7 PRINCIPLES OF THE INVEST FOUR MORE STRATEGY

INVESTING IN R EAL ESTATE CAN BRING INCREDIBLE RETURNS . YOU HAVE

COMPLETE CONTROL OVER YOUR INVESTMENT , UNLIKE THE STOCK MARKET OR
MUTUAL FUNDS . Y OUR INVESTMENT WILL BRING CONSTANT PASSIVE INCOME
WHICH WILL ALLOW YOU TO RETIRE WITHOUT HAVING TO WORRY ABOUT
YOUR CAPITAL RUNNING OUT IF YOU OUTGROW YOUR RETIREMENT SAVINGS .

IF YOU FOLLOW THESE STEPS YOU WILL HAVE MORE MONEY COMING IN FROM
RENTALS THAN FROM YOUR DAY JOB SOONER THAN YOU THINK .

Invest Four More is unique because is stresses the importance of investing in multiple rental
properties and leveraging the returns in a unique manner to maximize cash flow. To learn more
and to find out how to overcome specific challenges related to acquiring capital, securing loans
on more than four properties, and how to maximize the return on invested dollars, visit and
follow investfourmore.com.

1. Invest in Residential Real Estate. Commercial real estate is very complicated and
not for the beginning or even intermediate investor. Residential property is easy to
rent, easy to maintain and appreciates. I prefer single family rentals because there are
more of them and I can get better deals on them than
I have been evaluating the Invest
multi family.
Four More principles for the last 2
2. Buy properties below market value. It is not easy, years and can happily announce I
if it was everyone would do it. Do your research and am in the process of making the
work hard to find good deals. If you can find good huge leap from a corporate role
properties 20% or more below market it is very hard into working on the Invest Four
More strategy full time. I have
to get burned on any deal. REO and HUD properties seen the benefits first hand, which
can be great deals, but are getting harder to find. is why Im excited to see this
Short sales can work out fantastic if you act quickly information now becoming more
enough. Off market properties can be the best deals broadly available. This is life
changing information.
if you are willing to work hard to find them.
3. Buy as many properties as you can. Buying one
- Invest Four More reader
property is a great investment, but if you can buy
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4.

5.

6.

7.

multiple properties a year you will create real wealth! Owning multiple properties will
open many doors in the investment world. Your cash flow will count as income; your
credit will go up the more mortgages you pay on time. You will have more equity and be
able to borrow more money towards more houses.
Develop a plan to obtain mortgages on more than four properties as soon as
you can. Whether it is through private money, a portfolio lender or normal bank that
will lend on more than four, you can never start too early. The key to building a rental
property business is buying many properties, not four. 10 is great, 20 better, 30
awesome, 100 and you can retire an extremely wealthy person without having to worry
about money again.
Plan a way to get cash or financing for down payments and repairs needed on
new properties. The biggest challenge is finding the capital to get started with
multiple properties. There are many ways to get capital; the tough part is keeping it for
investing and not spending it. Refinancing personal or investment properties, saving
cash flow, putting away 10% of your income for investing, flipping houses or getting a
better paying job are all ways to get more cash.
Reinvest your cash flow into paying off one mortgage at a time. If you are short
on cash and have no other means to buy more properties this step can be put off until
you are able to save more cash. Once you get multiple properties cash flow going
towards paying off one mortgage at a time the snowball effect will begin. Paying off
mortgages will become a yearly occurrence and not many things feel as good as paying
off a house. That extra cash flow from one less mortgage will go towards paying off the
next house even faster!
Look at your returns! Many financial gurus tell you to pay off your cars and house as
quickly as possible, but you can get the lowest interest rates on your principle residence
and cars. Dont pay off those loans any quicker than possible if you can make over 20%
returns investing in Real Estate. 20% return is much better than paying off a 4 or 5 %
interest rate on your car. Spend your money on something that will make you more
money.

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COMPARE FOR YOURSELF

INVEST FOUR MORE ASSISTS YOU IN COMPARING ALTERNATIVES AND MAKING THE MOST OF YOUR ASSETS . SEE
HOW THE ALTERNATIVES STACK UP IN THE COMPARISON TABLES BELOW .

Invest Four More Model: Your investment is making you money in four ways. You buy house
right and gain instant equity. You have cash flow coming in every month from rent. Your home
most likely will appreciate just as much as the stock market if not more. You can depreciate
your cost basis for the home from your income taxes. Model assumes cash flow is not
reinvested into one mortgage; returns are even higher with reinvestment strategy.
Investment
Built in Equity
Cash Flow
Appreciation
Tax advantages
Equity Paid Down
Cumulative Benefit

Year 1
($30,000)
$25,000
$6,000
$7,500
$810
$1,500
$40,810

Year 2
($30,000)
$25,000
$12,000
$15,000
$1,620
$3,000
$95,930

Year 3
($30,000)
$25,000
$18,000
$22,500
$2,430
$4,500
$165,360

Year 4
($30,000)
$25,000
$24,000
$30,000
$3,150
$6,100
$249,110

Year 5
($30,000)
$25,000
$30,000
$37,500
$3,960
$7,900
$348,870

Money market or standard savings investments over time: Money markets and CDs
dont come close to accounting for inflation; you are basically losing money every year. Model
assumes a compounded at an APY of 0.12%, with $20,000 deposit at the start of each period for
10 years.
Investment
Return
Cumulative Benefit

Year 1
($30,000)
$36
$36

Year 2
($30,000)
$72
$108

Year 3
($30,000)
$108
$216

Year 4
($30,000)
$252
$360

Year 5
($30,000)
$288
$540

Stock and bond investments over time: You have little direct control over stocks and bonds.
Hopefully your choices do well, but if market crashes you can lose all your gains and then some.
The 6% assumption in this model is fairly optimistic and doesnt account for risk or years of loss.
Model assumes a compounded return of 6.00% with $20,000 deposit at the start of each period
for 10 years.

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Investment
Return
Cumulative Benefit

Year 1
($30,000)
$1,800
$1,800

Year 2
($30,000)
$2,472
$5,508

Year 3
($30,000)
$3,708
$11,238

Year 4
($30,000)
$7,875
$19,113

Year 5
($30,000)
$10,147
$29,260

Aggressive Payoff of Mortgage: We are assuming your interest rate is 5%, which may be
high depending on if you refinanced recently. The thing to remember is your investment in
your mortgage is not creating any cash flow, just equity pay down. You wont realize any
returns until you refinance, sell or completely pay off your home. On the flip side, rental
properties give you instant return that be reinvested to make more money!
Payoff Amount
Return
Cumulative Benefit

Year 1
($30,000)
$1,500
$1,500

Year 2
($30,000)
$3,000
$4,500

Year 3
($30,000)
$4,500
$9,000

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Year 4
($30,000)
$6,000
$15,000

Year 5
($30,000)
$7,500
$22,500

THE INVESTORS GUIDE TO PURCHASING HUD HOMES

Even the most seasoned investor with a killer Realtor can run into
issues when they try to buy a HUD home. HUD homes can be great
deals, but HUD uses a different system to sell their homes than
private owners or banks. I hope to help investors avoid common
mistakes when purchasing a HUD home with this article. If you
think HUDs system is too overwhelming and complicated, dont
give up. Once you figure out the system it is actually quite easy to
use. HUD has no emotions involved and deals strictly on numbers
and a buyers ability to close. Once you learn HUDs system it can be much easier to buy a HUD
home than a regular listing.

WHERE TO FIND HUD HOMES

The most important thing to know about HUD is HUDHOMESTORE.COM. HUD lists every
house they have for sale on this website and anyone can view it. It is very simple to search for
homes on Hudhomestore, the search function is on the home page and all you have to enter is
the state you want to search in. If you want to narrow it down to city, zip code, county or
address you can search for any of those items as well. One thing to remember is once HUD
accepts a bid on a property they take the property off Hudhomestore. If you see a sign in the
yard or a property in MLS but cant find it on Hudhomestore, they may have already accepted a
bid. There are a few other reasons the property many not be on the site including price
changes or if they order a new appraisal.

WHEN CAN INVESTORS BID

Just because a home is on Hudhomestore does not mean an investor can bid on it.
HUD has very strict bid periods where only owner occupants, non profits or government
agencies can bid on HUD Homes. HUD classifies properties into different categories and those
properties have different bid periods. Some properties will qualify for FHA financing and some
wont, depending on the amount of repairs needed. The properties that will go FHA are listed
as insured and the properties that wont are listed as uninsured. If a property is insured
investors cannot bid for the first 30 days! If a property is uninsured investors cannot bid for the
first 5 days. When you are looking at a listing on Hudhomestore look for the period deadline, it
will give the last day owner occupants, non profits and government agencies can bid. Investors
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can place a bid the next day after the period deadline expires. Just because a property is still on
Hudhomestore the day after the period deadline expired, it does not mean HUD did not receive
an acceptable bid. HUD reviews bids the first business day after the period deadline and the
property could be on the website for a short time in the morning while they review bids.
This can be very confusing the first time you try to process the information, but it gets easier
the more you use Hudhomestore. The thing to remember is investors can bid on the first day
after the period deadline. If you are unsure who can bid, HUD will list who the eligible bidders
are. When investors can bid it will say All bidders. If you have a good Realtor who knows the
HUD system they can walk you through the process.

HOW DOES AN INVESTOR SUBMIT A BID?

An investor must use a Real Estate agent registered with HUD to submit a bid on a HUD
home. If you are shopping for an agent and you are interested in HUD homes, ask your agent if
their company has an NAID number. If they dont have an NAID number then they cant submit
a bid for you. Any office can get an NAID, but it can take up to 6 weeks to get an NAID number
from HUD. If your agents office has an NAID they can register on Hudhomestore and submit a
bid for you very easily. The bid is submitted online and no documents are uploaded with the
bid. HUD does require the social security or EIN number for the purchaser in order to submit
the bid.

WHAT HAPPENS AFTER MY BID IS SUBMITTED ?

HUD will only respond to your agent through email if your bid is accepted. If your bid
is not accepted HUD will not notify your agent, but your agent can look up the bid status. Your
agent has to log in to HUDHOMESTORE.COM and go to bidder functions. They then can search
for bids they submitted and HUD will list the bid status. It may say reviewing bids, accepted,
cancelled or other bid accepted. If your bid was not accepted and no other bids were accepted
you can bid again as many times as you like. In some cases HUD may counter your offer. Their
counter is only a notification informing you of what net price HUD will accept. If you enter a bid
that nets HUD the counter price or more they will accept it as long as no one else submits a
higher bid. If your bid is accepted then the real work starts!

HOW LOW OF A BID WILL HUD ACCEPT ?

A buyer can submit any bid amount they want on a HUD home, but HUD has certain
guidelines they will accept. HUD hires asset management companies to select agents, look
over properties, market HUD homes, review contracts and monitor bids. Those asset
management companies are given guidelines from HUD on what bid amount they can accept.

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Usually they are allowed to accept a net amount around 10 to 12 percent less than ask price.
The net amount is what HUD will receive after commissions and closing costs are paid. HUD
always pays the listing broker 3% commission and the selling broker can get up to 3%
commission. If HUD is paying 6$ commission total, then that net amount they will accept has
dropped to 4 to 6 percent less than ask price. If the buyer wants closing costs then that amount
drops even further.

IS IT WORTH IT TO SUBMIT A BID I DONT THINK HUD WILL ACCEPT ?

YES! The first reason is HUD asks all bidders if they can hold their offer in b ackup
position. This means if an accepted offer cancels they will automatically accept the next
highest bid as long as it is an acceptable amount. It does not hurt to mark this box as you are
under no obligation to continue with the contract if HUD accepts your bid down the road and
you no longer want the property. If HUD lowers the price on a property they will review bids
they have already received to see if they are now an acceptable amount after the price change.
Your low bid could be accepted before anyone else gets a chance to submit a new bid after the
price change. There are also occasions when a low bid that does not meet HUD guidelines is
accepted. This usually happens on aged assets that have been on the market over 90 days. The
asset management company can ask for special approval from HUD on these low bids. When
this happens your agent may receive a counter from HUD in the morning and then an
acceptance later in the day. This is because the asset management company could not accept
the bid right away, but they sent it to HUD and approved it later in the day.

SENDING YOUR CONTRACT INTO HUD

If HUD accepts your bid, they will notify your agent by email and give your agent
instructions on how to send the paperwork to HUD. Your agent will hav e 48 hours to send the
original documents to HUD. That 48 hour period is extended for weekends and holidays. HUD
has their own sales contract, addendum and disclosures, they will also require a pre
qualification letter or proof of funds letter if you are paying cash and your earnest money must
be sent with the package. HUD requires certified fund for your earnest money. Your agent
should be able to help you out with the package and explain all the details. There are a couple
of very important documents to pay attention to that I will go over in the next sections. If your
package is going to be late, make sure your agent contacts HUD and tells them it will be late
and HUD may give you a little extra time. If your package requires corrections, HUD will email
your agent and usually corrections are due within 24 hours.

HOW DO INVESTORS GET THEIR EARNEST MONEY BACK ON HUD HOMES ?

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HUD is very clear that they treat investors differently than owner occupant buyers.
They feel investors are more experienced in Real Estate and should do their due diligence
before making an offer. HUD makes investors sign a document saying their earnest money will
not be refunded for inspection issues. HUD does have an inspection done on every home, but
many times the utilities are not on when the inspection is done and it is always best for a buyer
to have their own inspection completed. Remember it is very difficult for an investor to get
their earnest money back from HUD if they cancel the contract.

IF I BUY A HUD HOME FOR MY CHILDREN IS IT CONSIDERED OWNER OCCUPIED ?

The only way a buyer can be considered owner occupied is if the person living in the
home will be on the Deed when HUD sells the home. That occupant has to live in the home for
at least a year and cannot buy anymore HUD homes as an owner occupant in that first year.

HOW SERIOUS IS HUD ABOUT THE OWNER OCCUPANT PERIOD?

VERY SERIOUS! HUD makes owner occupants sign a document confirming they are owner
occupant and if they are found to be an investor, HUD can fine them $250,000 with prison time.
It is a federal crime to misrepresent yourself as an owner occupant when your true intention is
as an investor. Not only can the buyer be fined and sent to prison, the buyers agent and their
entire office can lose their ability to sell HUD homes. If you think you wont get caught,
remember there are a lot of investors who would love to bid on HUD homes but cant because
of owner occupant rules and they have no problem turning in other investors they see breaking
the rules. Listing agents are also encouraged to keep an eye out for investors posing as owner
occupants.

INSPECTIONS ON A HUD HOME

HUD has a different inspection policy than most REO sellers. When HUD has a property
listed they do not turn on any of the utilities. When HUD approves your contract you send in,
they will send your agent a signed copy back with the appraisal and a utility turn on request
form. You have to ask HUDs property preservation company permission to turn on the utilities
to do your inspection. You have 15 days from the time HUD signs the contract and they allow
you a three-day window to turn on the utilities. It is usually best to make your three-day
window as late into the 15 day inspection period as possible. The reason is you have to send in
the form to HUDs property preservation company, wait for them to approve it and then get
utilities on in your name. It can easily take over a week to get the form back and get utilities
on. HUD does not pay for the utilities or any turn on fees and they do not de-winterize the
property. In fact if you live in an area that requires winterization you will have to send in $150

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with your turn on request form if you want to turn on the water. This fee is for the property
preservation company to re-winterize the property after you complete your inspections.
If you find issues during your inspection, you have two choices. Cancel the contract or proceed
to close knowing HUD wont repair anything. They are very clear HUD homes are sold in as -is
condition and they will not make any repairs even if the lender requires it. They are also very
clear that they will not return your earnest money if you find inspection issues that cause you
to cancel your contract. As I said earlier, HUD does an inspection before listing each property
and the basic results are listed on HUDHOMESTORE.COM. To find the inspection, look under
addendums on HUDHOMESTORE and you will see a document called PCR. This will list the
general condition of the plumbing, electric, HVAC and roof. Do not depend on these
inspections to be perfect! Many times the HUD inspectors are only able to do a visual check
since the utilities are not on.

APPRAISALS FOR INVESTOR LOANS ON A HUD HOME

HUD does an appraisal on every home before they list it. In fact, the list price on HUD
homes is what the appraiser valued the home at. Owner occupants can use this appraisal if
they are going FHA, but if investors are getting financing and their lender requires an appraisal
they will need to get a new appraisal in most cases. If your appraiser requires the utilities to be
on for the appraisal, you have to follow the same procedure to turn on utilities as you did for
the inspection. The best practice is to schedule the appraisal at the same time as the inspection
if possible. The biggest issue I see with appraisals is the plumbing. HUDs inspector will do a
pressure check on the plumbing system before the home is listed. If the pressure test fails, it
means there is a leak somewhere in the system. That also means HUD will not let you turn on
the water for your inspection or appraisal. If the system fails the pressure test and your
appraiser requires the water to be on, you are out of luck. HUD wont repair the lines and no
repairs can be made before closing. Please pay attention to the HUD inspection before bidding
and talk to your lender about the appraisal process. I have seen many deals fail because the
water could not be turned on for appraisals on HUD homes. There are a few solutions. Many
times a lender can escrow for plumbing repairs or a portfolio lender may be able to do the loan
without utilities being on.
The other issue that can come up, but rarely does on HUD homes is an appraisal comes in low.
Usually HUD homes are priced low enough that an appraisal value is not an issue. If the
appraisal does come in low or the appraisal requires repairs, HUD does not make repairs or
price adjustments. Again the only choice will be to cancel or continue with the original bid
price and terms.

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CLOSING ON A HUD HOME

HUD gives cash buyers 30 days to close and financed buyers 45 days to close. If you
must have an extension due to your lender or other fault of the buyer, then HUD will charge
you for an extension. Typically is it $375 for a 15 day extension depending on the contract
price. HUD will grant two extensions, but if a third is needed HUD will have to have a very good
reason to approve it. Another cost HUD does not pay the most sellers pay is title insurance.
Make sure you factor that into your figures when bidding on a HUD home. HUD does not
require title insurance, but I highly recommend you get it. HUD does the best they can, but
they are dealing with other lenders homes that were foreclosed on and had FHA financing.
Sometimes a title issue will slip through the cracks and if you dont have title insurance it can be
a nightmare to get it cleared up. I sold a HUD home a few years ago that was owned by a large
bank. 6 months after the sale we learned the bank did not have clear title. The title company
was able to clear it up, but if the buyers did not buy the insurance it would have been on them
to figure out clear title.

REPAIRS PRIOR TO CLOSING

HUD is very clear that they will not make any repairs prior to closing and the buyer is
not allowed to alter the home in any way before closing. Some buyers may think it is not a bid
deal to fix a small plumbing leak or do some painting before closing. It is a very big deal. HUD
homes are federal property and it is a felony to make any alterations befor e you own the home.
If HUD finds out any repairs were made they usually cancel the contract on the spot, take the
buyers earnest money, investigate the buyers agent to see if they knew about it and then
consider charges depending on the severity. Do not make any repairs, change the locks, and
remove signs or anything from the home before closing!

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