The Complete Guide to Getting Started Day 1
- Slides: 86
The Complete Guide to Getting Started Day 1 Finding & Analyzing Deals Day 2 Choosing A Profit Strategy Day 3 Putting It All Together
Day 1 Finding & Analyzing Deals Creating Wealth with Real Estate Finding Deals • Motivated Sellers • Where to Find Deals • Targeting Sellers Evaluating Discount Property Evaluating Income Property & Cash Flow Financing With No Money Down Conventional Financing
Day 1 Finding & Analyzing Deals What will it take for you to be wealthy?
Day 1 Finding & Analyzing Deals • Learn The Wealth Formula • Learn Types of Income • Develop Millionaire Mindset • Implement Wealth Formula • GET STARTED
Day 1 Finding & Analyzing Deals “The Wealth Formula” • Constant Investment • Time For Growth • What Yield Will You Learn To Get • Wealth Result
Day 1 Finding & Analyzing Deals “Stage One Investing” • • Amount Invested Time Period Rate of Return Financial Goal $165 Per Month 25 Years ? ? ? ? $1, 000
Day 1 Finding & Analyzing Deals 25% $3, 800, 000!! Linear Rates Money plus Knowledge Amount Invested $165 a month Twenty-Five Years 20% $1, 400 K 15% 535, 000 10% 218, 000 6% 114, 000 3% 73, 000 0% 49, 500
Day 1 Finding & Analyzing Deals $3, 800, 000!! 25% 20% $1, 400 K Or Residual Rates? 15% 10% 218, 000 6% 114, 000 3% 73, 000 49, 500 0% Twenty-Five Years 535, 000
Day 1 Finding & Analyzing Deals Types of Income Linear Residual • Assets For • Time For Money • Results For Money
Day 1 Finding & Analyzing Deals Wealth Characteristics • Burning Desire • Goal Oriented • Decisive In Nature • Surrounded By Master Mind Team • Specialized Knowledge
Day 1 Finding & Analyzing Deals Real Estate Flip • Buy For $150, 000 • Sell For $180, 000 • Profit $30, 000
Day 1 Finding & Analyzing Deals Yield Profit Investment $ 30, 000 $150, 000 Rate of Return 20%
Day 1 Finding & Analyzing Deals Leverage $120, 000 from Bank $30, 000 from You $30, 000 $150, 000 Price 100%
Day 1 Finding & Analyzing Deals Balance Business Assets Linear Income Residual Income
Day 1 Finding & Analyzing Deals ü Creating Wealth with Real Estate Finding Deals • Motivated Sellers • Where to Find Deals • Targeting Sellers Evaluating Discount Property Evaluating Income Property & Cash Flow Financing With No Money Down Conventional Financing
Day 1 Finding Deals/Motivated Sellers GOALS At the end of this session, you will be able to: 1. Recognize a motivated seller 2. Summarize why sellers become motivated 3. Explain how to target motivated sellers Day 1 - Finding & Analyzing Deals
Finding Deals/Motivated Sellers Types of Motivated Sellers: 1. Price (wholesale) – willing to discount the price to get a quick sale 2. Terms – willing to discount the terms to get a quick sale Day 1 - Finding & Analyzing Deals
Finding Deals/Motivated Sellers Reasons Sellers Become Motivated 1. Personal – affect only the seller 2. Property – attach to the property 3. Economic – relate to general location or the local economy Day 1 - Finding & Analyzing Deals
Finding Deals/Motivated Sellers Reasons Sellers Become Motivated Personal • Owner’s location • Job Transfer • Health • Tired Landlord • Retirement • Death in the family • Divorce • Poor Management • Financial • Bad Partnership Day 1 - Finding & Analyzing Deals
Finding Deals/Motivated Sellers Reasons Sellers Become Motivated Property • Poor Management • Poor Financing • Property Condition • Obsolescence Day 1 - Finding & Analyzing Deals
Finding Deals/Motivated Sellers Reasons Sellers Become Motivated Economic • Local Economic Changes • Local Neighborhood Changes • Law Changes • Zoning, Rent Control, etc. Day 1 - Finding & Analyzing Deals
Finding the Deals/Where to Locate Realtors/MLS • Types of sellers • Pros • Cons • Tips Day 1 - Finding & Analyzing Deals
Finding the Deals/Where to Locate Newspapers • Types of sellers • Pros • Cons • Tips Day 1 - Finding & Analyzing Deals
Finding the Deals/Where to Locate Legal Newspapers • Types of sellers • Pros • Cons • Tips Day 1 - Finding & Analyzing Deals
Finding the Deals/Where to Locate Driving for Dollars • Types of sellers • Pros • Cons • Tips Day 1 - Finding & Analyzing Deals
Finding the Deals/Where to Locate Foreclosures • Types of Sellers/Foreclosure Process • Pros • Cons • Tips Day 1 - Finding & Analyzing Deals
Finding the Deals/Where to Locate Bird Dogs • Types of sellers • Pros • Cons • Tips Day 1 - Finding & Analyzing Deals
Finding the Deals/Where to Locate Courts • Types of sellers • Pros • Cons • Tips Day 1 - Finding & Analyzing Deals
Finding the Deals/Where to Locate Bird Dogs/Networking • Types of sellers • Pros • Cons • Tips Day 1 - Finding & Analyzing Deals
Finding the Deals/Where to Locate Advertising • Flyers • Business Cards • Newspaper Ads • Direct Mail • Car Signs • Radio & TV • Website • REIA Groups • Expired MLS • Yard Signs Day 1 - Finding & Analyzing Deals
Finding the Deals/Where to Locate Advertising • Types of sellers • Pros • Cons • Tips Day 1 - Finding & Analyzing Deals
Finding the Deals/How to Target Contacting Sellers • Advertising • Direct Mail • Telemarketing • Drive bys/Door knocking Day 1 - Finding & Analyzing Deals
Evaluating Income Property SESSION REVIEW What we covered this session: 1. How to recognize a motivated seller 2. Why sellers become motivated 3. How to target motivated sellers Day 1 - Finding & Analyzing Deals
Day 1 Finding & Analyzing Deals ü ü Creating Wealth with Real Estate Finding Deals ü Motivated Sellers ü Where to Find Deals ü Targeting Sellers Evaluating Discount Property Evaluating Income Property & Cash Flow Financing With No Money Down Conventional Financing
Evaluating Discount Property GOALS At the end of this session, you will be able to: 1. Summarize key focal points of valuing and analyzing discount property 2. Explain how to use a CMA 3. Perform a discount analysis Day 1 - Finding & Analyzing Deals
Evaluating Discount Property 7 Steps of Evaluation 1. Find the Property 2. Find the comps 3. Estimate Repairs 4. Estimate Costs 5. Evaluate Exit Strategies 6. Estimate Profit Potential 7. Complete Acquisition Sheet Day 1 - Finding & Analyzing Deals
Evaluating Discount Property Focal Points • • • Location Property Condition Price Financing Seller’s Motivation/Flexibility Day 1 - Finding & Analyzing Deals
Evaluating Discount Property Comparables (Comps) • • Address Sq footage Age Bedrooms Baths Gar/Carport Lot Size • • Construction Price Days on Mkt Extras Distance Subdivision Appraisals Day 1 - Finding & Analyzing Deals
Evaluating Discount Property Finding Comps • • • Tax Rolls Web Sites MLS/Realtors Driving for Dollars Listing Services Day 1 - Finding & Analyzing Deals
Evaluating Discount Property Estimating Repairs • Initial Self Inspection • Measuring Tape • Ground Tester • Marble • Screw Driver • Software • Licensed Inspector Day 1 - Finding & Analyzing Deals
Evaluating Discount Property Estimating Costs • Buying Costs • Holding Costs • Closing Costs Day 1 - Finding & Analyzing Deals
Evaluating Income Property SESSION REVIEW What we covered this session: 1. Key focal points of valuing and analyzing discount property 2. How to use a CMA/Find Comps 3. How to perform a discount analysis Day 1 - Finding & Analyzing Deals
Day 1 Finding & Analyzing Deals ü ü Creating Wealth with Real Estate Finding Deals ü Motivated Sellers ü Where to Find Deals ü Targeting Sellers ü Evaluating Discount Property Evaluating Income Property & Cash Flow Financing With No Money Down Conventional Financing
Evaluating Income Property GOALS At the end of this session, you will be able to: 1. Define key terms of cash flow analysis 2. Explain how to perform a cash flow analysis 3. Recognize pitfalls of cash flow analysis Day 1 - Finding & Analyzing Deals
Evaluating Discount Property Cash Flow Analysis __________ __________ _____ − − = − = Projected Gross Income Vacancy Loss Collection Loss Effective Gross Income Fixed Expenses Variable Expenses Net Operating Income Debt Service Pre-tax Cash Flow Day 1 - Finding & Analyzing Deals
Evaluating Discount Property Cash Flow Analysis Projected Gross Income: Monthly rent 12 Vacancy Loss: Accounts for time when property is not rented Effective Gross Income: Amount that remains to pay expenses Fixed Expenses: Any cost not related to occupancy Day 1 - Finding & Analyzing Deals
Evaluating Discount Property Cash Flow Analysis Variable Expenses: Any additional costs Net Operating Income: Income before any mortgage payments Debt Service: Mortgage payments Pre-Tax Cash Flow: Cash flow before paying taxes Day 1 - Finding & Analyzing Deals
Evaluating Discount Property Pitfalls of Cash Flow Analysis • Overestimation of income • Lease price vs. actual rent • Undervaluation of vacancies Day 1 - Finding & Analyzing Deals
Evaluating Discount Property Pitfalls of Expenses • Underestimation of fixed and variable expenses • Omission of maintenance expenses Day 1 - Finding & Analyzing Deals
Evaluating Discount Property Estimating Expenses • 20% of effective gross income • Three years of tax returns • Audited financials • Management company reports Day 1 - Finding & Analyzing Deals
Evaluating Income Property SESSION REVIEW What we covered this session: 1. Key terms of cash flow analysis 2. How to perform a cash flow analysis 3. How to recognize pitfalls of cash flow analysis Day 1 - Finding & Analyzing Deals
Day 1 Finding & Analyzing Deals ü ü Creating Wealth with Real Estate Finding Deals ü Motivated Sellers ü Where to Find Deals ü Targeting Sellers ü ü Evaluating Discount Property Evaluating Income Property & Cash Flow Financing With No Money Down Conventional Financing
Financing With No Money Down GOALS At the end of this session, you will be able to: 1. Explain factors affecting creative finance 2. Explain the following strategies: a. Seller finance b. Second mortgage c. Wrap around mortgage d. Lease Option e. Subject To 3. Name 15 creative strategies Day 1 - Finding & Analyzing Deals
Financing With No Money Down Factors Affecting Creative Finance – “a financing arrangement in which maximum share of invested resources comes from other people rather than from yourself” Day 1 - Finding & Analyzing Deals
Financing With No Money Down Key Terms Balloon Mortgage • Short-term, fixed-rate loans with fixed monthly payments • Set number of years, followed by one large, final balloon payment (the balloon) for the balance of the principal • Usually due at the end of five, seven, or 10 years Day 1 - Finding & Analyzing Deals
Financing With No Money Down Key Terms Note; Promissory Note • A written promise to pay a specific amount of money with interest at a specific rate for a specific period of time Owner Financing • Seller accepts a promissory note as part of the purchase price • Also called seller financing Day 1 - Finding & Analyzing Deals
Financing With No Money Down Key Terms Deed • A written instrument that, when executed and delivered, conveys title to or an interest in real estate. Mortgage • Instrument between lender and borrower. A conditional transfer or pledge of real estate as security for the payment of a debt. Also, the document creating a mortgage lien. Day 1 - Finding & Analyzing Deals
Financing With No Money Down Factors Affecting Creative Finance 1. At what price 2. Using whose financial resources? 3. How soft/hard are the other people? 4. What size of down payment? 5. When is the down payment due? 6. In what form of consideration? 7. What rate of interest? 8. What repayment term? Day 1 - Finding & Analyzing Deals
Financing With No Money Down Factors Affecting Creative Finance 1 2 3 4 5 6 7 8 9 10 Total Price Whose $ How soft/Hard is $? How big is down pmt? When is down pmt due? Consideration? Interest rate? Repayment Term? Day 1 - Finding & Analyzing Deals
Financing With No Money Down Creative Offers 101 Ultimate Paper Out - Who: - Why: - Considerations: Day 1 - Finding & Analyzing Deals
Financing With No Money Down Creative Offers 101 Second Mortgage - Who: - Why: - Considerations: Day 1 - Finding & Analyzing Deals
Financing With No Money Down Creative Offers 101 Wrap Around Mortgage - Who: - Why: - Considerations: Day 1 - Finding & Analyzing Deals
Financing With No Money Down Creative Offers 101 Lease Option - Who: - Why: - Considerations: Day 1 - Finding & Analyzing Deals
Financing With No Money Down Creative Offers 101 Buying “Subject To” - Who: - Why: - Considerations: Day 1 - Finding & Analyzing Deals
Financing With No Money Down Creative Offers 101 Buying with “Hard” or “Private” Money - Who: - Why: - Considerations: Day 1 - Finding & Analyzing Deals
Financing With No Money Down Thinking “Outside of the Box” 1. Joint ventures/partners 2. Buy low/refinance high 3. HELOC 4. Borrow the broker’s commission 5. Satisfy seller’s needs 6. Deposits, rent credits, tax credits 7. Government Programs Day 1 - Finding & Analyzing Deals
Financing With No Money Down Thinking “Outside of the Box” 8. Credit Cards 9. Borrow from friend/relative 10. Refinance 11. Car loan/boat loan 12. Unsecured bank loan 13. Signature loan 14. Credit partners Day 1 - Finding & Analyzing Deals
Evaluating Income Property SESSION REVIEW What we covered this session: 1. Factors affecting creative finance 2. Cookie Cutter financing strategies: a. Seller finance b. Second mortgage c. Wrap around mortgage d. Lease Option e. Subject To f. Hard money vs. Private money 3. Alternative ways to finance deals Day 1 - Finding & Analyzing Deals
Day 1 Finding & Analyzing Deals ü ü Creating Wealth with Real Estate Finding Deals ü Motivated Sellers ü Where to Find Deals ü Targeting Sellers ü ü ü Evaluating Discount Property Evaluating Income Property & Cash Flow Financing With No Money Down Conventional Financing
Conventional Financing GOALS At the end of this session, you will be able to: 1. Explain the difference between hard money lenders and conventional finance 2. Understand basic loan programs 3. Understand property qualifications 4. Understand borrower qualifications Day 1 - Finding & Analyzing Deals
Conventional Financing Hard Money vs. Conventional • • • LTV (Loan to Value) Interest Points Payment Schedule Repair Money Closing Costs Day 1 - Finding & Analyzing Deals
Conventional Financing Conventional Non - Conforming Loans • • • Fixed Rate Adjustable Rate Balloon/Reset Second Mortgage Equity line of credit Day 1 - Finding & Analyzing Deals
Conventional Financing Fixed Rate Mortgage Description – Constant, fixed payments during the term of the loan Advantages Disadvantages • Monthly payments are fixed over the life of the loan • Interest rate does not change • Protected if rates go up • Can refinance if rates go down • Higher interest rate • Higher mortgage payments • Rate does not drop if interest rates improve Day 1 - Finding & Analyzing Deals
Conventional Financing Adjustable Rate Mortgage Description – Lower initial interest rate, interest is adjusted periodically, have defined adjustment periods Advantages Disadvantages • Lower initial monthly payment • Lower payment over a shorter period of time • Rates and payments may go down if rates improve • May qualify for higher loan amounts • Payments may change over time • Potential for high payments if rates go up Day 1 - Finding & Analyzing Deals
Conventional Financing Balloon/Reset Mortgage Description – 30 year amortization and fixed rate loan. Entire balance due at end of specified term Advantages Disadvantages • Lower initial monthly payment • Lower payment over a shorter period of time • Many balloon mortgages offer the option to convert to a new loan after the initial term. • Risk of rates being higher at the end of the initial fixed period • Risk of foreclosure if you cannot make balloon payment or if you cannot refinance or if you cannot exercise the conversion option Day 1 - Finding & Analyzing Deals
Conventional Financing Second Mortgage Description – A second loan on the equity of the home, carry higher interest rates, shorter terms Advantages Disadvantages • Fixed payments • Interest may be tax deductible • Higher interest rates than on 1 st mortgages • Harder to refinance your first mortgage Day 1 - Finding & Analyzing Deals
Conventional Financing Equity Line - HELOC Description – Revolving lines of credit that use real estate as collateral Advantages Disadvantages • Only borrow what you need • Pay interest only on what you borrow • Flexible access to funds • Interest may be tax deductible • Rates can change. The maximum interest rate is normally high. • Payments can change • Harder to refinance your first mortgage Day 1 - Finding & Analyzing Deals
Conventional Financing Conventional-Conforming Loans • • Sub-Prime Interest Only Stated Income Power Option Day 1 - Finding & Analyzing Deals
Conventional Financing Sub-Prime Loans Description – Offered to borrowers with poor credit history, may require more down, higher interest Advantages Disadvantages • Potential for reestablishing credit if you pay your mortgage on time. • When used for debt consolidation, you may be able to reduce your monthly debt payment • Higher rates • Terms may not be as favorable • Harder to get long term fixed loans • Loans may have prepayment penalties Day 1 - Finding & Analyzing Deals
Conventional Financing Interest Only Loans Description – Pay interest only for specified period of time, based on 30 year loan Advantages Disadvantages • Gives you greater control largest monthly expense • Help manage cash flow and tax liability. • For set time, can pay only interest • Equity in your home still builds • Usually no prepayment penalty • Payments may change over time Day 1 - Finding & Analyzing Deals
Conventional Financing Stated Income Loans Description – Do not need to prove income or assets. (Stated/verified, stated/no verification) Advantages Disadvantages • Don’t need to verify income • Faster approval • Higher rates • Higher down payment Day 1 - Finding & Analyzing Deals
Conventional Financing Property Qualification Loan Parameters • • Property Type Transaction Type Loan Type Sale Price Desired Loan Amount Appraisal Amount Loan to Value Day 1 - Finding & Analyzing Deals
Conventional Financing Borrower Qualification Loan Parameters • • • Source of Down Payment Credit History Residence History Employment History Income/Debt Ratio Day 1 - Finding & Analyzing Deals
Conventional Financing SESSION REVIEW What we covered this session: 1. Difference between hard money and conventional financing 2. Basic loan programs 3. Property qualifications 4. Borrower qualifications Day 1 - Finding & Analyzing Deals
Day 1 Finding & Analyzing Deals ü ü Creating Wealth with Real Estate Finding Deals ü Motivated Sellers ü Where to Find Deals ü Targeting Sellers ü ü Evaluating Discount Property Evaluating Income Property & Cash Flow Financing With No Money Down Conventional Financing
The Complete Guide to Getting Started üFinding & Analyzing Deals Day 1 Day 2 Choosing A Profit Strategy Day 3 Putting It All Together
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