Comp Properties IN SECONDS!! Pellego on Zoom @ OCREIN

Yeah. So Joe wanted me to show you guys our website so you guys can start using it. It's a free website to use, or at least most of it's free. You can type in an address in the address bar and then pull up a property. And when you do this, at first it's going to look kind of like a Zillow or Redfin where you're just going to see information about the property. You know, some structure details. We just opened up in California, so I guess we've got a couple weird-looking things here, but the information is in there. And then we've got these other tabs, though, that are a lot more useful as an investor. So if we click on comps, we'll see a bunch of comps around this property. We've got a map of them. And then we've got kind of a full version right in front. And what our algorithm does is it looks for, by default, comps that are in a renovated condition. So you can see this one was labeled as a flip. If we look at the photos of it, see that it looks like a flip. Here's the subject property. So not quite as good. And this comp view helps just kind of figure out, like, this is a flip too. So it'll help you get a sense for, you know, what other houses have sold for in a renovated condition. In some cases, if the flip was purchased on market, you can see the before photos as well. See kind of what they did, what they paid for it. There's, there's kind of 2 prices with these things. There's, well, there's maybe 3 prices. There's what they bought it for, and then there's what they sold it for. And then there's this thing over here called the adjusted value. If we click on that, it goes from the sales price at the top to an adjusted value at the bottom. So the subject property is smaller. It's 23% smaller with square footage. So we're taking off $68,000 from that. It's missing, you know, 0.75 baths. So we're taking off another $16,000, $17,000. There's been some appreciation since that time period over the last 8 months, so we're adding some value there. And overall, that brings us to this $708,000 price. So as you're going through the comps, if you like the condition of a comp, the most important thing is to think about the adjusted value, because the sales price, you know, like this one in this case, it's smaller. What does that mean? Well, if we click on it, you know, we're actually adding some square footage. A lot of this stuff is going to be, you know, you're going to have to use your judgment on, you know, if you feel that one of these numbers is wrong, you know, go with your judgment. The computer, you know, only knows so much about these comps, so it estimates these numbers. It also doesn't know necessarily what condition it's in. So if you find one that's in a particularly bad condition, let's say, this adjusted value is based on the adjusted value of its sold price. So it's not about the condition, it's about the comp in relationship to the subject property from a size and feature perspective. Let's see, go back in the chat. If there's any questions, Joe, you want to just, you know, stop me and throw them in there? I can't see the chat while I'm doing this. Um, so yeah, so there's some information about comps. You can organize your comps using the thumbs up and thumbs down over here. If you thumbs down a comp, you're going to see a new ARV pop up. So in this case, this is called a custom ARV. So the, the Pelago ARV is the one you start with. And then the custom ARV is based on the comp that you select with the adjusted value, or you can just type in another number. So if you think it's worth $800,000, you can type that in and you can keep track of your number at the top. You can also edit the search, so you can edit any of this information to create a new comp search, to expand your comp search. You can see what's currently included there and what's not. Yeah, so that's, that's about the comps. I'll give it a moment in case there's any questions that pop up. Okay, then we have this rehab tab. So this is going to give you a view. Every one of these tabs is designed to help accomplish like the goal in mind for getting, you know, for those different stages. For the comps, the goal is really to figure out, you know, what's this thing going to be worth, so organizing those comps. On the rehab, it organizes the photos so that you can kind of see all of them. And then there's this guide here in the middle. So the guides are just estimates based on The size of the property, and then different amounts of work. So we don't know if it needs a heavy rehab or a light rehab. That's up to you. So the system, I think, started us at a light rehab here. And if we look through this, like, it probably needs a lot more than a light rehab. So when we click on these other numbers, we can kind of get a sense of how much this might cost. Keep in mind, this is a pretty small property if some of these numbers seem small. And so you might think, okay, I'm looking at this range, maybe this range. I think maybe it's going to be $70,000. And then you can just keep track of that. On the flip tab, it's going to kind of combine both of those numbers. So you can just edit the after repair value here as well as your rehab costs here. But you can also edit all of your other assumptions. So for instance, if you change your carrying time to, let's say, 3 months from 6 months, This number over here with the carrying costs is going to change. So I'll change that back to 6 so you can get a sense of it. And that changes. Same with your financing assumptions. So if we open up these carrying costs, we can see we've got $26,000 in interest. So if we were going to have, let's say, a 12% loan, we can see that number went up. And this other one, this $2,800, that's based on our rehab. So maybe the reality might be closer to— we have a 12% here, and maybe we have, you know, an 8% or 9% here, and we can adjust those numbers. It's also points. The points, if I change this, it's not going to change anything here. What it does is it changes it in my buying costs. So over here we've got origination fee. If I change it to 2%, now it's twice as much. I can finance the interest, I can finance the points. That's going to adjust my, my costs and my carrying costs, and I can kind of customize this to my numbers. I can save it too anytime so I don't lose my work. And I can also, after I've changed all my assumptions, I can input a profit. So let's say I want to make $40,000 on it. I can put in $40,000. It's going to have a bit of a rounding. thing that it does. So you can type it in again. It sometimes gets closer. We just haven't dealt with that yet, but it gets you a couple, you know, pretty close. So that works. And what that does is it adjusts your purchase price accordingly. So this number and this number are kind of inversely related. So if this was zero, this is going to go up about $40,000. If it's $40,000, It's going to go down about $40,000. Oh, I got— there's a thing that popped up. It's a chat. Can we export the analysis into a report? So this is one of the not-free features, but yes. So if you save your assumptions like so, I can click Export Analysis, and there's spreadsheet and PDF. I recommend the spreadsheet because Well, I'll show you in a moment. Do— so this creates a link. I paste that link into my URL and it creates a spreadsheet format. Let me move this to the side. And the spreadsheet has these tabs as well. So there's comps here. And so we can see the comps and the adjustments. And because it's a spreadsheet, we can change this number to anything we want. We can even add, you know, a random number here too. So we can really go, go to town on our comps. There's 5 comps here that we have selected. So it looks like we have 5 showing up. So we might want to clean that off. So before we send it to somebody, we have our rehab, which takes every other photo and has a breakdown. You can see it's not really broken down at all, so you might want to go through this yourself. Yeah, and you can just add some costs here. So, you know, windows, we're going to spend $6,000 on those. And then we're going to spend, you know, doors and trim, we'll spend $4,000. So we can break it down like this and the costs are tracked a little bit. We also have a best case, worst case, and expected case here. So, a little bit more you can do in the spreadsheet. And then the coolest part, I think, is that if we switch from landscape to portrait when we print it, I zoom out, you'll see it fits kind of like a regular printout page. So, we can go to the workbook. And now we've got kind of like a full printout that we can send somebody. So if we want to just send somebody the comps or send somebody our scope of work or the numbers, we can, we can also print off just one of those. Let's see a couple more questions. How does it calculate the rehab estimates? So someone asked about how are the rehab estimates calculated? Is it based on the city and the state? So everything is kind of based on Washington right now, 'cause we're pretty new to these other markets. So it might feel a little bit low consistently or a little high consistently for you. So I would say, you know, keep that in mind for the locations. It says Los Angeles here, but what it means there is that it's a relative location. So a nicer area. So if in Los Angeles things are more expensive than surrounding cities, these costs will be higher. And if they're a little bit lower, they'll be lower. And then it's just based on the size of it and the kind of some material costs and then labor costs. So if something has an extra bathroom, it's going to need more bathroom space. It's got more square footage. It increases both the things like paint and carpet and floors, but it also increases the size of the kitchen as well. So there's a couple extra details there, but I would say use it directionally. You know, there's— this is very— it's like good for maybe a ballpark. So if it always feels high or low to you, just make it a little higher or lower. We also have a— you can go here to our how-to guides in the features. And so there is kind of a breakdown. Of how these numbers are calculated. So some material, labor, and markup. This is mostly like kind of our philosophy on these and how we came up with them. It doesn't necessarily give you hard numbers, but I think that you'll find that directionally they're, you know, they work out. But we're looking for feedback. We just, you know, we're just getting this going now in California. And so we're, you know, we don't know what we don't know. So if you guys feel like, you know, you're always— you're looking at this and the rehab always feels low or always feels high, we'd love to know. That'll make— help us because we want to update it so that by default it just looks good for you guys. Or same way, if you see some comps that are, you know, way out of line, I'd love to know about them so that we can kind of figure out why our system picked those and we can kind of tune it so that it won't pick those in the future. We also have the rental page. So, and by the way, it's showing my face everywhere because I'm logged in as me. I think if you check it out in Southern California, you'll see Joe's face there. If you're an agent, you can have it say show your face, and that's so you can send it to people. So when it comes to the rental, we— all of the kind of numbers are on the left side. By the way, orange means edit everywhere on the site. So including these boxes, you can see they have an orange outline, and blue things you can click on. So if I want to change my property management assumption to, let's say, you know, $125 a month, I can change that, and it's going to keep track of that with my, with my cash flow. So same with vacancy, I can change my vacancy budget, you know, maybe I'm increasing this for coronavirus and my maintenance budget. You know, I've got a, you know, I fixed it up already, so maybe that number will go down. So I can play with those numbers. I can save that. It'll auto-save for me after the first time. Then I've got some long-term assumptions. So how much do I think it'll appreciate? These are very generic numbers that aren't based on the market. So you might go, oh, actually, it's— we're already up like 10% this year. So, you could do that and you'll see a dramatically different story for it over time. So, that's almost too extreme for us right now. Let's just go with 5%. And then, we can figure out our rent cost and increase. So, maybe right now it's 0%. And so, we're going to have a total flat cash flow appreciation. But let's say it's 3%. We see this stair-step pattern because it's how often do we do it? It's every 2 years.

Okay.

Maybe we make it every 3 years. Let's make a bigger change, 5 years. And we can see these stairs become wider. So if we change it every year, we're really maximizing that rental potential out of it, which of course is not super realistic. We can change this, let's say 15 years. We can see how that affects things. So we can see, oh, our equity is really where all the growth is. Under these assumptions because we're not really increasing our rent that much. And, and even when we are, most of the value is, is, is in the equity here based on these assumptions. We also have some mortgage assumptions. Let's say we had a 15-year and this was 30 years. We can see that there's a giant cost drop on the 15th year and that our profit It just goes like the cash flow portion of our profit instead of losing money anymore, we're actually making money there. One last feature on here is the— and again, guys, stop me anytime. I'm kind of just listing off the features here, but maybe no questions is good. So, we also have this thing, BRRRR, which is the acronym for buy, rehab, refinance, and rent out, or rent and refinance. And the idea here is that it's like a flip, That instead of selling, you refinance based on this upgraded value, and then you can have your mortgages based on that new value instead. And so the reason people do this is to have less net cash into the deal. So let me show you guys that. So if you click on the BRRRR, it's going to increase the monthly rent by default. You might still want to change it. Maybe you think it's $2,800. And what it's going to do is it's going to create an ARV-based refinance. So this is based on this $800,000 that we have at the top and some interest rates. So this— probably need to change this again. Let's say it's 3%, and we can see how that's going to change things over time. And what it has here is an initial cash-in versus a net cash-in. So the idea is that Getting to the point of the refinance is going to cost $172,000 in cash. And then after you do a refinance, if you can get 75% of your loan-to-value, whether that's in 6 months or through a combination of loans, then your net in will be $112,000 with your rehab costs and everything like that. So this is using the, the, the assumptions from this tab. So that's kind of an overview. Well, I guess I'll throw out a couple other little features that people seem to use. We also have edit structure. So if I want to add a bathroom, I can do that. And I'm going to get a new ARV based on that. And I'm also going to get different adjusted values on that one. So now that we don't have one fewer bathroom here, we no longer have that adjustment and the total goes up. So we can do this for— rebuild it. And then we can try to find new build properties. And we can do other little things like we can write notes on it. We can save it to a different list and so that we can create our lists and organize our properties. So that's an overview of the property page. Any questions on that?

Okay.

So the way I found this property is I used our search, which what it'll do is Let me get rid of some of these things. So right now, we can see if I get rid of all these filters, I've got— this is just houses. So I've got— oh, this is all of California. So we've got quite a lot of houses for sale in California. I'll add Los Angeles and Orange County. And I put in a max price here of $800,000. There was zero there. So now we're down to 1,500 and I've got houses selected. And here I put a -5% filter. And the reason I like the -5% is because, uh, Pelagos ARV is not going to be perfect. Its rehab might be too low or too high. So there could be a lot of things off. So this gives you a broader look at it. So you can see something like this was the property we picked. It was a -2%. In reality, it was worse than that because maybe the rehab was lower on it. But this works in reverse too. So if you see something has recently had, let's say, a price decrease here, maybe this one's open to a further price decrease. Same with this price decrease or something. So we could bring it from what looks like a marginal deal, like this short sale, maybe it's not approved yet and we can get it lower. So this 2% could become 10% if we get our price in, or if we think that the after repair value will be higher than Pelagos' number. So this is very much a starting point. So I like to have the -5. I think like $200,000 or $300,000 is maybe an okay number to go after to look at properties. But you can narrow this down quite a lot. This is a very broad area too. So you can narrow it down and have— if there's too many properties, maybe you make it 0%. If it's not enough properties, you can make it -10%. So I would use the negative number to show you more options. Um, yeah, for same for cash flow, keep in mind we have a lot of those like vacancy budgets and maintenance budgets and property management budgets. So for this, you might want to put, let's say, -$200 or something. So maybe we have -$5 and -$200. This is like I'm trying to find something maybe has a balance of cash flow And equity upside. You know, again, the Pelago numbers though are estimates, so I would— if you feel like these, you know, for all we know our monthly rents are way off, so that'd be good for us to know too. So the more we can improve it, the better the search experience will be for everybody. So any questions? Joe, it's not quite an hour and a half worth of material. But that's— that kind of covers most of it, so I thought I'd open it up now for questions.

Anybody have any questions? You can unmute or you can throw it in the chat, whichever you'd like.

Yeah, yeah, my name is Z. Yeah, really good website. It's really pretty useful to me. I guess there's just one question on how Pelago, you know, links— say if you find something that you like, links you to an agent that works with Pelago. And how you start a relationship with it?

Yeah, um, you know, we'd be happy, uh, you know, Joe's, Joe's our guy down there, so he can introduce you to different agents on the team. Uh, just getting started, so we only have a couple agents right now. Um, and so yeah, I would do like a one-on-one process right now. You, you can go on the site, um, We have a buyer solution thing where we can schedule a call, and it'll just route to Joe and myself, and we'll connect you to who we think is going to be most appropriate based on what you're looking for. So actually, here's some testimonials. That's kind of exactly what we do as a business. So as a business, we're a brokerage where agents, especially agents who are investors paying their license, we're 100% commission place. So the agents are very independent and autonomous. Our job is to provide them the support and the software. But while we're chatting with them, you know, about our software, we're like always trying to introduce our agents to people on the site. So we were able to introduce them to somebody here and, you know, here and stuff. So yeah, I'd say talk to Joe and he'll get you set up. Okay, great.

Yeah, and just a quick follow-up. You might have mentioned it before, but this is just MLS listing, right? There's nothing Like a for sale by owner database or probate, etc., etc., that this pulls from?

Well, you can— we've got the county data here too, so you can type in a property that's off market and the experience will still work. There won't be listing photos, but you'll still be able to find comps for it. So if somebody has an off-market property, we can throw one in and go through it.

Okay, thanks.

Of course. Thank you, Z. Someone asked, how did we come up with the idea for this? As investors and agents. So as an agent, and I started as an investor and I got my license just to kind of get my license. I wasn't really sure what I was going to do with it at first. And so, but I got sucked into real estate and ended up doing it full-time. And the process for looking for properties was the way I was taught, which still to this day makes the most sense to me, is to look at literally every single property on the market or all the ones that aren't obviously bad and go through this process where we're going to look for comps for each one and we're going to try to get to a point where we can say, oh no, this isn't a good deal. I don't want this, and move on. But there's just a ton of time doing that. And the process is super— it's always the same. You're never, as a flipper, going in and not trying to find your renovated comps. Let me go back to analyze flips. You're never going to have a situation where this isn't your flip formula. Some people might talk about the 70% rule, but the 70% rule is really just a way to try to simplify this idea. You know, but the costs are all in here. Like, there could be another cost, you know, that you add in, but there's never a cost— like, you're never going to not have at least like this structure of cost. So it was kind of initially like, hey, you know, I think this will be useful for myself and a lot of people who do this. So that's how we made it. All right, uh, let me know if you guys have any other questions. We have a website, it's got a lot of details on it. As I mentioned, we have the features section, so, you know, you can see how to do the different parts on it. Some of them have a video, so if we go to the Analyze property. There's a video here, so that brings you to a series. So you can see the different ones here. And yeah, if you guys ever want to reach out, you can. There's a lot of ways to reach out. First, you can create a free account. We've got these upgraded plans here for buyers and agents. So If you're looking for a different place to hang your license to get 100% commission and kind of be surrounded by more of an investor culture, give us a call. Or if you're looking to work with some investor agents, happy to introduce you to the ones we think are most appropriate for you. This will also work for multifamily rentals, although not in the LA market right now. We should have that in a few weeks, you know, say by the end of the year at the latest, but I think we'll have it Just in a few weeks. Thank you, Gretchen and Alana, and thank you for the messages, guys. I'll keep it up in case we have any other questions come in. And if you guys can always chat with us in this chat box. We've got a couple folks on our team here that you can reach through this. Okay, Joe, well, I'm not seeing any other questions come in, so I'll let you take it from here.

Thank you. I appreciate it. Let me, uh, I want to share my screen. Um, let me get to it. Okay, everybody, uh, everybody see my screen?

Yes.

I can't hear you, but anyway.

Yep.

Um, I, I just wanted to run you by one of our latest flips that we just closed on Friday, um, because I hear a lot of people saying, uh, that they can't find stuff on the MLS. This was, this was on the MLS, uh, not for long, but it was on the MLS anyways. Um, This property, and I don't think I have the old comps here, but we purchased this property for $415,000. And as you can see, it's off market now. We sold it for $551,000. And I just kind of wanted to walk you through, um, everything that Gideon just walked you through, but, um, a little bit maybe more focused at, um, You can see that there are some comps that— this is the area we're talking about. So the orange balloon there, that's the property. So you want to try to stay as focused in the area as you can. And so as you're going through these comps, that's why you have the plus and minus. Um, this is, this is what you're going to end up getting. This was the comp we were using, which sold in July of 2020. This was our, our after repair value comp. It took us 30 days to rehab it. And then once we put on the market, the market here in Southern California, as you all are aware, should be aware, it is on fire right now. It's a seller's market. So we ended up listing it at, I believe we listed at $545,000 or $540,000, somewhere around there. And it, and it continued to go up from there. After we put it on the market, it was on was on the market for basically a day or two, and we ended up getting an offer at five five fifty one, and we were like debating whether it was even going to appraise. But for some reason, it appraised at that value. So the comp that we I mean the property we just sold is the highest comp in the neighborhood. So then you come here to the rehab. We spent about $50 grand on the rehab. So let me put $50,000 in here. And then we'll go to the flip. And remember, we paid $415,000 for it. At the time, we thought $525,000.

So—

$525,000. I'm going to just put that in there for right now. This was a cash purchase, so we did not need a loan, so we can uncheck those. And buying costs at the end of the day and selling costs, we are our own brokerage, so, you know, I'm just going to put down here $1,000 on a selling commission. And so you get— you can see that the flip profit starts to go up from there. And then that's at the 525, and we literally held it for, uh, 2, 2 months. Yeah, no, um, yeah, 2 months, 2 months. And then, um, so that was a— what we were looking at was about a $40,000 profit, um, that again, you change this, turned into a 64th—

whoops.

Turned into a $64,000 profit on this property that was on the MLS. The lady had gone in, she started the rehab, she wanted to update everything in her house. She got overwhelmed. She called the real estate agent. They put it on the market. It was gone in a day before we could even get to it. But whoever bought it was a flipper. Probably not as experienced because they canceled the transaction, went back on the market again for a day. My son saw it, went and put an offer in immediately, and they accepted it at the $415,000 price. So, um, at the end of the day, like I said, he's walking away with about $64,000 for a 2-month rehab on this property. That's why I'm so excited about this website and that you're able to not only as an investor, but, you know, without getting an agent involved, you can do all this yourself on, you know, one website and be able to figure out all this stuff by yourself and, and then see if the, the profit potential is there. including if we had to put a purchase money loan. Obviously, you can see if you— if we have to put a loan on here, we went from $64,000, we go down to $52,000. I'm sure if I asked everybody to raise their hands if they would still do this deal, everybody would say yes, absolutely. So, um, this, this is, you know, when I found this website, uh, I was just amazed by it. And it's just such a help, uh, to me and, and sharing that with other investors, uh, as a tool for you to use and, uh, and then go out there and, and find properties. Um, the, the way that I've been finding properties is literally because I have MLS access and I'll put keyword searches in my property. So my keyword searches could be, um, Minimal flip— I'm sorry, minimal rehab, extensive rehab. Those are the type of words that I put into my searches, and then it pops up. So if an agent doesn't necessarily put those words in there, it'll never show up on my search. This one, like Gideon showed you, is 100 times better because you can put in, you know, the negative 5 and just search the whole county and just literally go through all the properties and start to figure out whether that is going to be a potential flip profit there or not. So it gives you a lot more opportunities to, you know, to look for properties that are on the market. This is also a great tool when the property's off-market. And off-market, I'm assuming you know what I'm talking about. It's like if you get a property from a wholesaler, Uh, that, that's what I would consider off-market. And you literally just pop the address in here and just go through the same thing that Gideon showed you and I just showed you. And you can determine whether there's going to be a profit potential there or not. You don't have to rely on the wholesaler to give you the comps because they're literally right here. And this is, this comes directly from our MLS. So these are current and up to date. And what I like about this is it also has the ability to look for the flip properties. And I'm sure there's some—

Yeah, in this one it looks like there weren't flips, at least in this, the narrow search that it's starting us with there. Yeah, so maybe if we edit the search we'll see flips. But yeah, something normally you can click that button if there are flips.

Yeah. Yeah, and I'm sure there's some secret formula in the back end how to figure that out. But yeah, this one, you know, that almost looks like a flip to me. But, you know, it may have been that they owned it and then decided to sell it after a while. And in this market, people are looking for property, you know, just like you're looking at here. They're looking for stuff That's already fixed up. And so, you know, people are— people know that. The agents tell them that. Here's another one that, you know, hey, best you fix up your property before you sell it. You're going to get way more value for it. So, so that's what they do. And, you know, here's another one that is probably within that range. And then this is the one that we use to establish our ARV to begin with. And that would— this— and I actually did that before I found this website. And that's come— I like to use this as an example because it's pretty accurate. It's— to me, it's very accurate. And it's something that, you know, I wanted to share with everybody.

Hey, Joe, before you move off that page, somebody while you were showing that asked about the assumption of the initial ARV of $525,000. So I just wanted to make a note that the sales price on that comp is $525,000, but the adjusted value— if you want to click out of there— the adjusted value to the left, yep, is $544,000 there. So he went with the $545,000 list price, so probably pretty spot on for that one. So I would go with the adjusted value, guys, instead of the sales price as your kind of your main number that you're looking at since the properties are going to have slight physical differences. And then that should kind of resolve the percentage of ARV. But I think part of what we're trying to do here is that— is we can get rid of the like 70% rule because it's really just an estimation that kind of cuts both ways. You know, it's— you know, if we include the rehab in there, depending on the amount of rehab, maybe the absolute number will feel really high or very low. You know, so in some— for a very low-priced home, we want more— might want more than 70%. And, you know, for most properties, we probably would be very happy, uh, with like 75%.

The other thing I wanted to point out, and I didn't see that until I actually clicked here, is it says Better View, $30,000. Now this is a condo complex, and let me go back and zoom in. Um, you know, these are all basically model matches. But in this case, you can see that on Lobelia, you have a view of the public park back here, whereas if it was the same place, it's like, let's say, number 10, it would not have that same view. So for example, this one literally had the same view that, that we had. And you can see the public park. It's called O'Neill Park, by the way. And you can see that that's the view. So obviously, if you're going to buy this one, you're going to pay a little bit more for the view. And so remember that, um, you know, you need to compare apples to apples. And when you're in a complex like this, if I was trying to flip number 10 here, I would not necessarily use this one as a comp because I know that this one had a better view. The other things to consider is this is also an end unit. Which is more desirable. So there's nobody on this side. This happens to be a condo, so there is somebody below you and then somebody on the other side as well. But you have to take all that stuff when you're flipping into consideration. And I was— I'm like really happy to see that somebody valued this view at another $30,000. And that's, that's probably why we ended up getting more money. On this property. This is the property we flipped, and I'll get to the view here in a second. So you can see the view out the back there. And there's a view again from the balcony, and this balcony, it— you can go out through the living room, and then it also wrapped around into the master bedroom as well. I get to that picture. Also, it was a very— it's a very nice unit. It's 2 bedrooms. Here's the master bedroom, and it's got a double door going out to the balcony. And this is the view that you wake up to every morning. So there's a lot of value that was added with that view. Anyways, a 2-bedroom and a loft. And then you can see there's another balcony upstairs. That's for the loft upstairs. And here's the loft, and there's the balcony as well. So we ended up putting this door there just in case somebody wanted to use this as a room. Legally, it's not a room. We would have to add a closet. It's got everything else. It's got the size. It's got a door or window. All we needed to do was put a closet over here and it would be considered a room. But we decided to leave it like that because everybody else was selling them just like that. So, you know, that would, that would have been another probably couple grand to add a closet on there. But, you know, if you don't have to spend that money, then don't spend it. Any questions on that flip? Okay, any, any other questions, whether it's on this or anything else you want to ask tonight? Hey, hey, Joe, this is Sam.

Can you hear me okay?

Yeah. Hey, so on your, on your LinkedIn, you spoke a little bit about sort of, you know, market forecasts and stuff. Any, any insight you want to share? We haven't seen a lot of it yet. I've got— well, I don't— my son-in-law has 10 people that are literally cold calling. And they're, they're making some headway. The reason we started early, because if you've ever done any type of cold calling, it's something that you like have to work your way through several calls, as many as possible, to learn what people are asking and what the responses are going to be. So that's why— that's at this point, that's what they're doing. They're gearing up. And we've been doing that for a little over a month now, and we're seeing some, you know, some leads coming in and stuff, but nothing, you know, tremendous as far as we're going to jump on it right away. We're waiting till the end of the year and, you know, basically to see what happens at the end of the year. And, you know, election has something to do with it. You know, I don't want to talk politics, but yeah, that has something to play with, with the real estate market. And we'll see at the end of the year, once forbearance is done, if you don't have a job, you know, what are your options? And it's not like it was 10 years ago. These people put 20% down. Here in California, I think last year we went up like 8 or 9%, uh, inflation, uh, housing inflation. I know Orange County, the median price right now is $700,000, which is to me is crazy, but that's what we're back up to. Um, but you know, if, if, if they don't have a job and they can't make their mortgage payment, then they have to start selling their homes. So there may be some more homes on the market, whether it's just a standard sale If human nature plays any part of it, which it will, there's people that they're going to say, well, I'm just going to wait till the last minute. And then those are the people that are going to end up calling us saying, we've run out of time, we've got $100,000 or more of equity, can you get us out of this mess and, you know, buy it for whatever? And those are the opportunities that we're kind of waiting to open up for us at the end of the year.

Got it.

Thank you.

Any other questions? Well, you guys were really talkative tonight. Normally I have lots of questions, but I didn't hear anybody.

Are you mainly targeting pre-foreclosures, Joe? Your list?

No, no. Um, we're do— we're doing pre-foreclosures, but everybody's doing that. So we're doing, uh, absentee owners. Um, we're, we're actually, uh, we pulled a list the other day of tax delinquent properties, and it's, it's not what you think. We're not going after the tax delinquent part. We're going after them because they haven't paid their property taxes in a year or so. So, we know that, you know, they're, they're on their way to being in trouble. So, we pulled a list, um, like that the other day and started to call. And again, absentee owners, whether they're in-state or out-of-state, um, we're targeting them as well.

Do you ever offer Creative financing, or are you just looking for the flips?

We ask for creative financing, yes. I think that's some— something that if you're an investor, you should always ask for. All they can do is say no, but what happens if they say yes? Yeah, absolutely. We always ask for that.

Uh, hey Joe, you said that it was a seller's market.

When do you think the market will start shifting to a buyer's market?

Would it be by the end of the year, or what do you think?

I think slowly after, uh, New Year's we'll start to see a lot more properties on the market, and it'll slow down the sellers market now, which basically means there's lots of buyers out there looking at the same properties and putting offers in. I think definitely that'll start to change after the end of the year, starting at the beginning of the year. And then who knows, again, politics, who knows if If they start to put programs in place that, you know, we're going to extend forbearance or whatever, that's going to just slow everything back down again. We're going to, you know, stay in a seller's market. So it just, it really, I mean, my crystal ball says wait till the end of the year. Anything else?

No?

Anybody have a property they want to talk about? Okay, um, you guys know how to get a hold of me. I'm around all the time. You can reach out through my calendar app or email me, call me, text me, whatever.

Actually, sorry, Joe, I was kind of paying attention to something else. Do you know anything about PUD homes?

Planned unit development. They're not any different really than a single-family. The reason that they have that designation is because the government lenders can loan to those a little bit easier than a condominium. So for an FHA buyer to buy a condominium, it has to be approved by FHA. So there's literally a website that you have to go to and say, okay, this complex is approved for FHA. If it's a PUD, it's considered single-family, and anything single-family, FHA and VA can loan on. So that's, that's really just a designation.

Okay, and are there like fees associated, monthly fees associated with PUD, like an HOA type fee? Yes, and there's an HOA. You can live in a single-family community and still have an HOA.

I live in a single-family community.

My HOA is the lake here in Mission Viejo. Everybody donates $14 a month for the lake, everybody in Mission Viejo. And you'll find most cities down here in South Orange County are the same. And, um, I also pay, I think it's $165 a quarter to maintain the greenbelt areas in front of my house and around my house.

Uh, so yeah, I—

you can be in a single-family, townhouse, PUD, condominium, wherever, and still have an HOA. I see.

Okay, got it.

Thank you.

Anybody else? It's like pulling teeth tonight. I'm surprised.

They're just taking notes with everything you're saying, I guess.

Yeah.

Hey Joe, it's Deacon. Um, just a question on just general financing to, you know, prepare to buy. Um, in terms of like pulling out HELOCs on investment properties, um, I guess on current rentals, um, is that harder to do now than in general? I haven't looked into it yet, but I was just, um, Wanted to hear your input or anyone's input on it.

Uh, yes, I would say, and I'll tell you the reason. If you're going to get a HELOC, I would start with, uh, credit unions. Um, I, I don't honestly know if you're going to be able to get a HELOC on an investment property. Uh, they'll, they'll happily do one on your own primary property. And the, the other thing that they're obviously starting to worry about now is because our prices are so high, if, uh, you get a HELOC on your house and, you know, let's say they'll give you 80%, uh, they're concerned if the, the market takes a downturn. And what I learned, um, over the last 40 years, especially, um, recently Is that when we had our downturn 10 years ago, if you had a HELOC locked in at, let's say, because we're back up to the same prices. So let's say you had a HELOC locked in at 80% of $1 million today's value. And then, you know, like what happened 10 years ago, the value of that property went down in half to $500,000. Your HELOC is more than the value of the house. And so the banks were literally rushing to send letters out to people who had HELOCs at that range and telling them that, um, they're lowering their HELOC level down to 70 or 80% of the new value. Um, and I was aware of that, so what did I do? I just took all my money out of the HELOC and put it in a separate bank account and just let it sit there.

So It—

that didn't, that didn't affect me. That actually gave me more cash flow to buy properties at the time. So, you know, that's something that if you do get one, it's probably going to be your primary residence and not investment properties. And if you— and if something does happen, a major downturn, I would suggest pulling that money out and putting it into the separate bank account so that you have those funds available. to invest in properties at the new lower price.

Okay, thanks.

Yeah, that's a good actionable tip. I guess a follow-up is, uh, um, I guess just doing like a regular refinance on an investment property. I looked at maybe like 4 months ago, um, and I haven't looked now, but is it— I mean, is it still like expensive or not expensive, but like, like relatively costly versus before, um, you know, COVID?

Yeah.

And then like, is it like less— is it still as restrictive of seeing like 50%, basically LTV?

For a refi?

Yeah, just, yes, for a refi on like an investment property, like a current investment property.

Okay. Yeah. For investment property, again, the banks are concerned with where the prices are at right now. And so they need to take that into account. If it's your own residence, um, there— I mean, people are doing refis left and right because the interest rate is so low. So, you know, they're, they're literally just— they're inundated with refis right now. That's, that's really kind of what's slowing down, uh, the market because it's taking— it may take, uh, 12 to 15 days to get an appraiser out where it used to take like 3 or 4 days. Because of so many refis going on. Yeah, anything that you do investment related is going to be more expensive, including getting a loan. It's always been like that. So if the interest rates are at, at 2%, you're going to end up paying 2.5% to 3% as an investor, and that's just an investor premium.

Understood. Thank you. Thanks, Joe.

This is Alana. Have the lending standards started tightening up overall, not just for the HELOCs and appraisals, but just in general? Are banks requiring more down, or besides just the rate differential? No, um, you know, they're still the same. They're, you know, You can get a loan at 20% down without any problem. And because the interest rates are so low, that's what's driving this market is the interest rates because they're so low. And if you put 20% down, they don't— they're not going to have a problem giving you a loan.

Okay, thank you.

Okay, anything else? Last call.

Um, Joe, uh, I'm new to— I'm new to real estate. I'm trying to get into it, trying to see what the market's like, what the— what everything is about. What are some, uh, starting tips you would give me?

Uh, probably best just to Connect with me offline and I'm happy to get you started. There's a lot of things I would have to talk to you to find out exactly what it is that you're looking to do, and that's a longer discussion that we can do offline.

Hey Joe, I have a quick question. Um, I spoke with one of my, one of my brokers about actually getting a loan through my LLC or doing financing through my LLC. Um, they were telling me that a lot of people aren't, or a lot of banks aren't doing that. However, they found a program that was, um, where you are the guarantor of the loan. They'll, they'll use your LLC. However, um, it's interest only and there's a prepayment penalty for the first 3 years. Um, how do you, how would, how do you feel about those? Do you think those are effective if If you're willing to wait 3 years, or what would, what would be the best recourse for that, for using that type of loan?

What's the purpose of getting the loan?

Let's say if, um, you wanted to get a multifamily and, um, you were able to put, you know, um, 20-25% down, and they were, um, I guess they're, they're not as stringent on, as opposed to pulling tax and personal income and you're getting this loan and, um, but you just can't refi out of it like you would if you were to, um, you know, fix it up and maybe want to BRRRR out of it later. You're just locked into it for like 3 years. Do you think that's probably a good avenue to do if you're kind of limited on funds?

Um, yeah, that's fine. I just do your numbers along the way to know, make sure that that's what you, um, like at the end of that 3-year period. Um, so, you know, you're talking about getting a loan with your LLC, and, um, I hear that a lot, but, um, I don't, I don't maybe understand what the purpose of, of that is. It's like, um, if, if it sounds like if this bank is qualifying you personally Then you're still personally responsible for that loan, whether it's in your LLC or not. So why go through the extra effort of, of just putting it in the LLC? Because you can get a loan and then close on the property the next day, just deed it into your LLC to get that liability protection. So I guess I'm not really understanding what the What the business— I guess the business loan is all about, because do you actually think they're going to give you more money because it's in an LLC?

So if I'm buying in the name of, like, in my business per se, like I use those funds from my business to purchase assets through, through the business, um, would that be advantageous or not? That's what I'm trying to figure out in regards— but if I am the guarantor on the loan, I see how you say it doesn't really matter. Right, exactly.

Like, okay, so let me give you a different example. So, I'm flipping a property and I'm gonna get a hard money loan on it, okay? The hard money loan is— the guarantee is the property, it's not me.

I mean, I could stop making my payment and they can't come after me. Their only recourse is the property. So, to me, that's I mean, not that I'm gonna stop paying, but to me, that's what I'm looking for, is that I can buy this property, I can put it in my LLC, and there's no recourse against me personally. It's against the property. Do you understand that?

Thank you.

Okay.

Anybody else? Okay, and Gideon's texting me offline here. Hold on a second. He's got something that you could— you could—

I was just saying that it might be referring to like a A private mortgage where they'll base it on the, um, just the asset price, where if you've got the down payment and everything, they don't really care what your income and, um, credit is. And you can refinance out of those anytime, but you're still going to be paying an origination fee, you're paying your points at the beginning, and then your interest rate is probably going to be closer to 6% instead of your 3%.

Yeah, I mean, you know, there's lots of creative financing out there from banks and private individuals, and you obviously pay accordingly to their, their structure. So, for example, when I, when I do hard money lending or, or get a hard money loan, because I've done so many flips, They obviously trust me that I'm going to complete this project in a timely manner and pay them back. So where a brand new person may get charged, you know, 2 points for the origination of the loan, I get charged half a point. And that's really kind of the difference because of my experience versus somebody else. So Again, they're, they're qualifying the property itself, and yes, to an extent, the person that's flipping the property, but they're basing their, their loan and the interest rate using all those factors. There's— So any of you have 401s or Roth IRAs or whatever? If you self-direct those funds, you can actually use that money to purchase real estate. So there's another good source of money that you can have. I buy, I buy properties through my 401 all the time. I just came out of 2 deals just recently, so I've got— I just, I just have the money sitting there. in my 401 waiting to get that other property. Um, just remember that since that is my 401, I pay for the property, pay for all the rehab. Once it sells, all that money has to come back into the 401. It cannot go into my pocket. Any money that goes in my pocket, I have to pay taxes for it. And that's the purpose of a 401, is to build that value up So then, you know, when you're old and you don't want to work anymore, you can live off those funds. But that's a good source of money if you're, if you're wanting to flip properties. Anybody else?

Yes, I have a question. Can you hear me? Yes. If I don't have a tax return, And if I purchase a property that the rent will pay off the mortgage, do you think they will— I would qualify for the loan? And if I have enough down payment as well, like 25% down payment?

You're asking me?

Uh-huh. Is that the right question for you?

Uh, yes and no, uh, because I've, I've seen it. Uh, the bank's gonna use 70% of your rental value And that's, that's basically, you know, 70% of whatever your, your income is coming in. They're going to use that formula. And, and then everything else— there, there are, there are, I'm pretty sure out there, there's some stated loans still out there. I think Gideon talked about What was it that you called it? Um, a statement loan?

A private mortgage, like an asset-based mortgage.

Asset-based, yeah, asset-based. So yeah, they're, they're, they're out there. It's possible you're going to pay more in interest than a traditional loan, uh, but they, they are out there.

But not with the Freddie Mac, um, the bank loan, right? Because if I go with the private and other loan, the interest rate will be higher and I'm not It might not be a good deal anymore.

Correct. And what you have to understand about the government loans is you've got, you know, all these boxes that these people there have to check off.

They don't like checking off boxes that it's an investor and they don't have— let's say they don't have a job or a W-2 income. People that are self-employed like me It makes it a lot more difficult for me to get a loan because I am self-employed and I could earn $1 million one year, but then the next year I could earn a dollar. So, you know, they— to me, for me, when they ask me to produce income verification for loans, they have me go back as far as 3 years. And You know, it's just, it's just a different structure for getting a loan. But your government loans, they're not very, they're not very user-friendly, let's say. They, they like the 9-to-5 W-2 worker. That, that's the one that they're going to qualify the easiest and the fastest. Um, if, if— I mean, when I do my qualifying They have to ask me everything about every property that I own, what the income is, what the loans are, what the HOA is. Excuse me. Everything about myself. It takes me a lot longer to get a loan than a normal W-2 employee would take.

Oh, but I can still get a loan, but it depends on where I go to, and I need to go to the asset-based And private stated income loan lender?

I would reach out to a mortgage broker. If you need a referral, I've got a couple of them I can send you to. They are going to be the ones that are going to be able to direct you or give you that loan. If you go to a city, you know, Citibank, Chase Bank, Bank of America, they're going to sell you their products, and believe me, they're more stringent than anybody else. They've got what's called overlays, and if, if this thing doesn't match their overlays, they just— they're not gonna give you a loan. Mortgage brokers are the ones that are gonna be able to give you the most bang for your buck.

Okay, all right, thank you.

Okay, going once, going twice, Okay, thank you everybody. Gideon, thank you very much for being with us this month. I appreciate it. It was very informative.

Thank you.