Bill Cook Articles -

Kim & Bill Cook

I met Kim and Bill Cook at an Investor Club Meeting held at Big Bob's in Knoxville in the Spring of 2007. Kim was giving a presentation on Short Sales. I was impressed enough that I bought their Course 'Big Profits in Short Sales' that night. I attended a Saturday Presentation in Cartersville, Ga. that was included with the course back in July of 2007. I enjoyed the Saturday Session, it was very easy to follow, and both Kim and Bill come across as real and genuine people as well as full time Real Estate Investors. I was impressed with what I had received and couldn't wait to get back home and put those new tools right to work.

That was my introduction to Bill and Kim Cook. Bill writes articles of interest on a regular basis, knowing this, I asked Bill if he would like to share these insights with KnoxREI.com. He graciously said yes, so I hope you enjoy these recent articles written by Bill Cook.

2-24-2008

Captain Obvious: Learn How to Say, “Next!”

One of my favorite real estate investing teachers is Ray “Captain Obvious” Alcorn. He’s one of the smartest and most experienced investors in America. He can look at a deal, bang it through his calculator and, seconds later, tell you whether it’s a deal worth doing or not.

Ray has a great saying: “To be a successful real estate investor, you gotta learn how to say, ‘Next!’” In other words, it’s your job to try to make every deal work, but when it’s not a deal worth doing – and most aren’t – you need to move on to the next deal.

This sounds like “duh”advice, but it’s surprising how easily an investor can get caught up in a bad deal and then do the deal just to do a deal. This mistake probably puts more investors out of business than any other.

Thankfully, last week, while I was trying to make a deal work, I remembered Ray’s money-saving lesson.

The deal began with a call from a lady who had a house in Habersham Estates in Cartersville, Georgia. She needed to sell immediately. She was agreeable to any deal structure I set up – as long as she got the mortgage payments off her back!

Here are the numbers: The house had three bedrooms and two baths. It was in good shape – it just needed a shave and a haircut (paint and carpet). She owed about $107,000. She had a 5.8% fixed-rate mortgage with payments of $840 per month (payments included taxes and insurance).

At first, I thought a Subject-To deal was the best way to go.

A Subject-To deal is when you buy a seller’s property subject to the seller’s mortgage. In other words, at closing, the seller’s mortgage IS NOT paid off. Instead, you agree to make the seller’s mortgage payment on the seller’s mortgage for the seller. (NOTE: Don’t confuse a Subject-To deal with a loan assumption – they are completely different deal-structuring techniques.)

I just knew that I could make this deal work. However, Kim, my wife, and Terrah Whitlock, our office manager, were a whole lot less than sure. Why did they doubt my incredible deal-structuring abilities? First, they know me to be a dunderhead. Second, the numbers flat didn’t work.

You see, while I could buy the house for payoff - $107,000 – the average house in that subdivision only sold for about $103,000. Also, while I could take over payments of $840 a month, average rents in that neighborhood were only about $725 a month.

It was immediately apparent to Kim and Terrah – and to the dunderhead several hours later – that this was a deal where we needed to say, “Next!”

Be sure to learn from my near mistake by doing two things: First, listen to women because they’re smarter than men. Second, remember Ray Alcorn’s wise advice!

Bill and Kim Cook live in Adairsville, Georgia and have been successfully investing in real estate for more than thirteen years. To learn more about Bill and Kim, please go to www.BartowRealEstate.com

2-17-2008

Which is the Better Investment: Rental Homes or a Mercedes Benz?

I’m in the market to buy a used Toyota 4 Runner. However, before I can buy it, I first need to sell my 1998 Mercedes Benz S 500. Actually, it’s not my car; it’s my mother’s. After buying a new car, she asked me to sell the Benz.

For the record, I drive a God-fearing 1998 Dodge dually 4x4 pickup with a mighty Cummins diesel engine – ARRRR! (Actually, the truck belongs to Kim – I’m not kidding! She lets me drive it if I ask nicely! Anyone have some manhood for sale?)

What does this have to do with rental homes? Hang on, I’m getting there.

Here’s the problem: My stepdad bought this Benz new in 1997. He paid $91,000. Last year, I priced the car at $12,900. There were no takers. I dropped the price to $10,900. Still, no takers. It’s now down to $7,900 and it has yet to sell.

Think about it: New, this Benz cost $91,000. Eleven years later, it’s worth less than $7,900. This proves one thing: Anyone who tells you that a car is an “investment” is out of his mind. Investments are supposed to go UP in value!

In 1997, about the same time my stepdad was buying his shiny new thing that honked, Kim and I bought a three-bedroom rental home in Canton, Georgia that needed some work. The property appraised for $65,000. Our purchase price was $42,000.

After doing a $5,000 rehab to the property, we rented it to a tenant. We received $600 each month in rent. Our monthly payments were about $370. This gave us a positive monthly cash flow of $230.

Fast forward to today: My stepdad’s car is worth less than $7,900. This means he LOST $83,000 on his “deal.”

On the other hand, the rental home we bought for $42,000 recently appraised for $117,000! This means that during the same period of time, our net worth increased by $75,000!

But the gain doesn’t stop there. We earned another $36,000 from rental income. And let’s not forget about the tax advantages that owning rental property brings: a mortgage interest deduction, deductions for repairs and improvements to the property, plus we depreciated the property even though it went up in value!

All told, from this one investment property, because we sacrificed and bought it instead of something that was shiny and honked, we’ve earned more than $100,000 – so far!

Will owning rental property help you to become wealthy? You be the judge.

Look folks, I’m not real bright. In fact, the only time “bright” and my name are mentioned in the same sentence is when someone is talking about the reflection coming off my bald head! Truthfully, if we can make it, so can you. You just gotta wanna badly enough!

Bill and Kim Cook live in Adairsville, Georgia and have been successfully investing in real estate for more than thirteen years. To learn more about Bill and Kim, please go to www.BartowRealEstate.com

2-10-2008

Landlords: Working With a Tenant’s Security Deposit

Since 1998, I’ve been teaching real estate investors better ways to manage their rental properties. It’s surprising the number of people who own rental property but have never taken a single landlording course. Fact is, landlording is a learned thing; no one is a “born” landlord.

For the record, I’ve managed rental property for more than thirteen years, have attended more than twenty landlording seminars and have read hundreds of landlording books and articles. Still, when it comes to working with tenants, about every day, I learn something new.

One of the most important things a landlord needs to know – backwards and forwards – is your state’s landlord-tenant laws.

Please remember that Georgia Code (i.e. Georgia law) IS NOT a bunch of suggestions. If you mistakenly think that it is, then a Magistrate Judge will only be too happy to correct your misconception. And brother, because “I didn’t know I couldn’t do that, your honor,” is such a poor legal defense, it will cost you plenty!

To find the Georgia Code section that concerns landlord and tenant laws, go to www.lexis-nexis.com/hottopics/gacode, click “OK”, then go to Title 44 (Property), then to Chapter 7 (landlord and tenant). Chapter 7 concerns Georgia’s landlord and tenant laws.

Please know that I’m not an attorney, nor did I play one on TV. If you aren’t sure what a particular law means, then it’s time to meet with your real estate attorney. Again, if you end up in court, ignorance won’t work as a defense. As a landlord, because you are supposed to know what you are doing had have an understanding of the law, you are usually held to a higher standard than a tenant.

Let’s look at one of the most important things a landlord needs to know: How to work with a tenant’s security deposit. (NOTE: Read Georgia Code Section 44-7-30 through 44-7-37.)

First, it’s important to remember that a tenant’s security deposit is not the landlord’s money. It is the tenant’s money being held by the landlord on the tenant’s behalf. When a tenant in good standing moves from a property and leaves the property the way it was found – except for normal wear and tear – the landlord must return the tenant’s full security deposit.

If, during the final property inspection, damage to the property is found, only the cost of the repair can be deducted from the tenant’s security deposit.

If you are an investor who owns more than ten rental properties, or if your properties are held in an entity (land trust, LLC or corporation), or if you use a management company to manage your properties, the security deposit rules are much more strict! The penalty for doing things wrong is HUGE!

Hope this helps you to be a better, more successful landlord!

2-3-2008

WWPD – What Would Pete Do?

Don’t you just love being hit between the eyes by a gee whillikers? I do, too, and that’s just what happened to me the other day.

Since most of our real estate investing deals are done within five miles of the Cartersville Wal-Mart, we’ve decided to sell our office building in Adairsville and buy a strip shopping center in Cartersville. This move will save us lots of traveling time. (REMEMBER: Business is done face-to-face with a seller, not behind the wheel of a car!)

Because it’s unwise to make double mortgage payments, I won’t buy a shopping center until the Adairsville office building sells. And because I won’t settle for just any old center, after our building sells, it may take months to find the right place to buy.

In the meantime, where do we relocate our office?

If you are a guy, the answer is obvious! We’ll move the office back into our house. After all, we ran our investing business out of our house for ten years. As a bonus, we’ll save a fortune in rent!

Women, bet you can guess what Kim and Terrah Whitlock – our Chief Financial Officer – thought about my brilliant idea. Both gave me a you’ve-lost-your-cotton-pickin’-mind look.

One day, while sitting in traffic pondering our office relocation dilemma – and realizing that women are always right, I saw a bumper sticker on a car that read: WWJD? (What Would Jesus Do?) It made me smile. That’s when I was hit by the gee whillikers: WWPD? (What Would Pete Do?)

Pete Fortunato (PeterFortunato.com) is one of the best and most creative deal structurers on the planet. There’s no way Pete would pay rent money (or “extortion” as Pete would probably call it) to a landlord. So I asked myself: What would Pete do?

Suddenly, a flood of creative deal-structuring techniques filled my head. I pulled over, grabbed a pen and began writing. Here are two of the eleven structures I came up with.

Structure 1: Find a small office building that’s not what I want, but is something that I’d consider keeping as rental property. Lease-option the property with the agreement that 100% of each month’s rent payment be applied toward the purchase price when I exercise my option to purchase the property. In addition, I’d ask for graduated rent payments: $500 for the first six months, $700 for the second six months, etc.

Structure 2: Find the perfect shopping center, negotiate the price, terms and conditions but, instead of immediately closing on the property, buy a one or two-year option on the property with 100% of my option fee to be applied toward the purchase price.

Thanks to Pete, I’ve learned that there are an endless number of ways a deal can be structured and that deal structuring is a learned thing.

1-27-2008

Learning About Real Estate Investing

“Where do I go to learn about real estate investing?” is a question that we’re asked several times each week. Many people think that there is some secret ten-page, easy-to-read book which outlines everything there is to know about real estate investing.

Sorry, folks – there is no such secret book. Want to guess how I know?

After thirteen years of investing in real estate, I have a good idea about where to go if you want to learn about real estate investing. It’s not a place; rather, it’s a number of places.

The best way to learn about real estate investing is to get together with other like-minded people on a regular basis.

For example: Kim and I want to buy a trailer park in Bartow County. Even though we have a lot of experience with buying and managing single-family rental homes, a trailer park is a horse of a different color. When it comes to trailer parks, Kim and I are nothing more than don’t-know-what-we’re-doing rookies.

To learn about trailer parks, last year I joined a small group of experienced trailer park owners – they have a secret handshake and everything. They call themselves “The Trailer Park Kings.” The membership roster is more secretive than Osama bin Laden’s hideout – David “The Real Deal” Protiva, Mark “The Captain” Titshaw and Chuck “Pretty Boy” Meek. Well, so much for the secretive part!

David, Mark and Chuck know a thousand times more about trailer parks than I do. They are “been there and done that” sort of guys. The only reason they let me join their group was as a favor to Kim – no one can say no to the Redhead!

Once a month, the Trailer Park Kings get together – usually on Mark’s mega-yacht that’s docked on Lake Lanier. We spend five or six hours discussing the best ways to buy and manage trailer parks. There is no book, three-day seminar or mentoring program that comes close to equaling the education I’m getting at these monthly meetings.

The second best way to learn about real estate investing is to join your local real estate investors association (REIA). A REIA is an organization of investors that promotes education and networking. If you want to meet with the other real estate investors in your area, you should attend your local REIA meetings.

In 2002, Kim and I started North Georgia REIA (www.REIoutpost.com). It quickly grew into the second largest REIA in Georgia. Finally, in 2007, because of the time it took to manage, we had to turn out the lights on our group.

However, a number of other REIAs have taken its place, including North Metro REIA (NorthMetroREIA.com), WeBuyGa REIA, the Rome REIA and the Dalton REIA. For a compete listing of REIAs in your area, go to www.NationalREIA.com and click on “Find a REIA”.

Hope this helps you to become a successful investor!

1-20-2008

Record Number of Foreclosures in Bartow!

Early this past Thursday morning, the day the February 2008 foreclosures were first published in Bartow County’s Daily Tribune, I got a call from Buddy Corbin with The Progressive Group. Buddy is a seasoned broker who represents a number of local real estate investors. He said, “I count 109 foreclosures in this morning’s newspaper; looks like we have another new record.”

I had a flashback to 1999. Kim and I had just moved our real estate investing business from Cherokee County to Bartow County. Back then, the only people at the monthly foreclosure auction were Buddy, Kim, me and maybe one or two other investors. In the paper, there were about 18 homes in foreclosure each month. It was a kinder, gentler time.

“Yeah,” I said, “it sure smashes the old record of 91 foreclosures we set last fall.”

“Do you remember when it was just you and me and 18 foreclosures each month?” Buddy asked. “Gosh, Buddy, that sure seems like a long time ago.” I answered.

I have never looked forward to the mornings when the monthly foreclosures are first published. When I see all the people in foreclosure, I can only wonder what caused them to fall into financial ruin. I’m reminded of something my mother taught me: Sometimes bad things happen to good people.

For example: Yesterday, I got a call from a terrific girl who is facing foreclosure. She has four kids. Because she is in nursing school with only one semester left, she doesn’t have a job. Recently, her husband – who had been paying the bills – ran off with his girlfriend. Now she (the nursing student) has no money, no family and nowhere to turn.

That’s a difficult situation for anyone to be in.

When someone is facing foreclosure, I believe answering all of his/her questions is one of the most important jobs a real estate investor has.

Think about it: Other than a knowledgeable real estate investor, is there anyone else who can answer a homeowner’s foreclosure questions? Most realtors, mortgage brokers and attorneys can’t because they were never taught the foreclosure process.

Sadly, most people facing foreclosure WRONGLYbelieve that once their house is sold at the foreclosure auction, minutes later someone will knock on their door and demand that they immediately move from the property. In truth, this cannot happen in Georgia!

In Georgia, when someone’s house sells at a foreclosure auction, the homeowner goes from being a homeowner to being a tenant. This means that Georgia’s landlord/tenant laws apply, and according to these laws, no one can be thrown out of a property without first going through the eviction process – which can take several weeks.

With a record number of foreclosures, this is a great time to be learning about real estate investing.

1-13-2008

If There’s a Question, Then There’s No Question

William Tingle, a good friend and top-notch real estate investor from Macon, Georgia, has a great saying that I stole from him: “If there’s a question, then there’s no question.” Boy, talk about words of wisdom. All real estate investors should remember William’s quote. It will surely save you a lot of grief, time, pain, money and aggravation!

When I first heard William say this, because my mind is usually stuck in turtle speed, I asked him what he meant. William said – using mostly one syllable words because of who he was talking to – that if you have a question about a deal, if something doesn’t seem right about the deal, then there is no question - don’t do the deal!

All too often, I hear about a real estate investor who charged headlong into a deal even though he knew something was wrong with it. Why didn’t he stop? Because he is a guy, of course. Any guy will tell you that he is more than man enough to make any deal work! And somewhere close by, you’ll find his wife shaking her head in disbelief and saying, “Oh, Lord, here we go again.”

Let me give you an example of a boneheaded investor doing a deal that he knew he shouldn’t do:

In 2006, this boneheaded investor found a single-family house for sale on Casey Street in Adairsville. Even though the real estate market had started to collapse, and even though his redheaded wife advised him to “just say no” to the deal, he knew, because guys know everything about everything, that he had the know-how to make this deal work.

He thought, after fixing up the house, that it would sell for $105,000. The property needed an $8,000 rehab. By buying this property for about $73,000, he had a doable deal.

One thing though: There was a BIG question, because of dropping real estate prices, as to whether the property would actually sell for $105,000. Obviously, this cocky investor had forgotten William Tingle’s words: “When there’s a question, then there’s no question – don’t do the deal!”

After he quickly completed the rehab, the house was put on the market for $105,000. Nothing happened. The price was lowered to $99,000. Again, nothing happened. Then it was lowered to $94,000. Still, nothing happened. Finally, when the price was lowered to $89,000, this boneheaded investor got an offer.

In the end, after paying all the expenses associated with doing this deal, our boneheaded investor LOST $2,000. He also got lots of “I told you so!” from his redheaded wife.

So, who was this boneheaded investor? Yep, you guessed it. It was me, Mr. Bonehead.

That deal taught me two things: First, always listen to my redheaded wife. Second, always listen to William Tingle.

1-6-2008

It’s Hard to Make a Bad Deal Good

There are six common mistakes made by real estate investors. Sadly, because most don’t realize that failure is only a temporary thing, many investors making these mistakes don’t attempt another deal. As an added bonus, their friends and family will repeatedly tell them, “I could have told you that you would fail – that real estate investing thing never works!”

What are these six common mistakes? 1) Not getting a basic real estate investing education before buying their first investment property. 2) Paying too much for the property. 3) Not doing their due diligence before buying the property. 4) Underestimating the cost and time it will take to complete the rehab. 5) Underestimating the time it will take to rent or sell the property. 6) Overestimating the amount for which the property will sell or rent.

Want to guess how I know about these six mistakes? I have made each and every one of them – numerous times! Look, I’m not the brightest bulb in the lamp, however, I am determined to stay lit! (I mean this in a light bulb way, not a getting drunk way!)

As a real estate investor, if you avoid making these mistakes and if you’ll make a lot of written offers on a regular basis, then success is all but guaranteed! However, if you make one or more of these mistakes, well, let’s just say that it’s hard to make a bad deal good. In other words, be prepared to write checks and lose money.

Chuck Meek, a good friend of mine from Alabama said it this way: “Bill, the most uttered phrase used by real estate investors is, ‘I’ll never do a deal that way again!’” You know, for someone from Alabama, Chuck is a pretty smart guy.

These days, when you are considering buying an investment property, pay particular attention to the purchase price. For example, when we look at a house to buy, we’re not focusing on the property’s current fair market value (FMV). As you know, real estate prices are continuing to slide lower. A house that was worth $150,000 in June 2005 is now worth about $135,000. Keeping this in mind, this $135,000 house will probably be worth about $125,000 when the market bottoms out in about March of 2009.

Therefore, when we are putting together an offer, we can’t look at what the property is worth today. Instead, we are forced to look at what the property will be worth fourteen months from now, at the low end of the market.

I hope today’s column helps you to avoid making some of the expensive mistakes that we’ve made over the years.

12-30-2007

Got Goals?

The days between Christmas and New Years are some of the most important days of the year for Kim and me. During this time, we set our one-year goals, and review and update our five-year and lifetime goals. We also reflect back on last year’s goals to see how we did.

It’s interesting that most of the successful people we know have written goals that they read on an almost daily basis. On the other hand, most of the unsuccessful people we know don’t have any written goals and are nothing more than walking, talking generalities. They have no clue why they get up in the morning except to say, “I have to go to work so I can pay the bills.”

Success is a journey. It has a beginning – where you are now; it has an ending – where you want to be; and it has a middle – all the obstacles that get in your way as you try to complete your journey. Success IS NOT a “lucky” lottery ticket. Success is a worked-at, strived-for, won’t-be-denied thing.

Have you given any thought as to where you want to be one year from today? Do you have a list of the great things that you want to accomplish during your lifetime? If so, do you have a written plan that describes – in detail – how you will accomplish these goals?

If you knew that it was impossible to fail, what incredible things would you attempt? (Write these things down – they are your “life goals”!)

This reminds me of a story: Frank Jones had worked for the railroad for twenty years, laying track. One day, while he laid track, a magnificent locomotive with a single, fancy railcar pulled up. It carried Bob Thompson, the president of the railroad. When Bob saw Frank, Bob jumped from his fancy railcar and ran up to Frank. The two men hugged, laughed and slapped each other on the back. After some time, Bob got back on his train and it pulled away.

The other men working with Frank stared in amazement. They had no idea that Frank knew the president of the railroad. To explain, Frank said, “Boys, twenty years ago, Bob and I went to work for the railroad laying track. My goal was to get a paycheck. Bob’s goal was to become president of the railroad. Looks like we both achieved our goals – I just wish I had set my goal a little bit higher!”

To set our goals, Kim and I turn off the TV, radio and other distractions, get out paper and pen, and spend time sharing ideas. We continually ask each other, “If you knew that it was impossible to fail, what would you want to accomplish this year?” After several days, we have our written goals set for the coming year.

Remember: Success is simple, but it isn’t easy, and it begins with written goals.

So how about you – got goals?

Bill and Kim Cook live in Adairsville, Georgia and have been successfully investing in real estate for more than twelve years. To learn more about Bill and Kim, please go to www.BartowRealEstate.com

12-23-2007

It’s Time to Update Your Records

This past Friday, as the end of the workday approached, Terrah Whitlock, our Chief Financial Officer, sat at her desk glaring at me in disbelief. We had spent two full days updating our entity (corporations, LLCs and trusts) and property records – something we do at the end of each year.

Why was Terrah so perturbed? Because, updating records is not fun, plus, Terrah, who is more than just a little bit pregnant, wasn’t feeling very well. (By the way, did you know that “pregnant” is an old Latin word that means, “A woman who is green and throws up thirty-seven times a day?”)

As we completed the Yearly Meeting of the Board of Directors for the last corporation, Terrah said, “I hate Dyches Boddiford.” You see, Dyches Boddiford (www.Assets101.com), who is my primary entity teacher, had taught me the importance of – and how to keep – accurate entity records. Fact is, without accurate records, you don’t actually have a valid corporation or LLC.

The following is a breakdown of the records we update at the end of each year. NOTE: If you are a new investor, don’t worry with entities. Focus on meeting with sellers, doing deals and gaining experience. After you’ve done four or five deals, then begin using entities.

Corporations: For each corporation, we hold an Annual Shareholders Meeting, at which we elect a Board of Directors. We then hold an Annual Board of Directors Meeting, at which we elect officers and make sure the corporation’s direction is on course.

LLCs: For each LLC, we hold an Annual Members Meeting, at which we appoint a manager (if there is one) and review the company’s goals.

Property Information Form: A number of years ago, I developed a Property Information Form – it’s one of the best things I’ve ever written. On a single piece of paper, I have all the important information that I need to know for each investment property we manage.

Here are just a few of the details listed on this form: Property Address, Purchase Price, Purchase Date, Fair Market Value, Legal Description, Title Insurance Company and Policy Number, Lender Information, Insurance Information, Property Tax Information, etc.

Insurance: It is vital to meet with your insurance agent at least once a year to review all of your policies. Over the years, we’ve found that some of our properties were over-insured, while others were under-insured. We’ve also discovered that sometimes we have the wrong type of policy in place. Remember: When there’s an accident, insurance is your first line of defense - so make sure your insurance is right!

Property Taxes: I’m always amazed that no one disputes their property tax bills. We dispute EVERY property tax bill and win most of the disputes.

We hope this gives you some insight on recordkeeping. Updating records isn’t fun, but it is a critical part of your real estate investing business – especially if you want to get to the next level.

Bill and Kim Cook live in Adairsville, Georgia and have been successfully investing in real estate for more than twelve years. To learn more about Bill and Kim, please go to www.BartowRealEstate.com

12-16-2007

Know Which Mortgage You’re Bidding On

It never fails. Several times each year, we shockingly watch inexperienced real estate investors come to the foreclosure auction and bid on a junior mortgage which they mistakenly think is a senior mortgage.

For example: Let’s say a $100,000 house is being sold at this month’s foreclosure auction. The mortgage being advertised for foreclosure reads $20,000. An inexperienced investor, who doesn’t know the difference between junior and senior mortgages or how to look them up, shows up ready to bid. The bidding opens at $18,968.35. The inexperienced investor confidently bids $19,000. Slowly, all of the experienced investors back away. They’re terrified of catching a terminal case of “stupid disease” which has obviously infected this inexperienced investor.

“Going once, twice, sold!” quickly cries the foreclosing attorney. With that, the inexperienced investor – who stands there with a cocky “what do you think of me now” look on his face – just bought a $100,000 house for $109,000! You see, this property had an $80,000 first mortgage that this investor – because he didn’t know how to do a Deeds Room lookup – didn’t know anything about.

It’s critical to remember that when buying property at a Georgia foreclosure auction, you must immediately pay for the property in full, with either cash or certified funds. Second, you are buying the property in an “as is” condition. Third, all senior mortgages (if any) remain with the property. Fourth, all junior mortgages (if any) are wiped away. Fifth, property taxes are not wiped away by a foreclosure. Sixth, IRS tax liens remain with the property but are wiped away 120 days after the auction.

Now to the big question: How do you know which mortgage is senior and which is junior? The senior mortgage is the mortgage (a.k.a. Security Deed) that is recorded first in the courthouse of the county in which the property is located.

In distinguishing junior mortgages from senior mortgages, many wrongly think that the amount of the mortgage is the determining factor. Others mistakenly believe that it is the date the mortgage was made. Again, to tell which mortgage is junior and which is senior, go to the Deeds Room in the courthouse and look at the date/time stamp on the recorded mortgage (Security Deed).

The only time this isn’t true is when a senior mortgage – even though it’s recorded first – agrees to become “subordinate” to a junior mortgage.

To help you better understand, let’s look at an example. A property has three mortgages: Mortgage A for $90,000, recorded on 1-7-07; Mortgage B for $20,000, recorded on 6-23-05; Mortgage C for $15,000, recorded on 10-13-07. Now, put these mortgages in order from senior to junior.

Answer: 1^st Mortgage for $20,000, recorded on 6-23-05; 2^nd Mortgage for $90,000, recorded on 1-7-07. 3^rd Mortgage for $15,000, recorded on 10-13-07. Remember: The key is to look at the recorded date/time.

Is it important to have an understanding of the Deeds Room? Absolutely! The Deeds Room is our second office.

12-9-2007

It’s Not Where You Start That Counts

Last Thursday, as Kim and I painted the kitchen in one of our rental properties, I got a phone call from John Adams. He wanted to make sure that we were prepared to speak at his two-day seminar that he and John Schaub were conducting in Atlanta that coming weekend.

John Adams (www.money99.com) is The Godfather of Atlanta Real Estate Investing and was our first real estate investing teacher. John Schaub (www.JohnSchaub.com) is a legendary real estate investing teacher. He and Jack Miller, both members of the Florida Six Pack, taught the very first “Here’s how to become wealthy buying single family homes” course in the country.

When John hung up, I looked at Kim with the biggest grin on my face. She knew exactly – because she’s a woman and women know everything – what I was thinking.

You see, when John called, Kim and I weren’t painting just any rental house – it was the first rental house we ever bought back in 1996!

When we bought that rental house, we were brand-new real estate investors. We didn’t know how the foreclosure process worked or how to manage rental property. Heck, we were nothing more than lost babes in the woods.

After buying that rental house, I remember backing our truck up to the front door, turning on John Adam’s weekly radio show, and listening to him talk about real estate investing as we rehabbed the property. It was like having John right there with us.

And here we were, twelve years later, standing in the kitchen of that same rental house – but this time we were preparing to teach at one of John’s seminars. Back in 1996, we could never have imagined that we would be able to come so far.

The road to success has not been easy. Despite what the infomercials claim, real estate investing is a hard, difficult thing to master. Becoming successful takes years of work, effort, study and sacrifice. There were many times that Kim and I thought about quitting. Thankfully, instead of quitting, we continued to put one foot in front of the other.

It’s like climbing Mount Everest. When a climber is at the base of that massive mountain and looking up, he must think, Wow, that peak is a long, long way away. There are two things the climber must do in order to reach the summit: 1) He must keep putting one foot in front of the other. 2) He can never, never, never quit! It’s a fact: There’s no shortcut or easy way to the top.

I think these two things are true for anyone wanting to achieve a worthy goal - including becoming a successful real estate investor.

Unfortunately, way too many people stand at the base of their “mountain” and think that they – for whatever reason – can’t reach the top. Remember: It’s not where you start that counts. It’s where you finish that matters!

12-1-2007

Success Ain’t Easy!

Have you ever been peacefully minding your own business when suddenly you’re hit squarely between the eyes with an inspirational thought? This recently happened to me.

While on my way to meet with a seller, I heard this quote on the radio: “What is success? It’s when you do the right thing, in the right way, at the right time.” I dang near wrecked while trying to pull over so I could write down this quote. (Oh, to the lady who was behind me in the white VW: Sorry about that!)

This quote set me to thinking and, as Kim will tell you, me thinking is a rare event that can be a dangerous thing!

Many of the folks I know are striving to be successful real estate investors – I’m one of them. Problem is, most of us don’t really know what “successful” is. Think about it: At what point can one call himself a “successful” real estate investor? When he owns one rental property? When he owns fifty rental properties? When he owns a skyscraper?

Success is relative. You are the only one who can define your own success.

For example, on Thanksgiving morning, Kim and I ran in a 5k race in Marietta, Georgia. My goal – the thing I needed to do to be successful – was to finish in less than thirty minutes. I crossed the finish line well behind the race winners. Heck, Jake Anderson, my twelve-year-old nephew, beat me by more than eight minutes. So, was I a loser? To the contrary - by finishing the race in less than thirty minutes, I reached my goal and was successful.

If I hadn’t had a goal, would I have been successful? No, since I didn’t win the race I would have been a loser! My point is this: To be successful, you must have a goal. It must be a goal that you believe you can achieve. You must write your goal on paper. You should read your goal out loud every day, and you should continually visualize yourself having already achieved your goal.

Now for an important question: As a real estate investor, do you know what you need to accomplish before you can call yourself successful? Sadly, when I ask most investors this question, they just look at me with a blank stare. How on earth can they know that they “got there” when they don’t even know where “there” is?

One other thing: Remember, success ain’t easy and it ain’t free. It’s not a lottery ticket. It is a worked-at, strived-or thing. In fact, only in Webster’s Dictionary does “success” come before “work.”

Won’t you spend some time today thinking about what it is that you need to accomplish before you can call yourself a successful real estate investor?