Table of Contents:
Real Estate Intro. & Partner Trivial Few
Finding Motivated Sellers
Problem Checklist
Funding Other People’s Money
Set up Deals For Investors
Real Estate Flip
Selling Points
Trump Formulas
Wholesaling
Match Buyer Wholesaler
Introduction to Real Estate
Making money in Real Estate can be very lucrative if you do it right. It is one of the best ways to generate a lot of cash in a relatively short period of time. Profiting at least $30,000 per flip can be done on a regular basis.
What are your reasons for getting involved with Real Estate. Do you want a primary income, or do you want to supplement an income like a School Teacher who flips a house in the Summer. Let me tell you the process is not that hard to learn. The more sweat equity you can do the better. Sweat Equity being improvements done by you not contractors..
The main problem a new flipper will run into is the funding in the first place. I will touch on OPM or other people’ money and even setting up deals with wholesaling. If you can use your own money like a line of credit that is great. What caught my eye as a strategy is that of setting up a residential flip then send numbers to Doctor’s offices to see if they fund for a %of profits. Once you do succeed with the first deal maybe you can build a bunch of deals with this Doctor. Dream big.
You should optimally have a partner when doing real estate flipping. A family member is ideal but you could work with a strategic friend. You want to have a good sounding board. Also your partner may have skills you don’t like interior decorating. You will have to split your profit but not going all on your own can be a game changer.
Here is some motivation. Making and keeping more money. Win/win situations. People who are their own boss. Trivial many or critical few. Stick with the winners. Winners wake up and make decisions follow up with action necessary to better their lives that day. To achieve this goal do what is necessary to achieve goal and go for it and take a risk. Winner never quit. Train yourself to become an expert in this stream. You can learn some and then try to execute and still not have a favorable outcome. If you like the idea you need to keep trying and stick to it till you get a result of success. You can be a jack of all trades but be the master of none. You need to set yourself up for success but putting in the time to be an expert or master and never give up. Make sure you gravitate towards your goal. Keep your eye on the prize. Be clear about why you are doing what you are doing. Try to form habits and not sheer force of will. Embrace discomfort. It’s a good thing to get out of your comfort zone. You got this. You will succeed.
This should not be your only input for real estate. I recommend some audio CDs that I will mention at the end of the book. I will mention the three D’s for finding Real Estate: Divorce, Death, Disaster and Absentee. The majority of Flips I have done have been a For Sale by Owner because of a death. Now let’s look at other ways to find motivated sellers of single family homes.
Ways to Find Real Estate to Flip
With real estate you make your money going in, or the price of purchase. If this post I will cover how to find houses to flip.
For Sale By Owner
The first way to find discount real estate is by driving your area looking for Signs in yards for sale by owner. Usually the House owner is a motivated seller and you can buy the house for a nice profitable price. The best motivated sellers are death in the family and divorce. Again you make your money by getting a house at a price that allows you to make improvements and still make a profit. When you are out for any reason be on the lookout for signs in yards. Have a pen and paper in your car to write down street info and a contact number. The price you can negotiate with any problems you see in your house inspection. You are looking for motivated sellers so you buy for a profitable price. You can set up a farm area by looking at maps and drive on the weekends.
Abandoned Houses
Be on the lookout for houses that no one lives in, because you may be able to buy the house. Look for piled up mail or a yard that hasn’t been taken care of. I have personally never bought a house this way but would purchase a house this way if the opportunity presented itself. If you find a house that fits the criteria knock on the door and if there is no one there write down the address. With the address check on Google to see if you can find a contact number or name. If you find a name but no phone you can try the online white pages. Again while searching your farm area on the weekend looking for For Sale By Owner signs look for abandoned houses.
Craigslist.org
Craigslist is a little like for sale by owner but it is online. Go to the website craigslist.org and type in your state and city you want to look at. Then click on the Houses for Sale link. Houses are displayed with the soonest listed first then later as you scroll down and look at the next page or pages. Look at every listing for your price range and look at any listing that seems promising and contact the owner if you are interested. There are also some Realtor listings but you are more on the lookout for sale by owner because you have a better chance at purchasing the house at a lower price.
Purchasing Real Estate on Real Estate Websites
The thing about Real Estate websites is they do display Foreclosure properties but I am not going to cover that in this post. The first website is a Bank owned REO or Fannie Mae site called Homepath.com. These are discounted houses but it is hard to find houses in your local areas. Check this site every week or two in you farm area because you can find some great discounted houses on this site.
Next is Auction.com. Type in your area and find houses. Like the URL says this is an auction website. There are online auctions and at site auctions. You do have to put up some money to bid on the online auction. This site does work to find profitable real estate. If you are serious you should check this site.
The last sites are regular real estate sites. The first is Zillow.com. You type in your city and state to search. You can also set up listings to be emailed to you if there are any new home listings. Zillow is easy to use and there are a lot houses listed. Trulia.com is another site that may have some listings others don’t so check Trulia once a week. Remax.com is a very comprehensive site and like Zillow you can set up emails to you with new listings. I have found that this site has almost every MLS listing or realtor network listing.
Following these ways you can find a profitable house to flip. Whether it is online or a for sale by owner sign you found while out you can find great real estate deals. I think my favorite way is finding a sign in a yard that is For Sale by Owner while out. However all techniques can find excellent deals. So set up the emails on Zillow and Remax and make a farm area with a map to check on Sunday. The way to check a profitable house is to look at listing on Zillow to see Zestimate what Zillow thinks house is worth. The Zestimate is what Zillow thinks the house is worth. This is not always 100% correct but will give you a good idea and range for what you can sell the house for. Also you can check what similar houses sold for in the area. These are called comps or comparisons. Check on Zillow to see what comps sold for with similar number of bedrooms, bathrooms, and square footage of house. Also check the yard size. You should find abou 5-6 comps to get an idea or ball park figure what the house will sell for.
Inspection Checklist
You want to find out about the house before you buy. There may be termite damage or other hidden problems. Here is a list to investigate:
Due Diligence Checklist have 30 days:
1.interior inspection
-appliances
-carpet or vinyl floor
– cabinets
-windows, walls, ceiling, doors
-major fire, water, damage pests
-Environmental asbestos, lead paint, radon , mold, outstanding permit problems
Service agreement review-Heating air conditioning cooling, landscaping,
2.Exterior Inspection
-roof leaks
-heating, AC, cooling, electrical
-wiring that is not in compliance, plumbing aged,
-paint, trim,
-driveway landscaping, drainage
Call utilities company last 12 months
If you find problems you can have a reduction in price because of what find
Funding Other People’s Money
Like I mentioned earlier an attractive way to fund deals is with a Doctor as an economic partner. If you can find someone else that is great too.
OPM(Other People’s Money)
The Strategy: Wealth will come to legal entities from multiple streams of income generated by your assets.
Real Estate-learn about depreciation
1.May want to develop real estate in several states. It takes a team of field partners around the country to make it work.
2.Learn how to leverage your money with other people’s money OPM
3.Must get team, a mentor, and know how to get on with starting.
4.Make want LLC to borrow with bank debt and OPM.
Opportunities include: land development, preconstruction, and pre-foreclosures
It’s easy to use your own money to buy whatever asset, but you have to learn new skills and strategies to persuade someone else to part with their hard-earned money to use in your investment. Let’s figure this out.
These are 4 simple factors when raising money to help demonstrate a return on investment investors are seeking.
1.Project-What is the project the lender is providing the capital for? What makes this opportunity attractive? Also share the negatives and how you plan to overcome them.
2.Partners-Who’s putting the deal together and what is their experience or track record?
3.Financing-Show the investor how the project will make money. Be realistic. Discuss roadblocks or challenges. Show where money is coming from and the terms. Potential investors will want to know how soon they will get their investment back and what the return will be.
4.Management-Explain who will be running day-to-day operations and their background.
Your pitch should be short and concise. Make sure you confidently address the four issues when looking to raise capital, then the odds of securing an investment are in your favor.
OPM in Real Estate
Owner Financing-(title passes to buyer either via 1st or partial 2nd mortgage)Make arrangements to pay owner(not a bank) in installments, typically principal and interest till paid off purchase price of property. There are no closing costs.
Land Contract-(title passes to buyer when certain conditions of the contract are met)Buyer gives the seller a down payment for property and the seller acts as a bank, financing the balance of the purchase price. The seller and buyer agree to an interest rate at the time of purchase.
Subject To(Existing mortgage remains in place, while title is transferred to the buyer)The subject to means buying a home subject to the existing mortgage. It means the buyer is taking over the payments. The unpaid balance of the existing mortgage is then calculated as part of the buyer’s purchase price.
Equity Partner- As part owner of property allows partner to participate in all aspects of property ownership. They receive in accordance to their ownership percentage a return on investment including cash flow, appreciation, and loan paydown.
Bartering
Lease or Option Contracts-on specific property allows the buyer the exclusive right to purchase the property. Once buyer has contract the seller cannot sell the property to anyone else.
Double closing-The investor first enters option contract to tie up property and then enters a contract to sell the property at a higher price. The buyer may then perform a double closing to close both transactions at the same time. You do need a real estate lawyer to perform this type of closing.
Private Money(Local investors fund via lines of credit, self-directed IRAs, insurance backed securities) A private money lender is an investor who makes loans secured by real estate. The average real estate investor relies on a steady flow of private money to supplement their deals.
To build a multi-million dollar real estate portfolio you can’t do this solo. We need to use other people’s money and be comfortably walking away from a portion of the profit.
Joint ventures seem to be the best way around to build wealth for each partner.
There is good debt and bad debt. Good debt is any debt that makes you money and bad debt tales money out. You can increase your return on investment using good debt or other peoples moneys. If you have your own money to put towards real estate good for you, but most people don’t. Even if you have enough capital you still should use a partner or OPM. Provided you structure deal well, the more you use OPM the higher your return will be.
Real Estate Single Family Home Flip
Make money going in(Look at comps Zestimate, estimate costs)
In real estate flipping you make your money when you buy the house. You have to purchase the house at a price that when you do your improvements you will have a good size profit. Next check websites like Zillow.com or Trulia.com for comparisons or comps. To find comps look at listings for houses with similar size, bedrooms, bathrooms, and general likeness for prices of these finished houses. Make an average or estimate of what you can sell your flip from the comps. Zillow has a Zestimate which is a dollar amount the site thinks the house is worth. Don’t only go by the Zestimate sometimes it isn’t the best indicator of the finished price. You can check these sites for similar houses in the area and what they sell for to get a sense of what your house is worth. Comps are a rule of thumb and maybe by your work on the house you have added more value. Next you need to estimate how much you will spend to improve the house. The more houses you do you will have a list of what you spent to figure out this number better. Now that you have an estimate on what you will spend you can add that to what you paid for the house and subtract that number from your average comp number to see your profit. Example: You bought the house for $160,000. You plan to spend $40,000 in improvements for a total of $200,000. Looking at the comps you can sell the house for $250,000 which what a house in that neighborhood with 3 bedrooms, 2 baths, acre yard, and 2100 sqft is selling for.
3.Find motivated seller(divorce or death in family)
4.Look at cost sheet
Make sure you keep great records and record everything you spend in spreadsheet ideally. If you are going to flip more houses you will want to know what you spent on improvement projects to better gauge your beginning profit.
5.Set time table for contractors stick to schedule
If you can find master carpenters first they can recommend other professionals for the jobs. Try Angieslist.com or homeadvisor.com for contractors. Make a general time table to stick to get all work done by a specified date.
6.Pick design elements(subway tile, floor to ceiling windows, light fixtures)
7.Sell for profit make a win/win for you and buyer
8.Do final inspection & appraisal
Find best cities to flip
Selling Points
You must figure attractive inexpensive improvements that add value and are attractive. This can be things like floor to ceiling windows or subway tile kitchen backsplashes. Once you find things you like you can use them for flips.
Attractive Lucrative Selling Points:
1.Sweat Equity-do as much of the improvements to house by self
2.Landscaping-The yard makes the house sell faster. On the first flip we didn’t fix up the yard. Landscaping could have added another $10,000 or more. The grass should be full and green. There should be mulch or river rock areas. You can do some sweat equity but you may want to outsource a day or weekend with a crew. Also are flowers or shrubs and fencing
3.Outside and inside painting-You have to weigh the cost vs profit. Painting usually adds more than cost.
4.Flooring-you do want to reuse wood flooring if you can. There may be some hidden flooring underneath that you could save. Again you want to add more value than cost. There are laminate, real wood, carpet, and tile options. Baseboards can be added.
5.Bathrooms-A subway tile walk-in shower is always a great addition. You may want to update the vanity or toilet but again check your budget.
6.Outlets & Switches-these are a pretty easy swap for new items. You should learn some basic electrical work. It’s a matter of connecting the white and black wires to the right screws on outlets.
7.Kitchens-Cabinets can be expensive. Use you improvement money wisely. You will need countertops as well as a sink. Another great addition is a tile backsplash. Again subway tile works well.
Remember to outsource any job that can’t be done with sweat equity. You may have to get permits and inspections for larger renovations or room additions.
New sheetrock may be necessary along with insulation.
Flip rights to contracts. Collect half profit.
Not physically meeting buyers or sellers.
Our intent is to always add value.
You are in the Marketing and Relationship Business
Win/Win Situations / Be friends with seller
Co-Wholesaling: Investor has property you bring buyer
Non-circumvent contract: buyer will not go around you to seller
Never own property
Not worry finding deals
We work for our buyers, Leverage OPI(other people’s inventory)
Don’t spend a dime marketing for properties
Action List:
1.Identify first target market(Large enough city to find wholesalers)
2.Find closing attorney using target market REIA club website
3.Start building your pipeline
a)What strategies are you going to use to find cash buyers and co-wholesalers?
b)need 5+ active co-wholesalers, & 5+ serious cash buyers
4.Start building your “Outsourced Team”
5.Play Matchmaker –Get Paid
What are Co-Wholesalers? These are persons whose have put properties under contract and the (Co-part) is you getting a buyer selling at a higher price, then splitting the profit with the wholesaler.
The crucial part of this process is finding the 5 or more cash buyers and the 5 or more co-wholesalers in your chosen target market.
If you live near a big enough city you can start there as your 1st target market.
Eventually you want to cover a bunch of target markets.
Cash buyers are regular people who want to put money to work and invest in real estate. Must build relationships with these “Fresh” new buyers.
Strategies for finding Cash Buyers(must find first):
1.Use a Craigslist ad.
2.Use Newspaper ad for target area
3.Use Google search ‘real estate cash buyers (target city)’ ‘real estate hedge fund(target city)’ ‘real estate developer’ ‘real estate land lord’ Check trulia.com message board. Try other searches as well. Spend some time searching get creative.
4.Try Linkedin.com
5.Lawn Signs
6.Direct Mail
Cash Buyers include doctors, land lords, entrepreneurs, retirees, or anyone “Retail” who has cash and can close fast
After finding cash buyers find out what types of properties they are looking for so you can find a deal for them. What looks like, location, year build, construction type, amount of repairs needed, number of bedrooms and bathrooms.
Find exactly what they want using own resources.
Now that you have 5 or more cash buyers for target area you need co-wholesalers with deals to match to cash buyers want lists.
Work only with wholesalers under contract
Never act representing someone else only representing yourself
Ways to find Co-Wholesalers in target area:
1.Use Google search ‘real estate wholesalers(target city)’ Spend a lot of time search different keywords.
2.Use Craigslist
3.Use Linkedin.com
4. Search Local REIA website(find out who are get email phone ask for vendors list.)
Co-Wholesaling Process “Double Assignment”
1.Email co-wholesalers inventory to network of buyers
2.Once have interested buyer Selling wholesaler signs your “assignment Agreement” agreed price
3.You may now Assign your interest in that contract to your buyer
4.You are selling your contractual terms as sale proceeds
5.Always “principal” selling your interest in the contract
6.Send all contracts into closing attorney or title company
You have relationships with or wholesalers