Joe Homs Fix & Flips BNI

Thank you. I'm going to be a little bit specific in today's talk, and I'm going to talk about actually flipping homes here in the OC, which is what my team and I are doing. Ryan and my daughter probably went to the restroom, but anyways, that's what we're doing. That's what I'm going to, you know, focus this talk on. I have had lots of people ask, where do I begin? First, I tell them, find out if you're suited for even Investing in real estate. You know, I was a police officer in my previous life, and not everybody's made to be a police officer, so you need to also find out if you're suited for real estate. What is your risk tolerance? Can you manage money? Are you afraid of risking all your assets? What are your long-term goals? How do you plan on paying for retirement? Real estate has created more millionaires than any other investment. And I'll show you the reason why it has. Where do I find the homes? MLS, which is the real estate industry standard. Everybody puts their house on for sale. I do find them through there. We're actually going to look at one here in a couple of days. It's on the MLS. Every once in a while, I'll do some direct mail marketing to people. Send them letters. I do door knocking. I actually found my son's home doing door knocking in that I knock on doors of people that are in distress. They're not making their payments to their first or second, and I have the opportunity to speak— we speak with them directly before they get onto the MLS or before it goes to foreclosure. Probates are a big one. Family, friends, and word of mouth is Very important. I think Tanya sent me a lead the other day. Thank you for that, appreciate it. What is the plan? Have a budget in place before you make an offer. Very important. Work the numbers into your plan and work your plan. Are you able to fix and repair minor issues? If not, then obviously you need to hire somebody to do the work. You could always act as a general contractor if it's your own property and sub out the work, which is a lot of what we do. Ryan and I do a lot of the work ourselves, but anything major we sub out to subcontractors. Holding title. I use an instrument called a trust agreement, and mostly I use that for privacy reasons because I can title a property in any name I want. It could be 123 Main Street, okay, and I'm the owner of that title, the beneficiary holder of that title. So when somebody goes to look up that address, they're going to look up and it's going to say 123 Main Street. They have no idea who owns that trust. I also use an LLC or an S corp, and I make them the actual beneficiary of the trust, and that gives me the additional liability protection that I'm looking for. Okay? If using financing, you must use your name and then transfer into one of the above entities. Banks, and Troy can account to this, he'll be up there next, they're way behind the times. They want somebody personally responsible for this property, so you have to have it in your name. It goes into your name, the next day you can literally pull it out and put it into the name of a trust or something else. Financing. Obviously cash is king. You can do hard money loans, They average anywhere between 10 and 12% plus points. And I have a lot of people look at me as 10 to 12%. When I bought my house in 1980, I was paying 16% interest. So it's all relative. Okay. You can use self-directed IRA, 401 plans, investor loans with 20 to 25% down. You can do equity shares with partners. Or you can do seller back— carryback financing, which means the seller of the property has enough equity there that they're willing to loan you the money for a period of time. Whether it's short or long, that's negotiable. Where do I find the help I need? I hire— where do you find the help you need? Hire a real estate investor that specializes in investment properties for a living. And that's really kind of important. In that I do find a lot of properties a lot of different ways. I don't rely just traditionally on the MLS. So you need to find somebody like myself that actually does these things on a daily basis. A good website if you wanted to go and learn is called biggerpockets.com. You can log on there, it's real easy, it's free. They have a lot of webinars on there. People all across the country. You can also team up with people that are interested in investing just like yourself. Join a real estate investment group and network with like-minded individuals. I joined a group in Lake Forest and I've been a member of that group for the last year and I do get a lot of members that come over and take a look at what Ryan and I are doing and I've got several investors that are looking to partner up with us. Real estate cycle, I just threw that in here real quick because it does go up and down. So again, what is your risk tolerance? The only thing that really hasn't gone down is you see the blue line at the bottom, that's the rental rates. They've always gone up. So when you lose your house, where do you go? You have to go renting. So when you have all these people that have lost their house, where are they going? Renting. What does that do? It brings up the rental market. Okay. What types of deals do you want? Buy and hold, a little bit difficult in Orange County right now, except I'm going to show you a little teaser in here in a second. Vacation rentals, and Ryan and I have been talking about this. There's an industry that's popping up, and you might be kind of towards the tail end of it, but there's an industry popping up. Buy a home for $400,000, payments around $3,000 a month. I turned it into a BRB— Airbnb, thank you— Airbnb vacation rental. I looked yesterday at the average rates around Disneyland. They're about $250 a month, which means that you have to— Per night. I'm sorry, $250 a day, which means you'd have to rent it out for 14 nights to break even at $3,000. So anything above that, you're making money. So it depends on what, you know, the place looks like. Most of the places I looked like were strictly devoted to Disneyland. They had pictures of Mickey Mouse inside the house, you know, nice furniture, obviously, things like this. So the nice thing about vacation rentals here in California is we're year-round. We don't have a season like they do back east. You know, there might be a 3-month season. We have 12 months out of the year. So if you're looking to, you know, make more money than an average rental, you might look into vacation rentals. This is what Ryan and I do. We fix and flip. The house on the left is what it looked like, and this is what we turned it into on the right. That deal was purchased off the MLS for $380,000. We put $60,000 into it, $440,000 total cost. Sold it 2 days after we had listed it for $535,000 and we made a profit of $80,000 on that one house. We just closed a deal, I think I spoke about this Monday. It was a small condo. We made $30,000 on that and we're working on the next rehab. Ryan tells me we're hopefully going to make somewhere around the same price, around $80,000. My power partners, mortgage brokers, Troy, CPA, Rochelle, all attorneys, especially if you have somebody that's interested in buying properties. I work with doctors, dentists, obviously high net worth people that are looking to diversify their funds away from from the traditional investments. I kind of went into all that. And then at the last one, somebody that has caught the real estate bug. And I actually spoke to a lady the other day. She's on her 5th property out of state, and she just, she said she caught the bug. And that's kind of the people I'm looking for, is the people like myself that have caught the bug. This is our information, the Homs Team, and if you have any questions, I'd be more than happy to answer them. Do you actually solicit for like investors and then you do all the work, the fix and the flip? That's the direction that we're heading right now. I started flipping homes with Ryan when he showed interest about a year and a half ago. I had stopped flipping homes for a long time, but then he said he wanted to start getting involved in that. So as we're going through these first 3 transactions, getting him used to what's, you know, what's normal in the flipping industry, we are going to start soliciting for other investors. And I do have 3 investors that are interested in flipping with us. What is a hard dollar loan and why is the Why is the interest so high? Hard money loan is somebody that, let's say you have $100,000 that you want to lend to me. You're going to make what's called a hard money loan, and for making a loan to me, you're going to charge me 10 to 12% interest. Okay, I don't have to do a credit report, I don't have to do this. I might have to show you my financials. You'd probably be smart to ask me to do that. But anyways, Your loan is going to be put like a loan on the house. You're going to be the first loan on that house. First, not a second. Not a second. Well, if it's a second, then you're going to ask for 14 to 16%. Okay, I want to do a second. The more risk there is, the more interest they charge. Do I actually have the money? No, I'm just kidding. If you have the ability to get the money, let's say, you know, normal sources at 3 or 4%, And it's cash there and you want to lend it out at 10%, then you're, you know, being a bank basically. Or like a self-directed IRA, can you do that? Absolutely, you can do self-directed IRA money. Yes, absolutely. I do that myself. Okay. Can you elaborate on that self-directed IRA? You can loan money out of your IRA? Absolutely, yes. In a self-directed IRA, you can just Just about do anything you want. There is some limitations, but let's say you wanted to loan me money for one of my flips. You could charge me whatever we've negotiated. You know, I'll ask you for 5 or 6%, you ask me for 10 to 12%, and then you get a deed of trust for the money, and it's recorded on that property to protect you in case something happens. And then for that period of time, usually on a hard money loan, I get the money up front and I don't pay you until the property sells. So let's say 4 or 5 months later the property sells, I give you all your money back. Now if you want to buy through an IRA, etc., you have to have a trust. A trust company has to manage it, isn't that true? Yes and no. There are some self-directed IRAs out there. that you don't need a manager, and I have a contact for that. Most of them do have a manager of that trust, and what the manager does— sorry, what the manager does, real quick, what the manager does is just make sure that you're investing correctly and go through all the paperwork to report to the IRS so that you're not doing anything illegal. Hi, I have a question.