The FTC released their final Mortgage Assistance Relief Services (MARS) ruling in December of 2010. Recently there has been much discussion about it and how it affects real estate investors. It appears that it really only affects you if you work with homeowners facing the prospect of foreclosure or you attempt to work on their behalf for a short sale, loan modification, forbearance, or any other strategy aimed at mortgage relief.

From what I can tell, the only affect seems to be that you need to include additional disclosures both in your marketing to general audiences, and more specific disclosures to the actual homeowner with whom you assist. You also can not collect upfront fees or require payment for services that have not been completed.

My advice is that you should talk with your attorney to see exactly how this ruling will affect the way you do business in your state if you are involved with any of these strategies. The actual FTC ruling can be found at:

http://www.ftc.gov/os/fedreg/2010/december/R911003mars.pdf

It seems that every time the government issues a new law or ruling there is much brouhaha in the industry with some “experts” claiming the end of investing as we know it. I see it as simple disclosures that the homeowner should understand anyway as just good business practice. So get the facts from your attorney and comply with the ruling  – that’s all.

Anyone have additional info on MARS they would like to share?

Lou Castillo

A little tough love here…

If you’re not marketing you’re never going to make money in the real estate business…probably in any business for that matter. So if you’re one of those people that isn’t marketing, this post is for YOU!

Let’s go over the common objections:

1) I don’t have enough money to market. Well then get some or do some inexpensive marketing. There are a lot of things you can do that are effective and not too costly…it’ll just require some of your time. If you really want to have and grow a business you need to put some time and money into marketing. You can also cut out some of your little daily expenses and reallocate those funds towards marketing. If funds are that tight then get a part time job (you won’t need it for long once your marketing starts working); partner with someone who has money and no time; use your credit cards; get a new credit card; borrow on the equity in your home; find someone willing to make you a personal loan.

There’s also a lot of  inexpensive yet effective marketing strategies you can implement. Like I said, they may take more of your time, but they are lower cost: Pass out fliers door-to-door in your target area; use bandit signs; work with local churches to provide a free seminar for homeowners with problem houses; work with a local pizza delivery company to pay for the printing of  their coupons that they place on top of the pizza box if you can use half the sheet for your ad.

2) I don’t have enough time. Marketing only takes a few hours a week. Certainly there are some things that you can cut out of your week to invest the time to create a better life. If no, then outsource the marketing. You create it and have someone else implement. Use Craigslist to place ads.

3) I don’t know what to put in my marketing. Read books on copy writing to get better or just start out with basic honest messages that you deliver in earnest. Here are the questions to answer: Who are you (brand name)? What is their problem that you can solve? How much does it cost (no cost; no fees; no commissions)? Why you? How can they trust you (think testimonials)? How can they reach you?

Your marketing will improve over time, but right now just get started. Don’t allow your inexperience to be an excuse because then you’ll always be inexperienced. Each step you take will boost your confidence and experience level.

I was going to say that I’m sorry if this post offended you, but that’s not true. If this post gets you irritated then maybe you’ll feel enough heat to take action.

I want you successful and marketing will get you there. Start marketing!

Expect abundance,

Lou Castillo
P.S.   Do you disagree with me? No problem. Post your comments below and let’s duke it out a little.

My mother always taught me that the road to success was through hard work. What I discovered is that there are other principles that are more important. Here is my list of the top 5 traits that successful entrepreneurs all have and follow:

1. Knowledge: You know the saying “It’s easy when you know how”? Well it is so true in business. It’s crazy to invest time or money without knowing what you’re doing. You need to learn the basics first to provide the greatest chance for success. But then, never stop. Always have a thirst for knowledge because the environment is always changing, there are new ideas, laws change, competition changes. The only way to stay ahead is to continually be in a learning mode.
2. Planning: Based on the knowledge you’ve gained about the business lay out a plan for the year and for the next few years. Most small business entrepreneurs fly by the seat of their pants without taking the time to plan and that gets them into trouble. Following a solid plan also allows you to see where improvements can be made. Without a clear plan, it’s hard to make course correction.
3. Marketing: As much as I try, I can not think of a single business that doesn’t require marketing. Even if you’re selling $5 bills for a nickel, you still need to get the word out. You can not expect to just quietly open the doors and have a rush of customers. You have to tell them about your product or service, overcome their objections, and get them excited enough to contact you. No business can grow without marketing. SO market, market, market and never stop marketing.
4. Connectivity: Stay connected with others in your business and in your community. The more connected you are with others the more new ideas you’ll pick up; the more you’ll learn about your competition; and the more you’ll be able to anticipate changes in your environment that will affect your business. You can not operate as an island disconnected from all others.
5. Focus: Zero in on your objective and become obsessed with its achievement. Resist the temptation to go in multiple directions until you have the first operating smoothly. Focus on your plan.

Obviously there are other traits to becoming a huge success, but these 5 build the foundation for a solid business.

Expect abundance,

Lou Castillo

P.S. Do you have any others that make up your top 5? Share them in a comment below.

It’s a new year and time to look at your marketing plan to see where you’re heading in 2011.

The key to long lasting and ever increasing success is in your marketing.  Not only is it necessary to start your business, but it will ensure that your profits continue to grow year after year. The question is NOT whether it will work or not, but rather whether you are committed enough to sustain your marketing plan over time?

When I worked for American Express, budget season rolled around each summer for the following year. Each division had to predict it profits for the following year, but before we could begin the process, the marketing department had to first lay out their plan for the year. You see, everyone from the CEO to the hourly employee knew that marketing was the driver of profits. Until there was a marketing plan, there were no profit plans. The same is true of your businesses whether you are just starting out or have been in business for a quarter century.

Frankly, marketing can be a bit of a pain in the (well, you know where).  You must faithfully devote yourself to  relentlessly follow your plan with  no immediate gratification. But that’s how marketing works. It’s not the singular message that attracts customers, but rather the continuous reminder about your product or service. Studies show that for a message to be effective it has to hit its intended audience five to seven times before producing any real results. By contrast, most marketers tend to give up after three to four attempts  – just shy of when they would actually start to attain results.

So start right now by making a New Year’s resolution to market, to continually market, and to never stop marketing. There is no “IF” – It definitely will work as long as you’re faithful to the process.

Lay out your plan right now based on a budget you can afford. Obviously the less dollars you have to spend the more work you may have to do personally, and the longer it may take to achieve results, but they will happen. Make sure that you are specific in your plan as to which target audience you will market; what marketing mediums you will use; and most important, when will each marketing piece be distributed? Stay true to those dates and give yourself no excuses.

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If you will lay out a plan and follow it without fail, you will soon start to see the results in your profits. From that point on, you’ll be able to predict your profits based on the amount of marketing you plan.

Happy New Year.  Make it your most prosperous ever!

Expect abundance,

Lou Castillo & Josh Brown

Well, it’s a few days before New Years and it seems like everyone and their brother is not working our is out of the office. So… instead of getting any real work done I decided to do a little learning today and found this great training video from author Seth Godin. Check it out & comment!!!

Is that the question you’re asking yourself on a regular basis? It’s what my wife and I asked everyday for 2 years when we were neophytes to real estate investing.

As I look back I realize that the problem was we wanted all of the answers up front – even though we didn’t even know all the questions. Now with over 15 years experience I realize the folly of that desire. There is no way to learn everything before you even start.

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Even if the program feeds you every morsel of information you could ever need, the problem is that you don’t have the experience to understand the context of the information. It’s useless at that point.

So what do you do? How do you get started? Here are my recommendations:

• Get an overview of many different strategies and techniques to see what best fits with your interests and skill sets. Consider more than just how much money it will make because if you hate doing it, you will never make a dime.
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• Start with a complete strategy. In other words you need a complete system from acquiring properties. If you don’t know how to complete the transaction, how will you make money. Understand that some programs are designed to add specialized knowledge on one facet of the business while others are designed to provide a full strategy.
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• Once you select the strategy that is best for you, look for the right teacher and the right product at the right price point for you. Do you learn better from a home study program where you an learn at your own pace; or from a live event where you can interact with the instructor; or do you learn best from private one-on-one instruction.
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• Pour through the material once for a broad understanding, then lay out a plan for implementation. Go back and study each step, and most importantly: TAKE ACTION. Nothing happens until you take action. How do you eat an elephant? One bite at a time. The same is true here.
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• Zero in on what is going to move your business forward. In other words – avoid busy work.
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• Realize that much of your learning and understanding is going to come from experience. You will not start with a perfect understanding of the techniques. Just like when you start a new job. You may go through extensive training, but you never feel comfortable until you start DOING the job. Training is designed to point you in the right direction and reduce the learning curve. Experience is where you learn.
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• Believe in yourself and in the strategy. You really can do it. Believe that and be persistent.
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• Treat obstacles and bumps in the road as simply part of the process and not a roadblock. For every problem there is a solution. Focus on the solution!
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• Stop looking for the next silver bullet that is going to change your life and focus on the material you already have. Dedicate yourself to making it work.

I know that getting started can be quite a daunting task. My wife and I spent the first 2 years just spinning our wheels until we got so frustrated that we just decided to make something happen. So if I had to give you just one piece of advice it would be “Make something happen.”

Expect abundance,

Lou Castillo

P.S.  Please share your thoughts and your story below. I’d love to hear from you.

With all of the media attention surrounding short sales it is no wonder that so many investors want to focus their resources on obtaining these types of leads. But is this really the best strategy for you?

I decided years ago (long before the short sale bonanza) that I had no desire to do short sales. Since I am often asked why I made that decision I thought that I’d share it here so you can make an educated decision as to whether this is a good strategy for you.

I guess I should start off  stating that I see the advantages to short sales. There are a record number of home owners who now owe more than the property is worth which is usually due to a combination of  over leveraging their property coupled with depreciating values. Attracting these home owners and convincing them that you have a solution to their financial problem is especially easy in this current market place. That’s the easy part. And when a short sale is accepted by the bank, there can be some significant profit available in the deal that otherwise would never have been possible.

I have personally heard of investors making $50,000 to $100,000 on a single short sale deal. So I certainly can not say it is a bad strategy. But here’s why I never found it to be a good strategy for me…

What you hardly ever hear is that only a small percentage of short sale offers are accepted by the lender – especially at the number that makes the deal profitable for the investor. There is a tremendous amount of paperwork to complete which all requires the homeowner’s consistent support. THey are going to have to pull together a lot of financial information. Remember, one of the conditions of a short sale is that the home owner can NOT receive any proceeds from the sale. The only motivation for the homeowner, therefore, to go through all of this effort is avoid a foreclosure. Many feel that because of all of the late payments they’ll never be able ot qualify for a loan so let the lender foreclose: “Who cares?” is the typical sentiment.

Once the paperwok is complete and submitted to the lender, the next goal is to get it noticed. The loss mitigators are so behind right now that only a small percentage of the offers can get their attention. The serious short sale investor spends a vast amount of their time just following up on their offers (often to no avail). Some investors have over time developed relationships with some of the loss mitigators at specific lenders and therefore have a better chance of having their offer reviewed, but you need to recognize that in order to achieve that status with a loss mitigaor, many offers have had to have been made first.

Let’s say that the lender does review your offer, it can take literally months of back and forth negotiation to get the deal finalized, and what I repeatedly hear in the marketplace are horror stories of lenders stringing along a deal for months and yanking it at last minute preferring to foreclose instead. And of the deals that do get accepted they are placing more and more restrictions as to how quickly the property can be re-sold by the investor.

One investor who has made over a milion dollars in short sales revealed to me that he made over 1100 offers (think about all that paperwork!) and got less than 100 accepted. He did very well on he ones that he got, but he invested a lot of time, money,an marketing into getting those few.

My thought with short sales is that I don’t like having the 3rd party (the bank) involved in the deal – and I was doing these deals when they were called “short pays” long before the short sale craze. Back then you simply called the lender, talked to a loss mitigator and made a deal or not. I still hated the bank deciding whether MY deal was going forward or not. Who really wants to deal with…

Personally, I prefer to invest in more marketing to attract more leads where I can pre-qualify the right sellers where I do not need to involve the lender. For me, I feel more in control of my business and my financial future. How about for you? Is this the right strategy?

I would certainly never advocate this being your only strategy or even your first strategy. If you are going to do short sales, I recommend that you also have other strategies for attracting leads and creating deals, and reserve the short sales as the extra “gravy” in your business when they finally do hit. It makes far more sense to first start making steady revenue with an alternative strategy like straight wholeslaing, then add short sales to your repetoire.

I also advise that you work with a legal team that handles the back end negotiations and follow-up with the lenders. Some work on a fee basis and some work on a percentage of profits. This will ensure that you stay compliant with the evolving laws about working wiht homeowners in foreclosure; and because of their long standing relationships with the various lenders, they’ll have a better chance of getting offers reviewed.

Are short sales a viable strategy? Absolutely. Just be sure that it is the right strategy for you in your current business development.

Expect abundance,

Lou Castillo

In a perfect world we could have all of the benefits of rental property like cash flow, equity accumulation; wealth building without the one big headache…tenants! Are you like me, sometimes I feel that when some people become tenants they lose all ability to think for themselves. And why is that the toilet seems to always overflow at 11 PM?

That’s why I have been looking for something to replace rental houses (because I couldn’t figure out a way to get someone to pay me rent, but not actually live in the house). I think I found the rental property for the perfect world!!

I am talking about self storage units. I recently met a guy that has focused his entire portfolio on self storage units and he told me: “The self-storage industry has been the fastest-growing sector of the United States commercial real estate industry over the last 30 years, and it continues to grow at a steady pace. Nearly one in 10 U.S. households are actively renting one or more self-storage units.”   That’s why I have been so interested. It’s an expanding market with plenty of demand already.

Even Inc. magazine recently said that self storage is one of the best industries for starting a business right now and 90% of them are owned by small business entrepreneurs. This is not one of those industries where only the big-boys get to play and make money.

The wonderful part about self storage units is that you don’t have all of the typical tenant hassles. Sure, technically your customers are “tenants”, but they don’t live on the property. There’s not much that can go wrong when you’re just renting 4 walls with a large door. If the tenant doesn’t pay, you don’t have all of the eviction issues. You simply wait the prescribed time in your state and then you sell off their stuff.

The cash flow is significant and you can pick up properties from motivated sellers just like you can with regular Single Family Houses and make even more money.

I’m going to do some more investigating, but this sure seems like the right way to go to build cash flow and equity. What are your thoughts on self storage units? Are you interested too?

You can’t blame the seller. After all, they have a personal and emotional attachment to the property, but it can be frustrating when you are trying to purchase an investment property and the seller just isn’t in touch with reality. The price is inflated. The contingencies are ridiculous. And they just won’t come to the table, let alone answer their phone! It’s supposed to be a buyer’s market, right? Yet here you are, doing an uncomfortable tango with a difficult seller. Other than turning your back on a desired property, what else can you do? Here are some suggestions for negotiating with difficult or unrealistic sellers.

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PUT ON YOUR BEST FACE

Yes, it’s a buyer’s market. And we’ll get to that in a moment. But initially, you have to engage the seller. If the seller is represented by an agent, treat the agent with respect. Try every phone number for the agent that you can get your hands on. If you can’t reach the agent, leave clear and detailed contact information for how the agent can reach you. Call daily until you reach him or her, leave one message each time, and always be pleasant and respectful. – no matter how long it takes.

If the seller is unrepresented, do the same thing, but with the seller. Don’t get pushy or demanding. Offer to meet the seller at a time and place convenient for him or her. Offer to drive to a workplace or restaurant. If you go to a restaurant, pick up the check. You’ll be asking him or her to pick up a lot more than that, so it’s a small price to pay to initiate some goodwill.

BE A GOOD LISTENER

It’s starting to sound like dating, isn’t it? And negotiating with sellers is a little that way. Start the conversation by asking a lot of questions and listen to the answers: “Tell me about your property; what are its best features? Why are you selling?” If it’s her or his primary residence, ask “Where will you be moving to?” Make note of some key points, like: (a) Value the property features that are held dearly. Build rapport this way. (b) Put together a deal that helps the seller solve her or his reasons for selling. Make price less important in the negotiations by showing the seller how working with you will help them to achieve their goals better and faster. (c) If they are moving, do some homework on their behalf. Get some information about their desired new home turf. Refer them to a trusted agent in the area who can help them find a great deal. Show them why this makes so much sense – they’ll be able to get a great price on a home in an area where they want to live.

DO YOUR HOMEWORK

Gather and study as much of the following as you can: (a) comparable property sales in the area from the last 3-6 months, (b) inspection report, (c) appraisal, (d) survey, (e) seller’s disclosures, (f) area market values and trends for this property type, and any other information that may be pertinent to negotiating price, contingencies, and other contract details. When building contingencies into the contract consider contract stipulations that respond to the seller’s needs – from when you were listening earlier – to show that you are constructing a deal in their best interest. When you meet with the seller or the agent, point out this language in the contract, and bring all the supporting evidence for your contract decisions, including price. Let the documents and contract language do the talking. Don’t get defensive, combative, or pushy. It’s now time for the seller to get realistic and not emotional. Your negative emotions will sabotage the process and prevent that from happening. So, make your best case and leave it in their hands. If you don’t hear from them and the response timeframe is drawing to an end, place phone calls as you did above and try to discover what the sticky points may be, or if they just need more time.

While it’s a buyer’s market out there, sellers are human, too. They love their properties, and have many warm memories attached to them. They are frightened of declining values and wary of low-balling hucksters. You’re in the driver’s seat, so be relaxed, friendly, patient, and understanding. With a gentle approach, considerate negotiations, and honest realism, sellers will eventually come your way rather than heading for the door.