Addicted to Real Estate – Why I Can’t Stop and Why You Should Start

The All-Money-Down Technique

So how does the all-money-down technique work by purchasing a home with cash? First of all, let me repeat that I really didn’t have any cash, but I had a significant amount of equity from Terry’s home and several homes that I owned put together to give me a substantial cash down payment. Banks and mortgage companies alike will accept money from a home-equity line of credit as cash to purchase a home. At least they did in 1997 under the financial guidelines of the day. What you must remember about mortgages and lending is that the guidelines change constantly, so this technique I used in 1997 may or may not be able to be used in the future. Whether it is or isn’t able to be used again doesn’t really matter to me as I believe that there will always be a way to buy real estate with limited money down sooner or later. There will always be a technique to acquire real estate but exactly how that will be done in the future I’m not completely sure.

I began purchasing homes in the Mayfair section of Philadelphia with the prices in the $30,000 to $40,000 per home price range. I would purchase a home with three bedrooms and one bathroom on the second floor with a kitchen, dining room, and living room on the first floor and a basement. What we call a row home in Philadelphia would consist of a porch out front and a backyard the width of the home. Most row homes in Philadelphia are less than twenty-two feet wide. For those of you who are not from Philadelphia and can’t picture what a Philadelphia row home looks like, I suggest you watch the movie Rocky. Twenty-two homes on each side of every block will really test your ability to be a neighbor. Things that will usually cause an argument with your Philadelphia neighbors often stem from parking, noise your children make, where you leave your trash cans, parties, and the appearance of your home.

In 1998 my girlfriend and I moved in together and to the suburbs of Philadelphia called Warminster. After living on a street in Tacony, much like Rocky did, I really looked forward to having space between my home and my next-door neighbor. I told Terry not to even think about talking with the people who lived next door to us. I told her if one of them comes over with a fruitcake I am going to take it and punt it like a football right into their backyard. I believe I was suffering from Philadelphia row home syndrome. My new neighbors in Warminster turned out to be wonderful people, but it took me eighteen months before I was willing to learn that.

So you just bought your row home for $35,000 in Mayfair, and after $2000 in closing costs and $5000 in repair costs, you find yourself a good tenant who wants to rent the home. After renting the home with a positive cash flow of $200 a month, you now have an outstanding debt of $42,000 on your home equity line of credit that will have to be paid off. When purchasing the home, I did not get a mortgage as I just purchased a home for cash as it is said in the business. All monies I spent on this house were spent from the home-equity line of credit.

The move now is to pay off your home-equity line of credit so you can go do it again. We now go to a bank with your fixed-up property and tell the mortgage department that you want to do a cash-out refinancing of your real estate investment. It helps to explain that the neighborhood you purchase your property in should have a wider range of pricing as the neighborhood of Mayfair did in the mid-90s. The pricing of homes in Mayfair is quite unusual as you would see a $3000 difference in home values from one block to the next. This was important when doing a cash-out refinancing because it’s pretty easy for the bank to see that I just bought my property for $35,000 regardless of the fact that I did many repairs. I could justify the fact that I’ve spent more money on my home to fix it up, and by putting a tenant in, it was now a profitable piece of real estate from an investment standpoint.

If I was lucky like I was many times over doing this system of purchasing homes in Mayfair and the appraiser would use homes a block or two away and come back with an appraisal of $45,000. Back then there were programs allowing an investor to purchase a home for 10 percent down or left in as equity doing a 90 percent cash out refinance giving me back roughly $40,500. Utilizing this technique allowed me to get back most of the money I put down on the property. I basically paid just $1,500 down for this new home. Why did the mortgage companies and the appraisers keep giving me the numbers I wanted? I assume because they wanted the business. I would only tell the bank I need this to come in at $45,000 or I am just keeping it financed as is. They always seemed to give me what I wanted within reason.

This whole process took three to four months during which time I may have saved a few thousand dollars. Between the money I saved from my job and my investments and cash out refinancing, I had replenished most or all of my funds from my home-equity line of credit that was now almost back to zero to begin the process again. And that is exactly what I intended to do. I used this system to purchase four to six homes a year utilizing the same money to purchase home after home after home over and over again. In reality, the technique is a no-money down or little money down technique. At the time maybe I had $60,000 in available funds to use to buy homes off of my HELOC, so I would buy a home and then replenish the money. It was a terrific technique that was legal, and I could see my dream of being a real estate investor full-time coming to an eventual reality even though I wasn’t there yet.

During the years from 1995 to 2002, the real estate market in Philadelphia made gradual increases of maybe 6 percent as each year went on. I began to track my net worth that was 100 percent equity, meaning I had no other forms of investments to look at when calculating my net worth. Generally speaking, the first five years of my real estate career did not go well because of the bad decisions I made purchasing buildings and the decline in the market. Furthermore, my lack of knowledge and experience in repairs made it a rough. The second five years of my real estate career that I just finished explaining didn’t make much money either. I supported myself primarily through my career as a salesman, but I could definitely see the writing on the wall that down the road real estate was going to be my full-time gig.

Realty Professionals of America

I own an office building that has a real estate company as a tenant called Realty Professionals of America. The company has a terrific plan where a new agent receives 75 percent of the commission and the broker gets only 25 percent. If you don’t know it, this is a pretty good deal, especially for a new real estate agent. The company also offers a 5 percent sponsorship fee to the agent who sponsors them on every deal they do. If you bring an individual who is a realtor in to the company that you have sponsored, the broker will pay you a 5 percent sponsorship out of the broker’s end so that the new realtor you sponsored can still earn 75 percent commissions. In addition to the above, Realty Professionals of America offers to increase the realtor’s commission by 5 percent after achieving cumulative commission benchmarks, up to a maximum of 90 percent. Once a commission benchmark is reached, an agent’s commission rate is only decreased if commissions in the following year do not reach a lower baseline amount. I currently keep 85 percent of all my deals’ commissions; plus I receive sponsorship checks of 5 percent from the commissions that the agents I sponsored earn. If you’d like to learn more about being sponsored into Realty Professionals of America’s wonderful plan, please call me directly at 267-988-2000.

Getting My Real Estate License

One of the things that I did in the summer of 2005 after leaving my full-time job was to make plans to get my real estate license. Getting my real estate license was something I always wanted to do but never seemed to have the time to do it. I’m sure you’ve heard that excuse a thousand times. People always say that they’re going to do something soon as they find the time to do it, but they never seem to find the time, do they? I try not to let myself make excuses for anything. So I’ve made up my mind before I ever left my full-time job that one of the first things I would do was to get my real estate license. I enrolled in a school called the American Real Estate Institute for a two-week full-time program to obtain my license to sell real estate in the state of Pennsylvania. Two terrific guys with a world of experience taught the class, and I enjoyed the time I spent there. Immediately after completing the course at the American Real Estate Institute, I booked the next available day offered by the state to take the state exam. My teachers’ advice to take the exam immediately after the class turned out to be an excellent suggestion. I passed the exam with flying colors and have used my license many times since to buy real estate and reduce the expenses. If you are going to be a full-time real estate investor or a commercial real estate investor, then you almost have to get a license. While I know a few people who don’t believe this, I’m convinced it’s the only way.

I worked on one deal at $3 million where the commission to the buyer’s real estate agent was $75,000. By the time my broker took a share, I walked with $63,000 commission on that deal alone. With the average cost per year of being a realtor running about $1200 per year, this one deal alone would’ve paid for my real estate license for fifty-three years. Not to mention all the other fringe benefits like having access to the multiple listing service offered too many realtors in this country. While there are other ways to get access to the multiple listing services or another program similar to it, a real estate license is a great way to go.

Some of the negatives I hear over and over again about having your real estate license is the fact that you have to disclose that you are realtor when buying a home if you’re representing yourself. Maybe I’m missing something, but I don’t see this as a negative at all. If you’re skilled in the art of negotiation, it’s just another hurdle that you have to deal with. I suppose you could end up in a lawsuit where a court of law could assume because you are realtor you should know all these things. I don’t spend my life worrying about the million ways I can be sued any more than I worry about getting hit by a car every time I cross the street.

The Addict
From his first investment property over 20 years ago to his relentless search for the next great deal every day, Falcone is a non-stop real estate investment machine!

Get Addicted
Sometimes addiction is a very good thing. In this book Phil Falcone, the ultimate real estate addict, will show you how to achieve amazing success as a real estate investor:

• Delve into the details of actual deals he negotiated and learn why his methods were so effective
• Discover why his residential to commercial real estate strategy will create ultimate wealth
• Learn how he used apparent liabilities (OCD, insomnia, and workaholic behavior) to help him achieve his goals
• Explore why he can’t stop investing in real estate, and how you can start controlling your own financial destiny through real estate

Frank, funny and informative, Addicted to Real Estate will inspire any investor to achieve higher levels of drive and success in the rewarding world of real estate.

Phil Falcone is a Philadelphia area full-time real estate investor who started in the business at the age of 23, and whose portfolio today includes commercial offices, apartment buildings, and residential homes. As the owner of Falcone Real Estate Holding Corporation, he prides himself on his non-stop real estate focus and determination, his ability to be a gre

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Real Estate Agents and the Internet – How to Buy and Sell Real Estate Today

Then and Now

Ten years ago, a search for real estate would have started in the office of a local real estate agent or by just driving around town. At the agent’s office, you would spend an afternoon flipping through pages of active property listings from the local Multiple Listing Service (MLS). After choosing properties of interest, you would spend many weeks touring each property until you found the right one. Finding market data to enable you to assess the asking price would take more time and a lot more driving, and you still might not be able to find all of the information you needed to get really comfortable with a fair market value.

Today, most property searches start on the Internet. A quick keyword search on Google by location will likely get you thousands of results. If you spot a property of interest on a real estate web site, you can typically view photos online and maybe even take a virtual tour. You can then check other Web sites, such as the local county assessor, to get an idea of the property’s value, see what the current owner paid for the property, check the real estate taxes, get census data, school information, and even check out what shops are within walking distance-all without leaving your house!

While the resources on the Internet are convenient and helpful, using them properly can be a challenge because of the volume of information and the difficulty in verifying its accuracy. At the time of writing, a search of “Denver real estate” returned 2,670,000 Web sites. Even a neighborhood specific search for real estate can easily return thousands of Web sites. With so many resources online how does an investor effectively use them without getting bogged down or winding up with incomplete or bad information? Believe it or not, understanding how the business of real estate works offline makes it easier to understand online real estate information and strategies.

The Business of Real Estate

Real estate is typically bought and sold either through a licensed real estate agent or directly by the owner. The vast majority is bought and sold through real estate brokers. (We use “agent” and “broker” to refer to the same professional.) This is due to their real estate knowledge and experience and, at least historically, their exclusive access to a database of active properties for sale. Access to this database of property listings provided the most efficient way to search for properties.

The MLS (and CIE)

The database of residential, land, and smaller income producing properties (including some commercial properties) is commonly referred to as a multiple listing service (MLS). In most cases, only properties listed by member real estate agents can be added to an MLS. The primary purpose of an MLS is to enable the member real estate agents to make offers of compensation to other member agents if they find a buyer for a property.

This purposes did not include enabling the direct publishing of the MLS information to the public; times change. Today, most MLS information is directly accessible to the public over the Internet in many different forms.

Commercial property listings are also displayed online but aggregated commercial property information is more elusive. Larger MLSs often operate a commercial information exchange (CIE). A CIE is similar to an MLS but the agents adding the listings to the database are not required to offer any specific type of compensation to the other members. Compensation is negotiated outside the CIE.

In most cases, for-sale-by-owner properties cannot be directly added to an MLS and CIE, which are typically maintained by REALTOR associations. The lack of a managed centralized database can make these properties more difficult to locate. Traditionally, these properties are found by driving around or looking for ads in the local newspaper’s real estate listings. A more efficient way to locate for-sale-by-owner properties is to search for a for-sale-by-owner Web site in the geographic area.

What is a REALTOR? Sometimes the terms real estate agent and REALTOR are used interchangeably; however, they are not the same. A REALTOR is a licensed real estate agent who is also a member of the NATIONAL ASSOCIATION OF REALTORS. REALTORS are required to comply with a strict code of ethics and conduct.

MLS and CIE property listing information was historically only available in hard copy, and as we mentioned, only directly available to real estate agents members of an MLS or CIE. About ten years ago, this valuable property information started to trickle out to the Internet. This trickle is now a flood!

One reason is that most of the 1 million or so REALTORS have Web sites, and most of those Web sites have varying amounts of the local MLS or CIE property information displayed on them. Another reason is that there are many non-real estate agent Web sites that also offer real estate information, including, for-sale-by-owner sites, foreclosure sites, regional and international listing sites, County assessor sites, and valuation and market information sites. The flood of real estate information to the Internet definitely makes the information more accessible but also more confusing and subject to misunderstanding and misuse.

Real Estate Agents

Despite the flood of real estate information on the Internet, most properties are still sold directly through real estate agents listing properties in the local MLS or CIE. However, those property listings do not stay local anymore. By its nature, the Internet is a global marketplace and local MLS and CIE listings are normally disseminated for display on many different Web sites. For example, many go to the NATIONAL ASSOCIATION OF REALTORS Web site, http://www.realtor.com, and to the local real estate agent’s Web site. In addition, the listing may be displayed on the Web site of a local newspaper. In essence, the Internet is just another form of marketing offered by today’s real estate agent, but it has a much broader reach than the old print advertising.

In addition to Internet marketing, listing agents may also help the seller establish a price, hold open houses, keep the seller informed of interested buyers and offers, negotiate the contract and help with closing. When an agent provides all of these services it is referred to as being a full service listing arrangement. While full service listing arrangements are the most common type of listing arrangement, they are not the only option anymore.

Changes in the technology behind the real estate business have caused many agents to change the way they do business. In large part, this is due to the instant access most consumers now have to property listings and other real estate information. In addition, the Internet and other technologies have automated much of the marketing and initial searching process for real estate. For example, consumers can view properties online and make inquires via email. Brokers can use automated programs to send listings to consumers that match their property criteria. So, some agents now limit the services they offer and change their fees accordingly. An agent may offer to advertise the property in the MLS but only provide limited additional services. In the future, some real estate agents may offer services in more of an ala carte fashion.

Because of the volume of real estate information on the Internet, when people hire a real estate agent today they should look at the particular services offered by the agent and the depth of their experience and knowledge in the relevant property sector. It is no longer just about access to property listing information. Buyers and sellers historically found agents by referrals from friends and family. The Internet now provides ways to directly find qualified agents or to research the biography of an agent referred to you offline. One such site, AgentWorld.com, is quickly becoming the LinkedIn or Facebook for real estate agents. On this site an agent can personalize their profile, start a blog, post photos and videos and even create a link to their web site for free. Once unique content is added to their profile page the search engines notice!

Some have argued that the Internet makes REALTORS and the MLS less relevant. We believe this will be false in the long run. It may change the role of the agent but will make knowledgeable, qualified, and professional REALTORS more relevant than ever. In fact, the number of real estate agents has risen significantly in recent years. No wonder, the Internet has made local real estate a global business. Besides, Internet or not, the simple fact remains that the purchase of real property is the largest single purchase most people make in their life (or, for many investors, the largest multiple purchases over a lifetime) and they want expert help. As for the MLS, it remains the most reliable source of real estate listing and sold information available and continues to enable efficient marketing of properties. So, what is the function of all the online real estate information?

Online real estate information is a great research tool for buyers and sellers and a marketing tool for sellers. When used properly, buyers can save time by quickly researching properties and, ultimately, make better investment decisions. Sellers can efficiently research the market and make informed decisions about hiring an agent and marketing their properties online. The next step is to know where to look online for some of the best resources.
Internet Strategies

In the sections that follow, we provide strategies and tips on how to use the Internet to locate properties for sale and research information relevant to your decision to purchase the property. There are many real estate Web sites from which to choose and although we do not mean to endorse any particular Web site, we have found the ones listed here to be good resources in most cases or to be so popular that they need mention. One way to test a Web site’s accuracy is to search for information about a property you already own.

Finding Real Estate for Sale

Despite the widely available access to real estate listings, many believe that MLS databases continue to offer the most complete and accurate source of real estate information. Most MLSs now distribute content to other Web sites (primarily operated by real estate agents). An excellent starting point for MLS originated content is the national NAR Web site, realtor.com, which is also the most popular web site for searching real estate listings. Virtually all local and regional MLSs have an agreement with realtor.com to display much of their active listing inventory.

Some local and regional MLS systems also have a publicly accessible Web site. However, to get complete information you will most likely still need to find a qualified local REALTOR. Many local real estate agents will also provide their customers (via email) new listings that are input into the MLS that match their predefined criteria. This can be very helpful to a busy buyer.

There are also many Web sites that display both real estate agent listed and for-sale-by-owner properties. Some of the more popular Web sites include zillow.com and trulia.com. These sites offer other services too. For example, zillow.com is best known for its instantaneous property valuation function and trulia.com for providing historical information. Another source of properties for sale is the state, regional, and local Web sites associated with brokerage companies; for example, remax.com or prudential.com. Search engines like yahoo.com and classified advertising sites like craigslist.com also have a large number of active real estate listings.

One key difference between these sites is how much information you can access anonymously. For example, at trulia.com you can shop anonymously up to a point but then you will need to click through to the agent’s Web site for more information. Many new real estate search engines allow you to sift through listings without having to fill out a form. The best strategy is to browse a few of the sites listed above to find geographic areas or price ranges that are interesting. Once you get serious about a property, then that is the time to find a qualified REALTOR of your choice to conduct a complete search in the local MLS.

It also never hurts to search the old-fashioned way by driving through the neighborhoods that interest you. There is no substitute for physically, not virtually, walking the block when you are making a serious investment decision. In this sense, real estate is still a very local business and standing in front of the property can lead to a much different decision than viewing a Web page printout.

Valuing Real Estate

As we mentioned, one of the most popular real estate tools is zillow.com’s instant property valuation. Just type in an address and in and you get a property value. It even charts the price ups and downs, and shows the last date sold (including price) and the property taxes. There are other sites that provide similar tools such as housevalues.com and homegain.com. Unfortunately, many people use these estimated values alone to justify sales prices, offers and counteroffers. However, these are only rough estimates based on a formula that incorporates the local county sales information. These estimates can swing wildly over a short period of time and do not appear to always track actual market changes, which are normally more gradual. In addition, these estimates do not automatically take into account property remodels or renovations or other property specific or local changes. This is not to say these sites are not useful. In fact, they are great starting points and can provide a good ball-park value in many cases.

When it comes to getting a more accurate value for a particular property, there are other strategies that are more trustworthy. One is to go directly to your county’s Web site. More often than not the county assessor’s area of the Web site provides sales and tax information for all properties in the county. If you want to research a particular property or compare sales prices of comparable properties, the local assessor’s sites are really helpful. When you visit a county’s Web site you are getting information straight from the source. Most counties today publish property information on their Web sites. Many times you cannot only see the price a previous owner paid, but the assessed value, property taxes, and maps. Some county assessors are now adding a market and property valuation tools too.

Given the importance of valuation to investing, we are also going to remind you of the two most important (non-Internet) valuation methods: real estate agents and appraisers. Working with a local REALTOR is an accurate and efficient way to get value information for a property. While one of the primary purposes of the MLS is to market the active property listings of its members, the system also collects sales information for those listings. REALTOR members can pull this sales information and produce comparable market analyses (sometimes called CMAs) that provide an excellent snapshot of a particular property’s value for the market in a particular area.

Finally, the most accurate way to value a property is by having a certified appraiser produce an appraisal. An appraiser will typically review both the sold information in the MLS system as well as county information and then analyze the information to produce a valuation for the property based on one or more approved methods of valuation. These methods of valuation can include a comparison of similar properties adjusted for differences between the properties, determine the cost to replace the property, or, with an income producing property, determine a value based on the income generated from the property.

The Neighborhood

There are many ways the Internet can help you get the scoop on a particular neighborhood. For example, census data can be found at census.gov. You can also check out the neighborhood scoop at sites like outside.in or review local blogs. A blog is a Web site where people discuss topics by posting and responding to messages. Start by looking at placeblogger.com and kcnn.org/citymediasites.com for a directory of blogs. Trulia.com has a “Heat Map” that shows how hot or cold each neighborhood is based on prices, sales, or popularity among the sites users.

Schools

When it comes to selling residential property or rental properties that cater to families, the quality of the area school district makes a huge difference. There are many Web sites devoted to school information. Check out greatschools.net or schoolmatters.com. Most local school districts also have their own Web site. These sites contain a variety of information about the public schools and the school district, including its district demographics, test scores, and parent reviews.

Finding the Right Real Estate Agent

A recent addition to the Internet boom in real estate information is Web sites that let real estate agents market their expertise and local knowledge by displaying their professional profiles and socially networking with blogs. You can search to find an agent with a particular expertise, geographic area of specialization, or an agent offering specific services. The web site AgentWorld.com lets users quickly and easily find an agent with the right expertise using keyword searches and clean and simple agent profiles. AgentWorld.com also enables agents to post personalized blogs, photos and videos to help consumers find the best agent for their needs. Plus, many agent profiles include a direct link to the agent’s web site where you will likely find the local MLS listings.

Maps and Other Tools

The Internet has made mapping and locating properties much easier. To get an aerial view or satellite image of a property or neighborhood, go to maps.live.com or maps.google.com or visit walkscore.com to see how walk-able a particular property is. These sites can give you an idea of the neighborhood characteristics and the types of entertainment, restaurants, and other facilities that are within walking distance of the property. Maps.Live.com provides a view at an angle so you can see the sides of houses and Maps.Google even gives you a 360 degree street-level view for certain neighborhoods. If you have not tried one of these satellite map Web sites, you really should if only for amusement.

Final Thoughts on Internet Strategies

The Internet is a very effective research and marketing tool for real estate investors but is not a replacement for a knowledgeable experienced real estate professional. The Internet can save you time and money by enabling quick and easy property research and marketing options. Sites like AgentWorld.com also help you efficiently find a REALTOR who fits your buying or selling needs.

Always remember, when it comes to Internet strategies for real e

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