buckets, which is good. If you get the contractor grade paint, you’re going to get

paint that clogs up on the bottom, right?

And that last half gallon you’re not going to be used – able to use and what it does to your

painters is when you roll out that paint that hardened, globbed paint gets on your brush and then it gets

on your walls.

We call them paint buggers.

Yeah, and then they dry and then you gotta go peel off all the paint buggers on the walls and

then you gotta patch up the wall and that’s from using too low of a grade paint, contractor grade.

Use the Benjamin Moore paint and you’ll do good and you’ll only have to cover in one coat most

of the time if it’s a regular color down below. I put mirrors around, especially in a small house but also in

a big one. Ceiling fans everywhere I can. People love ceiling fans. That gets the ooh effect. The light

switches and outlets. I use the newer ones. You know, let’s say the outlets look like this, you know, and

– usually. Well, if you’ve got an old house, they’ve got like the domino type of ones now.

Those will make an older house look newer and being from New England, where our housing

stock is built mostly in the 18 and early 1900s, we take an old house and one of the ways to make it look

newer is like this.

Also, the light switches also look like this as well. People like them and they’re very cheap to

change – very cheap. Always put blinds instead of the shades. Hardwood versus carpet. What’s better?

Hardwood. It is shiny, looks good, easy to clean. No. There is a – probably 15 to 20 percent of the

population that is allergic to carpet.

Yeah. Anybody in the room allergic to carpet? Maybe it’s not that high. It’s probably about less

than ten, but yeah, so what you’re doing is you’re actually taking out some of your buyers.

So whenever we have a property that has carpet and hardwood floors below, we always pull the

carpet and we’ll save the carpet and put it in one of our rentals if it’s good and we’ll refinish the

hardwood floors.


Some of the keys here. Use the same materials over and over again. When you start doing this,

go to Home Depot. Get a list of all the different materials that you’ll use. You’re going to be using

lighting over and over again, the same ceiling fans over and over again, the same type of doors,

appliances, counters.

Get all the SKU numbers from Home Depot, so now all you need to do is fax over your list to

Home Depot and then one of your guys can pick the stuff up or your contractor can pick the stuff up and

that way it’s going to save you time and money.

How are we going to attract the buyers? Who are your buyers? Well, your A and B type of

buyers that have money credit and can go to local banks and mortgage companies are going to be about

30 percent of your market.

Your C and D borrowers, which have little to no money, little credit, that were going to use

mortgage companies and special programs are about 70 percent of your market, so what you want to do

is you want to get with a good mortgage broker and find out what programs they have to service your C

and D buyers.

That’s important. One of the key members on your Chunker team is a good mortgage broker

that has a variety of – I call them tools or conduits or just suppliers of mortgages for the C and D type of

borrowers that can get them financed.

And the way you’re going to find these people, this is – one of the things I love to do is do a

buyer’s seminar and you can do it at a local restaurant or church or VFW.

You don’t have to get up there and actually do it yourself. You’re just going to get up there and

introduce the people that are going to be there.

And what you’re going to do is you’re going to hand out a property report. You’re going to invite

a banker. You’re going to invite an attorney. You’re going to invite a home inspector and every one of

those guys for the benefit of them being there and exposed to those buyers are going to give something

away for you.

The banker may give out a free application, $250.00 value. The attorney may give out a free

homestead act for $125.00 value. The home inspector may give $50.00 off his regular home inspection

and then you want to have some sort of a raffle there.

And if you do it in a restaurant, we do – there’s actually a restaurant, a good pizza place, that we

like to have ours in and we just have the people come in and we serve them pizza and then we go

through the process and what we do is we send postcards to all the renters in the area.

We advertise in the newspaper and we usually get about 15 or 20 people in to buy, but more

importantly, typically, we’ve found a buyer for our property in that one night and we sell the property

quickly.

So what it does is it creates a competitive atmosphere and it also gives you a buyer’s list for your

other properties. If you have more than one property, then sell it to the others as well, but each one of

these guys gets up and does their spiel.


You introduce the property. Then the banker talks about how to get – how he’s going to get

them financed and how great the property is. Then the attorney gets up and he talks about the process

of going through, you know, the process of buying the property and then he talks about how great the

property is.

And then the home inspector talks all about a home inspection and then talks about how great

that property is. All right? So you hear the common theme? How great the property is, so you can sell it.

You can also attract buyers through choose your neighbor campaign, which is basically we’ll go

circumference around the property to the nearest 25 homeowners and we have – we knock on the door

and say, “Mr. Smith, just wanted you to know that we just purchased a property down the street.

“We’re going to rehab it and make it look good. Here’s a flier of the property. This is what we’re

going to be asking for it. Who do you know that you would like to be your next neighbor?” And most

people – would it be your coworker? Would it be another family member? Most people know somebody

that they would like to have come into the neighborhood, so we say, “This is your chance to choose your

next neighbor, you know, to quote, unquote ‘control your neighborhood.’ Here are some fliers. Here’s

my card. Give me a call if you know someone who wants to buy.”

We sell about 40 percent of our properties that way – works; works good. Classified ads to 24-

hour voice mail. That’s good. You get a classified ad that goes into your voice mail. The voice mail

describes the property, tells them where the location is. They go drive by and if they want to get in then

they give you a call.

If it’s in a good area, you can put a lockbox in there and allow them to go in. If it’s in a marginal

area, don’t put it on lockbox and allow them to go in. Make sure there’s somebody there, but at that

time, they’ll have the ability to call somebody, one of your buyer’s agents.

The last thing you want to do is sell properties. I mean that’s the worst is dealing with buyers

and showing properties, so have somebody that can show that property for you. Then you’re going to

have signs on the property that says that the property’s for sale.

If you can get 100 percent financing on the property, that’s probably the biggest lead generation

sign that you can put out in front of your property, 100 percent financing. Direct them there through

Web sites and direct them there through newspaper inserts.

Here are some of the headlines that have worked for us in the past, that pulled pretty well in the

classifieds and what we’re trying to do now is get them from the classifieds, get them into the voice mail

system, get them over to the property to see it and then, see, we’re having them jump through a series

of hoops.

Before they get to talk to somebody from the office they’ve just jumped through three hoops to

get there. The best part about your voice mail system is that it captures the calls and it captures the

phone numbers in case you want to call somebody back and it allows you to deal with only the buyers

who are ready to buy now.

Back to Web sites. You want to have an easy to remember domain name. Who’s the – is the lady

in the room that took the Web site, put it online last night and got her first lead and she called the

person?


The same information that’s in the voice mail is going to be on your Web site. You can direct

them to the property directly from your Web site. Put pictures of the homes in there.

Show the payment amounts. People buy based on payment amounts. That’s really important,

too. People buy based on payment amounts more so than price, and have contact information on each

page of that Web site.

When prescreening buyers you take them through a series of hoops. The first hoop is being

onsite and the voice mail. The second hoop is the drive to the property. The third hoop is to have

handouts ready. You can have a little box on the property that has a handout, describes the property a

little bit more.

These are all the different things you’re going to want to have on that handout and the fourth

one is that they submit an application and they meet with a lender and typically the fourth one, too,

they’re talking to your buyer’s agent.

Put the buyer in the proper program, talking about financing now. Require the buyer to

complete the checklist of items that the banker wants in a determined amount of time and if they don’t

do it, kick them out ’cause they’re going to be a pain in the butt to get to – to go through the buying

process.

Assign an assistant to monitor the lending process. You absolutely need to do this. Put a star

here because this is where your money’s coming from, so the lending process needs to be monitored. If

you don’t have a system then you need to do it yourself.

Once a week, you should be checking on every single one of your deals and find out what the

status is on them from the banker.

Review the HUD before closing. You’re supposed to get it 24 hours. You don’t usually. You

usually get it the day of.

Close. You don’t have to do it at the same time as the buyer. I usually don’t. I never go to the

closings. They take too long. You know, I’d just rather go stop at the attorney’s office and then do my

signing either in the morning or after the buyer’s gone and then I’m out of there and I’ll get my check.

And Step 5, preparing the property. Who does it? The assistant. Running the ads. Who does it?

The assistant. Capture the call; voice mail. Prescreen; buyers. Monitor the lender; assistant. Sign the

checks; you. Yes?

After the deal is done, you have a checklist to make sure that all this is done: shut off the

utilities; cancel the insurance; pick up the lockboxes and signs. Review the offer calculation worksheet to

make sure that what you thought you were going to spend on this property was what you actually

spent.

Forward the profit and loss statement to your accountant. You should be putting all this on

QuickBooks and e-mail to your accountant at the end of every deal. You do that and April 15 won’t be

such a hassle anymore. We’ve been doing that for years.

Take pictures of the property for private money or seller presentations, before and afters.

Always do before and afters of your properties; gives you credibility.


And then the eleven most common mistakes that buyers make or investors make are:

Not showing the property quickly

Not staging it properly

Paying too much for the property

Getting emotionally involved

Not making enough offers to buy

Not maintaining a buyers’ list

No prescreening system

No follow-up system

Dealing with buyers that can’t buy

Not keeping the property on the market during the process

Allowing a buyer to move into a property before the closing/

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