Let's Make a Deal!

You're really going to be able to see the different strategies and be able to align those strategies based on where you are in your career and where you would like to be. So we're. We're going to really get into these things, which I'm excited about, just taking one property and giving you all the options. And I have been just digesting a lot of Sharon's YouTube videos, his interviews, his teachings, because he said it on an interview the other day, like, if we can't present as well as he does and he's not active, then we suck. Those were his exact words. And so I'm trying to learn how to present more like Shaan to give you guys practical, tactile in a great way of doing it. So we've got a Swisher board in here, so we are trying some new stuff today, so be a little bit patient with me, but I promise it's going to be really good and the information is going to be really awesome. All right, you ready to get into this? Garrett, make sure I'm not switching and I'm not going to play Zoom. Dj. I have help in the studio, so that's a good thing. All right, welcome, everybody. One of the things I want to do is welcome to Real Academy. I'm Steve Valentine. You are welcome here whether you're with Real or you're outside of Real. And if somebody invited you, I'm glad you're here. If I haven't met you, this is your opportunity to date our culture and, and our company and even see what the people that are talking about Real that brought you into this call what they're about. So just keep this as an open invite. It's a way to see the company, the culture, and enjoy the content that's being given because Real offers it to any brokerage anytime you would like to be invited to these things. So thank you for being here. I'm Steve Ballantyne. I mean, I run one of the investment masterminds. There's four different ones in this. My goal is to educate you from the agent to not just show you what's possible in the investment space, but. But how to actually transition and make investing in real estate part of your traditional repertoire and part of your typical conversations. Because I highly believe that when that luck is when opportunity meets preparedness. And so in our journey as a real estate agent, it's to evolve and be able to see opportunities where we can help solve more people's problems, with which in turn helps us create a different income and a Different value proposition for our clients now and in the future. And the most important part is it is so beneficial to you as the agent. And again, as we're kind of going into times where we're trying to figure out how to add more value proposition to the conversations with our buyers and sellers, this is one of those conversations that is going to take you to another level in that and understanding the investment side. So who's echoing echoes all right, let's jump in. All right, Garrett, you ready? Garrett's gonna throw the first slide up there. All right, there are six strategies in this property. They are the traditional seller representation. Again, we're gonna take these in. And as I'm doing these, I want you to think about the strategy and I want you to answer yourself. Ask yourself a question. Can I do this right now? And do I have the resources? And if you can't do it right now, what resources are you missing? Is it relationship capital? Is it partners? Is it knowledge? Okay, so each one of these, I want to know where you're at in your journey and what you are ready for, not ready for, and what you're moving towards. Okay. All right, so let's go. Let me set the stage. This is a 2018 case study. It is a property that we bought, owned all the things, and we went through this process. So let me set the stage as to where this call came in from. Please listen to the conversation. Listen. Okay, my carpet guy, he is 65 years old. He does not install the carpet, but he's got crews that do. He's 65 years old. He knows a lot of old people. Steve also knows, his name is Steve too, that we invest and we buy homes and we fix things up. Steve has been a great resource for probably a couple of deals a year. So Steve calls, he says, hey, my buddy, he's got a house. He just needs somebody to buy he doesn't want to mess with. He's like 75 years old. Will you call him? Like, yeah, sure. So I call him and I said, hey, mister, I don't even remember his name is. Steve said to give you a call, tell me about the house. He said, I'm 75 years old. I just inherited my parents house. It has been sitting for 20 years. Nobody has opened the front door. And for those of you In Phoenix, it's 7th street and Indian School. So in 20 years, I have no idea what it looks like. So from 1998 to 2008, the house sat there through the crash, through the up, through the down, it sat through all of it doing nothing. It was such a fantastic time to open that door because the house looked like an apocalypse. Stuff on the counters. It's like somebody moved out and never came back. There literally was a perfect condition 1970s Playboy magazine on the kitchen counter. That was funny. So lots of, lots of good, good stuff in there. The conversation continues. Nobody's been in the house. It's a train wreck. I haven't been there. It was my parents house. I would like 50 grand. Can you do that? That was it. That was conversation. So now we're going to go through the strategy piece. Okay. That was literally the call. I went down and looked at the house. It is chock full. As we go through these photos, you'll see. So traditional listing, this is where we're all at, right? So let's go through the obstacles of a traditional listing. So we have, you know, in, in this particular case, it needs a lot of work. Doesn't look like it's going to sell. We've all walked into this appointment, right? And we're like, I don't want to put this on the market. I don't want to fight with the buyers, all the pieces. And a lot of times we also have a tendency to look at a property like this and go, I'm going to go find a buyer for this and I'm going to double end this thing. That is our commission mindset. Okay. Which is fine. It serves a purpose in our career. I was there. I'm going to get you to the end of this and you're going to see where the mindset should change. Okay, let's go to the rewards. And by the way, there's a Dropbox link in the chat that has all these documents in it printed out because we're going to use these every call. They're going to be really good for you to look at. So on the rewards side, we're making an income or in commission. As soon as Garrett moves the screen so I can see what the hell I'm doing, okay? Neighborhood exposure, right? We get a sign in the yard. We have potential to double end something like this. And we also have a chance to increase our realtor stats. We can double dip, which means we do did two transactions, we doubled our income, all the things we normally do. Right. Now let's go to the resources that we need on the traditional side. Typical resources, right? Sign some marketing budget, whatever your cost is. Those are typical, the resources that we need in this particular strategy, which all of us on this call should have those Resources to traditionally list a house. Right. All right. So at the time, again, case study. This house is trashed. Estimated list price. If we decide to go against the seller's wishes and try to put it on the market, we say, you know, I think I can get $75,000 for this. You should put it on the market and we should go through this process. Please don't do that. Listen, but let's just take it as a traditional for a second. Your expense is about 675 bucks. Take professional photos. I know it's trash to me, but anyway, signs, admin, transaction fee, all those things. Estimated time in this eight hours. Time you finish it, put it on the market, do all the things. Let's just say roughly eight hours. You're going to make about 200 bucks an hour on this one. That's what that looks like in one to three months. On a traditional side, I know it's 2018. We didn't have a lot of $75,000 houses right now. But it is what it is. This is the case study. All right. Now it's the off market. Now here is where we're going to shift to. Really think about your resources. Who don't you know that could help you solve this problem that you need to know and what relationships do you potentially need to have in an off market situation? So what do I mean by off market? Let's take the traditional that we know, which is wholesaling. I'm not a wholesaler. I don't wholesale. I really never have. I've done it a couple of times, but it's usually probably somebody that I know. I don't take properties like this and blast them out on the Internet and try to get a bunch of people fighting over them. I just don't do it that way. I want to have relationships with my investors and people. So I'm going to have a very tight knit of investors and so should you. So that whenever a property like this comes up, you have an immediate go to person or three people that says, you know what, I can solve this for you. Seller, you want 50 grand? I got you. Okay. This is for those of you that are a time and space in your career. We're not going to list it, but I do want to earn some additional money and solve the seller's problem problem in the quickest amount of time. Let's look through our obstacles when we do this. Gary, you got to move my screen. Sorry. There's. You just changed it. Told you. Technical difficulties today. All right, come on, Gary. All right, when we go to the obstacles on this, we have competition, fall through rate, may have to go to mls, maybe have a lack of construction knowledge and evaluation in this process. So what a lot of wholesalers do that we shouldn't be doing is when we take a deal like this, we're like, hey, I've got this house of $50,000 net. And exactly what the wholesalers do. Please don't do this. Estimated value to 25 hundred thousand dollars in repairs, $100,000 profit. Don't do that. Everybody has a different way to get to the repair, renovation. It is not for us to judge that. It's the same thing with the consumers. The consumers may have one price in their head. We have a different. What we don't want to do is confuse people. So let people look at the house and determine their own evaluation in that, that part of the market, especially on the investor side. I'm an investor. I don't need your evaluation. I need you to tell me, hey, here's a deal. This is the potential price. Are you interested in this? Don't play games with the price either. Okay? There's the one thing that I despise with people is just tell me all the numbers. If you're telling me we can buy the house for 50 and you want to make 15 grand, and I know I've got to be into this for 65, cool. Do my numbers work? If my numbers don't work and I come back and say that's too high, you get to determine am I going to take money out of my side or am I going to go back to the seller. So what you're doing in this is you are. You're getting paid to connect the dots. So on the reward side of this, this is what this looks like. You have a guaranteed outcome for your client. They gave you a net result. Now you get to make a spread on this. I'm going to show you that in just a second, you potentially are going to make higher earnings, quicker payday. You become a resource. You've solved the problem in less time with less energy. Who wants to do a little bit more of this? Right. All right. The only additional thing that you need here is your investor resources. You have the resources from the other things you're doing the investor leads, which again, I would take leads out of there. Your investor relationship. Now, you're either creating new investors by teaching them what's possible, or you're finding other resources. People like me, that is in the Phoenix market, which most of you Know that I am always a resource. If you are trying to get out of something and you want to make some money, but you don't want to be in the investor. There are plenty of people on Instagram, Google, look who's doing the flips in the market. Talk to them and start building relationships. Here's why this is important. When you're not working with buyers and sellers and you're watching house porn on Zillow or MLS, if you have 3 to 5 target investors that are always looking for something, guess what? Those people, when you come across a deal, they are instant call. It's an instant paycheck because you're connecting the dots. So how do we get paid this way? This is where a lot of people like, I don't know how to do this. And what does it look like with the seller? Okay, let's go through it. Seller and let's, let's talk about the. Sorry, Garrett just switched this for the next one. Okay. So the way we get paid in an off market situation is one of two ways. If you are comfortable with the seller and saying, hey, in order for me to go out to some of my buyers who pay me for properties like this, I'm going to need a contract that you agreed to this price. So we're going to sign a contract. You can do it in your name. I don't highly recommend it. Put it in an entity. You are going to be assigning the contract, right? This, this is. Or I'm sorry, you're not assigning the contract. So just understand this. We do have to have a contract. Just so we have something that's valid. Now we have something in writing there. Now we're going to go to our buyers and say, hey, me, Steve, I got this deal at 50 grand. I want to make 15 on this. I think the numbers are really good. Will you pay me a $15,000 buyer broker fee on this? Okay, now I'm paying you the representation. There is no representation on the seller. We're basically bringing him a for sale by owner. You're getting paid by the buyer. The documents worked exactly that way. So we're doing a contract with me, the buyer and between the seller and the buyer. And I am representing only being represented by you, the buyer's agent or my representative on this. Does that make sense? So this is, this is one way that we can increase our income when we find something like this is who can I represent on this to bring them this deal? Because they're going to pay me to bring me the Deal. I'm not getting paid from the seller. So this goes a long way with a lot of the stuff we're talking about in nar, which is, where am I going to get paid in these things? Well, it's not the commission. It's actually a price tag for the investment to the investor. And if the numbers make sense, you can increase your income on that. All right, let's go to off market.

This.

That was all off market. Okay, this is the final. This. This is our final. So this is what this looks like if you brought me the deal. Seller, net 50 grand. It took you about four hours to get through all of it. You're making about $2500 an hour in something like this. All of us could use one of those paychecks a month. Right. And it's possible. You do have to go through in the investor relationship and figure out who's looking for certain things, because some people are only looking for flips. Some people might be looking for rentals. They're looking for rentals. Some of these situations that don't pan out in a flip might be a good resource for somebody to buy something a little bit below market as a rental. So keep that in mind. All right. Acquisition. This goes to obstacles in the acquisition process. So this is where you do have the resource of money to purchase this property. So Remember, seller says $50,000 net. This is what I want. Okay. Now we're going to go through and we're to look at our obstacles, which is purchase, holding, repairs, no connections, lack of construction, knowledge and evaluation. Right. These are some things we want to be careful with, again, with how we are sharing this knowledge with these people. When it comes down to this and yourself, that's the. That's the big part. Let's go to the rewards, Garrett. All right. The rewards in the acquisition is the seller's already giving you a price or whatever it is. You have the price established. So now we have control over the negotiations. When we buy something, we have control over the price. We have a potential higher income because, remember, properties never hit the market, so we really don't know what the market position is for it. We're only doing it based on theory.

We were supposed to go at a different time.

Mute. Whoever that is. The other nice thing is when you buy a property and you acquire it, it's like buying a lead gen source, if you have a marketing component to acquiring properties. So you might buy something as is, you might buy something as is. And we need to go through and understand. Sorry, give me Just a second. So that we have the marketing plan to get through and actually take this lead source and move through it. So think about it. When you acquire something, can you run Facebook ads to it? Can you do some different marketing to it? What can you do with that resource? Why you own it when you acquire it? Go to the next one. All right, what do you need? Required resources. When you're acquired, you're going to need relationships with money, right? So you're going to either need to be able to borrow capital from clients, hard money, maybe an equity line, maybe you have cash. Either way, these are all resources you're going to need to be prepared for the opportunity when it happens. Potential partnerships. Look, when you're starting out in this and you want to operate and you want to move from one place to the next, the best possible way to do this is by partnering with somebody when you have an opportunity. So, for example, if you come in here and you're like, april has a really good deal, and she talks with Alex, and Alex knows what he's doing.

And.

And now April has asked Alex to partner with her. So she brought the potential. Alex may bring the resources, and they're going to split or figure out whatever their determination is in that partnership. What that does is it helps you learn through the process, and you're willing to give up a little bit of income for the learning curve in this process with somebody that knows what they're doing more than you do. So you're not doing it by the braille method, by the way. I did a lot of braille method learning. I didn't have a lot of resources for people. I had a lot of resources for money. But I learned the hard way in a lot of ways. And this is one of the things that I'm doing with you, is helping you not do it the hard way, build it faster, better, stronger. All right, let's go to the next one. All right, here's what it looks like. To acquire it. Seller, net, they wanted 50. If you have the resources, you might be able to borrow more than what the purchase price is to cover costs or repairs, those types of things. Or you may have, you know, a $50,000 net, and somebody wants you to put 20% down, so you're gonna have to put 10,000 down. Your. Your costs change. I just did a flat with what. What happened? So, and what's possible. Your. Your estimated time holding is two months. So your interest holding costs about 1100. Tax and insurance 500, escrow 2500. And then your income and time to be determined. So in these three stages, we have the way that we can do our active income, which we represent traditional sellers, buyers, and like this case, traditional listing. Right. And it's worth X amount. Then we go into, hey, how do we take this seller and connect them off market and solve their problem? And by solving their problem quickly without the obstacles, it allows us to earn more income because we're solving for that with less time and money out of pocket. Then we go into the acquisition, which is I can or I'm prepared. I either have a partner, I have money to buy this same appointment. Okay, this is where it looks like now we're going to enter into past the income strategy. Now we're going to increase our wealth, we're going to increase our income, and we're going to do some fun stuff. Because I think there's a lot of times where people really want to be, but they're not sure where the path is to get there. The first three ways are really easy. Resources to go through and figure out what you're missing, what you need, and how you want to do it so you're prepared for it. Stop waiting for the opportunity to come up and then scurrying for it versus having conversations and practicing around these things so that when it does come up, you can capture it, not let it slip. Yes, that's a little M and M for you. Okay, sell it as is. There's a theory that we've put in place for a long time in flips when we buy something or when you buy something, it's taking the time to properly evaluate the property before you go down the road of making repairs or demolition. The reason being is the minute you start swinging hammers, you make it worse and you start uncovering problems which have to be disclosed. Okay, if I bought something as is, I haven't done inspections to it. I don't have anything to disclose at that time because I don't have any knowledge other than what it is. So in the obstacles, you're going to have the holding cost minor repairs. So, like I have one right now where the hose bibs are leaking all over the place. So we got some minor repairs even though it's being sold as is perceived value. So whenever we show something that's this messy, the perceived value is the whole house is that messy. So it may be a good idea if you're going to do as is if the numbers work out, to go in and do a two or $3,000 cleanup and get everything out of the House in the yard, because people automatically discount probably 10% for the amount of junk that's in the house. I know that I do when I look at it. So if you can clean it out, it's definitely going to present better if you're actually going to put it in MLS or you're going to send it to clients. Because this is always like the first overcoming. Because nobody can see to the walls, the floors to make a good evaluation. So they are going to buy based on risk versus if you can uncover all the risk by taking the stuff out, you're probably going to get more money out of it by doing that. All right, let's look at the rewards of owning this. When we own this, we can speed up the process. We control the price. You see, when we're in the problem solving mode, it's usually because somebody wants a quick, solid way out of the problem. And we don't always have a lot of time to mess with the price. Try the price, see if we could get more out of it, see what kind of exposure would we want to flip it. So it gives you a lot of options when you buy the house. We only buy houses when I know there's an option to make money either selling it as is renovating or keeping as a rental. There's always an option for it when we buy it. We just don't always know when we get into it. So in the first 30 days, we always take a new acquisition like this one, and we just go through the process of as is what you're building. There is potential leads, neighborhood exposure. How are you going to market around that property that you own for a short amount of time? Go to rewards or resources, all the traditional resources. We've been going down some marketing and you're going to have a resource of a cleanup crew to clean that out. So pretty minor stuff on the as is. And here's the outcome. Sell it as is. So if I look at some of these, I'm like, hey, if I could make 25 grand as is and not mess with anything and put it on the market or sell it to an investor, great. So now we start looking at this. And I threw a number in there. What if I received an offer for 160 grand in the first 10 days because I had the right contact and it potentially nets $100,000, right? That's possible. So this is what it looks like as is when you find a really good deal that has a lot of spread in it that you might be able to buy and turn over quickly to a different investor that you may know and not have to go through the long process of actually flipping the house. And it's called cost of lost opportunity. So when we go through things, we buy something and we want to go to the pretty, we need to know how much the pretty is going to net us before we sell it as is. Because there's no point if I can make just as much money as is versus 10 months down the road in a flip and make a little bit more money there. Doesn't make a lot of sense take that much risk because there's so much unknown down this road. All right, foreign, let's talk about the renovation. This is always the scariest thing for most people because the obstacles are time and time is money. So if you don't have contractors that can move quickly, you got to remember that hard money is costing you a lot of money every month to hold. The average hard money cost is about three to four grand in that three to four hundred thousand dollar price range by the time you pay taxes, insurance and all other stuff. So you want to be able to move quickly through these because every month eats into your profitability. Future evaluation appraisals is always tough because we're putting a lot of new things in. We want to go to the top of the market when we're flipping. And if you're like me, you're like, you want the most amount of money as possible and the most profitability. And sometimes that can kind of burn you in the end. So here's the example. When you comp something today and you're going to renovate it or rebuild it, can you sell it for the number today and make a profit? Tom, versus six months down the road? And if six months down the road, if the market shifts 5%, are you going to break even or are you going to lose money? And you get really lucky if the market shifts up. But we want to know where our break even point is before we take that risk. And the reward is sometimes timing. We just get lucky. There's no perfect timing in real estate. Think about those of us that bought houses or represented clients six months before COVID How awesome of a position were they in after that? And how terrible is it for all the people that gave up during COVID to be sitting right now going, I'm going to time the market perfect. It's going to go down, but interest rates are going to go up. And I think they really screwed themselves. The end of the day, like I said, there's no perfect Timing in the real estate market because we have so many unknown variables in the future. And when things are going really well, it's really easy to take on more risk. And when things are not going so well, you're going to pull way back, which means your numbers need to be better when things are slowing down. So like in the today's market, we got to buy things much better than we did in 2020 and 2021, because we don't have the COVID experience happening. All right, what's the rewards of this? So a lot of rewards of this. You're building relationships with your vendors, which are a value add to your clientele and your own business. You're also, when you're flipping homes like this, you're. You're providing valuable solutions for your buyers. What do I mean by that? When you start flipping homes or doing renovations, you are going to learn a lot about cost, renovation process, things you should do, things you shouldn't do. There's just so much that you get to learn that makes you so valuable to your clients when you're showing homes or you're with a seller. Right. So when you start to understand, like, well, I just put a kitchen in a rental property and it was $10,000 and I'm sitting with a seller that thinks they can renovate a bigger kitchen for five grand. You now have a baseline to help them understand what today's current costs in the current market are. It's kind of fascinating when you meet with people that haven't done any renovation on their house in 10 years. Like, oh, yeah, I should be able to renovate this for about $29,000. You're like, yeah, times 12. It's my wife runs into a lot of that in the construction side.

All right.

There's so much here, neighborhood exposure. Remember, if you're renovating this house or you're going to build a spec home or something that nature, you're going to be in the neighborhood for 10 months, 12 months. What kind of marketing campaign can you build around that? To where the homes in the neighborhood that are dilapidated, maybe they just don't have the resources to do a renovation, but they would love to buy your newly renovated house and have you buy their house and do that all over again. That's happened multiple times in my career. So there's a lot of things when you start getting into this exposure and understanding that by owning the properties and what you can do with them and the lead generation piece, you can do with them, how much it will expand your business all right, let's go to the resources. Resources here. All the same resource that we're going through. Contractors are your big one building relationship with your contractors. Keep in mind, the cheapest contractor is not your best resource. If you have a contractor that subs the workout that you can go to one person and say, these are the things I want done, you might pay them a little bit more money. You going to get stuff done faster rather than you trying to be the general contractor coordinating all the repairs. Just keep that in mind because if it. Look, if you're going to do this, it's making sure that we're not buying ourselves a job. We certainly want to learn with somebody, but we don't want to go to the extent that we are spending hours with the contractor on the renovation or trying to source tile materials running around, because that hourly rate goes way down and your profitability goes way down. And I'll give you an example of this. I had a client recently that was splitting a lot, and they bought that lot in 2020. They demoed a house. The architect that they chose decided not only was he going to design the house, but he was going to do the last split for them. What happens is the client has been sitting for 18 months and now realize looking back, that I had the wrong person doing the land development. And it has cost cost them an extra $60,000 in holding costs because they had the wrong vendor doing the wrong thing. So make sure when you're doing this, you are hiring to the specialties and you are making sure people have deadlines and they need to be met and you need to follow up because it is costing you money on a daily basis. Think about this. Every day that house sits in hard money is 200 bucks a day that you were just throwing out the window. So the faster it goes, the more profitable you be. All right, let's look at the final. So the final 225. 10%. Right. This would be the hard money that we borrowed to make the repairs. Estimated holding cost 20 grand for 75 is the projected list price at the time. 7% cost of sale, $190,000 in profit. Plus you paid yourself a commission. Who wants that payday, right? That's. That's the long way around. Here's the only thing too with this that's not in here. Just keep in mind, we're doing this. That $186,000 is subject to ordinary income taxes. So depending on where your tax bracket is, you're probably also paying about 30 to 40 grand of that 186 in taxes. Okay. So that's really the profitability when it comes down to is make sure that you're factoring in what your taxes are on that. All right, let's go to the next buy, renovate and keep. If you want to know how we've built a portfolio, we maintain roughly 100 homes in our portfolio at any given time. Some of those are being developed, some are being flipped, some were rentals. But on average we keep about 100 properties moving in our portfolio. This is how we built our portfolio was by buying homes like this, renovating, rebuilding, refinancing and keeping. And there's so many different things that are great, but there's so many obstacles like you see here, right? What happens if the market, the rents, the rental market, they shift, they go up, they go down. Time is money getting it done because you're paying for all those costs, your budgets, and knowing if you're going to keep it up front. Because what we don't want to do is go through and do something really pretty and really fancy and really bougie to put on the market to turn into a rental property. Because we don't use the same finishes in our rental properties as we do our flips. The reason being is that we want to renovate things for tenant control and long term, long term, blah, blah, wear and tear and just lessening our long term liabilities. Future evaluation is a little tough if we're, if we're putting out 10 months, saying I'm hoping this is going to get to 475, but based on the current market, we should be okay. So we need to be really careful to not be overzealous with our pricing and being, I guess, a little bit greedy when it comes down to it on houses like this as well. Just remember the roof sewers. We're going to renovate and you're going to keep do all the big stuff, especially in the older homes. If you've got an older home in the 1980s that still has original sewer, if you do it now while you're doing the renovation, you don't ever have to go back and do it. And it's not going to be cash out of your pocket down the road. All right, let's go to the Warrens. The rewards are so daunting in this process. And let's just think through to a couple of things. And some of us in our career have these regrets and they don't have to be regrets, they just have to be things that we've learned not to do and things that we need to start doing. If the average real estate agent would buy one house every three years in their career, in 20 years, how many homes do they have? I don't even know the math off top of my head. It's just a question. Point being is that this should be part of our career, should be part of our vision to be prepared for opportunity to keep a property every couple of years when we do it. It's fascinating that the stat right now is that 85% of active participating real estate agents do not own an investment property, but they will sell you anything. And by the way, real estate is the number one wealth creation tool because you can borrow, leverage and have somebody else pay it over time. You can't do that in the stock market. You can't go borrow money, put it into stock, and have somebody rent that from you to pay it. So let's just put that in perspective. And this is what we do, and this is what we want other people to do. And if we want other people to do it, we should be doing it as well. Agreed. When you're doing the buy, renovate and repeating this process, your credit's got to be good. Your PNLs, your business, your finances need to be in order. Remember this as well when I talked about ordinary income, we want to pay ourselves. If you notice on the last slide, there's a commission being paid to me, and this is where a lot of agents have not learned this. So please write this down and understand this. When I invest in properties, I am the investor and I pay my other personality, the real estate strategist, as much money as I possibly can in every transaction. The reason I do that on our investments is because I want that income going into my commissions and increasing my bottom or my top line for my real estate business. Because that's what my career is and that's what the banks are looking at in order for me to finance more properties, keep my business running. If I just have ordinary income, like, oh, in 2022, you made $186,000 on this one house, we can't include that because it's not part of your normal thing. It was like a bonus. So unless you have multiple bonuses every year and you can show that it doesn't go into your real estate income, which is really where they want to see, because that's your ordinary. So keep that in mind. Part of this is structuring, part of this is financial literacy of where does it go? In my bucket, Right? So When Wendy and I buy a house. Wendy and I are buying a house now. Boss Lady Red is Wendy's company, the construction side. And Steve Valentine is on Valentine Group. These investors are hiring these people to buy, sell and renovate the investments for them. They get paid all the money they can get paid. I get what's left over as the investor. This is what this would look like if you kept it in two different ways. One is a non cash out. So you borrowed $255,000 to build a new house. I went through the numbers at the time. In 2018, you could build a 1900 square foot house for 100 bucks a square foot. Not the case anymore. That's where the numbers came from. So they're all based on 2018 numbers. 255 would have been the mortgage amount refinanced. That was all the construction, including the purchase. We have an estimated equity of 220. And at that you'd have $300 a month passive income from a rental property. Now if you want to go one further and you actually did a cash out refinance on the investment property and pulled $125,000 in cash out, you're going to be $600 negative. Now let's put a couple of things that are really important. Perspective. Nobody's excited about $600 negative. Right. Are you excited about writing a check for $40,000 to IRS? Okay, most people aren't. If I take the last scenario and come to this scenario, yes, I'm. It's $600 a month, $7,200 a year. Right. That is holding this house, that 125,000 that I pulled out in cash. I need to make that $125,000. Make me $7,200 over the next 12 months to cover its cost. Now that $125,000, guess what? I could go loan out at 10% to somebody else and cover my cost in this. I also have left $100,000 in equity in this house. I also have a negative write off on this house even though money is moved. And I also did not write IRS a $40,000 check in this. This is where the return on life comes into play. So a lot of times when we're investing, we're not really sure what we're investing in. Things like this are a return on life for your future, your family's future, your kids futures. Right. They could even be some securities for you when you need them. The point in owning investment properties is that they're serving certain purposes they're giving us, as real estate agents, great tax, tax shelters. They're. They're part of our business. They're assets that we can leverage to do more with. They continue to allow us to expand and move the chess pieces. And if we're really smart about it, a lot of times, we can move the chess pieces tax free into bigger things, other things. So this is why this should be very big part of your typical real estate journey. When we go from just doing the traditional and starting to see what is possible that we can invest in, that's going to give us some active income, some. Maybe some additional active income, and hopefully some passive, some tax advantages and some legacy wealth. All right, these are the six strategies. So I want you to think one through six. Which one did we actually execute on this? So we think we did a 1 or 2 or 3 or 4 or 5, 6. Throw in the chat and let's see if we can figure out what deal I did. And what deal would you do? Could you do any of them? Now? I know I'm asking lots of questions. Oh, Garrett, do we actually. Oh, no, we haven't really yet. All right, we got one. We got one interaction. Thanks. Out. Thanks, Andrew. All right, here's a strategy I did. Gary, you want to put that up there?

Give people enough time? Yeah.

Okay. Six, right? Okay. So cover that up for. So I'm going to have Garrett show you this. This PNL here. If you go down to the bottom, he'll blow it up. I didn't want to just give you numbers, so I want to give you $94,000 with our profit on this property. We sold it as is. We literally, we bought it from the guy. He wanted nothing to do with it. He wanted 50 grand because it helped him accomplish the things he wanted to accomplish. And I happen to have a builder friend of mine that was looking for something specific down there. I sent it to him, just trying, throwing shit against the wall, and he came back and said yes. And I'm like, okay, well, we didn't have the resources to build a home. We were just starting to figure out the acquisition part of it, and we were able to buy it, sell it, and in 10 days, we were $92,000 profitable in this particular transaction. So any one of these strategies would have worked. I just wanted you to see the difference is, like, you can go through in one of these transactions. And where some of us just look through the door from our typical real estate transaction eyes, we miss all these other opportunities to help the seller solve for that, so with that, I'm going to open it up for questions and answers for the last 15 minutes. Please give me some feedback. Be very, very helpful because I just want to make this better every time. So if there's something that I can go deeper into or more knowledge on, I would love to hear it. So it is open for you guys to go at it.

If I've never done one, where do I start?

You've never done one, where do I start? The first, the first place to start is that if you've never done one. Kim, you and I have had this conversation. I want you to buy a bag of monopoly money online and say you have a half a million dollars that you just inherited and I want you to start looking at properties and I want you to start feeling out the numbers going, is this a deal or no deal? Every MLS has a fix up repair section in it that you could do a daily search, find the things that are popping up close to your house, go look at them, run the numbers, see if they're not, see if they're a deal, see what your number would be to make it work. This is the way we practice on numbers. Good question, Kim. Hey Steve, have you, have you started going after Assumables yet or are you currently looking at those? I'm not going after them. My, my position on those things is just to be prepared when opportunity arises on Assumables. So there's two different ways. If you guys aren't familiar with this, you can. Oh, and by the way, welcome to Real Alex on thanks. On Assumables. If you don't know this, most loans have an assumption clause in it, which means the buyer seller is going to work with the mortgage company. They're going to qualify to assume that mortgage plus whatever cash difference is to take that mortgage over. It's very doable in this market. It's a little bit more work. There's even some third party companies out there that are helping mesh all that together. So yes, it's a, it's a great option, Alex. I usually use it when I come into something. And then there's also the other option which totally off course, which is doing the creative financing, we get into wraps, which is a whole nother conversation. You think you could talk a little bit more about the rap in the next segment of your video when you do it? Another one? Yeah, the, the raps are we'll, we'll get into something that's more on the creative financing for buying and holding flipping. It just gets super complicated. So I Kind of want to stay in these strategies right now. Okay, Dan the man, you're ready to start flipping some houses. What are you thinking? Yeah.

So first of all, Steve, thank you so much for putting this on such a ton of value here. The, the biggest thing that you touched on that we're looking at as well is just access to capital. You know, in this market, my wife and I are being really smart about our finances and just kind of playing the long term game. But you know, we are deepening our relationships with our investors. And because our biggest goal is to be as much zero out of pocket as possible as far as acquisition and remodel. But we're also looking at the multiple strategies as well as like, you know, it's got to make sense where it's like, all right, what is the, what does the client need? And then also, could this be something that could be a buy and hold long term, short term, wholesale, you know, looking at multiple angles versus just like, hey, let's only look for flips or let's only look for this.

Like we want to make sure that.

There are multiple exit strategies that make sense for us. So you touched on all the points that, that we're considering. But of course the biggest thing is just deepening those relationships with our investors for access to capital.

Okay, let me, let me answer the access to capital. When you start, we're looking at three ways to typically buy a house. You can either do it through cash, if you have cash leverage by using, you know, home equity, line of credit, something of that nature, or you look at private capital and hard money. Right. So we're typically going to be using private capital and hard money. Now Dan, you said, I want to keep as much money in my pocket as possible, which is always what I wanted to do. Here's the obstacle that you will run into when you're first starting out. You are trying to show proof. So your private lenders or hard money lenders, you're going to have to show proof that you know what the hell you're doing, which means you're probably going to put more money down. Hard money lenders right now because the market is a little softer, they're requiring 30% down. So you got to put 30% down plus have money for your repairs. Now that 30% in repairs could come from an equity line or a partner or something. Right. So we got to figure out all of our resource buckets. If you are starting to create proof or you have trust and you have built a reputation with certain clients, then I would approach them, which is exactly what I did. I went to my wealthier, older clients and I said, hey, what kind of rate of return would make it worth it for you to lend me money at a guaranteed rate of return secured in a first position against a real estate property? And my frequent answer was 10%. When I first started, I'm like, okay, and guess what? When you deal with private capital, they are much more likely to start lending you the whole price of the house. Because if you can show them, hey, I'm buying this house at 70, 60, $0.70 on the dollar, they know there's some equity in it and they're covered. The hard money lenders and private, like, people that really know what they're doing, they're going to require there's more boxes, there's more boundaries. So I've always worked on more private capital relationships because they don't have as many boundaries and guidelines that have to follow. So it should really be an ongoing conversation with clients in this way. Garrett gave me a compliment this morning. He's like, it's actually fascinating the amount of times that you ask a seller what they're doing with their money. At every listing appointment, every property I'm purchasing. Do you know why I ask? Because most of the time they don't know if and if I can give them an idea and persuade them to either be a lending source for me or sell or carry on the particular property we're talking about, or if I sell their property, would they be interested in investing. Now, I've given them ideas and now they really like those ideas. And we have 50 investors that I asked that question to at the kitchen table that still lend us money. And it's only because we ask the question. So I encourage you, just ask the question. Some of them will say, hey, you know, we've got plans for it.

Cool.

Tell me about your plans. Oh, you're going to put in the stock market. What's the guaranteed rate of return on that? Oh, your financial Advisor says like 9%. So he can guarantee you that not only you're not going to lose any money, but he's going to give you 9% cap rate over the next year. Most of you like, well, no, that's not how that works. Okay, let me show you how real estate investing works on this. When you're the lender, I'm going to guarantee you a 7% rate of return over the next year, which is double what a savings account is, it's double what a marketing money money market is, and it's secured by the property. Does that sound like a better investment for you? Does that help you accomplish what you're trying to accomplish? See, we stop at the sale and we don't go further. And if we go further, you'd be amazed at the opportunities and the doorways that are open. Questions? Yeah.

Hey, I really, I didn't take time to say hello to you. But anyway, really appreciate your presentation. Was great. I've been doing this for a long time, so couple mindset probably I didn't do this all the time. Number one, I've been selling this close to 40 years and so I did few flip free investments but never really thought through this process. I think coming from my old mindset is almost like a fiduciary duty to get the highest price for the seller. So always kind of felt kind of conflicted, jumping in, making profit on it. You know, it's like just. It's in my head. But everything you said is right. I mean we just need to get out of the mindset. The guy just want 50,000. He don't want to show it. You know, just get it over with and understand what his needs are, then go from there. So this, that's one of those things I challenge before. Now I'm kind of a like last couple of years I've been thinking, hey, if I'm really going to help this guy, he just don't want anything else. He just want to get that disposed. So you brought. Great, great point there. So I really appreciate you taking your time. Explain everything.

Thank you for that. Let. Let's stay on that for just a second. So think about this. How many times in your career have we had that same conversation with a seller and it's okay in our mind that another buyer came in and bought it for that price, but it wasn't okay for us to buy it at that price?

Yeah, it's crazy. It's like stupid.

The guy will sell it to a stranger at that price, but he won't sell it to somebody he knows at that price.

Yeah, that. Yep.

So here's, here's the mindset around fiduciary. We have. We absolutely want to operate in the utmost character and integrity and knock on wood. And I really don't have to look, I've been acquiring properties from clients and agents for the last decade, over a thousand of them. We don't have any lawsuits from any of that because we operate. And here's all the knowledge and here's the options you have. Here's what we don't do we don't give the seller the other options for some reason. And then when they choose somebody that gave them that option, we're upset because they choke. Well, why did you sell it to that guy? I would have bought. You didn't give me that option.

Right.

Why would I sell it to you if you didn't give me that option? And by the way, just because you're in a position of traditional listing doesn't mean we can't offer that option even if we're not ready to buy it. Solve the problem, connect the dots. And so our fiduciary really comes back to active listening and getting the client's highest price for the current situation and condition the property is in. Not the highest price, it's the highest price that the market market will dictate, but it's also the highest price that solves their problem. Right. What do you tell, what do you tell somebody that their husband's in a deportation camp and they need to close and they need money in 48 hours. Do you think I'm going to feel bad about that deal? Do you think I solved their problem? Right, Right.

You, you're right. You're right. And I think a lot of time we allow our fears or ignorant to take over instead of thinking through the whole process like really what's a good. Like you talking about the 48 Hours deal. What's the best thing for them? They don't care about profit. They just want to get that certain amount of money in that 48 hours. So that's more producciated duty than anything else. I think we kind of take our, like looking at the past, I would take just that fiduciary as an ignorant, not go through the next door. You know, just stick with, stick with. What do you think is ignorant about it? You just don't know.

So I don't even want to say it's ignorance though. You know, let's, let's give ourselves. I think you kind of blame it.

On, blame it on the stuff you don't know. You know what I'm saying? Exactly. Like every appointment, like where I got out of yours and I've been doing this for a long time, like four decades.

Right.

I. I did not buy property every month, every year either. So looking back, I think every listing appointment, you got to go through all this avenue, just see really actively listen to the buy the seller and see what they really want and then, you know, come up with options.

So. Agreed. And I think that when we go to certain houses and if we ask enough questions with the seller. That's where we determine which strategy or a couple of options to give them. You know, because if we take it and you show up to a $2 million house, we're not going through the as is strategy with them unless it's trashed. And like, so we want to curtail to what the client's situation is and develop a strategy and an option that works best for them. Yeah.

Well, I really appreciate you putting together. Did a great presentation. That was awesome.

Thank you. Thank you. Appreciate that.

All right, can I say something about pricing really fast, please, Abby, to your concern, right? Don't make an offer to your seller that you don't feel good about. Right? Like, if you are concerned, like they said, I want X, and you're like, geez, I'm gonna make xxx. Okay, if you don't feel good about it, then offer them X and a half. Or, or offer them something where you feel like, hey, this is more of an equitable deal. Yes. I'm solving the problem. I don't have to go for their throat in it. Right. Like, you can, you can figure that out. But you can't do that until you know what your cost of business is and what your approach is. Because you can't just willy nilly, just go, oh, I feel, I feel bad for these people. I'm just going to buy their house and I'm going to go in debt. Like, you have to make good choices around it. But I'm just saying there is those. There is a way to do this ethically, and I think that's what you're saying. Your concern is you don't feel ethical or moral around some of these things. But the truth in the matter is you're. You have your own moral compass about it, and so make the deals that, you know, you can sleep at night over. That's all.

Agreed. Good word, Kimmy.

Hey, I appreciate it.

Absolutely. Thank you, everybody for joining today. And keep watch on the next call. We're going to keep doing this and we'll break down a new one next time and have a great week. Thank you.

Thank you. This was awesome. Did a great job.

Thank you, Steve.

Peace out, people.