Business Strategies Transcriptions
Chapter 1: Lesson 1: Page 6: Business Strategy Overview
As a real Estate investor it’s important for you to understand all the different exit strategies that you have when you get leads on properties. So whether you’re looking at deals on the MLS or whether sellers are calling you, you’re getting leads into your business and everytime you get a lead on every call there’s an opportunity it’s up to you to analyze that lead and determine what possible exit strategy you could use. For example, if the leads a good one you could wholesale the deal or you could rehab the deal, or possibly do a prehab on the deal, or it could be something that you buy and hold, or it could be something that you refer to another investor or something that you refer to a real estate agent to list. So every lead that comes into your pipeline, what you do is you analyze it and you determine what the best strategy for that particular lead is.
Chapter 1: Lesson 4: Page 1: Your Business Strategy Over Time
Realize that over time, your real estate investing focus and how your real estate investing business looks is going to change. What you’re doing now, in your first 6 months, your first 12 months may be very different from what youre doing 3 years from now and what youre doing 5 years from now. Realize your family life, your financial situation, things will change and you’re going to have to make choices about how your business works and does it fit the lifestyle that you currently want. So, for example, my personal real estate investing business- my business partners and I, we started out wholesaling and focusing on small rehabs and we decided we were going to learn the business by focusing on these 2 core niches. Now overtime, our business looks very different than it did a decade ago. As we gained experience, as our needs and our family life changed we decided to focus on other strategies as well. We started buying rental properties, we started looking at commercial properties. So , realize, every single year you’re going to be evaluating what your business model looks like, making small changes to benefit from what’s happening in your local real estate market. Benefit from national changes that have happened that might be affecting the real estate market as a whole and looking at your personal lifestyle and making decisions and you’ll see, overtime, and if you talk to mastery alumni who’ve been in the business for a number of years, they may have started doing this and now they’re here doing this particular niche and realize there’s always opportunities to take advantage. As the market goes through cycles, as REIAs change and as your personal needs change you have to always be looking at your business at least once a year to determine and make sure that you have the best strategy that’s working for you.
Chapter 2: Lesson 1: The 3 Steps of a Wholesale Deal
Here are the 3 main steps of wholesaling. After you’ve acquired a property and put it under contract your first step will be marketing the property to your buyers list. Once you have found an interested buyer or buyers you will be ready for step 2. Prequalifying those candidates and showing the property. Once you have narrowed them down to one qualified buyer you will move on to step 3- the close. During this process, you will choose between 2 closing strategies- an assignment of contract, or the double close. After you choose your closing strategy it will be time to monitor and process the paperwork and go through the final closing process. Once you have closed on your wholesaling deal it will be time to celebrate.
Chapter 2: Lesson 2: Page 2: Assignment of Contract
An assignment of contract is a wholesale strategy in which you sell your rights to the contract and never actually own the property. You’ll get the property under contract and provide the seller with earnest money. The purchase and sale agreement has the verbiage of assignment, meaning you, or whoever you authorize, gets that contract. Who pays the closing costs? Well when you do an assignment of contract there aren’t actually any closing costs for you because the payment is for the contract itself. You never actually own the property and thus you don’t actually need any funding for this type of transaction. Keep in mind, you need to check your state regulations to determine appropriate payment structures when implementing this strategy.
Chapter 2: Lesson 2: Page 3: Double Close
A double close is a wholesaling strategy in which you have to buy the property from the seller and immediately sell that property to another investor. You can’t use the end buyer’s funds, you must have your own to buy the property and pay the closing costs then you sell the property to the buyer and you pay those closing costs as well. The benefit of the double close is that the seller doesn’t know how much money you are making for the deal. Keep in mind, you need to check your state regulations to determine appropriate payment structures when implementing this strategy.
Chapter 2: Lesson 2: Page 10: Think like a Marketer
Always be thinking like an entrepreneur and a marketer. If you have a traditional wholesale deal, ask yourself, who in your database is your target buyer that you can wholesale that property to? Perhaps it’s a rehabber or if it’s a reverse wholesale deal and you don’t have a property yet, but you have a really good buyer you might look in reverse and say how can I go out there and target specific deals that might fit this buyer’s needs. Then you’re going to gather the details on what the buyer needs and utilize and leverage your network. You can go out there and work with other real estate investors and see if they have any inventory for your buyer. You have to always be creative, always think outside of the box, and try to maximize every relationship and every lead that you get as a real estate investor.
Chapter 2: Lesson 3: Page 6: Wholesale Bonus Tip
Here’s a great tip, when youre doing wholesale deals, always try to negotiate to a point where you’re earning a 10% wholesale fee. Now you might not always get it. For example, on a $200,000 house if you negotiate a 5% spread, well, you’d be earning a $10,000 fee right? Always try to get to that 10% margin though. That’s a good number to shoot for. Now you might not always get there, but at least it give you a good idea of where to start.
Chapter 3: Lesson 1: Page 2: The 7 Steps of Rehab
Here are the 7 steps of a rehab deal. The first step is preparing for your rehab. Most of your work will be done in the planning stages. This will give you a rough idea of how many repairs are needed to update the property. The second is the scope of work. This gives you the information you need to get a contractor bid for materials and labor costs. Once you have your scope of work written up, it’s time for step 3, hiring your contractor. It’s always best to get a referral for a contractor, either way, the contractor will need to follow your system, not the other way around. Once you choose your contractor it’s time to show them the 6 critical documents, which is step 4. These documents will help you to get everything in writing which will protect you and others. In step 5 you will be managing the rehab. Educate yourself on costs, steps involved and the time it will take to keep the project on track. Establish milestones and inspection schedule to make sure that the project stays on schedule and on budget. Finishing construction will include anything that needs to be changed or redone. Any changes require a change order in writing. Do it right the first time to pass inspections and ensure the buyer gets a safe home. Step 6 is the contract closeout and the final payouts to your contractor. You will want to walk through the property and note any final items that need to be completed before issuing the final payment, this will also be the time to schedule any inspections required to close out your building permits. Once the permits have been signed off on and you are happy with the completed project, you will make your final payment to your contractor. The finishing touches and staging the home are the final steps of the process. Step 7, stage the property so that people can envision themselves in the home, then sell it, and don’t forget to celebrate.
Chapter 3: Lesson 3: Page 2: Best Practice: Start Pre-Selling
Here’s a bonus tip. Once you own a property and you start rehabbing a property always go into a presale mode. Put up a for sale sign in the yard to generate interest. Possibly email potential buyers that have contacted you in the past about other properties. Now, just a note, when you presale a property you have to be cautious, don’t show the property until the drywall is up because a lot of people have a hard time visualizing what the property is going to look like if the wall is open. Now we will show buyers through the properties but there are a couple things you want to be aware of. Number one, make sure your contractors are always cleaning up the job site so if you do walk a buyer through and maybe just the sheet rock is up on the walls and you haven’t installed everything yet you want to make sure that that property is at least as clean as possible. So that’s a huge tip when it comes to preselling the property. You can also have an agent. And if you’re going to work with an agent to sell the property you can have them post the property for sale on their personal website and market it to their buyers list ahead of time as well. Now don’t and this is a rule, don’t ever post the property on the MLS until the rehab is done and professional pictures are taken of that property. That’s one thing you want to make sure that you don’t violate. So those are just some short tips on preselling a property.
Chapter 3: Lesson 3: Page 3: Prehabbing
Another strategy we have utilized over the years is called prehabbing. It’s a hybrid strategy where you buy the property, you actually close on it, you do some minimal work, were talking cleaning up maybe do some demo or just getting the junk out of the house, and then you sell the house to another investor. The reason we call it a prehabbing is because it’s a combination of a wholesale and a rehab. Now you are not doing the entire rehab, you’re just getting rid of the junk so you can maximize the price when you sell it to another investor and it’s something we’ve done on quite a few properties that’s been very profitable for us.
Chapter 4: Lesson 1: Page 2: The Passive Income Club
The passive income club develops a comprehensive plan to eliminate the guesswork involved in investing so you can follow the same investment decisions that Than, Paul, or JD would make. You can invest in the very same markets, with the same property managers and the same rehab crews as FortuneBuilders. If you’re using your own money for passive investments, you may need to find other sources of capital to fund your active business. We teach this strategy in the Mastery program. To protect your own capital from fluctuations that might occur on the active side of business, we have found the most effective way to run that side of your business to use other people’s money.
Chapter 4: Lesson 2: Page 1: Testimonial 1
Hi we’re Francis and Gary Willison. We’re from Houston, Texas. We joined mastery back in February of 2013. We got started on our passive income first because we watched the video the true definition of wealth by Paul Shively. Made us realize that we probably needed to pause from looking for deals and starting on the active side. Probably needed to set up our entities with NCH and get started on the passive income. We’re both engineers and over the years we have both had some nice paying jobs. We both have 401ks and through the mastery program and NCH we learned that we could consolidate those into a self directed account and actually use those to buy real estate properties. So again, Terry Givens our passive income coach, recommended that we put the active business on hold until we got our passive income set up. So the passive income club hooked us up with Memphis invest and in may of 2013 we started purchasing properties. So we ended up purchasing 6 properties in Memphis and 3 in Dallas and one in Dallas was a 4plex so we have approximately 12 tenants and to date we’re getting about $7600 a month. SO right now we are tickled pink with the program. Our goal is $20,000 a month passive income and we should hit it just short of 10 years in the program.
Chapter 4: Lesson 2: Page 2: Bonus Testimonial
One of our favorite features of the program is the hands off approach, the turnkey cash flow concept is amazing. The fact that you don’t have to see the house, you don’t have to rent the house, you don’t have to repair the house. You’ve got an A+ property management in place. Basically all you do is pick out the property, close on the property and from then on Memphis Invest takes care of all of the details. The concept of just working on this project for 4 hours a year is just amazing. A 4 hour work year is pretty hard to believe, but it’s true, once you get it set up, you get the properties in your plan, you just basically go to the mailbox and pick up your money.
Chapter 5: Lesson 1: Page 2: Market Conditions
Let’s talk about your local real estate market. First and foremost, you can make money in any market. There’s always opportunities the question is: are you doing everything to discover and uncover those opportunities. As a real estate investor, realize, there are market differences, however, I don’t care where you live, there are people making money in real estate in your market. And what you want to do is study what other people are doing so you are never missing niche opportunities that might exist in neighborhoods. For example, we like to buy in transitional neighborhoods where we can buy on the low comps and then sell on the high comps. And I discovered this a long time ago and its benefited us so many times and we will target those areas. You might find areas where you can subdivide a lot and put up 2 houses or 2 townhomes. What you realize is that you want to have a pulse on the market and you want to look at what other investors are doing to make money. Then you’re going to process it based on your goals to benefit from some of those things that are happening in your particular market so always pay attention to what’s going on. Another great tip is definitely attend some of the local planning and zoning meetings. You’re going to get some insider information about what’s happening in certain areas of town. Are there schools being put in that are going to raise property values. Is there something going on that might lower property values in a certain area. Those are great meetings to attend to learn what’s going on in your local market so that you can benefit and maximize your potential as an investor in your specific market.
Chapter 5: Lesson 1: Page 4: Demand
Buyer demand can vary from one neighborhood to another depending on the region. Neighborhood 1 might make up the majority of the demands for buyers notwithstanding the size of the homes while just 2 miles away on the same street, neighborhood number 2 might have more homes being rented out; possibly homes that are adjacent to apartment complexes.
Chapter 6: Lesson 1: Page 4: Marketing Systems
Now we’re going to get into a lot more detail on marketing and other marketing campaigns, however I want you to understand the importance of marketing right now. It’s one of the most important topics you can learn and you’re going to spend a lot of time through the course of this program learning how to market. It’s one of the most critical areas of the business because it’s what drives your deals. Without marketing you’re not going to make any money because you’re not going to have any deals to make money on. This is an area you’re going to want to master and pay attention to and become a master marketer. These are the foundational strategies you should utilize in your real estate business, chances are, if your business is going stale for any reason, you might want to go back and revisit these strategies to get your business back on track . By actively looking at and leveraging these tools and people on a daily basis that’s how you’re going to grow your business and achieve your goals.