EP 522 – The Three Do’s Of Due Diligence

This is the no Closer show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property for pennies on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same. Now, here's your host, CEO of We Close notes, Scott Carson.

Good morning, good afternoon, good evening, everybody. Welcome to this episode of the Noclose Show. As always, Scott Carson. Excited to be here with the day. Hopefully you've had a rockin October so far. Things are always busy around here with a variety of things of us selling assets, looking at new assets, speaking and marketing. But I kind of want to take things back, take it back to the old school or an old fool who's so cool, you know what I mean? Can cover a couple basic things, especially for our listeners out there and the people that are looking to get into real estate investing, people are looking to get into notes, people that are tending things, but they're kind of on that edge of pulling the trigger of actually going the distance and actually closing on a deal. So this episode is kind of about the three basic things that you really need to look at in any type of real estate deal, any type of property. Looking at buying it really kind of simplifies it down to the three basics. And this kind of comes down to securing your investor's principle and really what are you doing to secure it, to protect not only you, but protect them and their investment with you, especially if you're using other people's money. Now, if you're not using other people's money, you want to secure your own investment, obviously, right? So the thing that was drilled in my head early on are the three basic things that you really need to look at with any type of real estate deal, whether you're buying a rental, you're doing a fix and flip, you're buying notes. It all kind of lines up with these initially initial three things that you need to look at first and foremost. First thing is always value. You have to know value. I can't tell you the number of times that people have called me up to talk about a deal or a note and they're all excited about it, but they don't know the true value of it, the true value of an asset. Now it's not pulling Zillow, that's not pulling any appraisal. It's literally talking to a realtor and getting comps. Now, if it's a residential, it's a pretty easy deal to Jump on and pull comps and you're gonna have some variation in the markets depending on what you're pulling and what they're, how effective you or your realtor at jumping on the local MLS multiple listing service. And taking a look at the comparative market amount analysis of CMA. Now, I'm not talking about going out and paying 400 bucks for an appraisal. There's no reason to do that. And that's an initial cost that's gonna be way, way too much. Or even paying for a BPO, a broker price opinion, which can run you 100 to $150 per property. How do you do this? Let's take a look at a couple things. First, in checking value, you want to see what's going on in the neighborhood, the condition the property, either need to put your eyes on it or somebody else's eyes on it. Now, in the note business, we are looking often at a lot of assets. So we don't put eyes on the assets till we've made bids, they've come back and countered back, finally have a number. Then we look at value much more with a fine tooth comb at that point. But when you're initially like most people, they're driving around neighborhoods, driving for dollars, we used to say that. And looking at ugly assets, ugly properties, people that are run down, maybe they've got long weeds, it looks like it's vacant, or a FSBO for sale by owner. Or they get a list from a wholesaler on potential assets, or they're pulling the violation, the zoning code enforcement violations list from the local county, which is a good list to look at. If you're looking for properties that run down in an area, obviously aren't going to know the condition of the interior. I mean, maybe you can peek inside, but hopefully you're not peeking into somebody's bedroom. If somebody's still living there, should go peeking in windows if somebody's living there. Okay, but let's say it's vacant. You want to walk around the property, take a look at it. Be careful, never break an entering. Okay? Don't perform a B and E. Don't get arrested, commit any felonies along the way. But you have to get an idea of where the asset value lies. Is it on a up rain in great condition or is it on low in. In crappy condition? That's the kind of variation you do. Now, there are all sorts of one page, like due diligence, checklist, things you can look at and go from there. When you're Looking at an asset, this is different from a note due diligence checklist. So we're just still just talking about the property right now. Okay, looking at the property, what's a roof look like? Is there any cracks in the foundation? What's a lawn look like? What are the windows? Are they busted in? What does it look like? Does any paint job? Does it look rougher? Does it look good? Is it up? With the regular maintenance of the rest of the neighborhood is a good thing to look at. If it's on par everything else, great. Then you can look at recently sold in that neighborhood. Now, one big thing on value. As we saw before, value will vary on a neighborhood by neighborhood basis depending on what's going on with the neighborhood. Now, if there have been some distressed sales where there's been a foreclosure or pre foreclosure or short sale, that will obviously drop down the value of the assets. Especially if you're doing a foreclosure, it's going to affect every property in the neighborhood. You need to look at that stuff. Not everybody looks at that stuff. Now some people I know, when they make bids, they'll pull just the distressed sales and that's what they'll look at there in their cma. Oh, let's get rid of all the good assets to drop their value down. That's not a smart thing to do. I suggest you always know your own value, always pull your own comps. Never trust what a seller is telling you. We've seen this many times happen in the note business where sellers will have pulled several BPOs and they will go with a higher BPO. They won't look at the other two BPOs. They'll try to stretch the values by finding higher valued assets maybe just on the outskirts of the circle or the area things are located in. So that's something to keep in mind that you want to look at and make sure true value in the true area of where it's at. Now, what goes into true value? Well, you need to have square footage and people are like, well, how do you find that? You know what you do? This is where the Zillows, the Trulias will help you out because they often give you the number of beds and baths. All right, and then the year built, is it on par with everything else? Does it look like it's been updated Oftentimes Some of the counties will even show recent solds in the nearby area too, which is really nice to help you look at comps online without having a realtor involved. But I still believe the best thing is look at what's going on, look what's sold in an area, and then talk to a realtor in the neck of the woods. Now, when we're out looking at assets, we've been driving on different roadshows and we see an asset, we look at that same block for what? We look for a for sale sign. Okay, look for a realtor there. Because what's a realtor sign gonna help you out with? Well, it's gonna find a realtor that knows the market, who's listing it so they know the value, especially the house that they sell, they're selling. And there's a great comparable to yours. Is it the right square footage? Is it up to date? Distress sale? Is it a probate? You know, those are all different things that will affect value because the interior may need work or may not. Exterior needs some work. So it's the things you got to look at to determine your values. Because I get, like I said, I have people call me all the time with an asset and they say, well, it's somewhere between 40 and 80 grand. I'm like, that's way too big a spread on value. You don't really know your value. Especially if they owe 75,000. Is it really worth 80 or is it worth 40? Your bid. You don't want to bid 50 cents on the dollar unpaid balance of 75,000, that's 37 and some change. The value being 40, that's not a good thing. Now the value is 80 and you're bidding 50 cents of the UPB at 37. Now that's a deal. So you really need to know your values in an area. You need to have a realtor. I'm a big fan of using notepros N O T E p r o z.com noteproz.com you type in an address, it'll pull up information off the county records. If it's available, it'll pull recent sold. Give you a rough avm. Now, what is an avm? An AVM is an automated valuation model. Basically Zillow basic starting point. If you can't find a realtor or a real estate agent in an area to help pull comps for you, probably. This is why it's important to make relationships with local realtors, taking a coffee, networking at your local meetup groups, things like that. That's why you want to go to your local real estate club, so you can find people that you can work with or jump on meetup groups or other areas. And say, hey, I've got a property I'm gonna get buying if you help me. Now, realtors won't always like to pull property values on a property doesn't look like it's listed. So that may the no business. I have to constantly say that, hey, we're buying, we bought portfolio. We're gonna buy a portfolio of loans. Can you give us a quick valuation on that? Now if you're just driving around, you're just going to take a look at what's going on and maybe pull real estate signs and take a look at and okay, I'm gonna adjust this down 20 grand because I guarantee the house that I'm looking at is in as good condition as brand new, spick and span, cleaned up, ready for the MLS aspect of things. But value, you need to know the higher value of the houses. Five to ten grand vary pretty easily. So don't get so excited. You think it's worth 150, that's the high number on your values. I would drop it down like 140 somewhere. That way you're conservative in your numbers and make your numbers work. When you're working exit strategies or fixing, always go up that lower number because there's no guarantee you're going to get that high end number. And valuations true numbers are come somewhere in that middle. Okay, that's the first one, always knowing value. Now second one is checking taxes. This is an easily done thing that most people like. How do I check taxes? Well, you can jump on the tax association website, going to Netra Online. Netr Online.com is a great website. It's a free website, takes you to. It's basically a listing to every state, every county, city, township, province, whatever it might be. Tax association website, you'll have the county appraisal district, you'll have the county clerk often have a tax assessor association, treasuring of the county, stuff like that. But that's the first place you want to go is the tax appraisal district and look there first. Now what do you have to type in? Well, either the address, the APN number. Now what is the APN number? That's the property number. Every property in every state, every county has an apn. If you don't know what that number is, Zillow will often show it. If you look down further on it. It's a great thing that Zillow Trulia does. If you know the address, that's the first place. If you can find the borrower's name or another borrower type in their name. Because that's a really handy thing that you want to do both times. Yes, an address is great and you can find the owner, but you may want to by just doing a search for the owner, you'll see if they own other real estate in that same area, in that same county, in that same city. And that always comes in really handy when you're looking to see. The thing you want to realize is that if you're looking at this stuff, if you can find somebody with multiple properties, it may be A, well, first and foremost easier to reach out to them if you're going to look in to buy a true piece of property. Or B, they may have other deals, other properties that they're looking to get rid of as well. Or C, in the note business, when we look to see if they own other property, this works as a leverage or buying a note deal with them. Because hey, if we buy a note, all right, on one of the properties they own and they don't work with us and their other properties are titled in the same thing, we can go after them and say, hey, we're gonna slap a judgment against the other properties until you get us paid. So that's the big thing about always knowing very important thing too. Making sure to check the taxes. What's owed. Are taxes paid up to date? Is there a pending tax sale? How do we see if there's a pending tax sale? Well, you can often see they'll let you pull up the most recent bill. That's public record. Taxes are paid or not paid. If this shows taxes not paid, then double check. You may want to call the county with a phone call. Yes, that means you actually pick up the phone and call the county, see if they're pending tax sale. Because a lot of times if there is a pending tax sale, it won't the the county websites won't allow you to pay the taxes on there. They'll say oh, paying tax on. When you call, call to find out. A lot of states kind of falls on a two one, two ways. One is either redemption period. So they do take a tax foreclosure. There's a redemption period where you can pay the taxes to get the asset back. Or in some cases when there's tax certificates. Oftentimes there's no redemption period. So once the certificates sale, there's a two to three year period before they take it to tax sale. If the tax certificates are not redeemed or paid off prior to the tax sale, then it's sold and whoever bought it the tax sale wins. I would check out one of our previous videos on tax sales and tax overages. It's a great learning, great learning thing. Great topic for you guys to take a look at. Select 254, 256. But anyway, checking taxes, it's important now, especially in the notes space. If the name is different and this is one thing that people miss out on is they don't look the last couple years on the taxes. They'll go and see the name and. Oh yeah, perfect. What we do in the notes space is when we check taxes, go to county records, we look to see is there how much is owed in taxes, what's the annual taxes due. There's a borrower current. But if the name has changed recently, especially in the last year or two years, have been now far back, the loan has not been paid. As the loan's not been paid for three years, you want to go back and make sure that there's not been a name change in the last two, three years. If a name changed, either property sold, somebody else has picked it up or it's gone to tax sale. And you can't work with a bar at that point because it's sold to somebody else. Now if there's a redemption period, six to 12 months in some states, then you can still jump in if it's happened the last 12 months or less. Okay, so checking taxes is one of the most easiest things to do. You should always do this before you make a bid on anything. Checking the taxes owed, checking, seeing what's owed, what's going on with it, is the name still in the same place? Tax association website's great. Does it borrow more assets? Okay. It's a great thing to look at. Okay. Important to do. So that's the second thing. Checking taxes, checking value, see overall value, checking taxes. And then the third thing is all about checking title. Now this is not. You're not gonna start paying to pull title. There's no real. You could jump on the county clerks and try to look at title yourself, but you're going to ultimately miss something. You are not a title expert. So this is a requirement. I say everybody needs to have a title company that they work with. Now you're not going to check. Really start diving into title. Unless you see a name change has happened, tax sale. Then you want to take a look at it kind of recorder's office online and see what's going to happen. Where has there been deeds filed, things like that. Most of the time you're going to pay For a title report notes, we call it a title update previous two owners because the note still in note still in effect, the owner still in effect. There's been a title change as far as the name ownership change I should say in the last two years. But with traditional real estate before you close, once you've agreed to a price or some sort of sale, maybe it's a subject to, maybe it's doing a wraparound, maybe it's buying it outright, whatever it might be, you're going to definitely want to get a title report pulled. Now in a traditional estate you're gonna often pay full title update. Just do it. The seller often will pay for this part of the closing docs closing costs and you want to review that. You want to make sure that especially if you're buying the property, for the most part, you want to make sure that there's clear title across the board, especially you're buying most properties in sales there's clear title before a bank will finance that property. It's a requirement actually 100% of the time there'd be clear title. I mean making sure that liens, any liens or judgments have been taken off the property, any city liens, city ordinances, in some cases utilities are paid up to date or taxes are pro rated and paid before or at closing, stuff like that. Now with what we do in the note business, checking title is stuff we want to look at. We want to make sure that a, a lot of liens can be wiped out via foreclosure. So if we're in the first lien position, we want to make sure there's no junior liens behind us. And that could be a second mortgage, it could be weed liens, it could be a private lien that's slapped on the property. We've dealt with a whole variety of things. You want to double check and talk with a local realtor, realtor or attorney more so, or the title company and see what happens. If you take that note back and foreclose, will those liens be wiped out? Will those liens go away or will they follow the borrower and not the property? It's an important thing to keep in mind there. Now another thing that's important too is you always check title, especially if you're going to exit strategy of the note business. Before we allow a borrower to turn a property over and walk away, you don't want them to deed the property back to the bank and there's a junior mortgage in place. Because the minute now that we file that Release in the first. Now that junior mortgage drops into the first lien position. Now we got to deal with them and foreclose them. So this is why it's important to always check the title checking taxes and back taxes liens. Is there daily fines being targeted to the property because if something's out of code, is there a $500 weed lien or demolition or has the property been subject to being trashed out or demolished by the city because it's sitting vacant and in a rougher position? So title is very important. Title, full title report is about 250, 300 bucks. Depending on where it's at. This can take a couple days to come in. The more rural the county, the longer it's going to take you to get a title update. Usually a title update can be done in 48 to 72 hours or full title report can be pulled roughly in a couple days. What happens a lot of times, especially if you're taking on a loan on a property you're going to close, you want to make sure a week before closing that all the title's been pulled and ready to rock and roll. Most people wait till the last minute and then they're constantly harping on the title rep to get the title pulled or the title plants to pull. And if it's in a rural area, it's going to take some time. So keep that in mind. Some counties charge for you to pull information, especially the rural ones because they don't have a full time staff, they're not online. So it requires me to go in and pull that information, report it all out. So title insurance is important, but you're not gonna be paying for that on the front end and pay that for that closing or before you close, you're gonna especially note business. Once we agree to a property price on a note and then we sign a contract, then we pay for title update. Don't need a full title report, but very easily do. Going to Pro Title USA ship on their website. You can order from there, even email orders@protitleusa.com title update for like the last two owners would be like 85, 90 bucks. All right. It's not a full title report back to when the property was created, which is what you would do if you're buying the property and selling in a traditional sale. You're gonna pull full title report in that way. So those are the three biggest things. Let's do a quick recap of this before we dive into some more stuff here. So first thing that we pull is Values, you need to know your values. You don't know your values. You know anything. Okay? That's the thing when you reach out to somebody, especially if you're looking at an asset or you're looking for advice, counsel on what to do. Know your values. You don't know your values. It's a waste of time and it's gonna frustrate me, it's gonna frustrate others that you reach out to for help as well. So always know your values. Second thing, check taxes. Netra Online, netronline.com It's a free website. Check out taxes, check out the owner's name matches up, see if there's any other assets. Check those taxes are paid. If they're not paid, is there a tax sale? Was there a tax sale? Is there a redemption period? These are questions you're gonna ask the county by picking the phone and calling. All right? Very important to do to check that stuff out. It's basic due diligence. Those are the two big things in the front end values. Maybe you wanna pull a BPO. Okay, that's about 125, 150 note space. You're only able to pay for an external BPO, which is like a 125, 115 full BPO can run you 150 to 200 bucks. I know some investors that are paying for two BPOs before they close, which is fine. They can do that. It's an extra $300 cost and they use that as their way. We help with due diligence and not relying on realtors or other people, go out there, do it. So it all depends on your network. That's completely up to you. If you have a really good agent who understands it and works with you and you know the market, great. But it's a market that you're outside of. Just get somebody to go do it for you. There is a website called prp. Real Property Reports usually links into most of the MLS across the country. If you're a realtor, it's free service. Just need to have your national associated realtors login information. If you're not a realtor, you may want to refer, say, hey, can you pull a property report with me? If you've got access to this and they can tap it in. It's basically just an avm, all right. Automation valuation model. It's just used for front end due diligence. But if you pull that and it gives you, that's going to give you a range of where the, the property's at no interior inspection, obviously, but take a look at that and go from there now. And then that takes us on to R3's checking title. Does the person selling the house have the right to sell? Does the bank who's selling the note have the right to sell the note? Is it still there for you to pick up? Has it gone to tax, foreclosure? What other things are behind your lien? These are all questions that have to be asked and the answers are out there. You just got to pull that information and go from there. Now that's going to be the most important three things that you need to do always and forever with every asset. Knowing your values, checking taxes and checking title. That'll make sure that you're buying something that makes sense, something that's still there, something that has value and you've done your initial due diligence. Now obviously there's more due diligence when you dive into other things. What's the neighborhood look like, what's going on in the city and what's going on in location? I mean these are important things that you need to talk to your local professionals about. Some people don't know that. Like there's areas in Indiana, I'll give you an example, that they've flooded, they've turned into a man made like in flooding neighborhoods. And if your property's in the neck of the woods, you're buying a nut that's supposedly in the neck of the woods. You want to make sure you're buying a property still and not something that's in Atlantis. Okay, it's underwater or Aquaman's at. That's an important thing to look at. You want to make sure true. If your realtors are looking at the assets that they're actually looking at the actual property that you're looking at. You don't want to make the mistake that we've had happen to some of our students. Where a realtor went out and looked at two properties. One was a burned out shack. It was this pristine property. Well, the realtor pulled values for the nice property, not paying attention to the address being wrong. That the note that the investor's buying was on the shack, not the nice property. So incorrect data that when the investor got the value back, they're like, oh, it's a beautiful property. No, it's an ugly piece of shit that was sitting next door. So they were paid for the asset. Luckily they use their own funds on that deal. But that's an expensive tuition to learn when you're not double Checking. So always make sure that the realtor takes a photo of the actual street number on the property of some sort. Okay. Using Zillow or Google Maps doesn't mean it's always the right asset sitting there in the dot on the map. Sometimes it's next door. That's a big thing that many people have seen us do. Their due diligence is looking at the actual street sign, the street numbers, or the mailbox. The name of the mailbox matchup is the street number on the mailbox match up with a house where it's at. Those are important things that you got to look at doing. Otherwise, if you don't, you could be spending money a lot to buy a lot or a shack with a lot of other fees from the city. Okay. Other things that you want to make sure that you're doing too, is what will happen. A lot of times, make sure it's the same number of bed and baths, makes sure it's similar square footage, plus or minus 100. A big thing on BPOS you're pulling is you want to look at recent solds besides just. And pendings. And then also things have sold. Pendings. All right. And actives, things that are under contract. Currently pendings. Okay. Those are sold and those that are active. Big thing to look at too is days on market. What's the average day on market for your asset? Now, remember we talked about beforehand? Yeah. If you're figure Your value is 150, does that mean it's on days in market longer to get that? Try to get that, or would it make more sense for you to. All right, listed at 140. Forget the 10 grand. Give that to somebody else, especially equity. But get the thing sold in 60 days versus it taking 120 days and then you still haven't to drop the value down or drop the price down to hit that nugget. Look at days on market. I had one investor call me up and say, hey, I'm buying this property in Lagrange, Texas, which is about an hour from here, an hour and a half east of here. I'm like, okay, what's it worth? I go, it's worth a hundred. I'm like, okay, and what are you buying the note for? 33 grand. Okay, how much is owed on the note? Oh, they owe over 130. Okay. Okay, great, you're buying it. Discount. How much repairs are needed? Oh, roughly 35,000. I'm like, oh, what do they need? Oh, needs a new roof. Needs this. Like, okay, what's your Days on market and they go 365 days in the market. I'm like running. It would take you a year to sell that house when you finished up. What are your financing with your own money or somebody else's money? Yeah, using somebody else's money. Using a hard money lender at 18%. I'm like run. You're going to lose your profits by paying off your hard money lender on this asset. It does not. The numbers don't make sense. And that's what you had to know. When you look at the value. Look at trying to figure out repairs and figuring out the market conditions. That's what you got to look at your exit strategy. It's really the ultimate thing at the very end. You gotta pay attention to. Now if your goal is to take a property back and hold it for extended period of time as a rental, great. You're getting paid a little bit more for it. Goal is to come back and flip it, do a wholesale deal to somebody else. Then you need to get really, really low price below 60, 70 cents of the dollar. And this is the as is value. It's not the after repair value. ARV is just a number. Does not really exist out there, everybody. So knowing your exit strategy, port. If you're buying a note and it's owner occupied and you want to keep them in the property, great. What do those numbers look like? What are you paying? Is it performing note? Is it non performing note? These are all different things that you have to keep in mind of doing your due diligence. So take a look at and see. Okay, they've been paying on time for a while. I'm going to pay probably 75, 80 cents a dollar for that note to get them. Is the payment coming in minus cost, still going to be a good return on investment for me for a couple years. What's my goal after 12 months, am I going to sell the note as a re performer, keep it or go do what am I going to have to foreclose? If I have to foreclose, what's the numbers look like? So those are all important things to keep in mind. What are your holding costs? You have a servicing company, what's that monthly cost going to be? If you're going to keep it as a land, a rental, are you going to pay for property management? What's the taxes? What's the insurance costs along the way? I mean we just had a really, a huge storm just come through Austin. A huge, huge tornado hit through Dallas just recently as of last night. And damaged homes and businesses. So you got to keep in mind what's going on with that. If the assets are in Florida, on the Gulf coast, what's going to happen? Are you going to be able to afford the insurance costs of hurricane of wind damage and rain? I've got a couple buddies that bought a nice house, 300 $400,000 note a nice house. They foreclosed, they put some work in, but the insurance costs are like $700 a month. Okay, Expensive insurance on that. And it's been dragging out this foreclosure on this asset. And they keep having to pay the insurance costs and the insurance and insurance and insurance eating the deal alive. So that's an important thing that some people don't even bother looking at till the very end. As they're basically funding, they're calling to get the insurance paid on. I'm like, whoa, whoa, whoa, you need to check insurance costs on the front end. What's it gonna cost you on a monthly and annual basis there for you and figure that into your exit strategy. That gonna make sense for you or now you're going from a double digit to a single digit return because you didn't check your insurance costs. Now if you own the property, you're paying it and if it's the borrower on it, then they should be paying it. But let's face it, that doesn't always happen. So keep that in mind. Very important to take a look at those due diligence items before you look at, before you close, before you really do things. I know that many people get so excited about driving around, looking at dollars and seeing ugly properties. Grass is mowing. One of the first deals that I did was a subject to deal that was literally right around the corner from where I lived in Round Rock originally. And borrower that owned the property. Him and his wife had split, divorced. He actually moved closer to Houston. She moved somewhere else. But there was this property that was not being taken care of. Now he had to pay the mortgage, but she was the one person responsible for selling the property. She was taking her sweet time. Well, what was happening? Well, weeds are getting higher. The weeds are getting higher. The city had mowed the property a couple times. I finally was able to reach out to him and try to. I got into the property, you could see it needs some cosmetic work, some tile work, some new carpet. Not too much, just some basic updating. But there's a lot of crap still left in the house. And the only way it made sense for us was to really take the property over subject to which we were able to take over subject to and then wholesale to somebody else to come in and turned it into a long term rental. And we made five grand on the wholesale deal. Actually 5,000 plus 100 bucks because he gave me 100 bucks to mow the lawn to save them. 250 bucks being on there. So that was kind of the thing. I had to track him down. Called a neighbor where he lived at and the neighbor worked with the guy. The guy called me on a cell phone. But two days later, after he got off work, we negotiated things. He came up to Austin on the weekend. We met, walked the property. I kind of went through the due diligence sheet, talked about taxes owed. And he was willing to sign the property over subject to with approval of his wife to get the property soldier. And that's what we did. We were able to take it all over 72 with the six months and then sell it off in 45 days. So five grand. 5,145 days is not a bad day or a bad week or a bad month for most people. Especially for our first deal that was phenomenal. Now second thing, another deal that we looked at. Mailed out letters. Person called regarding the letters. I drew them by, saw that it needs some work. It needed a whole lot of work. There was really ugliness going on in the inside. He had a squatter living inside with four big dogs were defecating everywhere. The bottom two feet of the sheetrock was yellow from where the dogs were pissing. It was absorbing from the carpet up. When you'd walk in, the carpet kind of go squish, squish flies everywhere. Water been turned off for three months. The lady was still using the toilets and then just wiping her butt and putting the dirty toilet paper in a home or bucket. And then we close off the toilets for in a household. As the level of excrement increased to the point where it was just one of the nastiest houses I've ever been in. And unfortunately we weren't able to do anything with the house. She owed more than the property's worth. The bank at the time, World Savings wouldn't sell the note, wouldn't discount the note. We tried to do a short sale. They wouldn't work with us on the short sale. Eventually she ended up passing away. She got sick and passed away in the property. There was all sorts of liens and judgments from the city. She'd been arrested a few times and knock bonds out and things like that. So it Was just an absolute title mess. The value, although a beautiful big square house on over half acre backyard on the end of a cul de sac just was a total mess. The people that ended up buying at the foreclosure auction had five dumpsters of just trash and nasty stuff they pulled out of the house. They just stripped the whole house down to the concrete slab and down to sheetrock because it was just messy and stinky. And then redid all the sheetrocks that you're smoking in the house too. So basically stripped it down to the studs and then had to raise sheetrock, redo everything, go up there full. So it was a major rehab to give thing with 207 Silk Cove is the address that comes to my mind now out of the blue. But yeah, there can be some nasty stuff out there, people. There can be really nasty things. If you. I know we all get excited about going to workshops and flip this house and all these things that are on tv. We want to be a millionaire, we want to change our lives. And it's easy to get sucked into that stuff, run around trying to do things. But if you don't know what you don't know, you can end up writing a check that ends up a check that your ass can't cash. Basically. How do I know? Hey, I've been there. I've done made plenty of mistakes in my life in my real estate business as well too. And you learn more from them. But this is why it's important to network with other people to build relationships with vendors. A good sign if you're in traditional real estate and you're using a hard money lender and hard money lender won't finance the property because they don't believe your values. The rehabs. That's usually a sign that hey, you haven't done your work. One of the most valuable things that I did early on in my business was when I was getting real estate. I would run it by a hard money lender as my check. And if they were willing to finance it, I knew it was a pretty good deal and I would market it to other private investors knowing that I had to back up funding source with a hard money lender. There's also been times that we have sold assets with pre approved financing in place from a local lender or hard money lender who would finance repairs and then be in place. And that's a valuable marketing tool to use as well. Because oftentimes hard money lenders have their own list of investors that they'll mail out deals to email out with the hopes of getting them to finance or take them on for financing. And so they can make their points and their spread between what they're borrowing the money from for private investors and what they're charging. So that's another thing is you want to look at too, is what are your money costs going to cost you if you're using your own money? Okay, what's the cost for that opportunity costs? Use your own money versus somebody else? Somebody else going to charge you? Is it below market rates? Is it bank financing? And I'll tell you right now, most of you are not going to get bank financing. And people talk all the time like, oh, I was talking to gentleman yesterday, he's like, oh, yeah, I've only had my LLC for a year. I can't get bank financing for another year. You'll need to wait around for bank financing. If you'll go out and talk to investors, you'll go out and network. You can raise capital from those people and make things happen. So let's think, if you're going to go financing with a bank, what are they going to cover? If you use hard money financing, what are the costs? What's the time frame? Is there any cost to extend it for six months? What's the days on market? These things all have to match up to make sure it's a good deal for you before you pull the trigger. Whether it's traditional real estate or note investing. Hey, be very careful out there. All the things that can go wrong. Because let me tell you right now, things will go wrong. Either contractors will slough off, you may end up paying to find something wrong with a property that you didn't find. Water heater, boiler, got to replace plumbing in an area. There's a whole lot of different things that go wrong. The slab is cracked, the roof doesn't even replace spot. There's all sorts of things that go wrong. Oh, there's a lien out there that you miss trying to do it yourself. Those are all different things that can happen. And one of the best things that you can do initially is hire somebody to come in and help you out, hold your hand, mentor you walk along. A coach is great. Somebody who's got experience in doing this because it's years of experience. Hey, you might have to pay somebody to coach you. You know what? Free has no value. And that person, he or she who's got the years of experience, their time has been worth something. So keep that in mind. I see this happening. People bashing coaches and mentors. And I laugh. I'm like, they spent all this time as long as they've done deals. Now there's people out there that don't do deals. Let's just get. There's a big difference. Those that are doing deals and have got a ton of experience, their knowledge, their time, their coaching is extremely valuable. Those that haven't pulled the trigger on deals that aren't doing stuff, yeah, that's not worth it. But there's plenty of people out there you can reach out to and talk to. It's well worth it to make sure you're doing it. How do you find a good coach, good mentor? Talk. Ask people, ask for references. Who have you coached? What have they done? It's one of the big things that you got to keep in mind. You want to deal with somebody who's helped others be successful. That's the big point is success. If you want to be successful, find other people that are going, doing it or have done it and are in a place where you want to be and go talk to those people. Take them to lunch, take them to breakfast, take them to dinner, get together with them as far as just spend time with them. But don't be a ask hole where you ask a ton of questions, don't take answers, don't sit there and pick their brain and then don't reciprocate in some sort of fashion. Some people will do a split of deals, some people will do a flat fee on the front end, some people will take a percentage. There's no right or wrong on that aspect of it. But whoever is going to give you the best knowledge is going to be, be worth it, whatever you pay for those. Because I know that when I've paid for coaches and mentors, it has always helped me speed up that learning curve dramatically where I was able to get a lot more done or avoid mistakes and pitfalls along the way. Because I had somebody there kind of hold my hand, say, hey, watch out for that, watch out for this, and go from there. So that's important. Don't take your advice from somebody who's done one deal. Now they're teaching a program or a workshop. It's not the same thing, okay? Not the same thing. Somebody's done it over and over and over. Stubbed their toe, stubbed their, busted their lip open a few times, you know, hit their thumb with a few hammers along the way. It's important to keep in mind with that, is that, look, experience. You can pay for experience in one of two Ways with time and your own experience and money or with money to somebody else who's had the experience help speed you up. And so that's important thing too. No matter what you're doing. Wholesaling, fix and flipping, landlording, lease options, wraparounds, whatever, sub twos, whatever type of asset class it is, there's experts that have done what you're doing and can help you get there a lot faster. And they will also give you other due diligence aspects along the way that are unique to that asset class. The thing you can't do is just one asset class and then go out and try to apply it to something else. I had a student who's interested in mobile home park investing and he's never taken a class in mobile home park investing, but he's all sitting there trying to hire a realtor. I'm like, wait a second, you're coming from this space. Yes, I know you've been a realtor before. You're coming from the notes space as well. Look, you need to learn with the ins and outs of this isn't just the same thing as going out and making offers that can get yourself in a lot of trouble. Why don't you sign up and take a class from somebody here, Recommend this person or take this other person class. Take something and educate yourself because that will be much more valuable to you than you going out and trying to do it on your own. And try to save a couple hundred bucks. Okay? Or a thousand bucks, you'll make a mistake that cost you exponentially greater than that. So do yourself a favor, everybody diving into brand new, take a deep breath. But those big three things are universal across the way. You know value, you don't know the tax situation. Checking taxes, and then you'll need to check the title. Those three major things will help protect your investment or your investor's investment in your deal first and foremost. So commit those to memory. It may tweak it a little bit depending on what type of asset class, but still, those are the three biggest things. You got to keep it when it comes to performing due diligence initially on different types of deals out there for you. So go out, take some action, everybody. I wish you the best of luck and we'll see you all at the top. Bye.