Complete Guide to Real Estate

1
The
Complete Guide to
Getting
Started
Day 1 Finding Analyzing Deals
Day 2 Choosing A Profit Strategy
Day 3 Putting It All Together
2
Day 1Finding Analyzing Deals
Creating Wealth with Real Estate
Finding Deals

• Motivated Sellers

• Where to Find Deals

• Targeting Sellers

Evaluating Discount Property
Evaluating Income Property Cash Flow
Financing With No Money Down
Conventional Financing
3
Day 1Finding Analyzing Deals
What will it take for you to be wealthy?
4
Day 1Finding Analyzing Deals

• Learn The Wealth Formula
• Learn Types of Income
• Develop Millionaire Mindset
• Implement Wealth Formula
• GET STARTED

5
The Wealth Formula
Day 1Finding Analyzing Deals

• Constant Investment
• Time For Growth
• What Yield Will You Learn To Get
• Wealth Result

6
Stage One Investing
Day 1Finding Analyzing Deals

• Amount Invested 165 Per Month
• Time Period 25 Years
• Rate of Return ???????
• Financial Goal 1,000,000

7
Day 1Finding Analyzing Deals
25
20
Money plus Knowledge
15
10
Amount Invested 165 a month
6
3
0
8
Day 1Finding Analyzing Deals
3,800,000!!

25
1,400 K
20
Or Residual Rates?
535,000
15
218,000
10
114,000
6
73,000
3
49,500
0
Twenty-Five Years
9
Types of Income
Day 1Finding Analyzing Deals
Linear
Residual

• Time For Money
• Results For Money

• Assets For Money

10
Wealth Characteristics
Day 1Finding Analyzing Deals

• Burning Desire
• Goal Oriented
• Decisive In Nature
• Surrounded By Master Mind Team
• Specialized Knowledge

11
Real Estate Flip
Day 1Finding Analyzing Deals

• Buy For 150,000
• Sell For 180,000
• Profit 30,000

12
Yield
Day 1Finding Analyzing Deals
Profit
Rate of Return
Investment
30,000
20
150,000
13
Leverage
Day 1Finding Analyzing Deals
120,000 from Bank
150,000 Price
30,000 from You
30,000
100
30,000
14
Balance
Day 1Finding Analyzing Deals
Business
Linear Income
Assets
Residual Income
15
Day 1Finding Analyzing Deals

Creating Wealth with Real Estate
Finding Deals

• Motivated Sellers

• Where to Find Deals

• Targeting Sellers

Evaluating Discount Property
Evaluating Income Property Cash Flow
Financing With No Money Down
Conventional Financing
16
Day 1 - Finding Analyzing Deals
Day 1Finding Deals/Motivated Sellers
GOALS

• At the end of this session, you will be able to
• Recognize a motivated seller
• Summarize why sellers become motivated
• Explain how to target motivated sellers

17
Day 1 - Finding Analyzing Deals
Finding Deals/Motivated Sellers

• Types of Motivated Sellers
• Price (wholesale) willing to discount the
  price to get a quick sale
• Terms willing to discount the terms to get a
  quick sale

18
Day 1 - Finding Analyzing Deals
Finding Deals/Motivated Sellers
Reasons Sellers Become Motivated

• Personal affect only the seller
• Property attach to the property
• Economic relate to general
  location or the local economy

19
Day 1 - Finding Analyzing Deals
Finding Deals/Motivated Sellers
Reasons Sellers Become Motivated
Personal

• Owners location
• Health
• Retirement
• Divorce
• Financial

• Job Transfer
• Tired Landlord
• Death in the family
• Poor Management
• Bad Partnership

20
Day 1 - Finding Analyzing Deals
Finding Deals/Motivated Sellers
Reasons Sellers Become Motivated
Property

• Poor Management
• Poor Financing
• Property Condition
• Obsolescence

21
Day 1 - Finding Analyzing Deals
Finding Deals/Motivated Sellers
Reasons Sellers Become Motivated
Economic

• Local Economic Changes
• Local Neighborhood Changes
• Law Changes
• Zoning, Rent Control, etc.

22
Day 1 - Finding Analyzing Deals
Finding the Deals/Where to Locate
Realtors/MLS

• Types of sellers
• Pros
• Cons
• Tips

23
Day 1 - Finding Analyzing Deals
Finding the Deals/Where to Locate
Newspapers

• Types of sellers
• Pros
• Cons
• Tips

24
Day 1 - Finding Analyzing Deals
Finding the Deals/Where to Locate
Legal Newspapers

• Types of sellers
• Pros
• Cons
• Tips

25
Day 1 - Finding Analyzing Deals
Finding the Deals/Where to Locate
Driving for Dollars

• Types of sellers
• Pros
• Cons
• Tips

26
Day 1 - Finding Analyzing Deals
Finding the Deals/Where to Locate
Foreclosures

• Types of Sellers/Foreclosure Process
• Pros
• Cons
• Tips

27
Day 1 - Finding Analyzing Deals
Finding the Deals/Where to Locate
Bird Dogs

• Types of sellers
• Pros
• Cons
• Tips

28
Day 1 - Finding Analyzing Deals
Finding the Deals/Where to Locate
Courts

• Types of sellers
• Pros
• Cons
• Tips

29
Day 1 - Finding Analyzing Deals
Finding the Deals/Where to Locate
Bird Dogs/Networking

• Types of sellers
• Pros
• Cons
• Tips

30
Day 1 - Finding Analyzing Deals
Finding the Deals/Where to Locate
Advertising

• Flyers
• Business Cards
• Newspaper Ads
• Direct Mail
• Car Signs

• Radio TV
• Website
• REIA Groups
• Expired MLS
• Yard Signs

31
Day 1 - Finding Analyzing Deals
Finding the Deals/Where to Locate
Advertising

• Types of sellers
• Pros
• Cons
• Tips

32
Day 1 - Finding Analyzing Deals
Finding the Deals/How to Target
Contacting Sellers

• Advertising
• Direct Mail
• Telemarketing
• Drive bys/Door knocking

33
Day 1 - Finding Analyzing Deals
Evaluating Income Property
SESSION REVIEW

• What we covered this session
• How to recognize a motivated seller
• Why sellers become motivated
• How to target motivated sellers

34
Day 1Finding Analyzing Deals

Creating Wealth with Real Estate

Finding Deals

• Motivated Sellers

• Where to Find Deals

• Targeting Sellers

Evaluating Discount Property
Evaluating Income Property Cash Flow
Financing With No Money Down
Conventional Financing
35
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
GOALS

• At the end of this session, you will be able to
• Summarize key focal points of valuing and
  analyzing discount property
• Explain how to use a CMA
• Perform a discount analysis

36
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
7 Steps of Evaluation

• Find the Property
• Find the comps
• Estimate Repairs
• Estimate Costs
• Evaluate Exit Strategies
• Estimate Profit Potential
• Complete Acquisition Sheet

37
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
Focal Points

• Location
• Property Condition
• Price
• Financing
• Sellers Motivation/Flexibility

38
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
Comparables (Comps)

• Address
• Sq footage
• Age
• Bedrooms
• Baths
• Gar/Carport
• Lot Size

• Construction
• Price
• Days on Mkt
• Extras
• Distance
• Subdivision
• Appraisals

39
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
Finding Comps

• Tax Rolls
• Web Sites
• MLS/Realtors
• Driving for Dollars
• Listing Services

40
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
Estimating Repairs

• Initial Self Inspection
• Measuring Tape
• Ground Tester
• Marble
• Screw Driver
• Software
• Licensed Inspector

41
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
Estimating Costs

• Buying Costs
• Holding Costs
• Closing Costs

42
Day 1 - Finding Analyzing Deals
Evaluating Income Property
SESSION REVIEW

• What we covered this session
• Key focal points of valuing and analyzing
  discount property
• How to use a CMA/Find Comps
• How to perform a discount analysis

43
Day 1Finding Analyzing Deals

Creating Wealth with Real Estate

Finding Deals

• Motivated Sellers

• Where to Find Deals

• Targeting Sellers

Evaluating Discount Property
Evaluating Income Property Cash Flow
Financing With No Money Down
Conventional Financing
44
Day 1 - Finding Analyzing Deals
Evaluating Income Property
GOALS

• At the end of this session, you will be able to
• Define key terms of cash flow analysis
• Explain how to perform a cash flow analysis
• Recognize pitfalls of cash flow analysis

45
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
Cash Flow Analysis
__________ Projected Gross
Income __________ - Vacancy Loss __________ -
Collection Loss __________ Effective Gross
Income __________ - Fixed Expenses __________
- Variable Expenses __________ Net
Operating Income __________ - Debt
Service __________ Pre-tax Cash Flow
46
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
Cash Flow Analysis
Projected Gross Income Monthly rent ?12 Vacancy
Loss Accounts for time when property is not
rented Effective Gross Income Amount that
remains to pay expenses Fixed Expenses Any cost
not related to occupancy
47
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
Cash Flow Analysis
Variable Expenses Any additional costs Net
Operating Income Income before any mortgage
payments Debt Service Mortgage payments Pre-Tax
Cash Flow Cash flow before paying taxes
48
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
Pitfalls of Cash Flow Analysis

• Overestimation of income
• Lease price vs. actual rent
• Undervaluation of vacancies

49
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
Pitfalls of Expenses

• Underestimation of fixed and variable
  expenses
• Omission of expenses
• Omission of maintenance expenses

50
Day 1 - Finding Analyzing Deals
Evaluating Discount Property
Estimating Expenses

• 20 of effective gross income
• Three years of tax returns
• Audited financials
• Management company reports

51
Day 1 - Finding Analyzing Deals
Evaluating Income Property
SESSION REVIEW

• What we covered this session
• Key terms of cash flow analysis
• How to perform a cash flow analysis
• How to recognize pitfalls of cash flow
  analysis

52
Day 1Finding Analyzing Deals

Creating Wealth with Real Estate

Finding Deals

• Motivated Sellers

• Where to Find Deals

• Targeting Sellers

Evaluating Discount Property

Evaluating Income Property Cash Flow
Financing With No Money Down
Conventional Financing
53
Day 1 - Finding Analyzing Deals
Financing With No Money Down
GOALS

• At the end of this session, you will be able to
• Explain factors affecting creative finance
• 2. Explain the following strategies
• a. Seller finance
• b. Second mortgage
• c. Wrap around mortgage
• d. Lease Option
• e. Subject To
• 3. Name 15 creative strategies

54
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Factors Affecting Creative Finance
Creative Finance a financing arrangement in
which maximum share of invested resources comes
from other people rather than from yourself
55
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Key Terms

• Balloon Mortgage
• Short-term, fixed-rate loans with fixed monthly
  payments
• Set number of years, followed by one large, final
  balloon payment (the balloon) for the balance of
  the principal
• Usually due at the end of five, seven, or 10 years

56
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Key Terms

• Note Promissory Note
• A written promise to pay a specific amount of
  money with interest at a specific rate for a
  specific period of time
• Owner Financing
• Seller accepts a promissory note as part of the
  purchase price
• Also called seller financing

57
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Key Terms

• Deed
• A written instrument that, when executed and
  delivered, conveys title to or an interest in
  real estate.
• Mortgage
• Instrument between lender and borrower. A
  conditional transfer or pledge of real estate as
  security for the payment of a debt. Also, the
  document creating a mortgage lien.

58
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Factors Affecting Creative Finance

1. At what price
2. Using whose financial resources?
3. How soft/hard are the other people?
4. What size of down payment?
5. When is the down payment due?
6. In what form of consideration?
7. What rate of interest?
8. What repayment term?

59
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Factors Affecting Creative Finance
1 2 3 4 5 6 7 8 9 10 Total
Price
Whose
How soft/Hard is ?
How big is down pmt?
When is down pmt due?
Consideration?
Interest rate?
Repayment Term?
60
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Creative Offers 101
Ultimate Paper Out - Who - Why -
Considerations
61
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Creative Offers 101
Second Mortgage - Who - Why -
Considerations
62
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Creative Offers 101
Wrap Around Mortgage - Who - Why -
Considerations
63
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Creative Offers 101
Lease Option - Who - Why -
Considerations
64
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Creative Offers 101
Buying Subject To - Who - Why -
Considerations
65
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Creative Offers 101
Buying with Hard or Private Money -
Who - Why - Considerations
66
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Thinking Outside of the Box

1. Joint ventures/partners
2. Buy low/refinance high
3. HELOC
4. Borrow the brokers commission
5. Satisfy sellers needs
6. Deposits, rent credits, tax credits
7. Government Programs

67
Day 1 - Finding Analyzing Deals
Financing With No Money Down
Thinking Outside of the Box

1. Credit Cards
2. Borrow from friend/relative
3. Refinance
4. Car loan/boat loan
5. Unsecured bank loan
6. Signature loan
7. Credit partners

68
Day 1 - Finding Analyzing Deals
Evaluating Income Property
SESSION REVIEW

• What we covered this session
• Factors affecting creative finance
• 2. Cookie Cutter financing strategies
• a. Seller finance
• b. Second mortgage
• c. Wrap around mortgage
• d. Lease Option
• e. Subject To
• f. Hard money vs. Private money
• 3. Alternative ways to finance deals

69
Day 1Finding Analyzing Deals

Creating Wealth with Real Estate

Finding Deals

• Motivated Sellers

• Where to Find Deals

• Targeting Sellers

Evaluating Discount Property

Evaluating Income Property Cash Flow

Financing With No Money Down
Conventional Financing
70
Day 1 - Finding Analyzing Deals
Conventional Financing
GOALS

• At the end of this session, you will be able to
• Explain the difference between hard money
  lenders and conventional finance
• 2. Understand basic loan programs
• 3. Understand property qualifications
• 4. Understand borrower qualifications

71
Day 1 - Finding Analyzing Deals
Conventional Financing
Hard Money vs. Conventional

• LTV (Loan to Value)
• Interest
• Points
• Payment Schedule
• Repair Money
• Closing Costs

72
Day 1 - Finding Analyzing Deals
Conventional Financing
Conventional Non - Conforming Loans

• Fixed Rate
• Adjustable Rate
• Balloon/Reset
• Second Mortgage
• Equity line of credit

73
Day 1 - Finding Analyzing Deals
Conventional Financing
Fixed Rate Mortgage
Description Constant, fixed payments during the
term of the loan
Advantages
Disadvantages

• Monthly payments are fixed over the life of
  the loan
• Interest rate does not change
• Protected if rates go up
• Can refinance if rates go down

• Higher interest rate
• Higher mortgage payments
• Rate does not drop if interest rates improve

74
Day 1 - Finding Analyzing Deals
Conventional Financing
Adjustable Rate Mortgage
Description Lower initial interest rate,
interest is adjusted periodically, have defined
adjustment periods
Advantages
Disadvantages

• Lower initial monthly payment
• Lower payment over a shorter period of time
• Rates and payments may go down if rates
  improve
• May qualify for higher loan amounts

• Payments may change over time
• Potential for high payments if rates go up

75
Day 1 - Finding Analyzing Deals
Conventional Financing
Balloon/Reset Mortgage
Description 30 year amortization and fixed rate
loan. Entire balance due at end of specified term
Advantages
Disadvantages

• Lower initial monthly payment
• Lower payment over a shorter period of time
• Many balloon mortgages offer the option to
  convert to a new loan after the initial term.

• Risk of rates being higher at the end of the
  initial fixed period
• Risk of foreclosure if you cannot make
  balloon payment or if you cannot refinance or
  if you cannot exercise the conversion option

76
Day 1 - Finding Analyzing Deals
Conventional Financing
Second Mortgage
Description A second loan on the equity of the
home, carry higher interest rates, shorter terms
Advantages
Disadvantages

• Fixed payments
• Interest may be tax deductible

• Higher interest rates than on 1st mortgages
• Harder to refinance your first mortgage

77
Day 1 - Finding Analyzing Deals
Conventional Financing
Equity Line - HELOC
Description Revolving lines of credit that use
real estate as collateral
Advantages
Disadvantages

• Only borrow what you need
• Pay interest only on what you borrow
• Flexible access to funds
• Interest may be tax deductible

• Rates can change. The maximum interest rate
  is normally high.
• Payments can change
• Harder to refinance your first mortgage

78
Day 1 - Finding Analyzing Deals
Conventional Financing
Conventional-Conforming Loans

• Sub-Prime
• Interest Only
• Stated Income
• Power Option

79
Day 1 - Finding Analyzing Deals
Conventional Financing
Sub-Prime Loans
Description Offered to borrowers with poor
credit history, may require more down, higher
interest
Advantages
Disadvantages

• Potential for reestablishing credit if you
  pay your mortgage on time.
• When used for debt consolidation, you may be
  able to reduce your monthly debt payment

• Higher rates
• Terms may not be as favorable
• Harder to get long term fixed loans
• Loans may have prepayment penalties

80
Day 1 - Finding Analyzing Deals
Conventional Financing
Interest Only Loans
Description Pay interest only for specified
period of time, based on 30 year loan
Advantages
Disadvantages

• Gives you greater control largest monthly
  expense
• Help manage cash flow and tax liability.
• For set time, can pay only interest
• Equity in your home still builds
• Usually no prepayment penalty

• Payments may change over time

81
Day 1 - Finding Analyzing Deals
Conventional Financing
Stated Income Loans
Description Do not need to prove income or
assets. (Stated/verified, stated/no verification)
Advantages
Disadvantages

• Dont need to verify income
• Faster approval

• Higher rates
• Higher down payment

82
Day 1 - Finding Analyzing Deals
Conventional Financing
Property Qualification

• Loan Parameters
• Property Type
• Transaction Type
• Loan Type
• Sale Price
• Desired Loan Amount
• Appraisal Amount
• Loan to Value

83
Day 1 - Finding Analyzing Deals
Conventional Financing
Borrower Qualification

• Loan Parameters
• Source of Down Payment
• Credit History
• Residence History
• Employment History
• Income/Debt Ratio

84
Day 1 - Finding Analyzing Deals
Conventional Financing
SESSION REVIEW

• What we covered this session
• Difference between hard money and conventional
  financing
• 2. Basic loan programs
• 3. Property qualifications
• 4. Borrower qualifications

85
Day 1Finding Analyzing Deals

Creating Wealth with Real Estate

Finding Deals

• Motivated Sellers

• Where to Find Deals

• Targeting Sellers

Evaluating Discount Property

Evaluating Income Property Cash Flow

Financing With No Money Down

Conventional Financing
86
The
Complete Guide to
Getting
Started

Day 1 Finding Analyzing Deals
Day 2 Choosing A Profit Strategy
Day 3 Putting It All Together