Episode 1 : Due Diligence for 5536 Rio Street

Episode 2 : Kicking off the Renovation

In today’s tumultuous market, flipping properties can be a dangerous game. There are definitely things that every investor should pay close attention to when considering doing a flip.

Here’s a quick run down of what you’ll learn in episode 3, “Flip Tips in Today’s Market”:

• 4 flip tips to minimize your risk in today’s real estate investing market.
• Updates on the Rio Street Flip.
• Why we decided to sheet over one of the doors in the kitchen.
• Changing the configuration of the kitchen.
• Flip tips from Bobby Wallace, leader of the Charleston Real Estate Investor’s Association.
• Flip tips from Wil Christenson, full time investor, entrepreneur, and fellow contributor at MustKnowInvesting.
• Mortgage broker extraordinaire, Julie Blumetti, shares what to look for in a retail buyer.

Click Here to Watch Episode 3 : “Flip Tips in Today’s Market”

Our October 16th deadline to have the renovation 100% completed is fast approaching.

Stay tuned for the next episode . . .

Real Estate Investing FAQ (Frequently Asked Questions)

How do I get started investing in real estate?

Education comes first. Developing a good knowledge base is important so that you can determine the best investing strategy for your specific situation. There are a few real estate investing books that I recommend on the recommended reading page. Check out #49 for a list of real estate investing websites.

But, do not make the mistake of thinking you have to know it all before you take any action. True learning takes place when you take what you study and put it into practice.

Finding a real estate investing mentor is a way to fast track your way to success. Learning from an expert’s experience and mistakes can save you a ton of time and money.

What typically holds back beginning real estate investors when getting started?

I’m going to cover the top 2 things that come to mind.

1. Negative Thinking

This covers negative self talk, self limiting beliefs, and accepting negative feedback from others as if it were true. This is the most destructive type of thinking that exists. No matter what vocation you’re interested in, if you want to be successful, this must be addressed. Being optimistic and positive is a standard trait among the top performers in every industry. As a Man Thinketh, by James Allen, is an excellent book on the subject. Also, check out 4 Fundamental Assumptions from Your Real Estate Investment Advisors.

2. Inaction

Bottom line, if you want results, you’ve got to get off your butt and take action. Reading a hundred books on real estate investing and taking some seminars isn’t going to do anything for you unless you put it into practice. I’ve seen too many professional seminar attendees that continue to spend thousands of dollars every few months but still haven’t bought their first deal. That’s ridiculous! Start making phone calls, start your marketing campaign, and go out and make some offers!

What’s the best way to finance a deal?

Deals can be structured in many different ways as a creative real estate investor so having multiple options provides you the best way to finance them.

Start by looking at your own resources (cash, equity, credit, etc.). Determine what assets you may have personally to use in your real estate investments. If you have some cash or good credit, that can definitely aide you in getting started but is not a necessity . . . I started without cash or credit.

The first and easiest lender to get on board on your team will be a hard money lender. They lend based on a property . . . not a person. Bring them a good deal and the financing is waiting. You can most likely find one at a real estate investment club near you.

Partnerships can be a great way to get deals done. There is a limitless number of ways that partnerships can be set up so be as creative as you want. Our first partnership deal was a 75%/25% deal split. The partner provided the financing and got 25% of the net profit once the property was sold. Check out Profiting from Partnerships for more on that.

Recruiting money from private investors can be one of the most profitable and flexible ways to finance your deals. A private investor can be anyone that wants to make a good return on investment from real estate. We did a free no pitch 100% content webinar on recruiting private money about a month ago. If you missed it, click here recruiting private money webinar replay.

Click here for more on real estate investment financing strategies.

How is the current market affecting real estate investors?

It has affected my business mainly by making it more difficult to monetize properties through sales and refinances.  When selling a property, there is a great deal of competition. In my area, there has been a 250% increase of the number of houses on the market compared to 3 years ago. The mortgage industry is still changing so much, who knows what’s in store for us there.

But, with that said, it’s a great time to buy! Anyone that has a lot of cash and/or has the ability to buy and hold properties is in a great position right now! There hasn’t been a better time to buy in many years.

In my opinion, the most important thing you can do right now is to plan for multiple exit strategies. This will insure that you do not put yourself in a tough spot with a house in today’s market.

How do I protect myself when putting a property under contract?

One way is to limit the amount of earnest money that you put down on the contract. We, as investors, rarely put down any more than $500 as an earnest money deposit. We typically put down $100 for earnest money. This money is held by the  closing attorney or title company of our choice.

Another way is to have a clause in your contract that states something like, “This offer is subject to partner’s approval.” It can be as simple as that. Doesn’t matter if you technically have a partner or not. This will allow you to pull out of the deal if you find out that it’s not what you thought it was.

After you’ve put a property under contract, you want to make sure to file the right paperwork against the property to protect the deal. The last thing you ever want is to get an awesome property under contract and lose the deal because you failed to act intelligently about it.

Episode 1 : Due Diligence for 5536 Rio Street

We just closed on the property last Wednesday, September 17th. The second episode commenced last Friday when we kicked off the renovation.

Here’s a quick list of what you’ll find in the video:

• Meet our partners on the deal, Sean Hall and Eli Sanderlin.
• How the lead came in and a “Must Know” Tip on marketing.
• Why Sean and Eli decided to partner with us on the deal and the value of working together.
• Some interior shots of the property after the initial tear out.
• How the renovation will unfold.
• How we plan on adding curb appeal with Chris Williamson and his crew.
• The Negotiation and another “Must Know” Tip for success.
• Our total repair estimate and time line to get it all done.

(if you are reading this article from your email subscription, you may have to go directly to the blog to see the video)

To give an overview on the deal, here’s what we are working with:

Purchase Price: $58,000

Repair Estimate: $15,000.00

Estimated ARV (after repaired value): $115,000.00

Time Frame for Renovation: September 17th to October 16th

As I stated in the video, it’s crucial based on our exit stategy of retailing the home to finish the renovation by the middle of October. This will give us a solid month to market the property prior to the winter months.

Stay tuned for the next episode!

Here’s the top 3 real estate investing articles of all time here at MustKnowInvesting.com:

1. 59 “Must Know” Tips in Creative Real Estate Investing to Minimize Risk and Maximize Returns

This creative real estate investing article presents tips throughout the entirety of the investing process. Whether you are a beginner, an expert, a flipper, a wholesaler, however you relate to the real estate investing world, you will be provided with some insights into safely maximizing your returns.

There are a ton of links throughout this article to help guide you through the blog to find exactly what you are looking for.

click here to read the article

2. How to Turn a Good Deal into a Great Deal : Creative Real Estate Investing

You’ll learn 7 simple ways to turn a good deal into a great deal such as getting “the stuff,” negotiating seller financing, rezoning a property, and more.

Remember, you never want to make the mistake of “trying” to make a deal work. Either it’s a deal or it’s not! What we’re talking about here are some simple ways to pad the deal for a greater comfort level and profitability!

It doesn’t ever hurt to be on the conservative side of things . . . especially in today’s market!

click here to read the article

3. The Most Costly Mistake You’ll Ever Make as a Creative Real Estate Investor

Here’s a little excerpt:

Have you ever read or heard about a killer deal that a real estate investor did and thought to yourself, “Why in the world would the seller ever accept an offer like that?” or “I could never make that kind of an offer” or “How do you talk someone into that?”

If you answered “yes,” than you have most likely suffered from this common profit destroying tendency. At some time or another, ever creative real estate investor has made this mistake and must always be on guard against it . . .

click here to read the article

Enjoy!

Read this first if you haven’t already, Secrets of Real Estate Investing Success : The Missing Link (part 1).

In part 1 of this series, we identified that profit is the #1 reason why you are in business and discussed the four key focus areas of your real estate investing business’s profitability (marketing, your negotiating / communicating skill set, converting your real estate investing actions into cash, and leveraging through systems).

But, knowing all of that isn’t enough, there’s still a missing link that separates the mediocre majority and the successful real estate investors who are where they want to be!

The missing link is understanding and effectively applying the Pareto Principle, also known as the 80/20 rule, in the key focus areas in your real estate investing business.

The Pareto Principle states that 80% of the effects (results) come from 20% of the causes (actions). This can be applied across the board to almost anything. If you want to learn more about that, just google it.

Alright, you know the #1 reason why you’re in business is for profit, you know the key focus areas to maximize your real estate investing business’s profitability, and that the missing link is applying the 80/20 rule to it.

Not what?

Applying the Pareto Principle to Your Real Estate Investing Business

First, you want to determine where you are as an investor. What are your strengths and weaknesses that apply most to your being a successful investor? Have you bought your first deal yet? Are you struggling to get past your fears of the unknown? Have you been getting the same mediocre results for years and can’t figure out why?

A beginner and an intermediate investor would apply the missing link in very different ways based on their circumstances.

Second, you must gain a full understanding of how your time is spent. This is done by writing down everything, and I mean everything, that you do on a day to day basis during your working hours. Until you can take an educated view of how you spend your time, chances are, you’ll stay stuck at your current investing level. You’ll continue to get the same results you’ve gotten month after month, year after year.

If you think you know how you spend your time, prepared to be blown away. You most likely spend the majority of your time doing unimportant things in a very haphazard way. Not what we advocate if you really want to be successful as a creative real estate investor! (in our creative real estate investing mentoring program, we take each student through a thorough time analysis applied to the key focus areas of profitability in their real estate investing business)

Now that you know where you are as an investor and have a baseline for how you spend your time, you’re ready to apply the 80/20 rule!

Remember, 20% of the your current actions are producing 80% of your results. Ask yourself, “How could I change the way that I use my time to produce far greater results? What key focus areas of profitability do I need to focus on based on where I’m at?

The ball is in your court now! What you do is solely up to you. Are you going to be proactive with this information?

Most people will continue to fall into their habitual reactive mode and respond to everything during their day that “happens.” They will work on the things that aren’t important and procrastinate on the things that make THE difference between being a highly successful real estate investor and those stuck in low levels of performance.

The choice is yours!

Traditionally, real estate investing has been taught through various books, home study courses, and seminars

All of those learning tools and experiences are great, but times are changing. Through the explosion of the Internet, information is just a click away and FREE. Now the problem is sifting through the information glut and finding a reliable source for good actionable content.

Check out the video below so that you can get a full view on how we look at your real estate investing education in today’s world and how MustKnowInvesting fits into that.

(if you’re reading this post through your email subscription, you may have to go directly to the blog to view the video)

Bottom line, we aren’t holding anything back as far as what we teach, high level creative real estate investing tips, techniques, and strategies. You simply don’t have to go out and spend hundreds or thousands of dollars anymore to get the best of the best creative real estate information.

Your Golden Opportunity

Comment on this post and tell us what you want to learn more about! We’ll be happy to write articles specifically to suit your interests and needs. We look forward to hearing from you soon!

Happy Investing!

This post is for the 85% of creative real estate investors who say to themselves:

____________________________________________

“I’m not where I want to be. I want to

Make BIG MONEY Investing in Real Estate!

What am I doing wrong?”

____________________________________________

What’s the difference that makes the difference between mediocrity and success in creative real estate investing? What’s the missing link?

Before we can get to the missing link, you must ask yourself, “Why am I in Business?” If you didn’t say profit as your #1 reason, we’ve got a problem! You are going to need to reevaluate what you’re doing if you care about becoming a successful real estate investor.

“But Patrick, the #1 reason that I’m in business for myself is to give back to my community, help my parents out financially, and eventually, start a nonprofit.”

WRONG ANSWER! These are all terrific reasons to go into business for yourself, but they all hinge on the One Most Important Thing of All, Your Business’s Profitability!

OK, so we’ve established that profit is the #1 reason why you’re in business. To get to the missing link, we must analyze what specific actions make a real estate investing business profitable.

__________________________________________

Key Focus Areas for your Real Estate Investing Business’s Profitability

1. Marketing

Do you have plenty of seller and buyer leads at your disposal? What is your marketing strategy? Do you track your cost per lead, cost per deal?

2. Your Negotiating / Communicating Skill Set

Have you studied sales and negotiating? Do you use a sales system? Do you effectively communicate with sellers, buyers, investors, contractors? How do you handle typical objections?

3. Converting Your Real Estate Investing Actions into Cash

Have you learned the ins and outs of wholesaling, assigning contracts? Do you use lease options as a strategy for selling property at maximum value? Do you know how to flip a house and come out on top?

4. Leveraging through Systems

What real estate investing systems are you using to manage and organize your business?

_____________________________________

Depending on where you are at in your real estate investing career, you will want to focus more on some of the key focus areas more than others. For instance, if you’re a beginner,  the first action that should be taken would be in marketing. If you don’t have any leads, there’s really not anything for you to do, right? No way for you to make any money as a real estate investor.

But, even knowing what the key areas of focus should be for your real estate investing business is not enough. There’s still a missing link! And that missing link is the difference between average mediocre results in real estate investing and Making the Big Money!

Tune in later this week, in part 2 of this post, I’ll be explaining exactly what holds back most investors from ever achieving their dreams and what to do about it!

This seems like a popular topic amongst investors, and since I’m no expert at buying apartment buildings, I found someone who is. His name is Matthew Martinez. Matthew is the author of 2 Years to a Million in Real Estate, the founder of one of the largest real estate investment associations in the country, and has been interviewed by The Wall Street Journal, Money Magazine, and The New York Times. CNN even called him a tycoon in the making!

Matthew’s second book, Investing in Apartment Buildings, is due to be released in November. Here’s a small excerpt . . .

The Dwindling Middle Class

I’d be remiss if I neglected to implore you to act now rather than waiting and planning to begin at some time in the future. My argument for taking action immediately is outlined in this introductory chapter. Primarily, I’m convinced that the middle class—families with incomes between $40,000 and $200,000 a year—is shrinking at an alarming rate as a result of the financial burdens of our time. If you classify yourself as middle class (based on this definition), you, too, should be alarmed, but I’ll explain how investing in real estate can help.

There are three distinct socioeconomic strata in the United States, and the chasm between the upper and lower groups is becoming increasingly more pronounced every day. As the income gap between these two groups widens, it highlights the inequality between those who have achieved financial prosperity and those who find themselves caught in a perpetual cycle of financial instability, poverty, and lack of opportunity. Sociologists refer to this demographic divide as the “haves” versus the“have-nots.” Both of these groups are growing in numbers, but primarily at the expense of the middle class.

Burdened with excessive credit card debt and facing a precarious job market that has been severely stunted by the subprime debacle, the credit crunch, recession, the Iraq war, terrorism, and several recent natural disasters, the middle class is desperately trying to survive in this unstable environment. However, given the current economic climate, its future seems anything but prosperous. In fact, those who continue to classify themselves as members of the dwindling middle class are finding that their wages have stagnated and that their chances of reaching greater financial prosperity are seemingly negligible.

 

That got my attention whenever I first read it. And now for the solution! (oh yeah, click here to download a couple chapters from the Investing in Apartment Buildings book pre-publication)

 

The Solution: Passive Income

Most individuals start investing in real estate because they perceive it as a path to wealth and financial freedom that will permit them to no longer need to work a day job. You can achieve financial freedom by creating a passive income stream that is large enough to cover your ongoing expenses, or you can achieve it by having a large enough “nest egg” to enable you to live off the proceeds from the interest earned each year. Income-producing real estate (specifically from apartment buildings) can provide a healthy income stream for you and your family during good times and bad. Apartment buildings are unique assets that can generate significant passive income for the rest of your life. Passive income is the profit created from rental activity and is one of the primary benefits of owning such valuable assets. One of the goals of multifamily ownership is to buy apartment buildings and manage them properly so that they generate a profit each year (i.e., they have positive cash flow). When you achieve a stabilization of your portfolio, apartment buildings can provide a sufficient financial cushion and protection should you fall victim to any of life’s less favorable “chances.”

I recently met with the owner of a 50-unit apartment complex. He was 82 years old and quite frail because he had suffered a stroke a year earlier. He had owned the property for 30 years and had paid off the mortgage. Since it was generating $15,000 in positive cash flow each month, he was able to sleep well at night, knowing that his wife could live off the income from the property should he pass away. This is why passive income from apartment investing is so coveted.

 

I suggest if you have an interest in learning how to buy apartment buildings, download the free chapters from the book. Investing in Apartment Buildings looks like a great addition to any real estate investor’s library. You’ll feel the same way after you read the free download.

Check out the video below for a preview of what’s to come. We are going to take you into our daily real estate investing experience and walk you through what it’s like to be a full time investor.

Some of our investor buddies, Sean and Eli, just contracted a deal recently on Rio Street in North Charleston, South Carolina, and they want to bring us in as partners in the deal. Often times, local investors will bring us in on deals because of our expertise in negotiating, deal structuring, financing, renovating, etc. There are limitless ways to create value in this game so always bring an open mind to the table.

In the video, I open with a few details about the deal, speak with one of our contractors about the necessary repairs, and walk you through what renovations we plan on making and why.

(if you are reading this post from your emal subscription, you may have to go directly to the blog to see the video)

In the coming weeks, you’ll see the deal unfold as we close on it, renovate it, and finally put it on the market for sale.

Stay tuned for the next episode . . .

If you aren’t yet privy to the power of trusts in real estate investing, check this out. Dusty covered a ton of content ranging from the players in a trust (the trustee, beneficiary, successor trustee, director, etc), the differences between land trusts, personal property trusts and living trusts, some of the many benefits like getting your name off public record, avoiding probate, protecting yourself when buying subject to, avoiding seasoning problems, transactional privacy, and much more.

Here’s what some of the attendees had to say about it:

“I was very impressed by Dusty’s knowledge and his willingness to share it. Hope he’s available at other meetings for questions once I have a grasp on his information. Thanks Dusty for your brilliance!”

- Sheryl Greenberg

“Dusty, your presentation was unbelievable, and it was packed with valuable information and tips. As I told Patrick, you all should be commended for all the free information that you are willing to share in order to help others succeed. Thanks for taking the time to share your knowledge and experience about land trusts with the group, and I look forward to learning more from you in the future. The group is lucky to have you and Patrick as members.”

-Bryant Pearson

“Dusty did do a wonderful job of explaining and trusts. I have always been somewhat confused by these and to date have never used them because I wasn’t really sure how. Thanks to Dusty I now have a greater understanding and am planning to begin using trusts on future purchases. Greatly appreciate Dusty’s time and willingness to share information.”

-Karen Rapchick

“Dusty did an excellent job. He stepped to the plate (with very little advance notice) and clobbered it. He really opened my eyes to different approaches; the info was priceless. Thanks again!”

-Rob Robinson

Dusty’s spoke for over an hour but here’s a short clip on the benefits of transactional privacy with land trusts and how Walt Disney used this technique to lock up over 28,000 acres for pennies on the dollar.

If you are interested in gaining access to the entire lesson, all you have to do is sign up for the email updates on the site.

This is just the tip of the iceberg as far as trusts go. Just so you know, this kind of information usually costs thousands of dollars and you would get it from someone less knowledgeable than Dusty. Dusty has studied asset protection, specifically, using trusts in real estate for many years. Enjoy!