If your approach to finding properties involves people contacting you, then you’ll need some method of keeping track of them. For this, I recommend a ream of three-hole punched paper, eight divider tabs, and a three-ring binder that will stay in your file tub when not in use. Label your tabs as follows:

• Preliminary Review

• Prospects

• Referrers

• Suspects

• Can’t Help Now

• Foreclosed

• Avoided Foreclosure

• Other Professionals

If you keep track of your whole life on a computer (like I do), then set up the labels above as categories in Outlook or whatever other address or date software you use. Whatever you use, you must have the ability to enter pretty much unlimited notes in some field, and you must be able to sort by categories. You’ll notice that the tabs do not include one for active properties. That’s because, once you’ve decided that you want to pursue a particular property, you should devote a separate folder to that one.

All papers, notes, and notices relative to that particular property will go in the folder. (More on what goes into the folder comes in later chapters.) If a borrower has more than one property, create more than one file. All of the files can be stored in a plastic container that can sit on your desk, get tossed in the car, or be placed on the kitchen table. It’s portable and indestructible— a great combination.

Get into the habit of making notes after you talk to people, and then dropping those notes into the file. Make sure you put a date on your notes. After a few weeks, it gets surprisingly difficult to remember exactly when you obtained certain information. Sometimes it’s critically important to know what you knew and when you knew it.

Never throw away any of your papers.

You’ll want to read through all of them from time to time in order to get a sense of what things work for you and what methods don’t work. For example, if you tally your lead sources, you might find that one person sends you tons of leads, but they never turn into anything. Another person sends you very few, but they all ended up in purchases. You might notice that owners of luxury homes either file for Chapter 11 Bankruptcy or sue their lender under some theory, stopping foreclosures. (I’m not saying this is common—it’s just an example I made up.) If you see something like this happening time and again, you might decide it’s a waste of time to work with upper bracket (luxury) homes.

Meet Jim

In the following lines, you’ll meet another workout specialist—Jim. He’s fictional, but based on some very real people and their everyday experiences in this industry. Jim will stay with us throughout this blog, as he searches for a good property and analyzes which options are best for him. In order to understand his motivations and restrictions, we need to know a little bit about Jim. He has been out of school for about three years He has a good job as the assistant manager at an auto parts store. He also has a steady girlfriend he hopes to marry one day. But, there are rumors that Jim’s employer might be shutting down several locations and laying off all the employees.

Jim needs an investment that isn’t full-time, will grow over the years, and that he can manage on some sort of touch-it, feel-it basis, as opposed to stocks and bonds. He also needs something that will not require very much money in a down payment. He has three foreclosure opportunities.

All of them have a first mortgage in default, with a payoff of $85,000.

Property One is three acres of land with a 2,000 square foot building rented out to the United States government on a twenty-five-year lease for use as a post office. The rent is $1,000 per month, but increases each year in order to keep up with inflation. In the trade, we say the building has a “credit tenant,” which means a national tenant with great credit.

Property Two is virtually identical, but is rented out to a young chiropractor. She has a two-year lease for $1,000 per month. She might have a great credit score, but she’s not called a “credit tenant.” Property Three is a modest starter home within walking distance of a good elementary school. It has some deferred maintenance (neglected repairs), but it is essentially a sound structure. Jim could either live in it himself or rent it to someone else for about $1,000 per month. In order to evaluate these properties and make the right choice for which one to buy, Jim needs to:

• engage in some introspection to define his goals and needs;

• learn real estate concepts and analytical tools;

• discover how to evaluate other people’s motivations;

• create some checklists for prudent investing; and,

• put it all together to make the right decision.

By the time he’s ready to make good buying decisions, you will be, too.