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Cash Flow Guys Podcast
33 minutes | 4 days ago
283 - Where My Money Comes From
Over the last several years many people have asked and wondered how I specifically earn my income. Was I a drug dealer? Did I have rich parents? Nope! In this episode, I peel back the curtain for everyone to learn where my income comes from. What's important about this episode, in particular, is that you understand that it's because I have multiple streams of income that I don't have to ever go back to work. By focusing more on several smaller streams instead of one larger one I bet insulate myself from sliding backward financially because if one income stream suffers, the others continue to produce. The same is true in real estate, it's not a bad idea to spread yourself out a bit, perhaps by investing in different types of assets or deals while also doing some passive and active investing. As you see an opportunity, capture it, add it to your portfolio and then go out and get another.
24 minutes | 11 days ago
282 - How To Overcome Fear of Confrontation
Early on I learned from my Dad that if you want something in life you better go get it because nothing will ever be handed to me. He also taught me the importance of “going for the close” also known as asking for the business. Humans tend to spend a great deal of time thinking about what they want and more time coming up with reasons they cannot get what they want. Such thoughts often lead us down a rabbit hole of doubt which eventually leads to our belief that whatever we want is behind some sort of roadblock that we won’t be able to overcome. Here are a few examples of what I am referring to: Not applying for deal funding because you don’t feel you will be approved. Not wanting to answer the phone when a potentially motivated seller calls because you don’t know what to say to them. Being resistant to spend any time with a seller in fear you will look stupid by asking questions or not feeling like you know the right questions to ask. Refusing to make offers in fear of being rejected. Feeling that a larger valued deal is “too big” or “too expensive” for you to handle. Fear of being rejected by a seller or Realtor because you “can’t afford” to buy anything worth having. What I just mentioned only scratches the surface as you might imagine. Here’s the reality of what’s happening in the seller’s mind: Did I overprice this property? Will people heckle me or be mean if I overprice my property? What if I put a sign-out and nobody shows up? Well, I could drop the price but then I’d be admitting I overpriced the property to begin with and therefore look stupid for sure! How do I really know I am getting a fair price for my property? What if I sell it too cheap? If it sells too fast doesn’t that mean I sold it too cheap? If I think I sold it too cheap can I back out of the deal? What if buyers bring Covid into my home I don’t have the energy to clean up or organize and buyers coming through will judge me as a nasty mess for not being clean. How do I know if I picked the right Realtor? Should I even hire a Realtor or do it myself and “save the commission” What if we are not yet at the top of the market, I wonder if I should wait a little longer? Landlord Sellers think: Buyers walking through my units will anger my tenants If my tenants know the property is for sale they will all move out suddenly What if the new landlords make my tenants move out suddenly? All of this leads up to one thing...STRESS!! Now that we covered all that, I think it is fair to say that both buyers and sellers are under tremendous pressure when trying to complete a real estate transaction. Regardless of the current market conditions, the most effective way to overcome the majority of these issues is to position yourself as transparent. Be approachable, be willing to sit down with your fellow human, look them in the eye and work through the process. No matter how hot or cold a market is, there will always be buyers and sellers with problems to solve. In 2021 face to face has become a less popular option but services like Zoom and other apps make it easy to communicate with others via video or audio. Use these services, open up dialogue and talk things out. When I am brokering a property sale transaction for a buyer or seller, I encourage all parties to get on the phone or meet in person to negotiate the transaction. I want active participation from all parties. It’s these meetings that bring forth the best results for all parties in most cases. I realize that for many the thought of sitting down face to face with “the other side” as they say may be terrifying. I assure you that if you give it a try you will likely be pleasantly surprised by the end results. I also realize that many people simply won’t agree to an open discussion or negotiation due to the crippling fear of confrontation. Regardless I ask you at least try by asking for a meeting, the worst thing that can happen is the other party would say no. Please know that the other party is as scared or nervous as you are.
19 minutes | 18 days ago
281 - The IRS Taxes Cryptocurrency!
For the last several years, many have enjoyed the rewards of investing in various forms of cryptocurrency under the assumption they could avoid the prying eyes of the government. Some bragged about being able to conduct business and earn capital gains free of the worry of taxation. Those days are over… Last week I was listening to an episode of Rich Dad Radio titled “The IRS Versus Bitcoin” where I stumbled upon some shocking news reported by CPA Tom Wheelwright, a Rich Dad advisor. Tom warned listeners by saying that anytime you use or trade cryptocurrency, it becomes a taxable event! He went on to say that if in 2020 you did ANYTHING besides buying cryptocurrency you must declare it to the IRS when filing your taxes, if you don’t, it’s a FELONY. It seems that any transaction except buying bitcoin is subject to a tax beginning at a rate of15% for both the user of the bitcoin and the receiver. There is also capital gains tax that will apply to many transactions. So much for bitcoin being unregulated! We will have to wait to see if the IRS can gain any traction in regard to enforcement…but that never really stopped them in the past. That got me thinking…in today’s brave new world it seems our elected leaders have the ability and the gall to pass just about any legislation they are paid to make into law. These policies and laws are often created without much thought to how they will impact everyone they represent. It’s been said many times that if you simply pay attention to what the government wants you to invest in, you can enjoy a relatively tax-free or at least tax favored lifestyle. Those that complain about how things are an attempt to circumvent the system are often found out and severely punished. Before your mind goes down a political rabbit hole, you must understand that the IRS does it’s thing regardless of who is in office, yes, the IRS’ activities are influenced by the White House, Congress, and Senate but that doesn’t change the fact that in a basic sense, taxation, for the most part, can be avoided. Here is a stackable nugget of what I have learned thus far which has helped me legally reduce my tax obligation year over year, while never having to sacrifice my lifestyle to accomplish it. The Government does not like you flipping anything, houses, apartments, businesses, whatever…they want you to earn in streams of income, not piles. The Government wants you to provide housing, not buy and flip it and by doing so decrease affordability. The Government these days wants you to invest in renewable energy sources, soon, expect the tax benefits of investing in oil and gas to be reduced or 67disappear. When you generate piles, they are easy to see and discover, yet nobody is looking for streams to steal. Many say that taxation in and of itself is a crime. So if you were a criminal looking to steal money, wouldn’t you gravitate towards looking for the easy to see and easy get piles to steal from? Of course, you would. I’m not suggesting you hide income from the government, they will find it eventually so why hide it, instead, structure your affairs such that you mostly earn streams, and can turn piles into streams.
19 minutes | 25 days ago
280 - How To Overcome Sticker Shock
Asking price does not matter For Sale By Owner Properties are overpriced Properties sold by wholesalers are overpriced Bank Foreclosures are overpriced Listed Properties are overpriced ALL off-market properties are overpriced and actually “on market” so stop saying off-market people All contractor bids are too high All Real Estate Commissions are too expensive All Lawyers are too pricey All closing costs are too costly All Lenders charge too much in fees All Banks charge too many fees Income Tax is a Ripoff Sales Tax is Theft Property Tax is a scam All Cable bills are too costly All water bills are ridiculous All electric bills are feeding a monopoly All new cars aren’t worth what they are asking All Hotels aren’t worth the nightly rate All meals at fancy restaurants are price gouging Mixed drinks sold at a bar are a rip-off, the price of a cold beer is crazy… Regardless, each and every one of us buys or pays for these things each and every day of our lives. Look at the property anyway, find the value, if there is none then go look at another. Either way, if you allow the price of something to stop you in your tracks you will never cover any ground, you will remain stuck. Listen in for some great tips on how to discover opportunity regardless of the “asking price” of an asset.
19 minutes | a month ago
279 - What Questions Should I Ask Sellers?
This episode was born from a listener question in regard to what sort of questions should you ask when speaking with a seller. For me, this was a struggle in the beginning because I didn’t have any points of reference to keep me on track. Many years in sales taught me to avoid scripts if at all possible so I could better craft the meeting into a more conversational style. I did not want to risk sounding like a robot, instead, I wanted to build rapport and ease into the conversation so that I could learn what I needed about the seller and their pain points without sounding like a lawyer in a cross-examination. As a result of learning to get better at talking with sellers, I created my property information form. I looked at tons of examples I found on the internet and took bits and pieces from each one in order to craft one that best fit my needs. In fact, I still use the form to this day in each and every Seller encounter. To obtain a free copy of the form visit my website at CashFlowGuys.com and click on the resources tab for the download link.
28 minutes | a month ago
278 - 40 Year Loans - Crisis or Opportunity?
This topic for me began with a video I watched on YouTube Last night put out by a Youtuber who goes by “Meet Kevin”. In case you’d like to watch the video on YouTube, here’s the Link: https://youtu.be/iepZC3HdS8E The video was about the coming proposed changes to the CFPB’s policies as they relate to mortgage forbearance. The CFPB (Consumer Finance Protection Board) is concerned that in the coming months we could slip into a major foreclosure crisis spawned from the mass number of mortgages that will be exiting forbearance very soon. Here is a link to the proposed ruling: CFPB RUling Currently, there are approximately 3 million Loans in forbearance 1.7 million of those mortgages need to start getting repaid (forbearance expiring) In short, their short-term proposal is to force loan servicers (lenders) to extend a borrower’s mortgage by as much as 40 YEARS. (480 months) That’s 40 years ON TOP of the remaining time you have on the mortgage. It flat out says the borrow if affected by covid has a RIGHT to a 40-year extension. The proposed policy change also suggests no foreclosure filings allowed until Dec 2021. This is a very unique situation, after playing the audio from Meet Kevin’s video I break down what he said and hopefully provide some insight that will help you see the bright side of this situation as it pertains to us real estate investors.
22 minutes | 2 months ago
277 - The $72000 Dumpster Situation
It’s really simple...People can’t buy what they cannot find. Every minute of everyday people incorrectly spell things when listing items for sale. Find those items and you will find motivated sellers. This could be on eBay, Amazon, Facebook Marketplace, Craigslist, Offer Up or other online sales sites. Here are some examples of things I have bought at a huge discount because the ads were misspelled or miscategorized or under-advertised and then sold the items at a huge upside after marketing them properly. By under-advertising, I mean limiting exposure to items for sale, being lazy, not telling the world. This is a common mistake that Realtors and House Flippers make. I bought 6 sets of Halcyon Technical Scuba Gear being sold by a fire department on eBay. All new and unused, no idea why they were selling, frankly don’t care. The seller spelled Halcyon wrong so nobody bid on the auction. The starting bid was $500. I was the only bidder and won the auction for the opening bid amount. ONE set of the gear was worth $1,900 alone. I sold five sets for $1,500 each for a total of $7,500 and kept one set for myself that lasted me 15 years without fail. I once bought an FSBO property back in the old days when buyers and sellers were allowed to communicate and be in the same room..imagine that… In a casual conversation with the seller discussing what was next for her, she stated she now needed to get rid of her other four houses she had inherited. Had I asked this question sooner in the buying process we could have been closing on 5 houses instead of one. It turned out that the day before closing her niece announced that she was getting her real estate license and she promised her the chance to sell the homes on the open market so she could get the experience. Needless to say, I lost out on 4 more listings and my client lost out on a couple more great deals. And YES, I tried everything I could think of to sway her towards selling now instead of waiting to later to no avail. Back in the late 90’s I was walking through a parking lot behind a thrift store and noticed a bunch of golf clubs and bags leaning up against a full dumpster. Inside the dumpster was loaded with baseball equipment, bats, batting helmets, catcher gear, and more golf clubs and bags. I walked back home, got my truck, and unloaded that dumpster by hand into my truck in two trips. My total take on that adventure was $21500 in sales with ZERO inventory costs. It turned out the thrift store manager did not think used sporting goods would sell very well and he did not want to take time to clean the germs from the helmets, pads, and golf club grips (he was a germaphobe). Over the next 6-8 months I went back to that dumpster twice a week at night before the pickup day to restock my inventory. I wound up making an additional $50,000 from that same dumpster for a grand total that exceeded $72,000. Every time you see something that someone else does not want ask yourself this question….How can I make a decent profit from this item in a short amount of time with minimal effort? Who do I know that would value this item or items more than me? What specific steps can I take to find and notify that person that my item is for sale? Here’s the bottom line, there is an opportunity is everywhere around you.
19 minutes | 2 months ago
276 - Price Cowards Are You One Of Them?
Post credit to Alissa Walker and Wade Sutherlin, the lucky husband of Amanda Young who was my guest on episodes 172 and 173 A CONVERSATION ABOUT PERCEIVED VALUE: A customer asked a contractor friend of mine how much it would cost to do this project. My friend gave him a proposal: $4500 The customer responded: That seems really high. My friend asked: What do you think is a reasonable price for this job? The customer answered: $2500 maximum My friend responded: Ok, then I invite you to do it yourself. The customer answered: I don't know how to. My friend responded: Alright, then how about for $2500 I'll teach you how to. So besides saving you $2000, you'll learn valuable skills that will benefit you in the future. The customer answered: Sounds good! Let’s do it! My friend responded: Great! To get started, you are going to need some tools. You will need a chop saw, table saw, cordless drill, bit set, router, skill saw, jigsaw, tool belt, hammer, etc.. The customer answered: But I don't have any of those tools and I can't justify buying all of these for one job. My friend responded: Ok. Well then for an additional $300 I can rent my tools to you to use for this project. The customer answered: Okay. That’s fair. My friend responded: Great! We will start the project on Monday. The customer answered: I work Monday through Friday. I’m only available on the weekends. My friend responded: If you want to learn from me then you will need to work when I work. This project will take 3 days so you will need to take 3 days off work. The customer answered: That means I’m going to have to sacrifice my pay for 3 days or use my vacation time! My friend responded: That’s true. Remember, when you do a job yourself you need to account for unproductive factors. The customer answered: What do you mean by that? My friend responded: Doing a job completely from start to finish includes time spent to plan the project, pick up materials, travel time, gas, set up time, clean up, and waste disposal amongst other things. That’s all in addition to the actual project itself. And speaking of materials, that’s where we will start on Monday so I need you to meet me at the lumberyard at 6:00 am. The customer answered: At 6 am?!! My workday doesn’t usually start until 8 am! My friend responded: Well then you’re in luck! My plan is to start on the deck build by 8 am. But to do so we have to start at 6 am to get materials picked up, loaded, and delivered to your job site. The customer answered: You know, I’m realizing that a lot more goes into a job than what a customer sees in the finished project. Your proposal of $4500 is very reasonable. I would like you to handle the project. CONCLUSION: When you pay for a job, especially a custom job, (whether it’s a physical project or digital project) you pay not only for the material and the work to be completed. You also pay for: ✔️ Knowledge ✔️ Experience ✔️ Custom Skills ✔️ Tools ✔️ Time to plan ✔️ Time to prepare ✔️ Professionalism ✔️ Work Ethic ✔️ Excellence ✔️ Discipline ✔️ Commitment ✔️ Integrity ✔️ Taxes ✔️ Licenses ✔️ Sacrifices ✔️ Liabilities ✔️ Insurance If you request a proposal for custom work to be done, please don’t disrespect a service provider by trying to get them to lower their prices. If their proposal exceeds your budget, there’s nothing wrong with getting other proposals. Just remember.. you get what you pay for. 👉🏼 SERVICE PROVIDERS: Know your worth and be confident in it. 👉🏼 CONSUMERS: Recognize their worth and be respectful of it. Sharing this to support all my friends, family, and clients who are Entrepreneurs, Business Owners, and tradesmen.
19 minutes | 2 months ago
275 - Top Five Ways To Commit Real Estate Malpractice
The truly successful real estate investors and Realtors are the ones who are most skilled at solving problems. Less successful people focus only on the deal or the potential profits. In this episode, I discuss the five most common examples of Real Estate Malpractice and how to avoid them. If you are able to avoid these pitfalls and learn why they are pitfalls, you will virtually eliminate any competition you might have in the marketplace. Always remember that your beliefs and needs are not identical to the seller’s beliefs and needs which means to understand the seller’s problem, you have to get good at asking questions. How do we get good at asking questions that are easy to answer? We practice and learn by doing. Listen in this week and add another set of tools to your investor toolbox.
23 minutes | 2 months ago
274 - What Should I Do First?
In this episode, we discuss where to get started. In this case, I am replying to one of our listeners who is just getting started in real estate. He has done a great job so far getting himself lined up well to earn a profit now we will dive in and help guide him through the process. I’ll be brief in the notes this week since I think you’ll get lots of value by simply listening to the episode. Enjoy!
15 minutes | 2 months ago
273 - Solid Gold Leads
Once you make a decision to put yourself out there by marketing yourself to sellers, the next part (and often the most challenging) is knowing which leads to focus the most time and energy on. When I first started marketing, I quickly learned that leads of any kind don’t come for free, so I had to be careful to be sure I did not waste them. By wasting a lead, I mean underestimating the value of a lead and therefore not putting much (if any) time into reaching them with my message. Honestly, I didn’t think much about the value of one lead over another. I mistakenly thought that all leads were the same and therefore had equal value. Soon, I realized how wrong I was about the lead evaluation process and it was then that I found out that I was throwing money away (literally, in the trash) When using direct mail in your approach it's common to get returned mail back when your mail piece cannot reach the seller. This of course only happens if you a sure to include a return address on your mail piece (using a return address on your mail pieces is a golden nugget, you’re welcome). Over the years I have met thousands of investors from all over the world. I often ask those who use direct mail what they do with the mail that comes back undeliverable. I can honestly say that over 80% of the people I have asked this question to have told me that they remove the bad addresses from their mailing list and discard the mail piece. That’s it, in the trash it goes! Please know that the tougher it is to locate someone the better the lead quality is. That’s because most of any competition you might have will give up at the first sign of difficulty in reaching the hard-to-find seller. Think about the sheer number of people that talk about wanting to invest in real estate, buy the books and courses and never take any further steps. The majority of people who want to be investors simply quit at the first sign of hard work. The same is true for most things that lead to financial success. This reminds me of a situation that is going on right now with one of my students. He just did a mailing to his list of motivated sellers and received a handful of them back as undeliverable. Taking my advice, he decided to skip trace those returned postcards to see if he could find a better address to mail his postcard to. The seller had an uncommon name so he began the search by using good ole’ Google to see what he could find on the person. Low and behold it turns out the seller was arrested for committing a double murder and is currently serving two consecutive life sentences for his crime. Needless to say, my student now knows where this seller can be found literally for the rest of his life. Most investors upon hearing this would turn and run the other direction, but not my student, he is working through the problem until he can have the opportunity to sit down in front of this seller and begin to help him solve his real estate problem. Imagine looking through bulletproof glass sitting face to face with a cold-blooded killer! Worse, imagine negotiating the sale of an apartment building with one! The reality is that he has found a seller with a problem that likely needs a very unique solution. This ladies and gentlemen, THIS is how creative deals are born. So far, he has used his Propstream account to search the property’s public records and recorded documents that the mortgage is current. Further searching on Propstream revealed his lawyer recently filed a Lis pendens on the property which we imagine is a strategy to use the property as collateral towards the payment of legal fees of defending the client who is now in prison. In speaking with the prison officials, he was told that in order to visit the seller in prison he would need the seller’s authorization to accept his visit. The next step is to begin writing letters to the seller in prison so that he helps him see the benefit of accepting such a visit. Stay tuned for updates on this real-world true story.
17 minutes | 3 months ago
272 –How To Kill A Deal in 2021
Recently I listed a property for a client in the Tampa, FL Market. Yes, I am still living in the Florida Keys, however, I have a real estate team in the Tampa, FL, and Key West Markets now. I often find it shocking how easy it is for Realtors to kill deals for their clients and for themselves. I thought I’d bring value this week by educating you on the most popular way Realtors are blowing it this year. For those of you planning to buy in 2021 or ever again this applies to you. If you ever plan to sell any real estate of your own in the future this topic also applies to you. Granted, if I was to discuss every way Realtors, Buyers and Sellers kill deals this would turn into an 80-hour audiobook instead of a podcast. Tons of buyers are shopping before being sure they are fully qualified for a mortgage. Clearly, if you are using 100% cash then this won’t apply to you. This week I have had several instances of this happening. I believe every Realtor should know this already but since this week proves they don’t I’ll share with you what I mean about this. It’s always a bad idea to show houses to people who have not proven they are approved to buy such a house, here is why. The Buyers fall in love with a house and later find out that their lender can’t get them approved for the mortgage due to credit or income issues. Make no mistake, buyers will fight Realtors tooth and nail on this because everyone is eager to go house shopping but your time is being wasted if there is no preapproval. Lenders sometimes give preapprovals that are useless. What do I mean? I mean that the lender hands out a boilerplate approval letter (the same as they give to everyone) without first checking the buyer’s credit and verifying their income. I’m not sure if they do this simply because they are lazy, or maybe they think the buyer is more likely to be loyal to them if they “think” they are approved quickly. When a buyer goes under contract on a home, the next step is usually to get a home inspection and termite inspection (the latter is more common in the south). Next, an appraisal is ordered which means by knowing the buyer has forked over around $700 to $1,000 to have these services performed. There are no takebacks or refunds if they later find out they can’t qualify for a mortgage on the house. If it’s a commercial property the bill is significantly higher. Before you go shopping for any real estate, be clear on how you intend on paying for it. There’s nothing worse for a seller to take their home off the market only to find out a month later that the buyer is not qualified to buy it. Lost market time can crush a seller’s equity and even destroy another deal they might be working on if they needed to sell in order to close on the next purchase. If you are raising private money, you should have more than one financial friend to work within the event the first investor or two flake out. Consider closing on the concept with several financial friends. By closing on the concept bring them up to speed on the particulars of your deal, how you intend to proceed, and then simply probe for their buy-in. Lastly, always offer a seller the option to accept payments for their equity. Notice how I said that, instead of saying “seller financing” which terrifies most sellers, dumb it down to say payments for their equity. This is because technically, the seller is NOT loaning you money, therefore they are NOT financing you. Instead, they are simply accepting payments for their equity.
20 minutes | 3 months ago
271 - Massive Pandemic Opportunity Coming Are You Ready?
According to Hud’s Housing Market Indicators Monthly Update for January 2021, 40.3% of Mortgages in America are reporting as delinquent as compared to 28.1% at the same time last year (Comparing January 2020 to January 2021. 2,056,000 mortgages are considered seriously delinquent (which means over 90 days past due) Only 5% are in forbearance That means that there is a title wave of defaulted assets building up looking for a shoreline to destroy. What does this mean for you? MASSIVE OPPORTUNITY! When the title wave hits it will be epic, beyond imagination and that’s not a conspiracy theory...that’s a fact! The Federal Government will likely extend the foreclosure ban when it’s up for renewal in an effort to plug a leak in the dam that’s only temporarily holding back the water. It doesn’t really matter whether you are for or against the foreclosure ban because it’s already happening, and there is nothing you can do about it, except PROFIT!. The mounting debt that is late mortgage payments won’t simply disappear. There will be no flick of a pen to put cash in the accounts of lenders, especially on privately held mortgages. Big banks will likely get bailed out again but note investors could get wiped out. How does this spell opportunity? For starters, mortgages that originated in the last several years were likely written at very low-interest rates. In the lifetime of any mortgage, the value of the property that secures it will rise and fall and rise again, that’s undeniable. Origination is the most expensive part of a mortgage for the borrower, after that it’s just interest and principal payback provided it’s paid on time. Let’s compare it to buying a new car versus buying a used car. When you buy a new car it’s estimated that it loses 10-20% of its value the very second you pull it off the lot. Much more is lost if your negotiating skills are lacking or you become desperate to sell it. When you buy a home, it’s common to pay thousands of dollars if not tens of thousands of dollars for closings costs and commissions for all the support staff used to find, fund, and close the transaction. That money, once spent, is often considered gone forever unless the buyer waits for the property to appreciate to a level that absorbs those closing fees. As an investor, when you buy a property from a motivated seller you can often secure a significantly discounted price and save a small fortune if you buy with cash or private money. By private money I don’t mean the typical hard money loans you hear about at your local real estate meeting or club, I’m talking about financial friends you assist in funding your purchases for the long term in order for them to capitalize on a much longer-term gain than is typical with other types of structures. You can also “take over” the existing mortgage by buying the property subject to the existing mortgage. Buying a property “subject to” means the underlying mortgage stays attached to the property and in the seller’s name. The deed is transferred into your name which means you own the property but the seller’s lender has a lien against it in the form of a mortgage. Provided you stay current on the loan, it’s likely you can simply make payments until paid in full with no issue. Here’s a great time to hire a Real Estate Attorney that’s well versed in the process to assist you in preparing the contracts and disclosures necessary to inform the seller of how things are going to happen. Here’s an example of what I mean: Jimmy bought a house 4 years ago for $300k and put 20% down resulting in a mortgage in the amount of $240,000 which has a payment of $1,145.80 plus taxes and insurance. He is having a tough time keeping up with his mortgage, in fact, he is 90 days past due. Like most Americans, Jimmy doesn’t have $5,000 laying around to get caught up, and each month it gets worse. Today the payoff would be approximately $222,000 if you bought it today. Assuming the property appreciated 10% per year, that would mean the property is now worth $439,230. This means that over $200k net profit is a reasonable event after paying commissions and fees. The only question that remains is, how much of that $200k are you willing to share with Jimmy and your team?
21 minutes | 3 months ago
270 - The Most Often Overlooked Critical Detail In Buying Real Estate
Today we will uncover the most often overlooked critical detail when it comes to closing on your next deal. Skipping this one detail could cost you thousands of dollars and possibly result in you losing ownership of the property you intend to buy. I am talking about the details found in your title insurance commitment, precisely the info found in section B 2 of the commitment where exceptions to title insurance coverage are listed. Before we dive in, I’d like to briefly explain what title insurance is and why you need it. Title insurance is designed to protect a buyer of real estate if any past issue relating to the marketability of title has been overlooked over the entire history of ownership for that particular property. Title insurance only protects you in the event of PAST title issues, not future ones. It’s designed to protect you from problems that may arise from things that happened before buying the property. By the way, when I say “property,” I mean any real estate where ownership transfers whether it be residential or commercial, vacant land, whatever. What’s an exception? An exception is a specific item set forth that is not covered by the policy, which is excluded from coverage. STANDARD EXCEPTIONS. Every commitment has standard or regional exceptions. The traditional Owner's Policy will not cover any defects in title, losses, or claims, which fall within the standard exceptions. Here are some examples of standard exceptions found on title insurance commitments: Municipal Liens (for things such as water, sewer, garbage service unpaid bills) Assessments for Water, sewer, streetlight, drainage, or other types of improvements arranged for by your local government. Unpaid Property Taxes Federal Tax Liens Court Judgments Foreclosure Proceedings Fines Rights of tenants as about specific unexpired lease backed rights Encroachments Boundary Issues Restrictive covenants such as deed restrictions or other restrictions that pertain to the use of the land Child Support Liens Please note that the actual value of any property, regardless of use, lies in the marketability of its title. To get a copy of a free cheat sheet put out by First American Title, go to cashflowguys.com/title If you buy any real estate piece without first obtaining Title Insurance, you are taking a huge risk! In many cases, if you buy a property from a wholesaler with a double close, you will not receive title insurance for the purchase, meaning you are entirely uninsured against issues from the past cropping up and ripping you off. In a perfect world, your Realtor should be reviewing the title commitment with you if you are buying a property. If you are not working with a Realtor, then understand that the title company or closing Attorney is usually NOT required by any law (per se) to review these items with you or to call your attention to them. However, they must provide a copy to you, often buried in a mountain of other documents. Sometimes these issues will prevent a lender from originating a new loan that uses the property in question as collateral. If issues are found and NOT listed as exceptions to coverage, the title insurance policy will pay for legal expenses and any other related expenses to correct the title issue if it impacts the marketability of the title. When reviewing this document before closing, you can see that the title company and seller clear all the exceptions before closing. Once the issues are corrected, be sure to either have a replacement title commitment created or insist that the one with the problem documented be “marked up” and signed off by the title closing agent/attorney. Once the item has been either removed or marked upon the commitment, you will have insurance protection if it comes up again as it relates to the marketability of the title.
18 minutes | 3 months ago
269 - The 1031 Trap
1031 is a tax savings tool that many Americans take advantage of every year. A benefit to some, a nightmare for others. Allow me to explain Before we get started…. I’m NOT a CPA or Tax Professional; the info herein is my opinion...wait, why do we say that? What has ever happened to a non-CPA giving advice? I have no stories to tell on the topic...if you do, email email@example.com because I’m curious A 1031 exchange is a legal vehicle for deferring capital gains taxes. By electing 1031 exchange status when selling one property and investing in other investment properties, you get spared from capital gains taxes. (temporarily) Why? Because those taxes are deferred, not excused or forgiven… To get the facts on the 1031B program right from the Internal Revenue Service, go to irs.gov and search 1031 for further details. Let’s talk about deferment for a minute... At the time of this recording, the US Debt Clock shows our current debt at almost 28 trillion dollars. Our elected bottom feeders are about to add 1.9 trillion dollars to that in the next 30 days. This means the US debt is spiraling out of control, how will we ever stay afloat as a country? Only one way...TAXATION!! Do you honestly think that taxes will EVER go down in the future? Spoiler Alert, they won’t, in fact, they can’t. So, if taxes are only going to increase over time, why would you want to defer your tax obligation to a future time when taxes are higher? The second thing to think about is the impact of being rushed on your decision-making ability. In order to complete a 1031 exchange, you have to designate the replacement property or properties within 45 days. Do you honestly think 45 days is enough time to find, negotiate and go under contract on a great deal? No.. Likely, because you lack the time to do so, you will wind up buying out of desperation to “just get a deal done” while the clock is ticking. Below we will get into the math.. By the way, “designating the properties” means a notice to the seller of each designated property. The seller will need to sign the notice (according to the IRS.gov website). That’s not much time to put a deal together no matter what the economy is doing. Is it easy to overpay when you feel pressured to make a decision? Yep Head over to IRS.gov and search form 8824 and download the instructions, there is lots of good info here that you should discuss with your tax professional before proceeding. Let’s talk math for a second. Using a capital gains calculator I found online, I entered the following information: Original Purchase Price: $150,000 Sale Price: $250,000 Annual Income of taxpayer $150,000 Filing Status: Single Capital Gains Tax: Approximately $16,900 (married taxpayer would have a slightly lower number) Have you ever lived there? This is what the IRS says about that ”If the property given up was owned and used as your home for at least a total of 2 years during the 5-year period ending on the date of the exchange, you may be able to exclude part or all of any gain figured on Form 8824. For details on the exclusion of gain (including how to figure the amount of the exclusion), see Pub. 523, Selling Your Home.” If You Choose to go the 1031 route… Step 1 – Find a 1031 Qualified Intermediary Like self-directed IRAs, you are required to use a qualified third-party provider to get the break from the IRS. They will help handle everything for you. Step 2 – Identify The Properties You Will Buy Upon the sale of your assets, you have 45 days to identify what properties you will reinvest in. Not that you can locate multiple properties. You don’t have to close on them all. Step 3 – Close On Your New Assets After closing on the sale of the properties you are exiting, you have 180 days actually to close on some of the deals you have identified. Note that you can also use your funds to improve or even build new properties.
20 minutes | 4 months ago
268 - How To Avoid The Fear of Eviction Bans
Currently, there is a Federal Eviction Ban in place until March 31st, there’s talk that will continue until September 30th and possibly beyond that date. If you own income property as I do, such headlines certainly don’t help us sleep well at night, do they? Some of the people I have talked to recently are thinking about dumping their portfolios. Others are talking about allowing leases to expire and just keeping the units vacant until this blows over. Many buyers are beginning to second guess their decision to make a purchase until this blows over. Frankly, I think it's a great time to buy because never before have we had times so uncertain. Uncertainty breeds motivation in sellers. The biggest future challenge for buyers will be in obtaining institutional financing as lenders will likely pull back from lending on income properties. Now is a good time to hone your capital raising skills, you can do that at PrivateMoneyCrashCourse.com The eviction ban only applies to a portion of the population which seems to exclude many tenants who think they may be covered under this ban. Be proactive in open communication with your tenants in the event they fall behind. Yes, there will be a percentage of “Professional Tenants” that will try to use this situation to their advantage, but I feel that percentage will be a minor one. Recently, rental assistance stimulus has been passed and is available in many areas. If you have a tenant falling behind i’d get up to speed on how you can apply on behalf of your tenant to get paid. Getting up to speed begins by calling your local state HUD office to get the ball rolling. Please know that there is TONS of misinformation out there to intentionally worry good people in times of financial crisis. Avoid news websites, or any other non-official government information source when it comes to learning about the programs and how your tenants can qualify. Let’s not forget that this crisis is not impacting everyone equally which means there are still lots of good quality tenants out there that are ready, willing, and able to pay your rent. Now is a great time to access the value you are providing to your tenants. It’s more challenging to intentionally screw over a good person, so be a good person and be sure you are providing more in use value than you are taking back in cash value. When talking to sellers, go ahead and bring the topic of eviction bans up in conversation and discuss it. A polite conversation about this topic can serve to motivate a seller even more than they already are to unload their rental property sooner rather than later.
22 minutes | 4 months ago
267 - Are Turn Key Rentals A Good Investment?
Turn key rentals continue to grow in popularity amongst beginning investors due in part to the belief that they are easier to acquire, manage and control. Although there are differing opinions on what is considered turn-key, it generally means that the purchase, rehab, and management as a rental is done by a third party instead of the individual investor having to do everything. While for many it's a realistic way to get your foot in the door to the world of investing the end results are often less than exciting. Ease of Acquisition: Most people have a tough time putting deals together, they don’t have the time or desire to work their own seller leads. To buy a turnkey rental you simply place a deposit and wait for your turn. The easier something is to buy, the more people are generally willing to pay for it. This means that turnkey providers can often pack a hefty profit into each deal for themselves because people love the done for you model. Such a practice means skinny margins for the end buyer. Proforma Returns: Turnkey providers often use proforma documents to outline the expected profits from owning the property they are advertising. It's important to note that these numbers are rarely ever achieved and the actual returns are often considerably lower. You should do your own independent research to double-check the expected returns as advertised by the provider. Call three property managers and ask them what the rent amount should be based on the specific address you are thinking about buying. Ask them if they would manage it and how much they would charge. Also, ask them if they would feel comfortable replacing tenants if the need arose in a reasonable time frame. Be sure to check each expense to verify its accuracy, often what’s listed is an estimate, sometimes it's just a guess. Repairs and Rehab: Always get a home inspection done, even if the property was freshly renovated. Having a third party licensed home inspector to double-check everything and provide a report is a worthwhile minor investment. Expect to pay between $400 to $600 for a home inspection on a single-family home. Multi families will cost more and are usually priced per unit. The inspector will be able to check and report on the electrical system, plumbing, HVAC, Roof, and overall condition of the property. After receiving the inspection report, be sure to have the provider take care of any needed repairs BEFORE closing, especially safety items such as those that involve electricity, gas, or structural issues. Summary: Turn-Key Rentals can be a good investment for those who lack the desire or skill to go at it themselves. Because more people are involved in the acquisition lower returns should be expected but some return on investment is much better than no return on investment. Doing nothing will lead to your nest egg being consumed by inflation as time move on, don’t get caught up in that.
26 minutes | 4 months ago
266 – How To Get More Deals Without Knowing How To Sell
Knowing the appropriate time to make an offer isn’t something that most folks think about, however it is something that needs not to be overlooked. Putting out an offer too soon can often lead to instant rejection. Putting out an offer too late may cause the seller to think you are a tire kicker. Sellers often want us to make an offer as soon as possible, why is this? The urgency to receive your offer usually is because of one or two reasons, they are nervous about the selling process and want to get it over with as soon as possible OR because they suspect you might just be wasting their time. Have you ever been concerned about saying the wrong thing to the seller and upsetting or offending them? Does the thought of not knowing what to say to a seller make you a bit nervous? Everyone says to build rapport with the sellers, heck, I teach that too, but I realize it’s a huge challenge to build rapport with a stranger these days. Social Media, The Pandemic, and just plain everyday society make it more challenging than ever for many people to build relationships these days. In recent years humans have grown to be far more skeptical than ever of each other. Some gravitate to communicating via text messaging so they can avoid being face to face or having to speak spontaneously. Others use social media as a means to communicate. It is helpful to understand that being shy doesn’t begin and end with buyers, it’s a real issue amongst sellers too. Fear of confrontation and shyness is a huge part of why many homeowners hire Realtors to sell their homes for them. For many, it’s worth paying tens of thousands of dollars to avoid a potentially uncomfortable experience. So how do we overcome these issues? One word….TEAM Sales skill is not inside of each and every human, it’s a rare breed that has the skill and enjoys the process. Some people jump out of airplanes for a thrill, others? (people like me), we SELL! If you are not a Rockstar salesperson and feel you would not enjoy learning how to become that Rockstar, join forces with someone who IS a great salesperson. A great salesperson knows exactly when it is time to make the offer and close the deal. Why waste time learning a skill that you likely will never use and will ultimately make you feel uncomfortable in attempting? By bringing on a salesperson or “acquisition manager” you will garner far better lead conversion results than you could ever expect to achieve on your own. I know you might be thinking but wait! I can’t afford to pay a salesman right now. I have good news for you, a Rockstar salesperson does not expect to get paid until they close a deal. This means you can compensate them for the deal itself. Compensation can come in the form of a cash payment at closing, it can even be financed into the deal sometimes! Wait, what? Rabbit Hole Warning! Financed into the deal? Yes, you can pay out to vendors in a deal at the closing table by simply adding the amount of the payout to the sales price and then having the payout listed as a disbursement at closing. As long as the property appraises for the revised sales price if using a bank loan then everything should work fine. It wouldn’t hurt to keep your loan officer/processor in the loop as to your intent so there are no “gotcha’s” to sneak up in the final hours before closing. You can bring your salesperson in on the deal and pay them a portion of the net monthly cash flow. You could pay them a lump sum amount of future appreciation in a specified time frame. I have paid vendors using a note and mortgage recorded against the property for collateral and then made monthly or annual payments to them. Want to dive deeper into this topic? Then dig in by listening to this week’s episode.
18 minutes | 4 months ago
265 - Who Should You Be Talking To
In this episode of the podcast, I explore the specific criteria that make for a motivated seller lead. Too often we waste time, effort, and money marketing to unmotivated sellers who are not interested in selling to us. Instead, when compiling a list of people to market to, deep dive into the available criteria to come up with a formula that will lead you to discover motivated sellers. As you might imagine, motivated sellers are more receptive to selling at a discount and also are far more likely to seriously consider creative acquisition solutions. Something as simple as choosing to market to vacant properties instead of occupied ones can make all the difference in the outcome of your marketing campaign. I also announce the names of the two winners of the one-year free subscription to Propstream. Don’t miss this episode there is lots of value. If you want to sign up for a 7-day free trial to get motivated seller leads, go to CashFlowGuys.com/Data
19 minutes | 5 months ago
264 - A New Beginning
Today is January 1st, 2021. It’s a new year that also marks the end of 2020. This means 2020 is behind us. Nothing good comes from reflecting back on the drama of 2020. There is no need to look back on your past, instead, let’s get focused on the changes we can make moving forward to better ourselves and those around us. If you have bad credit or low credit as some say, start paying your bills and correct the situation. Call your creditors and work out a resolution. If you can’t work through this one problem I guarantee you will fail as a real estate investor because you will certainly encounter greater challenges as an investor than negotiating with creditors. If you are saddled with credit card debt, stop using them today and begin paying them off as fast as possible. Dave Ramsey teaches Financial Peace University which will make it simple to get out of debt if you are willing to do the work. If you are under-earning, stop overspending and focus on earning what you are worth. If you are not earning what you are worth, change jobs, change careers or work more hours to get out from underneath the grasp of your creditors. You can fix your own problems, that begins with admitting you have a spending and/or earning problem. Please stop lying to yourself. Do not leverage the equity in your home, it’s a trap that could leave you homeless. Learn how to raise private money instead. If you refuse to learn how to raise private money you will most likely fail as a real estate investor because banks only loan money to people who do no need it. Closing costs alone will greatly reduce and profits you hope to make in the first few years. Don’t leave your financial future to be decided by some salaried loan officer making chump change as an annual salary. If you are about to do a deal, will it pay for itself? Are you taking the opinion of those who stand to benefit by you proceeding with the deal? Sellers Lie, Realtors Lie, Wholesalers Lie...facts are facts so verify everything. Embrace the idea that you MUST generate motivated seller leads to survive. Nobody will bring a great deal to your front door ever, instead you will need to go out and seek motivated sellers. There is no such thing as a property that is priced right. Everything is overpriced, always has been always will be so stop looking for a “great deal” to be advertised. Finding a great deal has nothing to do with the asking price. Sellers, Realtors, and Wholesalers are not appraisers. Also, the appraiser’s opinion of value doesn’t really matter either. What matters is knowing if the property will yield the profit margin you believe it will, if not, you are not done negotiating. Don’t guess about anything in 2021. Don’t guess as to why someone is selling, ASK Don’t try to guess what number a seller will say yes to...talk to them instead. Remove as many middlemen from the equation as ethically possible. That doesn’t mean you should go around Realtors or wholesalers who have a written agreement with a seller, instead, market directly to non represented sellers yourself and filter them down such that you only speak to the non-motivated ones. The Bottom line is that 2021 can and will be your best year ever. For that to happen, you have to give yourself permission to fail and continue to fail until you succeed. You know right from wrong, you know what’s logical and what’s not. You don’t need to invest tens of thousands of dollars into education to buy an investment property, instead, apply basic logic and you will far exceed your expectations.
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